Lateral or Incomplete pass?

[FridayKnights]

Here the question.

It’s related to play I hate most in all of HSFB. It’s that pass to the wide out while he’s still near the line of scrimmage.

Here’s what happened. The wide out lines up split wide to the left side of the offense.

The ball is hiked and the wide out takes one step forward across the line of scrimmage, the QB takes one step back, turns to the left and throws to the receiver.

An on rushing d-lineman gets a hand out the tips the ball. The ball is deflected and lands about 1 yard behind the line of scrimmage close to the receiver. The d-lineman breaking through lands on the ball and recovers it.

The call on the field was that it was a lateral and a fumble recovered by the defense.

To me, the receiver was forward of the line of scrimmage the pass was to him, it was a tip ball that fell incomplete. My call is incomplete pass, offense retains possession with a loss of down.

Does anyone know the rule.

Thanks