Report on the July 12 Meeting of Creditors

The July 12 Meeting of Creditors held at the Cashman Theater in Las Vegas was a continuation of the first Meeting of Creditors held pursuant to Section 341 of the Bankruptcy Code. The following is a summary of the highlights of that meeting. The next major event in the USA Debtors' bankruptcy cases is a U.S. Bankruptcy Court hearing on August 4 in Las Vegas. Click here for Docket and Motions.

The June 12 Meeting of Creditors included an overview by the Debtors' Chief Restructuring Officer, Thomas J. Allison, of the Debtors' efforts to reconstruct financial records key to understanding the company's financial position, the status of the loans in its portfolio, and the creation of accurate individual account records for investors. The meeting was presided over by Assistant U.S. Trustee August Landis.

Lawyers for the four official committees in the Debtors. cases, as well as individuals in attendance, were able to ask direct questions of Allison and Landis, as well as Debtors. legal counsel, including Annette Jarvis and Lenard Schwartzer. High lights among what was discussed at the meeting include:

• Nearly 500,000 individual pieces of information about loans and investor accounts have been examined to rebuild the company's books.
• The company is making progress in collecting on loans and has recovered approximately $14 million of $41 million that was past due from borrowers.
• No foreclosure proceedings have been initiated against any Borrower to date, but USACM has identified a couple of Borrowers it expects to take foreclosure action on in the near future. USACM has been successful at bringing certain loans to a performing status or in getting loans paid off at par or better through communication and negotiation with Borrowers. This is far more effective and cost-efficient approach than foreclosure.
• Two of the Debtors, USA Capital Realty Advisors, LLC and USA Securities, LLC will likely be liquidated.
• Allison favors continuing to operate USACM as a going concern as the best method of harvesting value for all investors, rather than liquidating or winding down the company
• Allison is looking to see if there are any over funding in the pension program for employees that could be an asset of the Estate.
• New Account Statements have been sent to Direct Lenders and Fund Members for the period through April 12, 2006, and the company has set up an online form and downloadable document for Direct Lenders and Fund Members to use to submit their concerns about the data in those statements if they feel they need to. Statements for the period through June 30, 2006 are scheduled to go out the week of July 17.
• USACM filed a motion to distribute funds which will be heard at the hearing on August 4 in which USACM is asking for authorization to pay to certain investors certain funds held in the collection account and the two Fund Debtors seek authorization to distribute funds to Fund Members.
• Joe Milanowski has been cooperating with the Debtors, and a security agreement and promissory note for the $58.3 million owed by them, through their entity USA Investment Partners, was approved at the June 21, 2006 hearing by the United States Bankruptcy Court.
• The Debtors may sue Milanowski or Hantges for monies owed to investors, but first the Company will start by investigating Hantges and Milanowski including obtaining information about their personal net worth and assets, Allison said.

Direct Lenders and Fund Members in attendance were told they can expect to receive more information about the Debtors' restructuring efforts by regularly monitoring the Company's website - www.usacapitalcorp.com. Anyone interested in receiving alerts via email when new information is posted to the website are encouraged to go to the website and register to receive the alerts.