UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q





(Mark one)


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





For the quarterly period ended March 31, 2009


OR


 TRANSITION 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 Woodway
Suite 9024
Houston, 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 ý No o





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  

Accelerated filer  Non-accelerated filer    (Do not check if a smaller reporting company)

Smaller reporting company  ý





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes oNo ý








Number of shares outstanding as of the close of business on May 12, 2009:





TITLE OF CLASS

NUMBER OF SHARES OUTSTANDINGCommon Stock, $0.001 par value.

36,809,671












TABLEOF CONTENTS








PART I - FINANCIAL INFORMATION





Item 1.
Unaudited Consolidated Financial Statements

F-1Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

1Item 3.
Quantitative and Qualitative Disclosures about Market Risk

6Item 4.
Controls and Procedures

7PART II - OTHER INFORMATIONItem 1.
Legal Proceedings

7Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

7Item 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




FIRSTCAPITAL INTERNATIONAL, INC.
 __________
 
 
 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  F-1
 Table of Contents
  FIRST CAPITAL INTERNATIONAL, INC.
 TABLE OF CONTENTS
 __________
 
 
 PageUnaudited Consolidated Financial Statements:Consolidated Balance Sheets as of March 31, 2009(Unaudited) and December 31, 2008
F-3Unaudited Consolidated Statements of Operations for the three months ended March 31, 2009 and 2008
F-4Unaudited Consolidated Statements of Cash Flows For the three months ended March 31, 2009 and 2008
F-5Notes to Unaudited Consolidated Financial Statements
F-6
  F-2
 Table of Contents
  FIRST CAPITAL INTERNATIONAL, INC.
 CONSOLIDATED BALANCE SHEETS
 March 31, 2009 and December 31, 2008
 __________
 
 March 31,


December 31,2009


2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
21,710


$
3,938Accounts receivable


168,519



16,247Employee receivables


4,771



11,786Due from related parties


4,771



4,910Total assets

$
199,771


$
36,881LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent liabilities:Credit cards obligations and line of credit

$
114,414


$
125,292Accounts payable and accrued liabilities


136,824



141,996Accrued interest payable to related parties


185,606



174,008Current portion of notes payable to related parties


37,941



68,314Current portion of notes payable


55,235



55,235Convertible notes payable to related parties


50,000



50,000Convertible notes payable


500,000



500,000Deferred revenue


230,935



155,025Total current liabilities


1,310,955



1,269,870Notes payable to related parties, non-current


759,183



742,083Total liabilities


2,070,138



2,011,953Commitments and contingenciesStockholders’ deficit:Preferred stock, $0.001 par value; 20,000,000 shares authorized; 4,500,000 shares issued and outstanding


4,500



4,500Common stock, $0.001 par value; 200,000,000 shares authorized; 36,809,671 and 36,809,671 shares issued and outstanding, respectively


36,810



36,810Additional paid-in capital


9,496,402



9,481,055Accumulated deficit


(11,408,079
)


(11,497,437
)Total stockholders’ deficit


(1,870,367
)


(1,975,072
)Total liabilities and stockholders’ deficit

$
199,771


$
36,881
 
 
 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 Ended March 31, 2009 and 2008
 (uanaudited)
 
 March 31,


March 31,2009


2008Revenue:System sales

$
403,511


$
76,687Consulting Services


-



14,000Total revenue


403,511



90,687Costs of sales:Cost of systems


128,879



37,548Cost of consulting services


-



2,800Total cost of sales


128,879



40,348Gross Margin


274,632



50,339Selling, general and administrative expenses


165,513



162,535Income/(loss) from operations


109,119



(112,196
)Other expense:Interest expense


(19,761
)


(19,217
)Net income/(loss)

$
89,358


$
(131,413
)Basic and diluted net income/(loss) per common share

$
0.00


$
(0.00
)Weighted average shares outstanding


36,809,671



35,947,994
 
 
 The accompanying notes are an integral part of these
 unaudited consolidated financial statements.
  F-4
 Table of Contents
  FIRST CAPITAL INTERNATIONAL, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31, 2009 and 2008
 (unaudited)
 
 March 31,


March 31,2009


2008Cash flows from operating activities:Net income/(loss)

$
89,358


$
(131,413
)Adjustments to reconcile net income (loss) to net cash    provided by (used in) operating activities:Stock based compensation


15,347



-Changes in operating assets and liabilities:Accounts receivable


(152,272
)


23,614Employee receivables


7,015



(3,998
)Other current assets


139



(1,730
)Credit Card Obligations


(10,878
)Accounts payable and accrued liabilities


(5,172
)


(7,073
)Accrued Interest


11,598Deferred Income


75,910



23,900Net cash provided by (used in) operating activities


31,045



(96,700
)Cash flows from financing activities:Payments of notes payable and long-term debt to related party


(15,773
)


(7,000
)Proceeds from notes payable and long-term debt to related party


2,500



102,500Proceeds from sale of common stock


-



5,000Net cash provided by (used in) financing activities


(13,273
)


100,500Net increase in cash and cash equivalents


17,772



3,800Cash and cash equivalents, beginning of period


3,938



3,972Cash and cash equivalents, end of period

$
21,710


$
7,772Supplemental disclosure of cash flow information:Cash paid for interest

$
8,164


$
14,779Cash paid for taxes

$
-


$
-Supplemental disclosure of non cash investing and financing activities:Cashless exercise of options

$
-


$
54,000Reduction of related party note in connection with option exercise

$
-


$
43,790Reduction of accrued interest in connection with option exercise

$
-


$
10,210
 
 
 The accompanying notes are an integral part of these
 unaudited consolidated financial statements.
  F-5
 Table of Contents
  FIRST CAPITAL INTERNATIONAL, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 
 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-K for the year ended December 31, 2008.
 
 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. The Company, for the first time, netted a profit of $89,358 for the three months ended March 31, 2009, however has an accumulated deficit of $(11,408,079) and a working capital deficit of $(1,111,184) at March 31, 2009.
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 are currently in litigation.
  F-6
 Table of Contents
  4.
Notes Payable to Related Parties
 
 During the three months ended March 31, 2009, the Company had the following notes payable to related parties transactions:
 
 During 2009, four promissory notes to Alex Genin, our chief executive officer, were paid off.  The total principal and interest paid on these notes were $9,000 and $2,480 respectively.  Two promissory notes originally due April and May 2009 bearing 8% interest for a total principal amount of $37,500 were extended three
years.  None of these notes were collateralized.  As of March 31, 2009 the total principal amount due on all notes to Alex Genin is $184,400.
 
 During 2009, Eastern Credit Limited, Inc., a company controlled by Alex Genin, our chief executive officer, made a loan to us under a $2,500 promissory note which bear interest at the rate of 8% and which is due February 2012. None of these notes were collateralized.  As of March 31, 2009 the total principal amount due on all
notes to Eastern Credit Limited, Inc. is $246,300.
 
 During 2009, First National Petroleum, Corp., a company controlled by Alex Genin, our chief executive officer, extended three years, a $7,500 promissory note originally due April 2009 which bear interest at the rate of 8%. None of these notes were collateralized.  As of March 31, 2009 the total principal amount due on all notes
to First National Petroleum is $14,500.
 
 During 2009, a promissory note to Pacific Commercial Credit, Ltd., a company controlled by Alex Genin, our chief executive officer, was partially paid.  The total principal and interest paid on this note were $2,400 and $1,695 respectively.  The remaining balance on this note is $7,000.  None of these notes
were collateralized.  As of March 31, 2009 the total principal amount due on all notes to Pacific Commercial Credit is $85,000.
 
 During 2009, a promissory note to Stromberg Development, Inc., a company owned by Alex Genin, our chief executive officer, was partially paid.  The total principal and interest paid on this note were $2,000 and $400 respectively.  The remaining balance on this note is $8,000.  None of these notes were collateralized.  As
of March 31, 2009 the total principal amount due on all notes to Stromberg Development is $40,000.
 
 During 2009, United Capital Group, Ltd., a company controlled by Alex Genin, our chief executive officer, extended three years, a $67,983 promissory note originally due March 2009 which bear interest at the rate of 8%. None of these notes were collateralized.  As of March 31, 2009 the total principal amount due on all notes to
United Capital Group is $198,983.
 
 5.
Stock and Option Transactions
 
 During the three months ended March 31, 2009, the company sold 0 shares of restricted common stock. Eight options to purchase up to 4,190,000 shares of our common stock were granted and four options to purchase up to 2,620,000 shares expired in the period. The company recognized $15,347 in stock-based compensation. 1,020,000 options granted
during the year end 2008, vest in May 2010 thus the compensation expense is recognized over the 24 month service period. As of March 31, 2009, the Company recognized $15,100 in stock based compensation. Of the total 4,190,000 options granted during the three months ended March 31, 2009, 90,000 vest in December 2009, 100,000 vest in December 2010, and 4,000,000 vest in December 2011 thus the compensation expense is recognized over the applicable service period.  As of March 31, 2009, the company recognized
$248 in stock based compensation.
  F-7
 Table of Contents
  Fair value of the Company’s stock options was determined based upon the Black-Scholes option pricing model.  The following assumptions were used to calculate fair value using the Black Scholes option pricing model for the period ended March 31, 2009: (i) average dividend yield of 0.00%; (ii) expected volatility of 382%,;
(iii) expected life of 2 years; and (iv) estimated risk-free interest rate of 2.4%.
 
 The Black-Scholes option valuation model was developed for use in estimating fair value of traded options, which have no vesting restrictions and are fully transferable.  In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.  Because the
Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.


F-8
 Table of Contents




PART I - FINANCIAL INFORMATION








Item 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Please see financial statements beginning on page F-1




Item2. 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-K for the year ended December 31, 2008. 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.


1
 Table of Contents




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.





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 $15,347 stock-based compensation cost in the three months ended March 31, 2009 for the options granted 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.


2
 Table of Contents





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.





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 Hotel Group allowed us to secure contracts to install video surveillance systems in several Marriott Hotels in Florida and Texas.  We are currently
working on much larger proposals for their new “under construction” hotels.





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’re currently conducting upsell marketing efforts and have been able to secure upsell option for 40% of the development.





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, of which there can be no assurances.





Projects in Texas





We are bidding on large security projects with several Houston area school districts and are planning on marketing our products and capabilities to various government entities.





We are bidding on several high-rise condominium projects in the Houston area. As a result, we signed an initial contract in August 2007 with a new luxury high-rise complex in Houston to install a security solution as well as to design for the owners a new state-of-the-art “Concierge” Digital Living Automation software.  We
believe this has created new opportunities for our home automation solutions.   We started marketing the “Concierge” concept in other regions and are working on several proposals.  We anticipate this hi-rise condo project will be a good source for the Company’s revenue through upsell activities, of which there can be no assurances.


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





We are considering launching our “Concierge” software platform nationwide.  We have had numerous discussions with integrators and hi-rise management companies that showed interest in purchasing our concierge platform.  As a result, we are developing strategies for selling and marketing the “Concierge”
platform nationwide.  However, we’re anticipating a market slowdown in home automation due to the current national economic crisis.





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 site and believe we can successfully complete the project, should it be awarded to us.





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;





New Developments





Due to the current economic crisis, we foresee instabilities and a rise of domestic terrorism throughout the United States.  As a countermeasure company, we are developing a threat evaluation program for owners of condominium properties, commercial malls, office buildings and municipal facilities.





Our Company had recent discussions with Cypress Group, LLC regarding threat assessment services nationwide under the company’s umbrella.  The Cypress Group represents a pool of individuals predominantly composed of ex-law enforcement officers, i.e. ex-FBI/CIA and secret service operatives, with highly respected professional
skills in the threat mitigation field.





We have also developed  applications jointly with ZuluBravo, LLC, allowing detection of homemade explosives throughout buildings, malls and hotels.





We believe this new technology will augment the Company’s current security system and video surveillance product line and will greatly enhance our marketing position.


4
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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. For the first time, we had a profit of $89,358 during the three months ended March 31, 2009. We also had positive cash flows from operations of $31,045 during the three months ended March 31,
2009. Our history of recurring losses raises 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 continue to 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, 2008 and 2007, 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 due to the significant costs associated with home automation and video security technology operations.





Recurring losses had resulted in an accumulated deficit of $(11,408,079) on March 31, 2009. Revenues for the three months ended March 31, 2009 were $403,511 compared to revenues of $90,687 for the three months ended March 31, 2008. The increase in revenue is mainly attributable to our success in acquiring major projects as a result of our
marketing efforts.





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) which has substantially improved our operating results.  Our revenues have significantly increased
and we have shown, for the first time, a profit for the three months ending March 31, 2009.  We can provide no assurance that profitability will be sustainable.





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 can not give any assurances that we will be able to successfully compete in this market.





THE THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2008





During the three months ended March 31, 2009, our revenues were $403,511 as compared to $90,687 for the three months ended March 31, 2008 because we were able to recognize revenues on completed phases on major long term projects.





During the three months ended March 31, 2009, selling, general and administrative expenses slightly increased by $2,978 or 2% to $165,513 as compared to the three months ended March 31, 2008. This increase was mainly attributable to an increase in rent and amortization of stock option compensation offset by decreases in personnel related
expenses because of reclassification to costs.





During the three months ended March 31, 2009, we had a net profit of $89,358 as compared to a net loss of $131,413 in the three months ended March 31, 2008.


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LIQUIDITY AND CAPITAL RESOURCES





As of March 31, 2009, we had cash resources of $21,710. We estimate that during the three months ending June 30, 2009, our cash requirements will be approximately $180,000 (or approximately $60,000 per month). We believe that our revenue-producing operations will continue to 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/or 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 2009 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 three months ended March 31, 2009, we received $0 cash from the sale of our securities and $0 on exercise of option to purchase our shares.





During 2009, we had several loan transactions with 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 March 31, 2009





During 2009, four promissory notes to Alex Genin, our Chief Executive Officer, were paid off.The total principal and interest paid on these notes were $9,000 and $2,480 respectively.  Two promissory notes originally due April and May 2009
bearing 8% interest for a total principal amount of $37,500 were extended three years. None of these notes were collateralized.  As of March 31, 2009, the total principal amount due on all notes to Alex Genin is $184,400.





During 2008, Eastern Credit Limited, Inc., a company controlled by Alex Genin, our Chief Executive Officer, made a loan to us under a $2,500 promissory note which bear interest at the rate of 8% and which is due February 2012.  None of these notes were collateralized. As of March 31, 2009 the total principal amount due on all
notes to Eastern Credit Limited is $246,300.





ECL Trading Co, Inc., a company controlled by Alex Genin, our Chief Executive Officer, has one outstanding promissory note bearing 8% interest and which is due February 2011.  This note was not collateralized.  As of March 31, 2008, the total principal amount due on all notes to ECL Trading is $8,000.





During 2009, First National Petroleum, Corp., a company controlled by Alex Genin, our Chief Executive Officer, extended three years, a $7,500 promissory note originally due April 2009 which bear interest at the rate of 8%. None of these notes were collateralized.  As of March 31, 2009 the total principal amount due on all notes
to First National Petroleum is $14,500.





During 2009, a promissory note to Pacific Commercial Credit, Ltd., a company controlled by Alex Genin, our Chief Executive Officer, was partially paid.  The total principal and interest paid on this note were $2,400 and $1,695 respectively.  The remaining balance on this note is $7,000.  None of these notes
were collateralized.  As of March 31, 2009 the total principal amount due on all notes to Pacific Commercial Credit is $85,000.





During 2009, a promissory note to Stromberg Development, Inc., a company owned by Alex Genin, our Chief Executive Officer, was partially paid.  The total principal and interest paid on this note were $2,000 and $400 respectively.  The remaining balance on this note is $8,000.  None of these notes were collateralized.  As
of March 31, 2009 the total principal amount due on all notes to Stromberg Development is $40,000.





During 2009, United Capital Group, Ltd., a company controlled by Alex Genin, our Chief Executive Officer, extended for three years a $67,983 promissory note originally due March 2009 which bears interest at the rate of 8%. None of the notes to United Capital Group were collateralized.  As of March 31, 2009 the total principal
amount due on all notes to United Capital Group is $198,983.





In May 2008, a director of the Company made a short term loan to us for a total principal amount of $18,000, bearing 6% interest, which is due in 2009.  This loan was not collateralized.


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Item3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not applicable.





Item4. 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 not effective in timely recording, processing, summarizing and reporting material information required to be included in our Exchange Act filings.





Management noted no changes in the following material weaknesses stated in the 10-K:





1.
As of December 31, 2008, we did not maintain effective controls over the control environment.  Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures.  This has resulted in inconsistent practices.  Further, no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.  Since
these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.





Management is currently addressing the material weaknesses identified in its internal controls over financial reporting.





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





Item1. 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 a promissory note collateralized by an option to purchase 2,500,000 shares (or 833,334 shares after a 1-for-3 reverse split) of our company for $500,000 by Virage Consulting in 2006 to expire
in May, 2007.  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.  The agreement allowed the investor to dispose of the shares, in part or in full prior to May, 2007.  The proceeds from any such disposal would have reduced the principal balance of $500,000.  We believe the note effectively became null and void when Virage Consulting accepted
the shares in April 2006. We have hired an attorney and are proceeding accordingly. Currently, the principal balance remains on the books as a current note payable until an outcome can be reasonably determined.





On October 8, 2008 J.W. Rogers, an investor, named the Company and Alex Genin, our Chief Executive Officer, parties to a lawsuit filed in the 295th Judicial District Court of Harris County, Texas alleging impropriety and fraud in a recent stock purchase.  We
consider this to be a meritless lawsuit and are planning to file a motion for summary.





On December 19, 2008 a lawsuit was filed against VIP Systems and Alex Genin, our Chief Executive Officer, by Brodson Construction for breach of contract as a sub-contractor for approximately $34,000 including damages.  We consider this to be a frivolous lawsuit and have retained an attorney to counter sue.




Item2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





During the three months ended March 31, 2009, 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.


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1.During the three months ended March 31, 2009, eight options to purchase up to 4,190,000 shares of our common stock were granted to a manager and seven employees of the Company at an exercise price ranging from $0.03 to $0.05.  Of  the total 4,190,000 options,
90,000 vest in December 2009, 100,000 vest in December 2010, and 4,000,000 vest in December 2011.  These options expire 90 days after they vest.


Item3. DEFAULT UPON SENIOR SECURITIES





On March 24, 2006, signed a promissory note bearing interest of 0% due on May 30, 2007 to a sophisticated investor and 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) as collateral. 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 are currently in litigation.





ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None





Item5. OTHER INFORMATION





None




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Item6. EXHIBITS




Exhibit 31.1 and 31.2 – 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 and 32.2 - 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:  May 14, 2009
By: /s/ Alex GeninAlex GeninChief Executive Officer andActing Chief Financial Officer(Principal Financial Officer)






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