**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-QSB**




(Mark
                One)x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
              
              FOR
                THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
              
              FOR
                THE TRANSITION PERIOD FROM __________ TO __________
              
              COMMISSION
                FILE NUMBER ________________




**LAPIS
      TECHNOLOGIES, INC.**


(Name
      of
      small business issuer in its charter)





**Delaware**
              (State
                or other jurisdiction of incorporation or organization)
            **27-0016420**
              (I.R.S.
                Employer Identification No.)




**19
      W. 34th Street, Suite 1008, New York, NY 10001**


(Address
      of principal executive offices)





Issuer’s
      telephone Number: **(212)
      937-3580**





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: As of November 9, 2007, the issuer
      had 6,483,000 outstanding shares of Common Stock.





Transitional
      Small Business Disclosure Format (check one): Yes o No x




**TABLE
      OF CONTENTS**




**Page****PART
                I - FINANCIAL INFORMATION**Item
                1.       Financial Statements
            
            
            3Item
                2.       Management’s Discussion and Analysis or
                Plan of Operation
            
            
            9Item
                3.       Controls and Procedures
            
            
            11**PART
                II - OTHER INFORMATION**Item
                1.       Legal Proceedings
            
            
            12Item
                2.       Unregistered Sales of Equity Securities
                and Use of Proceeds
            
            
            12Item
                3.       Defaults Upon Senior
                Securities
            
            
            12Item
                4.       Submission of Matters to a Vote of
                Security Holders
            
            
            12Item
                5.       Other Information
            
            
            12Item
                6.       Exhibits
            
            
            12**SIGNATURES**
            
            
            13


2


**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  **Financial
      Statements.**


**LAPIS
                    TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEET****(In
                    Thousands, Except Share Amounts)****ASSETS**September
                    30,2007Current
                    Assets:Cash
                    and cash equivalents
                
                $
                86Accounts
                    receivable
                
                
                4,285Inventories
                
                
                4,141Prepaid
                    expenses and other current assets
                
                
                371Total
                    current assets
                
                
                8,883Property
                    and equipment, net
                
                
                277Deferred
                    income taxes
                
                
                23$
                9,183**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    Liabilities:Bank
                    line of credit
                
                $
                1,294Short
                    term bank loans
                
                
                2,935Current
                    portion of term loans
                
                
                192Accounts
                    payable and accrued expenses
                
                
                2,617Due
                    to stockholder
                
                
                180Due
                    to affilliates
                
                
                96Income
                    taxes payable
                
                
                -Total
                    current liabilities
                
                
                7,314Term
                    loans, net of current portion
                
                
                285Severance
                    payable
                
                
                88Total
                    liabilities
                
                
                7,687Commitments
                    and contingenciesMinority
                    interest
                
                
                434Stockholders'
                    Equity:Preferred
                    stock; $.001 par value, 5,000,000 shares authorized, none issued
                
                
                -Common
                    stock; $.001 par value, 100,000,000 shares authorized, 6,483,000shares
                    issued and outstanding
                
                
                6Additional
                    paid-in capital
                
                
                78Accumulated
                    other comprehensive loss
                
                
                (140
                )Retained
                    Earnings
                
                
                1,118Total
                    stockholders' equity
                
                
                1,062$
                9,183
 The
          accompanying notes are an integral part of these financial
          statments.
  3
  
 **LAPIS
                  TECHNOLOGIES, INC. AND SUBSIDIARY****CONSOLIDATED
                  STATEMENTS OF INCOME****(In
                  Thousands, Except Earnings Per Share and Share Amounts)**Nine
                  Months Ended
              
              Three
                  Months EndedSeptember
                  30,
              
              September
                  30,2007
              
              2006
              
              2007
              
              2006Sales
              
              $
              6,372
              
              $
              5,028
              
              $
              2,238
              
              
              1,401Cost
                  of sales
              
              
              4,639
              
              
              3,596
              
              
              1,447
              
              
              1,162Gross
                  profit
              
              
              1,733
              
              
              1,432
              
              
              791
              
              
              239Operating
                  expenses:Research
                  and development expenses
              
              
              221
              
              
              232
              
              
              22
              
              
              118Selling
                  expenses
              
              
              151
              
              
              73
              
              
              24
              
              
              8General
                  and administrative
              
              
              948
              
              
              905
              
              
              305
              
              
              342Total
                  operating expenses
              
              
              1,320
              
              
              1,210
              
              
              351
              
              
              468Income
                  from operations
              
              
              413
              
              
              222
              
              
              440
              
              
              (229
              )Other
                  income (expense):Other
                  income
              
              
              -
              
              
              6
              
              
              -
              
              
              (3
              )Interest
                  expense, net
              
              
              (306
              )
              
              (267
              )
              
              (111
              )
              
              (92
              )Income
                  before provision for income taxes and minority interest
              
              
              107
              
              
              (39
              )
              
              329
              
              
              (324
              )Provision
                  for income taxes
              
              
              7
              
              
              136
              
              
              7
              
              
              53Minority
                  interest
              
              
              5
              
              
              (24
              )
              
              57
              
              
              (52
              )Net
                  income(loss)
              
              
              95
              
              
              (151
              )
              
              265
              
              
              (325
              )Other
                  comprehensive (loss) income, net of taxesForeign
                  translation (loss) gain
              
              
              163
              
              
              21
              
              
              172
              
              
              (38
              )Comprehensive
                  (loss) income
              
              $
              258
              
              $
              (130
              )
              $
              437
              
              $
              (363
              )Basic
                  net loss per share
              
              $
              0.01
              
              $
              (0.02
              )
              $
              0.04
              
              $
              (0.05
              )Basic
                  weighted average common shares outstanding
              
              
              6,483,000
              
              
              6,483,000
              
              
              6,483,000
              
              
              6,483,000
 
 The
        accompanying notes are an integral part of these financial
        statments.
  4
 **CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****(In
                    Thousands)**Nine
                    Months EndedSeptember
                    30,2007
                
                2006Cash
                    flows from operating activities:Net
                    income
                
                $
                58
                
                $
                (151
                )Adjustments
                    to reconcile net income to net cashprovided
                    by (used in) operating activities:Depreciation
                    and amortization
                
                
                92
                
                
                69Minority
                    interest
                
                
                20
                
                
                (10
                )Gain
                    on sale of property and equipment
                
                
                -
                
                
                (10
                )Deferred
                    income tax
                
                
                (1
                )
                
                (1
                )Change
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                392
                
                
                519Inventories
                
                
                (1,172
                )
                
                (296
                )Prepaid
                    expenses and other current assets
                
                
                35
                
                
                (193
                )Accounts
                    payable and accrued expenses
                
                
                (83
                )
                
                (333
                )Income
                    tax payable
                
                
                -
                
                
                -Customer
                    deposits
                
                
                -
                
                
                -Severance
                    payable
                
                
                4
                
                
                4Net
                    cash provided by (used in) operating activities
                
                
                (655
                )
                
                (402
                )Cash
                    flows from investing activities:Proceeds
                    from the sale of property & equipment
                
                
                -
                
                
                68Purchase
                    of property and equipment
                
                
                (70
                )
                
                (123
                )Increase
                    in due from stockholder
                
                
                170
                
                
                4(Increase)
                    decrease in due from affiliates
                
                
                (100
                )
                
                36Net
                    cash used in investing activities
                
                
                -
                
                
                (15
                )Cash
                    flows from financing activities:Increase
                    in bank line of credit, net
                
                
                (195
                )
                
                (129
                )Proceeds
                    from long term debt
                
                
                4,661
                
                
                3,365Repayment
                    of long-term debt
                
                
                (3,899
                )
                
                (2,791
                )Net
                    cash (used in) provided by financing activities
                
                
                567
                
                
                445Effects
                    of exchange rates on cash
                
                
                167
                
                
                4Increase
                    (decrease) in cash
                
                
                79
                
                
                31Cash,
                    beginning of period
                
                
                7
                
                
                78Cash,
                    end of period
                
                $
                86
                
                $
                109Supplemental
                    disclosure of cash flow information:Cash
                    paid during the period for:Interest
                
                $
                306
                
                $
                175Income
                    taxes
                
                $
                31
                
                $
                80
 The
          accompanying notes are an integral part of these financial
          statments.
 5




LAPIS
      TECHNOLOGIES, INC. AND SUBSIDIARIES


NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (In
        Thousands, Except Per Share Amounts)
 September
        30, 2007
 
 
 NOTE
        1 -
        DESCRIPTION OF BUSINESS
 
 Lapis
        Technologies, Inc. (the “Company”) was incorporated in the State of Delaware on
        January 31, 2002. The Company was originally named Enertec Electronics, Inc.
        and
        on April 23, 2002 changed its name to Opal Technologies, Inc. which changed
        its
        name to Lapis Technologies, Inc. on October 3, 2002. The Company’s operations
        are conducted through its wholly-owned Israeli Subsidiary, Enertec Electronics
        Ltd. (“Enertec”) and its majority owned Israeli subsidiary Enertec Systems 2001
        LTD (“Systems”). Enertec is engaged in the manufacturing, distribution and
        marketing of electronic components and products relating to power supplies,
        converters and related power conversion products, automatic test equipment,
        simulators and various military and airborne systems, within the State of
        Israel.
 
 NOTE
        2 -
        BASIS OF PRESENTATION AND CONSOLIDATION
 
 The
        accompanying unaudited consolidated financial statements and related footnotes
        have been prepared in accordance with accounting principles generally accepted
        in the United States of America for interim financial statements and pursuant
        to
        the rules and regulations of the Securities and Exchange Commission for Form
        10-QSB. Accordingly, they do not include all of the information and footnotes
        required by accounting principles generally accepted in the United States
        of
        America for complete financial statements. In the opinion of management,
        all
        adjustments (consisting of normal recurring accruals) considered necessary
        for a
        fair presentation have been included. For further information read the financial
        statements and footnotes thereto included in the Company's Annual Report
        to be
        filed in accordance with the rules and regulations of the Securities and
        Exchange Commission on Form 10-KSB for the year ended December 31, 2006.
        The
        results of operations for the nine, six and three months ended September
        30,
        2007 are not necessarily indicative of the operating results that may be
        expected for the year ending December 31, 2007.
 
 The
        accompanying financial statements include the accounts of the Company and
        their
        ownership interest in its subsidiaries. All significant intercompany balances
        and transactions have been eliminated in consolidation.
 
 NOTE
        3 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Stock
        based compensation
 
 The
        Company has adopted Statement of Financial Accounting Statement (“SFAS”) No.
        148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS
        148”). SFAS 148 amends SFAS No. 123 “Accounting for Stock-Based Compensation”
(“SFAS 123”), and provides alternative methods of transition for a voluntary
        change to the fair value based method of accounting for stock-based employee
        compensation. The Company has adopted the fair value method of accounting
        as
        discussed in SFAS 123 as of January 1, 2003. Accordingly, stock options,
        when
        issued, will be recorded in accordance with the terms of that
        document.
 
 Use
        of
        Estimates
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and the disclosure of contingent assets and liabilities
        at the date of the financial statements and revenues and expenses during
        the
        reporting period. Actual results could differ from those
        estimates.
 6
 
 LAPIS
        TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (In
        Thousands, Except Per Share Amounts)
 SEPTEMBER
        30, 2007
 
 
 
 NOTE
        3 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 Recent
        Accounting Pronouncements
 
 In
        December 2004, FASB issued Statement No. 123 (revised 2004), “Share-Based
        Payment” (SFAS 123 (revised 2004), effective for public entities that file as
        small business issuers as of the beginning of the first interim or annual
        reporting period that begins after December 15, 2005. This Statement is a
        revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation,”
and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,”
and its related implementation guidance. SFAS 123 (revised 2004) eliminates
        the
        alternative to use Opinion No. 25’s intrinsic value method of accounting that
        was provided in Statement 123 as originally issued. Under Opinion 25, issuing
        stock options to employees generally resulted in recognition of no compensation
        cost. This Statement requires entities to recognize the cost of employee
        services received in exchange for awards of equity instruments based on the
        grant-date fair value of those awards (with limited exceptions). Recognition
        of
        that compensation cost helps users of financial statements to better understand
        the economic transactions affecting an entity and to make better resource
        allocation decisions. The Company is required to adopt Statement 123 (revised
        2004) as of January 1, 2006, and does not expect this statement to have a
        material effect on its results of operations.
 
 In
        May
        2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a
        Replacement of APB Opinion No. 20 (Accounting Changes) and FASB No. 3 (Reporting
        Accounting Changes in Interim Financial Statements),” that changes requirements
        for the accounting for and reporting of a change in accounting principle.
        This
        Statement requires retrospective application to prior periods’ financial
        statements of changes in accounting principle unless it is impracticable
        to
        determine either the period-specific effects or the cumulative effect of
        the
        change. When it is impracticable to determine the period-specific effects
        of an
        accounting change on one or more individual prior periods presented, this
        Statement requires that the new accounting principle be applied to the balances
        of assets and liabilities as of the beginning of the earliest period for
        which
        retrospective application is practicable and that a corresponding adjustment
        be
        made to the opening balance of retained earnings (or other appropriate
        components of equity or net assets in the statement of financial position)
        for
        that period rather than being reported in an income statement. When it is
        impracticable to determine the cumulative effect of applying a change in
        accounting principle to all prior periods, this Statement requires that the
        new
        accounting principle be applied as if it were adopted prospectively from
        the
        earliest date practicable.
 
 Statement
        154 is effective for accounting changes and error corrections made in fiscal
        years beginning after December 15, 2005 (calendar year 2006). Early adoption
        is
        permitted.
 7
 
 LAPIS
        TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (In
        Thousands, Except Per Share Amounts)
 SEPTEMBER
        30, 2007
 
 
 
 NOTE
        3 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 Recent
        Accounting Pronouncements
 
 In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
        for Financial Assets and Financial Liabilities—Including an Amendment of FASB
        Statement No. 115.” This Standard allows entities to voluntarily choose, at
        specified election dates, to measure many financial assets and financial
        liabilities (as well as certain non-financial instruments that are similar
        to
        financial instruments) at fair value. The election is made on an
        instrument-by-instrument basis and is irrevocable. If the fair value option
        is
        elected for an instrument, the Statement specifies that all subsequent changes
        in fair value for that instrument shall be reported in earnings. SFAS No.
        159 is
        effective for ATMI beginning on January 1, 2008. We are currently
        evaluating the impact this new Standard could have on our financial position
        and
        results of operations.
 
 
 NOTE
        4 -
        PROVISION FOR INCOME TAXES -
  The
        income tax expense for the nine, six and three months ended September 30,
        2007
        is based upon the income tax laws of Israel. Israeli tax law does not allow
        a
        parent company to offset its’ income with losses from any of its subsidiaries.
  8


**Item
      2.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





This
      Report contains forward-looking statements within the meaning of Section 27A
      of
      the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
      1934. These statements relate to future events or our future financial
      performance. In some cases, you can identify forward-looking statements by
      terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
      "believe," "estimate," "predict," "potential" or "continue," the negative of
      such terms, or other comparable terminology. These statements are only
      predictions. Actual events or results may differ materially from those in the
      forward-looking statements as a result of various important factors. Although
      we
      believe that the expectations reflected in the forward-looking statements are
      reasonable, such should not be regarded as a representation by Lapis
      Technologies, Inc., or any other person, that such forward-looking statements
      will be achieved. The business and operations of Lapis Technologies, Inc. and
      its subsidiaries are subject to substantial risks, which increase the
      uncertainty inherent in the forward-looking statements contained in this Report.





The
      following discussion and analysis should be read in conjunction with the
      Consolidated Financial Statements and related notes included elsewhere in this
      Report.





**Overview**





We
      were
      formed in Delaware on January 31, 2002 under the name Enertec Electronics,
      Inc.
      and have filed two certificates of amendment changing our name to Opal
      Technologies, Inc. and then to Lapis Technologies, Inc. We conduct operations
      in
      Israel through our wholly owned subsidiary, Enertec Electronics Limited
      ("Enertec Electronics"), an Israeli corporation formed on December 31, 1991,
      and
      Enertec Systems 2001 LTD ("Enertec Systems"), an Israeli corporation formed
      on
      August 28, 2001, of which we have a 73% equity interest. Enertec Electronics
      is
      a distributor of electronic components and products relating to power supplies,
      converters and related power conversion products. Enertec Systems designs,
      develops and manufactures airborne, shipborne and land military electronic
      equipment, automatic test systems as well as various other military electronic
      products for manufacturers of defense systems in accordance with their
      specifications.





*Liquidity
      and Capital Resources*





Our
      cash
      balance at September 30, 2007 has decreased compared to the cash balance at
      September 30, 2006, with cash and cash equivalents of $86,000 as of September
      30, 2007 compared to $109,000 at September 30, 2006. Total current assets at
      September 30, 2007 were $8,883,000 as compared to $6,446,000 at September 30,
      2006. The increase in current assets is mainly due to increase in accounts
      receivable and an increase in work in process inventory.





Our
      accounts receivable at September 30, 2007 was $4,285,000, as compared to
      $3,193,000 at September 30, 2006.  This
      change in accounts receivable is primarily due to increase in sales .





As
      of
      September 30, 2007 our working capital was $1,569,000 as compared to $1,286,000
      at September 30, 2006. The increase in the working capital is primarily
      due to a greater increase in work in process and accounts receivable
      relative to the increase in accounts payable and the increase in banks debt.







The
      current portion of our short-term loans at September 30, 2007 totaled $192,000
      compared to $179,000 at September 30, 2006. Our total short-term loans amounted
      to $2,935,000 for the nine-month period ended September 30, 2006 as compared
      to
      $1,957,000 at September 30, 2006.




As
      of
      September 30, 2007, our total bank debt was $4,706,000 as opposed to $3,761,000
      at the end of September 30, 2006. These funds were borrowed as follows;
      $3,127,000 which includes the current portion of long term debt, as various
      short term bank loans due through 2007, $ 285,000 of long term debt due through
      March 2010, and $ 1,294,000 using our bank lines of credit. As a result we
      increased the amount borrowed for the nine months ended September 30, 2007
      by
      $945,000 as compared to the same period of 2006.





The
      increase in bank debt is mainly due to the increase in accounts receivables
      and
      the decrease in USD/Shekel exchange rate since the loans are in shekels. The
      USD/Shekel exchange rate decreased by 6.7% from 4.302 as of September 30, 2006
      to 4.013 as of September 30, 2007 .





As
      of
      September 30, 2007, we are current with all of our bank debt and compliant
      with
      all the terms of our bank debt.





9


*Financing
      Needs*




Although
      we currently do not have any material commitments for capital expenditures,
      we
      expect our capital requirements to increase over the next several years as
      we
      continue to develop and test our suite of products, increase marketing and
      administration infrastructure, and embark on developing in-house business
      capabilities and facilities. Our future liquidity and capital funding
      requirements will depend on numerous factors, including, but not limited to,
      the
      levels and costs of our research and development initiatives, the cost of hiring
      and training additional sales and marketing personnel to promote our products
      and the cost and timing of the expansion of our marketing efforts.





Based
      on
      our current business plan, we anticipate that our existing cash balances and
      cash generated from future sales will be sufficient to permit us to conduct
      our
      operations and to carry out our contemplated business plans for the next twelve
      months. However, management may undertake additional debt or equity financings
      to better enable Lapis to grow and meet its future operating and capital
      requirements. Currently, the only external sources of liquidity are our banks,
      and we may seek additional financing from them or through securities offerings
      to expand our operations, using new capital to develop new products, enhance
      existing products or respond to competitive pressures.





**Results
      of Operations**





**Three
      and Nine Months Ended September 30, 2007 Compared to Three and Nine Months
      Ended
      September 30, 2006**





Revenues
      for the three and nine months ended September 30, 2007 were $2,238,000 and
      $6,372,000 respectively, as compared to $1,401,000 and $5,028,000 for the three
      and nine months ended September 30, 2006, respectively. This represents an
      increase of $837,000, or 59.7% for the quarter ended September 30, 2007 and
      an
      increase of $1,344,000, or 26.7%, for the nine months ended September 30, 2007,
      when compared to the same periods of 2006.





The
      increase of 26.7% in revenues for the nine months ended September 2007 versus
      the same period for the prior year is mainly a result of the increase in sales
      during the second and third quarters  of
      2007
      as compared to the same period of 2006.




During
      this period we have started to deliver to our customers several new military
      products introduced during 2006 which are implemented by our customers into
      long
      term defense programs. The first prototypes of these products have completed
      the
      qualification tests programs and we have started to produce them in higher
      volume on our production lines.




The
      decrease in USD/Shekel exchange rate affects our business since the sales are
      in
      shekels. The average USD/Shekel decreased by 8% from 4.522 for the nine month
      period ended September 2006 to 4.163 for the nine month period ended September
      2007.





The
      increase of $837,000 (59.7%) in revenues for the three-months ended September
      30, 2007 as compared to the same period of 2006 is mainly a result of an
      increased number of products, part of our long term projects, started to be
      manufactured in higher quantities on the production lines, following the first
      units and prototypes made by the different engineering groups.





Gross
      profit totaled approximately $791,000 for the quarter ended September 30, 2007
      and $1,733,000 for the nine months ended September 30, 2007. For the three
      and
      nine months ended September 30, 2006, gross profit totaled $239,000 and
      $1,432,000, respectively.





Comparing
      the three-month period ended September 30, 2007 to the same period of 2006,
      gross profit increased by approximately $552,000, or 231%. For the nine-month
      period ended September 30, 2007, gross profit increased approximately $301,000,
      or 21%, compared to the same period of 2006. The increase in gross profits
      for
      the nine month period as compared to the same period of 2006 is primarily due
      to
      the increase in sales.




Gross
      profit as a percentage of sales was 35.3% for the three-month period ended
      September 30, 2007 as compared to 17.1 % for the same period of 2006 and for
      the
      nine-month period ended September 30, 2007, was 27.2% as compared to 28.5%
      for
      the same period of 2006.





The
      increase in gross profit as a percentage of sales for the three-month period
      ended September 30, 2007 as compared to the same period of 2006 is a result
      of:





1.
      The
      gross profit as a percentage of sales for the three-month period ended September
      30, 2006 was in particularly low mainly as a result
      of
      focusing on the delivery of first prototypes of several new products in the
      third quarter of 2006.The cost of a prototype includes high costs of development
      and tooling, resulting in a low profit margin.





2 *.* The
      gross profit as a percentage of sales for the three-month period ended September
      30, 2007 was in particularly high mainly as a result
      of
      focusing on the delivery of an increased number of serial products with higher
      profit margin and less prototypes with low profit margin.




3. The
      decrease in gross profit as a percentage of sales for the nine month period
      ended September 30, 2007 to the same period of 2006 is a result of increased
      cost of sales at Enertec Electronics due to the increased competition in the
      local market.  10




Total
      operating expenses are comprised of selling, general and administrative expenses
      and Research & Development. For the three months and nine months ended
      September 30, 2007, operating expenses totaled $351,000 and $1,320,000,
      respectively. This was a decrease of $117,000 (25%) when compared to the three
      month period and an increase of $110,000 (9.1%) compared to the nine-month
      periods ended September 30, 2006. The increase in operating expenses for the
      nine-month period as compared to the same period of 2006 is attributable mainly
      to the increase in selling expenses due to our increased marketing efforts,
      in
      particular in the second quarter of 2007, in order to maintain our position
      in
      the much more competitive environment during the last year and the decrease
      in
      USD/Shekel exchange rate since the operating expenses are in shekels. The
      average USD/Shekel decreased by 8% from 4.522b for the nine month period ended
      September 2006 to 4.163 for the nine month period ended September
      2007.





The
      decrease in operating expenses for the three month period as compared to the
      same period of 2006 is attributable mainly to the decrease in Research &
Development expenses of $96,000 and a decrease of about $37,000 in the General
      & Administrative expenses mainly due to the decrease in the cost of
      professional services, partly offset by an increase of about $ 16,000 in the
      selling expenses .





Our
      net
      income was $265,000 in the three months ended September 30, 2007 and $95,000
      in
      the nine months ended September 30, 2007. This compares to a net loss of
      $325,000 in the three months ended September 30, 2006 and $151,000 in the nine
      months ended September 30, 2006.




This
      represents an increase in the net income by $590,000, or 182%, comparing the
      three months ended September 30, 2007 to the three months ended September 30,
      2006, and an increase in the net income by $246,000, or (163%), comparing the
      nine months ended September 30, 2007 to the nine months ended September 30,
      2006.





The
      increase in the net income in the three-month period ended September 30, 2007
      was mainly due to an increase of $552,000 in gross profit, a decrease of
      $117,000 in the total operating expenses, a decrease of $46,000 in provision
      for
      tax partly offset by and an increase of $109,000 in the minority
      interest.





For
      the
      nine month period ending September 30th 2007, the increase in the net income
      is
      mainly due to an increase of $301,000 in gross profit and a decrease of $129,000
      in provision for tax, partly offset by an increase of $39,000 in interest
      expenses, an increase of $110,000 in operating expenses and an increase of
      $29,000 in the minority interest.





As
      of
      September 30, 2007, we had 2 customers that accounted for approximately 48.5%
      of
      the accounts receivable. For the nine months ended September 30, 2007,
      approximately 56.2% of our sales were to 2 customers.





**Research
      and Development Costs**





Research
      and development costs are part of operating expenses. Research and development
      costs for the three and nine months ended September 30, 2007 were $22,000 and
      $221,000, respectively. Research and development costs for the three and nine
      months ended September 30, 2006 were $118,000 and $232,000, respectively. ****





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off balance sheet arrangements that are reasonably likely to have
      a
      current or future effect on our financial condition, revenues, and results
      of
      operations, liquidity or capital expenditures.




**Critical
      Accounting Policies**





Concentration
      of Credit Risk - Concentrations of credit risk with respect to trade receivables
      are limited to customers dispersed primarily across Israel. All trade
      receivables are concentrated in the manufacturing and distribution of electronic
      components segment of the economy; accordingly the Company is exposed to
      business and economic risk. Although the Company does not currently foresee
      a
      concentrated credit risk associated with these trade receivables, repayment
      is
      dependent upon the financial stability of this segment of the
      economy.





Revenue
      Recognition and Customer Deposits - Revenue is recorded as product is shipped,
      the price has been fixed or determined, collectibility is reasonably assured
      and
      all material specific performance obligations have been completed. The product
      sold by the Company is made to the specifications of each customer; sales
      returns and allowances are allowed on a case-by-case basis, are not material
      to
      the financial statements and are recorded as an adjustment to sales. Cash
      payments received in advance are recorded as customer deposits.





Revenue
      relating to service is recognized on the straight-line basis over the life
      of
      the agreement, generally one year. For the three and six months ended September
      30, 2007 revenue relating to service contracts was less than one percent of
      net
      sales.





Financial
      Instruments - The carrying amounts of financial instruments, including cash
      and
      cash equivalents, accounts receivable, bank line of credit, short term bank
      loans and accounts payable and accrued expenses approximate fair value at
      September 30, 2007 because of the relatively short maturity of the instruments.
      The fair value of due from stockholder is not practical to estimate without
      incurring excessive cost and is carried at cost at September 30, 2007. The
      carrying value of the long-term debt approximate fair value at September 30,
      2007 based upon debt terms available for companies under similar
      terms.


Foreign
      Currency Translation - Lapis Technologies, Inc. has one wholly owned subsidiary,
      Enertec Electronics Limited, an Israeli corporation, and one majority owned
      subsidiary, Enertec Systems 2001 Ltd., an Israeli corporation. The assets and
      liabilities of the foreign subsidiaries are translated at current exchange
      rates
      and related revenues and expenses at average exchange rates in effect during
      the
      periods reported. Resulting translation adjustments, if material, are recorded
      as a separate component of accumulated other comprehensive income or
      loss.




**Item
      3.**  **Controls
      and Procedures.**





As
      of the
      end of the period covered by this report, we conducted an evaluation, under
      the
      supervision and with the participation of our Chief Executive Officer and Chief
      Financial Officer of our disclosure controls and procedures (as defined in
      Rule
      13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation,
      our Chief Executive Officer and Chief Financial Officer concluded that our
      disclosure controls and procedures are effective to ensure that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is: (1) accumulated and communicated to our management, including
      our Chief Executive Officer and Chief Financial Officer, as appropriate to
      allow
      timely decisions regarding required disclosure; and (2) recorded, processed,
      summarized and reported, within the time periods specified in the Commission's
      rules and forms. There was no change to our internal controls or in other
      factors that could affect these controls during our last fiscal quarter that
      has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.


11


**PART
      II**


**UPDATE
      BELOW SECTION AS NECESSARY**





**Item
      1.**  **Legal
      Proceedings.**




We
      are
      not a party to any pending legal proceeding, nor is our property the subject
      of
      a pending legal proceeding, that is not in the ordinary course of business
      or
      otherwise material to the financial condition of our business. None of our
      directors, officers or affiliates is involved in a proceeding adverse to our
      business or has a material interest adverse to our business.







**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds.**




Not
      applicable.





**Item
      3.**  **Defaults
      Upon Senior Securities.**





Not
      applicable.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





Not
      applicable.





**Item
      5.**  **Other
      Information.**





Not
      applicable.





**Item
      6.**  **Exhibits.**




**Exhibit
                Number**
            
            **Description**31.1
            
            Certification
                by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act.31.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act.32.1
            
            Certification
                by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code.32.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code.


12


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**LAPIS
                TECHNOLOGIES, INC.**Date:
                November 13, 2007
            By:
            /s/ Harry
                MundHarry
                MundChief
                Executive Officer, President
              and
                Chairman of the Board




Date:
                November 13, 2007
            By:
            /s/ Miron
                MarkovitzMiron
                MarkovitzChief
                Financial Officer, Chief Accounting
              Officer
                and Director


13