**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 MARCH 31,
                2006







o
            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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No
x





**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 May 8, 2006, 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
            1Item 2.
            Management’s
                Discussion and Analysis or Plan of Operation
            6Item 3.
            Controls
                and Procedures
            9**PART
                II - OTHER INFORMATION**Item 1.
            Legal
                Proceedings
            9Item 2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            9Item 3.
            Defaults
                Upon Senior Securities
            9Item 4.
            Submission
                of Matters to a Vote of Security Holders
            9Item 5.
            Other
                Information
            9Item 6.
            Exhibits
            9**SIGNATURES**
            10











**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS.**


**LAPIS
                  TECHNOLOGIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEET****(In
                  Thousands, Except Share Amounts)**
  **ASSETS**March
                  31,2006Current
                  Assets:Cash
                  and cash equivalents
              
              $
              15Accounts
                  receivable
              
              
              3,669Inventories
              
              
              2,326Prepaid
                  expenses and other current assets
              
              
              662Total
                  current assets
              
              
              6,672Property
                  and equipment, net
              
              
              307Deferred
                  income taxes
              
              
              16$
              6,995**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Bank
                  line of credit
              
              $
              1,641Short
                  term bank loans
              
              
              945Current
                  portion of term loans
              
              
              358Accounts
                  payable and accrued expenses
              
              
              1,910Due
                  to stockholder
              
              
              8Due
                  to affilliates
              
              
              68Income
                  taxes payable
              
              
              -Total
                  current liabilities
              
              
              4,930Term
                  loans, net of current portion
              
              
              672Severance
                  payable
              
              
              57Total
                  liabilities
              
              
              5,659Commitments
                  and contingenciesMinority
                  interest
              
              
              383Stockholders'
                  Equity:Preferred
                  stock; $.001 par value, 5,000,000 shares authorized, none issued
              
              
              -Common
                  stock; $.001 par value, 100,000,000 shares authorized, 5,483,000shares
                  issued and outstanding
              
              
              6Additional
                  paid-in capital
              
              
              78Accumulated
                  other comprehensive loss
              
              
              (137
              )Retained
                  Earnings
              
              
              1,006Total
                  stockholders' equity
              
              
              953$
              6,995
  The
        accompanying notes are an integral part of these financial
        statements.
 1
 **LAPIS
                    TECHNOLOGIES, INC. AND SUBSIDIARY****CONSOLIDATED
                    STATEMENTS OF INCOME****(In
                    Thousands, Except Earnings Per Share and Share Amounts)**
  Three
                    Months EndedMarch
                    31,2006
                
                2005Sales
                
                $
                1,994
                
                $
                1,665Cost
                    of sales
                
                
                1,394
                
                
                1,207Gross
                    profit
                
                
                600
                
                
                458Operating
                    expenses:Research
                    and development expenses
                
                
                70
                
                
                34Selling
                    expenses
                
                
                27
                
                
                23General
                    and administrative
                
                
                279
                
                
                284Total
                    operating expenses
                
                
                376
                
                
                341Income
                    from operations
                
                
                224
                
                
                117Other
                    income (expense):Interest
                    expense, net
                
                
                (87
                )
                
                (61
                )Income
                    before provision for income taxes and minority interest
                
                
                137
                
                
                56Provision
                    for income taxes
                
                
                56
                
                
                56Minority
                    interest
                
                
                18
                
                
                **(50**
                **)**Net
                    income
                
                
                63
                
                
                **50**Other
                    comprehensive (loss) income, net of taxesForeign
                    translation (loss) gain
                
                
                (16
                )
                
                (11
                )Comprehensive
                    (loss) income
                
                $
                47
                
                $
                39Basic
                    net loss per share
                
                $
                0.01
                
                $
                0.01Basic
                    weighted average common shares outstanding
                
                
                6,483,000
                
                
                5,483,000
   The
        accompanying notes are an integral part of these financial
        statements.
 2
 **LAPIS
                    TECHNOLOGIES, INC. AND SUBSIDIARY****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****(In
                    Thousands)**
  Three
                    Months EndedMarch
                    31,2006
                
                2005Cash
                    flows from operating activities:Net
                    income
                
                $
                63
                
                $
                50Adjustments
                    to reconcile net income to net cashprovided
                    by (used in) operating activities:Depreciation
                    and amortization
                
                
                21
                
                
                30Minority
                    interest
                
                
                15
                
                
                (61
                )Gain
                    on sale of property and equipment
                
                
                -Deferred
                    income tax
                
                
                -
                
                
                (1
                )Change
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                43
                
                
                151Inventories
                
                
                109
                
                
                (18
                )Prepaid
                    expenses and other current assets
                
                
                (286
                )
                
                (184
                )Accounts
                    payable and accrued expenses
                
                
                (309
                )
                
                2Income
                    tax payable
                
                
                -
                
                
                54Customer
                    deposits
                
                
                -
                
                
                54Net
                    cash provided by (used in) operating activities
                
                
                (344
                )
                
                77Cash
                    flows from investing activities:Purchase
                    of property and equipment
                
                
                (16
                )
                
                -Increase
                    in due from stockholder
                
                
                2
                
                
                (13
                )Net
                    cash used in investing activities
                
                
                (14
                )
                
                (13
                )Cash
                    flows from financing activities:Increase
                    in bank line of credit, net
                
                
                344
                
                
                (233
                )Proceeds
                    from long term debt
                
                
                760
                
                
                1,221Repayment
                    of long-term debt
                
                
                (794
                )
                
                (1,123
                )Net
                    cash (used in) provided by financing activities
                
                
                311
                
                
                (135
                )Effects
                    of exchange rates on cash
                
                
                (16
                )
                
                (10
                )Increase
                    (decrease) in cash
                
                
                (63
                )
                
                (81
                )Cash,
                    beginning of period
                
                
                78
                
                
                124Cash,
                    end of period
                
                $
                15
                
                $
                430Supplemental
                    disclosure of cash flow information:Cash
                    paid during the period for:Interest
                
                $
                34
                
                $
                61Income
                    taxes
                
                $
                51
                
                $
                22
  The
        accompanying notes are an integral part of these financial
        statements.
 3
 
  LAPIS
            TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 (In
            Thousands, Except Per Share Amounts)
 MARCH
            31,
            2006
 
 
 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, 2005.
            The
            results of operations for three months ended March 31, 2006 are not necessarily
            indicative of the operating results that may be expected for the year
            ending
            December 31, 2006.
 
 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.
  4
 
 LAPIS
            TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 (In
            Thousands, Except Per Share Amounts)
 MARCH
            31,
            2006
 
 
 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.
 
 NOTE
            4 -
            PROVISION FOR INCOME TAXES -
  The
            income tax expense for the three months ended March 31, 2006 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.


5


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**





This
      quarterly 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.
      Because these forward-looking statements involve risks and uncertainties, there
      are important factors that could cause actual results to differ materially
      from
      those expressed or implied by these forward-looking statements, including our
      plans, objectives, expectations and intentions and other factors discussed
      under
      "Risk Factors," included in our Registration Statement on Form 10-SB filed
      with
      the Securities and Exchange Commission on March 26, 2004.





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 manufacturer and distributor of electronic components and products relating
      to
      power supplies, converters and related power conversion products, automatic
      test
      equipment (ATE), simulators and various military and airborne systems. Enertec
      Electronics maintains two divisions, the Systems Division and the Electronics
      Division. The Systems Division designs, develops and manufactures test systems
      for electronics manufacturers in accordance with their specifications. The
      Electronics Division markets and distributes the test systems, power supplies
      and other electronic components manufactured by us, and by other manufacturers
      who engage us to distribute their products.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      March 31, 2006, our cash balance was $15,000 as compared to $43,000 at March
      31,
      2005. The decrease in cash balance was mainly due to the increase in the
      Company’s revenues. Total current assets at March 31, 2006 were $6,672,000 as
      compared to $5,723,000 at March 31, 2005. The increase in current assets is
      mainly due to the increase in accounts receivables.





Our
      accounts receivable at March 31, 2006 was $3,669,000 as compared to $2,393,000
      at March 31, 2005. This increase is attributable to the increase in the revenues
      and to the delivery of a large order in December 2005 in the amount of
      approximately $1,250,000.





As
      of
      March 31, 2006 our working capital was $1,742,000 as compared to $1,214,000
      at
      March 31, 2005. The increase in the working capital is mainly due to an increase
      in accounts receivables. Bank Leumi and Bank Hapoalim have extended us a
      combined total bank debt of $3,616,000 as opposed to $2,892,000 at March 31,
      2005. This debt is made up of a number of different components: short-term
      debt,
      long-term debt and in the form of lines of credit, which we use from time to
      time to satisfy our temporary cash flow needs.





The
      current portion of our term loans at March 31, 2006 consisted of $358,000
      compared to $151,000 at March 31, 2005. Our total short-term loans consisted
      of
      $945,000 for the period ended March 31, 2006.





6


At
      March
      31, 2006, our total bank debt was $3,616,000 as opposed to $2,892,000 at March
      31, 2005. These funds were borrowed as follows: $1,303,000 which includes the
      current portion of long term debt, as various short term bank loans due through
      2007, $672,000 of long-term debt due through March 2010 and $1,641,000 borrowed
      using our bank lines of credit. As a result, we increased the amount borrowed
      for the three-months ended March 31, 2006 by $724,000 from $2,892,000. The
      increase in bank debt is mainly due to the increase in account receivables.





There
      are
      no other lines of credit available to us to refinance our short-term bank loans.
      Additionally, we currently do not have any other sources of financing available
      to us for refinancing our short-term loans. As of March 31, 2006 we are current
      with all of our bank debt and compliant with all the terms of our bank debt.





**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. 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. At the present time,
      we
      do not have definitive plans to seek additional financing.





**RESULTS
      OF OPERATIONS**





**THREE
      MONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31,2005**





For
      the
      three-month period ended March 31, 2006 we had total revenue of $1,994,000
      compared to revenue of $1,665,000 for the three-month period ended March 31,
      2005. The increase in revenue of $329,000, or 19.8% is due to:





-
      Increased investment in marketing during the last two quarters of 2005;


-
      Several
      additional new products in the military division were introduced;
      and


-
      Our
      efforts to increase our sales to several new divisions at Rafael which we
      identified as the main client we would target in 2005.





As
      a
      result we were invited to bid on numerous projects which we won based on our
      competitive pricing and technology.





Gross
      profit totaled $600,000 for the three months ended March 31, 2006 as compared
      to
      $458,000 for the three months ended March 31, 2005, an increase of $142,000
      or
      31%. Gross profit as a percentage of sales for the three months ended March
      31,
      2006 was 30.1% as compared to 27.5% for the three months ended March 31, 2005.
      The increase in gross profit is primarily a result of higher revenues. The
      increase in gross profit as a percentage of sales is a result of receivables
      of
      several follow-up orders which have higher profit margins than new products.





Total
      operating expenses are comprised of selling, general and administrative expenses
      and R&D. Historically R&D costs were included in the cost of sales. The
      2005 first quarter financials have been re-classified accordingly to allow
      comparison. Operating expenses for the three-month periods ended March 31,
      2006
      and 2005 were $376,000 and $341,000, respectively, an increase of $35,000 or
      10.3%. The increase in operating expenses is primarily attributable to increased
      R&D expenses of $36,000. The increase of our R&D expenditures is a
      result of our strategic decision to develop new technologies which we expect
      will allow us to diversify our product lines and the creation of long term
      strategic alliances with several big military programs.





7


Our
      net
      income for the three-month period ended March 31, 2006 was $63,000 as compared
      to income of $50,000 in the three-month period ended March 31, 2005. This
      increase in net income in the amount of $13,000 or 26% is mainly due to the
      increase in the gross profit.




At
      March
      31, 2006, we had two customers that accounted for approximately 61.8% of
      accounts receivable. For the three-month periods ended March 31, 2006 and 2005,
      approximately 59.2% and 41% of our sales were to two customers, 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, 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-month periods ended March
      31,
      2006 and 2005 revenue relating to service contracts is less than one percent
      of
      net sales.





Research
      and Development Costs - Research and development costs are charged to general
      and administrative expense in the accompanying statement of income and consist
      of salaries. Research and development cost for the three months ended March
      31,
      2006 and 2005 were approximately $70,000 and $34,000, respectively.





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 March
      31, 2005 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 March 31, 2006. The carrying value
      of
      the long-term debt approximate fair value at March 31, 2006 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.







8





**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.





**PART
      II**





**ITEM
      1. LEGAL PROCEEDINGS.**





As
      of the
      date this report was filed, there was no material development in the legal
      proceedings reported in the Company’s annual report on Form 10-KSB for the
      fiscal year ended December 31, 2005.





**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 Act31.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act32.1
            
            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 Code32.2
            
            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







9


**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.**Dated:May
              15, 2006
            By:
            /s/
              Harry
              MundHarry MundChief
              Executive Officer, Presidentand Chairman of the
              Board


Dated:May
              15, 2006
            By:
            /s/
              Miron
              MarkovitzMiron MarkovitzChief
              Financial Officer, Chief AccountingOfficer and
              Director


10