FIRST CAPITAL INTERNATIONAL INC - FORM 10-Q

Attached files

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EX-31.1 - EXHIBIT 31.1 - FIRST CAPITAL INTERNATIONAL INC	ex31_1.htm
EX-32.1 - EXHIBIT 32.1 - FIRST CAPITAL INTERNATIONAL INC	ex32_1.htm

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

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

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

Yes o No x

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

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

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements		F-1

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

Item 3. Quantitative and Qualitative Disclosure about Market Risk		6

Item 4. Controls and Procedures		7

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		7

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		8

Item 3. Default Upon Senior Securities		8

Item 4. Submission of Matters to a Vote of Security Holders		8

Item 5. Other Information		8

Item 6. Exhibits		9

SIGNATURES		9

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FIRST CAPITAL INTERNATIONAL, INC.

__________

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

F-1

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FIRST CAPITAL INTERNATIONAL, INC.

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__________

		Page

Unaudited Consolidated Financial Statements:

Unaudited Consolidated Balance Sheets as of September 30, 2009and December 31, 2008		F-3

Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2009 and 2008		F-4

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008		F-5

Notes to Unaudited Consolidated Financial Statements		F-6

F-2

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FIRST CAPITAL INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2009 and December 31, 2008

__________

	September 30,			December 31,
	2009			2008
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	17,845		$	3,938
Accounts receivable		149,207			16,247
Employee receivables		3,771			11,786
Due from related parties		4,410			4,910

Total assets	$	175,233		$	36,881

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Credit card obligations and line of credit	$	113,223		$	125,292
Accounts payable and accrued liabilities		80,131			141,996
Accrued interest payable to related parties		211,559			174,008
Current portion of notes payable to related parties		203,945			68,314
Current portion of notes payable		-			55,235
Convertible notes payable to related parties		50,000			50,000
Convertible notes payable in default		500,000			500,000
Deferred revenue		193,562			155,025
Total current liabilities		1,352,420			1,269,870

Long Term Liabilities:
Notes payable		38,126			-
Notes payable to related parties, non-current		657,483			742,083
Total Long Term Liabilities		695,609			742,083

Total liabilities		2,048,029			2,011,953

Commitments and contingencies

Stockholders’ 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			4,500
Common 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			36,810
Additional paid-in capital		9,560,723			9,481,055
Accumulated 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

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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 Ended
	September 30,						September 30,
	2009			2008			2009			2008
Revenue:
System sales	$	211,990		$	228,436		$	875,967		$	514,908
Consulting services		-			-			-			14,000

Total revenue		211,990			228,436			875,967			528,908

Costs of sales:
Cost of systems		72,278			76,647			308,702			257,721
Cost of consulting services		-			-			-			2,800

Total cost of sales		72,278			76,647			308,702			260,521

Gross Margin		139,712			151,789			567,265			268,387

Selling, general and administrative expenses		135,205			176,468			485,772			520,923


Income/(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

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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			2008
Cash 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			13,108
Changes in operating assets and liabilities:
Accounts receivable		(132,959	)		23,288
Employee receivable		8,015			(14,521	)
Other current assets		500			(1,506	)
Credit card obligations		(12,069	)		19,161
Accounts payable and accrued liabilities		(61,865	)		79,972
Accrued interest		37,551			35,142
Deferred 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			225,345
Proceeds from sale of common stock		-			62,865
Net cash provided by (used in) financing activities:		33,921			203,277

Net increase in cash and cash equivalents		13,907			(1,870	)
Cash and cash equivalents, beginning of period		3,938			3,972

Cash and cash equivalents, end of period	$	17,845		$	2,102

Supplemental disclosure of cash flow information:
Cash paid for interest	$	22,428		$	15,254
Cash paid for taxes	$	-		$	-
Supplemental disclosure of non cash investing and financing activities:
Cashless exercise of options	$	-		$	54,000
Cashless stock purchase	$	-			12,000
Reduction 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	$	-		$	16,765
Reduction of related party note in connection with option exercise	$	-		$	43,790
Reduction 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

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FIRST CAPITAL INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation and Critical Accounting Policies

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

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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.

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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			2008

Customer 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

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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

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

FORWARD-LOOKING STATEMENT AND INFORMATION

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

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

The following discussion should be read in conjunction with our unaudited consolidated interim financial statements and related notes thereto included in this quarterly report and in our audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our Form 10-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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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:

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report on Form 10-Q, our Chief Executive Officer and our Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were 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:

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

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Item 2. UNREGISTERED SALES 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. DEFAULT UPON SENIOR SECURITIES

On March 24, 2006, we issued 2,500,000 restricted common shares at $0.20 per share (or 833,334 shares of restricted common stock at $0.60 after a 1-for-3 reverse split) to a sophisticated investor as a collateral for a note payable bearing interest of 0% and due on May 30, 2007. The agreement 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

Item 5. OTHER INFORMATION

None

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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 Genin
	Alex Genin
	Chief Executive Officer and
	Acting Chief Financial Officer and
	Principal Financial Officer

FIRST CAPITAL INTERNATIONAL INC - FORM 10-Q - November 12, 2009

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