UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q





(Mark
one)


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




For
the quarterly period ended September 30, 2009


OR


o 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
      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 x 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  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 oNo x








Number of
shares outstanding as of the close of business on November 11,
2009:




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










TABLE OF CONTENTS








PART
      I - FINANCIAL INFORMATIONItem 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 Disclosure 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
            
            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 September 30, 2009and December 31,
      2008
            
            F-3Unaudited
      Consolidated Statements of Operations for the three months and nine months
      ended September 30, 2009 and 2008
            
            F-4Unaudited
      Consolidated Statements of Cash Flows for the nine months ended
      September 30, 2009 and 2008
            
            F-5Notes
      to Unaudited Consolidated Financial Statements
            
            F-6


F-2
 Table of Contents


FIRST
CAPITAL INTERNATIONAL, INC.


CONSOLIDATED
BALANCE SHEETS


September
30, 2009 and December 31, 2008


__________





September 30,
            
            
            December 31,2009
            
            
            2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            17,845
            
            
            $
            3,938Accounts
      receivable
            
            
            149,207
            
            
            
            16,247Employee
      receivables
            
            
            3,771
            
            
            
            11,786Due
      from related parties
            
            
            4,410
            
            
            
            4,910Total
      assets
            
            $
            175,233
            
            
            $
            36,881LIABILITIES AND STOCKHOLDERS’
      DEFICITCurrent
      liabilities:Credit
      card obligations and line of credit
            
            $
            113,223
            
            
            $
            125,292Accounts
      payable and accrued liabilities
            
            
            80,131
            
            
            
            141,996Accrued
      interest payable to related parties
            
            
            211,559
            
            
            
            174,008Current
      portion of notes payable to related parties
            
            
            203,945
            
            
            
            68,314Current
      portion of notes payable
            
            
            -
            
            
            
            55,235Convertible
      notes payable to related parties
            
            
            50,000
            
            
            
            50,000Convertible
      notes payable in default
            
            
            500,000
            
            
            
            500,000Deferred
      revenue
            
            
            193,562
            
            
            
            155,025Total
      current liabilities
            
            
            1,352,420
            
            
            
            1,269,870Long
      Term Liabilities:Notes
      payable
            
            
            38,126
            
            
            
            -Notes
      payable to related parties, non-current
            
            
            657,483
            
            
            
            742,083Total
      Long Term Liabilities
            
            
            695,609
            
            
            
            742,083Total
      liabilities
            
            
            2,048,029
            
            
            
            2,011,953Commitments
      and contingenciesStockholders’
      deficit:Preferred
      stock, $0.001 par value; 20,000,000 shares authorized; 4,500,000 shares
      issued and outstanding as of September 30, 2009 and December 31, 2008,
      respectively
            
            
            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 as of September 30, 2009 and
      December 31, 2008, respectively
            
            
            36,810
            
            
            
            36,810Additional
      paid-in capital
            
            
            9,560,723
            
            
            
            9,481,055Accumulated
      deficit
            
            
            (11,474,829
            )
            
            
            (11,497,437
            )Total
      stockholders’ deficit
            
            
            (1,872,796
            )
            
            
            (1,975,072
            )Total
      liabilities and stockholders’ deficit
            
            $
            175,233
            
            
            $
            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 and Nine Months Ended September 30, 2009 and 2008


__________





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember 30,
            
            
            September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Revenue:System
      sales
            
            $
            211,990
            
            
            $
            228,436
            
            
            $
            875,967
            
            
            $
            514,908Consulting
      services
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            14,000Total
      revenue
            
            
            211,990
            
            
            
            228,436
            
            
            
            875,967
            
            
            
            528,908Costs
      of sales:Cost
      of systems
            
            
            72,278
            
            
            
            76,647
            
            
            
            308,702
            
            
            
            257,721Cost
      of consulting services
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,800Total
      cost of sales
            
            
            72,278
            
            
            
            76,647
            
            
            
            308,702
            
            
            
            260,521Gross
      Margin
            
            
            139,712
            
            
            
            151,789
            
            
            
            567,265
            
            
            
            268,387Selling,
      general and administrative expenses
            
            
            135,205
            
            
            
            176,468
            
            
            
            485,772
            
            
            
            520,923Income/(Loss)
      from operations
            
            
            4,507
            
            
            
            (24,679
            )
            
            
            81,493
            
            
            
            (252,536
            )Other
      expense:Interest
      expense
            
            
            (19,645
            )
            
            
            (20,305
            )
            
            
            (58,886
            )
            
            
            (60,606
            )Net
      income/( loss)
            
            $
            (15,138
            )
            
            $
            (44,984
            )
            
            $
            22,607
            
            
            $
            (313,142
            )Basic
      and diluted net income/(loss) per common share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )Weighted
      average shares outstanding
            
            
            36,809,671
            
            
            
            36,775,617
            
            
            
            36,809,671
            
            
            
            36,207,212








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 Nine Months Ended September 30, 2009 and 2008


__________





September 30,
            
            
            September 30,2009
            
            
            2008Cash
      flows from operating activities:Net
      income/(loss)
            
            $
            22,607
            
            
            $
            (313,142
            )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Stock
      based compensation
            
            
            79,668
            
            
            
            13,108Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (132,959
            )
            
            
            23,288Employee
      receivable
            
            
            8,015
            
            
            
            (14,521
            )Other
      current assets
            
            
            500
            
            
            
            (1,506
            )Credit
      card obligations
            
            
            (12,069
            )
            
            
            19,161Accounts
      payable and accrued liabilities
            
            
            (61,865
            )
            
            
            79,972Accrued
      interest
            
            
            37,551
            
            
            
            35,142Deferred
      income
            
            
            38,538
            
            
            
            (46,649
            )Net
      cash provided by (used in) operating activities:
            
            
            (20,014
            )
            
            
            (205,147
            )Cash
      flows from financing activities:Payments
      of notes payable and long-term debt to related party
            
            
            (58,579
            )
            
            
            (84,933
            )Proceeds
      from notes payable and long-term debt to related party
            
            
            92,500
            
            
            
            225,345Proceeds
      from sale of common stock
            
            
            -
            
            
            
            62,865Net
      cash provided by (used in) financing activities:
            
            
            33,921
            
            
            
            203,277Net
      increase in cash and cash equivalents
            
            
            13,907
            
            
            
            (1,870
            )Cash
      and cash equivalents, beginning of period
            
            
            3,938
            
            
            
            3,972Cash
      and cash equivalents, end of period
            
            $
            17,845
            
            
            $
            2,102Supplemental
      disclosure of cash flow information:Cash
      paid for interest
            
            $
            22,428
            
            
            $
            15,254Cash
      paid for taxes
            
            $
            -
            
            
            $
            -Supplemental
      disclosure of non cash investing and financing activities:Cashless
      exercise of options
            
            $
            -
            
            
            $
            54,000Cashless
      stock purchase
            
            $
            -
            
            
            
            12,000Reduction
      of loan in connection with expense reimbursement
            
            $
            17,109
            
            
            $
            -Reduction
      of accrued interest in connection with expense
    reimbursement
            
            $
            1,150
            
            
            $
            -Reduction
      of loan in connection with stock purchase
            
            $
            -
            
            
            $
            16,765Reduction
      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






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 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.





Net Income/(Loss) per Common
Share





Basic and
diluted net income per share are computed by dividing the net income/ (loss) by
the weighted average number of shares of common stock and common stock
equivalents outstanding during the years.  Common stock equivalents
consist of common stock issuable under the Company’s stock compensation plan for
its employees and consultants. Common stock equivalents are not included in
diluted loss per share calculations because they would be
anti-dilutive.  There were no common stock equivalents at September
30, 2009 and December 31, 2008.








2.
            Going
      Concern





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has a net profit of $22,607 for
the nine months ended September 30, 2009, however, has an accumulated deficit of
$(11,474,829) and a working capital deficit of $(1,177,187) at September 30,
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.


F-6
 Table of Contents


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. The note
expired on May 30, 2007.  We are in default of this Note and are
currently in litigation.








4.
            Notes Payable to
      Related Parties





During
the nine months ended September 30, 2009, the Company had the following notes
payable to related parties transactions:





During
2009, eleven promissory notes to Alex Genin, our Chief Executive Officer, were
paid off.  The total principal and interest paid on these notes were
$21,400 and $5,930 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 September 30, 2009 the total principal amount
due on all notes to Alex Genin is $172,000.





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. In the same
period, one promissory note with principal and interest of $ $3,000 and $978,
respectively, was paid off.  None of these notes were
collateralized.  As of September 30, 2009 the total principal amount
due on all notes to Eastern Credit Limited, Inc. is $243,300.





During
2009, one promissory note to ECL Trading Co., Inc., a company controlled by Alex
Genin, our Chief Executive Officer, was partially paid. The total principal and
interest paid on this note was $6,000 and $433, respectively.  This
note was not collateralized.  As of September 30, 2009 the total
principal amount due on notes to ECL Trading is $2,000.





During
2009, First National Petroleum, Corp., a company controlled by Alex Genin, our
Chief Executive Officer, made several loan to us under 13 promissory notes for a
total principal amount of $90,000 which bear interest at the rate of 8% and
which are due  between April and September 2012.  A note for
$7,500 originally due April 2009 which bears interest at the rate of 8% was
extended three years. None of these notes were collateralized.  As of
September 30, 2009 the total principal amount due on all notes to First National
Petroleum is $104,500.





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 the notes to Pacific Commercial Credit were
collateralized.  As of September 30, 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 $6,000 and $600
respectively.  The remaining balance on this note is
$4,000.  None of the notes to Stromberg Development were
collateralized.  As of September 30, 2009 the total principal amount
due on all notes to Stromberg Development is $36,000.





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 the notes to
United Capital Group were collateralized.  As of September 30, 2009
the total principal amount due on all notes to United Capital Group is
$198,983.





During
2009, Cathy George, a director of the company, extended one year an $18,000
short term loan and a $50,000 convertible note due November 2009, bearing 6%
interest.  These loans were not collateralized.


F-7
 Table of Contents


5.
            Stock and Option
      Transactions





During
the nine months ended September 30, 2009, the company sold 0 shares of
restricted common stock. Ten options to purchase up to 4,240,000 shares of our
common stock were granted and four options to purchase up to 2,620,000 shares
expired in the period. For the nine month period ended September 30, 2009, the
Company recognized $79,668 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. Of the total 4,240,000 options
granted during the nine months ended September 30, 2009, 50,000 are immediately
exercisable, 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.





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 September 30, 2009: (i) average dividend yield of 0.00%; (ii) expected
volatility of 380%; (iii) expected life of 2 years; and (iv) estimated risk-free
interest rate of 2.4%.








6.
            Commitments and
      Contingencies





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 judgment.





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.





On August
21, 2009, a lawsuit was filed by Carnes Engineering, Inc. against the Company
and Alex Genin, our Chief Executive Officer filed in the County Civil Court at
Law No. 1 of Harris County, Texas, alleging non-payment for services performed
in the Company’s main office amounting to approximately $19,000.  We
consider this to be a groundless lawsuit and will vigorously defend the
case.  Notification of this lawsuit was received on October 14,
2009.





7.
            Major
      Customers





During
the periods ended September 30, 2009 and 2008, three customers each accounted
for  more than 10% of  revenue as follows:





2009
            
            
            2008Customer
      1
            
            
            44
            %
            
            
            27
            %Customer
      2
            
            
            23
            %
            
            
            19
            %Customer
      3
            
            
            6
            %
            
            
            11
            %





As of
September 30, 2009, accounts receivable due from one of these customers
represented 75% of the total balance.








8.
            Subsequent
      Events




There
were no subsequent events from the end of the quarter through November 13,
2009.


F-8
 Table of Contents


PART
I - FINANCIAL INFORMATION








Item
1. FINANCIAL STATEMENTS





Please
see unaudited consolidated financial statements beginning on page
F-1








Item 2. MANAGEMENT'SDISCUSSION 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.


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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





Beginning
January 1, 2006, the Company adopted SFAS No. 123(R), “Accounting for Stock
Based Compensation,” SFAS No. 123(R), which requires all share-based payments to
employees (which includes non-employee Board of Directors), including employee
stock options, warrants and restricted stock, be measured at the fair value of
the award and expensed over the requisite service period (generally the vesting
period). The fair value of common stock options or warrants granted to employees
is estimated at the date of grant using the Black-Scholes option pricing model
by using the historical volatility of comparable public companies. The
calculation also takes into account the common stock fair market value at the
grant date, the exercise price, the expected life of the common stock option or
warrant, the dividend yield and the risk-free interest rate.





The
Company from time to time may issue stock options, warrants and restricted stock
to acquire goods or services from third parties. Restricted stock, options or
warrants issued to other than employees or directors are recorded on the basis
of their fair value, which is measured as of the date required by Emerging
Issues Task Force (“EITF”) Issue 96-18, “Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.” In accordance with EITF 96-18, the options or
warrants are valued using the Black-Scholes option pricing model on the basis of
the market price of the underlying equity instrument on the “valuation date,”
which for options and warrants related to contracts that have substantial
disincentives to non-performance, is the date of the contract, and for all other
contracts is the vesting date. Expense related to the options and warrants is
recognized on a straight-line basis over the shorter of the period over which
services are to be received or 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 —The
fair value of stock based payments 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
$79,668 stock-based compensation cost in the nine months ended September 30,
2009 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.


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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 and 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.





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 unaudited
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





We are
focusing on video surveillance business opportunities in Florida and are
currently in negotiation to install security systems with several large
properties.





Despite
the real estate downturn, 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.


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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. The
current economic conditions have hindered our efforts in successfully closing
new deals with new luxury high-rise complexes 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 there are new
opportunities for our home automation solutions.   We anticipate
the hi-rise condo project will be a good source for the Company’s revenue
through upsell activities, of which there can be no assurances.





We are
also actively involved in several Houston hotels’ installation projects,
predominantly Marriott and Hilton 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 are
anticipating a market slowdown in home automation due to the current national
economic crisis.





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.





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.





Due to
the current energy crises and significant rise in alternative energy projects
worldwide, we are working on the development of a security concept for wind
power and solar farm projects.  We believe we can market this
alternative energy security concept worldwide.





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 had a
profit of $22,607 during the nine months ended September 30, 2009. However, we
had negative cash flows from operations of $20,014 during the nine months ended
September 30, 2009. We also had an accumulated deficit of $(11,474,829) and a
working capital deficit of $(1,177,187) at September 30, 2009.  These
conditions 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, 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.


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Recurring
losses resulted in the accumulated deficit of $(11,474,829) on September 30,
2009.  Revenues for the nine months ended September 30, 2009 were
$875,967 compared to revenues of $528,908 for the nine months ended September
30, 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 a profit for the nine months
ended September 30, 2009.  However, 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 cannot
give any assurances that we will be able to successfully compete in this
market.





RESULTS
OF OPERATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AS COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2008





During
the three months ended September 30, 2009, our revenues were $211,990 as
compared to $228,436 for the three months ended September 30, 2008.





During
the three months ended September 30, 2009, selling, general and administrative
expenses decreased by $41,263 or 23% to $135,205, from $176,468 as compared to
the three months ended September 30, 2008. This was mainly attributable to
decreases in materials and contracted services partially offset by increases in
payroll and option amortization and a one-time credit against health insurance
and rent expenses.





During
the three months ended September 30, 2009, we had a net loss of $15,138 as
compared to a net loss of $44,984 in the three months ended September 30,
2008.





RESULTS
OF OPERATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AS COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 2008





During
the nine months ended September 30, 2009, our revenues were $875,967 as compared
to $528,908 for the nine months ended September 30, 2008, due to our marketing
activities.





During
the nine months ended September 30, 2009, selling, general and administrative
expenses decreased by $35,151 or 7% to $485,772, from $520,923 as compared to
the nine months ended September 30, 2008. The net decrease was mainly
attributable to decreases in contracted services and professional fees and
materials charges partially offset by increases in rent expense and option
amortization and a one-time credit against health insurance and rent
expenses.





During
the nine months ended September 30, 2009, we had a net profit of $22,607 as
compared to a net loss of $313,142 in the nine months ended September 30,
2008.





LIQUIDITY
AND CAPITAL RESOURCES





As of
September 30, 2009, we had cash resources of $17,845. We estimate that during
the three months ending December 31, 2009, our cash requirements will be
approximately $270,000 (or approximately $90,000 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.


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 Table of Contents


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 nine months ended September 30, 2009, we received $0 cash from the sale of
our securities and $0 on exercise of options 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 September 30, 2009:





During
2009, eleven promissory notes to Alex Genin, our Chief Executive Officer, were
paid off.  The total principal and interest paid on these notes were
$21,400 and $5,930 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 September 30, 2009 the total principal amount
due on all notes to Alex Genin is $172,000.





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. In the same
period, one promissory note with principal and interest of $ $3,000 and $978,
respectively, was paid off.  None of these notes were
collateralized.  As of September 30, 2009 the total principal amount
due on all notes to Eastern Credit Limited, Inc. is $243,300.





During
2009, one promissory note to ECL Trading Co., Inc., a company controlled by Alex
Genin, our Chief Executive Officer, was partially paid. The total principal and
interest paid on this note was $6,000 and $433, respectively.  This
note was not collateralized.  As of September 30, 2009 the total
principal amount due on notes to ECL Trading is $2,000.





During
2009, First National Petroleum, Corp., a company controlled by Alex Genin, our
Chief Executive Officer, made several loan to us under 13 promissory notes for a
total principal amount of $90,000 which bear interest at the rate of 8% and
which are due between April and September 2012.  A note for $7,500
originally due April 2009 which bears interest at the rate of 8% was extended
three years. None of these notes were collateralized.  As of September
30, 2009 the total principal amount due on all notes to First National Petroleum
is $104,500.





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 the notes to Pacific Commercial Credit were
collateralized.  As of September 30, 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 $6,000 and $600
respectively.  The remaining balance on this note is
$4,000.  None of the notes to Stromberg Development were
collateralized.  As of September 30, 2009 the total principal amount
due on all notes to Stromberg Development is $36,000.





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 the notes to
United Capital Group were collateralized.  As of September 30, 2009
the total principal amount due on all notes to United Capital Group is
$198,983.





During
2009, Cathy George, a director of the company, extended one year an $18,000
short term loan and a $50,000 convertible note due November 2009, bearing 6%
interest.  These loans were not collateralized.








Item 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.


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 Table of Contents


Item 4. CONTROLSAND 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-K.  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








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 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 judgment.





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.





On August
21, 2009, a lawsuit was filed by Carnes Engineering, Inc. against the Company
and Alex Genin, our Chief Executive Officer filed in the County Civil Court at
Law No. 1 of Harris County, Texas, alleging non-payment for services performed
in the Company’s main office amounting to approximately $19,000.  We
consider this to be a groundless lawsuit and will vigorously defend the
case.  Notification of this lawsuit was received on October 14,
2009.


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Item 2. UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





During
the nine months ended September 30, 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.





1.  During
the nine months ended September 30, 2009, we received $0 cash from the sale of
our securities and $0 on exercise of options to purchase our
shares.





2.  During
the nine months ended September 30, 2009, ten options to purchase up to
4,240,000 shares of our common stock were granted to directors and seven
employees of the Company at an exercise price ranging from $0.03 to
$0.20.  These options were issued as consideration for services
rendered to the Company.  Of the total 4,240,000 options, 50,000 are
immediately exercisable, 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.








Item 3. DEFAULTUPON 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 allowed 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.  A
formal lawsuit had been filed by Virage Consulting as described above in Item
1.








Item 4. SUBMISSIONOF 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 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:  November
      11, 2009
            By:
      /s/ Alex GeninAlex
      GeninChief
      Executive Officer andActing
      Chief Financial Officer andPrincipal
      Financial Officer





9