UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q





(Mark
one)


xQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
the quarterly period ended June 30, 2008


OR


oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the transition period from to




Commission
File No. 000-26271





FIRST
CAPITAL INTERNATIONAL, INC.


(Exact
name of registrant as specified in its Charter)




Delaware
            
            76-0582435(State
      or Other Jurisdiction of
      Incorporation or Organization)
            
            (I.R.S.
      Employer Identification No.)




5120
      WoodwaySuite
      9024Houston,
      Texas
            
            77056(Address of principal executive offices)
            
            (Zip
      Code)





(713)
      629-4866(Issuer’s
      Telephone Number, Including Area
Code)





Indicate
by check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchanged 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
 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 definition of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o  (Do
      not check if a smaller reporting company)
            Smaller
      reporting company  x


Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  Yes o No x





SEC1296
      (02-08)
              Potential persons who are to
      respond to the collection of information contained in this form arenot
      required to respond unless the form displays a currently valid OMB control
      number.





Number of
shares outstanding as of the close of business on August 13, 2008:





TITLE
      OF CLASS
            
            NUMBER
      OF SHARES OUTSTANDINGCommon
      Stock, $0.001 par value.
            
            36,809,671












TABLE OF CONTENTS





PART
I - FINANCIAL INFORMATION





Item 1.
            Unaudited Financial Statements
            F-1Item 2.
            Management's Discussion and Analysis of Financial
      Condition and Results of Operations
            1Item 3.
            Quantitative and Qualitative Disclosure about
      Market Risk
            7Item 4.
            Controls and Procedures
            7PART
      II - OTHER INFORMATIONItem 1.
            Legal Proceedings
            8Item 2.
            Unregistered Sales of Equity Securities and Use
      of
            8Item 3.
            Default Upon Senior
Securities
            8Item 4.
            Submission of Matters to a Vote of Security
      Holders
            8Item 5.
            Other Information
            8Item 6.
            Exhibits
            9SIGNATURES
            9




Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


__________





UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS





F-1
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.




TABLE
OF CONTENTS


__________





PageUnaudited
      Consolidated Financial Statements:Unaudited
      Consolidated Balance Sheets as of June 30, 2008 and December 31,
      2007
            F-3Unaudited
      Consolidated Statements of Operations for the three months and six months
      ended June 30, 2008 and 2007
            F-4Unaudited
      Consolidated Statement of Stockholders’ Deficit for the six months ended
      June 30, 2008
            F-5Unaudited
      Consolidated Statements of Cash Flows  for the six months ended June
      30, 2008 and 2007
            F-6Notes
      to Unaudited Consolidated Financial Statements
            F-7




F-2
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


CONSOLIDATED
BALANCE SHEETS


June
30, 2008 and December 31, 2007


__________





June
      30,
            
            
            December 31,2008
            
            
            2007(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            23,350
            
            
            $
            3,972Accounts
      receivable
            
            
            31,619
            
            
            
            54,823Employee
      receivables
            
            
            31,484
            
            
            
            25,978Due
      from related parties
            
            
            4,445
            
            
            
            3,892Total
      assets
            
            $
            90,898
            
            
            $
            88,665LIABILITIES AND
      STOCKHOLDERS’ DEFICITCurrent
      liabilities:Credit
      card obligations and line of credit
            
            $
            159,439
            
            
            $
            133,469Accounts
      payable and accrued liabilities
            
            
            177,870
            
            
            
            113,150Accrued
      interest payable to related parties
            
            
            147,238
            
            
            
            127,336Current
      portion of notes payable to related parties
            
            
            349,083
            
            
            
            274,600Convertible
      notes payable to related parties
            
            
            50,000
            
            
            
            50,000Convertible
      notes payable
            
            
            500,000
            
            
            
            500,000Deferred
      revenue
            
            
            126,199
            
            
            
            128,687Total
      current liabilities
            
            
            1,509,829
            
            
            
            1,327,242Notes
      payable to related parties, non-current
            
            
            523,700
            
            
            
            503,773Total
      liabilities
            
            
            2,033,529
            
            
            
            1,831,015Commitments
      and contingenciesStockholders’
      deficit:Preferred
      stock, $0.001 par value; 20,000,000 shareauthorized; 4,500,000
      shares issued and outstanding
            
            
            4,500
            
            
            
            4,500Common
      stock, $0.001 par value; 200,000,000 shares authorized;
      36,308,671 and 35,337,005 shares issued and outstanding at June 30, 2008
      and December 31, 2007, respectively
            
            
            36,309
            
            
            
            35,337Additional
      paid-in capital
            
            
            9,403,631
            
            
            
            9,337,726Accumulated
      deficit
            
            
            (11,381,806
            )
            
            
            (11,113,648
            )Subscription
      receivable
            
            
            (5,265
            )
            
            
            (6,265
            )Total
      stockholders’ deficit
            
            
            (1,942,631
            )
            
            
            (1,742,350
            )Total
      liabilities and stockholders’ deficit
            
            $
            90,898
            
            
            $
            88,665








The
accompanying notes are an integral part of these


unaudited
consolidated financial statements.





F-3
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS


For
the Three Months and Six Months Ended June 30, 2008 and 2007


__________





Three
      Months Ended
            
            
            Six
      Months EndedJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue:System
      sales
            
            $
            209,785
            
            
            $
            62,458
            
            
            $
            286,472
            
            
            $
            199,246Consulting
      services
            
            
            -
            
            
            
            -
            
            
            
            14,000
            
            
            
            -Total
      revenue
            
            
            209,785
            
            
            
            62,458
            
            
            
            300,472
            
            
            
            199,246Costs
      of sales:Cost
      of systems
            
            
            143,526
            
            
            
            36,986
            
            
            
            181,074
            
            
            
            116,621Cost
      of consulting services
            
            
            -
            
            
            
            -
            
            
            
            2,800
            
            
            
            -Total
      cost of sales
            
            
            143,526
            
            
            
            36,986
            
            
            
            183,874
            
            
            
            116,621Gross
      Margin
            
            
            66,259
            
            
            
            25,472
            
            
            
            116,598
            
            
            
            82,625Selling,
      general andadministrative
      expenses
            
            
            181,918
            
            
            
            180,419
            
            
            
            344,455
            
            
            
            535,828Loss
      from operations
            
            
            (115,659
            )
            
            
            (154,947
            )
            
            
            (227,857
            )
            
            
            (453,203
            )Other
      expense:Interest
      expense
            
            
            (21,084
            )
            
            
            (16,039
            )
            
            
            (40,301
            )
            
            
            (31,452
            )Net
      loss
            
            $
            (136,743
            )
            
            $
            (170,986
            )
            
            $
            (268,158
            )
            
            $
            (484,655
            )Basicand diluted net loss percommon share
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.01
            )
            
            $
            (0.01
            )Weighted
      average shares outstanding
            
            
            36,289,661
            
            
            
            32,943,506
            
            
            
            36,118,827
            
            
            
            32,903,533








The
accompanying notes are an integral part of these


unaudited
consolidated financial statements.





F-4
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


UNAUDITED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT


For
the Six Months Ended June 30, 2008


__________




Preferred
      Stock
            
            
            Common
      Stock
            
            
            
            
            
            
            
            
            
            
            
            TotalShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Additional
              Paid-In
              Capital
            
            
            Subscription
              Receivable
            
            
            Accumulated
              Deficit
            
            
            Stock-
              Holders’
              DeficitBalance at December 31, 2007
            
            
            4,500,000
            
            
            $
            4,500
            
            
            
            35,337,005
            
            
            $
            35,337
            
            
            $
            9,337,726
            
            
            $
            (6,265
            )
            
            $
            (11,113,648
            )
            
            $
            (1,742,350
            )Common stock issued for cash
            
            
            -
            
            
            
            -
            
            
            
            71,666
            
            
            
            72
            
            
            
            9,528
            
            
            
            -
            
            
            
            -
            
            
            
            9,600Amortization
      of employee option compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,277
            
            
            
            -
            
            
            
            -
            
            
            
            3,277Common
      stock issued as repayment of loan
            
            
            -
            
            
            
            -
            
            
            
            900,000
            
            
            
            900
            
            
            
            53,100
            
            
            
            -
            
            
            
            -
            
            
            
            54,000Payment
      of subscription receivable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,000
            
            
            
            -
            
            
            
            1,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (268,158
            )
            
            
            (268,156
            )Balance
      at June 30, 2008
            
            
            4,500,000
            
            
            $
            4,500
            
            
            
            36,308,671
            
            
            $
            36,309
            
            
            $
            9,403,631
            
            
            $
            (5,265
            )
            
            $
            (11,381,806
            )
            
            $
            (1,942,629
            )








The
accompanying notes are an integral part of these


unaudited
consolidated financial statements.





F-5
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS


For
the Six Months Ended June 30,


2008
and 2007


__________





June
      30,
            
            
            June
      30,2008
            
            
            2007Cash
      flows from operating activities:Net
      loss
            
            $
            (268,158
            )
            
            $
            (484,655
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      based compensation
            
            
            3,277
            
            
            
            231,619Changes
      in operating assets and liabilities:Accounts
      and Employee receivable
            
            
            17,698
            
            
            
            (38,632
            )Inventory
            
            
            -
            
            
            
            3,381Other
      current assets
            
            
            (553
            )
            
            
            -Accounts
      payable and accrued liabilities
            
            
            120,802
            
            
            
            91,075Deferred
      income
            
            
            (2,488
            )
            
            
            -Net
      cash used in operating activities
            
            
            (129,422
            )
            
            
            (197,212
            )Cash
      flows from financing activities:Payments
      of notes payable and long-term debtto
      related party
            
            
            (17,800
            )
            
            
            -Proceeds
      from notes payable and long-term debtto
      related party
            
            
            156,000
            
            
            
            71,000Proceeds
      from sale of common stock
            
            
            10,600
            
            
            
            41,360Net
      cash provided by financing activities
            
            
            148,800
            
            
            
            112,360Net
      increase/(decrease) in cash and cash equivalents
            
            
            19,378
            
            
            
            (84,852
            )Cash
      and cash equivalents, beginning of period
            
            
            3,972
            
            
            
            95,138Cash
      and cash equivalents, end of period
            
            $
            23,350
            
            
            $
            10,286Supplemental
      disclosure of cash flow information:Cash
      paid for interest
            
            $
            10,852
            
            
            $
            6,587


Cash
      paid for taxes
            
            $
            -
            
            
            $
            -Supplimental
      disclosure of non cash investing and financing activities:


Cashless
      exercise of options
            
            $
            54,000
            
            
            $
            -


Reduction
      of related party note in connectionwith
      option exercise
            
            $
            43,790
            
            
            $
            -


Reduction
      of accrued interest in connectionwith
      option exercise
            
            $
            10,210
            
            
            $
            -








The
accompanying notes are an integral part of these


unaudited
consolidated financial statements.





F-6
 Table of Contents




FIRST
CAPITAL INTERNATIONAL, INC.


NOTES
TO UNAUDITED CONSOLIDATED FINANCIALSTATEMENTS


__________





1.     Basis of Presentation and
Critical Accounting Policies





First
Capital International, Inc. (the “Company”), formerly Ranger/USA, Inc.,
incorporated as a Delaware Corporation on April 21, 1994 and assumed its current
name in August 1998 when new management took over the Company.




The
unaudited consolidated condensed financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted, pursuant to such rules and regulations. These unaudited
consolidated condensed financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto of First Capital
International, Inc. (the "Company") included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2007.




In
the opinion of management, the unaudited consolidated condensed financial
information included herein reflect all adjustments, consisting only of normal,
recurring adjustments, which are necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
interim periods presented. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be expected
for a full year or any other interim period.




Use
Estimates





The
preparation of 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, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates
and assumptions.





Principles of
Consolidation





The
consolidated condensed financial statements include the accounts of the Company
and its wholly owned subsidiary VIP Systems, Inc. after elimination of all
significant intercompany accounts and transactions.





2.     Going
Concern





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company suffered losses of $268,158 for the six months ended
June 30, 2008, has an accumulated deficit of $11,381,806 and a working capital
deficit of $1,418,931 at June 30, 2008. These conditions raise substantial doubt
as to the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. Management intends to finance these
deficits by selling its common stock.





3.     Convertible Note
Payable





On
March 24, 2006, the Company issued 2,500,000 restricted common shares at $0.20
per share (or 833,334 shares of restricted common stock at $0.60 after a
1-for-3  reverse split) to a sophisticated investor as collateral for
note payable bearing 0%  interest due on May 30, 2007. The agreement
allowed the investor to dispose of the shares, in part or full, prior to May 30,
2007.  The proceeds from any such disposal would reduce the principal
balance of $500,000. The promissory note is also secured by all assets of the
Company. In accordance with APB Opinion 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants, this instrument is accounted for as a
liability in the financial statements.  The note expired on May 30,
2007.  We are in default of this Note and a lawsuit has been formally
filed.  An extension is still under negotiation as of June 30,
2008.





F-7
 Table of Contents




4.     Notes Payable to Related
Parties




During
the six months ended June, 2008, the Company issued the following notes to
related parties:




During
2008, Alex Genin, our chief executive officer, made several loans to us under
six separate promissory notes for a total principal amount of $44,000 which bear
interest at the rate between 0% and 8% and which are due between January 2010
and April 2011.  No interest has been imputed due to the immateriality
of the amount. Three promissory notes originally due March 2008 bearing 7%
interest for a total principal amount of $8,000 were extended three years. Seven
promissory notes due between February 2008 and October 2008 were offset by an
option Mr. Genin exercised in January 2008.  The total principal and
interest paid on these notes are $43,790 and $10,210 respectively.  A
$9,000 note originally made in October 2007 was paid off.  None of
these notes were collateralized.




During
2008, Eastern Credit Limited, Inc., a company controlled by Alex Genin, our
chief executive officer, made a loan to us under an $18,000 promissory note
which bear interest at the rate of 7% and which is due February 2011. During the
same period, five notes maturing between January 2008 and March 2008 for a total
principal amount of $68,000 which bear interest at the rate ranging between 6%
and 7% were extended three years. A promissory note originally made in August
2006 bearing 8% interest for a total principal amount of $1,000 was paid
off.  None of these notes were collateralized.




During
2008, ECL Trading Co, Inc., a company controlled by Alex Genin, our chief
executive officer, made a loan to us under a $14,500 promissory note bearing 8%
interest and which is due February 2011.  A partial payment in the
amount of $4,000 was made on this note.  This note was not
collateralized.




During
2008, First National Energy Corporation, a company controlled by Alex Genin, our
chief executive officer, made a loan to us under a $20,000 promissory note
bearing 8% interest and which is due February 2010.  A partial payment
in the amount of $2,000 was made on this note.  This note was not
collateralized.




During
2008, Pacific Commercial Credit, Ltd., a company controlled by Alex Genin, our
chief executive officer, made loans to us under five separate promissory notes
for a total principal amount of $41,500 bearing 8% interest and which are due
between March and May 2011.  These notes were not
collateralized.




During
2008, a promissory note for $1,800 to Stromberg Development, a company owned by
Alex Genin, our chief executive officer, was paid off.




In
May 2008, one other director made a short term loan to us for a total principal
amount of $18,000 bearing 6% interest and which is due in 2008.  This
loan was not collateralized.





5.     Stock and Option
Transactions





During
the six months ended June 30, 2008, the company sold 71,666 shares of restricted
common stock to an investor for $9,600 based on the trading value of the stock
on the date of sale. An option to purchase 900,000 shares was exercised by one
of its directors for the value of the stock on the date of issue for proceeds of
$54,000.  The proceeds were then used to pay down the note payable and
accrued interest to the director. Four options to purchase up to 260,000 shares
expired.  The company granted eight options to purchase up to
1,130,000 shares at $0.06 per share to its employees during the same
period.  These options are exercisable effective May 1, 2010 through
July 1, 2010 contingent upon the employees still being employed at the exercise
date. For the six months ended June 30, 2008, the Company had stock based
compensation expense of $3,277.




F-8
 Table of Contents




6.     Subsequent
Events





During
July 2008, the company sold 501,000 shares of restricted common stock to
investors for $59,000 approximating the trading value of the stock on the sale
date.




F-9
 Table of Contents




PART I - FINANCIAL
INFORMATION




Item
1.    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Please see financial statements
beginning on page F-1




Item 2.   MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS





FORWARD-LOOKING
STATEMENT AND INFORMATION





We are
including the following cautionary statement in this Form 10-Q to make
applicable and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf of First Capital International, Inc. (the “Company”).
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, future events or performance and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements.





Our
expectations, beliefs and projections are expressed in good faith and we believe
that they have a reasonable basis, including without limitations, management's
examination of historical operating trends, data contained in our records and
other data available from third parties, but there can be no assurance that our
expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors and matters discussed elsewhere herein, the
following are important factors that, in our view, could cause actual results to
differ materially from those discussed in the forward-looking statements: our
ability to operate on a global basis; our  ability to effectuate and
successfully operate acquisitions, and new operations; our ability to obtain
acceptable forms and amounts of financing to fund current operations and planned
acquisitions; the political, economic and military climate in nations where we
may have interests and operations; the ability to engage the services of
suitable consultants or employees in foreign countries; and competition and the
ever-changing nature of the technology industry. We have no obligation to update
or revise these forward-looking statements to reflect the occurrence of future
events or circumstances.





The
following discussion should be read in conjunction with our unaudited
consolidated interim financial statements and related notes thereto included in
this quarterly report and in our audited consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contained in our Form 10-KSB for the year ended December
31, 2007. Certain statements in the following MD&A are forward looking
statements. Words such as "expects", "anticipates", "estimates" and similar
expressions are intended to identify forward looking statements. Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





The
Company's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States.





The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and
liabilities.  On an ongoing basis, we evaluate our
estimates.  We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances.  These estimates and assumptions provide a basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources.  Actual results may differ
from these estimates making it reasonably possible that a change in the
estimates could occur in the near term.





REVENUE
RECOGNITION





The
Company enters into two types of sales of VIP Systems: sales to end-users and
sales to resellers. Revenue on sales to end-users is recognized upon completion
of installation and testing of the system. Revenue on sales to resellers is
recognized either upon delivery of systems or for major long-term projects,
recognized upon completion of each phase of installation.


1
 Table of Contents




The
company entered into consulting services for power plant projects in Russia in
2007.  Revenue from these services are billed and recognized
monthly.





Payments
and advances received for future sales or installation of systems are deferred
until the delivery and/or installation is complete.  For major
long-term projects, revenue is recognized upon completion of each phase of
installation.





STOCK-BASED
COMPENSATION





Until
December 31, 2005, we accounted for employee stock options using the intrinsic
value method in accordance with Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees, and had adopted the
disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure.  Under the intrinsic value
method, we only recorded stock-based compensation resulting from options granted
at below fair market value.  Effective January 1, 2006, we adopted
SFAS No. 123R, “Share Based Payments”, which requires that we measure the cost
of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award, and recognize that cost over
the vesting period.





Valuation and Amortization Method— We estimate the fair value of stock options granted using the
Black-Scholes option-pricing formula and a single option award
approach.  This fair value is then amortized on a straight-line basis
over the requisite service periods of the awards, which is generally the vesting
period.





Expected Term— The expected
term represents the period that our stock-based awards are expected to be
outstanding and is determined based on historical experience of similar awards,
giving consideration to the contractual terms of the stock-based awards, vesting
schedules and expectations of future employee behavior as influenced by changes
to the terms of its stock-based awards.





Expected Volatility —Stock-based payments made prior to January 1, 2006 were accounted for
using the intrinsic value method under APB 25.  The fair value of
stock based payments made subsequent to December 31, 2005 is valued using the
Black-Scholes valuation method with a volatility factor based on our historical
stock trading history.





Risk-Free Interest Rate— We
base the risk-free interest rate used in the Black-Scholes valuation method on
the implied yield currently available on U.S. Treasury securities with an
equivalent term.





Estimated Forfeitures— When
estimating forfeitures, we consider voluntary termination behavior as well as
analysis of actual option forfeitures.





Compensation
expenses for Restricted Stocks issued to employees and others are calculated
based on the fair market value on the grant date.  We recognized
$3,277 stock-based compensation cost in the three months ended June 30, 2008 for
the options and there were 0 shares of restricted stock issued to employees and
others.





The
following description of our business, our financial position and results of
operations should be read in conjunction with our Unaudited Consolidated
Condensed Financial Statements and the Notes to Financial Statements contained
in this report on Form 10-Q.




RECENT
ACCOUNTING PRONOUNCEMENTS




The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on its results of operations,
financial position or cash flow.





INTRODUCTION





First
Capital International, Inc. (the “Company”), formerly Ranger/USA, Inc.,
incorporated as a Delaware Corporation on April 21, 1994, assumed its current
name in August 1998 when new management took over the Company.  At the
time new management assumed control, the Company had no existing operations, and
began implementation of a new business plan.  Beginning in 1998, the
Company’s original focus was the identification, acquisition and operation of
businesses serving or focused on Central and Eastern European
markets.  Since 2001, the Company has focused its operations on the
development of its “smart house” technology and markets for the Company’s new
home command center.


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References
to First Capital International, Inc. in this Form 10-Q include First Capital
International, Inc. and our wholly-owned subsidiary VIP Systems, Inc., which is
a home automation and video surveillance solutions firm.





At the
annual meeting of the stockholders held on July 14, 2006, the stockholders
approved a 1-for-3 reverse split.  The effect of our reverse split is
reflected in all references to the price of our common stock and the audited
financial statements herein.





Our
principal executive offices are located at 5120 Woodway, Suite 9024, Houston,
Texas 77056; voice: (713) 629-4866 fax: (713) 629-4913. Our corporate web site
is at www.FirstCap.net.





We are
engaged in the design, production and sale of security system for homeland
security applications as well as home automation and video surveillance systems,
including highly sophisticated marine video surveillance
applications.  It is our intent to grow through the continued
development and marketing of this new and innovative technology.





Patents





In
October 2001, we filed a US patent application for our VIP Systems(TM) with
fully integrated software/hardware and began assembling units for Beta testing.
On September 30, 2003, we received Patent # US 6,628,510 for our VIP
Systems(TM).





We
developed an Industrial Security Solution (“Solution”) for complex industrial
projects including projects related to the oil and gas industry. This Solution
allows a client to monitor remote sites, record events on video and exercise
full control over any power units at the industrial site remotely. This system
can also be used as an anti-terrorist device to preclude unauthorized use of
important industrial equipments in case of a takeover attempt. We believe that
this Solution can be marketed through governmental agencies, as well as major
industrial companies. At the present time, we are looking into possible
alliances in order to market this product worldwide.





In
January 2004, we filed an application for a patent with the U.S. Patent Office
for use of our technology in a manner that addresses issues of the new Air Sea
Ground Defense System ("ASGDS") with Active Control Link. This new ASGDS
technology allows an air/sea and/or ground control center to actually see inside
an aircraft or ship when it is still in the air/open sea and allow the ground
center to take control of the respective aircraft/ship in the event of a
hijacking attempt or other terrorist attempts to take over an airplane/ship. In
cooperation with the US Coast Guard and the Port of Houston Authorities, we
successfully completed the pilot project and installed a Marine Security System
on one of the MARAD’s military vessels at the Port of Houston. The presentation
of this technology was held on October 12, 2004 at the Port of Houston
facilities.





Our
second demonstration of our ASGDS was on May 11, 2006. This event was hosted by
the Port of Houston Authority and US Department of Homeland Security. At this
event, we demonstrated our technology, fully integrated with the satellite
broadband service and the new DefendIR camera system, manufactured by ICX,
Inc.   In June 2006, we signed an exclusive two year contract to
market ICX cameras in the former Soviet Union countries.





In the
first and second quarters of 2006, we had several meetings with the
representatives of Russian Government regarding our ASGDS and believe that good
opportunities exist in Russia for our security solutions, due to rapidly growing
business of LNG export from Russia to USA.





During
2007, we were acting as a consultant for URS Washington Group International to
develop power energy business opportunities in the Russian
Federation.  Currently, we continue developing market strategies for
URS Washington Group International in this area.





PROJECTS





During
2005-2006, we completed several security installations at Marriott Hotel Group
properties in Texas, Florida and Louisiana.   Our marketing
efforts with the Marriott Hotels allowed us to secure contracts to install video
surveillance systems in several Marriott Hotels in Florida and
Texas.  We are now working on much larger proposals for their new
“under construction” hotels.


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Projects
in Florida





In March
2005, we signed a contract with the Dinerstein Companies, a large real estate
developer, to provide basic home automation/security package for their mid-rise
project in Florida.  We expect to finalize our system installation for
this project during September to October 2008 and start some upsell
activities.





During
2007, we invested in our Florida operation and hired additional sales force in
Florida.   As a result, we have ongoing negotiations with several
hi-rise condo developers in Miami, Florida to market our technology solutions to
new hi-rise condo communities in Florida.  We also received contracts
to install home automation systems in high-end homes in the area and we will
continue to work on installation projects with several hotels in the area
including Marriott Hotels and Doubletree Hotels.





We are
bidding on several hi-rise commercial building projects in Florida and believe
that our efforts will bring contracts to provide CCTV/automation solutions for
these projects.  We believe our Florida operations are positioned to
bring substantial revenue for the company.





Projects
in Texas





We are
bidding on several high-rise condominium projects in the Houston and Miami area.
As a result, we signed an initial contract in August 2007 with a new luxury
high-rise complex in Houston to install security solution as well as to design
for the owners a new state-of-the-art “Concierge” Digital Living Automation
software.  This has created new opportunities for our home automation
solutions.   We are currently working on the software design and
planning to invest in marketing the “Concierge” concept into other
regions.  This hi-rise condo project will also be a good source for
the company’s revenue through upsell activities.





We are
also actively involved in Houston hotels installation projects, predominantly
Marriott Hotels as well as upscale residential projects in Houston.





Projects
in Russia





In May
2007, we signed an agreement with a major Russian electronic defense contractor,
OAO Ruselectronics.  Under this agreement, we will develop a marketing
strategy to sell our products for the Russian market and Ruselectronics will
provide the resources to complete the developed projects in
Russia.   We believe this forthcoming demonstration and support
from Ruselectronics and the recent interest in this technology from the members
of the Russian Congress and Senate will give us opportunities to implement this
technology jointly with Ruselectronics in the Russian Federation.





Since
December 2006, we have been working with URS, Washington Group Division, a U.S.
construction/defense company, to bring them opportunities for large projects in
Russia.  Washington Group is in the final negotiation stage with First
National Energy Corporation to build two new power plants in St. Petersburg,
Russia as well as several other gas generation and electrical power plants in
the Moscow region.  In May 2007, we signed a teaming agreement with
URS, Washington Group Division specifying that, if such contracts are obtained,
we will have exclusive rights to provide the design and installation of video
security systems, fire security systems and IT systems for these
projects.  These projects are currently in the funding stage and upon
successful funding of these projects, we expect to receive contracts relating to
security design and installation.





In
September 2007, we have signed a joint working agreement with Decisive Analytics
Corporation, a US defense system integrator.  We are working with them
on possibilities of implementing some of our technologies into their current
research product.  We are also working with them on possibilities on
designing complex security solutions for potential power plant projects in
Russia currently under development with URS, Washington Group
Division.





Other
International Projects





We are
currently bidding on a full security solution project in Equatorial Guinea for
Marathon Oil Company.  During 2007, we visited Equatorial Guinea and
surveyed a future job site.  As a result, we became very familiar with
the project and believe we can complete should we be awarded the
project.  We are also currently considering alliances with several
companies in the Middle East to capitalize on the rapid growth in the
region.


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Trade
Shows





To build
awareness and demand for our VIP Systems, we have participated in a number of
key trade shows, including:





●
            International
      Security Conference in Brussels, Belgium in February
  2007;





●
            International
      Anti-Terrorist Security Conference in Moscow, Russia in November
      2006;





●
            Port
      of Houston Homeland Security Demonstration event using US Merchant Fleet
      ship – “New challenges for Port Security” in Houston, Texas in May
      2006;





●
            Houston
      Apartment Association Show in Houston, Texas in April
  2006;





●
            International
      Security Conference in Brussels, Belgium in February
  2006;





●
            US
      Department of Homeland Security Exhibit in Washington, DC in March
      2005;





●
            US
      Trade Mission and exhibit in Moscow, Russia in February
    2005;




GOING
CONCERN CONSIDERATION





Since we
began operations, we have been dependent on debt and equity raised from
individual investors and related parties to sustain our operations. We incurred
net losses of $268,158 during the six months ended June 30, 2008. We also had
negative cash flows from operations of $192,422 during the six months ended June
30, 2008. These factors and our history of recurring losses raise substantial
doubt about our ability to continue as a going concern. Our long-term viability
as a going concern is dependent upon three key factors as follows:





●
            Our
      ability to obtain adequate sources of debt or equity funding to meet
      current commitments and fund the continuation of our business
      operations;





●
            Our
      ability to acquire or internally develop viable businesses;
      and





●
            Our
      ability to ultimately achieve profitability and cash flows from operations
      in amounts that would sustain our
operations.





As a
result of potential liquidity problems, our auditors have added an explanatory
paragraph in their opinion on our financial statements for the years ended
December 31, 2007 and 2006, indicating that substantial doubt exists concerning
our ability to continue as a going concern.





Our
ability to achieve profitability depends on our ability to successfully develop
and market home automation and video security technology. We can give no
assurance that we will be able to achieve commercial success. We are subject to
all risks inherent in a growing venture, including the need to develop marketing
expertise and produce significant revenue. We may incur losses for the
foreseeable future due to the significant costs associated with home automation
and video security technology operations.





Recurring
losses have resulted in an accumulated deficit of $11,381,806 on June 30, 2008.
Revenues for the six months ended June 30, 2008 were $300,472 compared to
revenues of $199,246 for the three months ended June 30, 2007. The increase in
revenue is mainly attributable to recognition of revenues on completed major
long term projects during the second quarter ending June 30, 2008.





Our
losses were attributable primarily to the developmental stage of our business.
Our new focus has resulted in our further development of VIP Systems(TM) that
we feel will improve our operating results.  Although we believe that
our revenues will increase, and that we will ultimately be profitable, we can
provide no assurance that profitability will occur.


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COMPETITION





There are
presently several major competitors in the home automation industry. Many of our
competitors are more established companies with substantially greater capital
resources and substantially greater marketing capabilities than us. We cannot
give any assurances that we will be able to successfully compete in this
market.





RESULTS
OF OPERATION FOR THE THREE MONTHS ENDED JUNE 30, 2008 AS COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 2007





During
the three months ended June 30, 2008, our revenues were $209,785 as compared to
$62,458 for the three months ended June 30, 2007 because we were able to
recognize revenues on completed major long term projects.





During
the three months ended June 30, 2008, selling, general and administrative
expenses increased slightly by $1,500 or 1% to $181,918 as compared to the three
months ended June 30, 2007. This was mainly attributable to a decrease in
payroll expenses, decreased charges to stock and option compensation expense
offset by increases in rent, contracted and professional services and materials
and supplies  expenses.





During
the three months ended June 30, 2008, we had a net loss of $136,746 as compared
to a net loss of $170,972 in the three months ended June 30, 2007.




RESULTS
OF OPERATION FOR THE SIX MONTHS ENDED JUNE 30, 2008 AS COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2007





During
the six months ended June 30, 2008, our revenues were $300,472 as compared to
$199,246 for the six months ended June 30, 2007, due to our marketing
activities.





During
the six months ended June 30, 2008, selling, general and administrative expenses
decreased by $191,375 or 36% to $344,453 as compared to the six months ended
June 30, 2007. The net decrease was mainly attributable to
decreased  issuance of options to employees and management which
resulted in decreased charges to compensation expense and decreased travel and
entertainment expenses partially offset by an increase in professional fees and
rent expenses.





During
the six months ended June 30, 2008, we had a net loss of $268,158 as compared to
a net loss of $484,638 in the six months ended June 30, 2007.




LIQUIDITY
AND CAPITAL RESOURCES





As of
June 30, 2008, we had cash resources of $23,350. We estimate that during the
three months ending September 30, 2008, our cash requirements will be
approximately $180,000 (or approximately $60,000 per month). We believe that our
revenue-producing operations will expand. Such an expansion of operations will
require funding for pending contracts.  We anticipate raising
additional capital through the sale of our stock or through
borrowing.  Although we plan to obtain additional financing through
the sale of our common stock and by obtaining debt financing, there is no
assurance that capital will be available from any source, or, if available, upon
terms and conditions acceptable to us.





We
currently have no material commitments for capital expenditures for our U.S.
operations. We anticipate that the following expenditures will be made in 2008
if funds are available: $100,000 for continued development of our home
automation and video security business and $250,000 for marketing
expenses.





During
the six months ended June 30, 2008, we received $9,600 cash from the sale of our
securities and $1,000 in subscription receivables.





During
2008, we obtained loans from Alex Genin, our Chief Executive Officer and Acting
Chief Financial Officer and companies controlled or related to
him.  Mr. Genin is a significant stockholder of the
company.  The following is a summary of all the loan transactions
through June 30, 2008.


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 Table of Contents




United
Capital Group, a company controlled by Alex Genin, our chief executive officer
has several loans outstanding under 14 separate promissory notes bearing 8%
interest rate and maturing between March 2009 and December 2010.  None
of these notes were collateralized. As of June 30, 2008, the total principal
amount due on all notes to United Capital Group is $198,983.





During
2008, Alex Genin, our chief executive officer, made several loans to us under
six separate promissory notes for a total principal amount of $44,000 which bear
interest at the rate between 0% and 8% and which are due between January 2010
and April 2011.  No interest has been imputed due to the immateriality
of the amount. Three promissory notes originally due March 2008 bearing 7%
interest for a total principal amount of $8,000 were extended three years. Seven
promissory notes due between February 2008 and October 2008 were offset by an
option Mr. Genin exercised in January 2008.  The total principal and
interest paid on these notes are $43,790 and $10,210 respectively.  A
$9,000 note originally made in October 2007 was paid off.  None of
these notes were collateralized.  As of June 30, 2008, the total
principal amount due on all notes to Alex Genin is $255,600.





During
2008, Eastern Credit Limited, Inc., a company controlled by Alex Genin, our
chief executive officer, made a loan to us under an $18,000 promissory note
which bear interest at the rate of 7% and which is due February 2011. During the
same period, five notes maturing between January 2008 and March 2008 for a total
principal amount of $68,000 which bear interest at the rate ranging between 6%
and 7% were extended three years.  A promissory note originally made
in August 2006 bearing 8% interest for a total principal amount of $1,000 was
paid off.  None of these notes were collateralized. As of June 30,
2008, the total principal amount due on all notes to Eastern Credit Limited is
$229,300.





During
2008, ECL Trading Co, Inc., a company controlled by Alex Genin, our chief
executive officer, made a loan to us under a $14,500 promissory note bearing 8%
interest and which is due February 2011.  A partial payment in the
amount of $4,000 was made on this note.  This note was not
collateralized.  As of June 30, 2008, the total principal amount due
on all notes to ECL Trading is $10,500.





During
2008, First National Energy Corporation, a company controlled by Alex Genin, our
chief executive officer, made a loan to us under a $20,000 promissory note
bearing 8% interest and which is due February 2010.  A partial payment
in the amount of $2,000 was made on this note.  This note was not
collateralized.  As of June 30, 2008, the total principal amount due
on all notes to First National Energy Corporation is $18,000.





First
National Petroleum, Inc., a company controlled by Alex Genin, our chief
executive officer, has two outstanding promissory notes which bear interest at
the rate of 8% and are due April 2009 and June 2010. None of these notes were
collateralized.  As of June 30, 2008, the total principal amount due
on all notes to First National Petroleum is $14,500.





During
2008, Pacific Commercial Credit, Ltd., a company controlled by Alex Genin, our
chief executive officer, made loans to us under five separate promissory notes
for a total principal amount of 41,500 bearing 8% interest and which are due
between March and May 2011.  These notes were not
collateralized.  As of June 30, 2008, the total principal amount due
on all notes to Pacific Commercial Credit, Ltd. is $87,400.





Stromberg
Development, Inc., a company owned by Alex Genin, our chief executive officer,
had eight outstanding promissory notes made during 2007 which bear interest at
the rate of 8% and are due in three years between April 2010 and September
2010.  A promissory note for $1,800 was paid off in June
2008.  None of these notes were collateralized. As of June 30, 2008,
the total principal amount due on all notes to Stromberg Development, Inc. is
$40,500.





In May
2008, one other director made a short term loan to us for a total principal
amount of $18,000 bearing 6% interest and which is due in 2008.  This
loan was not collateralized.





Item 3.    QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Not
applicable.





Item 4.   CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





As of the
end of the period covered by this report on Form 10-Q, our Chief Executive
Officer and our Chief Financial Officer performed an evaluation of the
effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation,
our Chief Executive Officer and our Chief Financial Officer concluded that as of
the end of the period covered by this report on Form 10-Q, our disclosure
controls and procedures were effective in timely recording, processing,
summarizing and reporting material information required to be included in our
Exchange Act filings.


7
 Table of Contents




Changes
in Internal Control Over Financial Reporting





There were no changes in the Company’s internal control over
financial reporting that occurred during the most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, its
internal control over financial reporting for that period.








PART
II - OTHER INFORMATION





Item 1.   LEGAL PROCEEDINGS





On May
27, 2008, a lawsuit was filed against us by Virage Consulting at the US Southern
District Court of New York.  The issue arises from an option to
purchase 2,500,000 shares of our company for $500,000 by Virage Consulting in
2006.  The core issue was regarding the rights of Virage Consulting to
purchase share transaction with a subsequent promissory note from the company as
a secondary collateral for the purchased shares.  However, Virage
Consulting decided to exercise its option to convert and purchased the
shares.  The shares were issued and delivered to Virage Consulting at
their request.  We are currently still in negotiation with Virage
Consulting attorneys.





Item 2.  UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS





During
the six months ended June 30, 2008, we effected the following transactions in
reliance upon exemptions from registration under the Securities Act of 1933 as
amended as provided in Section 4(2) thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did we pay any commissions or fees to any underwriter in connection with any
of these transactions. None of the transactions involved a public offering. We
believe that each of these persons had knowledge and experience in financial and
business matters which allowed them to evaluate the merits and risk of the
purchase or receipt of these securities of the Company.  We believe
that each of these persons was knowledgeable about our operations and financial
condition.





1.  During
the six months ended June 30, 2008, we received $9,600 cash from an investor for
a total sale of 71,666 shares of our restricted common stock and $1,000 in
subscription receivables.  The market value of these issuances ranged
from $0.06 to $0.12 per share.





2.  During
the six months ended June 30, 2008, we granted eight options to purchase up to
1,130,000 shares of common stock to employees.  Four options to
purchase up to 260,000 shares expired in the same period,








Item 3.   DEFAULT UPON SENIOR
SECURITIES





On March
24, 2006, we issued 2,500,000 restricted common shares at $0.20 per share (or
833,334 shares of restricted common stock at $0.60 after a 1-for-3 reverse
split) to a sophisticated investor as a collateral for a note payable bearing
interest of 0% and due on May 30, 2007. The agreement allows the disposal of the
shares by the investor, in part or full, prior to May 30, 2007; and the proceeds
from such disposal would reduce the principal balance of $500,000. The
promissory note is also secured by all assets of the Company. In accordance with
APB Opinion 14, Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants, this instrument is accounted for as a liability in the
financial statements.  The note expired on May 30, 2007.  We
are in default of this note and a formal lawsuit has been filed by Virage
Consulting as described above in Item 1. An extension is still under negotiation
as of June 30, 2008.





Item 4.    SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS





None





Item 5.    OTHER INFORMATION





None


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 Table of Contents




Item
6.   EXHIBITS





Exhibit 31.1 - Certification of Chief Executive Officer
and Acting Chief Financial Officer of First Capital International, Inc. required
by Rule 13a - 14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.





Exhibit 32.1 - Certification of Chief Executive Officer
and Acting Chief Financial Officer of First Capital International, Inc. pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C.
63.





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.







First
      Capital International, Inc.Date:
            August
      14, 2008
            By:
            /s/
      Alex GeninAlex
      GeninChief
      Executive Officer andActing
      Chief Financial Officer andPrincipal
      Financial Officer




9