Bank Instrument Controlled Settlements (BICS)

In 1993, Capstone developed its Bank Instrument Controlled Settlements ("BICS") program for domestic commercial transactions to improve cash flow and increase sales for its client companies. The BICS program allows suppliers of commercial goods and services to offer credit terms to their commercial customers through the use of payment instruments with exact pre-agreed terms under which payment to the suppliers would be made. Capstone Group's payment instruments are offered in the form of letters of credit, bills of exchange, trade drafts and letters of guarantee. During 1999, Capstone Group fully implemented its BICS program on a broad scale internationally. Capstone Business Credit purchases the account receivable generated from the BICS program following the delivery of goods to the end buyer.

The Capstone Group BICS program provides immediate payment to its client's suppliers while offering flexible, extended payment terms for buyers. The benefits the BICS program offers wholesale businesses are similar to the benefits of consumer credit cards. Management believes that, just as the credit card revolutionized payment for consumer purchases, the BICS program will when fully implemented, in certain wholesale business sectors, have a similar impact upon the way these businesses fund commercial transactions. 

BICS refers to the Capstone Group financial platform, which provides a credit structure and secure payment system with the issue of a payment instrument whose pre-agreed terms are negotiated between the buyer of goods or services ("Buyer") and accepted by the seller of the goods or services ("Supplier"). Capstone Group assumes the obligation and terms and conditions of the Buyer by signing and delivering via its bank the agreed upon BICS instrument to the Supplier. In conformity with the Buyer's acknowledgment required for entry into this program, once executed, the payment obligation of a BICS is absolute, affected only by and conditioned upon the delivered terms, as contracted (Purchase Order), and the conformity of the goods purchased. The executed BICS establishes a specific payment date of a specific amount from a designated bank account. The BICS itself constitutes the payment instrument for the transaction according to its terms. In addition, the BICS is negotiable so that the Supplier may endorse it and transfer it to another party. At its most basic level, a BICS can be viewed as a bank guaranteed negotiable promissory note. As a result of this system, Capstone Group becomes the "supplier" to its joint venture participants (client's) who purchases from prescreened, qualified Suppliers identified and designated by the joint venture trading participant. Until payment is made through the purchase of the account receivable or its securitization, Capstone Group holds title to the goods purchased for the joint venture trading participant. These goods are segregated from other inventory of the participant typically in a third party warehouse under the control of Capstone Group. Each warehouse can only release Capstone Group merchandise under the expressed written consent of one of the executives at Capstone Group. Participating warehouses are under agreement and are provided specimen signature documents of authorized Capstone Group executives who are responsible for releasing merchandise to approved account debtors.

When the commercial transaction is complete, the resulting "receivable" is converted into a financial instrument, which is purchased by Capstone Business Credit. The advantage to the Supplier is immediate payment (within 48 hours) and the elimination of credit risk. The benefit to the Buyer is extended credit terms.