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, 2007
 
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
FOR THE TRANSITION PERIOD FROM __________ TO __________
 
COMMISSION FILE NUMBER ________________
 
LAPIS TECHNOLOGIES, INC.
(Name of small business issuer in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
27-0016420
(I.R.S. Employer Identification No.)
 
19 W. 34th Street, Suite 1008, New York, NY 10001
(Address of principal executive offices)

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

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

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
     3  
Item 2.       Management’s Discussion and Analysis or Plan of Operation
     9  
Item 3.       Controls and Procedures
     11  
 
      
PART II - OTHER INFORMATION
 
      
Item 1.       Legal Proceedings
     11  
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds
     12  
Item 3.       Defaults Upon Senior Securities
     12  
Item 4.       Submission of Matters to a Vote of Security Holders
     12  
Item 5.       Other Information
     12  
Item 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
 
$
80
  
Accounts receivable
   
3,735
 
Inventories
   
3,539
 
Prepaid expenses and other current assets
   
439
 
Due from stockholder
   
31
 
         
Total current assets  
    
7,824
 
         
Property and equipment, net
   
282
 
Deferred income taxes
   
21
 
         
   
$
8,127
  
         
LIABILITIES AND STOCKHOLDERS' EQUITY
       
         
Current Liabilities:
       
Bank line of credit
 
$
1,137
  
Short term bank loans
   
2,944
 
Current portion of term loans
   
181
 
Accounts payable and accrued expenses
   
2,270
 
Due to stockholder
   
-
 
Due to affilliates
   
116
 
Income taxes payable
   
-
 
         
Total current liabilities  
    
6,648
 
         
Term loans, net of current portion
   
314
 
Severance payable
   
83
 
         
 Total liabilities
   
7,045
 
         
Commitments and contingencies
       
         
Minority interest
   
362
 
         
Stockholders' 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
 
Additional paid-in capital
   
78
 
Accumulated other comprehensive loss
   
(142
)
Retained Earnings
   
778
 
         
Total 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 Ended
 
   
June 30,
 
   
2007
 
2006
 
Sales
 
$
4,134
  
$
3,627
  
Cost of sales
   
3,192
   
2,434
 
               
Gross profit
    
942
   
1,193
 
               
Operating expenses:
             
Research and development expenses
   
199
   
114
 
Selling expenses
   
127
   
65
 
General and administrative
   
643
   
563
 
               
Total operating expenses  
    
969
   
742
 
               
Income from operations
   
(27
)
  
451
 
               
Other income (expense):
             
Other income
   
-
   
9
 
Interest expense, net
   
(195
)
  
(175
)
               
Income (loss) before provision for income taxes and minority interest
    
(222
)
  
285
 
               
Provision for income taxes
   
-
   
83
 
Minority interest
   
(52
)
  
(28
)
               
Net income (loss)
   
(170
)
  
174
 
               
Other comprehensive (loss) income, net of taxes
             
Foreign translation (loss) gain
   
(9
)
  
59
 
               
Comprehensive (loss) income
 
$
(179
)
$
233
  
               
Basic net income (loss) per share
 
$
(0.03
)
$
0.03
  
 
              
Basic 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 Ended
 
 
 
June 30,
 
 
 
2007
 
2006
 
Cash flows from operating activities:
         
Net income
 
$
(170
)
$
174
  
Adjustments to reconcile net income to net cash
             
provided by (used in) operating activities:  
              
 Depreciation and amortization
   
48
   
39
 
 Minority interest
   
(52
)
  
37
 
 Gain on sale of property and equipment
   
-
   
(9
)
 Deferred income tax
   
1
   
-
 
Change in operating assets and liabilities:
             
Accounts receivable  
    
942
   
299
 
Inventories  
    
(570
)
  
(213
)
Prepaid expenses and other current assets  
    
(33
)
  
(237
)
Accounts payable and accrued expenses  
    
(460
)
  
(613
)
Income tax payable  
    
(2
)
  
-
 
Severence payable  
    
(1
)
  
2
 
Customer deposits  
    
-
   
-
 
               
Net cash provided by (used in) operating activities
   
(297
)
  
(521
)
               
Cash flows from investing activities:
             
Proceeds from the sale of property & equipment
   
-
   
70
 
Purchase of property and equipment
   
(31
)
  
(101
)
Increase in due to affilliates
   
(80
)
  
34
 
Increase in due to stockholder
   
(41
)
  
3
 
               
Net cash used in investing activities
   
(152
)
  
6
 
               
Cash flows from financing activities:
             
Increase in bank line of credit, net
   
(352
)
  
(286
)
Proceeds from long term debt
   
3,807
   
2,338
 
Repayment of long-term debt
   
(2,937
)
  
(1,655
)
               
Net cash (used in) provided by financing activities
   
518
   
397
 
               
Effects of exchange rates on cash
   
4
   
42
 
               
Increase (decrease) in cash
   
73
   
(76
)
Cash, beginning of period
   
7
   
78
 
               
Cash, end of period
 
$
80
  
$
2
  
               
Supplemental disclosure of cash flow information:
             
Cash paid during the period for:
             
Interest  
  
$
195
  
$
175
  
Income 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.
 
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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 Mund
 
Harry Mund
 
Chief Executive Officer, President
and Chairman of the Board
 
     
Date: August 13, 2007
 By:  
/s/ Miron Markovitz
 
Miron Markovitz
 
Chief Financial Officer, Chief Accounting
Officer and Director
 
13