**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 JUNE 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 August 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
            
            
            11Item
                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)**
  June
                      30,2007**ASSETS**Current
                      Assets:Cash
                      and cash equivalents
                  
                  $
                  80Accounts
                      receivable
                  
                  
                  3,735Inventories
                  
                  
                  3,539Prepaid
                      expenses and other current assets
                  
                  
                  439Due
                      from stockholder
                  
                  
                  31Total
                      current assets
                  
                  
                  7,824Property
                      and equipment, net
                  
                  
                  282Deferred
                      income taxes
                  
                  
                  21$
                  8,127**LIABILITIES
                      AND STOCKHOLDERS' EQUITY**Current
                      Liabilities:Bank
                      line of credit
                  
                  $
                  1,137Short
                      term bank loans
                  
                  
                  2,944Current
                      portion of term loans
                  
                  
                  181Accounts
                      payable and accrued expenses
                  
                  
                  2,270Due
                      to stockholder
                  
                  
                  -Due
                      to affilliates
                  
                  
                  116Income
                      taxes payable
                  
                  
                  -Total
                      current liabilities
                  
                  
                  6,648Term
                      loans, net of current portion
                  
                  
                  314Severance
                      payable
                  
                  
                  83Total
                      liabilities
                  
                  
                  7,045Commitments
                      and contingenciesMinority
                      interest
                  
                  
                  362Stockholders'
                      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
                  
                  
                  (142
                  )Retained
                      Earnings
                  
                  
                  778Total
                      stockholders' equity
                  
                  
                  720$
                  8,127
  3
 **LAPIS
            TECHNOLOGIES, INC. AND SUBSIDIARY** **CONSOLIDATED
              STATEMENTS OF INCOME** **(In
                Thousands, Except Earnings Per Share and Share Amounts)**
 Six
                      Months EndedJune
                      30,2007
                  
                  2006Sales
                  
                  $
                  4,134
                  
                  $
                  3,627Cost
                      of sales
                  
                  
                  3,192
                  
                  
                  2,434Gross
                      profit
                  
                  
                  942
                  
                  
                  1,193Operating
                      expenses:Research
                      and development expenses
                  
                  
                  199
                  
                  
                  114Selling
                      expenses
                  
                  
                  127
                  
                  
                  65General
                      and administrative
                  
                  
                  643
                  
                  
                  563Total
                      operating expenses
                  
                  
                  969
                  
                  
                  742Income
                      from operations
                  
                  
                  (27
                  )
                  
                  451Other
                      income (expense):Other
                      income
                  
                  
                  -
                  
                  
                  9Interest
                      expense, net
                  
                  
                  (195
                  )
                  
                  (175
                  )Income
                      (loss) before provision for income taxes and minority
                      interest
                  
                  
                  (222
                  )
                  
                  285Provision
                      for income taxes
                  
                  
                  -
                  
                  
                  83Minority
                      interest
                  
                  
                  (52
                  )
                  
                  (28
                  )Net
                      income (loss)
                  
                  
                  (170
                  )
                  
                  174Other
                      comprehensive (loss) income, net of taxesForeign
                      translation (loss) gain
                  
                  
                  (9
                  )
                  
                  59Comprehensive
                      (loss) income
                  
                  $
                  (179
                  )
                  $
                  233Basic
                      net income (loss) per share
                  
                  $
                  (0.03
                  )
                  $
                  0.03Basic
                      weighted average common shares outstanding
                  
                  
                  6,483,000
                  
                  
                  6,483,000
  4
  **LAPIS
            TECHNOLOGIES, INC. AND SUBSIDIARY**
 ****CONSOLIDATED
            STATEMENTS OF CASH FLOWS****
 ****(In
            Thousands)****
  Six
                      Months EndedJune
                      30,2007
                  
                  2006Cash
                      flows from operating activities:Net
                      income
                  
                  $
                  (170
                  )
                  $
                  174Adjustments
                      to reconcile net income to net cashprovided
                      by (used in) operating activities:Depreciation
                      and amortization
                  
                  
                  48
                  
                  
                  39Minority
                      interest
                  
                  
                  (52
                  )
                  
                  37Gain
                      on sale of property and equipment
                  
                  
                  -
                  
                  
                  (9
                  )Deferred
                      income tax
                  
                  
                  1
                  
                  
                  -Change
                      in operating assets and liabilities:Accounts
                      receivable
                  
                  
                  942
                  
                  
                  299Inventories
                  
                  
                  (570
                  )
                  
                  (213
                  )Prepaid
                      expenses and other current assets
                  
                  
                  (33
                  )
                  
                  (237
                  )Accounts
                      payable and accrued expenses
                  
                  
                  (460
                  )
                  
                  (613
                  )Income
                      tax payable
                  
                  
                  (2
                  )
                  
                  -Severence
                      payable
                  
                  
                  (1
                  )
                  
                  2Customer
                      deposits
                  
                  
                  -
                  
                  
                  -Net
                      cash provided by (used in) operating activities
                  
                  
                  (297
                  )
                  
                  (521
                  )Cash
                      flows from investing activities:Proceeds
                      from the sale of property & equipment
                  
                  
                  -
                  
                  
                  70Purchase
                      of property and equipment
                  
                  
                  (31
                  )
                  
                  (101
                  )Increase
                      in due to affilliates
                  
                  
                  (80
                  )
                  
                  34Increase
                      in due to stockholder
                  
                  
                  (41
                  )
                  
                  3Net
                      cash used in investing activities
                  
                  
                  (152
                  )
                  
                  6Cash
                      flows from financing activities:Increase
                      in bank line of credit, net
                  
                  
                  (352
                  )
                  
                  (286
                  )Proceeds
                      from long term debt
                  
                  
                  3,807
                  
                  
                  2,338Repayment
                      of long-term debt
                  
                  
                  (2,937
                  )
                  
                  (1,655
                  )Net
                      cash (used in) provided by financing activities
                  
                  
                  518
                  
                  
                  397Effects
                      of exchange rates on cash
                  
                  
                  4
                  
                  
                  42Increase
                      (decrease) in cash
                  
                  
                  73
                  
                  
                  (76
                  )Cash,
                      beginning of period
                  
                  
                  7
                  
                  
                  78Cash,
                      end of period
                  
                  $
                  80
                  
                  $
                  2Supplemental
                      disclosure of cash flow information:Cash
                      paid during the period for:Interest
                  
                  $
                  195
                  
                  $
                  175Income
                      taxes
                  
                  $
                  17
                  
                  $
                  80
  5
  LAPIS
          TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 (In
          Thousands, Except Per Share Amounts)
 JUNE
          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 six and three months ended June 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)
 JUNE
          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)
 JUNE
          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 six and three months ended June 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.
      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 30, 2007.





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 test systems, airborne, shipborne and land electronic
      equipment, as well as various other military electronic products for
      manufacturers of defense systems in accordance with their
      specifications.





Liquidity
      and Capital Resources





As
      of
      June 30,2007 our cash balance was $80,000 as compared to $2,000 at June 30,
      2006. Total current assets at June 30, 2007 were $7,824,000 as compared to
      $6,676,000 at June 30, 2006. The increase in current assets is mainly due to
      an
      increase in receivables and inventory.





Our
      accounts receivable at June 30, 2007 was $3,735,000, as compared to $3,413,000
      at June 30, 2006. This change in accounts receivable is primarily due to
      increase in sales





As
      of
      June 30, 2007 our working capital was $1,176,000 as compared to $ 1,893,000
      at
      June 30, 2006. The decrease in the working capital is due primarily to an
      increase in accounts payable due to an increase in our receivables and
      inventory.





The
      current portion of our short-term loans at June 30, 2007 totaled
      $181,000compared to $292,000 at June 30, 2006. Our total short-term loans
      amounted to $2,944,000 for the six-month period ended June 30, 2007 as compared
      to $1,751,000 at June 30, 2006.




As
      of
      June 30, 2007, our total bank debt was $ 4,576,000 as opposed to $ 3,747,000
      at
      the end of June 30, 2006. These funds were borrowed as follows:





$3,125,000
      which includes the current portion of long term debt, as various short term
      bank
      loans due through 2007, $ 314,000 of long term debt due through March 2010
      and $
      1,137,000 using our bank lines of credit. As a result we increased the amount
      borrowed for the six months ended June 30, 2007 by $ 829,000 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 4.3% from 4.44
      as of June 30, 2006 to 4.249 as of June 30 2007 .





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 June 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 Six Months Ended June 30, 2007 Compared to Three and Six Months Ended June
      30, 2006**





Revenues
      for the three and six months ended June 30, 2007 were $ 2,277,000_and $
      4,134,000_respectively, as compared to $1,633,000 and $3,627,000 for the three
      and six months ended June 30, 2006, respectively. This represents an increase
      of
      $644,000, or 39.4 % for the quarter ended June 30, 2007 and an increase of
      $
      507,000, or 14 %, for the six months ended June 30, 2007, when compared to
      the
      same periods of 2006. The increase of 14 % in revenues for the six months ended
      June 2007 versus the same period for the prior year is mainly a result of the
      increase in sales during the 2'nd quarter of 2007 as compared to the same period
      2006The increase of 39.4 % in revenues for the three-months ended June 30,
      2007
      as compared to the same period of 2006 is mainly due to the deliveries of
      several long term projects started during 2006 and the decrease in USD/Shekel
      exchange rate since the sales are in shekels. The average USD/Shekel exchange
      rate decreased by 9.6 % from 4.5895 for the six months period ended June 2006
      to
      4.150 for the period ended June 2007.





Gross
      profit totaled approximately $ 484,000 for the quarter ended June 30, 2007
      and $
      942,000 for the six months June 30, 2007. For the three and six months ended
      June 30, 2006, gross profit totaled $593,000 and $1,193,000, respectively.
      Comparing the three-month period ended June 30, 2007 to the same period of
      2006,
      gross profit decreased by approximately $ 109,000, or 18.4 %. For the six-month
      period ended June 30, 2007, gross profit decreased approximately $ 251,000,
      or
      21.0 %, compared to the same period of 2006. The decrease in gross profits
      is
      primarily due to the increase in cost of sales at higher percentage than the
      increase in sales.





At
      Enertec Systems the increase in cost of sales is primarily due to the focus
      during the last quarters on several new technologies projects with higher
      tooling cost, resulting in lower profit margins on the short term as well as
      a
      result of the increase in work in process and the increase in wages of the
      engineers and programmers as a consequence of the high demand for highly skilled
      engineers and programmers by the local high-tech industries.





At
      Enertec Electronics the lower profit margin is due to the increased competition
      in the local market and the need to compete with the continuously increasing
      volume of outsourcing to the far east.





Gross
      profit as a percentage of sales was 21.3 % for the three-month period ended
      June
      30, 2007 as compared to 36.3% for the same period of 2006 and for the six-month
      period ended June 30, 2007, was 22.8 % as compared to 32.9% for the same period
      of 2006.




The
      decrease in gross profit as a percentage of sales is a result of the increase
      in
      the cost of sales and lower profit margins.





For
      the
      three months and six months ended June 30, 2007, operating expenses totaled
      $
      504,000 and $ 969,000, respectively. This was an increase of $ 138,000 (37.7
      %)
      and $ 227,000 (30.6 %) when compared to the three and six-month periods ended
      June 30, 2006. The increase in operating expenses for the six-month period
      as
      compared to the same period of 2006 is attributable mainly to the increase
      in
      research and development, selling and General & Administrative
      expenses.





Selling
      expenses increased by $ 86,000 and $62,000 for the three months and six months
      period ended June 30, 2007 as compared to the same period in 2006. The increase
      in selling expenses is due mainly to our increased marketing efforts, in
      particular in the second quarter of 2007, in order to maintain our market share
      in the commercial field which became much more competitive during the last
      year.





The
      General & Administrative expenses increased by $ 66,000 and $80,000 for the
      three months and six months period ended June 30,2007 as compared to the same
      period in 2006. The increase is mainly due to increase in the legal &
consulting fees and the decrease in the USD/Shekel exchange rate since the
      G&A expenses are in Shekels.





Our
      net
      loss was $ 94,000 in the three months ended June 30, 2007 and $ 170,000 in
      the
      six months ended June 30, 2007. This compares to net income of $111,000 in
      the
      three months ended June 30, 2006 and $ 174,000 in the six months ended June
      30,
      2006. This represents a decrease in net income of $ 205,000, or 184.7 %,
      comparing the three months ended June 30, 2007 to the three months ended June
      30, 2006, and a decrease in net income of $ 344,000, or 197.7 %, comparing
      the
      six months ended June 30, 2007 to the six months ended June 30, 2006..The
      decrease in the profitability for the three-month period ended June 30, 2007
      and
      the six month period ending June 30, 2007 was mainly due to the decrease in
      the
      gross profit and the increase in the operating expenses.




10





As
      of
      June 30, 2007, we had 2 customers that accounted for approximately 59.9% of
      the
      accounts receivable. For the six months ended June 30, 2007, approximately
      54.2%
      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 six months ended June 30, 2007 were **$** 30,000
      and $ 199,000, respectively. Research and development costs for the three and
      six months ended June 30, 2006 were $44,000 and $114,000, 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 June
      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 June
      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 June 30, 2007. The carrying value
      of
      the long-term debt approximate fair value at June 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.





**PART
      II**


**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.




11




**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:
                August 13, 2007
            By:
            /s/ Harry
                MundHarry
                MundChief
                Executive Officer, President
              and
                Chairman of the Board




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




13