**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 WASHINGTON,
        D.C. 20549
  **FORM
        10-Q**
  (Mark
        One)
  **x** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE**
 **ACT
        OF 1934**
  **FOR
        THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008.**
  *COMMISSION
        FILE NUMBER 000-10690*
  **LAPIS
                  TECHNOLOGIES, INC.**(Exact
                  Name of Registrant as Specified in its
                  Charter)
 
 Delaware
              
              27-0016420(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)
 
 19
                  W 34 Street, Suite 1008, New York, NY 10001(Address
                  of principal executive offices)(Zip
                  code)
  Issuer's
        telephone number: (212) 937-3580
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 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  ̈
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer, or a smaller reporting company.
        See
        the definitions of “large accelerated filer,” “accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act.
  Large
                  accelerated filer ̈
              Accelerated
                  filer ̈Non-accelerated
                  filer ̈
              Smaller
                  reporting companyx
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes  ̈ No x
  **APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS**
 **DURING
        THE PRECEDING FIVE YEARS**
  Indicate
        by check mark whether the registrant filed all documents and reports required
        to
        be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
        of securities under a plan confirmed by a court. Yes  ̈ No  ̈
  **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 October 31, 2008, there were 6,483,000
        outstanding shares of the Registrant's Common Stock, $.001 par
        value.
  
 
 **TABLE
        OF CONTENTS****TOBE
        REVISED**
 
 **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
              
              13**PART II - OTHER INFORMATION**Item 1.       Legal Proceedings
              
              13Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds
              
              13Item 3.       Defaults Upon Senior Securities
              
              14Item 4.       Submission of Matters to a Vote of Security Holders
              
              14Item 5.       Other Information
              
              14Item 6.       Exhibits
              
              14**SIGNATURES**
              
              14
  
  **PART
        I - FINANCIAL INFORMATION**
  **Item
        1.**  **Financial
        Statements.**
 
 **LAPIS
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          BALANCE SHEET**
 **(In
          Thousands, Except Share Amounts)**
 
 September 30,
                
                December 31,2008
                
                2007(unaudited)**ASSETS**Current
                    Assets:Cash
                    and cash equivalents
                
                $
                393
                
                $
                133Accounts
                    receivable
                
                
                6,146
                
                
                5,414Inventories
                
                
                4,937
                
                
                3,736Prepaid
                    expenses and other current assets
                
                
                210
                
                
                118Total
                    current assets
                
                
                11,686
                
                
                9,450Property
                    and equipment, net
                
                
                246
                
                
                267Deferred
                    income taxes
                
                
                22
                
                
                20$
                11,954
                
                $
                9,737**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    Liabilities:Bank
                    line of credit
                
                $
                1,347
                
                $
                1,362Short
                    term bank loans
                
                
                4,822
                
                
                3,907Current
                    portion of term loans
                
                
                225
                
                
                200Accounts
                    payable and accrued expenses
                
                
                3,472
                
                
                2,361Due
                    to stockholder
                
                
                (75
                )
                
                -Due
                    to affilliates
                
                
                118
                
                
                (97
                )Income
                    taxes payable
                
                
                -
                
                
                2Total
                    current liabilities
                
                
                9,909
                
                
                7,735Term
                    loans, net of current portion
                
                
                104
                
                
                247Severance
                    payable
                
                
                197
                
                
                176Total
                    liabilities
                
                
                10,210
                
                
                8,158Commitments
                    and contingenciesMinority
                    interest
                
                
                529
                
                
                448Stockholders'
                    Equity:Preferred
                    stock; $.001 par value, 5,000,000 shares authorized, none
                    issued
                
                
                -
                
                
                -Common
                    stock; $.001 par value, 100,000,000 shares authorized, 6,483,000
                    shares
                    issued and outstanding
                
                
                6
                
                
                6Additional
                    paid-in capital
                
                
                78
                
                
                78Accumulated
                    other comprehensive loss
                
                
                297
                
                
                92Retained
                    Earnings
                
                
                834
                
                
                955Total
                    stockholders' equity
                
                
                1,215
                
                
                1,131$
                11,954
                
                $
                9,737
 
 The
          accompanying notes are an integral part of these financial
          statements.
  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
                    30,2008
                
                2007
                
                2008
                
                2007Sales
                
                $
                7,613
                
                $
                6,372
                
                
                2,268
                
                $
                2,238Cost
                    of sales
                
                
                5,615
                
                
                4,639
                
                
                1,445
                
                
                1,447Gross
                    profit
                
                
                1,998
                
                
                1,733
                
                
                823
                
                
                791Operating
                    expenses:Research
                    and development expenses
                
                
                100
                
                
                221
                
                
                46
                
                
                22Selling
                    expenses
                
                
                124
                
                
                151
                
                
                109
                
                
                24General
                    and administrative
                
                
                1,330
                
                
                948
                
                
                270
                
                
                305Total
                    operating expenses
                
                
                1,554
                
                
                1,320
                
                
                425
                
                
                351Income
                    from operations
                
                
                444
                
                
                413
                
                
                398
                
                
                440Other
                    income (expense):Other
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -Interest
                    expense, net
                
                
                (392
                )
                
                (306
                )
                
                (147
                )
                
                (111
                )Income
                    before provision for income taxes and minority interest
                
                
                52
                
                
                107
                
                
                251
                
                
                329Provision
                    for income taxes
                
                
                -
                
                
                7
                
                
                -
                
                
                7Minority
                    interest
                
                
                40
                
                
                5
                
                
                23
                
                
                57Net
                    income
                
                
                12
                
                
                95
                
                
                228
                
                
                265Other
                    comprehensive (loss) income, net of taxesForeign
                    translation (loss) gain
                
                
                126
                
                
                163
                
                
                115
                
                
                172Comprehensive
                    (loss) income
                
                $
                138
                
                $
                258
                
                $
                343
                
                $
                437Basic
                    net loss per share
                
                $
                0.00
                
                $
                0.01
                
                $
                0.04
                
                $
                0.04Basic
                    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
          statements.
 
 4
  **LAPIS
          TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **(In
          Thousands)**
 
 Nine
                    Months EndedSeptember
                    30,2008
                
                2007Cash
                    flows from operating activities:Net
                    income
                
                $
                12
                
                $
                58Adjustments
                    to reconcile net income to net cash provided by (used in) operating
                    activities:Depreciation
                    and amortization
                
                
                68
                
                
                92Minority
                    interest
                
                
                81
                
                
                20Gain
                    on sale of property and equipment
                
                
                -
                
                
                -Deferred
                    income tax
                
                
                (2
                )
                
                (1
                )Change
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (732
                )
                
                392Inventories
                
                
                (1,201
                )
                
                (1,172
                )Prepaid
                    expenses and other current assets
                
                
                (92
                )
                
                35Accounts
                    payable and accrued expenses
                
                
                1,172
                
                
                (83
                )Income
                    tax payable
                
                
                (2
                )
                
                -Customer
                    deposits
                
                
                -
                
                
                -Severance
                    payable
                
                
                21
                
                
                4Net
                    cash provided by (used in) operating activities
                
                
                (675
                )
                
                (655
                )Cash
                    flows from investing activities:Proceeds
                    from the sale of property & equipment
                
                
                -
                
                
                -Purchase
                    of property and equipment
                
                
                (46
                )
                
                (70
                )Increase
                    in due from stockholder
                
                
                62
                
                
                170(Increase)
                    decrease in due from affiliates
                
                
                (51
                )
                
                (100
                )Net
                    cash used in investing activities
                
                
                (35
                )
                
                -Cash
                    flows from financing activities:Increase
                    in bank line of credit, net
                
                
                (15
                )
                
                (195
                )Proceeds
                    from long term debt
                
                
                5,519
                
                
                4,661Repayment
                    of long-term debt
                
                
                (4,722
                )
                
                (3,899
                )Net
                    cash (used in) provided by financing activities
                
                
                782
                
                
                567Effects
                    of exchange rates on cash
                
                
                189
                
                
                167Increase
                    (decrease) in cash
                
                
                260
                
                
                79Cash,
                    beginning of period
                
                
                133
                
                
                7Cash,
                    end of period
                
                $
                393
                
                $
                86Supplemental
                    disclosure of cash flow information:Cash
                    paid during the period for:Interest
                
                $
                392
                
                $
                306Income
                    taxes
                
                $
                16
                
                $
                31
 
 The
          accompanying notes are an integral part of these financial
          statements.
  5
  LAPIS
          TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 (In
          Thousands, Except Per Share Amounts)
 SEPTEMBER
          30, 2008
 
 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-Q. 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, 2007.
          The
          results of operations for the six and three months ended September 30,
          2008 are
          not necessarily indicative of the operating results that may be expected
          for the
          year ending December 31, 2008.
 
 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, 2008
 
 NOTE
          3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 Recent
          Accounting Pronouncements
 
 In
          July 2006, the FASB issued Interpretation No. 48, “Accounting for
          Uncertainty in Income Taxes – An Interpretation of FASB Statement 109,”
(“FIN 48”). FIN 48 prescribes a comprehensive model as to how a company should
          recognize, measure, present and disclose in its financial statements uncertain
          tax positions that the company has taken or expects to take on a tax return.
          The
          adoption of FIN 48 is effective January 1, 2007. The Company has determined
          there will be no effect on their financial statements.
  In
          June 2006, the FASB ratified the Emerging Issues Task Force
          (“EITF”) consensus on EITF Issue No. 06-2, “Accounting for Sabbatical
          Leave and Other Similar Benefits Pursuant to FASB Statement No. 43.” EITF
          Issue No. 06-2 requires companies to accrue the costs of compensated
          absences under a sabbatical or similar benefit arrangement over the requisite
          service period. EITF Issue No. 06-2 is effective for us beginning
          July 1, 2007. The cumulative effect of the application of this consensus on
          prior period results should be recognized through a cumulative-effect adjustment
          to retained earnings as of the beginning of the year of adoption. Elective
          retrospective application is also permitted. The application of this consensus
          won‘t have a material impact on our financial statements.
 
 In
          September 2006, the Financial Accounting Standards Board (“FASB”) issued
          SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
          Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
          132(R),” (“FAS 158”). Among other things, FAS 158 requires companies to
          prospectively recognize a net liability or asset and to report the funded
          status
          of their defined benefit pension and other postretirement benefit plans
          on their
          balance sheets, with an offsetting adjustment to accumulated other comprehensive
          income; such recognition will not affect the Company’s statement of income. The
          adoption of FAS 158 is effective for the year ending December 31, 2006. The
          Company has determined there will be no effect on their financial
          statements.
  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.
 
 In
          December 2007 the FASB issued SFAS No. 160 “Non-controlling Interests in
          Consolidated Financial Statements”. FAS 160 seeks to improve the relevance,
          comparability, and transparency of the financial information that a reporting
          entity provides in its consolidated financial statements by establishing
          accounting and reporting standards. This statement is effective for fiscal
          years
          beginning after December 15, 2008. The Company has not yet determined what
          the
          effect will be, if any, on their financial statements.
 
 7
  LAPIS
          TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 (In
          Thousands, Except Per Share Amounts)
 SEPTEMBER
          30, 2008
 
 NOTE
          3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
 
 Recent
          Accounting Pronouncements
 
 Management
          does not believe that any other recently issued, but not yet effective
          accounting pronouncements, if adopted, would have a material effect on
          the
          accompanying consolidated financial statements.
 
 NOTE
          4 – PROVISION FOR INCOME TAXES
  The
          income tax expense for the nine and three months ended September 30, 2008
          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.
  NOTE
          5 – SALE OF THE COMPANY
  On
            February 28, 2008, the Company entered into an agreement for the issue
            and sale
            of shares in Lapis Technologies, Inc. and the transfer of shares of Star
            Night
            Technologies Ltd. to the Company (the “Lapis SPA”), with Harry Mund and
            Mordechai Solomon (the “Investor”). Mr. Mund is the Company’s chief executive
            officer, director and majority stockholder.
 
 In
            connection with the Lapis SPA, on February 28, 2008, the Company’s indirect
            wholly owned subsidiary, Enertec Management Ltd. (“Enertec Management”) (which
            the Company owns through its direct wholly owned subsidiary Enertec Electronics
            Ltd.), entered into an agreement (the “Systems SPA”) for the sale and purchase
            of Enertec Systems 2001 Ltd., with Harry Mund and S.D.S. (Star Defense
            Systems)
            Ltd., a company that trades on the Tel Aviv Stock Exchange (“S.D.S.”) whose
            majority stockholder is Mordechai Solomon.
 
 In
            connection with the Lapis SPA and the Systems SPA, the Company also entered
            into, on February 28, 2008, an agreement with Mund Holdings Ltd., a company
            owned by Harry Mund, for the sale of the entire issued and outstanding
            share
            capital of Enertec Electronics Ltd. (the “Electronics SPA”).
 
 The
            Investor, on behalf of himself and SDS, verbally informed the Company
            and
            Enertec Management that the Investor and SDS will not complete the transactions
            contemplated by the
            Lapis
            SPA and the Systems SPA. The latter is evidenced by a report filed by
            SDS with
            the Tel Aviv Stock Exchange on September 10, 2008, to inform that it
            cancels the
            assembly of its general meeting scheduled for September 11, 2008 (the
            "Report").
            According to the Report, the assembly was cancelled pursuant to Mordechai
            Solomon's, a controlling shareholder in SDS, notice to SDS that the transactions
            contemplated by the Lapis SPA (and, as a result, the transactions contemplated
            by the Systems SPA) will not be completed.
 **
 Because
            the transactions contemplated by the Lapis SPA and the Systems SPA will
            not be
            completed, the Company will also not complete the transactions contemplated
            by
            the Electronics SPA.
 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-KSB filed
        with
        the Securities and Exchange Commission on March 31, 2008.
 
 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. We are manufacturers
        and distributors of various military and airborne systems, simulators, automatic
        test equipment (ATE), electronic components and products relating to power
        supplies, converters and related power conversion products.
  On
        February 28, 2008, we entered into an agreement for the issue and sale of
        shares
        in Lapis Technologies, Inc. and the transfer of shares of Star Night
        Technologies Ltd. to us (the “Lapis SPA”), with Harry Mund, and Mordechai
        Solomon (the “Investor”). Mr. Mund is the Company’s chief executive officer,
        director, and majority stockholder.
  9
  In
        connection with the Lapis SPA, on February 28, 2008, our indirect wholly
        owned
        subsidiary, Enertec Management Ltd. (“Enertec Management”) (which we own through
        our direct wholly owned subsidiary Enertec Electronics Ltd.), entered into
        an
        agreement (the “Systems SPA”) for the sale and purchase of Enertec Systems 2001
        Ltd., with Harry Mund, and S.D.S. (Star Defense Systems) Ltd., a company
        traded
        on the Tel Aviv Stock Exchange (“S.D.S.”) whose majority stockholder is
        Mordechai Solomon.
 
 In
        connection with the Lapis SPA and the Systems SPA, we also entered into,
        on
        February 28, 2008, an agreement with Mund Holdings Ltd., a company owned
        by
        Harry Mund, for the sale of the entire issued and outstanding share capital
        of
        Enertec Electronics Ltd. (the
        “Electronics SPA”).
  The
          Investor, on behalf of himself and SDS, verbally informed Enertec, the
          Company
          and Enertec Management that the Investor and SDS will not complete the
          transactions contemplated by the Lapis SPA and the Systems SPA. The latter
          is
          evidenced by a report filed by SDS with the Tel Aviv Stock Exchange on
          September
          10, 2008, to inform that it cancels the assembly of its general meeting
          scheduled for September 11, 2008 (the “Report”). According to the Report, the
          assembly was cancelled pursuant to Mordechai Solomon’s, a controlling
          shareholder in SDS, notice to SDS that the transactions contemplated by
          the
          Lapis SPA (and, as a result, the transactions contemplated by the Systems
          SPA) will not be completed.
 
 Because
          the transactions contemplated by the Lapis SPA and the Systems SPA will
          not be
          completed, the Company will also not complete the transactions contemplated
          by
          the Electronics SPA.
 
 *Liquidity
        and Capital Resources*
 
 As
        of
        September 30, 2008 our cash balance was $393,000 as compared to $86,000 at
        September 30, 2007. Total current assets at September 30, 2008 were $11,686,000
        as compared to $ 8,883,000at
        September 30, 2007. The increase in current assets is mainly due to increase
        in
        accounts receivable and an increase in work in process inventory.
 
 Our
        accounts receivables at September 30, 2008 were $6,146,000 as compared to
        $4,285,000, at September 30, 2007. This change in accounts receivable is
        primarily due to increase in sales and longer credit period we had to grant
        for
        a current big project following the customer request.
 
 As
        of
        September 30, 2008 our working capital was $1,777,000 as compared to $1,569,000
        at September 30, 2007. The increase in the working capital is due primarily
        to a
        greater increase in current assets than the increase in current liabilities.
 
 The
        current portion of our short-term loans at September 30, 2008 totaled $225,000
        as compared to $192,000 at September 30, 2007. Our total short-term loans
        amounted to $4,822,000 for the nine month period ended September 30, 2008
        as
        compared to $2,935,000 for the nine-month period ended September 30, 2007.
  As
        of
        September 30, 2008, our total bank debt was $6,498,000 as opposed to $4,706,000
        at the end of September 30, 2007. These funds were borrowed as
        follows:
 
 $5,047,000
        which includes the current portion of long term debt, as various short term
        bank
        loans due through 2009, $104,000 of long term debt due through March 2010
        and
        $1,347,000 using our bank lines of credit. As a result we increased the amount
        borrowed for the nine months ended September 30, 2008 by $1,792,000 compared
        to
        the same period in 2007. 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 14.75% from
        4.013 as of September 30, 2007 to 3.421 as of September 30, 2008.
  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 September 30, 2008, 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,
        other than as described in this report, 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.
  10
  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, 2008 Compared to Three and Nine Months
        Ended
        September 30, 2007**
 
 Revenues
        for the three and nine months ended September 30, 2008 were $2,268,000 and
        $7,613,000 respectively as compared to $2,238,000 and $6,372,000 for the
        three
        and nine months ended September 30, 2007, respectively. This represents an
        increase of $30,000 or 1.3% for the quarter ended September 30, 2008 and
        an
        increase of $1,241,000 or 19.5%, for the nine months ended September 30,
        2008,
        when compared to the same periods of 2007. The increase of 19.5% in revenues
        for
        the nine months period ended September 30, 2008 as compared to the same period
        of 2007 is mainly the result of the decrease in USD/Shekel exchange rate
        since
        the sales are in shekels. The average USD/Shekel exchange rate decreased
        by
        15.6% from 4.163 as of September 30, 2007 to 3.512 as of September 30,
        2008.
 
 Gross
        profit totaled approximately $823,000 for the quarter ended September 30,
        2008
        and $1,998,000 for the nine months ended September 30, 2008. For the three
        and
        nine months ended September 30, 2007, gross profit totaled $791,000 and
        $1,733,000 respectively. Comparing the three-month period ended September
        30,
        2008 to the same period of 2007, gross profit increased by approximately
        $32,000, or 4.0%. For the nine-month period ended September 30, 2008, gross
        profit increased approximately $265,000, or15.3%, compared to the same period
        of
        2007. The increase in gross profits is primarily due to the increase in
        sales.
 
 Gross
        profit as a percentage of sales was 36.3% for the three-month period ended
        September 30, 2008 as compared to 35.3% for the same period of 2007 and for
        the
        nine-month period ended September 30, 2008, was 26.2% as compared to 27.2%
        for
        the same period of 2007.
  The
        increase in gross profit as a percentage of sales for the three-month period
        ended September 30, 2008 as compared to the same period of 2007 is a result
        of
        lower cost of sale and higher profit margin for some projects delivered during
        the third quarter 2008 as compared to the same period 2007.
 
 The
        decrease in gross profit as a percentage of sales for the nine-month period
        ended September 30, 2008 as compared to the same period of 2007 is due to
        lower
        profit margins during the first quarter of 2008 as compared to the first
        quarter
        of 2007.
 
 For
        the
        three months and nine months ended September 30, 2008, operating expenses
        totaled $425,000 and $1,554,000 respectively. This was an increase of $74,000
        (21.1%) and $234,000 (17.7%) when compared to the three and nine-month periods
        ended September 30, 2007. The increase in operating expenses for the nine-month
        period as compared to the same period of 2007 is attributable mainly to the
        increase in General and Administrative expenses partly offset by the decrease
        in
        Research and Development and Selling expenses.
  Research
        and Development expenses increased by $24,000 for the three months period
        and
        decreased by $121,000 for the nine months period ended September 30, 2008
        as
        compared to the same period in 2007. The decrease in Research and Development
        expenses for the nine month period ended September 30, 2008 as compared to
        the
        same period in 2007 is the result of more manpower resources allocated during
        the first quarter of 2008 to the fulfillment of the increased number of orders
        received as compared to the same period 2007.
 
 Selling
        expenses increased by $85,000 and decreased by$ 27,000 for the three months
        and
        nine months period ended September 30, 2008 as compared to the same period
        in
        2007. The decrease in selling expenses during 2008 as compared to 2007 is
        the
        result of more manpower resources allocated during the first two quarter
        of 2008
        to the fulfillment of the increased number of orders received as compared
        to the
        same period 2007.
  11
  The
        General & Administrative expenses decreased by $35,000 and increased
        $382,000 for the three months and nine months period ended September 30,
        2008 as
        compared to the same period in 2007. The increase in the General &
Administrative expenses during the nine month period ended September 30,
        2008 as
        compared to the same period in 2007 is mainly due to the increase in the
        professional services and the decrease in USD/Shekel exchange rate since
        the
        G&A expenses are in shekels. The decrease in General and Administrative
        expenses during the three months ended September 30, 2008 as compared to
        the
        same period in 2007 is mainly due to the decrease in professional services
        during the third quarter of 2008, partly offset by the decrease in the
        USD/sheke/exchange rate since the General and Administrative expenses
        are in shekels. The average USD/Shekel exchange rate decreased by 15.6%
        from 4.163 as of September 30, 2007 to 3.512 as of September 30,
        2008.
  Our
        net
        income was $228,000 for the three months ended September 30, 2008 and $12,000
        in
        the nine months ended September 30, 2008. This compares to net income of
        $265,000 in the three months ended September 30, 2007 and $ 95,000 in the
        nine
        months ended September 30, 2007. This represents a decrease in net income
        of
        $37,000, or 14%, comparing the nine months ended September 30, 2008 to the
        nine
        months ended September 30, 2007, and a decrease in net income of $83,000,
        or
        87.4%, comparing the nine months ended September 30, 2008 to the nine months
        ended September 30, 2007.
 
 The
        decrease in the net income for the three-month and nine months period ended
        September 30, 2008 as compared to the same period in 2007, was mainly due
        a
        larger increase in the operating and interest expenses than the increase
        in the
        gross profit.
 
 As
        of
        September 30, 2008, we had 2 customers that accounted for approximately 67.5%
        of
        the accounts receivable. For the nine months ended September 30, 2008,
        approximately 66% 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, 2008 were $46,000
        and
        $100,000, respectively. Research and development costs for the three and
        nine
        months ended September 30, 2007 were $22,000 and $221,000, 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, collectability 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 months ended September 30,
        2008
        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, 2008 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, 2008. The
        carrying value of the long-term debt approximate fair value at September
        30,
        2008 based upon debt terms available for companies under similar
        terms.
  12
  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.**  **Quantitative
        and Qualitative Disclosures about Market Risk.**
 
 N/A.
 
 **Item
        4T.**  **Controls
        and Procedures.**
 
 **Evaluation
        of Disclosure Controls and Procedures**
  Our
        management is responsible for establishing and maintaining a system of
        disclosure controls and procedures (as defined in Rule 13a-15(e) under the
        Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to
        ensure that information required to be disclosed by the Company in the reports
        that we file or submit under the Exchange Act is recorded, processed, summarized
        and reported, within the time specified in the Security and Exchange
        Commission's rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed by an issuer in the reports that it files or submits
        under the Exchange Act is accumulated and communicated to the issuer's
        management, including its principal executive officer or officers and principal
        financial officer or officers, or persons performing similar functions, as
        appropriate to allow timely decisions regarding required
        disclosure.
  Pursuant
        to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation
        with the participation of the Company’s management, including Harry Mund, the
        Company’s Chief Executive Officer (“CEO”) and Miron Markovitz, the Company’s
        Chief Financial Officer (“CFO”), of the effectiveness of the Company’s
        disclosure controls and procedures (as defined under Rule 13a-15(e) under
        the
        Exchange Act) as of the period ended September 30, 2008. Based upon that
        evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure
        controls and procedures are effective to ensure that information required
        to be
        disclosed by the Company in the reports that the Company files or submits
        under
        the Exchange Act, is recorded, processed, summarized and reported, within
        the
        time periods specified in the SEC’s rules and forms, and that such information
        is accumulated and communicated to the Company’s management, including the
        Company’s CEO and CFO, as appropriate, to allow timely decisions regarding
        required disclosure.
  **Changes
        in internal controls**
  Our
        management, with the participation our CEO and CFO, performed an evaluation
        as
        to whether any change in our internal controls over financial
        reporting occurred during the quarter ended September 30, 2008.  Based
        on that evaluation, our CEO and CFO concluded that no change occurred in
        the
        Company's internal controls over financial reporting during the 2008 quarter
        ended September 30, 2008 that has materially affected, or is reasonably likely
        to materially affect, the Company's internal controls over financial
        reporting.
 
 **PART
        II- OTHER INFORMATION**
 
 **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
        1A. Risk Factors.**
 
 N/A.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
 
 N/A.
  13
  **Item
        3. Defaults Upon Senior Securities.**
 
 N/A.
  **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 N/A.
 
 **Item
        5. Other Information.**
 
 Not
        applicable.
  **Item
        6. Exhibits.**
 
 Exhibit
                Number
              
              Description31.1
              
              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
 
 **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 14, 2008
              By:
              /s/ *Harry
                  Mund*Harry
                    Mund
                Chief Executive Officer (principal executive
                  officer), President
                and
                  Chairman of the BoardDate:
                  November 14, 2008
              By:
              /s/ 
                  *Miron Markovitz*Miron
                    Markovitz
                Chief
                  Financial Officer, Chief Accounting
                Officer
                  and Director
  14