10-Q

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 June 30, 2016

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

For the transition period from _________to_________

Commission file number: 001-35848

ZAIS GROUP HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	46-1314400
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Two Bridge Avenue, Suite 322

Red Bank, NJ 07701-1106

(Address of Principal Executive Offices and Zip Code)

(732) 978-7518
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No  ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  x
Non-accelerated filer  ¨	Smaller reporting company  ¨
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨  No x

As of August 9, 2016, 13,900,917 shares of Class A common stock, par value $0.0001 per share, and 20,000,000 shares of Class B Common Stock, par value $0.000001 per share, were issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	46
PART II − OTHER INFORMATION	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3. Defaults Upon Senior Securities	46
Item 4. Mine Safety Disclosures	46
Item 5. Other Information	46
Item 6. Exhibits	46
SIGNATURES	47
EXHIBIT 31.1  CERTIFICATIONS
EXHIBIT 31.2  CERTIFICATIONS
EXHIBIT 32.1  CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
EXHIBIT 32.2  CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

2 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES
 
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)

	June 30, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	32,064		$	44,351
Income and fees receivable		1,655			2,529
Investments, at fair value		—			8,169
Investments in affiliates, at fair value		5,207			5,242
Due from related parties		1,382			748
Prepaid expenses		1,946			776
Other assets		301			310
Fixed assets, net		422			544
Assets of Consolidated Funds
Cash and cash equivalents		—			33
Investments, at fair value		44,201			30,509
Total Assets	$	87,178		$	93,211
Liabilities and Equity
Liabilities
Notes payable	$	1,259		$	1,255
Compensation payable		4,303			3,575
Due to related parties		142			175
Fees payable		2			756
Other liabilities		798			1,546
Liabilities of Consolidated Funds
Other liabilities		101			101
Total Liabilities		6,605			7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding.		—			—
Class A Common Stock, $0.0001 par value; 180,000,000 shares authorized; 13,900,917 and 13,870,917 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.		1			1
Class B Common Stock, $0.000001 par value; 20,000,000 shares authorized; 20,000,000 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.		—			—
Additional paid-in capital		61,965			60,817
Retained earnings (Accumulated deficit)		(22,715	)		(13,805	)
Accumulated other comprehensive income (loss)		24			158
Total stockholders’ equity, ZAIS Group Holdings, Inc.		39,275			47,171
Non-controlling interests in ZAIS Group Parent, LLC		19,689			23,716
Non-controlling interests in Consolidated Funds		21,609			14,916
Total Equity		80,573			85,803
Total Liabilities and Equity	$	87,178		$	93,211

The accompanying notes are an integral part of these consolidated financial statements.

3 

ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES
 
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in thousands)

	Three Months Ended June 30, 2016			Three Months Ended June 30, 2015 (1)			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015 (1)
Revenues
Management fee income	$	3,571		$	4,081		$	7,140		$	7,834
Incentive income		143			1,213			295			2,121
Other revenues		79			106			159			137
Total Revenues		3,793			5,400			7,594			10,092
Expenses
Compensation and benefits		7,999			7,361			17,006			13,931
General, administrative and other		2,950			4,764			6,160			9,101
Depreciation		64			146			127			208
Expenses of Consolidated Funds		29			—			48			—
Total Expenses		11,042			12,271			23,341			23,240
Other income (loss)
Net gain (loss) on investments		55			2			37			45
Other income (expense)		87			9			692			5
Net gains (losses) of Consolidated Funds’ investments		2,176			—			3,693			—
Total Other Income (Loss)		2,318			11			4,422			50
Income (loss) before income taxes		(4,931	)		(6,860	)		(11,325	)		(13,098	)
Income tax (benefit) expense		4			(1,682	)		9			(2,584	)
Consolidated net income (loss), net of tax		(4,935	)		(5,178	)		(11,334	)		(10,514	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(147	)		291			(201	)		483
Total Comprehensive Income (Loss)	$	(5,082	)	$	(4,887	)	$	(11,535	)	$	(10,031	)
Allocation of Consolidated Net Income (Loss), net of tax
Non-controlling interests in Consolidated Funds	$	1,052		$	—		$	1,786		$	—
Stockholders’ equity, ZAIS Group Holdings, Inc.		(4,076	)		(2,947	)		(8,910	)		(3,769	)
Non-controlling interests in ZAIS Group Parent, LLC		(1,911	)		(2,231	)		(4,210	)		(6,745	)
	$	(4,935	)	$	(5,178	)	$	(11,334	)	$	(10,514	)
Allocation of Total Comprehensive Income (Loss)
Non-controlling interests in Consolidated Funds	$	1,052		$	—		$	1,786		$	—
Stockholders’ equity, ZAIS Group Holdings, Inc.		(4,174	)		(2,753	)		(9,044	)		(3,448	)
Non-controlling interests in ZAIS Group Parent, LLC		(1,960	)		(2,134	)		(4,277	)		(6,583	)
	$	(5,082	)	$	(4,887	)	$	(11,535	)	$	(10,031	)
Consolidated Net Income (Loss), net of tax per Class A common share applicable to ZAIS Group Holdings, Inc. – Basic	$	(0.29	)	$	(0.21	)	$	(0.64	)	$	(0.47	)
Consolidated Net Income (Loss), net of tax per Class A common share applicable to ZAIS Group Holdings, Inc. – Diluted	$	(0.29	)	$	(0.21	)	$	(0.64	)	$	(0.53	)
Weighted average shares of Class A common stock outstanding:
Basic		13,892,016			13,870,917			13,881,466			8,046,665	(3)
Diluted(2)		20,892,016			20,870,917			20,881,466			15,046,665	(3)

(1)

Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company.   As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated.  There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

(2)

Number of diluted shares outstanding for periods after the Business Combination (as defined in Note 1) takes into account non-controlling interests in ZAIS Group Parent, LLC that may be exchanged for Class A common stock under certain circumstances.

(3) Pro-rated based on the portion of the period preceding and following the Business Combination.

The accompanying notes are an integral part of these consolidated financial statements.

4 

ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Equity and Non-controlling Interests (Unaudited)
(Dollars in thousands except share amounts)

	Class A Common Stock				Class B Common Stock				Additional paid-in-capital		Retained earnings (Accumulated deficit)			Accumulated other comprehensive income (loss)			Non-controlling interests in ZAIS Group Parent, LLC			Non-controlling interests in Consolidated Funds		Total Equity
	Shares		Amount		Shares		Amount
December 31, 2015		13,870,917	$	1		20,000,000	$	-	$	60,817	$	(13,805	)	$	158		$	23,716		$	14,916	$	85,803
Vesting of RSUs		30,000		-		-		-		-		-			-			-			-		-
Capital contributions		-		-		-		-		-		-			-			-			4,907		4,907
Capital distributions		-		-		-		-		-		-			-			(284	)		-		(284	)
Equity-based compensation charges		-		-		-		-		1,118		-			-			564			-		1,682
Consolidated net income (loss)		-		-		-		-		-		(8,910	)		-			(4,210	)		1,786		(11,334	)
Rebalancing of ownership between the Company and non-controlling interest in ZAIS Group Parent, LLC		-		-		-		-		30		-			-			(30	)		-		-
Other comprehensive income (loss)		-		-		-		-		-		-			(134	)		(67	)		-		(201	)
June 30, 2016		13,900,917	$	1		20,000,000	$	-	$	61,965	$	(22,715	)	$	24		$	19,689		$	21,609	$	80,573

The accompanying notes are an integral part of these consolidated financial statements.

5 

ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES
 
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)

	Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Cash Flows from Operating Activities
Consolidated net income (loss)	$	(11,334	)	$	(10,514	)
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:
Depreciation		127			208
Net (gain) loss on investments		(37	)		(45	)
Non-cash equity-based compensation		1,682			1,941
Interest expense on notes payable		4			2
Operating cash flows due to changes in:
Income and fees receivable		874			8,714
Due from related parties		(634	)		(79	)
Prepaid expenses		(1,170	)		(625	)(2)
Other assets		(1	)		79
Deferred tax asset		—			(2,603	)
Compensation payable		728			(4,516	)
Due to related parties		(33	)		142
Fees payable		(754	)		57	(2)
Other liabilities		(748	)		10	(2)
Consolidated Funds related items:
Purchases of investments in affiliated securities		(10,000	)		—	(1)
Change in unrealized (gain) loss on investments		(3,693	)		—	(1)
Change in cash and cash equivalents		33			—	(1)
Net Cash Provided by (Used in) Operating Activities		(24,956	)		(7,229	)
Cash Flows from Investing Activities
Purchases of fixed assets		(17	)		(131	)
Distributions from investments in affiliates		87			17
Purchases of investments		(11	)		—
Proceeds from sales of investments		8,174			—
Net Cash Provided by (Used in) Investing Activities		8,233			(114	)
Cash Flows from Financing Activities
Net proceeds from Business Combination		—			73,516
Ending cash at HF2 Financial Management, Inc.		—			2	(2)
Proceeds from issuance of notes payable		—			1,250
Contributions from non-controlling interests in Consolidated Funds		4,907			—
Distributions to non-controlling interests in ZGP		(284	)		(374	)
Net Cash Provided by (Used in) Financing Activities		4,623			74,394
Net increase (decrease) in cash and cash equivalents denominated in foreign currency		(187	)		483
Net increase (decrease) in cash and cash equivalents		(12,287	)		67,534
Cash and cash equivalents, beginning of period		44,351			7,664
Cash and cash equivalents, end of period	$	32,064		$	75,198

(1)

Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company.   As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated.  There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

(2)

Amounts have been adjusted to conform to current period presentation.

The accompanying notes are an integral part of these consolidated financial statements.

6 

ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Organization

ZAIS Group Holdings, Inc. (“ZAIS”) is a holding company conducting substantially all of its operations through ZAIS Group, LLC (“ZAIS Group”), an investment advisory and asset management firm focused on specialized credit which commenced operations in July 1997 and is headquartered in Red Bank, New Jersey and has an office in London. ZAIS Group is a wholly-owned consolidated subsidiary of ZAIS Group Parent, LLC (“ZGP”), a majority-owned consolidated subsidiary of ZAIS. ZGP became the sole member and 100% equity owner of ZAIS Group on March 31, 2014 pursuant to a merger transaction which is described in detail in ZAIS’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 23, 2015 (the “Closing 8-K”). References to the “Company” in these consolidated financial statements refer to ZAIS, together with its consolidated subsidiaries.

ZAIS Group is an investment advisor registered with the SEC under the Investment Advisors Act of 1940 and is also registered with the Commodity Futures Trading Commission as a Commodity Pool Operator and Commodity Trading Advisor. ZAIS Group provides investment advisory and asset management services to private funds, separately managed accounts, structured vehicles and ZAIS Financial Corp. (“ZFC REIT”), a publicly traded mortgage real estate investment trust (collectively, the “ZAIS Managed Entities”). The ZAIS Managed Entities predominantly invest in a variety of specialized credit instruments including bank loans, corporate credit instruments such as collateralized debt obligations (“CDOs”), collateralized loan obligations (together with CDOs referred to as “CLOs”) and various securities and instruments backed by these asset classes. ZAIS Group had approximately $3.949 billion of assets under management (“AUM”) as of June 30, 2016. ZAIS Group also serves as the general partner to certain ZAIS Managed Entities, which are generally organized as pass-through entities for U.S. federal income tax purposes.

The Company’s primary sources of revenues are (i) management fee income, which is based predominantly on the AUM of the ZAIS Managed Entities (ii) incentive income, which is based on the investment performance of the ZAIS Managed Entities and (iii) income of the consolidated ZAIS Managed Entities (the “Consolidated Funds”) which is based on the income generated from the portfolios of the Consolidated Funds, a portion of which is allocated to non-controlling interests in Consolidated Funds. There was no income (loss) in the current or prior year relating to the Consolidated Funds. All of the management fee income and incentive income earned by ZAIS Group from the Consolidated Funds is eliminated in consolidation.

On March 20, 2015, ZAIS made a decision to terminate the business operations of its Shanghai subsidiary. ZAIS Group ceased conducting regular business activities in Shanghai and the office is now closed. Final clearance from the relevant government authorities on the plan of liquidation is expected in the second half of 2016.

Recapitalization as a Result of a Business Combination

On October 5, 2012, HF2 Financial Management Inc. (“HF2”) was formed as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination, one or more businesses or entities. On September 16, 2014, HF2 entered into an Investment Agreement, as defined in the Closing 8-K, with ZGP and the members of ZGP (including Christian Zugel, the former managing member of ZGP and the founder and Chief Investment Officer of ZAIS Group, and certain related parties, collectively, the “ZGP Founder Members”), under which HF2 agreed to contribute cash to ZGP in exchange for newly issued Class A Units of ZGP (“Class A Units”) representing a majority financial interest in ZGP (the “Business Combination”) and to cause the transfer of all of its outstanding shares of Class B Common Stock, par value $0.000001 (the “Class B Common Stock”) to the ZGP Founder Members. All Class B Common Stock was then immediately deposited into a newly created irrevocable voting trust (the “ZGH Class B Voting Trust”), of which Mr. Zugel is the sole trustee. The Class B Common Stock has no economic rights and therefore is not considered participating securities for purposes of allocation of consolidated net income (loss).

On March 9, 2015, the stockholders of HF2 approved the Business Combination and the transaction closed on March 17, 2015 (the “Closing”). In connection with the Closing, HF2 changed its name to ZAIS Group Holdings, Inc. The Business Combination is described in detail in ZAIS’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the "Annual Report on Form 10-K”). Prior to the Closing, HF2 was a shell company with no operations. Upon the Closing, ZAIS became a holding company whose assets primarily consist of an approximate 66.5% interest in its majority-owned subsidiary, ZGP. Prior to the Closing, Christian Zugel served as the managing member of ZGP. Upon the Closing, ZAIS became the managing member of ZGP.

7 

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the SEC for interim reporting. In the opinion of management, all adjustments considered necessary for a fair statement of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP as contained in the ASC have been condensed or omitted from the unaudited interim consolidated financial statements according to the SEC rules and regulations. The information and disclosures contained in these unaudited interim consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K.

Segment Reporting

The Company currently is comprised of one reportable segment, the investment management segment, and substantially all of the Company’s operations are conducted through this segment. The investment management segment provides investment advisory and asset management services to the ZAIS Managed Entities.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the estimates used in preparing the consolidated financial statements are reasonable and prudent, actual results may ultimately differ from those estimates.

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 428) (“ASU 2016-02”). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. Adoption of ASU 2016-02 is not expected to have a material effect on the Company's consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The objective of the guidance is to simplify several aspects of the accounting for employee share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The update is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2016-09 is not expected to have a material effect on the Company's consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date (“ASU 2015-14”). This ASU amends the effective date of ASU 2014-09 for all entities by one year. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard clarifies the required factors that an entity must consider when recognizing revenue and also requires additional disclosures. With the issuance of ASU 2015-14 the new effective date for the Company is January 1, 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period.  The Company is currently still evaluating the impact of adopting ASU 2015-14.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued.  If conditions or events indicate it is probable that an entity will be unable to meet its obligations as they become due within one year after the financial statements are issued, the update requires additional disclosures.  The update is effective for periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements.

8 

Principles of Consolidation

The consolidated financial statements included herein are the financial statements of ZAIS, its subsidiaries and certain funds that are required to be consolidated. All intercompany balances and transactions have been eliminated in consolidation, including ZAIS’s investment in ZGP and ZGP’s investment in ZAIS Group. The Company's fiscal year ends on December 31.

The consolidated financial statements include non-controlling interests in ZGP which are primarily comprised of Class A Units of ZGP held by the ZGP Founder Members.

3. Investments in Affiliates

The Company applied the fair value option to its interests in the ZAIS Managed Entities that are not consolidated, and would have otherwise been subject to the equity or historical cost methods of accounting. The Company believes that the fair value of these investments is more indicative of the Company’s financial position than historical cost. At June 30, 2016 and December 31, 2015, the fair value of these investments was approximately $5,207,000 and $5,242,000, respectively. For the three months ended June 30, 2016 and June 30, 2015, the Company recorded an unrealized gain (loss) of approximately $25,000 and $2,000, respectively, associated with the investments still held at the end of each respective period. For the six months ended June 30, 2016 and June 30, 2015, the Company recorded an unrealized gain (loss) of approximately $(22,000) and $25,000, respectively, associated with the investments still held at the end of each respective period. Such amounts are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

At June 30, 2016 and December 31, 2015, no equity investment, individually or in the aggregate, held by the Company exceeded 10% of the total consolidated assets or income. As such, the Company did not present separate or summarized financial statements for any of its investees.

4. Fair Value of Investments

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values.

The Company follows the fair value measurement and disclosure guidance under U.S. GAAP, which establishes a hierarchical disclosure framework. This framework prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. In all cases, an instrument’s level within the hierarchy is based upon the market pricing transparency of the instrument and does not necessarily correspond to the Company’s perceived risk or liquidity of the instrument.

The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment.

Assets and liabilities that are measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 — Fair value is determined based on quoted prices for identical assets or liabilities in an active market. Assets and liabilities included in Level 1 include listed securities. As required in the fair value measurement and disclosure guidance under U.S. GAAP, the Company does not adjust the quoted price for these investments. The hierarchy gives highest priority to Level 1.

Level 2 — Fair value is determined based on inputs other than quoted prices that are observable for the asset or liability either directly or indirectly as of the reporting date. Assets and liabilities which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives, including foreign exchange forward contracts whose values are based on the following:

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• Quoted prices for similar assets or liabilities in active markets.

• Quoted prices for identical or similar assets or liabilities in non-active markets.

• Pricing models whose inputs are observable for substantially the full term of the asset or liability.

• Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 — Fair value is determined based on inputs that are unobservable for the investment and includes situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value require significant management judgment or estimation and the Company may use models or other valuation methodologies to arrive at fair value. Investments that are included in this category generally include distressed debt, less liquid corporate debt securities, non-investment grade residual interests in securitizations, collateralized debt obligations and certain derivative contracts. The hierarchy gives the lowest priority to Level 3.

The Company has established a valuation process that applies for all levels of investments in the valuation hierarchy to ensure that the valuation techniques are consistent and verifiable. The valuation process includes discussions between the valuation team, portfolio management team and the valuation committee (the “Valuation Committee”). The Valuation Committee consists of senior members of ZAIS Group and is co-chaired by the Chief Risk Officer and Chief Financial Officer of ZAIS Group. The Valuation Committee meets to review and approve the results of the valuation process which are used in connection with the preparation of quarterly and annual financial statements. The Valuation Committee is responsible for oversight and review of the written valuation policies and procedures and ensuring that they are applied consistently.

The lack of an established, liquid secondary market for some of the Company’s holdings may have an adverse effect on the market value of those holdings and on the Company’s ability to dispose of them. Additionally, the public markets for the Company’s holdings may experience periods of volatility and periods of reduced liquidity and the Company’s holdings may be subject to certain other transfer restrictions that may further contribute to illiquidity. Such illiquidity may adversely affect the price and timing of liquidations of the Company’s holdings.

The following is a description of the valuation techniques used to measure fair value and the classification of these instruments pursuant to the fair value hierarchy:

Investments

The Company determines the fair value of investments in short term high investment grade mutual funds using quoted market prices and, accordingly, the Company classifies these investments as Level 1. Net gains or losses on investments are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

Collateralized Loan Obligation – Warehouse

A Collateralized Loan Obligation Warehouse (the "CLO - Warehouse") was organized for the purpose of holding syndicate bank loans, also known as leveraged loans, during the warehouse period of an impending collateralized loan obligation vehicle.  During the warehouse period, the CLO - Warehouse will secure investments and build a portfolio of primarily leveraged loans and other debt obligations. The warehouse period terminates when the collateralized loan obligation vehicle closes; at this time the underlying assets held by the CLO - Warehouse are securitized into a collateralized loan obligation vehicle.

The fair value of the CLO - Warehouse is determined by adding the excess spread (accrued interest plus interest received less financing cost) to the CLO - Warehouse equity contribution made by the Consolidated Funds, unless ZAIS Group determines that the securitization period will not be achieved, in which case, the fair value of the CLO - Warehouse will be established based on the fair value of the underlying bank loan positions which are valued in a manner consistent with ZAIS Group’s valuation policy and procedures.  The net excess spread was 10.5% and 1.7% as of June 30, 2016 and December 31, 2015, respectively. CLO warehouses can be exposed to credit events, mark to market changes, rating agency downgrades and financing cost changes. Changes in the fair value of the CLO - Warehouse are reported in net gains (losses) of Consolidated Funds’ investments in the consolidated statements of comprehensive income (loss). Upon closing of the CLO, all assets held in the CLO – Warehouse are transferred into the collateralized loan obligation vehicle and the gain / (loss) on those assets is realized.

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Investment in Affiliates

Under U.S. GAAP, the Company is permitted, as a practical expedient, to estimate the fair value of its investments in other investment companies using the NAV (or its equivalent) of the related investment company. Accordingly, the Company utilizes the practical expedient in valuing its investments in the unconsolidated ZAIS Managed Entities, which is an amount equal to the sum of the Company’s proportionate interest in the capital accounts of the affiliated funds at fair value. The fair value of the assets and liabilities of the ZAIS Managed Entities are determined by the Company in accordance with its valuation policies described above. Pursuant to ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent) (“ASU 2015-07”), the Company no longer is required to categorize these investments within the fair value hierarchy. The resulting net gains or losses on investments are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

At June 30, 2016 and December 31, 2015, the Company held investments in five unconsolidated ZAIS Managed Entities. The valuation of the investments in these entities represents the amount the Company would receive at June 30, 2016 and December 31, 2015, respectively, if it were to liquidate its investments in these entities. ZAIS Group has the ability to liquidate its investments according to the provisions of the respective entities’ operative agreements.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
		Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,207
Investments, at fair value
CLO – Warehouse		—		—		44,201		44,201
Total investments, at fair value		—		—		44,201		44,201
Total assets, at fair value	$	—	$	—	$	44,201	$	49,408

  The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
		Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,242
Investments, at fair value
Short term high investment grade mutual funds		8,169		—		—		8,169
CLO – Warehouse		—		—		30,509		30,509
Total investments, at fair value		8,169		—		30,509		38,678
Total assets, at fair value	$	8,169	$	—	$	30,509	$	43,920

The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the six months ended June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
	Beginning Balance January 1, 2016		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance June 30, 2016		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at June 30, 2016
CLO - Warehouse	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692
Total investments, at fair value	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692

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The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the year ended December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
	Beginning Balance January 1, 2015		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance December 31, 2015		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at December 31, 2015
CLO - Warehouse	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509
Total investments, at fair value	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509

The Company’s policy is to record transfers between Level 1, Level 2 and Level 3, if any, at the beginning of the period.

There were no transfers between Level 1, Level 2 and Level 3 during the six months ended June 30, 2016 and the year ended December 31, 2015.

5. Variable Interest Entities (“VIEs”)

In the ordinary course of business, ZAIS Group sponsors the formation of VIEs that can be broadly classified into the following categories: hedge funds, hybrid private equity funds and securitized structures (CLOs). ZAIS Group generally serves as the investment advisor or collateral manager with certain investment-related, decision-making authority for these entities. The Company has not recorded any liabilities with respect to VIEs that are not consolidated. Certain ZAIS Managed Entities, including the CLOs, are VIEs. The Company applies the guidance of ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”) when determining which ZAIS Managed Entities are required to be consolidated.

Funds

The Company has determined that the fee it receives from several of the hedge funds and hybrid private equity funds ZAIS Group manages does not represent a variable interest because under ASU 2015-02, ZAIS Group’s fee arrangements are commensurate with the level of effort performed and include only customary terms that do not represent variable interests. The Company considered investments its related parties have in these entities when determining if ZAIS Group’s fee represented a variable interest.

As of June 30, 2016 and December 31, 2015, the Company has determined that ZAIS Group is the primary beneficiary of ZAIS Zephyr A-6, LP, which is consolidated in these unaudited consolidated financial statements. ZAIS Group is the primary beneficiary since it is deemed to have (i) the power to direct activities of the entity that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity.

Securitized Structures

ZAIS Group and certain of its wholly owned subsidiaries act as collateral manager for CLOs that are VIEs. These CLOs are entities that issue collateralized notes which offer investors the opportunity for returns that vary commensurately with the risks they assume. The notes issued by the CLOs are generally backed by asset portfolios consisting of loans, other debt or other derivatives. ZAIS Group receives collateral management fees (which in some cases are waived in lieu of certain ZAIS Managed Entities owning the equity tranches) for acting as the collateral manager for these structures and, subject to hurdle rates, may earn incentive income based on the performance of the vehicles.

The Company has determined that the fee it receives from the CLOs does not represent a variable interest because under ASU 2015-02, ZAIS Group’s fee arrangements are commensurate with the level of effort performed and include only customary terms that do not represent variable interests. The Company considered investments its related parties have in the CLOs when determining if ZAIS Group’s fee represented a variable interest.

The Company determined that it is not the primary beneficiary of CLO – Warehouses, which are VIEs, because the financing entity must approve all significant financing requests and, as a result, the Company does not have the power to direct activities of the entity that most significantly impacts its economic performance.

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The following table presents the assets and liabilities of entities that are VIEs, and consolidated by the Company on a gross basis prior to eliminations due to consolidation at June 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
	Funds		Funds
	(Dollars in thousands)
Assets
Assets of Consolidated Funds
Cash and cash equivalents	$	—	$	33
Investments, at fair value		44,201		30,509
Total Assets	$	44,201	$	30,542
Liabilities
Liabilities of Consolidated Funds
Other liabilities	$	101	$	101
Total Liabilities	$	101	$	101

The assets presented in the table above belong to the investors in the applicable entity, are available for use only by the entity to which they belong and are not available for use by the Company. The Consolidated Funds have no recourse to the general credit of ZAIS Group with respect to any liability.

ZAIS Group has a minimal direct ownership, if any, in the non-consolidated entities that are VIEs and its involvement is generally limited to providing asset management services. ZAIS Group’s exposure to loss from these entities is limited to a decrease in the management fees and incentive income that has been earned and accrued, as well as any direct equity ownership in the VIEs. The Company did not hold any material variable interests in unconsolidated VIEs at June 30, 2016 or December 31, 2015.  

6. Management Fee Income and Incentive Income

ZAIS Group earns management fees for funds and accounts, monthly, quarterly or annually, based on the net asset value of these funds and accounts prior to the accrual of incentive fees/allocations. Management fees earned for the CLOs, annually, are generally based on the par value of the collateral and cash held in the CLOs. Management fees earned by ZAIS Group from ZFC REIT, annually, are based on ZFC REIT's stockholders' equity, as defined in the amended and restated investment advisory agreement between ZAIS Group’s consolidated subsidiary ZAIS REIT Management, LLC (“ZAIS REIT Management”) and ZFC REIT. Twenty percent of the management fee income received from ZFC REIT is paid to holders of Class B interests in ZAIS REIT Management and is recorded on a gross basis and included in management fee income on the consolidated statements of comprehensive income (loss). This income is allocated to the holders of Class B interests in ZAIS REIT Management which is included in non-controlling interest in ZAIS Group Parent, LLC.

ZAIS REIT Management, a majority owned subsidiary of ZAIS Group, is the external investment advisor to ZFC REIT. On April 7, 2016, ZFC REIT announced that it had entered into an agreement and plan of merger (the “Merger Agreement”). In connection with the Merger Agreement, ZAIS REIT Management entered into a termination agreement (the “Termination Agreement”), whereby the current advisory agreement under which ZAIS REIT Management receives management fees from ZFC REIT will be terminated upon closing of the ZFC REIT merger and ZAIS REIT Management will receive a termination fee in the amount of $8,000,000. In the event that the Merger Agreement is terminated prior to the consummation of the transaction, the Termination Agreement will automatically terminate and be of no further effect.

In addition to the management fee income mentioned above, subordinated management fees may be earned from CLOs for which ZAIS Group and certain of its wholly owned subsidiaries act as collateral manager. The subordinated management fee is an additional payment for the same collateral management service, but has a lower priority in the CLOs’ cash flows. The subordinated management fee is contingent upon the economic performance of the respective CLO assets. If the CLOs experience a certain level of asset defaults, these fees may not be paid. There is no recovery by the CLOs of previously paid subordinated fees. ZAIS Group recognizes the subordinated management fee income when collection is reasonably assured and all related contingencies have been removed.

ZAIS Group manages certain funds and accounts from which it may earn incentive income based on hedge fund-style and private equity-style fee arrangements. Funds and accounts with hedge fund-style fee arrangements are those that pay ZAIS Group, on an annual basis, an incentive fee/allocation based on a percentage of net realized and unrealized profits attributable to each investor, subject to a hurdle (if any) set forth in each respective entity’s operative agreement. Additionally, all funds and accounts with hedge fund-style fee arrangements are subject to a perpetual loss carry forward, or perpetual “high-water mark,” meaning that the funds and accounts will not pay incentive fees/allocations with respect to positive investment performance generated for an investor in any year following negative investment performance until that loss is recouped, at which point an investor’s capital balance surpasses the high-water mark. The funds and accounts pay incentive fees/allocations on any net profits in excess of the high-water mark. Funds and accounts with private equity-style fee arrangements are those that pay an incentive fee/allocation based on a priority of payments under which investor capital must be returned and a preferred return, as specified in each fund’s operative agreement, must be paid to the investor prior to any payments of incentive-based income to ZAIS Group. For CLOs, incentive income is earned based on a percentage of cumulative profits, subject to the return of contributed capital (and subordinate management fees, if any), and a preferred inception to date return as specified in the respective CLOs’ collateral management agreements. ZAIS Group does not earn incentive income from ZFC REIT.

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The following tables represent the gross amounts of management fee income and incentive income earned prior to eliminations due to consolidation of the Consolidated Funds and the net amount reported in the Company’s consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2016 and June 30, 2015. June 30, 2015 amounts have been adjusted to conform to current period presentation:

		Three Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range		Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,373	$	—	$	2,373
CLO’s	0.15% - 0.50%		425		—		425
ZFC REIT	1.50%		773		—		773
Total		$	3,571	$	—	$	3,571
Incentive Income (1)
Funds and accounts	10% - 20%	$	143	$	—	$	143
CLO’s	20%		—		—		—
Total		$	143	$	—	$	143

		Three Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range		Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,942	$	—	$	2,942
CLO’s	0.15% - 0.50%		285		—		285
ZFC REIT	1.50%		854		—		854
Total		$	4,081	$	—	$	4,081
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,213	$	—	$	1,213
CLO’s	20%		—		—		—
Total		$	1,213	$	—	$	1,213

		Six Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range		Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	4,769	$	—	$	4,769
CLO’s	0.15% - 0.50%		830		—		830
ZFC REIT	1.50%		1,541		—		1,541
Total		$	7,140	$	—	$	7,140
Incentive Income (1)
Funds and accounts	10% - 20%	$	295	$	—	$	295
CLO’s	20%		—		—		—
Total		$	295	$	—	$	295

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		Six Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range		Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	5,977	$	—	$	5,977
CLO’s	0.15% - 0.50%		429		—		429
ZFC REIT	1.50%		1,428		—		1,428
Total		$	7,834	$	—	$	7,834
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,248	$	—	$	1,248
CLO’s	10% - 20%		873		—		873
Total		$	2,121	$	—	$	2,121

(1) Incentive income earned for certain of the ZAIS Managed Entities is subject to a hurdle rate of return as specified in each respective ZAIS Managed Entities’ operative agreement.

The management fee income amounts above are net of management fee credits of $(50,000) and $(39,000) for the three months ended June 30, 2016 and June 30, 2015, respectively. The management fee income amounts above are net of management fee credits of $(104,000) and $(104,000) for the six months ended June 30, 2016 and June 30, 2015, respectively. The incentive income amounts above are net of incentive income credits of $0 and $(59,000) for the three months ended June 30, 2016 and June 30, 2015, respectively. The incentive income amounts above are net of incentive income credits of $0 and $(59,000) for the six months ended June 30, 2016 and June 30, 2015, respectively.

At June 30, 2016, approximately $1,646,000 and $9,000 were accrued for management fee income and incentive income, respectively but not received, and included in income and fees receivable in the consolidated statements of financial condition. At December 31, 2015, approximately $1,670,000 and $859,000 were accrued for management fee income and incentive income, respectively but not received, and included in income and fees receivable in the consolidated statements of financial condition. 

7. Debt Obligations

Notes Payable

On March 17, 2015, in conjunction with the closing of the Business Combination, ZAIS issued two promissory notes with an aggregate principal balance of $1,250,000 to EarlyBirdCapital, Inc. and Sidoti & Company, LLC. The notes accrue interest at an annual rate equal to the annual applicable federal rate as published by the Internal Revenue Service (“AFR”) until the principal amount of, and all accrued interest on, the notes have been paid in full. The notes mature on March 17, 2017. The notes were issued in lieu of paying certain underwriting costs at the closing of the Business Combination and, accordingly, treated as a direct cost attributable to the Business Combination and capitalized to equity. The Company accrued interest on the notes for the three and six months ended June 30, 2016 and June 30, 2015, which is included in other income (expense) in the consolidated statements of comprehensive income (loss).

8. Compensation

Employees are eligible to receive discretionary incentive cash compensation (the “Bonus Award”) on an annual basis. The amount of the Bonus Award is based on, among other factors, both individual performance and the financial results of ZAIS Group. For certain employees, as documented in an underlying agreement (the “Bonus Agreement”), the Bonus Award may be further subject to a retention-based payout schedule that generally provides for 30% of the Bonus Award to vest and be paid incrementally over a three-year period. The Company expenses all current cash incentive compensation award payments ratably in the first year. All future payments are amortized equally over the required service period over the remaining term of the Bonus Award as defined in the Bonus Award Agreements. In the event an award is forfeited pursuant to the terms of the Bonus Agreement, the corresponding accruals will be reversed.

On March 29, 2016, the Compensation Committee of the Board of Directors of ZAIS adopted a retention payment plan for certain employees of ZAIS Group (the "Retention Payment Plan"). The Retention Payment Plan applies to approximately 60 employees of ZAIS Group who have an annual base salary of less than $300,000. The purpose of the Retention Payment Plan is to enable ZAIS Group to retain the services of its employees in order to ensure that ZAIS Group is not disrupted or adversely affected by the possible loss of personnel or their commitment to ZAIS Group. Under the Retention Payment Plan, the participating employees are entitled to receive cash retention payments on each of April 15, 2016, August 15, 2016 and November 15, 2016, if the employee remains employed by ZAIS Group on such dates. The aggregate amount of retention payments that may be paid to all participants under the Retention Payment Plan is approximately $4.5 million. All payments under the Retention Payment Plan will be amortized equally over the required service period ending on each of the three payment dates discussed above. In the event an award is forfeited pursuant to the terms of a respective Retention Payment Plan agreement, the corresponding accruals will be reversed. In addition, on March 1, 2016, the Compensation Committee of the Board of Directors of ZAIS approved a retention payment of $900,000 to Howard Steinberg, the Company's General Counsel, which was paid on March 15, 2016 and is included in compensation and benefits in the consolidated statements of comprehensive income (loss) for the six months ended June 30, 2016.

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ZAIS Group has entered into agreements with certain of its employees whereby certain employees and former employees have been granted rights to participate in a portion of the incentive income received from certain ZAIS Managed Entities (referred to as “Points”).

In 2013, ZAIS Group established the Income Unit Plan. Under the Income Unit Plan, certain employees were entitled to receive a fixed percentage of ZAIS Group’s distributable income, as defined in the Income Unit Plan agreement. Pursuant to the terms of the Income Unit Plan, a payout of 85% of the estimated award was made in December of the applicable performance year and the remaining balance was payable within 30 days of the issuance of ZAIS Group’s audit report for the prior year. An employee must have been actively employed by ZAIS Group on each scheduled payment date to have received their relevant payment. The Income Unit Plan was terminated effective December 31, 2014.

On March 8, 2016, the Company commenced a reduction in force and other restructuring which has resulted in a decrease of 23 employees of ZAIS Group. The Company has incurred total severance charges in the amount of approximately $762,000 as of June 30, 2016. The Company immediately recognized all severance expense for employees who were not required to provide services or those employees who were not being retained beyond the 60 day notification period. Conversely, for all employees who were required to provide services or those who were retained beyond the 60 day notification period, the related severance expense was amortized equally over the required service period.

The following table presents a detailed breakout of compensation expense recorded for the three and six months ended June 30, 2016 and June 30, 2015:

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015		Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Salaries	$	2,593,000	$	3,486,000	$	5,873,000	$	7,015,000
Bonus		3,502,000		666,000		7,400,000		2,229,000
Points		—		32,000		—		32,000
Commissions		3,000		30,000		3,000		45,000
Income Unit Plan		—		—		—		198,000
Equity-Based Compensation		1,339,000		1,616,000		1,682,000		1,878,000
Severance		119,000		974,000		762,000		974,000
Payroll taxes and benefits		443,000		557,000		1,286,000		1,560,000
Total compensation and benefits	$	7,999,000	$	7,361,000	$	17,006,000	$	13,931,000

Equity-Based Compensation

In conjunction with the closing of the Business Combination on March 17, 2015, ZGP authorized 1,600,000 Class B-0 Units eligible to be granted to certain employees of ZAIS Group. The Class B-0 Units are subject to a two year cliff-vesting provision, whereby all Class B-0 Units granted to an employee will be forfeited if the employee resigns or is terminated prior to the two year anniversary of the closing of the Business Combination. Subsequent to the two year anniversary of the Business Combination, an employee will only forfeit vested Class B-0 Units if the employee is terminated for cause. The Class B-0 Units are not entitled to any distributions from ZGP (and thus will not participate in, or be allocated any, income or loss) or other material rights until such Class B-0 Units vest. Upon vesting the Class B-0 Units will have the same rights as Class A Units of ZGP and are exchangeable on a one for one basis for Class A common shares subject to the restrictions set forth in the Exchange Agreement included in the Closing 8-K. In accordance with ASC 718, Compensation - Stock Compensation, the Company is measuring the compensation expense associated with these awards based on grant date fair value adjusted for estimated forfeitures. This compensation expense will be amortized equally over the two-year vesting period and will be cumulatively adjusted for changes in estimated forfeitures at each reporting date.

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The following table presents the unvested Class B-0 Units’ activity during the six months ended June 30, 2016:

	Number of B-0 Units			Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		1,337,486		$	9.67
Granted		100,000			6.34
Forfeited		(305,273	)		9.70
Vested		—			—
Balance at June 30, 2016		1,132,213		$	9.36

The total compensation expense expected to be recognized in all future periods associated with the Class B-0 Units is $3,704,000 at June 30, 2016, which is expected to be recognized over the remaining weighted average period of 0.71 years. The Company recorded compensation expense of $1,296,000 and $1,567,000 related to the Class B-0 Units for the three months ended June 30, 2016 and June 30, 2015, respectively. The Company recorded compensation expense of $1,566,000 and $1,829,000 related to the Class B-0 Units for the six months ended June 30, 2016 and June 30, 2015, respectively. During the three months ended March 31, 2016, the Company increased its forfeiture estimate from 8% to 29.6%. This increase includes approximately a 17.2% increase relating to the reduction in force announced in the Company’s Current Report on Form 8-K filed on March 8, 2016 and approximately a 4.4% increase relating to the change in management’s estimated forfeitures based on actual forfeitures since the grant date. The cumulative impact of the increase in estimated forfeitures of $(983,000) was recognized as a reduction in compensation and benefits for the six months ended June 30, 2016. The expense relating to the Class B-0 Units is included in compensation and benefits on the consolidated statements of comprehensive income (loss).

Pursuant to ZAIS’s 2015 Stock Incentive Plan, non-employee directors of ZAIS receive restricted stock units (“RSUs”) as a component of compensation for their service as directors of ZAIS. The awards are unvested at the time they are granted and, as such, are not entitled to any dividends or distributions from ZAIS or other material rights until such RSUs vest. The RSUs vest in full on the one-year anniversary of the grant date. Upon vesting ZAIS will issue the recipient shares of Class A Common Stock equal to the number of vested RSUs. In accordance with ASC 718, Compensation - Stock Compensation, the Company is measuring the expense associated with these awards based on the fair value on the grant date adjusted for estimated forfeitures. This expense is being amortized equally over the one-year vesting period and adjusted on a cumulative basis for changes in estimated forfeitures at each reporting date.

The following table presents the unvested RSU activity during the six months ended June 30, 2016:

	Number of RSUs			Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		30,000		$	9.85
Granted		30,942			3.22
Forfeited		—			—
Vested		(30,000	)		9.85
Balance at June 30, 2016		30,942		$	3.22

The total expense expected to be recognized in all future periods associated with the RSUs, considering estimated forfeitures of 0%, is $81,000 at June 30, 2016, which is expected to be recognized over the remaining weighted average period of 0.81 years. The Company recorded expense of $43,000 and $49,000 related to the RSUs for the three months ended June 30, 2016 and June 30, 2015, respectively. The Company recorded expense of $116,000 and $49,000 related to the RSUs for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense relating to these RSUs is included in compensation and benefits on the consolidated statements of comprehensive income (loss).

9. Income Taxes

Prior to the closing of the Business Combination on March 17, 2015, ZGP and its subsidiaries were pass-through entities for U.S. income tax purposes and their earnings flowed through to the owners without being subject to entity level income taxes. Accordingly, no income tax (benefit) expense has been recorded for the period prior to the closing of the Business Combination other than that related to ZGP’s foreign subsidiaries, which are branches for U.S. income tax purposes but paid income taxes in their respective foreign jurisdictions.

17 

Following the reorganization, while ZGP and its subsidiaries continue to operate as pass-through entities for U.S. income tax purposes not subject to entity level taxes, ZAIS is taxable as a corporation for U.S. tax purposes. Accordingly, the Company’s consolidated financial statements include U.S. federal, state and local income taxes on the ZAIS’ allocable share of the consolidated results of operations, as well as taxes payable to jurisdictions outside the U.S related to the foreign subsidiaries.

The Company recorded income tax expense of $4,000 and $9,000 for the three and six months ended June 30, 2016, respectively, related solely to foreign taxes. The Company recorded income tax (benefit) of $(1,682,000) and $(2,584,000) for the three and six months ended June 30, 2015, respectively, related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations, as well as foreign taxes payable to jurisdictions outside the U.S. related to the Company’s foreign subsidiaries.

The following is a reconciliation of the U.S. statutory federal income tax to the Company’s effective tax. As a result of the variations each quarter in the relationship between pre-tax income and income tax expense, the Company utilizes the actual effective tax rate for each interim period being presented to calculate the tax expense.

	Three Months Ended June,						Six Months Ended June,
	2016			2015			2016			2015
Income tax (benefit) expense at the U.S. federal statutory income tax rate	$	(1,676,000	)		(2,401,000	)		(3,850,000	)		(4,584,000	)
State and local income tax, net of federal benefit		(242,000	)		(291,000	)		(529,000	)		(373,000	)
Foreign tax		4,000			353,000			9,000			20,000
Effect of permanent differences		56,000			—			58,000			—
Income attributable to non-controlling interests in Consolidated Funds not subject to tax		(358,000	)		—			(607,000	)		—
Income attributable to non-controlling interests in ZGP not subject to tax		649,000			657,000			1,430,000			2,353,000
Valuation allowance		1,571,000			—			3,498,000			—
Total		4,000			(1,682,000	)		9,000			(2,584,000	)

The Company’s effective tax for the periods presented above includes a rate benefit attributable to the fact that the Company’s subsidiaries operate as limited liability companies and limited partnerships which are treated as pass-through entities for U.S. federal and state income tax purposes. Accordingly, the Company’s consolidated financial statements include U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations. The tax liability or benefit related to the partnership income or loss not allocable to the Company rests with the equity holders owning such non-controlling interests in ZAIS subsidiaries. For the three and six months ended June 30, 2016, the net effective tax represents the taxes accrued related to the Company’s operations in jurisdictions outside the U.S. as a full valuation allowance has been established on the tax benefit related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations. For the three and six months ended June 30, 2015, the net effective tax represents a tax benefit related to the Company’s operations in jurisdictions outside the U.S. as well as a tax benefit related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and are reported in the accompanying consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.

As of June 30, 2016, the Company had total deferred tax assets of $7,800,000 related to net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations. As of December 31, 2015, the Company had total deferred tax assets of $4,301,000 related to net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations. Additionally at June 30, 2016 and December 31, 2015, the Company had deferred tax assets of $767,000, respectively, related to ZAIS’s net operating losses and development stage start-up expenses incurred during the period from its inception and prior to the closing of the Business Combination with ZGP. The Company has established a full valuation allowance on the deferred tax asset as of June 30, 2016 and December 31, 2015.

18 

As of June 30, 2016, the Company has estimated federal and state income tax net operating loss carryforwards of $16,729,000 which will expire as follows:

2032	$	1,000
2033		83,000
2034		122,000
2035		7,388,000
2036		9,135,000
Total	$	16,729,000

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2016, the Company has determined that the most recent management business forecasts do not support the realization of net deferred tax assets recorded for the Company. The Company has recorded a book loss for the three and six months ended June 30, 2016 and it is anticipated that expenses will continue to exceed revenues in 2016. Although management intends to pursue various initiatives with potential to alter the operating loss trend, there is no specific plan that has been implemented at this point in time that will alter the negative earnings trend.

Accordingly, management continues to believe that it is not more likely than not that its deferred tax asset will be realized and the Company has continued to maintain the full valuation allowance against the deferred tax asset of as of June 30, 2016. The Company has recorded additional charges of $1,571,000 and $3,498,000 to our consolidated statements of comprehensive income (loss) relating to the net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations for the three and six months ended June 30, 2016. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The Company does not believe it has any significant uncertain tax positions. Accordingly, the Company did not record any adjustments or recognize interest expense for uncertain tax positions for the three and six months ended June 30, 2016 and June 30, 2015, respectively. In the future, if uncertain tax positions arise, interest and penalties will be accrued and included in the income tax (benefit) expense on the consolidated statements of comprehensive income (loss).

10. Related Party Transactions

ZAIS Group offers a range of alternative and traditional investment strategies through the ZAIS Managed Entities. ZAIS Group earns substantially all of its management fee income and incentive income from the ZAIS Managed Entities, which are considered related parties as the Company manages the operations of, and makes investment decisions for, these entities. The Company considers ZAIS Group’s principals, executives, employees and all ZAIS Managed Entities to be affiliates and related parties.

ZAIS Group invests in its subsidiaries and some of the ZAIS Managed Entities. Investments in subsidiaries and certain ZAIS Managed Entities that are consolidated are eliminated. Investments in certain ZAIS Managed Entities not consolidated are further described in Note 3.

ZAIS Group did not charge management fees or earn incentive income on investments made in the ZAIS Managed Entities (excluding CLOs and ZFC REIT) by ZAIS Group’s principals, executives, employees and other related parties. The total amount of investors’ capital balances that are not being charged fees were approximately $18,854,000 and $30,949,000 at June 30, 2016 and June 30, 2015, respectively.

Additionally, certain ZAIS Managed Entities, with existing fee arrangements, have investments representing 100% of the equity tranche of ZAIS CLO 1, Limited. (“ZAIS CLO 1”) and ZAIS CLO 2, Limited. (“ZAIS CLO 2”). Therefore, ZAIS Group did not charge management fees or earn incentive income on ZAIS CLO 1 and ZAIS CLO 2. The total amounts of AUM that are not being charged fees were approximately $563,685,000 and $558,288,000 at June 30, 2016 and June 30, 2015, respectively.

From time to time, ZAIS Group may pay related party research and data services expenses directly to vendors, and subsequently invoice these costs to the respective ZAIS Managed Entities based upon certain criteria. At June 30, 2016 and December 31, 2015, approximately $1,266,000 and $650,000, respectively, was due to ZAIS Group from the ZAIS Managed Entities as a result of this arrangement. At June 30, 2016 and December 31, 2015, approximately $54,000 and $32,000, respectively, was due to ZAIS Group from the ZAIS Managed Entities and other related parties which were not as a result of this arrangement. These amounts are included in due from related parties in the consolidated statements of financial condition.

ZGP has entered into a two-year Consulting Agreement (the “Consulting Agreement”) with Mr. Ramsey through RQSI, Ltd., an entity controlled by Mr. Ramsey, under the terms of which, among other things, Mr. Ramsey will provide consulting services to ZGP, ZAIS Group’s senior management team and ZAIS, as requested by ZAIS, from time to time during the 24-month period beginning on the closing of the Business Combination. Mr. Ramsey may not compete against ZGP during the term of the Consulting Agreement, and for two years following its termination. In consideration for his undertakings under the Consulting Agreement, ZGP will pay Mr. Ramsey a consulting fee of $500,000 per annum payable in monthly installments. ZGP may terminate the Consulting Agreement for cause, as defined in the Consulting Agreement. The Company has recorded approximately $125,000 in expenses relating to the Consulting Agreement for each of the three months ended June 30, 2016 and June 30, 2015, respectively. The Company has recorded approximately $250,000 and $145,000 in expenses relating to the Consulting Agreement for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense is included in general, administrative and other expenses in the consolidated statements of total comprehensive income.

19 

ZAIS Group has agreed to use certain statistical data generated by RQSI, Ltd. models. ZAIS Group will utilize this information for trading futures in one of the ZAIS Managed Entities.

ZAIS Group has entered into a month to month lease agreement with an affiliate of RQSI, Ltd to jointly occupy our UK office. The agreement is terminable upon 30 days’ notice. While there is currently no charge associated with the lease, the total market value of the agreement is approximately $13,000 per month.

ZAIS Group is a party to a consulting agreement with Tracy Rohan, Mr. Zugel’s sister-in-law, pursuant to which Ms. Rohan provides services to ZAIS Group relating to event planning, promotion, web and print branding and related services. Pursuant to the consulting agreement, Ms. Rohan earned approximately $27,000 and $29,000 for her services for the three months ended June 30, 2016 and June 30, 2015, respectively. Ms. Rohan earned approximately $54,000 and $58,000 for her services for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense is included in general, administrative and other expenses in the consolidated statements of total comprehensive income.

At June 30, 2016 and December 31, 2015, approximately $62,000 and $66,000 respectively, relating to employee loans were included in due from related parties in the consolidated statements of financial condition.

11. Fixed Assets

Fixed assets consist of the following:

	June 30, 2016			December 31, 2015
	( Dollars in thousands )
Office equipment	$	3,098		$	3,088
Leasehold improvements		838			853
Furniture and fixtures		572			574
Software		409			409
		4,917			4,924
Less accumulated depreciation		(4,495	)		(4,380	)
Total	$	422		$	544

For the three months ended June 30, 2016 and June 30, 2015, depreciation expense amounted to approximately $64,000 and $146,000, respectively. For the six months ended June 30, 2016 and June 30, 2015, depreciation expense amounted to approximately $127,000 and $208,000, respectively. The change in accumulated depreciation also includes the change in foreign currency spot rates for each respective period presented. The change in leasehold improvements also includes a $(15,000) reduction due to the translation of the functional currencies of our foreign subsidiaries.

12. Commitments and Contingencies

Capital Commitments

As of June 30, 2016, a portion of the proceeds of the Business Combination had been committed to expand existing product lines. Up to $51 million of equity capital has been committed to the Consolidated Fund, ZAIS Zephyr A-6, L.P., which would allow this Consolidated Fund to invest in ZAIS Group managed CLO vehicles and thereby satisfy the risk retention requirements for CLO managers under the Securities Exchange Act of 1934. As of June 30, 2016, approximately $20.5 million in capital has been contributed to the subsidiary.

20 

Lease Obligations

ZAIS Group is obligated under operating lease agreements for office space in the New Jersey and London offices expiring through October 2017. The Company recognizes expense related to its operating leases on a straight-line basis over the lease term. Aggregate future minimum annual rental payments for the periods subsequent to June 30, 2016 are approximately as follows:

Period	Amount
	( Dollars in thousands )
Six Months Ending December 31, 2016	$	457
Ten Months Ending October 31, 2017		721
	$	1,178

Rent expense is recognized on a straight-line basis and is included in general, administrative and other in the consolidated statements of comprehensive income (loss). For the three months ended June 30, 2016 and June 30, 2015, rent expense amounted to approximately $263,000 and $282,000, respectively. For the six months ended June 30, 2016 and June 30, 2015, rent expense amounted to approximately $507,000 and $818,000, respectively.

Litigation

From time to time, ZAIS Group may become involved in various claims, formal regulatory inquiries and legal actions arising in the ordinary course of business. The Company discloses information regarding such inquiries if disclosure is required pursuant to accounting and financial reporting standards. While we are currently involved in a formal regulatory inquiry, in management’s opinion the matter is not appropriate for accrual or disclosure in the financial statements at June 30, 2016.

Other Contingencies

In the normal course of business, ZAIS Group enters into contracts that provide a variety of indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to ZAIS Group under these arrangements could involve future claims that may be made against ZAIS Group. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.

Gain Contingencies

On April 7, 2016 the Company received notification from one of its insurance providers that the Company’s claim for reimbursement of certain legal costs relating to a formal regulatory inquiry had been approved. The total approved claim reimbursement for all legal costs incurred in excess of the $500,000 deductible was approximately $703,000. Pursuant to the guidance under ASC 450, Contingencies – Gain Contingencies , approximately $545,000 of the insurance reimbursements receivable has been recorded to other income (expense) in the consolidated statements of total comprehensive income (loss) for the portion that related to the costs incurred for the year ended December 31, 2015 in excess of the Company’s insurance deductible and a corresponding amount has been recorded to other assets in the consolidated statements of financial position. The Company also recorded approximately $158,000 of the insurance reimbursements receivable to other assets in the consolidated statements of financial position and a corresponding amount to general, administrative and other expense in the consolidated statements of comprehensive income (loss) for the portion that related to legal bills received for the six months ended June 30, 2016. During the three months ended June 30, 2016, the Company received insurance reimbursements of $697,000. At June 30, 2016, approximately $6,000 of insurance reimbursements receivable noted above is included in other assets in the consolidated statements of financial position.

13. Segment Reporting

The ZAIS Managed Entities segment is currently the Company’s only reportable segment, and represents the Company’s core business, as substantially all of the Company’s operations are conducted through this segment. The ZAIS Managed Entities segment provides investment advisory and asset management services to the ZAIS Managed Entities.

14. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined time to time by the Company’s board of directors. At June 30, 2016 and December 31, 2015, there were no shares of preferred stock issued or outstanding.

21 

Class A Common Stock

The Company is authorized to issue 180,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. Holders of record of Class A Common Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. At June 30, 2016 and December 31, 2015, there were 13,900,917 and 13,870,917 shares of Class A Common Stock issued and outstanding, respectively.

Class B Common Stock

The Company is authorized to issue 20,000,000 shares of Class B Common Stock with a par value of $0.000001 per share. The Class B Common Stock has no economic rights and therefore is not considered participating securities for purposes of allocation of net income (loss). Holders of record of Class B Common Stock are entitled to ten votes for each share held on all matters to be voted on by stockholders. At June 30, 2016 and December 31, 2015, there were 20,000,000 shares of Class B Common Stock issued and outstanding, held by the ZGH Class B Voting Trust.

15. Earnings Per Share

Shares of Class B common stock have no impact on the calculation of consolidated net income (loss) per share of Class A common stock as holders of Class B common stock do not participate in net income or dividends, and thus, are not participating securities.

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(Dollars in thousands, except shares and per share data)
Numerator:
Consolidated Net Income (Loss), net of tax, attributable to ZAIS Group Holdings, Inc. Class A common stockholders (Basic)	$	(4,076	)	$	(2,947	)	$	(8,910	)	$	(3,769	)
Effect of dilutive securities:
Consolidated Net Income (Loss), net of tax, attributable to non-controlling interests in ZGP		(1,911	)		(2,231	)		(4,210	)		(6,745	)
Less: Consolidated Net (Income) Loss, net of tax, attributable to ZAIS REIT Management Class B interests (1)		(142	)		(283	)		(284	)		(283	)
Income tax (benefit) expense (2)		—			1,027			—			2,871
Consolidated Net Income (Loss), net of tax, attributable to stockholders, after effect of dilutive securities	$	(6,129	)	$	(4,434	)	$	(13,404	)	$	(7,926	)
Denominator:
Weighted average number of shares of Class A Common Stock		13,892,016			13,870,917			13,881,466			8,046,665
Effect of dilutive securities:
Weighted average number of Class A Units of ZGP		7,000,000			7,000,000			7,000,000			7,000,000
Dilutive number of Class B-0 Units and RSUs (3)		—			—			—			—
Diluted weighted average shares outstanding (4)		20,892,016			20,870,917			20,881,466			15,046,665
Consolidated Net Income (Loss), net of tax, per Class A common share – Basic	$	(0.29	)	$	(0.21	)	$	(0.64	)	$	(0.47	)
Consolidated Net Income (Loss), net of tax, per Class A common share – Diluted	$	(0.29	)	$	(0.21	)	$	(0.64	)	$	(0.53	)

(1)	–	Amount represents portion of the management fee income received from ZFC REIT that is payable to holders of Class B interests in ZAIS Group’s consolidated subsidiary ZAIS REIT Management.
(2)	–	Income tax (benefit) / expense for the three and six months ended June 30, 2016 is calculated using an assumed tax rate of 39.29% and is net of a 100% valuation allowance. Income tax (benefit) / expense for the three and six months ended June 30, 2015 is calculated using an assumed tax rate of 40.85%. See Note 9 for details surrounding income taxes.
(3)	–	The treasury stock method is used to calculate incremental Class A common shares on potentially dilutive Class A common shares resulting from unvested Class B-0 Units granted in connection with and subsequent to the Business Combination and unvested RSUs granted to non-employee directors. These units are anti-dilutive and, consequently, have been excluded from the computation of diluted weighted average shares outstanding.
(4)	–	Number of diluted shares outstanding takes into account non-controlling interests of ZGP that may be exchanged for Class A Common Stock under certain circumstances.

22 

16. Supplemental Financial Information

The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company’s financial position at June 30, 2016 and December 31, 2015, and results of operations for the three and six months ended June 30, 2016 and June 30, 2015. Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures below reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02:

	June 30, 2016
	ZAIS			Consolidated Funds		Eliminations			Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	32,064		$	—	$	—		$	32,064
Income and fees receivable		1,655			—		—			1,655
Investments in affiliates, at fair value		27,698			—		(22,491	)		5,207
Due from related parties		1,382			—		—			1,382
Prepaid expenses		1,946			—		—			1,946
Other assets		301			—		—			301
Fixed assets, net		422			—		—			422
Assets of Consolidated Funds
Investments, at fair value		—			44,201		—			44,201
Total Assets	$	65,468		$	44,201	$	(22,491	)	$	87,178
Liabilities and Equity
Liabilities
Notes payable	$	1,259		$	—	$	—		$	1,259
Compensation payable		4,303			—		—			4,303
Due to related parties		142			—		—			142
Fees payable		2			—		—			2
Other liabilities		798			—		—			798
Liabilities of Consolidated Funds
Other liabilities		—			101		—			101
Total Liabilities		6,504			101		—			6,605
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—			—		—			—
Class A Common Stock		1			—		—			1
Class B Common Stock		—			—		—			—
Additional paid-in-capital		61,965			—		—			61,965
Retained earnings (Accumulated deficit)		(22,715	)		—		—			(22,715	)
Accumulated  other comprehensive income (loss)		24			—		—			24
Total stockholders’ equity, ZAIS Group Holdings, Inc.		39,275			—		—			39,275
Non-controlling interests in ZAIS Group Parent, LLC		19,689			—		—			19,689
Non-controlling interests in Consolidated Funds		—			44,100		(22,491	)		21,609
Total Equity		58,964			44,100		(22,491	)		80,573
Total Liabilities and Equity	$	65,468		$	44,201	$	(22,491	)	$	87,178

23 

	December 31, 2015
	ZAIS			Consolidated Funds		Eliminations			Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	44,351		$	—	$	—		$	44,351
Income and fees receivable		2,529			—		—			2,529
Investments, at fair value		8,169			—		—			8,169
Investments in affiliates, at fair value		20,767			—		(15,525	)		5,242
Due from related parties		748			—		—			748
Prepaid expenses		776			—		—			776
Other assets		310			—		—			310
Fixed assets, net		544			—		—			544
Assets of Consolidated Funds
Cash and cash equivalents		—			33		—			33
Investments, at fair value		—			30,509		—			30,509
Total Assets	$	78,194		$	30,542	$	(15,525	)	$	93,211
Liabilities and Equity
Liabilities
Notes payable	$	1,255		$	—	$	—		$	1,255
Compensation payable		3,575			—		—			3,575
Due to related parties		175			—		—			175
Fees payable		756			—		—			756
Other liabilities		1,546			—		—			1,546
Liabilities of Consolidated Funds
Other liabilities		—			101		—			101
Total Liabilities		7,307			101		—			7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—			—		—			—
Class A Common Stock		1			—		—			1
Class B Common Stock		—			—		—			—
Additional paid-in-capital		60,817			—		—			60,817
Retained earnings (Accumulated deficit)		(13,805	)		—		—			(13,805	)
Accumulated  other comprehensive income (loss)		158			—		—			158
Total stockholders’ equity, ZAIS Group Holdings, Inc.		47,171			—		—			47,171
Non-controlling interests in ZAIS Group Parent, LLC		23,716			—		—			23,716
Non-controlling interests in Consolidated Funds		—			30,441		(15,525	)		14,916
Total Equity		70,887			30,441		(15,525	)		85,803
Total Liabilities and Equity	$	78,194		$	30,542	$	(15,525	)	$	93,211

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	Three months Ended June 30, 2016
	ZAIS			Consolidated Funds		Eliminations			Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	3,571		$	—	$	—		$	3,571
Incentive income		143			—		—			143
Other revenues		79			—		—			79
Total Revenues		3,793			—		—			3,793
Expenses
Compensation and benefits		7,999			—		—			7,999
General, administrative and other		2,950			—		—			2,950
Depreciation		64			—		—			64
Expenses of Consolidated Funds		—			29		—			29
Total Expenses		11,013			29		—			11,042
Other Income (loss)
Net gain (loss) on investments		1,150			—		(1,095	)		55
Other income (expense)		87			—		—			87
Net gains (losses) of Consolidated Funds’ investments		—			2,176		—			2,176
Total Other Income (Loss)		1,237			2,176		(1,095	)		2,318
Income (loss) before income taxes		(5,983	)		2,147					(4,931	)
Income tax (benefit) expense		4			—		—			4
Consolidated net income (loss), net of tax		(5,987	)		2,147		(1,095	)		(4,935	)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(147	)		—		—			(147	)
Total Comprehensive Income (Loss)	$	(6,134	)	$	2,147	$	(1,095	)	$	(5,082	)

	Three months Ended June 30, 2015
	ZAIS			Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	4,081		$	—	$	—	$	4,081
Incentive income		1,213			—		—		1,213
Other revenues		106			—		—		106
Total Revenues		5,400			—		—		5,400
Expenses
Compensation and benefits		7,361			—		—		7,361
General, administrative and other		4,764			—		—		4,764
Depreciation		146			—		—		146
Expenses of Consolidated Funds		—			—		—		—
Total Expenses		12,271			—		—		12,271
Other Income (loss)
Net gain (loss) on investments		2			—		—		2
Other income (expense)		9			—		—		9
Net gains (losses) of Consolidated Funds’ investments		—			—		—		—
Total Other Income (Loss)		11			—		—		11
Income (loss) before income taxes		(6,860	)		—		—		(6,860	)
Income tax (benefit) expense		(1,682	)		—		—		(1,682	)
Consolidated net income (loss), net of tax		(5,178	)		—		—		(5,178	)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		291			—		—		291
Total Comprehensive Income (Loss)	$	(4,887	)	$	—	$	—	$	(4,887	)

25 

	Six months Ended June 30, 2016
	ZAIS			Consolidated Funds		Eliminations			Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,140		$	—	$	—		$	7,140
Incentive income		295			—		—			295
Other revenues		159			—		—			159
Total Revenues		7,594			—		—			7,594
Expenses
Compensation and benefits		17,006			—		—			17,006
General, administrative and other		6,160			—		—			6,160
Depreciation		127			—		—			127
Expenses of Consolidated Funds		—			48		—			48
Total Expenses		23,293			48		—			23,341
Other Income (loss)
Net gain (loss) on investments		1,896			—		(1,859	)		37
Other income (expense)		692			—		—			692
Net gains (losses) of Consolidated Funds’ investments		—			3,693		—			3,693
Total Other Income (Loss)		2,588			3,693		(1,859	)		4,422
Income (loss) before income taxes		(13,111	)		3,645		(1,859	)		(11,325	)
Income tax (benefit) expense		9			—		—			9
Consolidated net income (loss), net of tax		(13,120	)		3,645		(1,859	)		(11,334	)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(201	)		—		—			(201	)
Total Comprehensive Income (Loss)	$	(13,321	)	$	3,645	$	(1,859	)	$	(11,535	)

	Six months Ended June 30, 2015
	ZAIS			Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,834		$	—	$	—	$	7,834
Incentive income		2,121			—		—		2,121
Other revenues		137			—		—		137
Total Revenues		10,092			—		—		10,092
Expenses
Compensation and benefits		13,931			—		—		13,931
General, administrative and other		9,101			—		—		9,101
Depreciation		208			—		—		208
Expenses of Consolidated Funds		—			—		—		—
Total Expenses		23,240			—		—		23,240
Other Income (loss)
Net gain (loss) on investments		45			—		—		45
Other income (expense)		5			—		—		5
Net gains (losses) of Consolidated Funds’ investments		—			—		—		—
Total Other Income (Loss)		50			—		—		50
Income (loss) before income taxes		(13,098	)		—		—		(13,098	)
Income tax (benefit) expense		(2,584	)		—		—		(2,584	)
Consolidated net income (loss), net of tax		(10,514	)		—		—		(10,514	)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		483			—		—		483
Total Comprehensive Income (Loss)	$	(10,031	)	$	—	$	—	$	(10,031	)

17. Subsequent Events

None

26 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, references to (i) the “Company” refer to ZAIS Group Holdings, Inc. (“ZAIS”), together, as the context may require, with its consolidated subsidiaries, (ii) “ZAIS Group” refer to ZAIS Group, LLC, and (iii) “ZGP” refer to ZAIS Group Parent, LLC.

This discussion contains forward-looking statements and involves numerous known and unknown risks and uncertainties, including, but not limited to, those described in “Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Annual Report on Form 10-K”) and in other reports filed with the U.S Securities and Exchange Commission (“SEC”). Actual results and the timing of events may differ materially from those contained in any forward-looking statements due to a number of factors, including those in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K and in other SEC reports describing key risks associated with ZAIS and its subsidiaries’ business, operations and industry. Amounts and percentages presented throughout this management’s discussion and analysis of financial condition and results of operations may reflect rounding adjustments and as a result, totals may not appear to sum. The following discussion and analysis should be read in conjunction with the historical consolidated financial statements and related notes of the Company included elsewhere in this Quarterly Report on Form 10-Q.

Overview

ZAIS is a holding company conducting substantially all of its operations through ZAIS Group, a subsidiary of ZAIS’s majority-owned subsidiary, ZGP. ZAIS Group is an investment advisory and asset management firm focused on specialized credit. ZAIS Group is an investment advisor registered with the SEC under the Investment Advisers Act of 1940 and is also registered with the Commodity Futures Trading Commission as a Commodity Pool Operator and Commodity Trading Advisor. ZAIS Group provides investment advisory and asset management services to private funds, separately managed accounts, structured vehicles and ZAIS Financial Corp. (“ZFC REIT”), a publicly traded mortgage real estate investment trust (collectively, the “ZAIS Managed Entities”). The ZAIS Managed Entities predominantly invest in a variety of specialized credit instruments including bank loans, corporate credit instruments such as collateralized debt obligations (“CDOs”) and collateralized loan obligations (together with the CDOs referred to as “CLOs”) and various securities and instruments backed by these asset classes. ZAIS Group had approximately $3.949 billion of assets under management (“AUM”) as of June 30, 2016. ZAIS Group also serves as the general partner to certain ZAIS Managed Entities, which are generally organized as pass-through entities for U.S. federal income tax purposes. ZAIS Group’s AUM is primarily comprised of (i) total assets for mark-to-market funds and separately managed accounts; (ii) uncalled capital commitments, if any, for funds that are not in liquidation; and (iii) for issued structured vehicles, all assets being managed calculated per the management fee basis methodology defined in the respective vehicles’ indenture, although in certain circumstances some or all of the referenced management fees may be waived.  AUM also includes assets in the warehouse phase for new structured credit vehicles and is based on actual assets managed without reductions for leverage and most other liabilities and includes all assets regardless of whether management fees are being earned.

ZAIS Group commenced operations in July 1997, is headquartered in Red Bank, New Jersey and has an office in London. ZAIS Group is a wholly-owned consolidated subsidiary of ZGP, a majority-owned consolidated subsidiary of ZAIS. ZGP became the sole member and 100% equity owner of ZAIS Group on March 31, 2014 pursuant to a merger transaction which is described in detail in the Company’s Current Report on Form 8-K filed with the SEC on March 23, 2015 (the “Closing 8-K”).

The Company’s primary sources of revenues are (i) management fee income, which is based predominantly on the AUM of the ZAIS Managed Entities (ii) incentive income, which is based on the investment performance of the ZAIS Managed Entities and (iii) income of the consolidated ZAIS Managed Entities (the “Consolidated Funds”) which is based on the income generated from the portfolios of the Consolidated Funds, a majority of which is allocated to non-controlling interests in Consolidated Funds. There was no income in the current or prior year relating to the Consolidated Funds. All of the management fee income and incentive income earned by ZAIS Group from the Consolidated Funds is eliminated in consolidation.

27 

Organization Structure

The following diagram illustrates the Company’s corporate structure following the Business Combination

 

Recapitalization as a Result of a Business Combination

On October 5, 2012, ZAIS, formerly known as HF2 Financial Management Inc. (“HF2”) was formed as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination, one or more businesses or entities. On September 16, 2014, HF2 entered into an Investment Agreement, as defined in the Closing 8-K, with ZGP and the members of ZGP (including Christian Zugel, the former managing member of ZGP and the founder and Chief Investment Officer of ZAIS Group, and certain related parties, collectively, the “ZGP Founder Members”), under which HF2 agreed to contribute cash to ZGP in exchange for newly issued Class A Units of ZGP (“Class A Units”) representing a majority financial interest in ZGP (the “Business Combination”) and to cause the transfer of all of its outstanding shares of Class B Common Stock, par value $0.000001 (the “Class B Common Stock”) to the ZGP Founder Members. All Class B Common Stock was then immediately deposited into a newly created irrevocable voting trust (the “ZGH Class B Voting Trust”), of which Mr. Zugel is the sole trustee. The Class B Common Stock has no economic rights and therefore is not considered a participating security for purposes of allocation of net income (loss) of the Company.

On March 9, 2015, the stockholders of HF2 approved the Business Combination and the transaction closed on March 17, 2015 (the “Closing”). In connection with the Closing, HF2 changed its name to ZAIS Group Holdings, Inc. Please refer to Note 2 - "Business Combination" of the Company’s consolidated financial statements included in the Annual Report on Form 10-K for additional information. Prior to the Closing, HF2 was a shell company with no operations. Upon the Closing, ZAIS became a holding company whose assets primarily consist of an approximate 66.5% interest in its majority-owned subsidiary, ZGP. Prior to the Closing, Christian Zugel served as the managing member of ZGP. Upon the Closing, ZAIS became the managing member of ZGP.

Consolidation of ZAIS Managed Entities

The Company adopted ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”) as of January 1, 2015. Pursuant to this guidance, the Company is required to consolidate certain of the ZAIS Managed Entities in which it holds a variable interest and is deemed to be the primary beneficiary. Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders’ Equity as a result of this adoption. Accordingly, amounts included within this MD&A will differ from those within the 10Q for the three and six months ended June 30, 2015.

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When a ZAIS Managed Entity is consolidated, the assets, liabilities, revenues, expenses and cash flows of that entity are reflected on a gross basis, subject to eliminations in consolidation. The consolidation has no effect on the Company’s net income since its share of the earnings from these Consolidated Funds is included in equity. Additionally, the presentation of incentive income compensation expense and other expenses associated with generating such reclassified revenue is not affected by the consolidation process.

Core Business

Revenues

The Company’s operations have been financed by cash flows generated by its core business. The Company’s principal sources of revenues are management fees and incentive fees for investment advisory services provided to the ZAIS Managed Entities. For any given period, the Company’s revenues are influenced by the amount of AUM, the investment performance and the timing of when incentive income is recognized for certain of the ZAIS Managed Entities, as discussed below.

Management fees. ZAIS Group earns management fees for funds and accounts, monthly, quarterly or annually, based on the net asset value of these funds and accounts prior to the accrual of incentive fees/allocations. Management fees earned for the CLOs, annually, are generally based on the par value of the collateral and cash held in the CLOs. Management fees earned from ZFC REIT, annually, are based on ZFC REIT’s stockholders' equity, as defined in the amended and restated investment advisory agreement between ZAIS Group’s consolidated subsidiary ZAIS REIT Management, LLC (“ZAIS REIT Management”) and ZFC REIT. Twenty percent of the management fee income received from ZFC REIT is paid to holders of Class B interests in ZAIS REIT Management and is recorded on a gross basis and included in management fee income on the consolidated statements of comprehensive income (loss). This income is allocated to the non-equity holders of ZAIS REIT Management which is included in non-controlling interests in ZAIS Group Parent, LLC.

 ZAIS REIT Management, a wholly owned subsidiary of ZAIS Group, is the external investment advisor to ZFC REIT. On April 7, 2016, ZFC REIT announced that it had entered into an agreement and plan of merger (the “Merger Agreement”). In connection with the Merger Agreement, ZAIS REIT Management entered into a termination agreement (the “Termination Agreement”), whereby the current advisory agreement under which ZAIS REIT Management receives management fees from ZFC REIT will be terminated upon closing of the ZFC REIT merger and ZAIS REIT Management will receive a termination fee in the amount of $8.0 million. In the event that the Merger Agreement is terminated prior to the consummation of the transaction, the Termination Agreement will automatically terminate and will have no further effect.

In addition to the management fee income mentioned above, subordinated management fees may be earned from CLOs for which ZAIS Group, or a wholly owned subsidiary of ZAIS Group, acts as collateral manager. The subordinated management fee is an additional payment for the same service, but has a lower priority in the CLO’s cash flows. The subordinated management fee is contingent upon the economic performance of the respective CLO assets. If the CLOs experience a certain level of asset defaults, these fees may not be paid. There is no recovery by the CLOs of previously paid subordinated fees. ZAIS Group recognizes the subordinated management fee income when collection is reasonably assured and all related contingencies have been removed.

Incentive income. Incentive income is recognized when it is (i) contractually receivable, (ii) fixed or determinable, also referred to as crystallized and (iii) all related contingencies have been removed and collection is reasonably assured, which generally occurs in the quarter of, or the quarter immediately prior to, the distribution of the income by the ZAIS Managed Entities. The criteria for revenue recognition are typically met only after all contributed capital and the preferred return, if any, on that capital have been distributed to the ZAIS Managed Entities’ investors for vehicles with private equity-style fee arrangements, and is typically met only after any profits exceed a high-water mark for vehicles with hedge fund-style fee arrangements.

For funds and accounts with hedge fund-style fee arrangements, incentive income is earned based on a percentage of the net realized and unrealized profits attributable to each investor, subject to a hurdle (if any) set forth in each respective entity’s operative agreement. Additionally, all funds and accounts with hedge fund-style fee arrangements are subject to a perpetual loss carry forward, or “perpetual high-water mark,” meaning that the funds and accounts will not pay incentive fees/allocations with respect to positive investment performance generated for an investor in any year following negative investment performance until that loss is recouped, at which point an investor’s capital balance surpasses the high-water mark. The funds and accounts pay incentive fees/allocations, generally on an annual basis, on any net profits in excess of the high-water mark, subject to a hurdle rate of return, where applicable. Funds and accounts with private equity-style fee arrangements are those that pay incentive fee/allocation based on a priority of payments under which investor capital must be returned and a preferred return, as specified in each fund’s operative agreement, must be paid to the investor prior to any payments of incentive-based income to ZAIS Group. For CLOs, incentive income is earned based on a percentage of cumulative profits, subject to the return of contributed capital (and subordinate management fees, if any), and a preferred inception to date return as specified in the respective CLOs’ collateral management agreements. ZAIS Group does not earn incentive income from ZFC REIT.

The management fees and incentive income from the Consolidated Funds are eliminated in consolidation, and therefore are not reflected as revenue in the Company’s consolidated financial statements. ZAIS Group’s share of the earnings from the consolidated ZAIS Managed Entities is increased by the amount of the management fees and incentive income that are eliminated in consolidation.

29 

The following table presents the range of management and incentive fee rates on our funds and accounts, CLO’s and ZFC REIT during the respective periods presented:

	Three months ended June 30,		Six months ended June 30,
	2016	2015	2016	2015
Management Fee Income
Funds and accounts	0.50% - 1.25%	0.50% - 1.25%	0.50% - 1.25%	0.50% - 1.25%
CLO’s	0.15% - 0.50%	0.15% - 0.50%	0.15% - 0.50%	0.15% - 0.50%
ZFC REIT	1.50%	1.50%	1.50%	1.50%
Incentive Income (1)
Funds and accounts	10% - 20%	10% - 20%	10% - 20%	10% - 20%
CLO’s	20%	20%	20%	10% - 20%

(1) Incentive income earned for certain of the ZAIS Managed Entities is subject to a hurdle rate of return as specified in each respective ZAIS Managed Entities’ operative agreement.

Other revenues. Fees for consulting, data, funding and analytical services provided to outside parties and affiliated funds are accrued as earned.

Expenses

Compensation and benefits. Compensation and benefits expense is comprised of salaries, payroll taxes, employer contributions to welfare plans and discretionary and guaranteed cash bonuses, stock compensation, severance and other contractual compensation programs payable to employees and non-employee directors. Compensation and benefits expense is generally recognized over the related service period. On an annual basis, compensation and benefits comprise a significant portion of total expenses. Discretionary and guaranteed cash bonuses, stock compensation and other contractual compensation programs generally comprise a significant portion of total compensation and benefits. Levels of incentive compensation will vary to the extent they are tied to financial and operating performance of the Company and in some cases, to the performance of certain ZAIS Managed Entities.

The Company’s compensation plans include the following:

ZAIS Group, LLC Income Unit Plan

Under the Income Unit Plan, a portion of ZAIS Group’s net operating income (after making certain adjustments) was due to certain of ZAIS Group’s employees. These amounts were accrued as compensation expense in the period incurred. This plan was terminated effective December 31, 2014. No further amounts are payable under this plan.

Cash and Equity Based Awards

Compensation and benefits relating to the issuance of cash-based and equity-based awards to certain employees and non-employee directors is measured at fair value on the grant date. Compensation expense for awards that vest over a future service period is recognized over the relevant service period on a straight-line basis, adjusted for estimated forfeitures of awards not expected to vest. The compensation expense for awards that do not require future service is recognized immediately. Upon the end of the service period, compensation expense is adjusted to account for actual forfeiture rates.

On March 29, 2016, the Compensation Committee of the Board of Directors of ZAIS adopted a retention payment plan for certain employees of ZAIS Group (the "Retention Payment Plan"). The Retention Payment Plan applies to approximately 60 employees of ZAIS Group who have an annual base salary of less than $300,000. The purpose of the Retention Payment Plan is to enable ZAIS Group to retain the services of its employees in order to ensure that ZAIS Group is not disrupted or adversely affected by the possible loss of personnel or their commitment to ZAIS Group. Under the Retention Payment Plan, the participating employees are entitled to receive cash retention payments on each of April 15, 2016, August 15, 2016 and November 15, 2016, if the employee remains employed by ZAIS Group on such dates. The aggregate amount of retention payments that may be paid to all participants under the Retention Payment Plan is $4.5 million. All payments under the Retention Payment Plan will be amortized equally over the required service period ending on each of the three payment dates discussed above. In the event an award is forfeited pursuant to the terms of a respective Retention Payment Plan agreement, the corresponding accruals will be reversed. In addition, on March 1, 2016, the Compensation Committee of the Board of Directors of ZAIS approved a retention payment of $900,000 to Howard Steinberg, the Company's General Counsel, which was paid on March 15, 2016 and is included in compensation and benefits in the consolidated statements of comprehensive income (loss) for the six months ended June 30, 2016.

30 

Compensation Directly Related to Incentive Income (also referred to as “Points”)

ZAIS Group previously entered into agreements with employees to share with them a percentage of income generated from certain ZAIS Managed Entities (“Points Agreements”). Under existing Points Agreements, ZAIS Group has an obligation to pay a fixed percentage of the incentive income earned from the referenced entities, including income from the Consolidated Funds that is eliminated in consolidation, to certain employees and former employees. Amounts payable pursuant to the Points Agreements are recorded as compensation expense when they become probable and reasonably estimable. The determination of when the Points become probable and reasonably estimable so that Points expense should be recorded is based on the assessment of numerous factors, particularly those related to the profitability, realizations, distribution status, investment profile and commitments or contingencies of certain ZAIS Managed Entities for which Points Agreements have been awarded. Points are expensed no later than the period in which the underlying income is recognized. Payment of the Points generally occurs later than when the related income is received. Recipients’ rights to receive payments related to their Points Agreement are subject to forfeiture risks. ZAIS Group does not anticipate entering into additional Points Agreements.

General, administrative and other. General, administrative and other expenses are related to professional services, research services, occupancy and equipment, technology, travel and entertainment, insurance and other miscellaneous expenses.

Net gain (loss) on investments. Net gain (loss) on investments primarily consists of net gains and losses on the Company’s investments in the ZAIS Managed Entities.

Allocation of consolidated net income (loss) to non-controlling interests in Consolidated Funds. Portion of consolidated net income (loss) attributable to investors in the Consolidated Funds that do not have the right to redeem their interests.

Consolidated Funds

Income of Consolidated Funds. Revenues consist primarily of interest income and dividend income which is recognized on an effective interest rate method.

Expenses of Consolidated Funds. Expenses consist of interest expense, fund operating expenses and other miscellaneous expenses.

Net gains of Consolidated Funds’ investments. Net gains consist of net realized and unrealized gains and losses on investments held by the Consolidated Funds.

Trends Affecting Our Business

AUM has been trending downward since 2007. This trend results from the wind-up and liquidation of a number of private equity-style and structured vehicles combined with challenges ZAIS Group has faced in raising new capital in the recent investment environment of lower interest rates and changing regulations. Structured credit products have been disfavored by many investors and European investors have generally reduced investments in certain securitized investment vehicles due to increased capital regulatory requirements.

The reduction in AUM has decreased the Company’s management fees and incentive fees, which are the Company’s two principal sources of operating cash flow. As a result of this reduction, in 2015 and for the six months ended June 30, 2016 revenues and operating cash flow were insufficient to cover operating expenses, and excess working capital needs were funded by the proceeds of the Business Combination. It is currently expected that this negative working capital trend is likely to continue throughout 2016. Additionally, upon completion of the pending merger between ZFC REIT and Sutherland Asset Management Corp, ZAIS Group’s management fees and AUM related to mortgage strategies will decrease by approximately $(2.8) million, annually on a run-rate basis, and $(0.565) billion, respectively.

Non-GAAP Financial Measures

Net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA

The Company’s management reviews its results on both a Net income (loss) (excluding Consolidated Funds of ZAIS Group) and an Adjusted EBITDA basis. Net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA are key performance measures used by management when making operating decisions, assessing financial performance and allocating capital resources. Net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA are non-GAAP financial measures that exclude the adjustments described below that are required for presentation of the Company’s results on a GAAP basis These measures supplement and should be considered in addition to and not in lieu of the results of operations prepared in accordance with GAAP:

Adjustments to Net income (loss) to derive Net income (loss) (excluding Consolidated Funds of ZAIS Group)

· Consolidating effects of the Consolidated Funds. Amounts related to the Consolidated Funds, including the related eliminations of management fees, incentive income, other revenues and gain (loss) on investments. Management fees from the Consolidated Funds are accrued as earned and are calculated and paid monthly, quarterly or semi-annually, depending on the individual agreements, consistent with the revenue recognition policy for the funds the Company does not consolidate. The Company also defers the recognition of incentive income from certain funds that the Company does not consolidate until it is (i) contractually receivable, (ii) fixed or determinable (“crystallized”), and (iii) all related contingencies have been removed and collection is reasonably assured, consistent with the revenue recognition policy for the Consolidated Funds.

31 

Adjustments to Net income (loss) (excluding Consolidated Funds of ZAIS Group) to derive Adjusted EBITDA

· Compensation expense related to the Income Unit Plan. The Income Unit Plan was implemented in 2013 and was designed to deliver equity-like participation in ZAIS Group’s pre-tax income to key employees. Payments under the Income Unit Plan were recognized as compensation under GAAP. The Income Unit Plan was terminated effective December 31, 2014.

· Compensation expense related to Points awards recorded before related incentive income being recognized. This adjustment reclassifies certain incentive compensation expenses into the accounting periods in which the associated incentive income was received and recognized. Certain of ZAIS Group’s legacy incentive compensation programs provided incentive compensation payments equal to a fixed percentage of incentive income received by ZAIS Group and were due and payable in the period ZAIS Group received the incentive income. Under GAAP, a portion of these incentive compensation payments are required to be recognized in accounting periods prior to the accounting periods in which the related incentive income was received and recognized. Currently there is only one incentive compensation program that may cause similar timing mismatch issues for financial statements prepared in accordance with GAAP.

· Equity-based compensation. Management does not consider these non-cash expenses to be reflective of operating performance.

· Severance. Management does not consider these expenses to be reflective of ongoing operating performance.

· Impairment loss on goodwill. Management does not consider these expenses to be reflective of ongoing operating performance.

· Certain other non-cash and non-operating items.  

· Any applicable taxes, interest expense, foreign currency translation adjustments and depreciation expenses.

Our calculation of Adjusted EBITDA may not be directly comparable to other similar non-GAAP financial measures reported by other asset managers. The Company believes that Adjusted EBITDA is a useful benchmark for measuring its performance. Management also believes that investors should review the same supplemental financial measures that management uses to analyze the business. Management also reviews management fee income, incentive income, other revenues, compensation and benefits, non-compensation expenses and net gain (loss) on investments on an Adjusted EBITDA basis after excluding the adjustments described above. As a result, the metrics are also considered non-GAAP financial measures.

Previously, the Company decided to eliminate Distributable Earnings, and use only Net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA as its primary non-GAAP measures.  This change was made because management believed the differences between Distributable Earnings and Adjusted EBITDA were not significant, and that Net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA were more meaningful measures of performance.  In addition, the calculation of Adjusted EBITDA was modified in order to better reflect how management views our operating results. The measure now incorporates the investment income of its general partner investments, and eliminates the impact of severance and foreign currency adjustments that management does not consider to be reflective of on-going operating performance.

32 

Results of Operations

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

	Three Months Ended June 30,						Change
	2016			2015			$			%
	(dollars in thousands)
Consolidated net income (loss), net of tax	$	(4,935	)	$	(5,178	)	$	243			5	%
Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP	$	(5,987	)	$	(5,178	)	$	(809	)		-16	%
Adjusted EBITDA - Non-GAAP	$	(4,461	)	$	(4,124	)	$	(337	)		-8	%

The Company recorded a net loss (excluding Consolidated Funds of ZAIS Group) for the three months ended June 30, 2016 of $(6.0) million, compared with net loss (excluding Consolidated Funds of ZAIS Group) of $(5.2) million for the three months ended June 30, 2015. The quarter-over-quarter increase in net loss was driven by a $(0.5) million decrease in management fee income, a $(1.1) million decrease in incentive income and a $(1.7) million decrease in deferred tax assets due to the establishment of a full valuation allowance at December 31, 2015, partially offset by a decrease in expenses of $(1.3) million primarily related to a decrease in professional fees, salaries and severance costs and a $1.2 million increase in other income (loss). We continue to review our business and fund activities with a view towards improving our profitability through organic growth, reduction in expenses, acquisitions, dispositions of assets or the sale or termination of product lines. To date, we have concluded that a planned expansion in our capabilities in the residential whole loan market will no longer be a part of our future strategy and have largely exited those activities. We have also announced the planned termination of our management agreement with ZFC REIT pending completion of the merger between ZFC REIT and Sutherland Asset Management Corp. Upon completion of the merger, ZAIS Group’s management fees and AUM related to mortgage strategies will decrease by approximately $(2.8) million, annually on a run-rate basis, and $(0.565) billion, respectively. However, ZAIS REIT Management, a wholly owned subsidiary of ZAIS Group, will receive a termination fee in the amount of $8.0 million upon completion of the merger. In connection with these decisions and to reduce expenses related to other infrastructure staffing, on March 8, 2016, the Company commenced a reduction in force and other restructuring which has resulted in a decrease of 23 employees of ZAIS Group. This reduction will result in an annualized run rate savings of approximately $3.5 million in base compensation and benefits. We have incurred total severance charges in the amount of approximately $0.8 million, during the six months ended June 30, 2016. The Company has completed this reduction in force and now has 65 employees as of June 30, 2016 compared with 95 employees as of December 31, 2015 and 97 employees as of June 30, 2015. Total Adjusted EBITDA – Non-GAAP decreased by $(0.3) million primarily due to decreased management fees and incentive income partially offset by a decrease in expenses and an increase in other income (loss).

Reconciliations of Non-GAAP Financial Measures

The following table presents the reconciliation of the Company’s consolidated GAAP net income, net of tax to its non-GAAP financial measure of net income (loss) (excluding Consolidated Funds of ZAIS Group) for the three months ended June 30, 2016 and June 30, 2015:

	Three Months Ended June 30,
	2016			2015
	(Dollars in thousands)
Consolidated net income, net of tax (GAAP Net Income)	$	(4,935	)	$	(5,178	)
Addback: Elimination of net gain (loss) on investments		1,095			—
Addback: Expenses of Consolidated Funds		29			—
Net (gain) loss on Consolidated Funds’ investments		(2,176	)		—
Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP	$	(5,987	)	$	(5,178	)

The following table presents the reconciliations of the Company’s GAAP pre-tax consolidated net income to its non-GAAP financial measures of Adjusted EBITDA for the three months ended June 30, 2016 and June 30, 2015:

	Three Months Ended June 30,
	2016			2015
	(Dollars in thousands)
Adjusted EBITDA  - Non GAAP
Pre-tax Consolidated Net Income (loss) (GAAP pre-tax net income (loss))	$	(4,931	)	$	(6,860	)
Addback: Elimination of Net gain (loss) on investments		1,095			—
Addback: Expenses of Consolidated Funds		29			—
Net (gain) loss on Consolidated Funds’ investments		(2,176	)		—
Addback: Compensation attributable to equity compensation		1,339			1,616
Addback: Severance costs		119			974
Addback: Depreciation		64			146
Adjusted EBITDA – Non-GAAP	$	(4,461	)	$	(4,124	)

33 

Revenues

	Three Months Ended June 30,				Change
	2016		2015		$			%
	(dollars in thousands)
Management fee income	$	3,571	$	4,081	$	(510	)		-13	%
Incentive income		143		1,213		(1,070	)		-88	%
Other revenues		79		106		(27	)		-26	%
Total Revenues	$	3,793	$	5,400	$	(1,607	)		-30	%

Total revenues decreased by $(1.6) million primarily due to:

· The $(0.5) million decrease in management fees was due to the year-over-year reduction in average AUM of $(0.291) billion.

· The $(1.1) million decrease in incentive income is primarily driven incentive income received during the three months ended June 30, 2015 from a managed account which liquidated in 2015 and residual incentive income received which related to 2014 fund performance offset by an increase in incentive income received from a ZAIS Managed Entity in which incentive income is crystallized monthly.

· There are no adjustments to revenues to derive Adjusted EBITDA – Non-GAAP.

The following table details the changes to our AUM for three months ended June 30, 2016 and June 30, 2015. The methodology for calculating AUM is described in the Overview section.

	Three Months Ended June 30, 2016
	(dollars in billions)
	Corporate Credit Funds			Mortgage Related Strategies			Multi-Strategy Funds and Accounts			Total
Beginning of Period AUM (1)	$	1.828		$	1.479		$	0.684		$	3.991
Contributions (2)		0.271	(8)		—			0.001			0.272
Distributions (3)		(0.004	)		(0.004	)		—			(0.008	)
Redemptions (4)		(0.023	)		—			—			(0.023	)
Gain & Loss (5)		0.013			0.020			0.045			0.078
Other (6)		(0.085	)		(0.265	)		(0.011	)		(0.361	)
End of Period AUM (7)	$	2.000		$	1.230		$	0.719		$	3.949
Average AUM (9)	$	1.914		$	1.354		$	0.702		$	3.970

	Three Months Ended June 30, 2015
	(dollars in billions)
	Corporate Credit Funds			Mortgage Related Strategies			Multi-Strategy Funds and Accounts			Total
Beginning of Period AUM (10)	$	1.756		$	1.562		$	0.844		$	4.162
Contributions (2)		0.425	(11)		—			0.001			0.426
Distributions (3)		(0.057	)		(0.005	)		—			(0.062	)
Redemptions (4)		(0.117	)		—			(0.001	)		(0.118	)
Gain & Loss (5)		0.011			0.010			0.017			0.038
Other (6)		(0.175	)		0.008			0.080			(0.087	)
End of Period AUM (12)	$	1.843		$	1.575		$	0.941		$	4.359
Average AUM (9)	$	1.800		$	1.569		$	0.893		$	4.261

(1) AUM uses values for: Euro Epics and ZAIS Investment Grade Limited IX (“ZING IX”) as of March 10, 2016, Galleria CDO V, Ltd. (“Galleria V”) as of March 3, 2016, ZAIS CLO 1, Limited (“CLO 1”) as of March 4, 2016, ZAIS CLO 2, Limited (“CLO 2”) as of March 16, 2016 and ZAIS CLO 3, Limited (“CLO 3”) as of March 4, 2016.

34 

(2) Contributions related to funds, managed accounts and structured vehicles.

(3) Distributions related to funds, managed accounts and structured vehicles.

(4) Redemptions related to funds and managed accounts.

(5) Gain & Loss related to funds and managed accounts.

(6) Other represents changes primarily related to (i) leverage and other operating liabilities for funds and managed accounts and (ii) leverage, aggregate principal balance and other items for structured vehicles. Change in aggregate principal balance is primarily due to defaults, write downs, pay downs and collateral purchase/sales.

(7) AUM uses values for: Euro Epics and Galleria V as of June 10, 2016, ZING IX as of June 3, 2016, CLO 1 as of June 6, 2016 CLO 2 as of June 16, 2016, CLO 3 as of June 15, 2016 and CLO 4 as of May 27, 2016.

(8) Amount represents the pricing of ZAIS CLO 4, Limited (“CLO 4”). In connection with the pricing of CLO 4, the CLO 4 warehouse was closed resulting in approximately $23 million of redemptions and a $91 million reduction in leverage, aggregate principal balance and other items. These amounts are included in the Redemptions and Other rows in the table above.

(9) Average is based on the beginning and ending balance for the period presented.

(10) AUM uses values for: Euro Epics and Galleria V as of March 10, 2015, ZING IX as of March 3, 2015, CLO 1 as of March 5, 2015 and CLO 2 as of March 16, 2015.

(11) Amount represents the pricing of CLO 3. In connection with the pricing of CLO 3, the CLO 3 warehouse was closed resulting in approximately $30 million of redemptions and a $177 million reduction in leverage, aggregate principal balance and other items. These amounts are included in the Redemptions and Other rows in the table above. Balance includes $2 million of inflows into structured CLO warehouse vehicles that were received from other ZAIS Managed Entities. Total AUM has not been adjusted for these inflows related to the CLO warehouse period.

(12) AUM uses values for: Euro Epics as of June 10, 2015, Galleria V as of June 9, 2015, ZING IX as of June 3, 2015, CLO 1 as of June 4, 2015 and CLO 2 as of June 16, 2015.

Expenses

	Three Months Ended June 30,				Change
	2016		2015		$			%
	(dollars in thousands)
Compensation and benefits	$	7,999	$	7,361	$	638			9	%
General, administrative and other		2,950		4,764		(1,814	)		-38	%
Depreciation		64		146		(82	)		-56	%
Expenses of Consolidated Funds		29		—		29			—
Total Expenses	$	11,042	$	12,271	$	(1,229	)		-10	%

Total expenses decreased by $(1.2) million primarily due to:

· A $0.6 million increase in compensation and benefits predominately due to: a $1.3 million increase in accrued expenses relating to incentive compensation primarily relating to the accrual for year-end bonuses in 2016 and the payment of $1.5 million in retention bonuses during the three months ended June 30, 2016; offset by  a $(1.0) million decrease in salaries and associated payroll taxes and other employee benefits due to the reduction in force and other restructuring; a $(0.9) million decrease in severance; and a $(0.3) million decrease in equity compensation relating to an increase in the estimated forfeiture rate on the Company’s B-0 units.

· A $(1.8) million decrease in general, administrative and other expenses, primarily due to: a $(1.3) million decrease in professional fees primarily due to transaction expenses incurred relating to the Business Combination in 2015; a $(0.5) million decrease relating to a focused expense reduction.  

· A $0.029 million increase in expenses of Consolidated Funds, primarily due to a new Consolidated Fund which launched in the fourth quarter of 2015. $0.029 million of expenses of Consolidated Funds’ is added back to derive Adjusted EBITDA – Non-GAAP for the three months ended June 30, 2016.  

· Equity compensation of $1.3 million and severance costs of $0.1 million are added back to compensation and benefits to derive Adjusted EBITDA – Non-GAAP for the three months ended June 30, 2016. Equity compensation of $1.6 million and severance costs of $1.0 million are added back to compensation and benefits to derive Adjusted EBITDA – Non-GAAP for the three months ended June 30, 2015.

· $0.1 million and $0.1 million of depreciation expenses are added back to total expenses to derive Adjusted EBITDA – Non-GAAP for the three months ended June 30, 2016 and June 30, 2015, respectively.  

ZAIS Group’s results of operations depend, in part, on the level of ZAIS Group’s expenses, which can vary from period to period. The Company currently anticipates that its expenses will exceed its revenues in 2016, as they did in 2015 and the three months ended June 30, 2016. While the Company is seeking to reduce the expense imbalance by increasing revenue with new business growth and reducing expenses, there can be no assurances that ZAIS Group will correct this expense imbalance in 2016 or beyond. 

35 

Other Income

	Three Months Ended June 30,				Change
	2016		2015		$		%
	(dollars in thousands)
Net gain (loss) on investments	$	55	$	2	$	53		2,650	%
Other income (expense)		87		9		78		867	%
Net gains (losses) on Consolidated Funds’ investments		2,176		—		2,176		—
Total Other Income (Loss)	$	2,318	$	11	$	2,307		20,973	%

· Total other income increased by $2.3 million primarily due to a $2.2 million increase in net gains (losses) on Consolidated Funds’ investments associated with a new Consolidated Fund which launched in the fourth quarter 2015. This Consolidated Fund is solely invested in a CLO- Warehouse, which is categorized as a Level 3 asset in the fair value hierarchy. For more information on the Company's valuation policy for Level 3 assets, see Note 4, “Fair Value of Investments”, to the Company's consolidated financial statements. $1.1 million of net gain (loss) on investments attributable to a third party investor’s investment in the Consolidated Fund is removed from other income (loss) to derive Adjusted EBITDA – Non-GAAP for the three months ended June 30, 2016.

Income Taxes

	Three Months Ended June 30,					Change
	2016		2015			$		%
	(dollars in thousands)
Income tax (benefit) expense	$	4	$	(1,682	)	$	1,686		100	%

Income tax (benefit) expense increased by $1.7 million due to the full valuation allowance booked on the Company’s deferred tax asset during the three months ended June 30, 2016.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2016, the Company has determined that the most recent management business forecasts do not support the realization of net deferred tax assets recorded for the Company. The Company has recorded a book loss for the three months ended June 30, 2016 and it is anticipated that expenses will continue to exceed revenues in 2016. Although management intends to pursue various initiatives with potential to alter the operating loss trend, there is no specific plan that has been implemented at this point in time that will alter the negative earnings trend.

Accordingly, management continues to believe that it is not more likely than not that its deferred tax asset will be realized and the Company has continued to maintain the full valuation allowance against the deferred tax asset of as of June 30, 2016. The Company has recorded an additional $1.6 million charge to our consolidated statements of comprehensive income (loss) relating to the net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations for the three months ended June 30, 2016. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.  

See Note 9 to the Company’s consolidated financial statements for further information regarding the items affecting the Company’s effective income tax.

As of and for the three months ended June 30, 2016 and June 30, 2015, the Company was not required to establish a liability for uncertain tax positions.

Foreign currency translation adjustment

	Three Months Ended June 30,					Change
	2016			2015		$			%
	(dollars in thousands)
Foreign currency translation adjustment	$	(147	)	$	291	$	(438	)		-151	%

Changes in the foreign currency translation adjustment are due to fluctuations in the exchange rates prevailing at the end of each reporting period that the Company uses to translate the assets and liabilities of its foreign subsidiaries.

36 

Net Income (Loss) Allocated to Non-controlling Interests

The following table presents the components of the net income (loss) allocated to non-controlling interests in Consolidated Funds and to non-controlling interests in ZGP:

	Three Months Ended June 30,						Change
	2016			2015			$		%
	(dollars in thousands)
Non-controlling interests in Consolidated Funds	$	1,052		$	—		$	1,052		—
Non-controlling interests in ZAIS Group Parent, LLC	$	(1,911	)	$	(2,231	)	$	320		14	%

· A $1.1 million increase in the net income allocated to non-controlling interests in Consolidated Funds is driven by the launch of a new Consolidated Fund during fourth quarter of 2015.

· A $0.3 million decrease in net loss allocated to non-controlling interests in ZGP is driven primarily by the quarter-over-quarter reduction in expenses and the increase in unrealized gains on investments, partially offset by the reduction in management fees and incentive income.

Net Income (Loss) Attributable to ZAIS Group Holdings, Inc. Stockholders’ Equity

	Three Months Ended June 30,						Change
	2016			2015			$			%
	(dollars in thousands)
ZAIS Group Holdings, Inc. Stockholders’ Equity	$	(4,076	)	$	(2,947	)	$	(1,129	)		-38	%

The increase in net loss attributable to ZAIS Group Holdings, Inc. stockholders’ equity is driven primarily by the decrease in deferred tax assets as the Company continues to maintain the full valuation allowance which was originally established at December 31, 2015 and the reduction in management fees and incentive income, partially offset by the reduction in expenses and the increase in unrealized gains on investments.

Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

	Six Months Ended June 30,						Change
	2016			2015			$			%
	(dollars in thousands)
Consolidated net income (loss), net of tax	$	(11,334	)	$	(10,514	)	$	(820	)		-8	%
Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP	$	(13,120	)	$	(10,514	)	$	(2,606	)		-25	%
Adjusted EBITDA - Non-GAAP	$	(10,540	)	$	(10,038	)	$	(502	)		-5	%

The Company recorded a net loss (excluding Consolidated Funds of ZAIS Group) for the six months ended June 30, 2016 of $(13.1) million, compared with net loss (excluding Consolidated Funds of ZAIS Group) of $(10.5) million for the six months ended June 30, 2015. The quarter-over-quarter increase in net loss was driven by a $(0.7) million decrease in management fee income and a $(1.8) million decrease in incentive income and a $(2.6) million decrease in deferred tax assets due to the establishment of a full valuation allowance at December 31, 2015, partially offset by a $2.5 million increase in other income (loss). We continue to review our business and fund activities with a view towards improving our profitability through organic growth, reduction in expenses, acquisitions, dispositions of assets or the sale or termination of product lines. To date, we have concluded that a planned expansion in our capabilities in the residential whole loan market will no longer be a part of our future strategy and we have largely exited those activities. We have also announced the planned termination of our management agreement with ZFC REIT pending completion of the merger between ZFC REIT and Sutherland Asset Management Corp. Upon completion of the merger, ZAIS Group’s management fees and AUM related to mortgage strategies will decrease by approximately $(2.8) million, annually on a run-rate basis, and $(0.565) billion, respectively. However, ZAIS REIT Management, a wholly owned subsidiary of ZAIS Group, will receive a termination fee in the amount of $8.0 million upon completion of the merger. In connection with these decisions and to reduce expenses related to other infrastructure staffing, on March 8, 2016, the Company commenced a reduction in force and other restructuring which has resulted in a decrease of 23 employees of ZAIS Group. This reduction will result in an annualized run rate savings of approximately $3.5 million in base compensation and benefits. We have incurred total severance charges in the amount of approximately $0.8 million, during the six months ended June 30, 2016. The Company has completed this reduction in force and now has 65 employees as of June 30, 2016 compared with 95 employees as of December 31, 2015 and 97 employees as of June 30, 2015. Total Adjusted EBITDA – Non-GAAP decreased by $(0.5) million primarily due to an increase in expenses and decreased management fees and incentive income partially offset by an increase in other income (loss).

Reconciliations of Non-GAAP Financial Measures

The following table presents the reconciliation of the Company’s consolidated GAAP net income, net of tax to its non-GAAP financial measure of net income (loss) (excluding Consolidated Funds of ZAIS Group) for the six months ended June 30, 2016 and June 30, 2015:

	Six Months Ended June 30,
	2016			2015
	(Dollars in thousands)
Consolidated net income, net of tax (GAAP Net Income)	$	(11,334	)	$	(10,514	)
Addback: Elimination of net gain (loss) on investments		1,859			—
Addback: Expenses of Consolidated Funds		48			—
Net (gain) loss on Consolidated Funds’ investments		(3,693	)		—
Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP	$	(13,120	)	$	(10,514	)

The following table presents the reconciliations of the Company’s GAAP pre-tax consolidated net income to its non-GAAP financial measures of Adjusted EBITDA for the six months ended June 30, 2016 and June 30, 2015:

	Six Months Ended June 30,
	2016			2015
	(Dollars in thousands)
Adjusted EBITDA  - Non GAAP
Pre-tax Consolidated Net Income (loss) (GAAP pre-tax net income (loss))	$	(11,325	)	$	(13,098	)
Addback: Elimination of Net gain (loss) on investments		1,859			—
Addback: Expenses of Consolidated Funds		48			—
Net (gain) loss on Consolidated Funds’ investments		(3,693	)		—
Addback: Compensation attributable to equity compensation		1,682			1,878
Addback: Severance costs		762			974
Addback: Depreciation		127			208
Adjusted EBITDA – Non-GAAP	$	(10,540	)	$	(10,038	)

37 

Revenues

	Six Months Ended June 30,				Change
	2016		2015		$			%
	(dollars in thousands)
Management fee income	$	7,140	$	7,834	$	(694	)		-9	%
Incentive income		295		2,121		(1,826	)		-86	%
Other revenues		159		137		22			16	%
Total Revenues	$	7,594	$	10,092	$	(2,498	)		-25	%

Total revenues decreased by $(2.5) million primarily due to:

· The $(0.7) million decrease in management fees was primarily due to the year-over-year reduction in average AUM of $(0.194) billion.

· The $(1.8) million decrease in incentive income is primarily driven by residual incentive income received during the six months ended June 30, 2015 from CLO’s and funds which liquidated in 2014 and early 2015 offset by an increase in incentive income received from a ZAIS Managed Entity in which incentive income is crystallized monthly.

· There are no adjustments to revenues to derive Adjusted EBITDA – Non-GAAP.

The following table details the changes to our AUM for six months ended June 30, 2016 and June 30, 2015. The methodology for calculating AUM is described in the Overview section.

	Six Months Ended June 30, 2016
	(dollars in billions)
	Corporate Credit Funds			Mortgage Related Strategies			Multi-Strategy Funds and Accounts			Total
Beginning of Period AUM (1)	$	1.914		$	1.494		$	0.749		$	4.157
Contributions (2)		0.284	(8)		—			0.001			0.285
Distributions (3)		(0.025	)		(0.020	)		—			(0.045	)
Redemptions (4)		(0.127	)		—			(0.010	)		(0.137	)
Gain & Loss (5)		0.010			0.013			0.023			0.046
Other (6)		(0.054	)		(0.258	)		(0.045	)		(0.357	)
End of Period AUM (7)	$	2.002		$	1.229		$	0.718		$	3.949
Average AUM (9)	$	1.959		$	1.362		$	0.734		$	4.053

	Six Months Ended June 30, 2015
	(dollars in billions)
	Corporate Credit Funds			Mortgage Related Strategies			Multi-Strategy Funds and Accounts			Total
Beginning of Period AUM (10)	$	1.931		$	1.433		$	0.771		$	4.135
Contributions (2)		0.433	(11)		—			0.004			0.437
Distributions (3)		(0.142	)		(0.010	)		—			(0.152	)
Redemptions (4)		(0.273	)		—			(0.001	)		(0.274	)
Gain & Loss (5)		(0.105	)		0.025			0.032			(0.048	)
Other (6)		(0.001	)		0.127			0.135			0.261
End of Period AUM (12)	$	1.843		$	1.575		$	0.941		$	4.359
Average AUM (9)	$	1.887		$	1.504		$	0.856		$	4.247

38 

(1) AUM uses values for: Euro Epics and Galleria V as of December 10, 2015, ZING IX as of December 3, 2015, CLO 1 as of December 4, 2015, CLO 2 as of December 16, 2015 and CLO 3 as of December 15, 2015.

(2) Contributions related to funds, managed accounts and structured vehicles.

(3) Distributions related to funds, managed accounts and structured vehicles.

(4) Redemptions related to funds and managed accounts.

(5) Gain & Loss related to funds and managed accounts.

(6) Other represents changes primarily related to (i) leverage and other operating liabilities for funds and managed accounts and (ii) leverage, aggregate principal balance and other items for structured vehicles. Change in aggregate principal balance is primarily due to defaults, write downs, pay downs and collateral purchase/sales.

(7) AUM uses values for: Euro Epics and Galleria V as of June 10, 2016, ZING IX as of June 3, 2016, CLO 1 as of June 6, 2016 CLO 2 as of June 16, 2016, CLO 3 as of June 15, 2016 and CLO 4 as of May 27, 2016.

(8) Amount represents the pricing of CLO 4. In connection with the pricing of CLO 4, the CLO 4 warehouse was closed resulting in approximately $23 million of redemptions and a $93 million reduction in leverage, aggregate principal balance and other items. These amounts are included in the Redemptions and Other rows in the table above.

(9) Average is based on the beginning and ending balance for the period presented.

(10) AUM uses values for: ZAIS Value-Added Real Estate Fund I, L.P. (“ZVAREF”) as of September 30, 2014, EPICS I Ltd. ("Epics") and CO-EPICS I Ltd. ("Co-Epics") as of December 22, 2014, Euro Epics and Galleria V as of December 10, 2014, ZING IX as of December 3, 2014, CLO 1 as of December 4, 2014 and CLO 2 as of December 16, 2014.

(11) Amount represents the pricing of CLO 3. In connection with the pricing of CLO 3, the CLO 3 warehouse was closed resulting in approximately $30 million of redemptions and a $169 million reduction in leverage, aggregate principal balance and other items. These amounts are included in the Redemptions and Other rows in the table above. Balance includes $2 million of inflows into structured CLO warehouse vehicles that were received from other ZAIS Managed Entities. Total AUM has not been adjusted for these inflows related to the CLO warehouse period.

(12) AUM uses values for: Euro Epics as of June 10 2015 Galleria V as of June 9, 2015, ZING IX as of June 3, 2015, CLO 1 as of June 4, 2015 and CLO 2 as of June 16, 2015.

Expenses

	Six Months Ended June 30,				Change
	2016		2015		$			%
	(dollars in thousands)
Compensation and benefits	$	17,006	$	13,931	$	3,075			22	%
General, administrative and other		6,160		9,101		(2,941	)		-32	%
Depreciation		127		208		(81	)		-39	%
Expenses of Consolidated Funds		48		—		48			—
Total Expenses	$	23,341	$	23,240	$	101			0	%

Total expenses increased by $0.1 million primarily due to:

· A $3.1 million increase in compensation and benefits predominately due to: a $2.2 million increase in incentive compensation primarily relating to the accrual for year-end bonuses in 2016 and the payment of $2.8 million in retention and sign-on bonuses during the six months ended June 30, 2016; offset by a $(1.5) million decrease in salaries and associated payroll taxes and other employee benefits due to the reduction in force and other restructuring; a $(0.2) million decrease in equity compensation due to the increase in estimated forfeiture rate relating to the reduction in force in March 2016 and a $(0.2) million decrease in severance;.

· A $(2.9) million decrease in general, administrative and other expenses, primarily due to: a $(2.0) million decrease in professional fees primarily due to transaction expenses incurred relating to the Business Combination in 2015; a $(0.4) million decrease in occupancy and utilities related to the closure of the Shanghai office; a $(0.4) million decrease due to a focused expense reduction.  

· A $0.048 million increase in expenses of Consolidated Funds, primarily due to a new Consolidated Fund which launched in the fourth quarter of 2015.   $0.048 million of expenses of Consolidated Funds’ is added back to derive Adjusted EBITDA – Non-GAAP for the six months ended June 30, 2016.

· Equity compensation of $1.7 million and severance costs of $0.8 million are added back to compensation and benefits to derive Adjusted EBITDA – Non-GAAP for the six months ended June 30, 2016. Equity compensation of $1.9 million and severance costs of $1.0 million are added back to compensation and benefits to derive Adjusted EBITDA – Non-GAAP for the six months ended June 30, 2015.  

· $0.1 million and $0.2 million of depreciation expenses are added back to total expenses to derive Adjusted EBITDA – Non-GAAP for the six months ended June 30, 2016 and June 30, 2015, respectively.  

39 

ZAIS Group’s results of operations depend, in part, on the level of ZAIS Group’s expenses, which can vary from period to period. The Company currently anticipates that its expenses will exceed its revenues in 2016, as they did in 2015 and the six months ended June 30, 2016. While the Company is seeking to reduce the expense imbalance by increasing revenue with new business growth and reducing expenses, there can be no assurances that ZAIS Group will correct this expense imbalance in 2016 or beyond. 

Other Income

	Six Months Ended June 30,				Change
	2016		2015		$			%
	(dollars in thousands)
Net gain (loss) on investments	$	37	$	45	$	(8	)		-18	%
Other income (expense)		692		5		687			13,740	%
Net gains (losses) on Consolidated Funds’ investments		3,693		—		3,693			—
Total Other Income (Loss)	$	4,422	$	50	$	4,372			8,744	%

Total other income (loss) increased by $4.4 million primarily due to:

· A $3.7 million increase in net gains (losses) on Consolidated Funds’ investments primarily due to a $3.7 million increase in net gains (losses) on Consolidated Funds’ investments associated with a new Consolidated Fund which launched in the fourth quarter 2015. This Consolidated Fund is solely invested in a CLO- Warehouse, which is categorized as a Level 3 asset in the fair value hierarchy. For more information on the Company's valuation policy for Level 3 assets, see Note 4, “Fair Value of Investments”, to the Company's consolidated financial statements. $1.8 million of net gain (loss) on investments attributable to a third party investor’s investment in the Consolidated Fund is removed from other income (loss) to derive Adjusted EBITDA – Non-GAAP for the six months ended June 30, 2016. 

· A $0.7 million increase in other income (expense) due to $0.5 million of income relating to an insurance reimbursement for legal costs incurred during the year ended December 31, 2015. 

Income Taxes

	Six Months Ended June 30,					Change
	2016		2015			$		%
	(dollars in thousands)
Income tax (benefit) expense	$	9	$	(2,584	)	$	2,593		100	%

Income tax (benefit) expense increased by $2.6 million due to the full valuation allowance booked on the Company’s deferred tax asset during the six months ended June 30, 2016.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2016, the Company has determined that the most recent management business forecasts do not support the realization of net deferred tax assets recorded for the Company. The Company has recorded a book loss for the six months ended June 30, 2016 and it is anticipated that expenses will continue to exceed revenues in 2016. Although management intends to pursue various initiatives with potential to alter the operating loss trend, there is no specific plan that has been implemented at this point in time that will alter the negative earnings trend.

Accordingly, management continues to believe that it is not more likely than not that its deferred tax asset will be realized and the Company has continued to maintain the full valuation allowance against the deferred tax asset of as of June 30, 2016. The Company has recorded an additional $3.5 million charge to our consolidated statements of comprehensive income (loss) relating to the net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations for the six months ended June 30, 2016. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.  

See Note 9 to the Company’s consolidated financial statements for further information regarding the items affecting the Company’s effective income tax.

As of and for the six months ended June 30, 2016 and June 30, 2015, the Company was not required to establish a liability for uncertain tax positions.

40 

Foreign currency translation adjustment

	Six Months Ended June 30,					Change
	2016			2015		$			%
	(dollars in thousands)
Foreign currency translation adjustment	$	(201	)	$	483	$	(684	)		-142	%

Changes in the foreign currency translation adjustment are due to fluctuations in the exchange rates prevailing at the end of each reporting period that the Company uses to translate the assets and liabilities of its foreign subsidiaries.

Net Income (Loss) Allocated to Non-controlling Interests

The following table presents the components of the net income (loss) allocated to non-controlling interests in Consolidated Funds and to non-controlling interests in ZGP:

	Six Months Ended June 30,						Change
	2016			2015			$		%
	(dollars in thousands)
Non-controlling interests in Consolidated Funds	$	1,786		$	—		$	1,786		—
Non-controlling interests in ZAIS Group Parent, LLC	$	(4,210	)	$	(6,745	)	$	2,535		38	%

· A $1.8 million increase in the net income allocated to non-controlling interests in Consolidated Funds is driven by the launch of a new Consolidated Fund during fourth quarter of 2015.  Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company.   As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated.

· A $(2.5) million decrease in net loss allocated to non-controlling interests in ZGP is driven primarily by the timing of the Business Combination, which did not close until March 17, 2015.  Accordingly, the non-controlling interests in ZGP were allocated a larger portion of the losses during the six months ended June 30, 2015.

Net Income (Loss) Attributable to ZAIS Group Holdings, Inc. Stockholders’ Equity

	Six Months Ended June 30,						Change
	2016			2015			$			%
	(dollars in thousands)
ZAIS Group Holdings, Inc. Stockholders’ Equity	$	(8,910	)	$	(3,769	)	$	(5,141	)		-136	%

The increase in net loss attributable to ZAIS Group Holdings, Inc. equity is driven primarily by the timing of the Business Combination, which did not close until March 17, 2015. Accordingly, the stockholders’ of ZAIS Group Holdings, Inc. were allocated a smaller portion of the losses during the six months ended June 30, 2015. Additionally, the increase in net loss was due to a decrease in deferred tax assets as the Company continues to maintain the full valuation allowance which was originally established at December 31, 2015 and the reduction in management fees and incentive income, partially offset by the reduction in expenses and the increase in unrealized gains on investments.

41 

Performance of ZAIS Group’s Funds

ZAIS Group currently manages various funds and managed accounts. The below table sets forth unaudited net performance returns for the month ended June 30, 2016, year-to-date (“YTD”) and inception-to-date (“ITD”) through June 30, 2016 for the following funds.

Fund Name (1)	Net Asset Value as of June 30, 2016		Net Return for the Month Ended June 30, 2016 (2)			Net YTD Return through June 30, 2016 (2)			Net ITD Return through June 30, 2016 (2)
ZAIS Opportunity Fund (3) (4)	$	396,292,781		1.84	%		2.19	%		366.56	%
ZAIS INARI Fund	$	374,947,873		0.76	%		3.95	%		30.26	%

(1) The performance data in the tables above reflect unaudited net returns as of the close of business on the last day of the relevant period. These net returns reflect performance after taking into account management fees, expenses, and incentive fees/allocations, as applicable. Results reflect the reinvestments of dividends, interest and earnings. Past performance is not a guarantee, prediction or indicator of future returns and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. An individual investor's return may vary based on timing of capital transactions, differences in fund expenses and lower or no management fees and incentive fees/allocations.

(2) The month end, YTD and ITD net returns represent unaudited actual returns as of the date hereof, for performance of the above referenced funds through the date indicated. The YTD and ITD net returns represent the cumulative effect of compounding the monthly returns for the relevant time period.

(3) The month end, YTD and ITD net returns reflect an investment in ZAIS Opportunity Domestic Feeder Fund, LP (‘‘Domestic Feeder’’) Series A Interests that are subject to advisory fees and incentive allocation. Returns would differ for an investment in Domestic Feeder Series B and ZAIS Opportunity Fund, Ltd. (“Offshore Feeder”) Series A and Series B. Effective April 1, 2012, management fee rates were reduced from 1.50% to 1.25% for Series A and from 1.00% to 0.75% for Series B. Effective January 1, 2013, incentive fees or allocation rates were reduced from 25% to 20% for Series A and from 20% to 15% for Series B. The Domestic Feeder’s returns for January 2009 and February 2011 have been adjusted to account for an increase of capital resulting from redemption penalties retained in the fund for the benefit of the remaining investors. Due to this adjustment, inception-to-date GAAP returns for years after 2008 would be lower than the adjusted returns presented.

(4) The net asset value includes the net assets of the Domestic Feeder and Offshore Feeder.

Liquidity and Capital Resources

Historical Liquidity and Capital Resources

ZAIS Group has managed its historical liquidity and capital requirements by focusing on cash flows before giving effect to consolidation of the Consolidated Funds. ZAIS Group’s primary cash flow activities on an unconsolidated basis involve: (1) generating cash flow from operations, which largely includes management fee income and incentive income, offset by operating expenses; (2) realizations generated from investments in ZAIS Managed Entities; (3) funding capital commitments that ZAIS Group has made to its funds; and (4) prior to the Business Combination, making distributions to its sole member. At June 30, 2016 and June 30, 2015, the Company’s cash and cash equivalents were $32.1 million and $75.2 million, respectively, including investments in money market funds and United States government obligations.

The Company’s material sources of cash from ZAIS Group’s operations include: (1) management fee income, which is collected monthly or quarterly; (2) incentive income, which can be less predictable as to amount and timing; and (3) distributions related to investments in certain ZAIS Managed Entities. ZAIS Group primarily uses cash flow from operations to pay compensation and benefits, general, administrative and other expenses and foreign taxes. ZAIS Group’s cash flows are also used to fund investments in limited partnerships, fixed assets and other capital items. If cash flow from operations continues to be insufficient to fund operating expenses or such investments, ZAIS Group will continue to fund its business requirements with the proceeds from the Business Combination. For the six months ended June 30, 2016, the Company’s stand-alone (excluding the activities of the Consolidated Funds) net cash used in operations was $(15.2) million. The sources of operating cash flow were insufficient to cover operating expenses, and the excess working capital needs were funded by operating cash balances and the proceeds of the Business Combination. Current projections indicate that this negative working capital trend is likely to continue throughout 2016.

42 

At June 30, 2016 the consolidated financial statements reflect the cash flows of ZAIS’s operating businesses and ZAIS Zephyr A-6, L.P., the only ZAIS Managed Entity required to be consolidated under ASU 2015-02. The assets of ZAIS Group’s Consolidated Funds have an effect on ZAIS Group’s reported cash flows. The primary cash flow activities of the Consolidated Funds include: (1) raising capital from third party investors, which is reflected as non-controlling interests in the Consolidated Funds when required to be consolidated into the Company’s consolidated financial statements; (2) purchasing and selling investment securities; (3) generating cash through the realization of certain investments; and (4) distributing cash to investors. The Consolidated Funds are treated as investment companies under U.S. GAAP; therefore, the character and classification of all Consolidated Fund transactions are presented as cash flows from operations.

As of June 30, 2016, $25.5 million of the proceeds of the Business Combination had been deployed to expand existing product lines. This amount includes a $20.5 million contribution to a majority owned subsidiary of ZAIS Group which has been established to invest in ZAIS Group managed CLO vehicles and thereby satisfy the risk retention requirements for CLO managers under the Securities Exchange Act of 1934. Up to $56 million of equity capital has been committed to a majority owned subsidiary of ZAIS Group and another ZAIS Managed Entity which carries first loss risk. There is no assurance that the full $56 million committed will be used or as to the period of time during which this utilization may be required. ZAIS Group serves as the general partner of the majority-owned subsidiary and determines when, and to what extent, capital will be called.

We continue to review our business and fund activities with a view towards improving our profitability through organic growth, reduction in expenses, acquisitions, dispositions of assets or the sale or termination of product lines. To date, we have concluded that a planned expansion in our capabilities in the residential whole loan market will no longer be a part of our future strategy and we have largely exited those activities. We have also announced the planned termination of our management agreement with ZFC REIT pending the completion of the merger between ZFC REIT and Sutherland Asset Management Corp. Upon completion of the merger, ZAIS Group’s management fees and AUM related to mortgage strategies will decrease by approximately $(2.8) million, annually on a run-rate basis, and $(0.565) billion, respectively. However, ZAIS REIT Management, a wholly owned subsidiary of ZAIS Group, will receive a termination fee in the amount of $8.0 million upon completion of the merger. In connection with these decisions and to reduce expenses related to other infrastructure staffing, on March 8, 2016, the Company commenced a reduction in force and other restructuring which resulted in a decrease of 23 employees of ZAIS Group.  This reduction will result in an annualized run rate savings of approximately $3.5 million in base compensation and benefits. We incurred total severance charges in the amount of approximately $0.8 million, during the six months ended June 30, 2016. The Company has completed this reduction in force and now has 65 employees as of June 30, 2016 compared with 95 employees as of December 31, 2015 and 97 employees as of June 30, 2015.

Debt Obligations

On March 17, 2015, in conjunction with the closing of the Business Combination, ZAIS issued two promissory notes with an aggregate principal balance of $1,250,000 to EarlyBirdCapital, Inc. and Sidoti & Company, LLC. The notes accrue interest at an annual rate equal to the annual applicable federal rate as published by the Internal Revenue Service (“AFR”) until the principal amount of, and all accrued interest on, the notes have been paid in full. The notes mature on March 17, 2017. The notes were issued in lieu of paying certain underwriting costs at the closing of the Business Combination and, accordingly, treated as a direct cost attributable to the Business Combination and capitalized to equity.

Cash Flows

The significant amounts from the Company’s consolidated financial statements, which include the effects of the Consolidated Funds in accordance with GAAP, are summarized below. Negative amounts represent a net outflow, or use of cash.

	Six Months Ended June 30,
	2016			2015
	(dollars in thousands)
Statements of cash flows data
Net cash provided by (used in) operating activities	$	(24,956	)	$	(7,229	)
Net cash provided by (used in) investing activities		8,233			(114	)
Net cash provided by (used in) financing activities		4,623			74,394
Change in cash and cash equivalents denominated in foreign currency		(187	)		483
Net change in cash and cash equivalents	$	(12,287	)	$	67,534

Operating Activities

Net cash provided by (used in) operating activities is primarily driven by ZAIS Group’s earnings in the respective periods after adjusting for non-cash compensation and fee income, net realized (gain) loss on investments and net change in unrealized (appreciation) depreciation on investments that are included in net income. Cash used to purchase investments and the proceeds from the sale of such investments are also reflected in the Company’s operating activities as investing activities of the Consolidated Funds.

Net cash flow used in operating activities was $(25.0) million for the six months ended June 30, 2016. This amount primarily includes (i) net operating losses of $(11.3) million; (ii) purchase of investments in affiliated securities by the Consolidated Funds of $(10.0) million; (iii) net change in unrealized (gain) loss on investments of the Consolidated Funds of $(3.7) million; and (iv) an increase in prepaid expenses of $(1.2) million, partially offset by an increase in non-cash equity-based compensation of $1.7 million.

43 

Net cash flow used in operating activities was $(7.2) million for the six months ended June 30, 2015. This amount primarily includes (i) net operating losses of $(10.5) million; (ii) a decrease in compensation payable of $(4.5) million, and (iii) an increase in deferred tax assets of $(2.6) million, partially offset by an increase in income and fees receivable of $8.7 million and an increase in non-cash equity-based compensation of $1.9 million.

Investing Activities

The Company’s net cash provided by investing activities was $8.2 million for the six months ended June 30, 2016. This amount primarily includes proceeds from sales of investments.

The Company’s net cash used in investing activities was $(0.1) million for the six months ended June 30, 2015. This amount primarily includes purchases of fixed assets of $(0.1) million.

Financing Activities

The Company’s net cash provided by financing activities was $4.6 million for the six months ended June 30, 2016. This amount primarily includes contributions from non-controlling interests in Consolidated Funds of $4.9 million partially offset by $(0.3) million of distributions to non-controlling interests in ZGP.

The Company’s net cash provided by financing activities was $74.4 million for the six months ended June 30, 2015. This amount primarily includes net proceeds from the Business Combination of $73.5 million and proceeds from the issuance of notes payable of $1.3 million.

Future Sources and Uses of Liquidity

The Company’s current sources of liquidity are (1) cash on hand, (2) cash flows from operations, including management fee income and incentive income and (3) realizations on its investments in ZAIS Managed Entities. ZAIS believes that these sources of liquidity will be sufficient to fund the Company’s working capital requirements and to meet the Company’s current commitments. The Company’s primary liquidity needs will be comprised of cash to (1) fund the Company’s operations; (2) provide capital to facilitate the growth of ZAIS Group’s existing investment advisory and asset management business, including the expansion of ZAIS Group’s CLO management business, which has become more capital-intensive in light of current European Union and United States risk retention rules; (3) fund ZAIS Group’s potential commitments to new funds that it may advise; (4) provide capital to facilitate its expansion into businesses that are complimentary to ZAIS Group’s existing investment management business; and (5) pay income taxes.

Gain Contingencies

On April 7, 2016 the Company received notification from one of its insurance providers that the Company’s claim for reimbursement of certain legal costs relating to a formal regulatory inquiry had been approved. The total approved claim reimbursement for all legal costs incurred in excess of the $0.5 million deductible was approximately $0.7 million. Pursuant to the guidance under ASC 450, "Contingencies – Gain Contingencies” , approximately $0.5 million of the insurance reimbursements receivable has been recorded to other income (expense) in the consolidated statements of total comprehensive income (loss) for the portion that related to the costs incurred for the year ended December 31, 2015 in excess of the Company’s insurance deductible and a corresponding amount has been recorded to other assets in the consolidated statements of financial position. The Company also recorded approximately $0.2 million of the insurance reimbursements receivable to other assets in the consolidated statements of financial position and a corresponding amount to general, administrative and other expense in the consolidated statements of comprehensive income (loss) for the portion that related to legal bills received for the six months ended June 30, 2016. During the three months ended June 30, 2016, the Company received insurance reimbursements of $0.7 million. At June 30, 2016, approximately $0.006 million of insurance reimbursements receivable noted above is included in other assets in the consolidated statements of financial position.

Off-Balance Sheet Arrangements

As of June 30, 2016 and December 31, 2015, the Company did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Critical accounting policies are those that require the Company to make significant judgments, estimates or assumptions that affect amounts reported in its consolidated financial statements or the notes thereto. The Company bases its judgments, estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable and prudent. Actual results may differ materially from these estimates. See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements incorporated by reference in this Form 10-Q for a description of the Company’s critical accounting policies.

Recent Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements incorporated by reference in this Form 10-Q for a description of recent accounting pronouncements and their impact on the Company.

44 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our predominant exposure to market risk is related to ZAIS Group’s investments in the ZAIS Managed Entities and its role as general partner or investment manager for the ZAIS Managed Entities, and the sensitivities to movements in the fair value of their investments that may adversely affect our net gain (loss) on investments, management fees and incentive income.

Fair value of the financial assets and liabilities of the ZAIS Managed Entities may fluctuate in response to changes in the value of investments, foreign currency exchange rates, commodity prices and interest rates. The fair value changes in the assets and liabilities of the ZAIS Managed Entities affect the net gain (loss) on investments, management fees and incentive income ZAIS Group may earn from the ZAIS Managed Entities.

With regards to the Consolidated Funds, effective January 1, 2015 and subsequent to the adoption of ASU 2015-02, ZAIS Group now consolidates one ZAIS Managed Entity in which it has a majority ownership interest and, accordingly, changes in fair value of the Consolidated Fund could have a material impact on the Company’s allocable share of consolidated net income (loss) of this fund.

Credit Risk

All of the asset types held within the ZAIS Managed Entities are exposed to many risks, including credit risk. Credit risk arises in two forms; (1) debt issuers in the underlying ZAIS Managed Entities may fail to fulfill their obligations or the collateral value may become inadequate to cover our exposure and the market value of the instrument declines in price; and (2) the ZAIS Managed Entities may also face counterparty risk whereby the ZAIS Managed Entities have posted collateral in support of a derivative or repurchase contract and the counterparty becomes insolvent. Credit risk is monitored on an ongoing basis by the ZAIS Group risk management group who works with the ZAIS Group portfolio management team if it detects situations where economic performance is declining or a position does not conform to internal risk tolerances. The ZAIS Group risk management group manages counterparty risk by limiting term credit risk to highly rated financial institutions and by requiring additional collateral where appropriate.

Market Risk

Market risk is monitored on an ongoing basis by the ZAIS Group risk management group that conducts monthly stress tests for the asset types held within certain of our funds and separately managed accounts using five scenarios — base, modest upside, strong upside, modest downside and severe downside risk scenarios. At June 30, 2016, the severe downside market stress scenario shows that the three year annualized downside return would be -5.13%.

A -5.13% decline in the fair market value of the AUM for ZAIS Managed Entities at June 30, 2016 would impact ZAIS Group’s management fee income by approximately $(0.2) million. Additionally, ZAIS Group could receive no incentive income due to a decline in the fair market value due the respective ZAIS Managed Entities high-water mark. A decline in the fair market value of the AUM for ZAIS Group’s structured vehicles at June 30, 2016 would not impact ZAIS Group’s management fee income because the management fee on these vehicles is based on notional par value, not market value except in the case where assets may be distressed or defaulted in which case the trustee would price these respective assets at the lower of the market value or their expected recovery rate provided by the rating agencies.

Investments in ZAIS Managed Entities

In 2015, ZAIS Group committed approximately $56 million to be invested in two ZAIS Managed Entities, of which approximately $25.5 million had been funded through June 30, 2016. These investments differ from other risks because ZAIS Group is exposed to the direct risk of loss of principal versus a decline in AUM and resultant lower management fees. Both of these investments are in ZAIS Managed Entities which employ a high degree of financial leverage (either directly or indirectly through its underlying investments) and carry first loss risk. The estimated risk of loss for these investments in a severe market downturn could reach as high as (90)% or approximately $(23.0) million (based on amounts funded through June 30, 2016). ZAIS Group also holds general partner investments in certain ZAIS Managed Entities which are also exposed to direct risk of loss of principal.

Exchange Rate Risk

Certain of ZAIS Managed Entities hold investments denominated in non-U.S. dollar currencies which may be affected by movements in the rate of exchange between the U.S. dollar and foreign currencies. However, our foreign currency exposure is hedged with forward foreign exchange contracts which substantially offset the risk of foreign currency movements against the U.S. dollar. We estimate that as of June 30, 2016, a 10% weakening or strengthening of the U.S. dollar against all or any combination of currencies to which certain of ZAIS Managed Entities have exposure to exchange rates would impact the asset values of these entities in the aggregate of plus or minus 0.029% and would not significantly impact our management fees. Additionally, ZAIS Group is exposed to exchange rate risk on the balances and operations of its wholly-owned foreign subsidiaries. The Company has determined that this risk would not significantly impact the consolidated financial statements due to the size of its foreign operations.

45 

Interest Rate Risk

Certain of ZAIS Managed Entities have financing arrangements and hold credit instruments that accrue interest at variable rates linked to LIBOR. Interest rate changes may therefore impact the amount of interest payments, future earnings and cash flows. In the event LIBOR, and rates directly or indirectly tied to LIBOR, were to increase by 10% over LIBOR as of June 30, 2016, we estimate that the net effect on the net asset value of certain ZAIS Managed Entities would be a decline of approximately -0.152% which would not significantly impact our management fees. 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive and financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2016, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2016 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

PART II − OTHER INFORMATION

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 10, 2016. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this Report, there have been no identified material changes in the risk factors in our Annual Report on Form 10-K.

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

None.  

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.  

Item 5. Other Information

None.  

Item 6. Exhibits.

The Exhibit index that appears following the signature page is incorporated herein by reference.

46 

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.

	ZAIS GROUP HOLDINGS, INC.
	By:	/s/ Michael F. Szymanski
	Michael F. Szymanski
	Chief Executive Officer, President and Director
	By:	/s/ Donna Blank
	Donna Blank
	Chief Financial Officer
Date: August 9, 2016

47 

EXHIBIT INDEX

Exhibit Number	Description of Document
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

48 

EX-31.1

EXHIBIT 31.1
CERTIFICATIONS

I, Michael Szymanski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ZAIS Group Holdings, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2016	By:	/s/ Michael Szymanski
		Name:	Michael Szymanski
		Title:	Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2
CERTIFICATIONS

I, Donna Blank, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ZAIS Group Holdings, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e) 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2016	By:	/s/ Donna Blank
		Name:	Donna Blank
		Title:	Chief Financial Officer

EX-32.1

EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of ZAIS Group Holdings, Inc. (the "Company") for the quarter ended June 30, 2016 to be filed with the Securities and Exchange Commission on or about the date hereof (the "report"), I, Michael Szymanski, Chief Executive Officer and President of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: August 9, 2016

By:	/s/ Michael Szymanski
	Name:	Michael Szymanski
	Title:	Chief Executive Officer and President

EX-32.2

EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of ZAIS Group Holdings, Inc. (the "Company") for the quarter ended June 30, 2016 to be filed with the Securities and Exchange Commission on or about the date hereof (the "report"), I, Donna Blank, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: August 9, 2016

By:	/s/ Donna Blank
	Name:	Donna Blank
	Title	Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 09, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	ZAIS Group Holdings, Inc.
Entity Central Index Key	0001562214
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	ZAIS
Common Class A [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		13,900,917
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		20,000,000

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 32,064	$ 44,351
Income and fees receivable	1,655	2,529
Investments in affiliates, at fair value	5,207	5,242
Due from related parties	1,382	748
Prepaid expenses	1,946	776
Other assets	301	310
Fixed assets, net	422	544
Investments, at fair value	0	8,169
Total Assets	87,178	93,211
Liabilities
Notes payable	1,259	1,255
Compensation payable	4,303	3,575
Due to related parties	142	175
Fees payable	2	756
Other liabilities	798	1,546
Total Liabilities	6,605	7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding.	0	0
Additional paid-in capital	61,965	60,817
Retained earnings (Accumulated deficit)	(22,715)	(13,805)
Accumulated other comprehensive income (loss)	24	158
Total stockholders’ equity, ZAIS Group Holdings, Inc.	39,275	47,171
Total Equity	80,573	85,803
Total Liabilities and Equity	87,178	93,211
Common Class A [Member]
Equity
Common Stock	1	1
Common Class B [Member]
Equity
Common Stock	0	0
Consolidated Funds [Member]
Assets
Cash and cash equivalents	0	33
Investments, at fair value	44,201	30,509
Liabilities
Other liabilities	101	101
Equity
Non-controlling interests	21,609	14,916
ZAIS Group Parent, LLC [Member]
Equity
Non-controlling interests	$ 19,689	$ 23,716

XML

Consolidated Statements of Financial Condition (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	2,000,000	2,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Class A [Member]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	180,000,000	180,000,000
Common Stock, Shares, Issued	13,900,917	13,870,917
Common Stock, Shares, Outstanding	13,900,917	13,870,917
Common Class B [Member]
Common stock, par value (in dollars per share)	$ 0.000001	$ 0.000001
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued	20,000,000	20,000,000
Common Stock, Shares, Outstanding	20,000,000	20,000,000

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	[1]	Jun. 30, 2016	Jun. 30, 2015	[1]
Revenues
Management fee income		$ 3,571	$ 4,081		$ 7,140	$ 7,834
Incentive income		143	1,213		295	2,121
Other revenues		79	106		159	137
Total Revenues		3,793	5,400		7,594	10,092
Expenses
Compensation and benefits		7,999	7,361		17,006	13,931
General, administrative and other		2,950	4,764		6,160	9,101
Depreciation		64	146		127	208
Total Expenses		11,042	12,271		23,341	23,240
Other income (loss)
Net gain (loss) on investments		55	2		37	45
Other income (expense)		87	9		692	5
Total Other Income (Loss)		2,318	11		4,422	50
Income (loss) before income taxes		(4,931)	(6,860)		(11,325)	(13,098)
Income tax (benefit) expense		4	(1,682)		9	(2,584)
Consolidated net income (loss), net of tax		(4,935)	(5,178)		(11,334)	(10,514)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(147)	291		(201)	483
Total Comprehensive Income (Loss)		(5,082)	(4,887)		(11,535)	(10,031)
Allocation of Consolidated Net Income (Loss), net of tax
Stockholders’ equity, ZAIS Group Holdings, Inc.		(4,076)	(2,947)		(8,910)	(3,769)
Consolidated Net Income (Loss), net of tax		(4,935)	(5,178)		(11,334)	(10,514)
Allocation of Total Comprehensive Income (Loss)
Stockholders’ equity, ZAIS Group Holdings, Inc.		(4,174)	(2,753)		(9,044)	(3,448)
Total Comprehensive Income (Loss)		$ (5,082)	$ (4,887)		$ (11,535)	$ (10,031)
Consolidated Net Income (Loss), net of tax per Class A common share applicable to ZAIS Group Holdings, Inc. - Basic		$ (0.29)	$ (0.21)		$ (0.64)	$ (0.47)
Consolidated Net Income (Loss), net of tax per Class A common share applicable to ZAIS Group Holdings, Inc. - Diluted		$ (0.29)	$ (0.21)		$ (0.64)	$ (0.53)
Weighted average shares of Class A common stock outstanding:
Basic		13,892,016	13,870,917		13,881,466	8,046,665	[2]
Diluted	[3],[4]	20,892,016	20,870,917		20,881,466	15,046,665	[2]
Consolidated Funds [Member]
Expenses
Expenses of Consolidated Funds		$ 29	$ 0		$ 48	$ 0
Other income (loss)
Net gain (loss) on investments		2,176	0		3,693	0
Allocation of Consolidated Net Income (Loss), net of tax
Non-controlling interests		1,052	0		1,786	0
Allocation of Total Comprehensive Income (Loss)
Non-controlling interests		1,052	0		1,786	0
ZAIS Group Parent, LLC [Member]
Allocation of Consolidated Net Income (Loss), net of tax
Non-controlling interests		(1,911)	(2,231)		(4,210)	(6,745)
Allocation of Total Comprehensive Income (Loss)
Non-controlling interests		$ (1,960)	$ (2,134)		$ (4,277)	$ (6,583)

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

[2] Pro-rated based on the portion of the period preceding and following the Business Combination.

[3] Number of diluted shares outstanding for periods after the Business Combination (as defined in Note 1) takes into account non-controlling interests in ZAIS Group Parent, LLC that may be exchanged for Class A common stock under certain circumstances.

[4] Number of diluted shares outstanding takes into account non-controlling interests of ZGP that may be exchanged for Class A Common Stock under certain circumstances.

XML

Consolidated Statement of Changes in Equity and Non-controlling Interests - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands	Total	Common Class A [Member]	Common Class B [Member]	Additional Paid-in Capital [Member]	Retained earnings / (Accumulated deficit) [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Non-controlling interests in ZAIS Group Parent, LLC [Member]	Non-controlling Interests in Consolidated Funds [Member]
Beginning of the period at Dec. 31, 2015	$ 85,803	$ 1	$ 0	$ 60,817	$ (13,805)	$ 158	$ 23,716	$ 14,916
Beginning of the period (in shares) at Dec. 31, 2015		13,870,917	20,000,000
Vesting of RSUs (in shares)		30,000	0
Capital contributions	4,907	$ 0	$ 0	0	0	0	0	4,907
Capital distributions	(284)	0	0	0	0	0	(284)	0
Equity-based compensation charges	1,682	0	0	1,118	0	0	564	0
Consolidated net income (loss)	(11,334)	0	0	0	(8,910)	0	(4,210)	1,786
Rebalancing of ownership between the Company and non-controlling interest in ZAIS Group Parent, LLC	0	0	0	30	0	0	(30)	0
Other comprehensive income (loss)	(201)	0	0	0	0	(134)	(67)	0
End of the period at Jun. 30, 2016	$ 80,573	$ 1	$ 0	$ 61,965	$ (22,715)	$ 24	$ 19,689	$ 21,609
End of the period (in shares) at Jun. 30, 2016		13,900,917	20,000,000

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flows from Operating Activities
Consolidated net income (loss)	$ (11,334)	$ (10,514)	[1]
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:
Depreciation	127	208	[1]
Net (gain) loss on investments	(37)	(45)	[1]
Non-cash equity-based compensation	1,682	1,941
Interest expense on notes payable	4	2
Operating cash flows due to changes in:
Income and fees receivable	874	8,714
Due from related parties	(634)	(79)
Prepaid expenses	(1,170)	(625)	[2]
Other assets	(1)	79
Deferred tax asset	0	(2,603)
Compensation payable	728	(4,516)
Due to related parties	(33)	142
Fees payable	(754)	57	[2]
Other liabilities	(748)	10	[2]
Consolidated Funds related items:
Change in unrealized (gain) loss on investments	22	(25)
Net Cash Provided by (Used in) Operating Activities	(24,956)	(7,229)
Cash Flows from Investing Activities
Purchases of fixed assets, net	(17)	(131)
Distributions from investments in affiliates	87	17
Purchases of investments	(11)	0
Proceeds from sales of investments	8,174	0
Net Cash Provided by (Used in) Investing Activities	8,233	(114)
Cash Flows from Financing Activities
Net proceeds from Business Combination	0	73,516
Ending cash at HF2 Financial Management, Inc.	0	2	[2]
Proceeds from issuance of notes payable	0	1,250
Contributions from non-controlling interests in Consolidated Funds	4,907	0
Distributions to non-controlling interests in ZGP	(284)	(374)
Net Cash Provided by (Used in) Financing Activities	4,623	74,394
Net increase (decrease) in cash and cash equivalents denominated in foreign currency	(187)	483
Net increase (decrease) in cash and cash equivalents	(12,287)	67,534
Cash and cash equivalents, beginning of period	44,351	7,664
Cash and cash equivalents, end of period	32,064	75,198
Consolidated Funds [Member]
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:
Net (gain) loss on investments	(3,693)	0	[1]
Consolidated Funds related items:
Purchases of investments in affiliated securities	(10,000)	0	[3]
Change in unrealized (gain) loss on investments	(3,693)	0	[3]
Change in cash and cash equivalents	33	$ 0	[3]
Cash Flows from Financing Activities
Cash and cash equivalents, beginning of period	33
Cash and cash equivalents, end of period	$ 0

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

[2] Amounts have been adjusted to conform to current period presentation.

[3] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

XML

Organization

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Organization

ZAIS Group Holdings, Inc. (“ZAIS”) is a holding company conducting substantially all of its operations through ZAIS Group, LLC (“ZAIS Group”), an investment advisory and asset management firm focused on specialized credit which commenced operations in July 1997 and is headquartered in Red Bank, New Jersey and has an office in London. ZAIS Group is a wholly-owned consolidated subsidiary of ZAIS Group Parent, LLC (“ZGP”), a majority-owned consolidated subsidiary of ZAIS. ZGP became the sole member and 100% equity owner of ZAIS Group on March 31, 2014 pursuant to a merger transaction which is described in detail in ZAIS’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 23, 2015 (the “Closing 8-K”). References to the “Company” in these consolidated financial statements refer to ZAIS, together with its consolidated subsidiaries.

ZAIS Group is an investment advisor registered with the SEC under the Investment Advisors Act of 1940 and is also registered with the Commodity Futures Trading Commission as a Commodity Pool Operator and Commodity Trading Advisor. ZAIS Group provides investment advisory and asset management services to private funds, separately managed accounts, structured vehicles and ZAIS Financial Corp. (“ZFC REIT”), a publicly traded mortgage real estate investment trust (collectively, the “ZAIS Managed Entities”). The ZAIS Managed Entities predominantly invest in a variety of specialized credit instruments including bank loans, corporate credit instruments such as collateralized debt obligations (“CDOs”), collateralized loan obligations (together with CDOs referred to as “CLOs”) and various securities and instruments backed by these asset classes. ZAIS Group had approximately $3.949 billion of assets under management (“AUM”) as of June 30, 2016. ZAIS Group also serves as the general partner to certain ZAIS Managed Entities, which are generally organized as pass-through entities for U.S. federal income tax purposes.

The Company’s primary sources of revenues are (i) management fee income, which is based predominantly on the AUM of the ZAIS Managed Entities (ii) incentive income, which is based on the investment performance of the ZAIS Managed Entities and (iii) income of the consolidated ZAIS Managed Entities (the “Consolidated Funds”) which is based on the income generated from the portfolios of the Consolidated Funds, a portion of which is allocated to non-controlling interests in Consolidated Funds. There was no income (loss) in the current or prior year relating to the Consolidated Funds. All of the management fee income and incentive income earned by ZAIS Group from the Consolidated Funds is eliminated in consolidation.

On March 20, 2015, ZAIS made a decision to terminate the business operations of its Shanghai subsidiary. ZAIS Group ceased conducting regular business activities in Shanghai and the office is now closed. Final clearance from the relevant government authorities on the plan of liquidation is expected in the second half of 2016.

Recapitalization as a Result of a Business Combination

On October 5, 2012, HF2 Financial Management Inc. (“HF2”) was formed as a blank check company whose objective was to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination, one or more businesses or entities. On September 16, 2014, HF2 entered into an Investment Agreement, as defined in the Closing 8-K, with ZGP and the members of ZGP (including Christian Zugel, the former managing member of ZGP and the founder and Chief Investment Officer of ZAIS Group, and certain related parties, collectively, the “ZGP Founder Members”), under which HF2 agreed to contribute cash to ZGP in exchange for newly issued Class A Units of ZGP (“Class A Units”) representing a majority financial interest in ZGP (the “Business Combination”) and to cause the transfer of all of its outstanding shares of Class B Common Stock, par value $0.000001 (the “Class B Common Stock”) to the ZGP Founder Members. All Class B Common Stock was then immediately deposited into a newly created irrevocable voting trust (the “ZGH Class B Voting Trust”), of which Mr. Zugel is the sole trustee. The Class B Common Stock has no economic rights and therefore is not considered participating securities for purposes of allocation of consolidated net income (loss).

On March 9, 2015, the stockholders of HF2 approved the Business Combination and the transaction closed on March 17, 2015 (the “Closing”). In connection with the Closing, HF2 changed its name to ZAIS Group Holdings, Inc. The Business Combination is described in detail in ZAIS’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the "Annual Report on Form 10-K”). Prior to the Closing, HF2 was a shell company with no operations. Upon the Closing, ZAIS became a holding company whose assets primarily consist of an approximate 66.5% interest in its majority-owned subsidiary, ZGP. Prior to the Closing, Christian Zugel served as the managing member of ZGP. Upon the Closing, ZAIS became the managing member of ZGP.

XML

Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the SEC for interim reporting. In the opinion of management, all adjustments considered necessary for a fair statement of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP as contained in the ASC have been condensed or omitted from the unaudited interim consolidated financial statements according to the SEC rules and regulations. The information and disclosures contained in these unaudited interim consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K.

Segment Reporting

The Company currently is comprised of one reportable segment, the investment management segment, and substantially all of the Company’s operations are conducted through this segment. The investment management segment provides investment advisory and asset management services to the ZAIS Managed Entities.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the estimates used in preparing the consolidated financial statements are reasonable and prudent, actual results may ultimately differ from those estimates.

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 428) (“ASU 2016-02”). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. Adoption of ASU 2016-02 is not expected to have a material effect on the Company's consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The objective of the guidance is to simplify several aspects of the accounting for employee share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The update is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2016-09 is not expected to have a material effect on the Company's consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date (“ASU 2015-14”). This ASU amends the effective date of ASU 2014-09 for all entities by one year. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard clarifies the required factors that an entity must consider when recognizing revenue and also requires additional disclosures. With the issuance of ASU 2015-14 the new effective date for the Company is January 1, 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period.  The Company is currently still evaluating the impact of adopting ASU 2015-14.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued.  If conditions or events indicate it is probable that an entity will be unable to meet its obligations as they become due within one year after the financial statements are issued, the update requires additional disclosures.  The update is effective for periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements.

Principles of Consolidation

The consolidated financial statements included herein are the financial statements of ZAIS, its subsidiaries and certain funds that are required to be consolidated. All intercompany balances and transactions have been eliminated in consolidation, including ZAIS’s investment in ZGP and ZGP’s investment in ZAIS Group. The Company's fiscal year ends on December 31.

The consolidated financial statements include non-controlling interests in ZGP which are primarily comprised of Class A Units of ZGP held by the ZGP Founder Members.

XML

Investments in Affiliates

6 Months Ended

Jun. 30, 2016

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

3. Investments in Affiliates

The Company applied the fair value option to its interests in the ZAIS Managed Entities that are not consolidated, and would have otherwise been subject to the equity or historical cost methods of accounting. The Company believes that the fair value of these investments is more indicative of the Company’s financial position than historical cost. At June 30, 2016 and December 31, 2015, the fair value of these investments was approximately $5,207,000 and $5,242,000, respectively. For the three months ended June 30, 2016 and June 30, 2015, the Company recorded an unrealized gain (loss) of approximately $25,000 and $2,000, respectively, associated with the investments still held at the end of each respective period. For the six months ended June 30, 2016 and June 30, 2015, the Company recorded an unrealized gain (loss) of approximately $(22,000) and $25,000, respectively, associated with the investments still held at the end of each respective period. Such amounts are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

At June 30, 2016 and December 31, 2015, no equity investment, individually or in the aggregate, held by the Company exceeded 10% of the total consolidated assets or income. As such, the Company did not present separate or summarized financial statements for any of its investees.

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Fair Value of Investments

6 Months Ended

Jun. 30, 2016

Assets, Fair Value Disclosure [Abstract]

Fair Value Disclosures [Text Block]

4. Fair Value of Investments

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values.

The Company follows the fair value measurement and disclosure guidance under U.S. GAAP, which establishes a hierarchical disclosure framework. This framework prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. In all cases, an instrument’s level within the hierarchy is based upon the market pricing transparency of the instrument and does not necessarily correspond to the Company’s perceived risk or liquidity of the instrument.

The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment.

Assets and liabilities that are measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 — Fair value is determined based on quoted prices for identical assets or liabilities in an active market. Assets and liabilities included in Level 1 include listed securities. As required in the fair value measurement and disclosure guidance under U.S. GAAP, the Company does not adjust the quoted price for these investments. The hierarchy gives highest priority to Level 1.

Level 2 — Fair value is determined based on inputs other than quoted prices that are observable for the asset or liability either directly or indirectly as of the reporting date. Assets and liabilities which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives, including foreign exchange forward contracts whose values are based on the following:

• Quoted prices for similar assets or liabilities in active markets.

• Quoted prices for identical or similar assets or liabilities in non-active markets.

• Pricing models whose inputs are observable for substantially the full term of the asset or liability.

• Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 — Fair value is determined based on inputs that are unobservable for the investment and includes situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value require significant management judgment or estimation and the Company may use models or other valuation methodologies to arrive at fair value. Investments that are included in this category generally include distressed debt, less liquid corporate debt securities, non-investment grade residual interests in securitizations, collateralized debt obligations and certain derivative contracts. The hierarchy gives the lowest priority to Level 3.

The Company has established a valuation process that applies for all levels of investments in the valuation hierarchy to ensure that the valuation techniques are consistent and verifiable. The valuation process includes discussions between the valuation team, portfolio management team and the valuation committee (the “Valuation Committee”). The Valuation Committee consists of senior members of ZAIS Group and is co-chaired by the Chief Risk Officer and Chief Financial Officer of ZAIS Group. The Valuation Committee meets to review and approve the results of the valuation process which are used in connection with the preparation of quarterly and annual financial statements. The Valuation Committee is responsible for oversight and review of the written valuation policies and procedures and ensuring that they are applied consistently.

The lack of an established, liquid secondary market for some of the Company’s holdings may have an adverse effect on the market value of those holdings and on the Company’s ability to dispose of them. Additionally, the public markets for the Company’s holdings may experience periods of volatility and periods of reduced liquidity and the Company’s holdings may be subject to certain other transfer restrictions that may further contribute to illiquidity. Such illiquidity may adversely affect the price and timing of liquidations of the Company’s holdings.

The following is a description of the valuation techniques used to measure fair value and the classification of these instruments pursuant to the fair value hierarchy:

Investments

The Company determines the fair value of investments in short term high investment grade mutual funds using quoted market prices and, accordingly, the Company classifies these investments as Level 1. Net gains or losses on investments are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

Collateralized Loan Obligation – Warehouse

A Collateralized Loan Obligation Warehouse (the "CLO - Warehouse") was organized for the purpose of holding syndicate bank loans, also known as leveraged loans, during the warehouse period of an impending collateralized loan obligation vehicle.  During the warehouse period, the CLO - Warehouse will secure investments and build a portfolio of primarily leveraged loans and other debt obligations. The warehouse period terminates when the collateralized loan obligation vehicle closes; at this time the underlying assets held by the CLO - Warehouse are securitized into a collateralized loan obligation vehicle. 

The fair value of the CLO - Warehouse is determined by adding the excess spread (accrued interest plus interest received less financing cost) to the CLO - Warehouse equity contribution made by the Consolidated Funds, unless ZAIS Group determines that the securitization period will not be achieved, in which case, the fair value of the CLO - Warehouse will be established based on the fair value of the underlying bank loan positions which are valued in a manner consistent with ZAIS Group’s valuation policy and procedures.  The net excess spread was 10.5% and 1.7% as of June 30, 2016 and December 31, 2015, respectively. CLO warehouses can be exposed to credit events, mark to market changes, rating agency downgrades and financing cost changes. Changes in the fair value of the CLO - Warehouse are reported in net gains (losses) of Consolidated Funds’ investments in the consolidated statements of comprehensive income (loss). Upon closing of the CLO, all assets held in the CLO – Warehouse are transferred into the collateralized loan obligation vehicle and the gain / (loss) on those assets is realized.

Investment in Affiliates

Under U.S. GAAP, the Company is permitted, as a practical expedient, to estimate the fair value of its investments in other investment companies using the NAV (or its equivalent) of the related investment company. Accordingly, the Company utilizes the practical expedient in valuing its investments in the unconsolidated ZAIS Managed Entities, which is an amount equal to the sum of the Company’s proportionate interest in the capital accounts of the affiliated funds at fair value. The fair value of the assets and liabilities of the ZAIS Managed Entities are determined by the Company in accordance with its valuation policies described above. Pursuant to ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent) (“ASU 2015-07”), the Company no longer is required to categorize these investments within the fair value hierarchy. The resulting net gains or losses on investments are included in net gain (loss) on investments in the consolidated statements of comprehensive income (loss).

At June 30, 2016 and December 31, 2015, the Company held investments in five unconsolidated ZAIS Managed Entities. The valuation of the investments in these entities represents the amount the Company would receive at June 30, 2016 and December 31, 2015, respectively, if it were to liquidate its investments in these entities. ZAIS Group has the ability to liquidate its investments according to the provisions of the respective entities’ operative agreements.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
	Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,207
Investments, at fair value
CLO – Warehouse		—		—		44,201		44,201
Total investments, at fair value		—		—		44,201		44,201
Total assets, at fair value	$	—	$	—	$	44,201	$	49,408

  The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
	Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,242
Investments, at fair value
Short term high investment grade mutual funds		8,169		—		—		8,169
CLO – Warehouse		—		—		30,509		30,509
Total investments, at fair value		8,169		—		30,509		38,678
Total assets, at fair value	$	8,169	$	—	$	30,509	$	43,920

The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the six months ended June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
	Beginning Balance January 1, 2016		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance June 30, 2016		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at June 30, 2016
CLO - Warehouse	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692
Total investments, at fair value	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692

The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the year ended December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
	Beginning Balance January 1, 2015		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance December 31, 2015		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at December 31, 2015
CLO - Warehouse	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509
Total investments, at fair value	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509

The Company’s policy is to record transfers between Level 1, Level 2 and Level 3, if any, at the beginning of the period.

There were no transfers between Level 1, Level 2 and Level 3 during the six months ended June 30, 2016 and the year ended December 31, 2015.

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Variable Interest Entities ("VIEs")

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entity Disclosure [Text Block]

5. Variable Interest Entities (“VIEs”)

In the ordinary course of business, ZAIS Group sponsors the formation of VIEs that can be broadly classified into the following categories: hedge funds, hybrid private equity funds and securitized structures (CLOs). ZAIS Group generally serves as the investment advisor or collateral manager with certain investment-related, decision-making authority for these entities. The Company has not recorded any liabilities with respect to VIEs that are not consolidated. Certain ZAIS Managed Entities, including the CLOs, are VIEs. The Company applies the guidance of ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”) when determining which ZAIS Managed Entities are required to be consolidated.

Funds

The Company has determined that the fee it receives from several of the hedge funds and hybrid private equity funds ZAIS Group manages does not represent a variable interest because under ASU 2015-02, ZAIS Group’s fee arrangements are commensurate with the level of effort performed and include only customary terms that do not represent variable interests. The Company considered investments its related parties have in these entities when determining if ZAIS Group’s fee represented a variable interest.

As of June 30, 2016 and December 31, 2015, the Company has determined that ZAIS Group is the primary beneficiary of ZAIS Zephyr A-6, LP, which is consolidated in these unaudited consolidated financial statements. ZAIS Group is the primary beneficiary since it is deemed to have (i) the power to direct activities of the entity that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity.

Securitized Structures

ZAIS Group and certain of its wholly owned subsidiaries act as collateral manager for CLOs that are VIEs. These CLOs are entities that issue collateralized notes which offer investors the opportunity for returns that vary commensurately with the risks they assume. The notes issued by the CLOs are generally backed by asset portfolios consisting of loans, other debt or other derivatives. ZAIS Group receives collateral management fees (which in some cases are waived in lieu of certain ZAIS Managed Entities owning the equity tranches) for acting as the collateral manager for these structures and, subject to hurdle rates, may earn incentive income based on the performance of the vehicles.

The Company has determined that the fee it receives from the CLOs does not represent a variable interest because under ASU 2015-02, ZAIS Group’s fee arrangements are commensurate with the level of effort performed and include only customary terms that do not represent variable interests. The Company considered investments its related parties have in the CLOs when determining if ZAIS Group’s fee represented a variable interest.

The Company determined that it is not the primary beneficiary of CLO – Warehouses, which are VIEs, because the financing entity must approve all significant financing requests and, as a result, the Company does not have the power to direct activities of the entity that most significantly impacts its economic performance.

 

The following table presents the assets and liabilities of entities that are VIEs, and consolidated by the Company on a gross basis prior to eliminations due to consolidation at June 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
	Funds		Funds
	(Dollars in thousands)
Assets
Assets of Consolidated Funds
Cash and cash equivalents	$	—	$	33
Investments, at fair value		44,201		30,509
Total Assets	$	44,201	$	30,542
Liabilities
Liabilities of Consolidated Funds
Other liabilities	$	101	$	101
Total Liabilities	$	101	$	101

The assets presented in the table above belong to the investors in the applicable entity, are available for use only by the entity to which they belong and are not available for use by the Company. The Consolidated Funds have no recourse to the general credit of ZAIS Group with respect to any liability.

ZAIS Group has a minimal direct ownership, if any, in the non-consolidated entities that are VIEs and its involvement is generally limited to providing asset management services. ZAIS Group’s exposure to loss from these entities is limited to a decrease in the management fees and incentive income that has been earned and accrued, as well as any direct equity ownership in the VIEs. The Company did not hold any material variable interests in unconsolidated VIEs at June 30, 2016 or December 31, 2015.  

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Management Fee Income and Incentive Income

6 Months Ended

Jun. 30, 2016

Management Fee Income and Incentive Income [Abstract]

Management Fee Income and Incentive Income [Text Block]

6. Management Fee Income and Incentive Income

ZAIS Group earns management fees for funds and accounts, monthly, quarterly or annually, based on the net asset value of these funds and accounts prior to the accrual of incentive fees/allocations. Management fees earned for the CLOs, annually, are generally based on the par value of the collateral and cash held in the CLOs. Management fees earned by ZAIS Group from ZFC REIT, annually, are based on ZFC REIT's stockholders' equity, as defined in the amended and restated investment advisory agreement between ZAIS Group’s consolidated subsidiary ZAIS REIT Management, LLC (“ZAIS REIT Management”) and ZFC REIT. Twenty percent of the management fee income received from ZFC REIT is paid to holders of Class B interests in ZAIS REIT Management and is recorded on a gross basis and included in management fee income on the consolidated statements of comprehensive income (loss). This income is allocated to the holders of Class B interests in ZAIS REIT Management which is included in non-controlling interest in ZAIS Group Parent, LLC.

ZAIS REIT Management, a majority owned subsidiary of ZAIS Group, is the external investment advisor to ZFC REIT. On April 7, 2016, ZFC REIT announced that it had entered into an agreement and plan of merger (the “Merger Agreement”). In connection with the Merger Agreement, ZAIS REIT Management entered into a termination agreement (the “Termination Agreement”), whereby the current advisory agreement under which ZAIS REIT Management receives management fees from ZFC REIT will be terminated upon closing of the ZFC REIT merger and ZAIS REIT Management will receive a termination fee in the amount of $8,000,000. In the event that the Merger Agreement is terminated prior to the consummation of the transaction, the Termination Agreement will automatically terminate and be of no further effect.

In addition to the management fee income mentioned above, subordinated management fees may be earned from CLOs for which ZAIS Group and certain of its wholly owned subsidiaries act as collateral manager. The subordinated management fee is an additional payment for the same collateral management service, but has a lower priority in the CLOs’ cash flows. The subordinated management fee is contingent upon the economic performance of the respective CLO assets. If the CLOs experience a certain level of asset defaults, these fees may not be paid. There is no recovery by the CLOs of previously paid subordinated fees. ZAIS Group recognizes the subordinated management fee income when collection is reasonably assured and all related contingencies have been removed.

ZAIS Group manages certain funds and accounts from which it may earn incentive income based on hedge fund-style and private equity-style fee arrangements. Funds and accounts with hedge fund-style fee arrangements are those that pay ZAIS Group, on an annual basis, an incentive fee/allocation based on a percentage of net realized and unrealized profits attributable to each investor, subject to a hurdle (if any) set forth in each respective entity’s operative agreement. Additionally, all funds and accounts with hedge fund-style fee arrangements are subject to a perpetual loss carry forward, or perpetual “high-water mark,” meaning that the funds and accounts will not pay incentive fees/allocations with respect to positive investment performance generated for an investor in any year following negative investment performance until that loss is recouped, at which point an investor’s capital balance surpasses the high-water mark. The funds and accounts pay incentive fees/allocations on any net profits in excess of the high-water mark. Funds and accounts with private equity-style fee arrangements are those that pay an incentive fee/allocation based on a priority of payments under which investor capital must be returned and a preferred return, as specified in each fund’s operative agreement, must be paid to the investor prior to any payments of incentive-based income to ZAIS Group. For CLOs, incentive income is earned based on a percentage of cumulative profits, subject to the return of contributed capital (and subordinate management fees, if any), and a preferred inception to date return as specified in the respective CLOs’ collateral management agreements. ZAIS Group does not earn incentive income from ZFC REIT.

The following tables represent the gross amounts of management fee income and incentive income earned prior to eliminations due to consolidation of the Consolidated Funds and the net amount reported in the Company’s consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2016 and June 30, 2015. June 30, 2015 amounts have been adjusted to conform to current period presentation:

		Three Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,373	$	—	$	2,373
CLO’s	0.15% - 0.50%		425		—		425
ZFC REIT	1.50%		773		—		773
Total		$	3,571	$	—	$	3,571
Incentive Income (1)
Funds and accounts	10% - 20%	$	143	$	—	$	143
CLO’s	20%		—		—		—
Total		$	143	$	—	$	143

		Three Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,942	$	—	$	2,942
CLO’s	0.15% - 0.50%		285		—		285
ZFC REIT	1.50%		854		—		854
Total		$	4,081	$	—	$	4,081
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,213	$	—	$	1,213
CLO’s	20%		—		—		—
Total		$	1,213	$	—	$	1,213

		Six Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	4,769	$	—	$	4,769
CLO’s	0.15% - 0.50%		830		—		830
ZFC REIT	1.50%		1,541		—		1,541
Total		$	7,140	$	—	$	7,140
Incentive Income (1)
Funds and accounts	10% - 20%	$	295	$	—	$	295
CLO’s	20%		—		—		—
Total		$	295	$	—	$	295

		Six Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	5,977	$	—	$	5,977
CLO’s	0.15% - 0.50%		429		—		429
ZFC REIT	1.50%		1,428		—		1,428
Total		$	7,834	$	—	$	7,834
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,248	$	—	$	1,248
CLO’s	10% - 20%		873		—		873
Total		$	2,121	$	—	$	2,121

(1) Incentive income earned for certain of the ZAIS Managed Entities is subject to a hurdle rate of return as specified in each respective ZAIS Managed Entities’ operative agreement.

The management fee income amounts above are net of management fee credits of $(50,000) and $(39,000) for the three months ended June 30, 2016 and June 30, 2015, respectively. The management fee income amounts above are net of management fee credits of $(104,000) and $(104,000) for the six months ended June 30, 2016 and June 30, 2015, respectively. The incentive income amounts above are net of incentive income credits of $0 and $(59,000) for the three months ended June 30, 2016 and June 30, 2015, respectively. The incentive income amounts above are net of incentive income credits of $0 and $(59,000) for the six months ended June 30, 2016 and June 30, 2015, respectively.

At June 30, 2016, approximately $1,646,000 and $9,000 were accrued for management fee income and incentive income, respectively but not received, and included in income and fees receivable in the consolidated statements of financial condition. At December 31, 2015, approximately $1,670,000 and $859,000 were accrued for management fee income and incentive income, respectively but not received, and included in income and fees receivable in the consolidated statements of financial condition. 

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Debt Obligations

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

7. Debt Obligations

Notes Payable

On March 17, 2015, in conjunction with the closing of the Business Combination, ZAIS issued two promissory notes with an aggregate principal balance of $1,250,000 to EarlyBirdCapital, Inc. and Sidoti & Company, LLC. The notes accrue interest at an annual rate equal to the annual applicable federal rate as published by the Internal Revenue Service (“AFR”) until the principal amount of, and all accrued interest on, the notes have been paid in full. The notes mature on March 17, 2017. The notes were issued in lieu of paying certain underwriting costs at the closing of the Business Combination and, accordingly, treated as a direct cost attributable to the Business Combination and capitalized to equity. The Company accrued interest on the notes for the three and six months ended June 30, 2016 and June 30, 2015, which is included in other income (expense) in the consolidated statements of comprehensive income (loss).

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Compensation

6 Months Ended

Jun. 30, 2016

Share-based Compensation [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

8. Compensation

Employees are eligible to receive discretionary incentive cash compensation (the “Bonus Award”) on an annual basis. The amount of the Bonus Award is based on, among other factors, both individual performance and the financial results of ZAIS Group. For certain employees, as documented in an underlying agreement (the “Bonus Agreement”), the Bonus Award may be further subject to a retention-based payout schedule that generally provides for 30% of the Bonus Award to vest and be paid incrementally over a three-year period. The Company expenses all current cash incentive compensation award payments ratably in the first year. All future payments are amortized equally over the required service period over the remaining term of the Bonus Award as defined in the Bonus Award Agreements. In the event an award is forfeited pursuant to the terms of the Bonus Agreement, the corresponding accruals will be reversed.

On March 29, 2016, the Compensation Committee of the Board of Directors of ZAIS adopted a retention payment plan for certain employees of ZAIS Group (the "Retention Payment Plan"). The Retention Payment Plan applies to approximately 60 employees of ZAIS Group who have an annual base salary of less than $300,000. The purpose of the Retention Payment Plan is to enable ZAIS Group to retain the services of its employees in order to ensure that ZAIS Group is not disrupted or adversely affected by the possible loss of personnel or their commitment to ZAIS Group. Under the Retention Payment Plan, the participating employees are entitled to receive cash retention payments on each of April 15, 2016, August 15, 2016 and November 15, 2016, if the employee remains employed by ZAIS Group on such dates. The aggregate amount of retention payments that may be paid to all participants under the Retention Payment Plan is approximately $4.5 million. All payments under the Retention Payment Plan will be amortized equally over the required service period ending on each of the three payment dates discussed above. In the event an award is forfeited pursuant to the terms of a respective Retention Payment Plan agreement, the corresponding accruals will be reversed. In addition, on March 1, 2016, the Compensation Committee of the Board of Directors of ZAIS approved a retention payment of $900,000 to Howard Steinberg, the Company's General Counsel, which was paid on March 15, 2016 and is included in compensation and benefits in the consolidated statements of comprehensive income (loss) for the six months ended June 30, 2016.

ZAIS Group has entered into agreements with certain of its employees whereby certain employees and former employees have been granted rights to participate in a portion of the incentive income received from certain ZAIS Managed Entities (referred to as “Points”).

In 2013, ZAIS Group established the Income Unit Plan. Under the Income Unit Plan, certain employees were entitled to receive a fixed percentage of ZAIS Group’s distributable income, as defined in the Income Unit Plan agreement. Pursuant to the terms of the Income Unit Plan, a payout of 85% of the estimated award was made in December of the applicable performance year and the remaining balance was payable within 30 days of the issuance of ZAIS Group’s audit report for the prior year. An employee must have been actively employed by ZAIS Group on each scheduled payment date to have received their relevant payment. The Income Unit Plan was terminated effective December 31, 2014.

On March 8, 2016, the Company commenced a reduction in force and other restructuring which has resulted in a decrease of 23 employees of ZAIS Group. The Company has incurred total severance charges in the amount of approximately $762,000 as of June 30, 2016. The Company immediately recognized all severance expense for employees who were not required to provide services or those employees who were not being retained beyond the 60 day notification period. Conversely, for all employees who were required to provide services or those who were retained beyond the 60 day notification period, the related severance expense was amortized equally over the required service period.

  

The following table presents a detailed breakout of compensation expense recorded for the three and six months ended June 30, 2016 and June 30, 2015:

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015		Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Salaries	$	2,593,000	$	3,486,000	$	5,873,000	$	7,015,000
Bonus		3,502,000		666,000		7,400,000		2,229,000
Points		—		32,000		—		32,000
Commissions		3,000		30,000		3,000		45,000
Income Unit Plan		—		—		—		198,000
Equity-Based Compensation		1,339,000		1,616,000		1,682,000		1,878,000
Severance		119,000		974,000		762,000		974,000
Payroll taxes and benefits		443,000		557,000		1,286,000		1,560,000
Total compensation and benefits	$	7,999,000	$	7,361,000	$	17,006,000	$	13,931,000

Equity-Based Compensation

In conjunction with the closing of the Business Combination on March 17, 2015, ZGP authorized 1,600,000 Class B-0 Units eligible to be granted to certain employees of ZAIS Group. The Class B-0 Units are subject to a two year cliff-vesting provision, whereby all Class B-0 Units granted to an employee will be forfeited if the employee resigns or is terminated prior to the two year anniversary of the closing of the Business Combination. Subsequent to the two year anniversary of the Business Combination, an employee will only forfeit vested Class B-0 Units if the employee is terminated for cause. The Class B-0 Units are not entitled to any distributions from ZGP (and thus will not participate in, or be allocated any, income or loss) or other material rights until such Class B-0 Units vest. Upon vesting the Class B-0 Units will have the same rights as Class A Units of ZGP and are exchangeable on a one for one basis for Class A common shares subject to the restrictions set forth in the Exchange Agreement included in the Closing 8-K. In accordance with ASC 718, Compensation - Stock Compensation, the Company is measuring the compensation expense associated with these awards based on grant date fair value adjusted for estimated forfeitures. This compensation expense will be amortized equally over the two-year vesting period and will be cumulatively adjusted for changes in estimated forfeitures at each reporting date.

 

The following table presents the unvested Class B-0 Units’ activity during the six months ended June 30, 2016:

	Number of B-0 Units		Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		1,337,486	$	9.67
Granted		100,000		6.34
Forfeited		(305,273)		9.70
Vested		—		—
Balance at June 30, 2016		1,132,213	$	9.36

The total compensation expense expected to be recognized in all future periods associated with the Class B-0 Units is $3,704,000 at June 30, 2016, which is expected to be recognized over the remaining weighted average period of 0.71 years. The Company recorded compensation expense of $1,296,000 and $1,567,000 related to the Class B-0 Units for the three months ended June 30, 2016 and June 30, 2015, respectively. The Company recorded compensation expense of $1,566,000 and $1,829,000 related to the Class B-0 Units for the six months ended June 30, 2016 and June 30, 2015, respectively. During the three months ended March 31, 2016, the Company increased its forfeiture estimate from 8% to 29.6%. This increase includes approximately a 17.2% increase relating to the reduction in force announced in the Company’s Current Report on Form 8-K filed on March 8, 2016 and approximately a 4.4% increase relating to the change in management’s estimated forfeitures based on actual forfeitures since the grant date. The cumulative impact of the increase in estimated forfeitures of $(983,000) was recognized as a reduction in compensation and benefits for the six months ended June 30, 2016. The expense relating to the Class B-0 Units is included in compensation and benefits on the consolidated statements of comprehensive income (loss).

 

Pursuant to ZAIS’s 2015 Stock Incentive Plan, non-employee directors of ZAIS receive restricted stock units (“RSUs”) as a component of compensation for their service as directors of ZAIS. The awards are unvested at the time they are granted and, as such, are not entitled to any dividends or distributions from ZAIS or other material rights until such RSUs vest. The RSUs vest in full on the one-year anniversary of the grant date. Upon vesting ZAIS will issue the recipient shares of Class A Common Stock equal to the number of vested RSUs. In accordance with ASC 718, Compensation - Stock Compensation, the Company is measuring the expense associated with these awards based on the fair value on the grant date adjusted for estimated forfeitures. This expense is being amortized equally over the one-year vesting period and adjusted on a cumulative basis for changes in estimated forfeitures at each reporting date.

The following table presents the unvested RSU activity during the six months ended June 30, 2016:

	Number of RSUs		Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		30,000	$	9.85
Granted		30,942		3.22
Forfeited		—		—
Vested		(30,000)		9.85
Balance at June 30, 2016		30,942	$	3.22

The total expense expected to be recognized in all future periods associated with the RSUs, considering estimated forfeitures of 0%, is $81,000 at June 30, 2016, which is expected to be recognized over the remaining weighted average period of 0.81 years. The Company recorded expense of $43,000 and $49,000 related to the RSUs for the three months ended June 30, 2016 and June 30, 2015, respectively. The Company recorded expense of $116,000 and $49,000 related to the RSUs for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense relating to these RSUs is included in compensation and benefits on the consolidated statements of comprehensive income (loss).

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

9. Income Taxes

Prior to the closing of the Business Combination on March 17, 2015, ZGP and its subsidiaries were pass-through entities for U.S. income tax purposes and their earnings flowed through to the owners without being subject to entity level income taxes. Accordingly, no income tax (benefit) expense has been recorded for the period prior to the closing of the Business Combination other than that related to ZGP’s foreign subsidiaries, which are branches for U.S. income tax purposes but paid income taxes in their respective foreign jurisdictions.

Following the reorganization, while ZGP and its subsidiaries continue to operate as pass-through entities for U.S. income tax purposes not subject to entity level taxes, ZAIS is taxable as a corporation for U.S. tax purposes. Accordingly, the Company’s consolidated financial statements include U.S. federal, state and local income taxes on the ZAIS’ allocable share of the consolidated results of operations, as well as taxes payable to jurisdictions outside the U.S related to the foreign subsidiaries.

The Company recorded income tax expense of $4,000 and $9,000 for the three and six months ended June 30, 2016, respectively, related solely to foreign taxes. The Company recorded income tax (benefit) of $(1,682,000) and $(2,584,000) for the three and six months ended June 30, 2015, respectively, related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations, as well as foreign taxes payable to jurisdictions outside the U.S. related to the Company’s foreign subsidiaries.

  

The following is a reconciliation of the U.S. statutory federal income tax to the Company’s effective tax. As a result of the variations each quarter in the relationship between pre-tax income and income tax expense, the Company utilizes the actual effective tax rate for each interim period being presented to calculate the tax expense.

 

	Three Months Ended June,				Six Months Ended June,
	2016		2015		2016		2015
Income tax (benefit) expense at the U.S. federal statutory income tax rate	$	(1,676,000)		(2,401,000)		(3,850,000)		(4,584,000)
State and local income tax, net of federal benefit		(242,000)		(291,000)		(529,000)		(373,000)
Foreign tax		4,000		353,000		9,000		20,000
Effect of permanent differences		56,000		—		58,000		—
Income attributable to non-controlling interests in Consolidated Funds not subject to tax		(358,000)		—		(607,000)		—
Income attributable to non-controlling interests in ZGP not subject to tax		649,000		657,000		1,430,000		2,353,000
Valuation allowance		1,571,000		—		3,498,000		—
Total		4,000		(1,682,000)		9,000		(2,584,000)

The Company’s effective tax for the periods presented above includes a rate benefit attributable to the fact that the Company’s subsidiaries operate as limited liability companies and limited partnerships which are treated as pass-through entities for U.S. federal and state income tax purposes. Accordingly, the Company’s consolidated financial statements include U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations. The tax liability or benefit related to the partnership income or loss not allocable to the Company rests with the equity holders owning such non-controlling interests in ZAIS subsidiaries. For the three and six months ended June 30, 2016, the net effective tax represents the taxes accrued related to the Company’s operations in jurisdictions outside the U.S. as a full valuation allowance has been established on the tax benefit related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations. For the three and six months ended June 30, 2015, the net effective tax represents a tax benefit related to the Company’s operations in jurisdictions outside the U.S. as well as a tax benefit related to U.S. federal, state and local income taxes on the Company’s allocable share of the consolidated results of operations.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and are reported in the accompanying consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years. 

As of June 30, 2016, the Company had total deferred tax assets of $7,800,000 related to net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations. As of December 31, 2015, the Company had total deferred tax assets of $4,301,000 related to net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations. Additionally at June 30, 2016 and December 31, 2015, the Company had deferred tax assets of $767,000, respectively, related to ZAIS’s net operating losses and development stage start-up expenses incurred during the period from its inception and prior to the closing of the Business Combination with ZGP. The Company has established a full valuation allowance on the deferred tax asset as of June 30, 2016 and December 31, 2015.

As of June 30, 2016, the Company has estimated federal and state income tax net operating loss carryforwards of $16,729,000 which will expire as follows:

 

2032	$	1,000
2033		83,000
2034		122,000
2035		7,388,000
2036		9,135,000
Total	$	16,729,000

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2016, the Company has determined that the most recent management business forecasts do not support the realization of net deferred tax assets recorded for the Company. The Company has recorded a book loss for the three and six months ended June 30, 2016 and it is anticipated that expenses will continue to exceed revenues in 2016. Although management intends to pursue various initiatives with potential to alter the operating loss trend, there is no specific plan that has been implemented at this point in time that will alter the negative earnings trend.

Accordingly, management continues to believe that it is not more likely than not that its deferred tax asset will be realized and the Company has continued to maintain the full valuation allowance against the deferred tax asset of as of June 30, 2016. The Company has recorded additional charges of $1,571,000 and $3,498,000 to our consolidated statements of comprehensive income (loss) relating to the net operating losses and other temporary differences related to the Company’s allocable share of the consolidated results of operations for the three and six months ended June 30, 2016. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The Company does not believe it has any significant uncertain tax positions. Accordingly, the Company did not record any adjustments or recognize interest expense for uncertain tax positions for the three and six months ended June 30, 2016 and June 30, 2015, respectively. In the future, if uncertain tax positions arise, interest and penalties will be accrued and included in the income tax (benefit) expense on the consolidated statements of comprehensive income (loss).

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Related Party Transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

10. Related Party Transactions

ZAIS Group offers a range of alternative and traditional investment strategies through the ZAIS Managed Entities. ZAIS Group earns substantially all of its management fee income and incentive income from the ZAIS Managed Entities, which are considered related parties as the Company manages the operations of, and makes investment decisions for, these entities. The Company considers ZAIS Group’s principals, executives, employees and all ZAIS Managed Entities to be affiliates and related parties.

ZAIS Group invests in its subsidiaries and some of the ZAIS Managed Entities. Investments in subsidiaries and certain ZAIS Managed Entities that are consolidated are eliminated. Investments in certain ZAIS Managed Entities not consolidated are further described in Note 3.

ZAIS Group did not charge management fees or earn incentive income on investments made in the ZAIS Managed Entities (excluding CLOs and ZFC REIT) by ZAIS Group’s principals, executives, employees and other related parties. The total amount of investors’ capital balances that are not being charged fees were approximately $18,854,000 and $30,949,000 at June 30, 2016 and June 30, 2015, respectively.

Additionally, certain ZAIS Managed Entities, with existing fee arrangements, have investments representing 100% of the equity tranche of ZAIS CLO 1, Limited. (“ZAIS CLO 1”) and ZAIS CLO 2, Limited. (“ZAIS CLO 2”). Therefore, ZAIS Group did not charge management fees or earn incentive income on ZAIS CLO 1 and ZAIS CLO 2. The total amounts of AUM that are not being charged fees were approximately $563,685,000 and $558,288,000 at June 30, 2016 and June 30, 2015, respectively.

From time to time, ZAIS Group may pay related party research and data services expenses directly to vendors, and subsequently invoice these costs to the respective ZAIS Managed Entities based upon certain criteria. At June 30, 2016 and December 31, 2015, approximately $1,266,000 and $650,000, respectively, was due to ZAIS Group from the ZAIS Managed Entities as a result of this arrangement. At June 30, 2016 and December 31, 2015, approximately $54,000 and $32,000, respectively, was due to ZAIS Group from the ZAIS Managed Entities and other related parties which were not as a result of this arrangement. These amounts are included in due from related parties in the consolidated statements of financial condition.

ZGP has entered into a two-year Consulting Agreement (the “Consulting Agreement”) with Mr. Ramsey through RQSI, Ltd., an entity controlled by Mr. Ramsey, under the terms of which, among other things, Mr. Ramsey will provide consulting services to ZGP, ZAIS Group’s senior management team and ZAIS, as requested by ZAIS, from time to time during the 24-month period beginning on the closing of the Business Combination. Mr. Ramsey may not compete against ZGP during the term of the Consulting Agreement, and for two years following its termination. In consideration for his undertakings under the Consulting Agreement, ZGP will pay Mr. Ramsey a consulting fee of $500,000 per annum payable in monthly installments. ZGP may terminate the Consulting Agreement for cause, as defined in the Consulting Agreement. The Company has recorded approximately $125,000 in expenses relating to the Consulting Agreement for each of the three months ended June 30, 2016 and June 30, 2015, respectively. The Company has recorded approximately $250,000 and $145,000 in expenses relating to the Consulting Agreement for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense is included in general, administrative and other expenses in the consolidated statements of total comprehensive income.

ZAIS Group has agreed to use certain statistical data generated by RQSI, Ltd. models. ZAIS Group will utilize this information for trading futures in one of the ZAIS Managed Entities.

ZAIS Group has entered into a month to month lease agreement with an affiliate of RQSI, Ltd to jointly occupy our UK office. The agreement is terminable upon 30 days’ notice. While there is currently no charge associated with the lease, the total market value of the agreement is approximately $13,000 per month.

ZAIS Group is a party to a consulting agreement with Tracy Rohan, Mr. Zugel’s sister-in-law, pursuant to which Ms. Rohan provides services to ZAIS Group relating to event planning, promotion, web and print branding and related services. Pursuant to the consulting agreement, Ms. Rohan earned approximately $27,000 and $29,000 for her services for the three months ended June 30, 2016 and June 30, 2015, respectively. Ms. Rohan earned approximately $54,000 and $58,000 for her services for the six months ended June 30, 2016 and June 30, 2015, respectively. The expense is included in general, administrative and other expenses in the consolidated statements of total comprehensive income.

At June 30, 2016 and December 31, 2015, approximately $62,000 and $66,000 respectively, relating to employee loans were included in due from related parties in the consolidated statements of financial condition.

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Fixed Assets

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

11. Fixed Assets

Fixed assets consist of the following:

	June 30, 2016		December 31, 2015
	( Dollars in thousands )
Office equipment	$	3,098	$	3,088
Leasehold improvements		838		853
Furniture and fixtures		572		574
Software		409		409
		4,917		4,924
Less accumulated depreciation		(4,495)		(4,380)
Total	$	422	$	544

For the three months ended June 30, 2016 and June 30, 2015, depreciation expense amounted to approximately $64,000 and $146,000, respectively. For the six months ended June 30, 2016 and June 30, 2015, depreciation expense amounted to approximately $127,000 and $208,000, respectively. The change in accumulated depreciation also includes the change in foreign currency spot rates for each respective period presented. The change in leasehold improvements also includes a $(15,000) reduction due to the translation of the functional currencies of our foreign subsidiaries.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

12. Commitments and Contingencies

Capital Commitments

As of June 30, 2016, a portion of the proceeds of the Business Combination had been committed to expand existing product lines. Up to $51 million of equity capital has been committed to the Consolidated Fund, ZAIS Zephyr A-6, L.P., which would allow this Consolidated Fund to invest in ZAIS Group managed CLO vehicles and thereby satisfy the risk retention requirements for CLO managers under the Securities Exchange Act of 1934. As of June 30, 2016, approximately $20.5 million in capital has been contributed to the subsidiary.

 

Lease Obligations

ZAIS Group is obligated under operating lease agreements for office space in the New Jersey and London offices expiring through October 2017. The Company recognizes expense related to its operating leases on a straight-line basis over the lease term. Aggregate future minimum annual rental payments for the periods subsequent to June 30, 2016 are approximately as follows:

Period	Amount
	( Dollars in thousands )
Six Months Ending December 31, 2016	$	457
Ten Months Ending October 31, 2017		721
	$	1,178

Rent expense is recognized on a straight-line basis and is included in general, administrative and other in the consolidated statements of comprehensive income (loss). For the three months ended June 30, 2016 and June 30, 2015, rent expense amounted to approximately $263,000 and $282,000, respectively. For the six months ended June 30, 2016 and June 30, 2015, rent expense amounted to approximately $507,000 and $818,000, respectively.

 

Litigation

From time to time, ZAIS Group may become involved in various claims, formal regulatory inquiries and legal actions arising in the ordinary course of business. The Company discloses information regarding such inquiries if disclosure is required pursuant to accounting and financial reporting standards. While we are currently involved in a formal regulatory inquiry, in management’s opinion the matter is not appropriate for accrual or disclosure in the financial statements at June 30, 2016.

Other Contingencies

In the normal course of business, ZAIS Group enters into contracts that provide a variety of indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to ZAIS Group under these arrangements could involve future claims that may be made against ZAIS Group. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.

Gain Contingencies

On April 7, 2016 the Company received notification from one of its insurance providers that the Company’s claim for reimbursement of certain legal costs relating to a formal regulatory inquiry had been approved. The total approved claim reimbursement for all legal costs incurred in excess of the $500,000 deductible was approximately $703,000. Pursuant to the guidance under ASC 450, Contingencies – Gain Contingencies , approximately $545,000 of the insurance reimbursements receivable has been recorded to other income (expense) in the consolidated statements of total comprehensive income (loss) for the portion that related to the costs incurred for the year ended December 31, 2015 in excess of the Company’s insurance deductible and a corresponding amount has been recorded to other assets in the consolidated statements of financial position. The Company also recorded approximately $158,000 of the insurance reimbursements receivable to other assets in the consolidated statements of financial position and a corresponding amount to general, administrative and other expense in the consolidated statements of comprehensive income (loss) for the portion that related to legal bills received for the six months ended June 30, 2016. During the three months ended June 30, 2016, the Company received insurance reimbursements of $697,000. At June 30, 2016, approximately $6,000 of insurance reimbursements receivable noted above is included in other assets in the consolidated statements of financial position.

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Segment Reporting

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

13. Segment Reporting

The ZAIS Managed Entities segment is currently the Company’s only reportable segment, and represents the Company’s core business, as substantially all of the Company’s operations are conducted through this segment. The ZAIS Managed Entities segment provides investment advisory and asset management services to the ZAIS Managed Entities.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

14. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined time to time by the Company’s board of directors. At June 30, 2016 and December 31, 2015, there were no shares of preferred stock issued or outstanding.

Class A Common Stock

The Company is authorized to issue 180,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. Holders of record of Class A Common Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. At June 30, 2016 and December 31, 2015, there were 13,900,917 and 13,870,917 shares of Class A Common Stock issued and outstanding, respectively.

Class B Common Stock

The Company is authorized to issue 20,000,000 shares of Class B Common Stock with a par value of $0.000001 per share. The Class B Common Stock has no economic rights and therefore is not considered participating securities for purposes of allocation of net income (loss). Holders of record of Class B Common Stock are entitled to ten votes for each share held on all matters to be voted on by stockholders. At June 30, 2016 and December 31, 2015, there were 20,000,000 shares of Class B Common Stock issued and outstanding, held by the ZGH Class B Voting Trust.

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Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

15. Earnings Per Share

Shares of Class B common stock have no impact on the calculation of consolidated net income (loss) per share of Class A common stock as holders of Class B common stock do not participate in net income or dividends, and thus, are not participating securities.

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(Dollars in thousands, except shares and per share data)
Numerator:
Consolidated Net Income (Loss), net of tax, attributable to ZAIS Group Holdings, Inc. Class A common stockholders (Basic)	$	(4,076)	$	(2,947)	$	(8,910)	$	(3,769)
Effect of dilutive securities:
Consolidated Net Income (Loss), net of tax, attributable to non-controlling interests in ZGP		(1,911)		(2,231)		(4,210)		(6,745)
Less: Consolidated Net (Income) Loss, net of tax, attributable to ZAIS REIT Management Class B interests (1)		(142)		(283)		(284)		(283)
Income tax (benefit) expense (2)		—		1,027		—		2,871
Consolidated Net Income (Loss), net of tax, attributable to stockholders, after effect of dilutive securities	$	(6,129)	$	(4,434)	$	(13,404)	$	(7,926)
Denominator:
Weighted average number of shares of Class A Common Stock		13,892,016		13,870,917		13,881,466		8,046,665
Effect of dilutive securities:
Weighted average number of Class A Units of ZGP		7,000,000		7,000,000		7,000,000		7,000,000
Dilutive number of Class B-0 Units and RSUs (3)		—		—		—		—
Diluted weighted average shares outstanding (4)		20,892,016		20,870,917		20,881,466		15,046,665
Consolidated Net Income (Loss), net of tax, per Class A common share – Basic	$	(0.29)	$	(0.21)	$	(0.64)	$	(0.47)
Consolidated Net Income (Loss), net of tax, per Class A common share – Diluted	$	(0.29)	$	(0.21)	$	(0.64)	$	(0.53)

(1)	–	Amount represents portion of the management fee income received from ZFC REIT that is payable to holders of Class B interests in ZAIS Group’s consolidated subsidiary ZAIS REIT Management.
(2)	–	Income tax (benefit) / expense for the three and six months ended June 30, 2016 is calculated using an assumed tax rate of  39.29% and is net of a 100% valuation allowance. Income tax (benefit) / expense for the three and six months ended June 30, 2015 is calculated using an assumed tax rate of 40.85%. See Note 9 for details surrounding income taxes.
(3)	–	The treasury stock method is used to calculate incremental Class A common shares on potentially dilutive Class A common shares resulting from unvested Class B-0 Units granted in connection with and subsequent to the Business Combination and unvested RSUs granted to non-employee directors. These units are anti-dilutive and, consequently, have been excluded from the computation of diluted weighted average shares outstanding.
(4)	–	Number of diluted shares outstanding takes into account non-controlling interests of ZGP that may be exchanged for Class A Common Stock under certain circumstances.

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Supplemental Financial Information

6 Months Ended

Jun. 30, 2016

Statement of Financial Position [Abstract]

Consolidated Funds on the Company’s Financial Position [Text Block]

16. Supplemental Financial Information

The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company’s financial position at June 30, 2016 and December 31, 2015, and results of operations for the three and six months ended June 30, 2016 and June 30, 2015. Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated.  Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures below reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02:

	June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	32,064	$	—	$	—	$	32,064
Income and fees receivable		1,655		—		—		1,655
Investments in affiliates, at fair value		27,698		—		(22,491)		5,207
Due from related parties		1,382		—		—		1,382
Prepaid expenses		1,946		—		—		1,946
Other assets		301		—		—		301
Fixed assets, net		422		—		—		422
Assets of Consolidated Funds
Investments, at fair value		—		44,201		—		44,201
Total Assets	$	65,468	$	44,201	$	(22,491)	$	87,178
Liabilities and Equity
Liabilities
Notes payable	$	1,259	$	—	$	—	$	1,259
Compensation payable		4,303		—		—		4,303
Due to related parties		142		—		—		142
Fees payable		2		—		—		2
Other liabilities		798		—		—		798
Liabilities of Consolidated Funds
Other liabilities		—		101		—		101
Total Liabilities		6,504		101		—		6,605
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—		—		—		—
Class A Common Stock		1		—		—		1
Class B Common Stock		—		—		—		—
Additional paid-in-capital		61,965		—		—		61,965
Retained earnings (Accumulated deficit)		(22,715)		—		—		(22,715)
Accumulated other comprehensive income (loss)		24		—		—		24
Total stockholders’ equity, ZAIS Group Holdings, Inc.		39,275		—		—		39,275
Non-controlling interests in ZAIS Group Parent, LLC		19,689		—		—		19,689
Non-controlling interests in Consolidated Funds		—		44,100		(22,491)		21,609
Total Equity		58,964		44,100		(22,491)		80,573
Total Liabilities and Equity	$	65,468	$	44,201	$	(22,491)	$	87,178

	December 31, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	44,351	$	—	$	—	$	44,351
Income and fees receivable		2,529		—		—		2,529
Investments, at fair value		8,169		—		—		8,169
Investments in affiliates, at fair value		20,767		—		(15,525)		5,242
Due from related parties		748		—		—		748
Prepaid expenses		776		—		—		776
Other assets		310		—		—		310
Fixed assets, net		544		—		—		544
Assets of Consolidated Funds
Cash and cash equivalents		—		33		—		33
Investments, at fair value		—		30,509		—		30,509
Total Assets	$	78,194	$	30,542	$	(15,525)	$	93,211
Liabilities and Equity
Liabilities
Notes payable	$	1,255	$	—	$	—	$	1,255
Compensation payable		3,575		—		—		3,575
Due to related parties		175		—		—		175
Fees payable		756		—		—		756
Other liabilities		1,546		—		—		1,546
Liabilities of Consolidated Funds
Other liabilities		—		101		—		101
Total Liabilities		7,307		101		—		7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—		—		—		—
Class A Common Stock		1		—		—		1
Class B Common Stock		—		—		—		—
Additional paid-in-capital		60,817		—		—		60,817
Retained earnings (Accumulated deficit)		(13,805)		—		—		(13,805)
Accumulated other comprehensive income (loss)		158		—		—		158
Total stockholders’ equity, ZAIS Group Holdings, Inc.		47,171		—		—		47,171
Non-controlling interests in ZAIS Group Parent, LLC		23,716		—		—		23,716
Non-controlling interests in Consolidated Funds		—		30,441		(15,525)		14,916
Total Equity		70,887		30,441		(15,525)		85,803
Total Liabilities and Equity	$	78,194	$	30,542	$	(15,525)	$	93,211

	Three months Ended June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	3,571	$	—	$	—	$	3,571
Incentive income		143		—		—		143
Other revenues		79		—		—		79
Total Revenues		3,793		—		—		3,793
Expenses
Compensation and benefits		7,999		—		—		7,999
General, administrative and other		2,950		—		—		2,950
Depreciation		64		—		—		64
Expenses of Consolidated Funds		—		29		—		29
Total Expenses		11,013		29		—		11,042
Other Income (loss)
Net gain (loss) on investments		1,150		—		(1,095)		55
Other income (expense)		87		—		—		87
Net gains (losses) of Consolidated Funds’ investments		—		2,176		—		2,176
Total Other Income (Loss)		1,237		2,176		(1,095)		2,318
Income (loss) before income taxes		(5,983)		2,147				(4,931)
Income tax (benefit) expense		4		—		—		4
Consolidated net income (loss), net of tax		(5,987)		2,147		(1,095)		(4,935)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(147)		—		—		(147)
Total Comprehensive Income (Loss)	$	(6,134)	$	2,147	$	(1,095)	$	(5,082)

	Three months Ended June 30, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	4,081	$	—	$	—	$	4,081
Incentive income		1,213		—		—		1,213
Other revenues		106		—		—		106
Total Revenues		5,400		—		—		5,400
Expenses
Compensation and benefits		7,361		—		—		7,361
General, administrative and other		4,764		—		—		4,764
Depreciation		146		—		—		146
Expenses of Consolidated Funds		—		—		—		—
Total Expenses		12,271		—		—		12,271
Other Income (loss)
Net gain (loss) on investments		2		—		—		2
Other income (expense)		9		—		—		9
Net gains (losses) of Consolidated Funds’ investments		—		—		—		—
Total Other Income (Loss)		11		—		—		11
Income (loss) before income taxes		(6,860)		—		—		(6,860)
Income tax (benefit) expense		(1,682)		—		—		(1,682)
Consolidated net income (loss), net of tax		(5,178)		—		—		(5,178)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		291		—		—		291
Total Comprehensive Income (Loss)	$	(4,887)	$	—	$	—	$	(4,887)

	Six months Ended June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,140	$	—	$	—	$	7,140
Incentive income		295		—		—		295
Other revenues		159		—		—		159
Total Revenues		7,594		—		—		7,594
Expenses
Compensation and benefits		17,006		—		—		17,006
General, administrative and other		6,160		—		—		6,160
Depreciation		127		—		—		127
Expenses of Consolidated Funds		—		48		—		48
Total Expenses		23,293		48		—		23,341
Other Income (loss)
Net gain (loss) on investments		1,896		—		(1,859)		37
Other income (expense)		692		—		—		692
Net gains (losses) of Consolidated Funds’ investments		—		3,693		—		3,693
Total Other Income (Loss)		2,588		3,693		(1,859)		4,422
Income (loss) before income taxes		(13,111)		3,645		(1,859)		(11,325)
Income tax (benefit) expense		9		—		—		9
Consolidated net income (loss), net of tax		(13,120)		3,645		(1,859)		(11,334)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(201)		—		—		(201)
Total Comprehensive Income (Loss)	$	(13,321)	$	3,645	$	(1,859)	$	(11,535)

	Six months Ended June 30, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,834	$	—	$	—	$	7,834
Incentive income		2,121		—		—		2,121
Other revenues		137		—		—		137
Total Revenues		10,092		—		—		10,092
Expenses
Compensation and benefits		13,931		—		—		13,931
General, administrative and other		9,101		—		—		9,101
Depreciation		208		—		—		208
Expenses of Consolidated Funds		—		—		—		—
Total Expenses		23,240		—		—		23,240
Other Income (loss)
Net gain (loss) on investments		45		—		—		45
Other income (expense)		5		—		—		5
Net gains (losses) of Consolidated Funds’ investments		—		—		—		—
Total Other Income (Loss)		50		—		—		50
Income (loss) before income taxes		(13,098)		—		—		(13,098)
Income tax (benefit) expense		(2,584)		—		—		(2,584)
Consolidated net income (loss), net of tax		(10,514)		—		—		(10,514)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		483		—		—		483
Total Comprehensive Income (Loss)	$	(10,031)	$	—	$	—	$	(10,031)

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

17. Subsequent Events

None

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the SEC for interim reporting. In the opinion of management, all adjustments considered necessary for a fair statement of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP as contained in the ASC have been condensed or omitted from the unaudited interim consolidated financial statements according to the SEC rules and regulations. The information and disclosures contained in these unaudited interim consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K.

Segment Reporting

The Company currently is comprised of one reportable segment, the investment management segment, and substantially all of the Company’s operations are conducted through this segment. The investment management segment provides investment advisory and asset management services to the ZAIS Managed Entities.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the estimates used in preparing the consolidated financial statements are reasonable and prudent, actual results may ultimately differ from those estimates

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 428) (“ASU 2016-02”). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. Adoption of ASU 2016-02 is not expected to have a material effect on the Company's consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The objective of the guidance is to simplify several aspects of the accounting for employee share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The update is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2016-09 is not expected to have a material effect on the Company's consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date (“ASU 2015-14”). This ASU amends the effective date of ASU 2014-09 for all entities by one year. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660) (“ASU 2014-09”), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard clarifies the required factors that an entity must consider when recognizing revenue and also requires additional disclosures. With the issuance of ASU 2015-14 the new effective date for the Company is January 1, 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period.  The Company is currently still evaluating the impact of adopting ASU 2015-14.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued.  If conditions or events indicate it is probable that an entity will be unable to meet its obligations as they become due within one year after the financial statements are issued, the update requires additional disclosures.  The update is effective for periods beginning after December 15, 2016 with early adoption permitted.  Adoption of ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements included herein are the financial statements of ZAIS, its subsidiaries and certain funds that are required to be consolidated. All intercompany balances and transactions have been eliminated in consolidation, including ZAIS’s investment in ZGP and ZGP’s investment in ZAIS Group. The Company's fiscal year ends on December 31.

The consolidated financial statements include non-controlling interests in ZGP which are primarily comprised of Class A Units of ZGP held by the ZGP Founder Members.

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Fair Value of Investments (Tables)

6 Months Ended

Jun. 30, 2016

Assets, Fair Value Disclosure [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
	Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,207
Investments, at fair value
CLO – Warehouse		—		—		44,201		44,201
Total investments, at fair value		—		—		44,201		44,201
Total assets, at fair value	$	—	$	—	$	44,201	$	49,408

  The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy levels at December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
	Level 1		Level 2		Level 3		Total
Assets, at fair value
Investments in affiliates, at net asset value	$	—	$	—	$	—	$	5,242
Investments, at fair value
Short term high investment grade mutual funds		8,169		—		—		8,169
CLO – Warehouse		—		—		30,509		30,509
Total investments, at fair value		8,169		—		30,509		38,678
Total assets, at fair value	$	8,169	$	—	$	30,509	$	43,920

Schedule of Changes in Fair Value of Assets and Liabilities [Table Text Block]

The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the six months ended June 30, 2016:

	June 30, 2016
	( Dollars in thousands )
	Beginning Balance January 1, 2016		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance June 30, 2016		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at June 30, 2016
CLO - Warehouse	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692
Total investments, at fair value	$	30,509	$	10,000	$	—	$	3,692	$	—	$	44,201	$	3,692

The following table summarizes the changes in the Company’s Level 3 assets and liabilities for the year ended December 31, 2015:

	December 31, 2015
	( Dollars in thousands )
	Beginning Balance January 1, 2015		Purchases/ Issuances		Sales/ Redemptions/ Settlements		Total Realized and Change in Unrealized Gains (Losses)		Transfers to (from) Level 3		Ending Balance December 31, 2015		Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held at December 31, 2015
CLO - Warehouse	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509
Total investments, at fair value	$	—	$	30,000	$	—	$	509	$	—	$	30,509	$	509

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Variable Interest Entities ("VIEs") (Tables)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Variable Interest Entities [Table Text Block]

The following table presents the assets and liabilities of entities that are VIEs, and consolidated by the Company on a gross basis prior to eliminations due to consolidation at June 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
	Funds		Funds
	(Dollars in thousands)
Assets
Assets of Consolidated Funds
Cash and cash equivalents	$	—	$	33
Investments, at fair value		44,201		30,509
Total Assets	$	44,201	$	30,542
Liabilities
Liabilities of Consolidated Funds
Other liabilities	$	101	$	101
Total Liabilities	$	101	$	101

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Management Fee Income and Incentive Income (Tables)

6 Months Ended

Jun. 30, 2016

Management Fee Income and Incentive Income [Abstract]

Schedule of Components of Management Fee Income and Incentive Income [Table Text Block]

The following tables represent the gross amounts of management fee income and incentive income earned prior to eliminations due to consolidation of the Consolidated Funds and the net amount reported in the Company’s consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2016 and June 30, 2015. June 30, 2015 amounts have been adjusted to conform to current period presentation:

		Three Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,373	$	—	$	2,373
CLO’s	0.15% - 0.50%		425		—		425
ZFC REIT	1.50%		773		—		773
Total		$	3,571	$	—	$	3,571
Incentive Income (1)
Funds and accounts	10% - 20%	$	143	$	—	$	143
CLO’s	20%		—		—		—
Total		$	143	$	—	$	143

		Three Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	2,942	$	—	$	2,942
CLO’s	0.15% - 0.50%		285		—		285
ZFC REIT	1.50%		854		—		854
Total		$	4,081	$	—	$	4,081
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,213	$	—	$	1,213
CLO’s	20%		—		—		—
Total		$	1,213	$	—	$	1,213

		Six Months Ended June 30, 2016
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	4,769	$	—	$	4,769
CLO’s	0.15% - 0.50%		830		—		830
ZFC REIT	1.50%		1,541		—		1,541
Total		$	7,140	$	—	$	7,140
Incentive Income (1)
Funds and accounts	10% - 20%	$	295	$	—	$	295
CLO’s	20%		—		—		—
Total		$	295	$	—	$	295

		Six Months Ended June 30, 2015
		(Dollars in thousands)
	Fee Range	Gross Amount		Elimination		Net Amount
Management Fee Income
Funds and accounts	0.50% - 1.25%	$	5,977	$	—	$	5,977
CLO’s	0.15% - 0.50%		429		—		429
ZFC REIT	1.50%		1,428		—		1,428
Total		$	7,834	$	—	$	7,834
Incentive Income (1)
Funds and accounts	10% - 20%	$	1,248	$	—	$	1,248
CLO’s	10% - 20%		873		—		873
Total		$	2,121	$	—	$	2,121

(1) Incentive income earned for certain of the ZAIS Managed Entities is subject to a hurdle rate of return as specified in each respective ZAIS Managed Entities’ operative agreement.

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Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Share-based Compensation [Abstract]

Schedule Of Compensation Expense And Employee Benefit [Table Text Block]

The following table presents a detailed breakout of compensation expense recorded for the three and six months ended June 30, 2016 and June 30, 2015:

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015		Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Salaries	$	2,593,000	$	3,486,000	$	5,873,000	$	7,015,000
Bonus		3,502,000		666,000		7,400,000		2,229,000
Points		—		32,000		—		32,000
Commissions		3,000		30,000		3,000		45,000
Income Unit Plan		—		—		—		198,000
Equity-Based Compensation		1,339,000		1,616,000		1,682,000		1,878,000
Severance		119,000		974,000		762,000		974,000
Payroll taxes and benefits		443,000		557,000		1,286,000		1,560,000
Total compensation and benefits	$	7,999,000	$	7,361,000	$	17,006,000	$	13,931,000

Schedule of Nonvested Share Activity [Table Text Block]

The following table presents the unvested Class B-0 Units’ activity during the six months ended June 30, 2016:

	Number of B-0 Units		Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		1,337,486	$	9.67
Granted		100,000		6.34
Forfeited		(305,273)		9.70
Vested		—		—
Balance at June 30, 2016		1,132,213	$	9.36

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

The following table presents the unvested RSU activity during the six months ended June 30, 2016:

	Number of RSUs		Weighted Average Grant Date Fair Value per Unit
Balance at December 31, 2015		30,000	$	9.85
Granted		30,942		3.22
Forfeited		—		—
Vested		(30,000)		9.85
Balance at June 30, 2016		30,942	$	3.22

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The following is a reconciliation of the U.S. statutory federal income tax to the Company’s effective tax. As a result of the variations each quarter in the relationship between pre-tax income and income tax expense, the Company utilizes the actual effective tax rate for each interim period being presented to calculate the tax expense.

 

	Three Months Ended June,				Six Months Ended June,
	2016		2015		2016		2015
Income tax (benefit) expense at the U.S. federal statutory income tax rate	$	(1,676,000)		(2,401,000)		(3,850,000)		(4,584,000)
State and local income tax, net of federal benefit		(242,000)		(291,000)		(529,000)		(373,000)
Foreign tax		4,000		353,000		9,000		20,000
Effect of permanent differences		56,000		—		58,000		—
Income attributable to non-controlling interests in Consolidated Funds not subject to tax		(358,000)		—		(607,000)		—
Income attributable to non-controlling interests in ZGP not subject to tax		649,000		657,000		1,430,000		2,353,000
Valuation allowance		1,571,000		—		3,498,000		—
Total		4,000		(1,682,000)		9,000		(2,584,000)

Summary of Operating Loss Carryforwards [Table Text Block]

As of June 30, 2016, the Company has estimated federal and state income tax net operating loss carryforwards of $16,729,000 which will expire as follows:

 

2032	$	1,000
2033		83,000
2034		122,000
2035		7,388,000
2036		9,135,000
Total	$	16,729,000

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Fixed Assets (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Fixed assets consist of the following:

	June 30, 2016		December 31, 2015
	( Dollars in thousands )
Office equipment	$	3,098	$	3,088
Leasehold improvements		838		853
Furniture and fixtures		572		574
Software		409		409
		4,917		4,924
Less accumulated depreciation		(4,495)		(4,380)
Total	$	422	$	544

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Aggregate future minimum annual rental payments for the periods subsequent to June 30, 2016 are approximately as follows:

Period	Amount
	( Dollars in thousands )
Six Months Ending December 31, 2016	$	457
Ten Months Ending October 31, 2017		721
	$	1,178

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(Dollars in thousands, except shares and per share data)
Numerator:
Consolidated Net Income (Loss), net of tax, attributable to ZAIS Group Holdings, Inc. Class A common stockholders (Basic)	$	(4,076)	$	(2,947)	$	(8,910)	$	(3,769)
Effect of dilutive securities:
Consolidated Net Income (Loss), net of tax, attributable to non-controlling interests in ZGP		(1,911)		(2,231)		(4,210)		(6,745)
Less: Consolidated Net (Income) Loss, net of tax, attributable to ZAIS REIT Management Class B interests (1)		(142)		(283)		(284)		(283)
Income tax (benefit) expense (2)		—		1,027		—		2,871
Consolidated Net Income (Loss), net of tax, attributable to stockholders, after effect of dilutive securities	$	(6,129)	$	(4,434)	$	(13,404)	$	(7,926)
Denominator:
Weighted average number of shares of Class A Common Stock		13,892,016		13,870,917		13,881,466		8,046,665
Effect of dilutive securities:
Weighted average number of Class A Units of ZGP		7,000,000		7,000,000		7,000,000		7,000,000
Dilutive number of Class B-0 Units and RSUs (3)		—		—		—		—
Diluted weighted average shares outstanding (4)		20,892,016		20,870,917		20,881,466		15,046,665
Consolidated Net Income (Loss), net of tax, per Class A common share – Basic	$	(0.29)	$	(0.21)	$	(0.64)	$	(0.47)
Consolidated Net Income (Loss), net of tax, per Class A common share – Diluted	$	(0.29)	$	(0.21)	$	(0.64)	$	(0.53)

(1)	–	Amount represents portion of the management fee income received from ZFC REIT that is payable to holders of Class B interests in ZAIS Group’s consolidated subsidiary ZAIS REIT Management.
(2)	–	Income tax (benefit) / expense for the three and six months ended June 30, 2016 is calculated using an assumed tax rate of  39.29% and is net of a 100% valuation allowance. Income tax (benefit) / expense for the three and six months ended June 30, 2015 is calculated using an assumed tax rate of 40.85%. See Note 9 for details surrounding income taxes.
(3)	–	The treasury stock method is used to calculate incremental Class A common shares on potentially dilutive Class A common shares resulting from unvested Class B-0 Units granted in connection with and subsequent to the Business Combination and unvested RSUs granted to non-employee directors. These units are anti-dilutive and, consequently, have been excluded from the computation of diluted weighted average shares outstanding.
(4)	–	Number of diluted shares outstanding takes into account non-controlling interests of ZGP that may be exchanged for Class A Common Stock under certain circumstances.

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Supplemental Financial Information (Tables)

6 Months Ended

Jun. 30, 2016

Statement of Financial Position [Abstract]

Schedule Of Consolidated Funds on the Company’s Financial Position [Table Text Block]

The June 30, 2015 figures below reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02:

	June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	32,064	$	—	$	—	$	32,064
Income and fees receivable		1,655		—		—		1,655
Investments in affiliates, at fair value		27,698		—		(22,491)		5,207
Due from related parties		1,382		—		—		1,382
Prepaid expenses		1,946		—		—		1,946
Other assets		301		—		—		301
Fixed assets, net		422		—		—		422
Assets of Consolidated Funds
Investments, at fair value		—		44,201		—		44,201
Total Assets	$	65,468	$	44,201	$	(22,491)	$	87,178
Liabilities and Equity
Liabilities
Notes payable	$	1,259	$	—	$	—	$	1,259
Compensation payable		4,303		—		—		4,303
Due to related parties		142		—		—		142
Fees payable		2		—		—		2
Other liabilities		798		—		—		798
Liabilities of Consolidated Funds
Other liabilities		—		101		—		101
Total Liabilities		6,504		101		—		6,605
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—		—		—		—
Class A Common Stock		1		—		—		1
Class B Common Stock		—		—		—		—
Additional paid-in-capital		61,965		—		—		61,965
Retained earnings (Accumulated deficit)		(22,715)		—		—		(22,715)
Accumulated other comprehensive income (loss)		24		—		—		24
Total stockholders’ equity, ZAIS Group Holdings, Inc.		39,275		—		—		39,275
Non-controlling interests in ZAIS Group Parent, LLC		19,689		—		—		19,689
Non-controlling interests in Consolidated Funds		—		44,100		(22,491)		21,609
Total Equity		58,964		44,100		(22,491)		80,573
Total Liabilities and Equity	$	65,468	$	44,201	$	(22,491)	$	87,178

	December 31, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in thousands )
Assets
Cash and cash equivalents	$	44,351	$	—	$	—	$	44,351
Income and fees receivable		2,529		—		—		2,529
Investments, at fair value		8,169		—		—		8,169
Investments in affiliates, at fair value		20,767		—		(15,525)		5,242
Due from related parties		748		—		—		748
Prepaid expenses		776		—		—		776
Other assets		310		—		—		310
Fixed assets, net		544		—		—		544
Assets of Consolidated Funds
Cash and cash equivalents		—		33		—		33
Investments, at fair value		—		30,509		—		30,509
Total Assets	$	78,194	$	30,542	$	(15,525)	$	93,211
Liabilities and Equity
Liabilities
Notes payable	$	1,255	$	—	$	—	$	1,255
Compensation payable		3,575		—		—		3,575
Due to related parties		175		—		—		175
Fees payable		756		—		—		756
Other liabilities		1,546		—		—		1,546
Liabilities of Consolidated Funds
Other liabilities		—		101		—		101
Total Liabilities		7,307		101		—		7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock		—		—		—		—
Class A Common Stock		1		—		—		1
Class B Common Stock		—		—		—		—
Additional paid-in-capital		60,817		—		—		60,817
Retained earnings (Accumulated deficit)		(13,805)		—		—		(13,805)
Accumulated other comprehensive income (loss)		158		—		—		158
Total stockholders’ equity, ZAIS Group Holdings, Inc.		47,171		—		—		47,171
Non-controlling interests in ZAIS Group Parent, LLC		23,716		—		—		23,716
Non-controlling interests in Consolidated Funds		—		30,441		(15,525)		14,916
Total Equity		70,887		30,441		(15,525)		85,803
Total Liabilities and Equity	$	78,194	$	30,542	$	(15,525)	$	93,211

	Three months Ended June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	3,571	$	—	$	—	$	3,571
Incentive income		143		—		—		143
Other revenues		79		—		—		79
Total Revenues		3,793		—		—		3,793
Expenses
Compensation and benefits		7,999		—		—		7,999
General, administrative and other		2,950		—		—		2,950
Depreciation		64		—		—		64
Expenses of Consolidated Funds		—		29		—		29
Total Expenses		11,013		29		—		11,042
Other Income (loss)
Net gain (loss) on investments		1,150		—		(1,095)		55
Other income (expense)		87		—		—		87
Net gains (losses) of Consolidated Funds’ investments		—		2,176		—		2,176
Total Other Income (Loss)		1,237		2,176		(1,095)		2,318
Income (loss) before income taxes		(5,983)		2,147				(4,931)
Income tax (benefit) expense		4		—		—		4
Consolidated net income (loss), net of tax		(5,987)		2,147		(1,095)		(4,935)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(147)		—		—		(147)
Total Comprehensive Income (Loss)	$	(6,134)	$	2,147	$	(1,095)	$	(5,082)

	Three months Ended June 30, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	4,081	$	—	$	—	$	4,081
Incentive income		1,213		—		—		1,213
Other revenues		106		—		—		106
Total Revenues		5,400		—		—		5,400
Expenses
Compensation and benefits		7,361		—		—		7,361
General, administrative and other		4,764		—		—		4,764
Depreciation		146		—		—		146
Expenses of Consolidated Funds		—		—		—		—
Total Expenses		12,271		—		—		12,271
Other Income (loss)
Net gain (loss) on investments		2		—		—		2
Other income (expense)		9		—		—		9
Net gains (losses) of Consolidated Funds’ investments		—		—		—		—
Total Other Income (Loss)		11		—		—		11
Income (loss) before income taxes		(6,860)		—		—		(6,860)
Income tax (benefit) expense		(1,682)		—		—		(1,682)
Consolidated net income (loss), net of tax		(5,178)		—		—		(5,178)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		291		—		—		291
Total Comprehensive Income (Loss)	$	(4,887)	$	—	$	—	$	(4,887)

	Six months Ended June 30, 2016
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,140	$	—	$	—	$	7,140
Incentive income		295		—		—		295
Other revenues		159		—		—		159
Total Revenues		7,594		—		—		7,594
Expenses
Compensation and benefits		17,006		—		—		17,006
General, administrative and other		6,160		—		—		6,160
Depreciation		127		—		—		127
Expenses of Consolidated Funds		—		48		—		48
Total Expenses		23,293		48		—		23,341
Other Income (loss)
Net gain (loss) on investments		1,896		—		(1,859)		37
Other income (expense)		692		—		—		692
Net gains (losses) of Consolidated Funds’ investments		—		3,693		—		3,693
Total Other Income (Loss)		2,588		3,693		(1,859)		4,422
Income (loss) before income taxes		(13,111)		3,645		(1,859)		(11,325)
Income tax (benefit) expense		9		—		—		9
Consolidated net income (loss), net of tax		(13,120)		3,645		(1,859)		(11,334)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		(201)		—		—		(201)
Total Comprehensive Income (Loss)	$	(13,321)	$	3,645	$	(1,859)	$	(11,535)

	Six months Ended June 30, 2015
	ZAIS		Consolidated Funds		Eliminations		Consolidated
	( Dollars in Thousands )
Revenues
Management fee income	$	7,834	$	—	$	—	$	7,834
Incentive income		2,121		—		—		2,121
Other revenues		137		—		—		137
Total Revenues		10,092		—		—		10,092
Expenses
Compensation and benefits		13,931		—		—		13,931
General, administrative and other		9,101		—		—		9,101
Depreciation		208		—		—		208
Expenses of Consolidated Funds		—		—		—		—
Total Expenses		23,240		—		—		23,240
Other Income (loss)
Net gain (loss) on investments		45		—		—		45
Other income (expense)		5		—		—		5
Net gains (losses) of Consolidated Funds’ investments		—		—		—		—
Total Other Income (Loss)		50		—		—		50
Income (loss) before income taxes		(13,098)		—		—		(13,098)
Income tax (benefit) expense		(2,584)		—		—		(2,584)
Consolidated net income (loss), net of tax		(10,514)		—		—		(10,514)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment		483		—		—		483
Total Comprehensive Income (Loss)	$	(10,031)	$	—	$	—	$	(10,031)

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Organization (Details Textual) - USD ($) $ / shares in Units, $ in Millions	Jun. 30, 2016	Dec. 31, 2015	Mar. 31, 2014
ZAIS [Member]
Assets under Management, Carrying Amount	$ 3,949
Noncontrolling Interest, Ownership Percentage by Parent			100.00%
Equity Method Investment, Ownership Percentage	66.50%
Common Class B [Member]
Common Stock, Par or Stated Value Per Share	$ 0.000001	$ 0.000001
Common Class B [Member] | ZGP Founders [Member]
Common Stock, Par or Stated Value Per Share	$ 0.000001

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Investments in Affiliates (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Investments in and Advances to Affiliates [Line Items]
Investments in and Advances to Affiliates, at Fair Value	$ 5,207		$ 5,207		$ 5,242
Unrealized Gain (Loss) on Investments	$ 25	$ 2	$ (22)	$ 25

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Fair Value of Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Investments, at fair value
Investments in affiliates, at net asset value	$ 5,207	$ 5,242
Investments, Fair Value Disclosure		8,169
Consolidated Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	49,408	43,920
Investments, at fair value
Investments, Fair Value Disclosure	44,201	38,678
Collateralized Loan Obligations [Member]
Investments, at fair value
Investments, Fair Value Disclosure	44,201	30,509
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	0	8,169
Investments, at fair value
Investments in affiliates, at net asset value	0	0
Investments, Fair Value Disclosure	0	8,169
Fair Value, Inputs, Level 1 [Member] | Collateralized Loan Obligations [Member]
Investments, at fair value
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	0	0
Investments, at fair value
Investments in affiliates, at net asset value	0	0
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Collateralized Loan Obligations [Member]
Investments, at fair value
Investments, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	44,201	30,509
Investments, at fair value
Investments in affiliates, at net asset value	0	0
Investments, Fair Value Disclosure	44,201	30,509
Fair Value, Inputs, Level 3 [Member] | Collateralized Loan Obligations [Member]
Investments, at fair value
Investments, Fair Value Disclosure	$ 44,201	30,509
Funds [Member]
Investments, at fair value
Investments, Fair Value Disclosure		8,169
Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Investments, at fair value
Investments, Fair Value Disclosure		8,169
Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Investments, at fair value
Investments, Fair Value Disclosure		0
Funds [Member] | Fair Value, Inputs, Level 3 [Member]
Investments, at fair value
Investments, Fair Value Disclosure		$ 0

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Fair Value of Investments (Details 1) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Total investments, at fair value (Beginning Balance)	$ 30,509	$ 0
Total investments, at fair value, Purchases/Issuances	10,000	30,000
Total investments, at fair value, Sales/Redemptions/Settlements	0	0
Total investments, at fair value, Total Realized and Change in Unrealized Gains (Losses)	3,692	509
Total investments, at fair value, Transfers to (from) Level 3	0	0
Total investments, at fair value (Ending Balance)	44,201	30,509
Total investments, at fair value, Assets Measured on Recurring Basis, Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held	3,692	509
Collateralized Loan Obligations [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Total investments, at fair value (Beginning Balance)	30,509	0
Total investments, at fair value, Purchases/Issuances	10,000	30,000
Total investments, at fair value, Sales/Redemptions/Settlements	0	0
Total investments, at fair value, Total Realized and Change in Unrealized Gains (Losses)	3,692	509
Total investments, at fair value, Transfers to (from) Level 3	0	0
Total investments, at fair value (Ending Balance)	44,201	30,509
Total investments, at fair value, Assets Measured on Recurring Basis, Change in Unrealized Gains/Losses Relating to Assets and Liabilities Still Held	$ 3,692	$ 509

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Fair Value of Investments (Details Textual)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Collateralized Loan Obligation Excess Spread	10.50%	1.70%

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Variable Interest Entities ("VIEs") (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Assets of Consolidated Funds
Cash and cash equivalents	$ 32,064	$ 44,351	$ 75,198	$ 7,664
Total Assets	87,178	93,211
Liabilities of Consolidated Funds
Other liabilities	798	1,546
Total Liabilities	6,605	7,408
Consolidated Funds [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Assets of Consolidated Funds
Cash and cash equivalents	0	33
Investments, at fair value	44,201	30,509
Total Assets	44,201	30,542
Liabilities of Consolidated Funds
Other liabilities	101	101
Total Liabilities	$ 101	$ 101

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Management Fee Income and Incentive Income (Details) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		$ 3,571	$ 4,081	[1]	$ 7,140	$ 7,834	[1]
Management Fees, Incentive Revenue		143	1,213	[1]	295	2,121	[1]
Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		3,571	4,081		7,140	7,834
Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	143	1,213		295	2,121
Collateralized Loan Obligations [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		425	285		830	429
Collateralized Loan Obligations [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	$ 0	$ 0		$ 0	$ 873
Percentage of Incentive Income Earned	[2]	20.00%	20.00%		20.00%
Maximum [Member] | Collateralized Loan Obligations [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Conditional Management Fees, Based on Net Asset Value, Percentage		0.50%	0.50%		0.50%	0.50%
Maximum [Member] | Collateralized Loan Obligations [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Percentage of Incentive Income Earned	[2]					20.00%
Minimum [Member] | Collateralized Loan Obligations [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Conditional Management Fees, Based on Net Asset Value, Percentage		0.15%	0.15%		0.15%	0.15%
Minimum [Member] | Collateralized Loan Obligations [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Percentage of Incentive Income Earned	[2]					10.00%
Funds and accounts [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		$ 2,373	$ 2,942		$ 4,769	$ 5,977
Funds and accounts [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	$ 143	$ 1,213		$ 295	$ 1,248
Funds and accounts [Member] | Maximum [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Conditional Management Fees, Based on Net Asset Value, Percentage		1.25%	1.25%		1.25%	1.25%
Funds and accounts [Member] | Maximum [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Percentage of Incentive Income Earned	[2]	20.00%	20.00%		20.00%	20.00%
Funds and accounts [Member] | Minimum [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Conditional Management Fees, Based on Net Asset Value, Percentage		0.50%	0.50%		0.50%	0.50%
Funds and accounts [Member] | Minimum [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Percentage of Incentive Income Earned	[2]	10.00%	10.00%		10.00%	10.00%
ZFC REIT [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		$ 773	$ 854		$ 1,541	$ 1,428
Conditional Management Fees, Based on Net Asset Value, Percentage		1.50%	1.50%		1.50%	1.50%
Gross Amount [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		$ 3,571	$ 4,081		$ 7,140	$ 7,834
Gross Amount [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	143	1,213		295	2,121
Gross Amount [Member] | Collateralized Loan Obligations [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		425	285		830	429
Gross Amount [Member] | Collateralized Loan Obligations [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	0	0		0	873
Gross Amount [Member] | Funds and accounts [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		2,373	2,942		4,769	5,977
Gross Amount [Member] | Funds and accounts [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	143	1,213		295	1,248
Gross Amount [Member] | ZFC REIT [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		773	854		1,541	1,428
Elimination [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		0	0		0	0
Management Fees, Incentive Revenue		0	0		0	0
Elimination [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		0	0		0	0
Elimination [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	0	0		0	0
Elimination [Member] | Collateralized Loan Obligations [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		0	0		0	0
Elimination [Member] | Collateralized Loan Obligations [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	0	0		0	0
Elimination [Member] | Funds and accounts [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		0	0		0	0
Elimination [Member] | Funds and accounts [Member] | Incentive Fee Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees, Incentive Revenue	[2]	0	0		0	0
Elimination [Member] | ZFC REIT [Member] | Asset Management Income [Member]
Components of Management Fee Income and Incentive Income [Line Items]
Management Fee Income		$ 0	$ 0		$ 0	$ 0

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

[2] Incentive income earned for certain of the ZAIS Managed Entities is subject to a hurdle rate of return as specified in each respective ZAIS Managed Entities’ operative agreement.

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Management Fee Income and Incentive Income (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Apr. 07, 2016
Components of Management Fee Income and Incentive Income [Line Items]
Management Fees Receivable Subject To Compromise Early Contract Termination Fees						$ 8,000,000
Accrued Management Fee Income			$ 1,646,000		$ 1,670,000
Accrued Incentive Income			9,000		$ 859,000
Management Fee Credits	$ (50,000)	$ (39,000)	(104,000)	$ (104,000)
Incentive Fee Credits	$ 0	$ (59,000)	$ 0	$ (59,000)

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Debt Obligations (Details Textual)	Mar. 17, 2015 USD ($)
Notes Payable, Other Payables [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 1,250,000

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Compensation (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Salaries	$ 2,593,000	$ 3,486,000		$ 5,873,000	$ 7,015,000
Bonus	3,502,000	666,000		7,400,000	2,229,000
Points	0	32,000		0	32,000
Commissions	3,000	30,000		3,000	45,000
Income Unit Plan	0	0		0	198,000
Equity-Based Compensation	1,339,000	1,616,000		1,682,000	1,878,000
Severance	119,000	974,000		762,000	974,000
Payroll taxes and benefits	443,000	557,000		1,286,000	1,560,000
Total compensation and benefits	$ 7,999,000	$ 7,361,000	[1]	$ 17,006,000	$ 13,931,000	[1]

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

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Compensation (Details 1) - Class B-O Units [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
B-0 Units, Balance at December 31, 2015 | shares	1,337,486
B-0 Units, Granted | shares	100,000
B-0 Units, Forfeited | shares	(305,273)
B-0 Units, Vested | shares	0
B-0 Units, Balance at June 30, 2016 | shares	1,132,213
Weighted Average Grant Date Fair Value per Unit, Balance at December 31, 2015 | $ / shares	$ 9.67
Weighted Average Grant Date Fair Value per Unit, Granted | $ / shares	6.34
Weighted Average Grant Date Fair Value per Unit, Forfeited | $ / shares	9.7
Weighted Average Grant Date Fair Value per Unit, Vested | $ / shares	0
Weighted Average Grant Date Fair Value per Unit, Balance at June 30, 2016 | $ / shares	$ 9.36

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Compensation (Details 2) - Restricted Stock Units (RSUs) [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs, Balance at December 31, 2015 | shares	30,000
RSUs, Granted | shares	30,942
RSUs, Forfeited | shares	0
RSUs, Vested | shares	(30,000)
RSUs, Balance at June 30, 2016 | shares	30,942
Weighted Average Grant Date Fair Value per Unit, Balance at December 31, 2015 | $ / shares	$ 9.85
Weighted Average Grant Date Fair Value per Unit, Granted | $ / shares	3.22
Weighted Average Grant Date Fair Value per Unit, Forfeited | $ / shares	0
Weighted Average Grant Date Fair Value per Unit, Vested | $ / shares	9.85
Weighted Average Grant Date Fair Value per Unit, Balance at June 30, 2016 | $ / shares	$ 3.22

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Compensation (Details Textual)	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 08, 2016	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2013	Mar. 17, 2015 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense				$ 1,682,000	$ 1,941,000
Stock or Unit Option Plan Expense		$ 1,339,000	$ 1,616,000	$ 1,682,000	1,878,000
Employee Retention Notification Period				60 days
Restructuring and Related Cost, Number of Positions Eliminated	23
Severance Costs		119,000	974,000	$ 762,000	974,000
Share Based Compensation Estimated Forfeiture Percentage Due To Reduction In Work Force				17.20%
Share Based Compensation Estimated Forfeiture Percentage Due To Change In Management Estimation	4.40%
Retention Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred Compensation Arrangement with Individual, Distributions Paid		900,000		$ 900,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Based Compensation Estimated Forfeiture Percentage				8.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Based Compensation Estimated Forfeiture Percentage				29.60%
Retention Payment Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payments to Employees				$ 4,500,000
Severance Costs				762,000
Increase In Estimated Forfeiture Of Share Based Compensation Due To Reduction In Compensation And Benefits Amount				(983,000)
Class B-O Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares							1,600,000
Stock or Unit Option Plan Expense				$ 3,704,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term				8 months 16 days
Share-based Compensation, Total		1,296,000	1,567,000	$ 1,566,000	1,829,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense		$ 43,000	$ 49,000	$ 116,000	$ 49,000
Share Based Compensation Estimated Forfeiture Percentage				0.00%
Restricted Stock or Unit Expense				$ 81,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms				9 months 22 days
ZAIS Group, LLC [Member] | Income Unit Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period						30 days
ZAIS Group, LLC [Member] | Income Unit Plan [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage						85.00%
Bonus Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Bonus Award Percentage				30.00%

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Income Taxes (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Income tax (benefit) expense at the U.S. federal statutory income tax rate	$ (1,676,000)	$ (2,401,000)		$ (3,850,000)	$ (4,584,000)
Foreign tax	(242,000)	(291,000)		(529,000)	(373,000)
State and local income tax, net of federal benefit	4,000	353,000		9,000	20,000
Effect of permanent differences	56,000	0		58,000	0
Valuation allowance	1,571,000	0		3,498,000	0
Total	4,000	(1,682,000)	[1]	9,000	(2,584,000)	[1]
Consolidated Funds [Member]
Income attributable to non-controlling interests	(358,000)	0		(607,000)	0
ZAIS Group, LLC [Member]
Income attributable to non-controlling interests	649,000	657,000		1,430,000	2,353,000
Total	$ 4,000	$ (1,682,000)		$ 9,000	$ (2,584,000)

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

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Income Taxes (Details 1)	Jun. 30, 2016 USD ($)
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	$ 16,729,000
Expiration Date One [Member]
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	1,000
Expiration Date Two [Member]
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	83,000
Expiration Date Three [Member]
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	122,000
Expiration Date Four [Member]
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	7,388,000
Expiration Date Five [Member]
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	$ 9,135,000

XML

Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Income Tax [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration	$ 16,729,000		$ 16,729,000
Current Foreign Tax Expense (Benefit)	4,000		9,000
Current Income Tax Expense (Benefit), Total		$ (1,682,000)		$ (2,584,000)
Other Noncash Income Tax Expense	1,571,000		3,498,000
Before Acquisition of ZGP [Member]
Income Tax [Line Items]
Deferred Tax Assets, Net	7,800,000		7,800,000		$ 4,301,000
Deferred Tax Assets, Operating Loss Carryforwards, Total	$ 767,000		$ 767,000		$ 767,000

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Related Party Transactions (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Related Party Transaction [Line Items]
Due from Related Parties	$ 1,382,000		$ 1,382,000		$ 748,000
Related Party Transaction, Amounts of Transaction			13,000
ZAIS Managed Entities and Other Related Parties [Member]
Related Party Transaction [Line Items]
Due from Related Parties	54,000		54,000		32,000
General and Administrative Expense [Member]
Related Party Transaction [Line Items]
Consulting Fees Expenses	125,000	$ 125,000	250,000	$ 145,000
ZAIS Managed Entities [Member]
Related Party Transaction [Line Items]
Capital	18,854,000	30,949,000	18,854,000	30,949,000
Due from Related Parties	1,266,000		1,266,000		$ 650,000
ZAIS Managed Entities [Member] | Mr. Ramsey [Member]
Related Party Transaction [Line Items]
Consulting Fees			500,000
ZAIS Managed Entities [Member] | Ms. Rohan [Member]
Related Party Transaction [Line Items]
Consulting Fees	27,000	29,000	54,000	58,000
ZAIS CLO I and ZAIS CLO II [Member]
Related Party Transaction [Line Items]
Assets under Management, Carrying Amount	$ 563,685,000	$ 558,288,000	$ 563,685,000	$ 558,288,000

XML

Fixed Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Office equipment	$ 3,098	$ 3,088
Leasehold improvements	838	853
Furniture and fixtures	572	574
Software	409	409
Property, Plant and Equipment, Gross	4,917	4,924
Less accumulated depreciation	(4,495)	(4,380)
Total	$ 422	$ 544

XML

Fixed Assets (Details Textual) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	[1]	Jun. 30, 2016	Jun. 30, 2015	[1]
Property, Plant and Equipment [Line Items]
Depreciation, Depletion and Amortization	$ 64,000	$ 146,000		$ 127,000	$ 208,000
Reduction In Lease Hold Improvements Due To Change In Foreign Currency Spot Rate				$ (15,000)

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

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Commitments and Contingencies (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Future Minimum Rental Payments For Operating Leases [Line Items]
Six Months Ending December 31, 2016	$ 457
Ten Months Ending October 31, 2017	721
Operating Leases, Future Minimum Payments Due	$ 1,178

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Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Future Minimum Rental Payments For Operating Leases [Line Items]
Lease Expiration Date			Oct. 31, 2017
Operating Leases, Rent Expense	$ 263,000	$ 282,000	$ 507,000	$ 818,000
Other Commitment, Total	51,000,000		51,000,000
Capital Contribution To Subsidiary	20,500,000		$ 20,500,000
Legal Cost Reimbursement Description			The total approved claim reimbursement for all legal costs incurred in excess of the $500,000 deductible was approximately $703,000.
Proceeds from Insurance Settlement, Operating Activities	697,000
Insurance Settlement [Member]
Future Minimum Rental Payments For Operating Leases [Line Items]
Insurance Settlements Receivable	$ 6,000		$ 6,000
Legal Cost Reimbursement			703,000
Proceeds from Legal Settlements			$ 158,000
Other Nonoperating Income (Expense) [Member]
Future Minimum Rental Payments For Operating Leases [Line Items]
Legal Fees					$ 545,000

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Stockholders' Equity (Details Textual) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Stockholder Equity [Line Items]
Preferred Stock, Shares Authorized	2,000,000	2,000,000
Preferred Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Common Class A [Member]
Stockholder Equity [Line Items]
Common Stock, Shares Authorized	180,000,000	180,000,000
Common Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Common Stock, Shares, Issued	13,900,917	13,870,917
Common Stock, Shares, Outstanding	13,900,917	13,870,917
Common Class B [Member]
Stockholder Equity [Line Items]
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Par or Stated Value Per Share	$ 0.000001	$ 0.000001
Common Stock, Shares, Issued	20,000,000	20,000,000
Common Stock, Shares, Outstanding	20,000,000	20,000,000

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Numerator:
Consolidated Net Income (Loss), net of tax, attributable to ZAIS Group Holdings, Inc. Class A common stockholders (Basic)		$ (4,076)	$ (2,947)		$ (8,910)	$ (3,769)
Effect of dilutive securities:
Income tax (benefit) expense	[1]	0	1,027		0	2,871
Consolidated Net Income (Loss), net of tax, attributable to stockholders, after effect of dilutive securities		$ (6,129)	$ (4,434)		$ (13,404)	$ (7,926)
Denominator:
Weighted average number of shares of Class A Common Stock		13,892,016	13,870,917	[2]	13,881,466	8,046,665	[2],[3]
Effect of dilutive securities:
Weighted average number of Class A Units of ZGP		7,000,000	7,000,000		7,000,000	7,000,000
Dilutive number of Class B-0 Units and RSUs	[4]	0	0		0	0
Diluted weighted average shares outstanding	[5],[6]	20,892,016	20,870,917	[2]	20,881,466	15,046,665	[2],[3]
Consolidated Net Income (Loss), net of tax, per Class A common share - Basic		$ (0.29)	$ (0.21)	[2]	$ (0.64)	$ (0.47)	[2]
Consolidated Net Income (Loss), net of tax, per Class A common share - Diluted		$ (0.29)	$ (0.21)	[2]	$ (0.64)	$ (0.53)	[2]
ZAIS Group Parent, LLC [Member]
Effect of dilutive securities:
Consolidated Net Income (Loss), net of tax, attributable to non-controlling interests in ZGP		$ (1,911)	$ (2,231)		$ (4,210)	$ (6,745)
ZAIS REIT Management, LLC [Member]
Effect of dilutive securities:
Less: Consolidated Net (Income) Loss, net of tax, attributable to ZAIS REIT Management Class B interests	[7]	$ (142)	$ (283)		$ (284)	$ (283)

[1] Income tax (benefit) / expense for the three and six months ended June 30, 2016 is calculated using an assumed tax rate of 39.29% and is net of a 100% valuation allowance. Income tax (benefit) / expense for the three and six months ended June 30, 2015 is calculated using an assumed tax rate of 40.85%. See Note 9 for details surrounding income taxes.

[2] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.

[3] Pro-rated based on the portion of the period preceding and following the Business Combination.

[4] The treasury stock method is used to calculate incremental Class A common shares on potentially dilutive Class A common shares resulting from unvested Class B-0 Units granted in connection with and subsequent to the Business Combination and unvested RSUs granted to non-employee directors. These units are anti-dilutive and, consequently, have been excluded from the computation of diluted weighted average shares outstanding.

[5] Number of diluted shares outstanding for periods after the Business Combination (as defined in Note 1) takes into account non-controlling interests in ZAIS Group Parent, LLC that may be exchanged for Class A common stock under certain circumstances.

[6] Number of diluted shares outstanding takes into account non-controlling interests of ZGP that may be exchanged for Class A Common Stock under certain circumstances.

[7] Amount represents portion of the management fee income received from ZFC REIT that is payable to holders of Class B interests in ZAIS Group’s consolidated subsidiary ZAIS REIT Management.

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Earnings Per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Line Items]
Income Tax Expense Benefit Percentage	39.29%	40.85%	39.29%	40.85%
Valuation Allowance Percentage			100.00%

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Supplemental Financial Information (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and cash equivalents	$ 32,064	$ 44,351	$ 75,198	$ 7,664
Income and fees receivable	1,655	2,529
Investments, at fair value		8,169
Investments in affiliates, at fair value	5,207	5,242
Due from related parties	1,382	748
Prepaid expenses	1,946	776
Other assets	301	310
Fixed assets, net	422	544
Total Assets	87,178	93,211
Liabilities
Notes payable	1,259	1,255
Compensation payable	4,303	3,575
Due to related parties	142	175
Fees payable	2	756
Other liabilities	798	1,546
Liabilities of Consolidated Funds
Total Liabilities	6,605	7,408
Commitments and Contingencies (Note 12)
Equity
Preferred Stock	0	0
Additional paid-in-capital	61,965	60,817
Retained earnings (Accumulated deficit)	(22,715)	(13,805)
Accumulated other comprehensive income (loss)	24	158
Total stockholders’ equity, ZAIS Group Holdings, Inc.	39,275	47,171
Total Equity	80,573	85,803
Total Liabilities and Equity	87,178	93,211
Intersegment Eliminations [Member]
Assets
Cash and cash equivalents	0	0
Income and fees receivable	0	0
Investments, at fair value		0
Investments in affiliates, at fair value	(22,491)	(15,525)
Due from related parties	0	0
Prepaid expenses	0	0
Other assets	0	0
Fixed assets, net	0	0
Total Assets	(22,491)	(15,525)
Liabilities
Notes payable	0	0
Compensation payable	0	0
Due to related parties	0	0
Fees payable	0	0
Other liabilities	0	0
Liabilities of Consolidated Funds
Total Liabilities	0	0
Commitments and Contingencies (Note 12)
Equity
Preferred Stock	0	0
Additional paid-in-capital	0	0
Retained earnings (Accumulated deficit)	0	0
Accumulated other comprehensive income (loss)	0	0
Total stockholders’ equity, ZAIS Group Holdings, Inc.	0	0
Total Equity	(22,491)	(15,525)
Total Liabilities and Equity	(22,491)	(15,525)
ZAIS [Member]
Assets
Cash and cash equivalents	32,064	44,351
Income and fees receivable	1,655	2,529
Investments, at fair value		8,169
Investments in affiliates, at fair value	27,698	20,767
Due from related parties	1,382	748
Prepaid expenses	1,946	776
Other assets	301	310
Fixed assets, net	422	544
Total Assets	65,468	78,194
Liabilities
Notes payable	1,259	1,255
Compensation payable	4,303	3,575
Due to related parties	142	175
Fees payable	2	756
Other liabilities	798	1,546
Liabilities of Consolidated Funds
Total Liabilities	6,504	7,307
Commitments and Contingencies (Note 12)
Equity
Preferred Stock	0	0
Additional paid-in-capital	61,965	60,817
Retained earnings (Accumulated deficit)	(22,715)	(13,805)
Accumulated other comprehensive income (loss)	24	158
Total stockholders’ equity, ZAIS Group Holdings, Inc.	39,275	47,171
Equity attributable to non-controlling interests	19,689	23,716
Total Equity	58,964	70,887
Total Liabilities and Equity	65,468	78,194
Consolidated Funds, Before Eliminations [Member]
Assets
Cash and cash equivalents		33
Investments, at fair value	44,201	30,509
Total Assets	44,201	30,542
Liabilities
Other liabilities	101	101
Liabilities of Consolidated Funds
Total Liabilities	101	101
Commitments and Contingencies (Note 12)
Equity
Equity attributable to non-controlling interests	44,100	30,441
Total Equity	44,100	30,441
Total Liabilities and Equity	44,201	30,542
ZAIS Group Parent, LLC [Member]
Equity
Equity attributable to non-controlling interests	19,689	23,716
ZAIS Group Parent, LLC [Member] | Intersegment Eliminations [Member]
Equity
Equity attributable to non-controlling interests	0	0
Consolidated Funds [Member]
Assets
Cash and cash equivalents	0	33
Investments, at fair value	44,201	38,678
Liabilities
Other liabilities	101	101
Equity
Equity attributable to non-controlling interests	21,609	14,916
Consolidated Funds [Member] | Intersegment Eliminations [Member]
Assets
Cash and cash equivalents		0
Investments, at fair value	0	0
Liabilities
Other liabilities	0	0
Equity
Equity attributable to non-controlling interests	(22,491)	(15,525)
Common Class A [Member]
Equity
Common stock	1	1
Common Class A [Member] | Intersegment Eliminations [Member]
Equity
Common stock	0	0
Common Class A [Member] | ZAIS [Member]
Equity
Common stock	1	1
Common Class B [Member]
Equity
Common stock	0	0
Common Class B [Member] | Intersegment Eliminations [Member]
Equity
Common stock	0	0
Common Class B [Member] | ZAIS [Member]
Equity
Common stock	$ 0	$ 0

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Supplemental Financial Information (Details 1) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015		Jun. 30, 2016	Jun. 30, 2015
Revenues
Management fee income	$ 3,571	$ 4,081	[1]	$ 7,140	$ 7,834	[1]
Incentive income	143	1,213	[1]	295	2,121	[1]
Other revenues	79	106	[1]	159	137	[1]
Total Revenues	3,793	5,400	[1]	7,594	10,092	[1]
Expenses
Compensation and benefits	7,999	7,361	[1]	17,006	13,931	[1]
General, administrative and other	2,950	4,764	[1]	6,160	9,101	[1]
Depreciation	64	146	[1]	127	208	[1]
Total Expenses	11,042	12,271	[1]	23,341	23,240	[1]
Other Income (loss)
Net gain (loss) on investments	55	2	[1]	37	45	[1]
Other income (expense)	87	9	[1]	692	5	[1]
Total Other Income (Loss)	2,318	11	[1]	4,422	50	[1]
Income (loss) before income taxes	(4,931)	(6,860)	[1]	(11,325)	(13,098)	[1]
Income tax (benefit) expense	4	(1,682)	[1]	9	(2,584)	[1]
Discontinued Operations
Consolidated net income (loss), net of tax	(4,935)	(5,178)	[1]	(11,334)	(10,514)	[1]
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment	(147)	291	[1]	(201)	483	[1]
Total Comprehensive Income (Loss)	(5,082)	(4,887)	[1]	(11,535)	(10,031)	[1]
Intersegment Eliminations [Member]
Revenues
Management fee income	0	0		0	0
Incentive income	0	0		0	0
Other revenues	0	0		0	0
Total Revenues	0	0		0	0
Expenses
Compensation and benefits	0	0		0	0
General, administrative and other	0	0		0	0
Depreciation	0	0		0	0
Expenses of Consolidated Funds				0
Total Expenses	0	0		0	0
Other Income (loss)
Net gain (loss) on investments	(1,095)	0		(1,859)	0
Other income (expense)	0	0		0	0
Total Other Income (Loss)	(1,095)	0		(1,859)	0
Income (loss) before income taxes	0	0		(1,859)	0
Income tax (benefit) expense	0	0		0	0
Discontinued Operations
Consolidated net income (loss), net of tax	(1,095)	0		(1,859)	0
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment	0	0		0	0
Total Comprehensive Income (Loss)	(1,095)	0		(1,859)	0
ZAIS [Member]
Revenues
Management fee income	3,571	4,081		7,140	7,834
Incentive income	143	1,213		295	2,121
Other revenues	79	106		159	137
Total Revenues	3,793	5,400		7,594	10,092
Expenses
Compensation and benefits	7,999	7,361		17,006	13,931
General, administrative and other	2,950	4,764		6,160	9,101
Depreciation	64	146		127	208
Total Expenses	11,013	12,271		23,293	23,240
Other Income (loss)
Net gain (loss) on investments	1,150	2		1,896	45
Other income (expense)	87	9		692	5
Total Other Income (Loss)	1,237	11		2,588	50
Income (loss) before income taxes	(5,983)	(6,860)		(13,111)	(13,098)
Income tax (benefit) expense	4	(1,682)		9	(2,584)
Discontinued Operations
Consolidated net income (loss), net of tax	(5,987)	(5,178)		(13,120)	(10,514)
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment	(147)	291		(201)	483
Total Comprehensive Income (Loss)	(6,134)	(4,887)		(13,321)	(10,031)
Consolidated Funds, Before Eliminations [Member]
Expenses
Expenses of Consolidated Funds	29	0		48	0
Total Expenses	29	0		48	0
Other Income (loss)
Net gain (loss) on investments	2,176	0		3,693	0
Total Other Income (Loss)	2,176	0		3,693	0
Income (loss) before income taxes	2,147	0		3,645	0
Income tax (benefit) expense	0	0		0	0
Discontinued Operations
Consolidated net income (loss), net of tax	2,147	0		3,645	0
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustment	0	0		0	0
Total Comprehensive Income (Loss)	2,147	0		3,645	0
Consolidated Funds [Member]
Expenses
Expenses of Consolidated Funds	29	0	[1]	48	0	[1]
Other Income (loss)
Net gain (loss) on investments	2,176	0	[1]	3,693	0	[1]
Consolidated Funds [Member] | Intersegment Eliminations [Member]
Expenses
Expenses of Consolidated Funds	0	0			0
Other Income (loss)
Net gain (loss) on investments	$ 0	$ 0		$ 0	$ 0

[1] Subsequent to the filing of the 10-Q for the three months ended March 31, 2015, the Company elected to early adopt ASU 2015-02 with an effective date of January 1, 2015. As a result of this adoption, the majority of the ZAIS Managed Entities which were consolidated in the 10-Q for the three months ended March 31, 2015 were deconsolidated. Additionally, subsequent to the filing of the June 30, 2015 and September 30, 2015 10-Q’s, in December 2015 additional interpretations of ASU 2015-02 became available to the Company. As a result of these new interpretations, the Company reviewed its previous conclusions and determined that additional entities should be deconsolidated. There was no impact on the income (loss) allocated to ZAIS Group Holdings, Inc. Stockholders Equity as a result of this adoption. The June 30, 2015 figures above reflect the consolidated results of the Company for the three and six months ended June 30, 2015, subsequent to the adoption of ASU 2015-02.