Filed by Automated Filing Services Inc. (604) 609-0244 - Viscount Systems, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from _______________________ to _____________________

Commission File Number: 000-49746

VISCOUNT SYSTEMS, INC.
(Name of Small Business Issuer in its charter)

Nevada	88-0498181
(state or other jurisdiction of	(I.R.S. Employer I.D. No.)
incorporation or organization)

4585 Tillicum Street, Burnaby, British Columbia, Canada V5J 5K9
(Address of principal executive offices)

(604) 327-9446
Issuer’s telephone number

_________________________________________________________________
Former name, former address, and former fiscal year, if changed since last report

Check whether the registrant (1) filed all reports required to be filed by sections 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 [ ]

Check whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.
Yes [ ] No [X]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest
practicable date: As of June 30, 2007 the registrant’s outstanding common stock consisted of 17,770,000
shares.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

PART I. FINANCIAL INFORMATION

Safe Harbor Statement

Certain statements in this filing that relate to financial results, projections, future plans, events, or performance are forward-looking statements and involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Terms such as “we believe”, “we expect” or “we project”, and similar terms, are examples of forward looking statements that we may use in this report. Such statements also relate to the sales trends of our Enterphone 2000, EPX, previously named Enterphone 3000, and MESH product lines, general revenues, income, the number of new construction projects or building upgrades that may generate sales of our product, and in general the market for our products. Any projections herein are based solely on management’s views, and were not prepared in accordance with any accounting guidelines applicable to projections. Accordingly, these forward looking statements are intended to provide the reader with insight into managements proposals, expectations, strategies and general outlook for our business and products, but because of the risks associated with those statements, including those described herein and in our annual report, readers should not rely upon those statements in making an investment decision. The Company's actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and the Company assumes no obligation to update such forward-looking statements.

The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein. Unless otherwise noted as USD or U.S. dollars, all dollar references herein are in Canadian dollars. As at June 30, 2007, the foreign exchange rate certified by the Federal Reserve Bank of New York was CAD$1.0000 for USD$0.9386.

Item 1. Financial Statements

VISCOUNT SYSTEMS, INC.

CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)

JUNE 30, 2007

VISCOUNT SYSTEMS, INC.
Interim Condensed Consolidated Balance Sheets
(Expressed in Canadian dollars)

		June 30,			December 31,
		2007			2006
		(Unaudited)			(Audited)

Assets

Current assets
Cash	$	211,290		$	134,552
Trade accounts receivable, less allowance for doubtful accounts
of $195,357 at June 30, 2006 (December 31, 2006 - $164,924)		818,321			887,587
Inventory (note 2)		747,304			792,551
Prepaid expenses		23,603			6,028
Lease receivable		1,002			1,045
Total current assets		1,801,520			1,821,763

Lease receivable		1,458			1,968

Equipment (note 3)		82,853			90,107

Intangible assets (note 4)		161,915			172,360

Total assets	$	2,047,746		$	2,086,198

Liablilities and stockholders' equity

Current liabilities
Bank indebtedness (note 5)	$	-		$	319,687
Accounts payable and accrued liabilities		475,635			455,928
Deferred revenue		30,542			28,491
Due to stockholders (note 6)		292,402			292,402
Notes payable (note 7)		190,000			235,000
Total current liabilities		988,579			1,331,508


Commitments and contingencies (note 10)

Stockholders' equity
Capital stock (note 8)
Authorized:
100,000,000 common shares with a par value of US$0.001 per share
20,000,000 preferred shares with a par value of US$0.001 per share
Issued and outstanding:
17,770,000 common shares (December 31, 2006 - 16,082,450)		25,363			23,675
Additional paid-in capital		2,215,565			1,907,432
Accumulated deficit		(1,181,761	)		(1,176,417	)
Total stockholders' equity		1,059,167			754,690

Total liabilities and stockholders' equity	$	2,047,746		$	2,086,198

Subsequent event (Note 12)

See accompanying notes to interim condensed consolidated financial statements.

VISCOUNT SYSTEMS, INC.
Interim Condensed Consolidated Statements of Operations
(Unaudited)
(Expressed in Canadian dollars)

		Three months ended						Six months ended
		June 30						June 30
		2007			2006			2007			2006


Sales	$	1,324,311		$	1,108,840		$	2,665,921		$	2,250,394
Cost of sales and services		544,474			560,216			1,108,756			1,042,761
Gross profit		779,837			548,624			1,557,165			1,207,633

Expenses
Selling, general and administrative		707,998			662,846			1,357,018			1,303,199
Research and development		81,475			115,753			159,828			222,783
Depreciation and amortization		8,749			9,434			17,699			19,256
		798,222			788,033			1,534,545			1,545,238

Income (loss) before other items		(18,385	)		(239,409	)		22,620			(337,605	)

Other items
Other income		1,321			879			1,942			1,708
Interest and bank charges		(11,640	)		(18,079	)		(29,906	)		(30,770	)
		(10,319	)		(17,200	)		(27,964	)		(29,062	)

Loss before income taxes		(28,704	)		(256,609	)		(5,344	)		(366,667	)

Provision for income taxes		-			-			-			-

Net loss	$	(28,704	)	$	(256,609	)	$	(5,344	)	$	(366,667	)

Basic net loss per common share	$	(0.00	)	$	(0.02	)	$	(0.00	)	$	(0.02	)

Diluted net loss per common share	$	(0.00	)	$	(0.02	)	$	(0.00	)	$	(0.02	)

Weighted average number of common shares outstanding,
Basic		17,486,742			16,080,644			16,784,596			16,078,516
Diluted		17,486,742			16,080,644			16,784,596			16,078,516

See accompanying notes to interim condensed consolidated financial statements.

VISCOUNT SYSTEMS, INC.
Interim Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(Expressed in Canadian dollars)

					Additional
	Common Stock				paid-in
	Shares		Amount		capital		Accumulated deficit			Total


Balance, January 1, 2007	16,082,450	$	23,675	$	1,907,432	$	(1,176,417	)	$	754,690

Stock issued for cash upon
exercise of stock options	10,000		10		1,326		-			1,336
Units issued for cash from private placement	1,677,550		1,678		306,807					308,485
Net loss							(5,344	)		(5,344	)

Balance, June 30, 2007	17,770,000	$	25,363	$	2,215,565	$	(1,181,761	)	$	1,059,167

See accompanying notes to interim condensed consolidated financial statements.

VISCOUNT SYSTEMS, INC.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

		2007			2006


Operating activities:
Net loss	$	(5,344	)	$	(366,667	)
Items not involving cash:
Depreciation and amortization		17,699			19,256
Selling, general and administrative expenses paid by stock options		-			9,770
Changes in non-cash working capital balances (note 9)		119,249			(126,434	)
Net cash provided by (used in) operating activities		131,604			(464,075	)

Investing activities:
Purchase of equipment		-			(8,555	)
Net cash used in investing activities		-			(8,555	)

Financing activities:
Proceeds from (repayment of) bank indebtedness		(319,687	)		356,928
Proceeds from exercise of stock options		1,336			4,057
Proceeds from private placement		308,485			-
Repayment of notes payable		(45,000	)		-
Net cash provided by (used in) financing activities		(54,866	)		360,985

Increase (decrease) in cash		76,738			(111,645	)

Cash, beginning of period		134,552			246,563

Cash, end of period	$	211,290		$	134,918


Supplementary information:
Interest paid	$	14,785		$	16,535
Income taxes paid	$	-		$	-

See accompanying notes to interim condensed consolidated financial statements.

VISCOUNT SYSTEMS, INC.

Notes to Interim Condensed Consolidated Financial Statements

(Unaudited)

(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

1.	Basis of presentation

	These unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with instructions for Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America for a complete set of annual financial statements. Readers of these statements should read the audited annual consolidated financial statements of the Company filed on Form 10-KSB for the year ended December 31, 2006 in conjunction therewith. Operating results for the periods presented are not necessarily indicative of the results that will occur for the year ending December 31, 2007 or for any other interim period.

	The financial information as at June 30, 2007 and for the six and three month periods ended June 30, 2007 and 2006 is unaudited; however, such financial information includes all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for the fair presentation of the financial information in conformity with accounting principles generally accepted in the United States of America. The accompanying condensed consolidated balance sheet as of December 31, 2006 has been derived from the audited consolidated balance sheet as of that date included in the Form 10- KSB.

VISCOUNT SYSTEMS, INC.

Notes to Interim Condensed Consolidated Financial Statements

(Unaudited)

(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

2.	Inventory

		June 30,		December 31,
		2007		2006

Raw materials	$	433,198	$	546,444
Work in process		149,140		60,000
Finished goods		164,966		186,107

	$	747,304	$	792,551

3.	Equipment

				Accumulated		Net book
June 30, 2007		Cost		depreciation		value

Computer equipment	$	110,838	$	81,293	$	29,545
Office furniture and equipment		77,269		30,855		46,414
Leasehold improvements		46,814		39,920		6,894

	$	234,921	$	152,068	$	82,853

VISCOUNT SYSTEMS, INC.

Notes to Interim Condensed Consolidated Financial Statements

(Unaudited)

(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

3.	Equipment (cont’d…)

				Accumulated		Net book
December 31, 2006		Cost		depreciation		value

Computer equipment	$	110,838	$	77,585	$	33,253
Office furniture and equipment		77,269		28,422		48,847
Leasehold improvements		46,814		38,807		8,007

	$	234,921	$	144,814	$	90,107

4.	Intangible assets

	On May 16, 2003, the Company consummated an agreement for the purchase of certain assets of Telus Corporation (“Telus”) comprised primarily of service agreements for a product sold by Telus known as “Enterphone 2000”. At December 31, 2003, the Company had acquired 2,215 service agreements for which it paid a total of $208,921. The cost of the service agreements was included in intangible assets. The service agreements were initially considered to have an indefinite life and were not amortized through March 31, 2005. The number of service agreements held by the Company decreased to 1,868 at December 31, 2004, 1,780 at December 31, 2005 and 1,705 at December 31, 2006. During fiscal 2005, and fiscal 2006, the Company performed a test for impairment in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) and evaluated the status of service agreements. Management determined that no charge for impairment was required but the continuing reduction in the number of service contracts held indicated that the intangible asset should be deemed to have a definitive life based on the provisions of SFAS 142. Accordingly, the Company began, effective as of April 1, 2005, to amortize the cost of the service agreements on a straight-line basis over an estimated useful life of 10 years. At June 30, 2007, the Company held 1,687 service agreements (December 31, 2006 – 1,705) at a cost, net of accumulated amortization of $47,006 (December 31, 2006 - $36,561), of $161,915 (December 31, 2006 - $172,360).

VISCOUNT SYSTEMS, INC.

Notes to Interim Condensed Consolidated Financial Statements

(Unaudited)

(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

5.	Bank indebtedness

	Bank indebtedness represents cheques written in excess of funds on deposit and amounts drawn under a bank credit facility available to a maximum of $500,000. Amounts outstanding under the bank credit facility bear interest at the bank’s prime lending rate plus 1% and are repayable on demand. The facility is secured by substantially all of the Company’s assets under a general security agreement. The Company is required to maintain a current ratio greater than 1.5:1, measured quarterly, and a debt to tangible net worth ratio less than 1.5:1, measured annually, under the terms of the demand facility agreement. For purposes of debt convent calculations, amounts due to stockholders are considered a component of equity and not a liability.

	During the year ended December 31, 2006, the bank required the Company to secure the credit facility by personal property of a significant shareholder.

6.	Due to stockholders

	Amounts due to stockholders are non-interest bearing, unsecured and have no fixed terms of repayment.

7.	Notes payable

	The notes payable to individuals bear interest at 8% per annum, are unsecured, and are due December 31, 2007. Principal prepayments are made at the discretion of the Board of Directors.

8.	Capital stock

	On April 16, 2007, the Company completed a private placement of 1,677,550 units at a price of US$0.16 per unit for gross proceeds of US$268,408. Each unit consists of one common share of the Company and one warrant. Each warrant entitles the holder to acquire one additional common share of the Company for US$0.25 per share until April 16, 2012.

VISCOUNT SYSTEMS, INC.

Notes to Interim Condensed Consolidated Financial Statements

(Unaudited)

(Expressed in Canadian dollars)

Six months ended June 30, 2007 and 2006

8.	Capital stock (cont’d…)

	Stock Options

	A summary of the stock option activity is as follows:

	Number of options		Weighted average
			Exercise price (US$)
Outstanding at January 1, 2007	3,117,550	$	0.28
Granted	-		-
Exercised	10,000		0.12
Expired/cancelled	-		-
Outstanding at June 30, 2007	3,107,550		0.28

As a result of the amendments to SFAS 123 (R), the Company was required to expense the fair value of employee stock options over the vesting period beginning with the quarter ended March 31, 2006 under the modified prospective transition method. The Company recorded the fair value of stock-based compensation expense from the amortization of stock options issued in prior periods to employees of $Nil (June 30, 2006 - $9,343) and recorded $Nil (June 30, 2006 - $427) relating to the fair value of stock options issued to non-employees, during the six months ended June 30, 2007. Total stock-based compensation of $Nil (June 30, 2006 - $9,770) has been recorded in selling, general and administration expenses in the condensed consolidated statement of operations for the six months ended June 30, 2007.

Warrants

A summary of warrant activity is as follows:

			Number of warrants			Weighted average