UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM10-Q~~

☒

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

For the quarterly period ended March 31, ~~2018~~

2020



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

Commission file number:333-222986

CNL STRATEGIC CAPITAL, LLC

(Exact name of registrant as specified in its charter)



Delaware		32-0503849
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



CNL Center at City Commons 450 South Orange Avenue Orlando, Florida		32801
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

~~650-1000~~

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 ☐ý 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 RegulationS-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 ☒ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	~~☒ Do not check if smaller reporting company~~ý	Smaller reporting company	☐ý


		Emerging growth company	☒ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of May ~~10, 2018,~~13, 2020, the Company had ~~3,266,260~~4,770,390 Class FA shares, ~~299~~815,688 Class A shares, ~~and 17,948~~413,918 Class T shares, 343,247 Class D shares, 1,145,414 Class I shares and 145,364 Class S shares outstanding.

~~CNL STRATEGIC CAPITAL, LLC~~

INDEX



		PAGE
		~~PAGE~~PART I. FINANCIAL INFORMATION
~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~		~~Financial Statements:~~
Item 1.	Financial Statements (unaudited):	2


		Condensed Consolidated Statements of Assets and Liabilities ~~as of March 31, 2018 (unaudited) and December 31, 2017~~	2

2	Condensed Consolidated Statements of Operations	3


		Condensed Consolidated ~~Statement of Operations for the period from February 7, 2018 (commencement of operations) through March 31, 2018 (unaudited)~~		3

		~~Condensed Consolidated Statement~~Statements of Changes in Net Assets ~~for the period from February 7, 2018 (commencement of operations) through March 31, 2018 (unaudited)~~	4

4	Condensed Consolidated Statements of Cash Flows	5


		Condensed Consolidated ~~Statement~~Schedules of ~~Cash Flows for the period from February 7, 2018 (commencement of operations) through March 31, 2018 (unaudited)~~Investments	6
			5

		~~Condensed Consolidated Schedule of Investments as of March 31, 2018 (unaudited)~~		6

		Notes to Condensed Consolidated Financial Statements	8
			7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
			20

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	44

34Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION
~~Item 4.~~		~~Controls and Procedures~~
34Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46
~~PART II. OTHER INFORMATION~~

~~Item 1.~~		~~Legal Proceedings~~		35

~~Item 1A.~~		~~Risk Factors~~		35

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	47
			35

Item 3.		Defaults Upon Senior Securities	48

36Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48
~~Item 4.~~		~~Mine Safety Disclosures~~
36Item 6.	Exhibits	49

Exhibit Index			49
~~Item 5.~~			~~Other Information~~		36
Signatures			50
~~Item 6.~~		~~Exhibits~~		36


Item 1.	Financial Statements

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

~~Condensed Consolidated Statements of Assets and Liabilities~~

   March 31, 2018
(unaudited)    December 31,
2017
Assets

Investments, at fair value (amortized cost $76,931,763 and $— as of March 31, 2018 and December 31, 2017, respectively)
   $ 77,456,212    $ —
Cash and cash equivalents
   5,633,760    199,683
Deferred offering expenses
   485,482    317




Total assets
   83,575,454    200,000




Liabilities

Due to related parties (Note 5)
   $ 772,290    $ —
Distributions payable
   302,841    —
Payable for investments purchased
   181,126    —
Accounts payable and other accrued expenses
   115,345    —
Accrued directors’ fees
   22,903    —




Total liabilities
   1,394,505    —




Commitments and contingencies (Note 8)

Members’ Equity (Net Assets)

Preferred shares, $0.001 par value 50,000,000 shares authorized and unissued
   $ —      $ —
Common shares, $0.001 par value 94,660,000 Class A shares authorized and unissued
   —      —
Common shares, $0.001 par value 3,400,000 Class FA shares authorized; 3,266,260 and 8,000 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
   3,266    8
Common shares, $0.001 par value 662,620,000 Class T shares authorized and unissued
   —      —
Common shares, $0.001 par value 94,660,000 Class D shares authorized and unissued
   —      —
Common shares, $0.001 par value 94,660,000 Class I shares authorized and unissued
   —      —
Capital in excess of par value
   81,653,234    199,992
Accumulated net unrealized appreciation on investments
   524,449    —




Total Members’ Equity
   $ 82,180,949    $ 200,000





Net assets, Class FA shares
   $ 82,180,949    $ 200,000




Total Members’ Equity
   $ 82,180,949    $ 200,000

CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2020 (Unaudited) December 31, 2019
Assets
Investments at fair value (amortized cost of $155,774,339 and $133,274,339, respectively) $ 163,301,338
$ 144,195,000
Cash 28,914,536
20,954,005
Restricted cash —
10,000,000
Receivable for shares sold 5,389,738
—
Deferred offering expenses 45,542
25,423
Net due from related parties (Note 5) 328,385
278,564
Prepaid expenses and other assets 39,687
90,631
Total assets 198,019,226
175,543,623
Liabilities
Accounts payable and other accrued expenses 493,383
325,449
Distributions payable 732,046
593,536
Payable for shares repurchased 1,942,166
223,738
Payable for investments purchased 118,009
118,009
Total liabilities 3,285,604
1,260,732
Commitments and contingencies (Note 10)

Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000,000 shares authorized and unissued —
—
Class FA Common shares, $0.001 par value, 7,400,000 shares authorized; 4,748,839 and 4,274,748 shares issued, respectively; 4,674,839 and 4,255,548 shares outstanding, respectively 4,675
4,255
Class A Common shares, $0.001 par value, 94,660,000 shares authorized; 796,817 and 669,442 shares issued, respectively; 794,274 and 669,141 shares outstanding, respectively 794
669
Class T Common shares, $0.001 par value, 558,620,000 and 658,620,000 shares authorized, respectively; 334,315 and 198,662 shares issued and outstanding, respectively 334
199
Class D Common shares, $0.001 par value, 94,660,000 shares authorized; 335,722 and 305,817 shares issued, respectively; 332,538 and 302,632 shares outstanding, respectively 333
303
Class I Common shares, $0.001 par value, 94,660,000 shares authorized; 1,124,594 and 938,296 shares issued, respectively; 1,101,367 and 928,848 shares outstanding, respectively 1,101
929
Class S Common shares, $0.001 par value, 100,000,000 shares authorized; 9,030 shares issued and outstanding as of March 31, 2020 9
—
Capital in excess of par value 188,638,014
164,349,125
Distributable earnings 6,088,362
9,927,411
Total Members’ Equity $ 194,733,622
$ 174,282,891

Net assets, Class FA shares $ 126,919,282
$ 117,637,467
Net assets, Class A shares 20,887,589
18,008,048
Net assets, Class T shares 8,813,664
5,366,259
Net assets, Class D shares 8,624,930
8,053,103
Net assets, Class I shares 29,242,887
25,218,014
Net assets, Class S shares 245,270
—
Total Members’ Equity $ 194,733,622
$ 174,282,891

See notes to condensed consolidated financial statements.

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

~~Condensed Consolidated Statement of Operations~~

~~(unaudited)~~

   For the Period
from
February 7, 2018
(Commencement
of Operations) to
March 31, 2018
Investment Income

Interest income
   $ 728,216


Total investment income
   728,216


Operating Expenses

Organization and offering expenses
   221,564
Base management fees
   88,562
Professional services
   73,581
Director fees and expenses
   37,070
Administrative services
   32,493
Custodian and accounting fees
   15,000
Other
   317


Total operating expenses
   468,587
Expense support
   (43,212 )


Net expenses
   425,375


Net investment income
   302,841
Net change in unrealized appreciation on investments
   524,449


Net increase in net assets resulting from operations
   $ 827,290



Class FA common stock:

Net investment income per share
   $ 0.09


Diluted and basic earnings per share
   $ 0.25


Weighted average number of common shares outstanding (basic and diluted)
   3,266,430


Distributions declared per share
   $ 0.09

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended March 31,
2020 2019
Investment Income
Interest income $ 2,109,291
$ 1,363,280
Dividend income 186,746
406,505
Total investment income 2,296,037
1,769,785
Operating Expenses
Organization and offering expenses 221,889
185,701
Base management fees 515,598
241,638
Professional services 332,758
227,515
Pursuit costs 6,949
—
Director fees and expenses 51,133
57,699
General and administrative expenses 8,854
28,056
Custodian and accounting fees 41,290
62,150
Insurance expense 52,873
45,945
Distribution and shareholder servicing fees 26,359
6,769
Total operating expenses 1,257,703
855,473
Expense support (607,630 ) (216,073 )
Net expenses 650,073
639,400
Net investment income 1,645,964
1,130,385
Net change in unrealized (depreciation) appreciation on investments (3,393,662 ) 281,000
Net (decrease) increase in net assets resulting from operations $ (1,747,698 ) $ 1,411,385

Common shares per share information:
Net investment income $ 0.24
$ 0.28
Net (decrease) increase in net assets resulting from operations $ (0.26 ) $ 0.35
Weighted average number of common shares outstanding 6,782,358
3,984,004

See notes to condensed consolidated financial statements.

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

~~Condensed Consolidated Statement of Changes in Net Assets~~

~~(unaudited)~~

   For the Period
from February 7, 2018
(Commencement
of Operations) to
March 31, 2018
Operations:

Net investment income
   $ 302,841
Net change in unrealized appreciation on investments
   524,449


Net increase in net assets resulting from operations
   827,290


Distributions to shareholders from:

Net investment income
   (302,841 )


Net decrease in net assets resulting from distributions to shareholders
   (302,841 )


Capital share transactions:

Issuance of Class FA shares
   81,456,500


Net increase in net assets resulting from capital share transactions
   81,456,500


Total increase in net assets
   81,980,949
Net assets at beginning of period
   200,000


Net assets at end of period
   $ 82,180,949


Capital share activity:

Issuance of Class FA shares
   3,258,260


Net increase in shares outstanding
   3,258,260

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(UNAUDITED)

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2019 6,354,831
$ 6,355
$ 164,349,125
$ 9,927,411
$ 174,282,891
Net investment income —
—
—
1,645,964
1,645,964
Net change in unrealized depreciation on investments —
—
—
(3,393,662 ) (3,393,662 )
Distributions to shareholders —
—
—
(2,091,351 ) (2,091,351 )
Issuance of common shares through the Offerings 948,194
948
25,850,811
—
25,851,759
Issuance of common shares through distribution reinvestment plan 14,160
14
380,173
—
380,187
Repurchase of common shares pursuant to share repurchase program (70,822 ) (71 ) (1,942,095 ) —
(1,942,166 )
Balance as of March 31, 2020 7,246,363
$ 7,246
$ 188,638,014
$ 6,088,362
$ 194,733,622

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2018 3,862,515
$ 3,862
$ 97,229,217
$ 5,596,731
$ 102,829,810
Net investment income —
—
—
1,130,385
1,130,385
Net change in unrealized appreciation on investments —
—
—
281,000
281,000
Distributions to shareholders —
—
—
(1,235,971 ) (1,235,971 )
Issuance of common shares through the Offerings 399,472
400
10,572,654
—
10,573,054
Issuance of common shares through distribution reinvestment plan 3,841
4
101,200
—
101,204
Balance as of March 31, 2019 4,265,828
$ 4,266
$ 107,903,071
$ 5,772,145
$ 113,679,482

See notes to condensed consolidated financial statements.

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

~~Condensed Consolidated Statement of Cash Flows~~

~~(unaudited)~~

   For the Period from
February 7, 2018
(Commencement of
Operations) to March 31,
2018
Operating Activities:

Net increase in net assets resulting from operations
   $ 827,290
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

Purchases of investments, net
   (74,531,763 )
Net change in unrealized appreciation on investments
   (524,449 )
Amortization of deferred offering expenses
   196,041
Increase in payable to related parties
   772,290
Increase in payable for investments purchased
   181,126
Increase in accrued directors’ fees
   22,903
Increase in accounts payable and other accrued expenses
   115,345
Increase in deferred offering expenses
   (681,206 )


Net cash used in operating activities
   (73,622,423 )


Financing Activities:

Proceeds from issuance of common shares
   79,056,500


Net cash provided by financing activities
   79,056,500


Net increase in cash
   5,434,077
Cash and cash equivalents, beginning of period
   199,683


Cash and cash equivalents, end of period
   $ 5,633,760


Supplemental disclosure of cash flow information andnon-cash financing activities:

Amounts incurred but not paid (including amounts due to related parties):

Distributions payable
   $ 302,841
Offering costs
   $ 681,523
Non-cash contribution fromSub-Manager
   $ 2,400,000
Non-cash purchase of investments
   $ (2,400,000 )

As described further in Note 3. “Investments” and Note 5. “Related Party Transactions” to the condensed consolidated financial statements, the approximate $77 million purchase price to acquire the investment in the portfolio companies was partially also funded using the $2.4 million~~non-cash~~ ~~contribution from theSub-Manager.~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended March 31,
2020 2019
Operating Activities:
Net (decrease) increase in net assets resulting from operations $ (1,747,698 ) $ 1,411,385
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash used in operating activities:
Purchases of investments (22,500,000 ) —
Net change in unrealized depreciation (appreciation) on investments 3,393,662
(281,000 )
Amortization of deferred offering expenses 28,143
14,434
Amortization of deferred financing costs 3,603
—
Increase in net due from related parties (49,821 ) (755,337 )
Increase in accounts payable and other accrued expenses 167,934
97,268
Increase in deferred offering expenses (48,262 ) —
Decrease in prepaid expenses and other assets 47,341
37,788
Net cash (used in) provided by operating activities (20,705,098 ) 524,538
Financing Activities:
Proceeds from issuance of common shares 20,462,021
10,573,054
Shares repurchased (223,738 ) —
Distributions paid, net of distributions reinvested (1,572,654 ) (1,070,463 )
Net cash provided by financing activities 18,665,629
9,502,591
Net (decrease) increase in cash and restricted cash (2,039,469 ) 10,027,129
Cash and restricted cash, beginning of period 30,954,005
21,667,867
Cash and restricted cash, end of period $ 28,914,536
$ 31,694,996
Supplemental disclosure of cash flow information and non-cash financing activities:
Distributions reinvested $ 380,187
$ 101,204
Amounts incurred but not paid (including amounts due to related parties):
Distributions payable $ 732,046
$ 422,490
Offering costs $ 75,105
$ 77,516
Payable for shares repurchased $ 1,942,166
$ —

See notes to condensed consolidated financial statements.

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

~~Condensed Consolidated Schedule of Investments~~

~~(unaudited)~~

Company^(a)

Industry
   Interest
Rate Base
Floor    Maturity
Date    No. Shares/
Principal
Amount    Cost    Fair Value
Senior Secured Loan – First Lien–19.1%

Polyform Products, Co.

Modeling Clay
   16.0 % N/A    8/7/2023    $ 15,700,000    $ 15,700,000    $ 15,700,000
Senior Secured Loan – Second Lien–18.3%

Lawn Doctor
   Commercial and Professional Services    16.0 % N/A    8/7/2023    15,000,000    15,000,000    15,000,000




Total Senior Secured Loans
            $ 30,700,000    $ 30,700,000




Equity–56.9%

Polyform Products, Co.
   Modeling Clay          10,820    $ 15,756,212    $ 15,756,212
Lawn Doctor
   Commercial and Professional Services          7,746    30,475,551    31,000,000




Total Equity
               $ 46,231,763    $ 46,756,212




TOTAL INVESTMENTS–94.3%
            $ 76,931,763    $ 77,456,212




OTHER ASSETS IN EXCESS OF LIABILITIES–5.7%

         4,724,737


NET ASSETS–100.0%

         $ 82,180,949

~~(a) Security may be an obligation of one or more entities affiliated with the named company.~~

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF MARCH 31, 2020

(UNAUDITED)

Company ⁽¹⁾
Industry
Interest
Rate

Maturity
Date

Principal
Amount /
No. Shares
Cost Fair Value
Senior Secured Note – First Lien–9.1%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 8.0% 11/13/2020 $ 2,000,000
$ 2,000,000
$ 2,000,000
Polyform Products, Co. Hobby Goods and Supplies 16.0% 8/7/2023 15,700,000
15,700,000
15,700,000
Total Senior Secured Notes – First Lien $ 17,700,000
$ 17,700,000

Senior Secured Note – Second Lien–18.5%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 16.0% 8/1/2025 12,114,338
12,114,338
12,114,338
Blue Ridge ESOP Associates Business Services 15.0% 3/24/2026 2,640,844
2,640,844
2,640,844
Lawn Doctor, Inc. Commercial and Professional Services 16.0% 8/7/2023 15,000,000
15,000,000
15,000,000
Milton Industries Inc. Manufacturing 15.0% 11/21/2025 3,353,265
3,353,265
3,353,265
Resolution Economics, LLC Business Services 15.0% 1/2/2026 2,834,007
2,834,007
2,834,007
Total Senior Secured Notes - Second Lien $ 35,942,454
$ 35,942,454

Total Senior Secured Notes $ 53,642,454
$ 53,642,454

Equity–56.3%
Auriemma U.S. Roundtables
⁽²⁾
Information Services and Advisory Solutions 32,386
$ 32,385,662
$ 31,000,000
Blue Ridge ESOP Associates Business Services 9,859
9,859,156
9,859,156
Lawn Doctor, Inc.
⁽²⁾
Commercial and Professional Services 7,746
30,475,551
40,284,000
Milton Industries Inc. Manufacturing 6,647
6,646,735
6,646,735
Polyform Products, Co.
⁽²⁾
Hobby Goods and Supplies 10,820
15,598,788
14,703,000
Resolution Economics, LLC Business Services 7,166
7,165,993
7,165,993
Total Equity $ 102,131,885
$ 109,658,884

TOTAL INVESTMENTS–83.9%
⁽³⁾
$ 155,774,339
$ 163,301,338
OTHER ASSETS IN EXCESS OF LIABILITIES–16.1% 31,432,284
NET ASSETS–100.0% $ 194,733,622

FOOTNOTES:


⁽¹⁾	Security may be an obligation of one or more entities affiliated with the named company.


⁽²⁾	As of March 31, 2020, the Company owned a controlling interest in this portfolio company.


⁽³⁾	As of March 31, 2020, the aggregate gross and net unrealized appreciation for all securities in which there was an excess of value over tax cost was approximately $10.4 million and $9.1 million, respectively. The aggregate cost of securities for federal income tax purposes was approximately $154.2 million.

See notes to condensed consolidated financial statements.

CNL ~~Strategic Capital,~~STRATEGIC CAPITAL, LLC

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2019

Company ⁽¹⁾
Industry
Interest
Rate

Maturity
Date

Principal
Amount /
No. Shares
Cost Fair Value
Senior Secured Note – First Lien–10.1%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 8.0% 11/13/2020 $ 2,000,000
$ 2,000,000
$ 2,000,000
Polyform Products, Co. Hobby Goods and Supplies 16.0% 8/7/2023 15,700,000
15,700,000
15,700,000
Total Senior Secured Notes – First Lien 17,700,000
17,700,000

Senior Secured Note – Second Lien–17.5%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 16.0% 8/1/2025 12,114,338
12,114,338
12,114,338
Lawn Doctor, Inc. Commercial and Professional Services 16.0% 8/7/2023 15,000,000
15,000,000
15,000,000
Milton Industries Inc. Manufacturing 15.0% 11/21/2025 3,353,265
3,353,265
3,353,265
Total Senior Secured Notes - Second Lien $ 30,467,603
$ 30,467,603

Total Senior Secured Notes $ 48,167,603
$ 48,167,603

Equity–55.1%
Auriemma U.S. Roundtables
⁽²⁾
Information Services and Advisory Solutions 32,386
$ 32,385,662
$ 32,385,662
Lawn Doctor, Inc.
⁽²⁾
Commercial and Professional Services 7,746
30,475,551
41,395,000
Milton Industries Inc. Manufacturing 6,647
6,646,735
6,646,735
Polyform Products, Co.
⁽²⁾
Hobby Goods and Supplies 10,820
15,598,788
15,600,000
Total Equity $ 85,106,736
$ 96,027,397

TOTAL INVESTMENTS–82.7%
⁽³⁾
$ 133,274,339
$ 144,195,000
OTHER ASSETS IN EXCESS OF LIABILITIES–17.3% 30,087,891
NET ASSETS–100.0% $ 174,282,891

FOOTNOTES:


⁽¹⁾	Security may be an obligation of one or more entities affiliated with the named company.


⁽²⁾	As of December 31, 2019, the Company owned a controlling interest in this portfolio company.


⁽³⁾	As of December 31, 2019, the aggregate gross and net unrealized appreciation for all securities in which there was an excess of value over tax cost was approximately $12.6 million. The aggregate cost of securities for federal income tax purposes was approximately $131.6 million.

See notes to condensed consolidated financial statements.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

~~Notes to Financial Statements (Unaudited)~~

1. Principal Business and Organization

CNL Strategic Capital, LLC (the “Company”) is a limited liability company that primarily seeks to acquire and grow durable, middle-market U.S. businesses. The Company commenced operations on February 7, 2018. The Company is externally managed by CNL Strategic Capital Management, LLC (the “Manager”)~~, an entity that~~ and sub-managed by Levine Leichtman Strategic Capital, LLC (the “Sub-Manager”). The Manager is responsible for the overall management of the Company’s activities and the Sub-Manager is responsible for the day-to-day management of the Company’s assets. Each of the Manager and the Sub-Manager are registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The ~~Manager is controlled by CNL Financial Group, LLC, a private investment management firm specializing in alternative investment products.~~ Company conducts and intends to continue its operations so that the Company and each of its subsidiaries do not fall within, or are excluded from, the definition of an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

The Company ~~has engaged the Manager under a management agreement (the “Management Agreement”) pursuant~~intends to ~~which the Manager is responsible for the overall management of the Company’s activities. The Manager has engaged Levine Leichtman Strategic Capital, LLC (the“Sub-Manager”),~~ ~~a registered investment advisor, under asub-management~~ ~~agreement (the“Sub-Management~~ ~~Agreement”) pursuant to which theSub-Manager~~ ~~is responsible for theday-to-day~~ ~~management of the Company’s assets. TheSub-Manager~~ ~~is an affiliate of Levine Leichtman Capital Partners, Inc.~~

acquire and grow durable, middle market U.S. businesses with annual revenues primarily between $15 million and $250 million. The Company targets ~~for acquisition,~~ businesses that have a track record of stable and predictable operating performance, are highly cash flow generative ~~with annual revenues of primarily between $25 million~~ and ~~$500 million.~~have management teams who seek a meaningful ownership stake in the company. The Company’s ~~business strategy is to acquire~~investments are typically structured as controlling equity ~~stakes~~interests in combination with ~~loan positions in middle-market businesses. The Company’s business strategy~~debt positions. In doing so, the Company seeks to provide long-term capital appreciation ~~and~~with current income, while protecting invested capital. The Company seeks to structure its investments with limited, if any, third-party senior leverage.

In addition and to a lesser extent, the Company ~~intends to~~may acquire other debt and minority equity positions, which may include acquiring debt in the secondary market as well as minority equity ~~stakes~~interests and ~~loan~~debt positions viaco-investments with other funds managed by ~~affiliates of~~ the~~Sub-Manager.~~ Sub-Manager or their affiliates. The Company expects that these positions will comprise a minority of its total assets.

The Company ~~was formed as a Delaware limited liability company on August 9, 2016~~is currently offering and ~~intends to operate~~selling shares of its business in a manner that will permit it to avoid registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company did not commence operations until February 7, 2018, as described below.

~~The Company offered through a private placement (the “Private Placement”) up to $85 million of Class FA~~ limited liability company interests (the ~~“Class FA” shares, or the “founder shares”~~“Public Offering”) ~~and up~~pursuant to ~~$115 million of Class A limited liability company interests (the “Class A” shares) (one of the classes of shares that constitutenon-founder~~ shares). On February 7, 2018, the Company met the minimum offering requirement of $80 million in Class FA shares under the Private Placement, at which point the Company commenced operations, and it issued approximately 3.3 million Class FA shares at $25.00 per Class FA share resulting in gross proceeds of approximately $81.7 million. No Class A shares were sold under the Private Placement.

~~In October 2016, the Company confidentially submitted~~ a registration statement on FormS-1 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) ~~in connection with the proposed offering of shares of its limited liability company interests (the “Public Offering” and together with the Private Placement, the “Offerings”)~~. ~~The Registration Statement for the Public Offering was declared effective by the SEC on March 7, 2018.~~ Through its Public Offering, the Company is offering, in any combination, four classes of shares: Class A shares, Class T shares, Class D shares and Class I shares (collectively, the~~“non-founder~~ “Non-founder shares” and together with the Founder ~~Shares,~~shares (as described below), the “Shares”). In January 2020, the Company’s board of directors approved an extension of the Public Offering until March 7, 2021. Subject to requirements under the Securities Act of 1933, as amended (the “Securities Act”) and the applicable state securities laws of any jurisdiction, the Company intends to conduct the Public Offering until March 7, 2021. However, the Company reserves the right to further extend the outside date of the Public Offering or terminate the Public Offering at any time in its sole discretion.

In April and June 2019, the Company launched separate Class FA private offerings of up to $50.0 million each of Class FA shares (the “Class FA Private Offering” and the “Follow-On Class FA Private Offering”, respectively; collectively, the “Class FA Private Offerings”) pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act. The Class FA Private Offering closed in December 2019 and the Follow-On Class FA Private Offering closed in March 2020.

In January 2020, the Company’s board of directors authorized the designation of Class S shares of the Company’s common stock (“Class S shares” and together with Class FA shares, “Founder shares”), and approved a private offering of Class S shares (the “Class S Private Offering”, and together with the Class FA Private Offerings and the Public Offering, the “Offerings”) of up to a maximum of $50.0 million in Class S shares. The Class S Private Offering is being conducted pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act. The Company intends to conduct the Class S Private Offering until the earlier of (i) the date the Company has sold the maximum amount of the Class S Private Offering or (ii) six full months from the commencement of the Class S Private Offering. However, the Company reserves the right to extend the outside date of the Class S Private Offering in its sole discretion but in no event longer than an additional three full months.

See Note 7. “Capital Transactions” and Note 12. “Subsequent Events” for additional information related to the Offerings.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

2. Significant Accounting Policies

Basis of Presentation

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained in the Financial Accounting Standards Board Accounting Standards Codification (the “Codification” or “ASC”), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties.

In the opinion of management, the condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and necessary for the fair presentation of financial results as of and for the periods presented.

Although the Company is organized and intends to conduct its business in a manner so that it is not required to register as an investment company under the Investment Company Act, its financial statements are prepared using the specialized accounting principles of ASC Topic 946, “Financial Services—Investment Companies” (“ASC Topic 946”) to utilize investment company accounting. The Company obtains funds through the issuance of equity interests to multiple unrelated investors, and provides such investors with investment management services. Further, the Company’s business strategy is to acquire interests in middle-market U.S. businesses to provide current income and long term capital appreciation, while protecting invested capital. Overall, the Company believes that the use of investment company accounting on a fair value basis is consistent with the management of its assets on a fair value basis, and makes the Company’s financial statements more useful to investors and other financial statement users in facilitating the evaluation of an investment in the Company as compared to other investment products in the marketplace.

Principles of Consolidation

Under ASC Topic 946 ~~“Financial Services—Investment Companies” (“ASC Topic 946”)~~ the Company is precluded from consolidating any entity other than ~~another~~an investment company or an operating company which provides substantially all of its services to benefit the Company. In accordance therewith, the Company has consolidated the results of its wholly owned subsidiaries which provide services to the Company in its condensed consolidated financial statements. However, the Company has not consolidated the results of its subsidiaries in which the Company holds debt and equity investments. All intercompany account balances and transactions have been eliminated in consolidation.

~~Cash~~

Risks and Uncertainties

The recent outbreak of the novel coronavirus (“COVID-19”) pandemic around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by, among other things, instituting quarantines, mandating business and school closures, requiring restrictions on travel and issuing “shelter-in-place” and/or “stay-at-home” orders. Such actions are creating significant disruption in global supply chains, and adversely impacting a number of industries.

The major disruption caused by COVID-19 brought to a halt most economic activity in most of the United States resulting in a significant increase in unemployment claims and will likely result in a significant decline in the U.S. Gross Domestic Product.

COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the financial and credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19, and (vi) the negative impact on its portfolio companies.

Cash ~~Equivalents~~

Cash consists of demand deposits at commercial ~~banks~~banks. Cash is carried at cost plus accrued interest, which approximates fair value. The Company deposits its cash with ~~original maturities~~highly-rated banking corporations and, at times, cash deposits may exceed the insured limits under applicable law.

Restricted Cash

The Company’s restricted cash as of ~~three months or less from~~December 31, 2019 consisted of escrowed funds held with an affiliate of the ~~date~~Sub-Manager for investment purposes. The Company had no restricted cash as of ~~purchase.~~

March 31, 2020.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Use of Estimates

Management makes estimates and assumptions related to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the financial statement in conformity with generally accepted accounting principles. ~~Actual~~The uncertainty surrounding the COVID-19 pandemic may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and actual results could differ from those estimates.

Valuation of Investments

ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) clarifies that the fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs.

In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is defined as a market in which transactions for the asset or liability occur with sufficient pricing information on an ongoing basis. Publicly listed equity and debt securities and listed derivatives that are traded on major securities exchanges and publicly traded equity options are generally valued using Level 1 inputs. If a price for ~~a Level 1~~an asset cannot be determined based upon this established process, it shall then be valued as a Level 2 or Level 3 asset.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following: (i) quoted prices for similar assets in active markets; (ii) quoted prices for identical or similar assets in markets that are not active; (iii) inputs that are derived principally from or corroborated by observable market data by correlation or other means; and (iv) inputs other than quoted prices that are observable for the assets. Fixed income and derivative assets, where there is an observable secondary trading market and through which pricing inputs are available through pricing services or broker quotes, are generally valued using Level 2 inputs. If a price for ~~a Level 2~~an asset cannot be determined based upon this established process, it shall then be valued as a Level 3 asset.

Level 3 – Unobservable inputs for the asset or liability being valued. Unobservable inputs will be used to measure fair value to the extent that observable inputs are not available and such inputs will be based on the best information available in the circumstances, which under certain circumstances might include the Manager’s or theSub-Manager’s own data. Level 3 inputs may include, but are not limited to, capitalization and discount rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. Certain assets may be valued based upon estimated value of underlying collateral and include adjustments deemed necessary for estimates of costs to obtain control and liquidate available collateral. Thenon-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence. Debt and equity investments in private companies or assets valued using the market or income approach are generally valued using Level 3 inputs.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls will be determined 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 judgment and considers factors specific to each asset.

The Company’s board of directors is responsible for determining in good faith the fair value of the Company’s investments in accordance with the valuation policy and procedures approved by the board of directors, based on, among other ~~things,~~factors, the input of the Manager, theSub-Manager, ~~management,~~ its audit committee, and the independent third-party valuation firm. The determination of the fair value of the Company’s assets requires judgment, especially with respect to assets for which market prices are not available. For most of the Company’s assets, market prices will not be available. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a readily available market value existed for such assets, and the differences could be material. Because the calculation of the Company’s net asset value is based, in part, on the fair value of its assets, the Company’s calculation of net asset value is subjective and could be adversely affected if the determinations regarding the fair value of its assets were materially

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

higher than the values that the Company ultimately realizes upon the disposal of such assets. Furthermore, through the valuation process, the Company’s board of directors may determine that the fair value of the Company’s assets differs materially from the values that were provided by the independent valuation firm.

The Company may also look to private merger and acquisition statistics, public trading multiples adjusted for illiquidity and other factors, valuations implied by third-party investments in the businesses or industry practices in determining fair value. The Company may also consider the size and scope of a business and its specific strengths and weaknesses, as well as any other factors it deems relevant in assessing the value.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments

The Company will measure realized gains or losses as the difference between the net proceeds from the sale, repayment, or disposal of an asset and the adjusted cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in asset values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Income Recognition

Interest Income– Interest income is recorded on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest on loans and debt securities for accounting purposes if it has reason to doubt its ability to collect such interest.

The Company places loans onnon-accrual status when principal and interest are past due 90 days or more or when there is a reasonable doubt that the Company will collect principal or interest. Accrued interest is generally reversed when a loan is placed onnon-accrual. Interest payments received onnon-accrual loans may be recognized as income or applied to principal depending upon management’s judgment.Non-accrual loans are generally restored to accrual status when past due ~~and~~ principal and interest isamounts are paid and, in management’s judgment, isare likely to remain current.

Since inception, the Company has not experienced any past due payments on any of its loans.

Dividend Income – Dividend income is recorded ~~(1) on theex-dividend~~ ~~date for publicly issued securities and (2)~~ on the record date for privately issued ~~securities.~~

securities, but excludes any portion of distributions that are treated as a return of capital. Each distribution received from an equity investment is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments as dividend income unless there is sufficient current or accumulated earnings prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. Since inception, all distributions have been classified as dividend income.

Paid in Capital –

The Company records the proceeds from the sale of its common shares on a net basis to (i) capital stock and (ii) paid in capital in excess of par value, excluding upfront selling commissions and placement agent/dealer manager fees.

Share Repurchases

Under the Company’s share repurchase program (the “Share Repurchase Program”), a shareholder’s shares are deemed to have been redeemed as of the repurchase date, which will generally be the last business day of the month of a calendar quarter. Shares redeemed are retired and not available for reissue. See Note 7. “Capital Transactions” for additional information.

Organization and Offering Expenses

Organization expenses are expensed on the Company’s ~~statement~~statements of operations as incurred. Offering expenses, which consist of amounts incurred for items such as legal, accounting, regulatory and printing work incurred related to the Offerings, are capitalized on the Company’s statements of assets and liabilities as deferred offering expenses and expensed to the Company’s statements of operations over the lesser of the offering period or 12 months; however, the end of the deferral period will not exceed 12 months from the date the offering expense is incurred by the Manager and the Sub-Manager.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Distribution and Shareholder Servicing Fees

~~Sub-Manager.~~Under the Public Offering, the Company pays distribution and shareholder servicing fees with respect to its Class T and Class D shares, as described further below in

Note 5. “Related Party Transactions.” The Company records the distribution and shareholder servicing fees, which accrue daily, in its condensed statements of operations as they are incurred.

Deferred Financing Costs

Financing costs, including upfront fees, commitment fees and legal fees related to the Line of Credit (as defined and further described in Note 8. “Borrowings”) will be deferred and amortized over the life of the related financing instrument using the effective yield method. The amortization of deferred financing costs is included in general and administrative expense in the condensed statements of operations.

Allocation of Profit and Loss

Class-specific expenses, including base management fees, total return incentive fees, organization and offering expenses, distribution and shareholder servicing fees, expense support and certain transfer agent fees, are allocated to each share class of common shares in accordance with how such fees are attributable to the particular share classes, as determined by the Company’s board of directors, the Company’s governing agreements and, in certain cases, expenses which are specifically identifiable to a specific share class.

Income and expenses which are not class-specific are allocated monthly pro rata among the share classes based on shares outstanding as of the end of the month.

Earnings per Share

and Net Investment Income per Share

Earnings per share isand net investment income per share are calculated for each share class of common shares based upon the weighted average number of common shares outstanding during the reporting period.

Distributions

~~In March 2018, the~~

The Company’s board of directors ~~began~~has declared and intends to continue to declare ~~cash~~ distributions ~~to shareholders~~ based on ~~weekly~~monthly record dates and such distributions are expected to be paid on a monthly ~~basis.~~basis one month in arrears. Distributions are made on all classes of the Company’s shares at the same time.

~~U.S. Federal Income Taxes~~

The Company has adopted a distribution reinvestment plan that provides for reinvestment of distributions on behalf of shareholders. Non-founder shareholders participating in the distribution reinvestment plan will have their cash distribution automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable at a price per share equivalent to the then current public offering price, net of up-front selling commissions and dealer manager fees. Cash distributions paid on Class FA shares participating in the distribution reinvestment plan are reinvested in additional Class A shares.

Income Taxes

Under GAAP, the Company is subject to the provisions of ASC 740, “Income Taxes.” The Company follows the authoritative guidance on accounting for uncertainty in income taxes and concluded it has no material uncertain tax positions to be recognized at this time. If applicable, the Company will recognize interest and penalties related to unrecognized tax benefits as income tax expense in the statements of operations.

The Company has operated and expects ~~that it will~~to continue to operate so that it will qualify to be treated for U.S. federal income tax purposes as a partnership, and not as an association or a publicly traded partnership taxable as a corporation. Generally, the Company will not be taxable as a corporation if 90% or more of its gross income for each taxable year consists of “qualifying income” (generally, interest (other than interest generated from a financial business), dividends, real property rents, gain from the sale of assets that produce qualifying income and certain other items) and the Company is not required to register under the Investment Company Act (the “qualifying income exception”).

~~3. Investments~~

~~In October 2017,~~ As a partnership, the individual shareholders are responsible for their proportionate share of the Company’s taxable income.

The Company has analyzed its tax positions taken on its income tax returns for all open tax years (tax years ended December 31, 2019 and 2018), and has concluded that no provision for income tax is required in the Company’s financial statements. During each of the three months ended March 31, 2020 and 2019, the Company ~~entered into a merger agreement with LD Merger Sub, Inc., a wholly owned subsidiary of~~did not incur any interest or penalties.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

3. Investments

During the three months ended March 31, 2020, the Company co-invested in two additional portfolio companies, Resolution Economics, LLC (“Resolution Economics”) and ~~LD Parent, Inc., the parent company of Lawn Doctor, Inc.~~Blue Ridge ESOP Associates (“Lawn Doctor”). The merger agreement was amended on February 6, 2018. On February 7, 2018, pursuant to the terms of the merger agreement and an exchange agreement between the Company and the Leichtman-Levine Living Trust, an affiliate of the~~Sub-Manager~~ ~~(the “Exchange Agreement”~~Blue Ridge”), ~~the Company acquired an~~for approximately ~~63.9% equity interest~~$22.5 million in ~~Lawn Doctor from an affiliate of the~~aggregate.

~~Sub-Manager,~~ through an investment consisting of common equity and a debt investment in the form of a secured second lien loan to Lawn Doctor. After the closing of the merger, the consummation of the equity contribution pursuant to the Exchange Agreement and subsequent purchases of common equity in Lawn Doctor by certain members of Lawn Doctor’s senior management team, the Company owns approximately 62.9% of the outstanding equity in Lawn Doctor. As of March 31, ~~2018, the cost basis of~~2020 and December 31, 2019, the Company’s ~~investments in Lawn Doctor was approximately $30.5 million of common equity and $15.0 million of a debt investment. The purchase price~~investment portfolio is ~~subject to adjustment based on, among other factors, Lawn Doctor’s working capital and indebtedness at the closing with atrue-up~~summarized as follows: ~~adjustment.~~

In October 2017, the Company entered into a merger agreement with PFHI Merger Sub, Inc., a wholly owned subsidiary of the Company, and Polyform Holdings, Inc. (“Polyform”). The merger agreement was amended on February 6, 2018. On February 7, 2018, pursuant to the terms of the merger agreement, the Company acquired an approximately 87.1% equity interest in Polyform from an affiliate of the~~Sub-Manager,~~ ~~through an investment consisting of common equity and a debt investment in the form of a first lien secured term loan to Polyform. As of March 31, 2018, the cost basis of~~



	As of March 31, 2020
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior debt
Senior secured debt - first lien	$	17,700,000	$	17,700,000	10.8	%	9.1	%
Senior secured debt - second lien	35,942,454		35,942,454		22.0		18.5
Total senior debt	53,642,454		53,642,454		32.8		27.6
Equity	102,131,885		109,658,884		67.2		56.3
Total investments	$	155,774,339	$	163,301,338	100.0	%	83.9	%



	As of December 31, 2019
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior debt
Senior secured debt - first lien	$	17,700,000	$	17,700,000	12.3	%	10.1	%
Senior secured debt - second lien	30,467,603		30,467,603		21.1		17.5
Total senior debt	48,167,603		48,167,603		33.4		27.6
Equity	85,106,736		96,027,397		66.6		55.1
Total investments	$	133,274,339	$	144,195,000	100.0	%	82.7	%

Collectively, the Company’s investments in Polyform was approximately $15.8 million of common equity and $15.7 million of a debt investment. The purchase price is subject to adjustment based on, among other factors, Polyform’s working capital and indebtedness at the closing with a~~true-up~~ ~~adjustment.~~

~~The~~ debt investments ~~in the form of a secured second lien loan to Lawn Doctor and in the form of a first lien secured term loan to Polyform, as described above,~~ accrue interest at a weighted average per annum rate of ~~16%. Each loan will mature in August 2023.~~15.5% and have weighted average remaining years to maturity of 4.1 years as of March 31, 2020. The note purchase agreements contain customary covenants and events of default.

As of March 31, ~~2018,~~2020, all of the Company’s ~~investment~~ portfolio ~~consisted of four distinct positions, summarized as follows:~~

   As of March 31, 2018
Asset Category    Cost    Fair Value    Fair Value
Percentage of
Investment
Portfolio Fair Value
Percentage of
Net Assets
Senior debt

Senior secured debt - first lien
   $ 15,700,000    $ 15,700,000    20.3 % 19.1 %
Senior secured debt - second lien
   15,000,000    15,000,000    19.4 18.3






Total senior debt
   $ 30,700,000    $ 30,700,000    39.7 37.4
Equity
   46,231,763    46,756,212    60.3 56.9






Total investments
   $ 76,931,763    $ 77,456,212    100.0 % 94.3 %

companies were in compliance with their respective debt covenants.

As of March 31, ~~2018,~~2020 and December 31, 2019, none of the Company’s debt investments were on non-accrual status.

~~non-accrual~~ ~~status.~~

The industry and geographic dispersion of the Company’s investment portfolio as a percentage of total fair value of the Company’s investments as of March 31, ~~2018~~2020 and December 31, 2019 were as follows:



Industry	March 31, 2020		December 31, 2019
Commercial and Professional Services	34.0	%	39.2	%
Information Services and Advisory Solutions	27.6		32.2
Hobby Goods and Supplies	18.6		21.7
Business Services	13.7		—
Manufacturing	6.1		6.9
Total	100.0	%	100.0	%



Geographic Dispersion⁽¹⁾	March 31, 2020		December 31, 2019
United States	100.0	%	100.0	%
Total	100.0	%	100.0	%

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

FOOTNOTE:


~~Industry~~	~~As of~~ ~~March 31, 2018~~
~~Modeling Clay~~		~~40.6~~	%
~~Commercial and Professional Services~~		~~59.4~~

~~Total~~		~~100.0~~	%


~~Geographic Dispersion~~ ⁽¹⁾	~~As of~~ ~~March 31, 2018~~
~~United States~~		~~100.0~~	%

~~Total~~		~~100.0~~	%

⁽¹⁾	The geographic dispersion is determined by the portfolio company’s country of domicile or the jurisdiction of the security’s issuer.

All ~~portfolio companies~~investment positions held at March 31, ~~2018~~2020 and December 31, 2019 were denominated in U.S. dollars.

Summarized Operating Data

The following tables present unaudited summarized operating data for ~~Lawn Doctor and Polyform (the “initial businesses”)~~the Company’s portfolio companies which met at least one of the significance tests under Rule 8-03(b) of Regulation S-X for the ~~period February 7, 2018 (the date we acquired the initial businesses) through~~three months ended March 31, ~~2018~~2020 and ~~unaudited~~2019, and summarized balance sheet data as of March 31, ~~2018:~~

2020 (unaudited) and December 31, 2019, as applicable:

Lawn Doctor,

Inc. (“Lawn Doctor”)

As of March 31, 2020 and December 31, 2019, the Company owned approximately 62% of the outstanding equity in Lawn Doctor on an undiluted basis.

Summarized Operating Data (Unaudited)

   Period February 7,
2018⁽¹⁾ through
March 31, 2018
Revenues
   $ 3,118,748
Expenses
   (3,087,288 )


Income before taxes
   31,460
Income tax expense
   (7,825 )


Net Income
   $ 23,635



	Three Months Ended March 31,
	2020			2019
Revenues	$	6,723,173		$	6,451,501
Expenses	(7,082,077		)	(6,690,735		)
Loss before taxes	(358,904		)	(239,234		)
Income tax benefit	111,500			63,588
Consolidated net loss	(247,404		)	(175,646		)
Net loss attributable to non-controlling interest	71,310			36,635
Net loss attributable to Lawn Doctor	$	(176,094	)	$	(139,011	)

Summarized Balance Sheet Data ~~(Unaudited)~~

   As of
March 31, 2018
Current assets
   $ 7,016,164
Non-current assets
   $ 28,927,037
Current liabilities
   $ 4,081,423
Non-current liabilities
   $ 38,785,943
Stockholders’ Equity
   $ (6,924,165 )

March 31, 2020 (Unaudited) December 31, 2019
Current assets $ 10,176,387
$ 5,679,790
Non-current assets 94,167,915
96,327,351
Current liabilities 4,943,885
5,208,665
Non-current liabilities 56,006,676
52,854,284
Non-controlling interest (250,435 ) (179,125 )
Stockholders’ equity 43,644,176
44,123,317

Polyform

Products, Co. (“Polyform”)

As of March 31, 2020 and December 31, 2019, the Company owned approximately 87% of the outstanding equity in Polyform on an undiluted basis.

Summarized Operating Data (Unaudited)

   Period February 7,
2018⁽¹⁾ through
March 31, 2018
Revenues
   $ 2,417,593
Expenses
   (2,897,329 )


Net loss before taxes
   (479,736 )
Income tax benefit
   48,000


Net loss
   $ (431,736 )



	Three Months Ended March 31,
	2020			2019
Revenues	$	4,075,089		$	4,405,864
Expenses	(4,207,185		)	(4,397,038		)
(Loss) income before income taxes	(132,096		)	8,826
Income tax benefit (expense)	37,000			(3,000		)
Net (loss) income	$	(95,096	)	$	5,826

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Summarized Balance Sheet Data



	March 31, 2020 (Unaudited)		December 31, 2019
Current assets	$	7,318,843	$	5,917,238
Non-current assets	31,120,055		31,474,762
Current liabilities	2,676,525		1,484,148
Non-current liabilities	21,040,935		21,123,045
Stockholders’ equity	14,721,438		14,784,807

Auriemma U.S. Roundtables (“Roundtables”)

As of March 31, 2020 and December 31, 2019, the Company owned approximately 81% of the outstanding equity in Roundtables on an undiluted basis.

Summarized Operating Data (Unaudited)

   As of
March 31, 2018
Current assets
   $ 5,771,064
Non-current assets
   $ 22,436,533
Current liabilities
   $ 1,167,304
Non-current liabilities
   $ 20,567,473
Stockholders’ Equity
   $ 6,472,820

⁽¹⁾



	Three Months Ended March 31, 2020
Revenues	$	2,691,899
Expenses	(3,386,663		)
Loss before income taxes	(694,764		)
Income tax benefit	176,758
Net loss	$	(518,006	)

Summarized Balance Sheet Data



	March 31, 2020 (Unaudited)		December 31, 2019
Current assets	$	8,912,619	$	2,495,539
Non-current assets	60,733,542		61,232,699
Current liabilities	10,299,339		3,686,652
Non-current liabilities	20,769,470		20,946,228
Stockholders’ equity	38,577,352		39,095,358

FOOTNOTE:


⁽¹⁾	~~February 7, 2018 is the date the~~The Company acquired ~~the portfolio companies.~~Roundtables on August 1, 2019.

4. Fair Value of Financial Instruments

The Company’s investments were categorized in the fair value hierarchy described in Note 2. “Significant Accounting ~~Policies”,~~Policies,” as follows as of March 31, ~~2018:~~

   As of March 31, 2018
Description
   Level 1    Level 2    Level 3    Total
Senior debt
   $ —      $ —      $ 30,700,000    $ 30,700,000
Equity
   —      —      46,756,212    46,756,212








Total investments
   $ —      $ —      $ 77,456,212    $ 77,456,212

~~There were no transfers between Level 1~~2020 and ~~Level 2 during the period from February 7, 2018 (commencement of operations) through March~~December 31, ~~2018. The carrying value of cash is classified as Level 1 with respect to the fair value hierarchy. For the period from February 7, 2018 (commencement of operations) through March~~2019:



	As of March 31, 2020								As of December 31, 2019
Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Senior Debt	$	—	$	—	$	53,642,454	$	53,642,454	$	—	$	—	$	48,167,603	$	48,167,603
Equity	—		—		109,658,884		109,658,884		—		—		96,027,397		96,027,397
Total investments	$	—	$	—	$	163,301,338	$	163,301,338	$	—	$	—	$	144,195,000	$	144,195,000

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, ~~2018, the Company held four distinct investment positions classified as Level 3, representing an aggregate fair value of $77.5 million or 100.0% of the total investment portfolio.~~ 2020

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of March 31, ~~2018~~2020 and December 31, 2019 were as follows:

As of March 31, 2018
Asset Group
   Fair Value⁽¹⁾
Valuation Techniques

Unobservable Inputs

Range
(Weighted Average) ⁽²⁾

Impact to Valuation
from an Increase in
Input ⁽³⁾
Senior Debt
   $ 30,700,000
Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

10.5% - 13.5% (11.5%)
7.5x – 12.1x (10.5x)
8.0x – 12.0x (10.7x)

Decrease
Increase
Increase
Equity
   46,756,212
Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

10.5% - 13.5% (11.5%)
7.5x – 12.1x (10.5x)
8.0x – 12.0x (10.7x)

Decrease
Increase
Increase



Total
   $ 77,456,212

March 31, 2020

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

(Weighted Average)⁽¹⁾

Impact to Valuation from an Increase in

Input ⁽²⁾

Senior Debt

51,001,610

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% - 14.0% (10.6%)
7.5x – 15.3x (12.2x)
7.8x – 14.5x (12.1x)

Decrease
Increase
Increase

2,640,844

Transaction Precedent

Transaction Price

N/A

Equity

99,799,728

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% - 14.0% (10.6%)
7.5x – 15.3x (12.2x)
7.8x – 14.5x (12.1x)

Decrease
Increase
Increase

9,859,156

Transaction Precedent

Transaction Price

N/A

Total

163,301,338

December 31, 2019

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

(Weighted Average)⁽¹⁾

Impact to Valuation from an Increase in

Input ⁽²⁾

Senior Debt

44,814,338

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% - 14.0% (10.3%)
7.8x – 14.3x (12.3x)
8.0x – 14.5x (12.2x)

Decrease
Increase
Increase

3,353,265

Transaction Precedent

Transaction Price

N/A

Equity

89,380,662

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% - 14.0% (10.3%)
7.8x – 14.3x (12.3x)
8.0x – 14.5x (12.2x)

Decrease
Increase
Increase

6,646,735

Transaction Precedent

Transaction Price

N/A

Total

144,195,000

FOOTNOTES:


⁽¹⁾	~~Certain investments may be valued at cost for a period~~Discount rates are relative to the enterprise value of ~~time after an acquisition as~~ the ~~best indicator~~portfolio companies and are not the market yields on the associated debt investments. Unobservable inputs were weighted by the relative fair value of ~~fair value.~~the investments.


⁽²⁾	~~Weighted average amounts are based on the estimated fair values.~~

⁽³⁾

This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

The preceding tables ~~represent~~include the significant unobservable inputs as they relate to the Company’s determination of fair values for its investments categorized within Level 3 as of March 31, ~~2018.~~2020 and December 31, 2019. In addition to the techniques and inputs noted in the ~~table~~tables above, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the fair value estimates for the Company’s investments. Any significant increases or decreases in the unobservable inputs would result in significant increases or decreases in the fair value of the Company’s investments.

Investments that do not have a readily available market value are valued utilizing a market approach, an income approach (i.e. discounted cash flow approach), a transaction approach, or a combination of such approaches, as appropriate. The market ~~comparables~~ approach uses prices, including third party indicative broker quotes, and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The transaction approach uses pricing indications derived from recent precedent merger and acquisition transactions involving comparable target companies. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) that are discounted based on a required or expected discount rate to derive a ~~single~~ present value ~~amount.~~amount range. The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors the Company may take into account to determine the fair value of its investments include, as relevant: available current market data, including an assessment of the credit quality of the security’s issuer, relevant and applicable market trading and transaction comparables, applicable market yields and multiples, illiquidity discounts, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

company does business, comparisons of financial ratios of peer companies that are public, data derived from merger and acquisition activities for comparable companies, and enterprise values, among other factors.

Due to the significant market dislocation in March 2020 caused by the COVID-19 pandemic, the fair values of the Company’s portfolio companies were impacted by a combination of variability in EBITDA, decreases in public market multiples and increases in the risk premium in discount rates used to value the portfolio companies. As a result, during the three months ended March 31, 2020, the Company recognized unrealized depreciation of approximately $3.4 million on its equity investments in Lawn Doctor, Polyform and Roundtables. The fair values of the Company’s investments may be further negatively impacted after March 31, 2020 by the COVID-19 pandemic or by circumstances and events that are not yet known.

The following tables provide ~~reconciliations for the period from February 7, 2018 (commencement of operations) through March 31, 2018~~reconciliation of investments for which Level 3 inputs were used in determining fair ~~value:~~

   Period from February 7, 2018
(commencement of operations) through March 31, 2018
   Senior Debt    Equity    Total
Fair value balance as of February 7, 2018
   $ —      $ —      $ —
Additions
   30,700,000    46,231,763    76,931,763
Net change in unrealized appreciation⁽¹⁾
   —      524,449    524,449






Fair value balance as of March 31, 2018
   $ 30,700,000    $ 46,756,212    $ 77,456,212






Change in net unrealized appreciation in investments held as of March 31, 2018⁽¹⁾
   $ —      $ 524,449    $ 524,449

value for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31, 2020
	Senior Debt		Equity			Total
Fair value balance as of January 1, 2020	$	48,167,603	$	96,027,397		$	144,195,000
Additions	5,474,851		17,025,149			22,500,000
Net change in unrealized depreciation ⁽¹⁾	—		(3,393,662		)	(3,393,662		)
Fair value balance as of March 31, 2020	$	53,642,454	$	109,658,884		$	163,301,338
Change in net unrealized depreciation in investments held as of March 31, 2020 ⁽¹⁾	$	—	$	(3,393,662	)	$	(3,393,662	)



	Three Months Ended March 31, 2019
	Senior Debt		Equity		Total
Fair value balance as of January 1, 2019	$	30,700,000	$	51,800,000	$	82,500,000
Net change in unrealized appreciation ⁽¹⁾	—		281,000		281,000
Fair value balance as of March 31, 2019	$	30,700,000	$	52,081,000	$	82,781,000
Change in net unrealized appreciation in investments held as of March 31, 2019 ⁽¹⁾	$	—	$	281,000	$	281,000

FOOTNOTE:


⁽¹⁾	Included in net change in unrealized appreciation (depreciation) on investments in the condensed consolidated ~~statement~~statements of operations.

No securities were transferred into or out of the Level 3 hierarchy during the period from February 7, 2018 (commencement of operations) through March 31, 2018. All realized and unrealized gains and losses are included in earnings and are reported as separate line items within the Company’s statement of operations.

5. Related Party Transactions

~~As of December 31, 2017, the Company had issued 4,000 shares of the Company’s Class FA shares, to each of the Manager andSub-Manager,~~ ~~for an aggregate purchase price of $0.2 million (total of 8,000 Class FA shares). No selling commissions or dealer manager fees were paid in connection with the issuances.~~

On February 7, 2018, the Company commenced operations when it met the minimum offering requirement of $80 million in Class FA shares under its Private Placement. The $81.7 million in gross proceeds included a cash capital contribution of $2.4 million from the Manager in exchange for 96,000 Class FA shares and a cash capital contribution of $9.5 million from CNL Strategic Capital Investment, LLC, which is indirectly controlled by James M. Seneff, Jr., the chairman of the Company, in exchange for 380,000 Class FA shares. The $81.7 million also included 96,000 Class FA shares received in exchange for $2.4 million of~~non-cash~~ ~~consideration in the form of equity interests in Lawn Doctor received from an affiliate of theSub-Manager~~ pursuant to the Exchange Agreement. The $81.7 million in gross proceeds also included a cash capital contribution of approximately $0.4 million in exchange for 15,000 Class FA shares, from other individuals affiliated with the Manager.

The Manager andSub-Manager, along with certain affiliates of the Manager orSub-Manager, will receive fees and compensation in connection with the ~~Private Placement and Public Offering~~Offerings, as well as the acquisition, management and sale of the assets of the Company, as follows:

Dealer Manager/Placement ~~Agent/Dealer Manager~~

Agent

Commissions — ~~Under the Private Placement, there was no selling commission for the sale of Class FA shares.~~ Under the Public Offering, the Company ~~will pay~~pays CNL Securities Corp. (the “Managing Dealer” in connection with the Public Offering and the “Placement Agent” in connection with the Class FA Private ~~Placement)~~Offerings and Class S Private Offering), an affiliate of the Manager, a selling commission up to 6.00% of the sale price for each Class A share and 3.00% of the sale price for each Class T share sold in the Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). Under the Follow-On Class FA Private Offering, the Company paid the Placement Agent a selling commission of up to 5.50% of the sale price for each Class FA share sold. There was no selling commission for the sale of Class FA shares in the Class FA Private Offering. Under the Class S Private Offering, the Company pays the Placement Agent a selling commission of up to 2.00% of the sale price for each Class S shares sold. The Managing ~~Dealer~~Dealer/Placement Agent may reallow all or a portion of the selling commissions to participating broker-dealers.

~~Placement Agent/~~

Dealer Manager ~~Fee~~~~— Under the Private~~ Fee/Placement ~~there was no placement agent fee for the sale of Class FA shares.~~Agent — Under the Public Offering, the Company ~~will pay~~pays the Managing Dealer a dealer manager fee of up to 2.50% of the price of each Class A share and 1.75% of the price of each Class T share sold in the Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). Under the Follow-On Class FA Private Offering, the Company paid the Placement Agent a placement agent fee of up to 3.00% of the price of each Class FA share sold. There was no placement agent fee for the sale of Class FA shares sold in the Class FA Private Offering. Under the Class S Private Offering, the

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Company pays the Placement Agent a placement fee of up to 1.5% of the price of each Class S share sold. The Managing ~~Dealer~~Dealer/Placement Agent may reallow all or a portion of such dealer ~~manager~~manager/placement agent fees to participating broker-dealers.

~~Annual~~

Distribution and Shareholder Servicing Fee— Under the Public Offering, ~~beginning no later than the end of June 2018,~~ the Company ~~will also pay~~pays the Managing Dealer ~~an annual~~a distribution and shareholder servicing fee, subject to certain limits, with respect to its Class T and Class D shares (excluding Class T ~~Shares~~shares and Class D shares sold through the distribution reinvestment plan and those received as share distributions) in an annual amount equal to 1.00% and 0.50%, respectively, of its current net asset value per share, as disclosed in its periodic or current reports, payable on a monthly basis. The ~~annual~~ distribution and shareholder servicing fee ~~will accrue~~accrues daily and beis paid monthly in arrears. The Managing Dealer may reallow all or a portion of the ~~annual~~ distribution and shareholder servicing fee to the broker-dealer who sold the Class T or Class D shares or, if applicable, to a servicing broker-dealer of the Class T or Class D shares or a fund supermarket platform featuring Class D shares, so long as the broker-dealer or financial intermediary has entered into a contractual agreement with the Managing Dealer that provides for such reallowance. The ~~annual~~ distribution and shareholder servicing ~~fees~~fee is an ongoing fee that ~~will be~~is allocated among all Class T and Class D shares, respectively, and ~~will~~is not be paid at the time of purchase.

Manager and/or Sub-Manager

~~Sub-Manager~~

Organization and Offering Costs — Under ~~each of~~ the ~~Private Placement and Public Offering,~~Offerings, the Company ~~will reimburse~~reimburses the Manager and ~~its~~the Sub-Manager, along with their respective affiliates, for the organization and offering costs (other than selling commissions and placement agent / dealer manager fees) they have incurred on the Company’s behalf only to the extent that such expenses do not exceed (A) 1.0% of the cumulative gross proceeds from the Class FA Private ~~Placement~~Offerings and the Class S Private Offering (collectively, the “Private Offerings”), and (B) 1.5% of the cumulative gross proceeds from the Public Offering. ~~As of March 31, 2018, the Manager andSub-Manager,~~ ~~along with their respective affiliates, have incurred organization and offering costs of approximately $3.6 million. As of March 31, 2018, the~~The Company ~~had~~ incurred an obligation to reimburse the Manager andSub-Manager for approximately ~~$0.7~~$0.2 million in organization and offering costs based on actual amounts raised through the Offerings during each of ~~Class FA shares under its Private Placement, all~~the three months ended March 31, 2020 and 2019. The Manager and the Sub-Manager have incurred additional organization and offering costs of ~~which was outstanding~~approximately $5.5 million on behalf of the Company in connection with the Offerings (exceeding the respective limitations) as of March 31, ~~2018.~~

2020. These costs will be recognized by the Company in future periods as the Company receives future offering proceeds from its Public Offering and Private Offerings to the extent such costs are within the 1.5% and 1.0% limitations, respectively.

Base Management Fee to Manager andSub-Manager— The Company ~~will pay~~pays each of the Manager and theSub-Manager 50% of the total base management fee for their services under the Management Agreement and theSub-Management Agreement, subject to any reduction or deferral of any such fees pursuant to the terms of the Expense Support and Conditional Reimbursement Agreement described below. The Company incurred base management fees of approximately $0.5 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively.

The base management fee ~~will be~~is calculated for each share class at an annual rate of (i) for the~~non-founder~~ Non-founder shares of a particular class, 2% of the product of (x) the Company’s average gross assets and (y) the ratio of~~non-founder~~ Non-founder share Average Adjusted Capital (as defined below), for a particular class to total Average Adjusted Capital and (ii) for the ~~founder~~Founder shares of a particular class, 1% of the product of (x) the Company’s average gross assets and (y) the ratio of outstanding ~~founder~~Founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital, in each case excluding cash, and will be payable monthly in arrears. The management fee for a certain month is calculated based on the average value of the Company’s gross assets at the end of that month and the immediately preceding calendar month. The determination of gross assets ~~will reflect~~reflects changes in the fair market value of the Company’s assets, which ~~will~~does not necessarily equal their notional value, reflecting both realized and unrealized capital ~~appreciation.~~appreciation or depreciation. Average Adjusted Capital of an applicable class is computed on the daily Adjusted Capital for such class for the actual number of days in such applicable month. The base management fee may be reduced or deferred by the Manager and theSub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement described below. For purposes of this calculation, “Average Adjusted Capital” for an applicable class is computed on the daily Adjusted Capital for such class for the actual number of days in such applicable quarter. The annual preference return of 7% and the relevant breakpoints of 8.75% and 7.777%, respectively, are also adjusted for the actual number of days in each calendar year, measured as of each calendar quarter end. “Adjusted Capital” is defined as cumulative proceeds generated from sales of ~~our~~the Company’s shares of a particular share class (including proceeds from the sale of shares pursuant to the distribution reinvestment plan, if any), net of sales load (upfront selling commissions and dealer manager fees), if any, reduced for the full amounts paid for share repurchases pursuant to any share repurchase program, if any, for such class.

Total Return Incentive Fee on Income to the Manager andSub-Manager — The Company ~~will~~ also ~~pay~~pays each of the Manager and theSub-Manager 50% of the total return incentive fee for their services under the Management Agreement and theSub-Management Agreement. The Company did not incur total return incentive fees during the three months ended March 31, 2020 and 2019.

The total return incentive fee ~~will be~~is based on the Total Return to Shareholders (as defined below) for each share class in any calendar year, payable annually in arrears. The Company ~~will accrue~~accrues (but does not pay) the total return incentive fee on a quarterly basis, to the extent that it is earned, and ~~will perform~~performs a final reconciliation and makes required payments at completion of each calendar year.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

The total return incentive fee may be reduced or deferred by the Manager and theSub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement described below. For purposes of this calculation, “Total Return to Shareholders” for any calendar quarter is calculated for each share class as the change in the net asset value for such share class plus total distributions for such share class calculated based on the Average Adjusted Capital for such class as of such calendar quarter end. The terms “Total Return toNon-founder Shareholders” and “Total Return to Founder Shareholders” means the Total Return to Shareholders specifically attributable to each particular share class of~~non-founder~~ Non-founder shares or ~~founder~~Founder shares, as applicable.

The total return incentive fee for each share class ~~will be~~is calculated as follows:

No total return incentive fee will be payable in any calendar year in which the annual Total Return to Shareholders of a particular share class does not exceed 7% (the “Annual Preferred Return”).

As it relates to the~~non-founder~~ Non-founder shares, all of the Total Return to Shareholders with respect to each particular share class of~~non-founder~~ Non-founder shares, if any, that exceeds the annual preferred return, but is less than or equal to 8.75%, or the~~“non-founder~~ “Non-founder breakpoint,” in any calendar year, will be payable to the Manager(“ (“Non-founder Catch Up”). TheNon-Founder Catch Up is intended to provide an incentive fee of 20% of the Total Return toNon-founder Shareholders of a particular share class once the Total Return toNon-founder Shareholders of a particular class exceeds 8.75% in any calendar year.

As it relates to ~~founder~~Founder shares, all of the Total Return to Founder Shareholders with respect to each particular share class of Founder shares, if any, that exceeds the annual preferred return, but is less than or equal to 7.777%, or the “founder breakpoint,” in any calendar year, will be payable to the Manager (“Founder Catch Up”). The Founder Catch Up is intended to provide an incentive fee of 10% of the Total Return to Founder Shareholders of a particular share class once the Total Return to Founder Shareholders of a particular class exceeds 7.777% in any calendar year.

For any quarter in which the Total Return to Shareholders of a particular share class exceeds the relevant breakpoint, the total return incentive fee of a particular share class shall equal, for~~non-founder~~ Non-founder shares, 20% of the Total Return toNon-founder Shareholders of a particular class, and for ~~founder~~Founder shares, 10% of the Total Return to Founder Shareholders of a particular class, in each case because the annual preferred and relevant catch ups will have been achieved.

For purposes of calculating the Total Return to Shareholders, the change in the Company’s net asset value is subject to a High Water Mark. The “High Water Mark” is equal to the highestyear-end net asset value, for each share class of the Company since inception, adjusted for any special distributions resulting from the sale of the Company’s assets, provided such adjustment is approved by the Company’s board of directors. If, as of each calendar year end, the Company’s net asset value for the applicable share class is (A) above the High Water Mark, then, for such calendar year, the Total Return to Shareholders calculation will include the increase in the Company’s net asset value for such share class in excess of the High Water Mark, and (B) if the Company’s net asset value for the applicable share class is below the High Water Mark, for such calendar year, (i) any increase in the Company’s per share net asset value will be disregarded in the calculation of Total Return to Shareholders for such share class while (ii) any decrease in the Company’s per share net asset value will be included the calculation of Total Return to Shareholders for such share class. For the year ending December 31, ~~2018,~~2019, the High Water ~~Mark~~Marks were $26.65 for Class FA shares, $26.44 for Class A shares, $26.54 for Class T shares, $26.23 for Class D shares and $26.55 for Class I shares. For the year ending December 31, 2020, the High Water Marks will be ~~$24.75.~~$27.64 for Class FA shares, $26.91 for Class A shares, $27.01 for Class T shares, $26.61 for Class D shares, $27.15 for Class I shares and $27.64 for Class S shares.

For purposes of this calculation, “Average Adjusted Capital” for an applicable class is computed on the daily Adjusted Capital for such class for the actual number of days in such applicable quarter. The ~~Company did not incur any incentive fees during~~annual preferred return of 7% and the ~~period from February 7, 2018 (commencement~~relevant breakpoints of ~~operations) through March 31, 2018.~~

8.75% and 7.777%, respectively, are also adjusted for the actual number of days in each calendar year, measured as of each calendar quarter end.

Reimbursement to Manager andSub-Manager for Operating Expenses — The Company ~~will reimburse~~reimburses the Manager and theSub-Manager and their respective affiliates for certain operating costs and expenses of third parties incurred in connection with their provision of services to the Company, including fees, costs, expenses, liabilities and obligations relating to the Company’s activities, acquisitions, dispositions, financings and business, subject to the terms of the Company’s limited liability company agreement, the Management Agreement, theSub-Management Agreement and the Expense Support and Conditional Reimbursement Agreement (as defined below). The Company ~~will~~does not reimburse the Manager andSub-Manager for administrative services performed by the Manager orSub-Manager for the benefit of the Company.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Expense Support and Conditional Reimbursement Agreement— The Company entered into an expense support and conditional reimbursement agreement with the Manager and theSub-Manager (the “Expense Support and Conditional Reimbursement Agreement”), which became effective on February 7, 2018, pursuant to which each of the Manager and theSub-Manager agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Manager and theSub-Manager under the Management Agreement and theSub-Management Agreement, as applicable, to the extent that the Company’s annual regular cash distributions exceed its annual net income (with certain adjustments). The amount of such expense support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of the Company’s distribution reinvestment plan) to shareholders minus (b) the available operating funds, as defined in the Expense Support and Conditional Reimbursement Agreement (the “Expense Support”). The Company recorded expense support due from the Manager and Sub-Manager of approximately $0.6 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively. Expense support is paid by the Manager and Sub-Manager annually in arrears.

The Expense Support amount ~~will be~~is borne equally by the Manager and theSub-Manager and ~~will be~~is calculated as of the last business day of the calendar year. ~~Beginning on February 7, 2018 and continuing until~~Until the Expense Support and Conditional Reimbursement Agreement is terminated, the Manager andSub-Manager shall equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement has the same initial term and renewal terms as the Management Agreement or theSub-Management Agreement, as applicable, to the Manager or theSub-Manager.

If, on the last business day of the calendar year, the annual (calendar year)year-to-date available operating funds exceeds the sum of the annual (calendar year)year-to-date distributions paid per share class (the “Excess Operating Funds”), the Company ~~will use~~uses such Excess Operating Funds to pay the Manager and theSub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to certain conditions (the “Conditional Reimbursements”) as described further in the Expense Support and Conditional Reimbursement Agreement. The Company’s obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

As of March 31, 2020, the amount of expense support collected from the Manager and Sub-Manager since inception is approximately $1.8 million. As of March 31, 2020, management believes that reimbursement payments by the Company to the Manager and Sub-Manager are not probable under the terms of the Expense Support and Conditional Reimbursement Agreement. The following table reflects the expense support that may become reimbursable, subject to the conditions of reimbursement defined in the Expense Support and Conditional Reimbursement Agreement:

Distributions

Individuals and entities affiliated with the Manager and Sub-Manager owned approximately 0.6 million shares as of March 31, 2020 and March 31, 2019, respectively, and received distributions from the Company of approximately $0.2 million during each of the three months ended March 31, 2020 and 2019.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Related party fees and expenses incurred ~~during~~for the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018~~2020 and 2019 are summarized below:



		Three Months Ended March 31,
Related Party	Source Agreement & Description	2020			2019
Managing Dealer /Placement Agent	Managing Dealer / Placement Agent Agreements: Commissions	$	332,914		$	285,677
	Dealer Manager / Placement Agent Fees	195,796			138,634
	Distribution and shareholder servicing fees	26,359			6,769
Manager and Sub-Manager	Management Agreement and Sub-Management Agreement: Organization and offering reimbursement ⁽¹⁾⁽²⁾	242,008			171,267
	Base management fees ⁽¹⁾	515,598			241,638
Manager and Sub-Manager	Expense Support and Conditional Reimbursement Agreement: Expense support	(607,630		)	(216,073		)
Manager	Administrative Services Agreement: Reimbursement of third-party operating expenses⁽¹⁾	19,839			11,864
Sub-Manager	Sub-Management Agreement: Reimbursement of third-party pursuit costs ⁽¹⁾⁽³⁾	6,949			—

FOOTNOTE:


~~Related Party~~	~~Source Agreement & Description~~	~~Period from February 7,~~ ~~2018 (commencement of~~ ~~operations) through~~ ~~March 31, 2018~~
~~Manager and Sub-Manager~~	~~Management Agreement and~~ ~~Sub-Management~~ ~~Agreement:~~ ~~Organization and offering reimbursement~~⁽¹⁾ ~~Base management fees~~⁽¹⁾	$	~~707,046~~ ~~88,562~~
~~Manager andSub-Manager~~	~~Expense Support and Conditional Reimbursement Agreement:~~ ~~Expense Support Provided~~		~~(43,212~~	)
~~Manager~~	~~Administrative Services Agreement:~~ ~~Operating, administrative and compliance services~~⁽¹⁾		~~19,894~~

⁽¹⁾	Expenses subject to Expense Support.

⁽²⁾
Organization reimbursements are expensed on the Company’s statements of operations as incurred. Offering reimbursements are capitalized on the Company’s statements of assets and liabilities as deferred offering expenses and expensed to the Company’s statements of operations over the lesser of the offering period or 12 months.
⁽³⁾
Includes reimbursement of third-party fees incurred for investments that did not close, including fees and expenses associated with performing the due diligence reviews.

The following table presents amounts due from (to) related parties as of March 31, ~~2018:~~

Due from related parties:

Expense Support
   $ 43,212


Total due from related parties
   43,212
Due to related parties:

Organization and offering expenses
   707,046
Base management fees
   88,562
Operating, administrative and compliance expense reimbursement
   19,894


Total due to related parties
   815,502


Net due to related parties
   $ (772,290 )

~~There were no amounts due to related parties as~~2020 and December 31, 2019:



	March 31, 2020			December 31, 2019
Due from related parties:
Expense Support	$	607,630		$	1,372,020
Total due from related parties	607,630			1,372,020
Due to related parties:
Organization and offering expenses	(75,105		)	(56,888		)
Base management fees	(182,980		)	(165,338		)
Total return incentive fee	—			(847,863		)
Reimbursement of third-party operating expenses and pursuit costs	(11,170		)	(16,677		)
Distribution and shareholder servicing fees	(9,990		)	(6,690		)
Total due to related parties	(279,245		)	(1,093,456		)
Net due from related parties	$	328,385		$	278,564

Other Related Party Transactions

As of December 31, ~~2017.~~

~~Other Related Party Transactions~~

~~Prior to the Company’s acquisition of Lawn Doctor and Polyform as described in Note 3. “Investments,” Lawn Doctor and Polyform were majority owned by~~2019, an affiliate of the~~Sub-Manager.~~

Sub-Manager held $10.0 million of the Company’s funds in escrow for purposes of acquiring new equity and debt investments in January 2020.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

6. Distributions

The following table reflects the total distributions declared during the three months ended March 31, 2020 and ~~the~~2019:



	Three Months Ended March 31,
	2020						2019
Distribution Period⁽⁵⁾	Distributions Declared ⁽¹⁾⁽²⁾		Distributions Reinvested ⁽³⁾		Cash Distributions Net of Distributions Reinvested		Distributions Declared ⁽¹⁾	Distributions Reinvested ⁽⁴⁾	Cash Distributions Net of Distributions Reinvested
First Quarter	$	2,091,351	$	419,855	$	1,671,496	1,235,971	121,011	1,114,960

FOOTNOTES:


⁽¹⁾	The Company’s board of directors declared distributions per share on a monthly basis. See Note 11. “Financial Highlights” for distributions declared by share class. Distributions declared per share for each share class were as follows:



Record Date Period	Class FA		Class A		Class T		Class D		Class I
January 1, 2019 - March 31, 2019 (3 record dates)	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167
January 1, 2020 - March 31, 2020 (3 record dates)	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167


⁽²⁾	The Company’s board of directors also declared monthly distributions of $0.104167 per Class S share for record date March 30, 2020. The Class S shares were first sold on March 31, 2020 and therefore no distributions were declared for this class.


⁽³⁾	Includes distributions reinvested in April 2020 of $153,758 related to distributions declared based on record dates in March 2020 and excludes distributions reinvested in January 2020 of $114,090 related to distributions declared based on record dates in December 2019.


⁽⁴⁾	Includes distributions reinvested in April 2019 of $46,596 related to distributions declared based on record dates in March 2019 and excluded distributions reinvested in January 2019 of $26,789 related to distributions declared based on record dates in December 2018.


⁽⁵⁾	Distributions declared are paid and reinvested monthly in arrears.

The sources of declared distributions on a GAAP basis were as follows:



	Three Months Ended March 31,
	2020				2019
	Amount		% of Cash Distributions Declared		Amount		% of Cash Distributions Declared
Net investment income⁽¹⁾	$	1,645,964	78.7	%	$	1,130,385	91.5	%
Distributions in excess of net investment income⁽²⁾	445,387		21.3	%	105,586		8.5	%
Total distributions declared	$	2,091,351	100.0	%	$	1,235,971	100.0	%

FOOTNOTES:


⁽¹⁾	Net investment income includes expense support from the Manager and Sub-Manager of $607,630 and $216,073 for the three months ended March 31, 2020 and 2019, respectively. See Note 5. “Related Party Transactions” for additional information.


⁽²⁾	Consists of distributions made from offering proceeds for the periods presented.

In March 2020, the ~~period from February 7, 2018 (commencement~~Company’s board of ~~operations) through March 31, 2018 are presented in~~directors declared a monthly cash distribution on the ~~tables below.~~

   Period from February 7, 2018 (commencement of operations)
through March 31, 2018
   Class FA
   Per Share    Amount    Allocation
Total Declared Distributions
   $ 0.09    $ 302,841    100.0 %
From net investment income
   $ 0.09    $ 302,841    100.0 %

~~Net investment income includes Expense Support of $43,212 which supported distributions of $302,841 during the period from February 7, 2018 (commencement of operations) through March 31, 2018.~~

~~7. Capital Transactions~~

~~As of December 31, 2017, the Company had issued 4,000~~outstanding shares of ~~the Company’s~~all classes of common shares of record on April 29, 2020 of $0.104167 per share for Class FA shares, ~~to each of the Manager andSub-Manager,~~$0.104167 per share for ~~an aggregate purchase price of $200,000 (total of 8,000 Class FA shares). No selling commissions or dealer manager fees were paid in connection with the issuances.~~

On February 7, 2018, the Company commenced operations when it met the minimum offering requirement of $80 million in Class FA shares under its Private Placement and issued approximately 3.3 million shares of Class FA shares for aggregate gross proceeds of $81.7 million. The Company did not incur any selling commissions or placement agent fees from the sale of the approximately 3.3 million Class FA shares sold under the terms of the Private Placement. See Note 5. “Related Party Transactions” for additional information on shares issued to the Manager,~~Sub-Manager~~ ~~and their affiliates.~~

~~Private Placement~~

~~The Company offered through the Private Placement up to $85 million of Class FA shares and up to $115 million of~~ Class A shares, on a best efforts basis, which meant that the Placement Agent, used its best efforts but was not required to sell any specific amount of shares. On February 7, 2018, the Company met the minimum offering requirement of $80 million in$0.083333 per share for Class FAT shares, ~~under the Private Placement and the Company issued approximately 3.3 million~~$0.093750 per share for Class FAD shares, ~~at $25.00~~$0.104167 per share for Class FA share resulting in gross proceeds of approximately $81.7 million. No Class A shares were sold under the Private Placement. There was no selling commission or Placement Agent fee for the sale of Class FA shares. The Class FAI shares and $0.104167 per share for Class A shares in the Private Placement were offered for sale only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder.

S shares.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

7. Capital Transactions

Public Offering

~~Once the~~

The Registration Statement became effective on March 7, 2018, and the Company began offering up to $1,000,000,000 of ~~Shares,~~shares, on a best efforts basis, which means that CNL Securities Corp., as the Managing Dealer of the Public Offering, ~~will use~~uses its best ~~efforts~~effort but is not required to sell any specific amount of ~~Shares.~~shares. The Company is offering, in any combination, four classes of ~~Shares~~shares in the Public Offering: Class A shares, Class T shares, Class D shares and Class I shares. The initial minimum permitted purchase amount is $5,000 in ~~Shares. The initial per share Public Offering price was $27.32 per Class A share, $26.25 per Class T share, $25.00 per Class D share and $25.00 per Class I share.~~shares. There are differing selling fees and commissions for each share class. The Company ~~will~~ also ~~pay annual~~pays distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). The Public Offering price, selling commissions and dealer manager fees per share class are determined monthly as approved by the Company’s board of directors. As of March 31, 2020, the Public Offering price was $29.23 per Class A share, $28.16 per Class T share, $26.40 per Class D share and $26.99 per Class I share. See Note ~~10.~~12. “Subsequent Events” for information on changes to the Public Offering price, selling commissions and dealer manager / placement agent fees ~~per~~by share class.

The Company is also offering, in any combination, up to $100,000,000 of Class A shares, Class T shares, Class D shares and Class I shares to be issued pursuant to its distribution reinvestment plan. The Public Offering has a minimum offering requirement of $2 million in Shares under the Private Placement or the Public Offering. As of February 7, 2018, the Company had met the minimum offering requirement of $80 million in Class FA shares under the Private Placement. See Note ~~10.~~12. “Subsequent Events” for additional information related to the Public Offering.

Class FA Private Offerings

In April and June 2019, the Company launched separate Class FA Private Offerings of up to $50.0 million each of Class FA shares pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act. Under the Follow-On Class FA Private Offering the Company paid the Placement Agent a selling commission of up to 5.5% and placement agent fee of up to 3.0% of the sale price for each Class FA share sold in the Follow-On Class FA Private Offering, except as a reduction or sales load waiver may apply. There was no selling commission or placement fee on the sale of Class FA shares sold in the Class FA Private Offering. The Class FA Private Offering closed in December 2019 and the Follow-On Class FA Private Offering closed in March 2020.

Class S Private Offering

In January 2020, the Company’s board of directors authorized the designation of Class S shares and the Company commenced the Class S Private Offering of up to $50.0 million of Class S shares. The Placement Agent serves as placement agent for the Class S Private Offering. The Class S Private Offering is being conducted pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act. The Company will pay the Placement Agent a selling commission of up to 2.0% and a placement agent fee of up to 1.5% of the sale price for each Class S share sold in the Class S Private Offering, except as a reduction or sales load waiver that may apply. There are no ongoing distribution and shareholder servicing fees paid by the Company with respect to its Class S shares. Subject to requirements under the Securities Act and the applicable state securities laws of any jurisdiction, the Company intends to conduct the Class S Private Offering until the earlier of: (i) the date it has sold the maximum offering amount of the Class S Private Offering or (ii) six (6) full months from the commencement of the Class S Private Offering. However, the Company reserves the right to extend the outside date of the Class S Private Offering in its sole discretion but in no event longer than an additional three (3) full months. The Company may suspend or terminate the Class S Private Offering at any time in its sole discretion.

In conjunction with the launch of the Class S Private Offering, in January 2020 the Company’s board of directors reclassified 100,000,000 authorized shares of Class T shares to Class S shares, resulting in shares authorized of 7,400,000 Class FA shares, 94,660,000 Class A shares, 558,620,000 Class T shares, 94,660,000 Class D shares, 94,660,000 Class I shares and 100,000,000 Class S shares.

As of March 31, 2020, the purchase price for each Class S share in the Class S Private Offering was $28.56 per share.

The following table summarizes the total shares issued and proceeds received by share class in connection with the ~~Private Placement~~Offerings, excluding shares repurchased through the Share Repurchase Program described further below, for the ~~period~~three months ended March 31, ~~2018.~~

   Period from February 7, 2018
(commencement of operations)
through March 31, 2018
   Class FA
   Shares    Amount
Gross proceeds
   3,258,260    $ 81,456,500
Up-front selling commissions and dealer manager fees⁽¹⁾
   —      —




Net proceeds to Company
   3,258,260    $ 81,456,500




Average net proceeds per share
   $25.00

2020 and 2019:

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020



	Three Months Ended March 31, 2020
	Proceeds from Offerings								Distributions Reinvested⁽¹⁾			Total
Share Class	Shares Issued	Gross Proceeds		Sales Load ⁽²⁾⁽³⁾			Net Proceeds to Company⁽⁵⁾		Shares	Proceeds to Company		Shares	Net Proceeds to Company⁽⁵⁾		Average Net Proceeds per Share
Class FA	474,091	$	13,209,000	$	(117,975	)	$	13,091,025	—	$	—	474,091	$	13,091,025	$	27.61
Class A	120,775	3,461,287		(224,005		)	3,237,282		6,600	176,976		127,375	3,414,258		26.80
Class T	134,641	3,802,228		(180,606		)	3,621,622		1,012	27,216		135,653	3,648,838		26.90
Class D	27,873	738,000		—			738,000		2,033	53,846		29,906	791,846		26.48
Class I	181,784	4,914,955		—			4,914,955		4,515	122,149		186,299	5,037,104		27.04
Class S	9,030	255,000		(6,125		)	248,875		—	—		9,030	248,875		27.56
	948,194	$	26,380,470	$	(528,711	)	$	25,851,759	14,160	$	380,187	962,354	$	26,231,946	$	27.26



	Three Months Ended March 31, 2019
	Proceeds from Offerings								Distributions Reinvested⁽⁴⁾			Total
Share Class	Shares Issued	Gross Proceeds		Sales Load			Net Proceeds to Company		Shares	Proceeds to Company		Shares	Net Proceeds to Company		Average Net Proceeds per Share
Class A	177,162	5,072,865		(392,249		)	4,680,616		1,769	46,687		178,931	4,727,303		26.42
Class T	24,231	675,000		(32,062		)	642,938		56	1,488		24,287	644,426		26.53
Class D	13,749	360,000		—			360,000		1,226	32,096		14,975	392,096		26.18
Class I	184,330	4,889,500		—			4,889,500		790	20,933		185,120	4,910,433		26.53
	399,472	$	10,997,365	$	(424,311	)	$	10,573,054	3,841	$	101,204	403,313	$	10,674,258	$	26.47

FOOTNOTES:


⁽¹⁾	Amounts exclude distributions reinvested in April 2020 related to the payment of distributions declared in March 2020 and include distributions reinvested in January 2020 related to the payment of distributions declared in December 2019.

⁽²⁾

The Company incurred selling commissions and placement agent fees on the sale of Class FA shares sold in the Follow-On Class FA Private Offering and on the sale of Class S shares sold in the Class S Private Offering. The Company also incurred selling commissions and dealer manager fees on the sale of Class A and Class T shares sold in the Public Offering. See Note 5. “Related Party Transactions” for additional information regarding up-front selling commissions and dealer manager/placement agent fees.


⁽³⁾	The Company did not incur any selling commissions or placement agent fees from the sale of the approximately ~~3.3~~0.3 million Class FA shares sold ~~under~~in the ~~terms~~Class FA Private Offering.


⁽⁴⁾	Amounts exclude distributions reinvested in April 2019 related to the payment of distributions declared in March 2019 and include distributions reinvested in January 2019 related to the ~~Private Placement.~~payment of distributions declared in December 2018.

⁽⁵⁾
Approximately $5.4 million of net proceeds for shares sold and issued on March 31, 2020 was received in cash in April 2020. The proceeds are recorded in receivable for shares sold in the condensed consolidated statement of assets and liabilities as of March 31, 2020.

Share Repurchase Program

On March 29, 2019, the Company’s board of directors approved and adopted a Share Repurchase Program. The total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares will be limited to up to 2.5% of the aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of the aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of the Company’s trailing four quarters). Unless the Company’s board of directors determines otherwise, the Company will limit the number of shares to be repurchased during any calendar quarter to the number of shares the Company

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

can repurchase with the proceeds received from the sale of shares under its distribution reinvestment plan in the previous quarter. Notwithstanding the foregoing, at the sole discretion of the Company’s board of directors, the Company may also use other sources, including, but not limited to, offering proceeds and borrowings to repurchase shares.

During the three months ended March 31, 2020, the Company received requests for the repurchase of approximately $1.9 million of the Company’s common shares which exceeded proceeds from its distribution reinvestment plan in the fourth quarter of 2019 by approximately $1.6 million. The Company’s board of directors approved the use of other sources to satisfy repurchase requests received in excess of proceeds received from the distribution reinvestment plan. The following table summarizes the shares repurchased during the three months ended March 31, 2020:



	Shares Repurchased	Total Consideration		Price Paid per Share
Class FA	54,800	$	1,510,288	$	27.56
Class A	2,242	59,969		26.75
Class I	13,780	371,909		26.99
March 31, 2020 Total	70,822	$	1,942,166	$	27.42

As of March 31, 2020, the Company had a payable for shares repurchased of approximately $1.9 million. There were no shares repurchased during the three months ended March 31, 2019.

8. ~~Commitment~~Borrowings

In June 2019, the Company, through a wholly-owned subsidiary, entered into a loan agreement and related promissory note (the “Loan Agreement”) with Seaside National Bank & ~~Contingences~~

Trust for a $20.0 million line of credit (the “Line of Credit”). The Line of Credit has a maturity date of 364 days from the effective date of the Loan Agreement plus one 12-month extension. The Company is required to pay a fee of 0.4% of each borrowing with a maximum fee of $80,000 over the 364 day period. Under the Loan Agreement, the Company is required to pay interest on the borrowed amount at a rate of 30-day LIBOR plus an applicable spread of 2.75%. Interest payments are due monthly in arrears. The Company may prepay, without penalty, all or any part of the borrowings under the Loan Agreement at any time and such borrowings are required to be repaid within 180 days of the borrowing date. Under the Loan Agreement, the Company is required to comply with reporting requirements and other customary requirements for similar credit facilities. In connection with the Loan Agreement, in June 2019, the Company entered into an assignment and pledge of deposit account agreement (“Deposit Agreement”) in favor of the lender under the Line of Credit. Under the Deposit Agreement, the Company is required to contribute proceeds from the Offerings to pay down the outstanding debt to the extent there are any borrowings outstanding under the Loan Agreement above the minimum cash balance.

The Company had not borrowed any amounts under the Line of Credit as of March 31, 2020.

9. Concentrations of Risk

As of and for the three months ended March 31, 2020 and 2019, the Company had three portfolio companies (Lawn Doctor, Polyform and Roundtables) which met at least one of the significance tests under Rule 8-03(b) of Regulation S-X.

The portfolio companies are required to make monthly interest payments on their debt, with the debt principal due upon maturity. Failure of any of these portfolio companies to pay contractual interest payments could have a material adverse effect on the Company’s results of operations and cash flows from operations, which would impact its ability to make distributions to shareholders.

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

10. Commitments & Contingencies

See Note 5. “Related Party Transactions” for information on contingent amounts due to the Manager andSub-Manager for the reimbursement of organization and offering costs under the Public Offering.

From time to time, the Company and officers or directors of the Company may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its businesses. As of March 31, 2020, the Company was not involved in any legal proceedings.

11. Financial Highlights

The following ~~is a schedule~~are schedules of financial highlights of the Company attributed to ~~Class FA~~each class of shares for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~

   Period ended
March 31, 2018⁽¹⁾
   Class FA Shares⁽²⁾
OPERATING PERFORMANCE PER SHARE

Net Asset Value, Beginning of Period
   $ 25.00


Net investment income, before expense support⁽³⁾
   0.08
Expense support⁽³⁾
   0.01


Net investment income⁽³⁾
   0.09
Net realized and unrealized gains⁽³⁾⁽⁴⁾
   0.16


Net increase resulting from investment operations
   0.25


Distributions from net investment income⁽⁵⁾
   (0.09 )


Net Asset Value, End of Period
   $ 25.16


Net assets, end of period
   $ 82,180,949
Average net assets⁽⁶⁾
   $ 81,716,492
Shares outstanding, end of period
   3,266,260
Weighted average shares outstanding
   3,266,430
Total investment return based on net asset value⁽⁷⁾
   1.01 %
RATIOS/SUPPLEMENTAL DATA (annualized):

Ratios to average net assets:⁽⁶⁾⁽⁸⁾

Total operating expenses before expense support
   3.95 %
Total operating expenses after expense support
   3.58 %
Net investment income
   2.55 %
Portfolio turnover rate
   —   %

2020 and 2019.



	Three Months Ended March 31, 2020
	Class FA Shares			Class A Shares			Class T Shares			Class D Shares			Class I Shares			Class S Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period⁽¹⁾	$	27.64		$	26.91		$	27.01		$	26.61		$	27.15		$	27.56
Net investment income (loss), before expense support⁽²⁾	0.20			0.07			(0.12		)	0.08			0.08			(0.39		)
Expense support⁽²⁾⁽³⁾	0.09			0.09			0.16			—			0.10			0.39
Net investment income⁽²⁾	0.29			0.16			0.04			0.08			0.18			—
Net realized and unrealized losses⁽²⁾⁽⁴⁾	(0.47		)	(0.46		)	(0.44		)	(0.47		)	(0.47		)	(0.40		)
Net decrease resulting from investment operations	(0.18		)	(0.30		)	(0.40		)	(0.39		)	(0.29		)	(0.40		)
Distributions to shareholders⁽⁵⁾	(0.31		)	(0.31		)	(0.25		)	(0.28		)	(0.31		)	—
Net decrease resulting from distributions to shareholders	(0.31		)	(0.31		)	(0.25		)	(0.28		)	(0.31		)	—
Net Asset Value, End of Period	$	27.15		$	26.30		$	26.36		$	25.94		$	26.55		$	27.16

Net assets, end of period	$	126,919,282		$	20,887,589		$	8,813,664		$	8,624,930		$	29,242,887		$	245,270
Average net assets⁽⁶⁾	$	124,272,563		$	19,219,301		$	6,597,543		$	8,292,032		$	27,011,432		$	245,270
Shares outstanding, end of period	4,674,839			794,274			334,315			332,538			1,101,367			9,030
Distributions declared	$	1,407,473		$	223,612		$	60,942		$	88,027		$	311,297		$	—
Total investment return based on net asset value⁽⁷⁾	(0.69		)%	(1.11		)%	(1.49		)%	(1.47		)%	(1.07		)%	(1.45		)%
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:⁽⁶⁾⁽⁸⁾
Total operating expenses before expense support	0.47		%	1.01		%	1.89		%	0.98		%	0.98		%	1.91		%
Total operating expenses after expense support	0.15		%	0.67		%	1.28		%	0.98		%	0.60		%	0.46		%
Net investment income	1.06		%	0.61		%	0.16		%	0.29		%	0.67		%	—		%

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020



	Three Months Ended March 31, 2019
	Class FA Shares			Class A Shares			Class T Shares			Class D Shares			Class I Shares
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period	$	26.65		$	26.44		$	26.54		$	26.23		$	26.55
Net investment income (loss) before expense support⁽²⁾	0.27			(0.02		)	(0.04		)	0.15			0.05
Expense support⁽²⁾⁽³⁾	0.04			0.19			0.17			—			0.17
Net investment income⁽²⁾	0.31			0.17			0.13			0.15			0.22
Net realized and unrealized gains⁽²⁾⁽⁴⁾	0.07			0.09			0.08			0.07			0.08
Net increase resulting from investment operations	0.38			0.26			0.21			0.22			0.30
Distributions to shareholders⁽⁵⁾	(0.31		)	(0.31		)	(0.25		)	(0.28		)	(0.31		)
Net decrease resulting from distributions to shareholders	(0.31		)	(0.31		)	(0.25		)	(0.28		)	(0.31		)
Net Asset Value, End of Period	$	26.72		$	26.39		$	26.50		$	26.17		$	26.54

Net assets, end of period	$	89,259,528		$	9,799,809		$	1,477,301		$	3,607,349		$	11,535,495
Average net assets⁽⁶⁾	$	87,050,883		$	6,468,700		$	1,072,524		$	3,387,992		$	8,027,629
Shares outstanding, end of period	3,266,260			371,319			55,739			137,864			434,646
Distributions declared	$	1,020,708		$	75,454		$	10,024		$	36,428		$	93,357
Total investment return based on net asset value⁽⁷⁾	1.42		%	1.00		%	0.79		%	0.85		%	1.15		%
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:⁽⁶⁾⁽⁸⁾
Total operating expenses before expense support	0.59		%	2.17		%	2.13		%	1.12		%	1.80		%
Total operating expenses after expense support	0.46		%	1.46		%	1.50		%	1.12		%	1.18		%
Net investment income	1.15		%	0.63		%	0.48		%	0.58		%	0.83		%

FOOTNOTES:

⁽¹⁾

~~Operations commenced~~The net asset value as of the beginning of the period is based on ~~February 7, 2018.~~the net asset value as of December 31, 2019 for all share classes except Class S shares. The net asset value as of the beginning of the period for Class S shares is based on the price of shares sold, net of any sales load, to the initial Class S investors. The first investors for Class S shares purchased their shares in March 2020.


⁽²⁾	~~As of March 31, 2018, the Company had not sold any Class A, Class T, Class D or Class I shares.~~The per share amounts presented are based on weighted average shares outstanding.


⁽³⁾	~~The per share data was derived by using~~Expense support is accrued throughout the ~~weighted average shares outstanding during~~year and is subject to a final calculation as of the ~~period.~~last business day of the calendar year.

⁽⁴⁾

The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio ~~securities~~investments for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating ~~market~~fair values for the ~~portfolio.~~portfolio investments.


⁽⁵⁾	The per share data for distributions is the actual amount of distributions paid or payable per common share outstanding during the entire period; distributions per share are rounded to the nearest $0.01.


⁽⁶⁾	The computation of average net assets during the period is based on net assets measured at each month end, adjusted for capital contributions or withdrawals during the ~~monthly value of net assets.~~month.

⁽⁷⁾

Total investment return ~~based on asset value~~ is ~~a measure of~~calculated for each share class as the change in total value for shareholders who held the Company’s common shares at the beginning and end of the period, including distributions declared during the period. Total investment return based on net asset value is based on (i) net asset value per share on the first day of the period, (ii) the net asset value ~~per~~for such share onclass during the ~~last day~~period and assuming all distributions are reinvested. Amounts are not annualized and are not representative of total return as calculated for purposes of the ~~period,~~total return incentive fee described in Note 5. “Related Party Transactions.” Total returns before total return incentive fees also exclude related expense support. See footnote (9) below for information regarding the percentage of ~~(A) one~~total incentive fees covered by expense support by share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions, and (iii) distributions payable relating to one share, if any, on the last day of the period. The total investment return based on net asset value calculation assumes that (i) monthly cash distributions are reinvested in accordance with the Company’s distribution reinvestment plan and (ii) the fractional shares issued pursuant to the distribution reinvestment plan are issued at the then current public offering price, net of sales load, on each monthly distribution payment date.class for all periods presented. Since there is no public market for the Company’s shares, terminal market value per share is assumed to be equal to net asset value per share on the last day of the period presented. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by shareholders in the purchase of the Company’s shares.


⁽⁸⁾	~~Annualized assuming consistent~~Actual results ~~over a full fiscal year consisting of 365 days; however, this~~ may not be indicative of ~~actual results over~~future results. Additionally, an individual investor’s ratios may vary from the ratios presented for a ~~full fiscal year.~~share class as a whole.

~~10.~~

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2020

12. Subsequent Events

~~The~~

Distributions

In April 2020, the Company’s board of directors declared a monthly cash ~~distributions~~distribution on the outstanding shares of all classes of ~~the Company’s~~ common shares ~~based~~of record on ~~weekly record dates~~May 28, 2020 of $0.104167 per share for ~~the time period beginning on April 3, 2018 through~~Class FA shares, $0.104167 per share for Class A shares, $0.083333 per share for Class T shares, $0.093750 per share for Class D shares, $0.104167 per share for Class I shares and ~~including May 29, 2018, as set forth below:~~

Distribution
Record Date

Distribution
Payment Date
   Declared Distribution Per Share for Each Share Class

   Class FA    Class A    Class T    Class D    Class I
April 3, 2018
   May 10, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
April 10, 2018
   May 10, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
April 17, 2018
   May 10, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
April 24, 2018
   May 10, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
May 1, 2018
   June 11, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
May 8, 2018
   June 11, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
May 15, 2018
   June 11, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
May 22, 2018
   June 11, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038
May 29, 2018
   June 11, 2018    $ 0.024038    $ 0.024038    $ 0.019231    $ 0.021635    $ 0.024038

$0.104167 per share for Class S shares.

Offerings

In April ~~2018,~~2020, the Company’s board of directors ~~also~~ approved new per share ~~public~~ offering prices for each share class in the Public Offering and Class S Private Offering. The new ~~public~~ offering prices ~~became~~are effective onas of April ~~27, 2018.~~28, 2020. The following table provides the new ~~public~~ offering prices and applicable upfront selling commissions and placement agent / dealer manager fees for each share class available in the Public Offering and Class S Private Offering:

   Class A    Class T    Class D    Class I
Public Offering Price, Per Share
   $ 27.46    $ 26.38    $ 25.13    $ 25.13
Selling Commissions, Per Share
   $ 1.65    $ 0.79    $ —      $ —
Dealer Manager Fees, Per Share
   $ 0.68    $ 0.46    $ —      $ —



	Class A		Class T		Class D		Class I		Class S
Effective April 28, 2020:
Offering Price, Per Share	$	28.74	$	27.67	$	25.94	$	26.55	$	28.15
Selling Commissions, Per Share	1.72		0.83		—		—		0.57
Placement Agent / Dealer Manager Fees, Per Share	0.72		0.48		—		—		0.42

Capital Transactions

During the period April 1, ~~2018~~2020 through May ~~10, 2018,~~13, 2020, the Company received additional net proceeds ~~of $450,000 from the sale of 17,948 Class I shares~~ from its ~~Public Offering~~Offerings and ~~net proceeds of $7,500 from the issuance of 299 Class A shares through~~ its distribution reinvestment ~~plan.~~

plan of:



	Proceeds from Offerings								Distribution Reinvestment Plan			Total
Share Class	Shares	Gross Proceeds		Sales Load			Net Proceeds to Company		Shares	Gross Proceeds		Shares	Net Proceeds to Company		Average Net Proceeds per Share
Class FA	95,551	$	2,644,000	$	(49,985	)	$	2,594,015	—	$	—	95,551	$	2,594,015	$	27.15
Class A	17,080	482,000		(32,825		)	449,175		4,333	114,601		21,413	563,776		26.33
Class T	78,505	2,172,235		(103,181		)	2,069,054		1,098	29,188		79,603	2,098,242		26.36
Class D	9,258	240,160		—			240,160		1,452	37,988		10,710	278,148		25.97
Class I	40,490	1,075,000		—			1,075,000		3,557	95,192		44,047	1,170,192		26.57
Class S	136,334	3,819,500		(116,112		)	3,703,388		—	—		136,334	3,703,388		27.16
	377,218	$	10,432,895	$	(302,103	)	$	10,130,792	10,440	$	276,969	387,658	$	10,407,761	$	26.85

COVID-19

Subsequent to March 31, 2020, the global economy has continued to be severely impacted by the COVID-19 pandemic. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it will impact its portfolio companies. The impact of the COVID-19 pandemic on the U.S. and global economies generally, and the extent to which the COVID-19 pandemic impacts the Company in particular, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.


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

The following discussion is based on the unaudited condensed consolidated financial statements as of March 31, ~~2018~~2020 and December 31, 2019, and for the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~2020 and 2019. Amounts as of December 31, 2019 included in the unaudited condensed consolidated balance sheets have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes ~~thereto.~~thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2019 (our “Form 10-K”). Capitalized terms used in this Item 2 have the same meaning as in the accompanying ~~unaudited~~ condensed financial statements ~~in Item 1~~ unless otherwise defined herein.

Statement Regarding Forward-Looking Information

Certain statements in this quarterly report on Form10-Q for the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018 (“Quarterly~~2020 (this “Quarterly Report”) constitute~~“forward-looking~~ “forward-looking statements.”Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of our business and its performance, the economy and other future conditions and forecasts of future events and circumstances.Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:

our future operating results;

our business prospects and the prospects of our businesses and other assets;

unanticipated costs, delays and other difficulties in executing our business strategy;

performance of our businesses and other assets relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these assets;

our contractual arrangements and relationships with third parties;

actual and potential conflicts of interest with the Manager, theSub-Manager and their respective affiliates;

the dependence of our future success on the general economy and its effect on the industries in which we target;

events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural orman-made disasters, pandemics such as the novel coronavirus (“COVID-19”) pandemic or threatened or actual armed conflicts;

the use, adequacy and availability of proceeds from ~~this~~our current public offering, financing sources, working capital or borrowed money to finance a portion of our business strategy and to service our outstanding indebtedness;

the timing of cash flows, if any, from our businesses and other assets;

the ability of the Manager and theSub-Manager to locate suitable acquisition opportunities for us and to manage and operate our businesses and other assets;

the ability of the Manager, theSub-Manager and their respective affiliates to attract and retain highly talented professionals;

the ability to operate our business efficiently, manage costs (including general and administrative expenses) effectively and generate cash flow;

the lack of a public trading market for our shares;

the ability to make and the amount and timing of anticipated future distributions;

estimated net asset value per share of our shares;

the loss of our exemption from the definition of an “investment company” under the Investment Company ~~Act;~~Act of 1940, as amended (the “Investment Company Act”);

fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;

the degree and nature of our competition; or

the effect of changes to government regulations, accounting rules or tax legislation.

In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration of the pandemic, the extent of the adverse health impact on the general population and on our customers, and in particular our personnel, its impact on the employment rate and the economy, the extent and impact of governmental responses, and the impact of operational changes we or our businesses may implement in response to the pandemic.

Ourforward-looking statements are not guarantees of our future performance and shareholders are cautioned not to place undue reliance on anyforward-looking statements. While we believe ourforward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast,forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be

realized. Ourforward-looking statements are based on our current expectations and a variety of risks, uncertainties and other factors, many of which are beyond our ability to control or accurately predict.

Important factors that could cause our actual results to vary materially from those expressed or implied in ourforward-looking statements include, but are not limited to, the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our Form 10-K, this Quarterly Report and our subsequent quarterly reports on Form 10-Q. One of the most significant factors is the ongoing and potential impact of the current outbreak of the COVID-19 pandemic on the economy and the broader financial markets, which may have a significant negative impact on the Company's (and its portfolio companies) financial condition, results of operations and cash flows. The Company is unable to predict whether the continuing effects of the COVID-19 pandemic will trigger a further economic slowdown or a recession and to what extent the Company will experience disruptions related to the COVID-19 pandemic in the ~~Company’s prospectus filed with the SEC pursuant to Rule 424(b)(3) and dated March 7, 2018 (our “Prospectus”) and Item 1A in Part II of this Quarterly Report.~~

second quarter or thereafter.

All written and oralforward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements.Forward-looking statements speak only as of the date on which they are made; we undertake no obligation to, and expressly disclaim any obligation to, update or reviseforward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.

Overview

CNL Strategic Capital, LLC is a limited liability company that primarily seeks to acquire and grow durable, middle-market U.S. businesses. We are externally managed by the Manager, CNL Strategic Capital Management, LLC, an entity that is registered as an investment adviser under the ~~Investment~~ Advisers ~~Act of 1940, as amended.~~Act. The Manager is controlled by CNL Financial Group, LLC, a private investment management firm specializing in alternative investment products. We have engaged the Manager under ~~a management agreement~~the Management Agreement pursuant to which the Manager is responsible for the overall management of our ~~activities. The Manager has engaged~~activities and sub-managed by the Sub-Manager, Levine Leichtman Strategic Capital, LLC, a registered investment ~~advisor,~~adviser, under a~~sub-management~~ ~~agreement~~the Sub-Management Agreement pursuant to which theSub-Manager is responsible for theday-to-day management of our assets. TheSub-Manager is an affiliate of Levine Leichtman Capital Partners, ~~Inc.~~

LLC.

The Manager and theSub-Manager are collectively responsible for sourcing potential ~~acquisition~~acquisitions and debt financing opportunities, subject to approval by the Manager’s management committee that such opportunity meets our investment objectives and final approval of such opportunity by our board of directors, and monitoring and managing the businesses we acquire and/or finance on an ongoing basis. TheSub-Manager is primarily responsible for analyzing and conducting due diligence on prospective acquisitions and debt financings, as well as the overall structuring of transactions.

We intend to acquire and grow durable, middle market U.S. businesses with annual revenues primarily between $15 million and $250 million. We target ~~for acquisition,~~ businesses that have a track record of stable and predictable operating performance, are highly cash flow generative ~~with annual revenues of primarily between $25 million~~ and ~~$500 million.~~have management teams who seek a meaningful ownership stake in the company. Our ~~business strategy is to acquire~~investments are typically structured as controlling equity ~~stakes~~interests in combination with ~~loan positions in middle-market businesses. Our business strategy seeks~~debt positions. In doing so, we seek to provide long-term capital appreciation ~~and~~with current income, while protecting invested capital. We expect this to produce attractive risk-adjusted returns over a long time horizon. We seek to structure our investments with limited, if any, third-party senior leverage.

In addition and to a lesser extent, we ~~intend to~~may acquire other debt and minority equity positions, which may include acquiring debt in the secondary market as well as minority equity ~~stakes~~interests and ~~loan~~debt positions via co-investments with other funds managed by theSub-Manager or their affiliates. We expect that these positions will comprise a minority of ~~its~~our total assets.

We were formed as a Delaware limited liability company on August 9, 2016 and we operate and intend to continue to operate our business in a manner that will permit us to avoid registration under the Investment Company Act. We are not a “blank check” company within the meaning of Rule 419 of the Securities Act. We ~~did not commence~~commenced operations ~~until~~on February 7, ~~2018 as described below.~~

We offered through a private placement up to $85 million of Class FA limited liability company interests and up to $115 million of Class A limited liability company interests (one of the classes of Shares that constitute~~non-founder~~ ~~shares).~~

~~In October 2016, we confidentially submitted a registration statement on FormS-1~~ with the SEC in connection with the proposed offering of shares of our limited liability company interests (the “Public Offering” and together with the Private Placement, the “Offerings”). Through our Public Offering, we are offering, in any combination, four classes of shares: Class A shares, Class T shares, Class D shares and Class I shares. See Note 7. “Capital Transactions” of Item 1. “Financial Statements” for additional information related to our Offerings.

On February 7, 2018, we commenced operations when we met the minimum offering requirement of $80 million in Class FA shares under the Private Placement and issued approximately 3.3 million shares of Class FA shares for aggregate gross proceeds of $81.7 million, as described below under “Our Common Shares Offering.” On February 7, 2018, we acquired the initial businesses using a substantial portion of the net proceeds from the Private Placement. For a discussion of the initial businesses, see “Portfolio and Investment Activity” below.

On March 7, 2018, our Registration Statement was declared effective by the SEC and we began offering $1,000,000,000 of Shares under the Public Offering, as further described below under “Our Common Shares Offering–Public Offering.”

2018.

Our Common Shares Offerings

Public Offering

~~As of December 31, 2017, we had issued 4,000 shares of the Company’s Class FA shares, to each of the Manager andSub-Manager,~~ ~~for an aggregate purchase price of $200,000 (total of 8,000 Class FA shares). No selling commissions or dealer manager fees were paid in connection with the issuances.~~

~~Private Placement~~

We ~~offered~~are currently offering through the ~~Private Placement up to $85 million of Class FA shares and up to $115 million of Class A shares (one of the classes of Shares that constitutenon-founder~~ shares) on a best efforts basis, which meant that the Placement Agent in connection with the Private Placement used its best efforts but was not required to sell any specific amount of shares. On February 7, 2018, we commenced operations when we met our minimum offering requirement of $80 million in Class FA shares under the Private Placement and we issued approximately 3.3 million Class FA shares at $25.00 per Class FA share resulting in gross proceeds of approximately $81.7 million. The $81.7 million in gross proceeds included a cash capital contribution of $2.4 million from the Manager in exchange for 96,000 Class FA shares and a cash capital contribution of $9.5 million from CNL Strategic Capital Investment, LLC, which is indirectly controlled by James M. Seneff, Jr., the chairman of the Company, in exchange for 380,000 Class FA shares. The $81.7 million also included 96,000 Class FA shares received in exchange for $2.4 million of~~non-cash~~ ~~consideration in the form of equity interests in Lawn Doctor received from an affiliate of theSub-Manager~~ pursuant to the Exchange Agreement. The $81.7 million in gross proceeds also included a cash capital contribution of approximately $0.4 million in exchange for 15,000 Class FA shares, from other individuals affiliated with the Manager. The Class FA shares and Class A shares in the Private Placement were offered for sale only to persons that were “accredited investors,” as that term is defined under the Securities Act, and Regulation D promulgated thereunder. No Class A shares were sold under the Private Placement.

We did not incur any selling commissions or placement agent fees from the sale of the approximately 3.3 million Class FA shares sold under the terms of the Private Placement. We did incur obligations to reimburse the Manager and~~Sub-Manager~~ ~~for organization and offering costs based on actual amounts raised. These organization and offering costs related to the Private Placement had been previously advanced by the Manager andSub-Manager,~~ as described further in Note 5. “Related Party Transactions” of “Item 1. “Financial Statements.” Through March 31, 2018, we incurred approximately $0.7 million of organization and offering costs.

Public Offering

~~Once the Registration Statement became effective on March 7, 2018, we began offering~~ up to $1,000,000,000 of ~~Shares,~~shares, on a best efforts basis, which means that CNL Securities Corp., as the Managing Dealer of the Public Offering, ~~will use~~uses its best efforts, but is not required to sell any specific amount of ~~Shares.~~shares. We are offering, in any combination, four classes of ~~Shares~~shares in the Public Offering: Class A shares, Class T shares, Class D shares and Class I shares. The initial minimum permitted purchase amount is $5,000 in Shares. The initial per share Public Offering price was $27.32 per Class A share, $26.25 per Class T share, $25.00 per Class D share and $25.00 per Class I share. There are differing selling fees and commissions for each class. We ~~will~~ also pay ~~annual~~ distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Public Offering (excluding sales pursuant to ~~the Company’s~~our distribution reinvestment plan).

In April 2018, our board of directors approved new per share public offering prices for each share class in the Public Offering. The new public offering prices became effective on April 27, 2018. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Public Offering:

In May 2018, after taking in consideration the effect of subsequent post-closing adjustments during the true up period relating to the working capital and tax indebtedness of our portfolio companies, our net asset value per Class FA share was adjusted to $25.16 as of March 31, 2018. See Note 9. “Financial Highlights” for information on the end of period net asset value for Class FA shares.

We are also offering, in any combination, up to $100,000,000 of Class A shares, Class T shares, Class D shares and Class I shares to be issued pursuant to our distribution reinvestment plan. ~~The Public Offering had a minimum offering requirement~~

In January 2020, the Company’s board of ~~$2 million in Shares under the Private Placement or the Public Offering. As of February 2018, we had met the minimum offering requirement of $2 million~~directors approved an extension of the Public Offering ~~through the sale of more than $80 million in Class FA shares~~until March 7, 2021. Subject to requirements under the ~~Private Placement.~~

~~Portfolio~~Securities Act and ~~Investment Activity~~

~~In October 2017,~~the applicable state securities laws of any jurisdiction, we ~~entered into a merger agreement with LD Merger Sub, Inc., a wholly owned subsidiary~~intend to conduct the Public Offering until March 7, 2021. However, we reserve the right to further extend the outside date of the ~~Company, and LD Parent, Inc.,~~Public Offering or terminate the ~~parent company~~Public Offering at any time in our sole discretion.

Since the Public Offering became effective in March 2018 through March 31, 2020, we have received net proceeds from the Public Offering of ~~Lawn Doctor. The merger agreement was amended on February 6, 2018. On February 7, 2018, pursuant to the terms of the merger agreement and the Exchange Agreement, we acquired an~~ approximately ~~63.9% equity interest in Lawn Doctor from an affiliate of theSub-Manager,~~$68.9 million, including approximately $1.3 million received through an investment consisting of common equity and a debt investment in the form of a secured second lien loan to Lawn Doctor. After the closing of the merger, the consummation of the equity contribution pursuant to the Exchange Agreement and subsequent purchases of common equity in Lawn Doctor by certain members of Lawn Doctor’s senior management team, we own approximately 62.9% of the outstanding equity in Lawn Doctor.our distribution reinvestment plan. As of March 31, ~~2018,~~2020, the ~~cost basis~~Public Offering price was $29.23 per Class A share, $28.16 per Class T share, $26.40 per Class D share and $26.99 per Class I share. See Note 7. “Capital Transactions” and Note 12. “Subsequent Events” in Item 1. “Financial Statements” for additional information regarding the Public Offering.

Since the Public Offering became effective through March 31, 2020, we have incurred selling commissions and dealer manager fees of ~~our investments in Lawn Doctor was~~ approximately ~~$30.5~~$2.1 million from the sale of ~~common equity~~Class A shares and ~~$15.0 million of a debt investment.~~Class T shares. The ~~purchase price is~~Class D shares and Class I shares sold through March 31, 2020 were not subject to ~~adjustment~~selling commissions and dealer manager fees. We also incurred obligations to reimburse the Manager and Sub-Manager for organization and offering costs of approximately $1.0 million based on ~~among other factors, Lawn Doctor’s working capital~~actual amounts raised through the Public Offering since the Public Offering became effective through March 31, 2020. These organization and ~~indebtedness at closing.~~

offering costs related to the Public Offering had been previously advanced by the Manager and Sub-Manager, as described further in Note 5. “Related Party Transactions” of Item 1. “Financial Statements.”

In ~~October 2017,~~April 2020, our board of directors approved new per share public offering prices for each share class in the Public Offering. The new public offering prices are effective as of April 28, 2020. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Public Offering:



	Class A		Class T		Class D		Class I
Effective April 28, 2020:
Public Offering Price, Per Share	$	28.74	$	27.67	$	25.94	$	26.55
Selling Commissions, Per Share	1.72		0.83		—		—
Dealer Manager Fees, Per Share	0.72		0.48		—		—

Class FA Private Offerings

In April and June 2019, we launched separate Class FA Private Offerings of up to $50.0 million each of Class FA shares pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act and entered into a ~~merger~~placement agent agreement with ~~PFHI Merger Sub, Inc., a wholly owned subsidiary~~the Placement Agent, an affiliate of the ~~Company,~~Manager. There were no selling commissions or placement agent fees for the sale of Class FA shares in the Class FA Private Offering. Under the Follow-On Class FA Private Offering we paid the Placement Agent a selling commission of up to 5.5% and ~~Polyform.~~placement agent fee of up to 3.0% of the sale price for each Class FA share sold, except as a reduction or sales load waiver may apply. The ~~merger agreement was amended on February 6, 2018. On February 7, 2018,~~Class FA Private Offering closed in December 2019 and the Follow-On Class FA Private Offering closed in March 2020.

Class S Private Offering

In January 2020, our board of directors authorized the designation of Class S shares and we commenced the Class S Private Offering of up to $50.0 million of Class S shares. The Placement Agent serves as placement agent for the Class S Private Offering. The Class S Private Offering is being conducted pursuant to the ~~terms~~applicable exemption from registration under Section 4(a)(2) of the ~~merger agreement, we acquired an approximately 87.1% equity interest in Polyform from an affiliate~~Securities Act and Rule 506(c) of Regulation D promulgated under the~~Sub-Manager,~~ ~~through an investment consisting~~ Securities Act. We will pay the Placement Agent a selling commission of ~~common equity~~up to 2.0% and a ~~debt investment~~placement agent fee of up to 1.5% of the sale price for each Class S share sold in the ~~form~~Class S Private Offering, except as a reduction or sales load waiver that may apply. There are no ongoing distribution and shareholder servicing fees paid by the Company with respect to our Class S shares. Subject to requirements under the Securities Act and the applicable state securities laws of any jurisdiction, we intend to conduct the Class S Private Offering until the earlier of: (i) the date we have sold the maximum offering amount of the Class S Private Offering or (ii) six full months from the commencement of the Class S Private Offering. However, we reserve the right to extend the outside date of the Class S Private Offering in our sole discretion but in no event longer than an additional three full months. We may suspend or terminate the Class S Private Offering at any time in our sole discretion.

In conjunction with the launch of the Class S Private Offering, in January 2020 our board of directors reclassified 100,000,000 authorized shares of Class T shares to Class S shares, resulting in shares authorized of 7,400,000 Class FA shares, 94,660,000 Class A shares, 558,620,000 Class T shares, 94,660,000 Class D shares, 94,660,000 Class I shares and 100,000,000 Class S shares.

In April 2020, our board of directors approved a ~~first lien secured term loan to Polyform.~~ per share offering price of $28.15 for the Class S shares in the Class S Private Offering.

Portfolio and Investment Activity

As of December 31, 2019, we had invested approximately $133.3 million in four portfolio companies. During the three months ended March 31, 2020, we invested approximately $22.5 million in two additional portfolio companies.

As of March 31, ~~2018, the cost basis~~2020, we had invested in six portfolio companies, consisting of ~~our~~equity investments ~~in Polyform was approximately $15.8 million of common equity~~ and ~~$15.7 million of a debt investment. The purchase price is subject to adjustment based on, among other factors, Polyform’s working capital and indebtedness at closing.~~

~~The~~ debt investments in the form of a secured second lien loan to Lawn Doctor and in the form of a first lien secured term loan to Polyform as described above accrue interest at a per annum rate of 16%. Each loan will mature in August 2023.each portfolio company. The ~~note purchase agreements contain customary covenants and events of default.~~

~~As of March 31, 2018,~~table below presents our ~~investment~~investments by portfolio ~~included four distinct investment positions and the fair value of our portfolio was comprised of the following:~~

   As of March 31, 2018
Asset Category    Cost    Fair Value    Fair Value
Percentage of
Investment
Portfolio
Senior debt

Senior secured debt - first lien
   $ 15,700,000    $ 15,700,000    20.3 %
Senior secured debt - second lien
   15,000,000    15,000,000    19.4






Total senior debt
   $ 30,700,000    $ 30,700,000    39.7
Equity
   46,231,763    46,756,212    60.3






Total investments
   $ 76,931,763    $ 77,456,212    100.0 %

~~As of March 31, 2018, the weighted average yield on our debt portfolio was 16.0%.~~

~~Lawn Doctor~~

company since we commenced operations (in millions):



		As of March 31, 2020
		Equity Investments				Debt Investments ⁽¹⁾
Portfolio Company	Investment Date	Ownership %		Cost Basis		Type	Interest Rate		Maturity Date	Cost Basis		Total Cost Basis ⁽²⁾
Lawn Doctor	2/7/2018	62	%	$	30.5	Senior Secured - Second Lien	16	%	8/7/2023	$	15.0	$	45.5
Polyform	2/7/2018	87		15.6		Senior Secured - First Lien	16		8/7/2023	15.7		31.3
Roundtables	8/1/2019	81		32.4		Senior Secured - Second Lien	16		8/1/2025	12.1		44.5
Roundtables	11/13/2019	—		—		Senior Secured - First Lien	8		11/13/2020	2.0		2.0
Milton	11/21/2019	13		6.6		Senior Secured - Second Lien	15		11/21/2025	3.4		10.0
Resolution Economics	1/2/2020	8		7.2		Senior Secured - Second Lien	15		1/2/2026	2.8		10.0
Blue Ridge	3/24/2020	18		9.9		Senior Secured - Second Lien	15		3/24/2026	2.6		12.5
				$	102.2					$	53.6	$	155.8

FOOTNOTES:


⁽¹⁾	The note purchase agreements contain customary covenants and events of default. As of March 31, 2020, all of our portfolio companies were in compliance with their respective debt covenants.


⁽²⁾	See the Schedule of Investments and Note 3. “Investments” of Item 1. “Financial Statements” for additional information related to our investments, including fair values as of March 31, 2020.

Our Portfolio Companies

Lawn Doctor is a leading franchisor of residential lawn care programs and services. Lawn Doctor’s core service offerings provide residential homeowners with year-round monitoring and treatment by focusing on weed and insect control, seeding, and professionally and consistently-administered fertilization, using its proprietary line of equipment. Lawn Doctor is not involved in other lawn maintenance services, such as mowing, edging and leaf blowing.

Lawn Doctor’s franchised business model has repeatedly received recognition as a leading franchisor of lawn care services by industry associations and trade magazines, and has a customer retention rate of more than 80% over the past three years, which reflects the high level of quality and customer service that Lawn Doctor has been able to sustain over the years. Lawn Doctor’s efforts on behalf of its franchisees (which include shared marketing programs and infrastructure, an extensive online presence, and comprehensive training) have attracted a strong core of dedicated franchise owners who, in turn, contribute to the continued growth and success of the Lawn Doctor brand.

~~Polyform~~

Polyform is a leading developer, manufacturer and marketer of polymer clay products worldwide. Through its two primary brands, ~~Sculpey~~^®Sculpey® and Premo!^®, Polyform sells a comprehensive line of premium craft products to a diverse mix of customers including specialty and big box retailers, distributors ande-tailers. ~~We believe Polyform~~

Roundtables is ~~well regarded for its high quality, comprehensive line~~an information services and advisory solutions business to the consumer finance industry. Prior to this transaction, Roundtables operated as a division of ~~polymer clays, clay molds, children kits,wax-base~~ ~~clays,non-dry~~ ~~clays, clay~~Auriemma Consulting Group, Inc. Roundtables offers membership in any of 30+ topic-specific roundtables across five verticals (credit cards, auto finance, banking, wealth management and other lending) that includes participation in hosted executive meetings, proprietary benchmarking studies, and custom surveys. The subscription-based model provides executives with key operational data to optimize business practices and address current issues within the consumer finance industry.

Milton Industries, Inc. (“Milton”) is a leading provider of highly-engineered tools and ~~accessories. Polyform’s strong brand recognition,~~accessories for pneumatic applications across a variety of end markets including vehicle service; industrial maintenance, repair and operating supplies; aerospace and defense; and agriculture. The company has more than 1,300 active customers and over 1,600 SKUs with products including couplers, gauges, chucks, blow guns, filters, regulators and lubricators. Milton’s high-quality products, engineering expertise and partnership approach creates long-term relationships, with an average tenure of more than 30 years among its top ten customers.

Resolution Economics is a leading specialty consulting firm that provides services to law firms and corporations in labor and employment and commercial litigation matters.

Blue Ridge is an independent, third-party employee stock ownership plans (“ESOP”) and 401(k) administrator. For over 30 years, Blue Ridge has developed proprietary and comprehensive solutions to address the unique ~~product attributes~~ and ~~strong customer network have earned it~~complex administrative needs of companies operating as ESOPs and managing 401(k) plans. Blue Ridge's services and solutions include recordkeeping, compliance, reporting, distribution and processing, administrative services and plan management and analysis software.

Concentrations of Risk

As of and for the three months ended March 31, 2020 and 2019, we had three portfolio companies (Lawn Doctor, Polyform and Roundtables) which met at least one of the ~~leading market share positions in~~significance tests under Rule 8-03(b) of Regulation S-X.

The portfolio companies are required to make monthly interest payments on their debt, with the polymer clay segment within the United States. Polyform estimates that its products are available in approximately 8,900 retail locations through its major customers, plus many other locations through independent retailers. Products are shipped directlydebt principal due upon maturity. Failure of any of these portfolio companies to ~~48 countries worldwide.~~

~~See Note 3. “Investments”~~pay contractual interest payments could have a material adverse effect on our results of ~~Item 1. “Financial Statements” for additional information related~~operations and cash flows from operations, which would impact our ability to ~~our investments.~~

make distributions to shareholders.

Adjusted EBITDA

When evaluating the performance of our portfolio, we monitor ~~adjusted~~Adjusted EBITDA to measure the financial and operational performance of our portfolio companies and their ability to pay contractually obligated debt payments to us. In connection with this evaluation, the Manager andSub-Manager review monthly portfolio company operating performance versus budgeted expectations and conduct regular operational review calls with the management teams of the portfolio companies.

We present Adjusted EBITDA as a supplemental measure of the performance of our ~~initial businesses.~~portfolio companies which met at least one of the significance tests under Rule 8-03(b) of Regulation S-X for the three months ended March 31, 2019. We define Adjusted EBITDA as net income (loss), plus (i) interest expense, net, and loan cost amortization, (ii) taxes and (iii) depreciation and amortization, as further adjusted for certain othernon-recurring items that we do not consider indicative of the ongoing operating performance of our ~~initial businesses.~~portfolio companies. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future our ~~initial businesses~~portfolio companies may incur expenses that are the same as or similar to some of the adjustments in this presentation. This presentation of Adjusted EBITDA should not be construed as an inference that the future results of our ~~initial businesses~~portfolio companies will be unaffected by unusual ornon-recurring items.

We present Adjusted EBITDA for our significant portfolio companies because we believe it assists investors in comparing the performance of such businesses across reporting periods on a consistent basis by excluding items that we do not believe are indicative of their core operating performance.

Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are: (i) Adjusted EBITDA does not reflect cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; (iii) Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness; (iv) although depreciation and amortization arenon-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we do not consider to be indicative of theon-going operations of our ~~initial businesses;~~portfolio companies; and (vi) other companies in similar industries as our ~~initial businesses~~portfolio companies may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with ~~GAAP.~~accounting principles generally accepted in the United States of America (“GAAP”). We compensate for these limitations by relying primarily on the GAAP results and using Adjusted EBITDA only supplementally.

Summarized Net Income to Adjusted EBITDA Reconciliations ~~(Unaudited)~~

Lawn Doctor

   Period February 7,
2018⁽¹⁾ through
March 31, 2018
Net Income (GAAP)
   $ 23,635
Interest and Debt Related Expenses
   606,186
Depreciation and Amortization
   127,088
Income Tax Expense
   7,825
Transaction Costs
   313,895


Adjusted EBITDA(non-GAAP)
   $ 1,078,629

Three Months Ended March 31,
2020 2019
Net loss attributable to Lawn Doctor (GAAP) $ (176,094 ) $ (139,011 )
Interest and debt related expenses 1,057,036
1,089,334
Depreciation and amortization 622,894
629,674
Income tax benefit (111,500 ) (63,588 )
Adjusted EBITDA (non-GAAP) $ 1,392,336
$ 1,516,409

Polyform

   Period February 7,
2018⁽¹⁾ through
March 31, 2018
Net Loss (GAAP)
   $ (431,736 )
Interest and Debt Related Expenses
   428,946
Depreciation and Amortization
   291,465
Income Tax Benefit
   (48,000 )
Transaction Costs
   313,895


Adjusted EBITDA(non-GAAP)
   $ 554,570



	Three Months Ended March 31,
	2020			2019
Net (loss) income (GAAP)	$	(95,096	)	$	5,826
Interest and debt related expenses	729,945			720,145
Depreciation and amortization	418,292			411,444
Income tax (benefit) expense	(37,000		)	3,000
Adjusted EBITDA (non-GAAP)	$	1,016,141		$	1,140,415

Roundtables ⁽¹⁾



	Three Months Ended March 31, 2020
Net loss (GAAP)	$	(518,006	)
Interest and debt related expenses	648,022
Depreciation	375,162
Income tax benefit	(176,758		)
Adjusted EBITDA (non-GAAP)	$	328,420

FOOTNOTE:

~~(1)~~	~~February 7, 2018 is the date we~~
⁽¹⁾	We acquired ~~the portfolio companies.~~Roundtables on August 1, 2019.

Factors Impacting Our Operating Results

We expect that the results of our operations will be affected by a number of factors. Many of the factors that will affect our operating results are beyond our control.

We will be dependent upon the earnings of and cash flow from the businesses that we acquire to meet our corporate overhead and management fee expenses and to make distributions. These earnings and cash flows, net of any minority interests in these businesses, will be available:

•

~~first~~~~, to meet management fees and corporate overhead expenses of the company; and~~

•

~~second~~~~, to fund business operations and distributions by the company to shareholders.~~

first, to meet our management fees and corporate overhead expenses; and

second, to fund business operations and distributions by us to shareholders.

COVID-19

The Company and the operations of its portfolio companies could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the current outbreak of the COVID-19 pandemic. In March 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19, which continues to spread throughout the United States and globally. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by, among other things, instituting quarantines, mandating business and school closures, requiring restrictions on travel and issuing “shelter-in-place” and/or “stay-at-home” orders. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries. The Manager, the Sub-Manager and our businesses could be prevented from conducting business activities for an indefinite period of time. Since certain aspects of the services provided by our businesses involve face to face interaction, the related COVID-19 quarantines and work and travel restrictions may reduce participation or result in a loss of business. Additionally, since certain of the products offered by our businesses are manufactured in a facility or distributed through retail stores, a closure of such facility or loss in business for such retail store due to COVID-19 would have an adverse impact on product sales. For example, as a result of the outbreak and a “stay-at-home” order issued by the state of Illinois, the manufacturing facility used by Polyform temporarily closed starting in late March 2020.

We are working with management at each of our portfolio companies to prepare cost reduction plans, and to the extent appropriate begin executing such plans, to reduce or defer controllable costs, such as labor costs, marketing spend and capital expenditures. Additionally, our portfolio companies are proactively managing working capital and drawing on revolving credit facilities as applicable. Some of our portfolio companies have experienced and expect to continue to experience reductions in customer demand. We expect that the government measures taken to address the spread of the virus, the reductions in production at certain facilities, and the closure of many brick and mortar retail businesses will more meaningfully impact the operations of some of our portfolio companies in future periods. The ultimate extent of the impact of the COVID-19 pandemic on the financial performance of our business (including our portfolio companies) will depend on future developments, including the duration and spread of the COVID-19 pandemic, and the overall economy, all of which are highly uncertain and cannot be predicted.

Since March 13, 2020, there have been a number of federal, state and local government initiatives to manage the spread of the virus and its impact on the economy, financial markets and continuity of businesses of all sizes and industries. For example, on March 27, 2020, Congress approved, and President Trump signed into law, the CARES Act, an approximately $2 trillion stimulus package responding to the economic harms of COVID-19. The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing and loan forgiveness/forbearance. In addition, the Trump administration has indicated that it may sign additional legislation relating to the COVID-19 pandemic. It is currently unclear how or if the CARES Act or any future legislation would impact or benefit us, but we continue to analyze the relevant legislative and regulatory developments and the potential impact they may have on our business (including our businesses), results of operations, financial condition and liquidity. See Item 1A “Risk Factors” in Part II of this Form 10-Q for the quarter ended March 31, 2020 for additional information regarding the risks of COVID-19.

Size of assets

If we are unable to raise substantial funds, we will be limited in the number and type of acquisitions we may make. The size of our assets will be a key revenue driver. Generally, as the size of our assets grows, the amount of income we receive will increase. In addition, our assets may grow at an uneven pace as opportunities to acquire assets may be irregularly timed, and the timing and extent of the Manager’s and theSub-Manager’s success in identifying such opportunities, and our success in making acquisitions, cannot be predicted.

Market conditions

From time to time, the global capital markets may experience periods of disruption and instability, as we have seen and continue to see with the COVID-19 pandemic, which could materially and adversely impact the broader financial and credit markets and reduce the availability ~~to us~~ of debt and equity capital. Significant changes or volatility in the capital markets have and may ~~also~~continue to have a negative effect on the valuations of our businesses and other assets. While all of our assets are likely to not be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our assets are sold in a principal market to market participants (even if we plan on holding an asset long term or through its maturity) and impairments of the market values or fair market values of our assets, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. See “Results of Operations – Net Change in Unrealized (Depreciation) Appreciation” below for additional information regarding the impact of COVID-19 on the fair market values of our assets during the three months ended March 31, 2020. Significant changes in the capital markets may also affect the pace of our activity and the potential for liquidity events involving our assets. Thus, the illiquidity of our assets may make it difficult for us to sell such assets to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our assets if we were required to sell them for liquidity purposes.

~~Results of Operations~~

~~From the time~~

Liquidity and Capital Resources

General

Liquidity is a measure of our ~~formation on August 9, 2016 through February 6, 2018, we had not commenced~~ability to meet potential cash requirements, including ongoing commitments, fund and maintain our assets and operations, repay borrowings, make distributions to our shareholders and other general business needs. We will use significant cash to fund acquisitions, make additional investments in our portfolio companies, make distributions to our shareholders and fund our operations. ~~Operations commenced on February 7, 2018, when aggregate subscription proceeds in excess~~Our primary sources of ~~the minimum offering amount of $80 million were received in the Private Placement. We acquired our initial businesses on February 7, 2018 using a substantial portion of~~ cash will generally consist of:

the net proceeds from the ~~Private Placement. See “Overview – Our Common Shares Offering”~~Offerings;

distributions and ~~“Overview – Portfolio~~interest earned from our assets;

expense support; and ~~Investment Activity” above~~

proceeds from sales of assets and principal repayments from our assets.

We expect we will have sufficient cash from current sources to meet our liquidity needs for ~~additional information.~~

the next twelve months. However, we may opt to supplement our equity capital and increase potential returns to our shareholders through the use of prudent levels of borrowings. We may use debt when the available terms and conditions are favorable to long-term investing and well-aligned with our business strategy. In light of the current COVID-19 pandemic and its impact on the global economy, we are closely monitoring overall liquidity levels and changes in the business performance of our portfolio companies to be in a position to enact changes to ensure adequate liquidity going forward.

While we generally intend to hold our assets for the long term, certain assets may be sold in order to manage our liquidity needs, meet other operating objectives and adapt to market conditions. The timing and impact of future sales of our assets, if any, cannot be predicted with any certainty.

As of March 31, ~~2018,~~2020 and December 31, 2019, we had approximately $28.9 million and $31.0 million, respectively, of cash and restricted cash.

Sources of Liquidity and Capital Resources

Offerings. We received approximately $20.5 million and $10.6 million in net proceeds during the three months ended March 31, 2020 and 2019, respectively, from the Offerings, which excludes approximately $0.4 million and $0.1 million raised through our distribution reinvestment plan during the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, we had approximately 943 million common shares available for sale through the Public Offering and Class FA Private Offering and the Follow-On Class FA Private Offering.

Operating Activities. During the three months ended March 31, 2020 and 2019, we generated operating cash flows (excluding amounts related to purchases of investments) of approximately $1.8 million and $0.5 million, respectively. The increase in operating cash flows (excluding amounts related to purchases of investments) is primarily attributable to the following:

an increase in total investment income of approximately $0.5 million primarily attributable to an increase in interest earned on debt investments;

a decrease in amounts due from related parties of approximately $0.7 million due to the collection from the Manager and Sub-Manager of the annual expense support receivable, partially offset by new expense support receivables related to the three months ended March 31, 2020; and

a decrease in accounts payable of approximately $0.1 million.

Borrowings. In June 2019, the Company, through a wholly-owned subsidiary, entered into a Loan Agreement for a $20.0 million Line of Credit. The purpose of the Line of Credit is for general Company working capital and acquisition financing purposes. The Line of Credit has a maturity date of 364 days from the effective date of the Loan Agreement plus one 12-month extension. We had not borrowed any amounts under the Line of Credit as of March 31, 2020.

Uses of Liquidity and Capital Resources

Investments.We used approximately $22.5 million of cash proceeds from the Offerings to purchase investments in two portfolio companies during the three months ended March 31, 2020. We did not use proceeds to purchase investments during the three months ended March 31, 2019.

Distributions.We paid distributions to our shareholders of approximately $1.6 million and $1.1 million (which excludes distributions reinvested of approximately $0.4 million and $0.1 million, respectively) during the three months ended March 31, 2020 and 2019, respectively. See “Distributions” below for additional information.

Share Repurchases. We paid approximately $0.2 million during the three months ended March 31, 2020 to repurchase shares in accordance with our Share Repurchase Program. We did not repurchase shares during the three months ended March 31, 2019.

Distributions Declared

During the three months ended March 31, 2020 and 2019, our board of directors declared cash distributions to shareholders based on monthly record dates, and such distributions were paid monthly in arrears. See Note 6. “Distributions” in Item 1. “Financial Statements” for additional information, including distributions declared per share for each share class.

Cash distributions declared during the periods presented were funded from the following sources noted below:



	Three Months Ended March 31,
	2020				2019
	Amount		% of Cash Distributions Declared		Amount		% of Cash Distributions Declared
Net investment income⁽¹⁾	$	1,645,964	78.7	%	$	1,130,385	91.5	%
Distributions in excess of net investment income⁽²⁾	445,387		21.3	%	105,586		8.5	%
Total distributions declared⁽³⁾	$	2,091,351	100.0	%	$	1,235,971	100.0	%

FOOTNOTES:


⁽¹⁾	Net investment income includes expense support from the Manager and Sub-Manager of $607,630 and $216,073 for the three months ended March 31, 2020 and 2019, respectively. See Note 5. “Related Party Transactions” of Item 1. “Financial Statements” for additional information.


⁽²⁾	Consists of offering proceeds for both periods presented.

⁽³⁾

For the three months ended March 31, 2020, includes $419,855 of distributions reinvested pursuant to our distribution reinvestment plan, of which $153,758 was reinvested in April 2020 with the payment of distributions declared in March 2020. For the three months ended March 31, 2019, includes $121,011 of distributions reinvested pursuant to our distribution reinvestment plan, of which $46,596 was reinvested in April 2019.

We calculate each shareholder’s specific distribution amount for the period using record and declaration dates. Distributions are made on all classes of our shares at the same time. Amounts distributed are allocated among each class in proportion to the number of shares of each class outstanding. Amounts distributed to each class are allocated among the holders of our shares in such class in proportion to their shares. The per share amount of distributions on Class A, Class T, Class D and Class I shares will differ because of different allocations of certain class-specific expenses. Specifically, distributions paid to our shareholders of share classes with ongoing distribution and shareholder servicing fees may be lower than distributions on certain other of our classes without such ongoing distribution and shareholder servicing fees that we are required to pay. Additionally, distributions on the Non-founder shares may be lower than distributions on Founder shares because we are required to pay higher management and incentive fees to the Manager and the Sub-Manager with respect to the Non-founder shares. There is no assurance that we will pay distributions in any particular amount, if at all. See Note 6. “Distributions” in Item 1. “Financial Statements” for additional disclosures regarding distributions, including per share amounts declared per share class for the periods presented.

Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan pursuant to which shareholders who purchase shares in the Public Offering have their cash distributions automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable, unless such shareholders elect to receive distributions in cash, are residents of Opt-In States, or are clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan. Opt-In States include Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oregon, and Washington. Shareholders who are residents of Opt-In States, holders of Class FA shares, and clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares. Cash distributions paid on Class FA shares are reinvested in additional Class A shares.

The purchase price for shares purchased under our distribution reinvestment plan is equal to the most recently determined and published net asset value per share of the applicable class of shares. Because the distribution and shareholder servicing fee is calculated based on net asset value, it reduces net asset value and/or distributions with respect to Class T shares and Class D shares, including shares issued under the distribution reinvestment plan with respect to such share classes. To the extent newly issued shares are purchased from us under the distribution reinvestment plan or shareholders elect to reinvest their cash distribution in our shares, we retain and/or receive additional funds for acquisitions and general purposes including the repurchase of shares under the Share Repurchase Program.

We do not pay selling commissions or dealer manager fees on shares sold pursuant to our distribution reinvestment plan. However, the amount of the distribution and shareholder servicing fee payable with respect to Class T or Class D shares, respectively, sold in the Public Offering is allocated among all Class T or Class D shares, respectively, including those sold under our distribution reinvestment plan and those received as distributions.

Our shareholders will be taxed on their allocable share of income, even if their distributions are reinvested in additional shares of our common shares and even if no distributions are made.

Share Repurchase Program

We adopted the Share Repurchase Program effective March 2019, as further amended in January 2020, pursuant to which we conduct quarterly share repurchases to allow our shareholders to sell all or a portion of their shares (at least 5% of his or her shares) back to us at a price equal to the net asset value per share of the month immediately prior to the repurchase date. The repurchase date is generally the last business day of the month of a calendar quarter end. We are not obligated to repurchase shares under the Share Repurchase Program. If we determine to repurchase shares, the Share Repurchase Program also limits the total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares to up to 2.5% of our aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of our aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of our trailing four quarters). The Share Repurchase Program also includes certain restrictions on the timing, amount and terms of our repurchases intended to ensure our ability to qualify as a partnership for U.S. federal income tax purposes.

The aggregate amount of funds under the Share Repurchase Program is determined on a quarterly basis at the sole discretion of our board of directors. During any calendar quarter, the total amount of aggregate repurchases is limited to the aggregate proceeds from our distribution reinvestment plan during the previous quarter unless our board of directors determines otherwise. At the sole discretion of our board of directors, we may also use other sources, including, but not limited to, offering proceeds and borrowings to repurchase shares.

To the extent that the number of shares submitted to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, from among the requests for repurchase received by us based upon the total number of shares for which repurchase was requested and the order of priority described in the Share Repurchase Program. We may repurchase shares including fractional shares, computed to three decimal places.

Under the Share Repurchase Program, our ability to make new acquisitions of businesses or increase the current distribution rate may become limited if, over any two-year period, we experience repurchase demand in excess of capacity. If, during any consecutive two year period, we do not have at least one quarter in which we fully satisfy 100% of properly submitted repurchase requests, we will not make any new acquisitions of businesses (excluding short-term cash management investments under 90 days in duration) and we will use all available investable assets (as defined below) to satisfy repurchase requests (subject to the limitations under the Share Repurchase Program) until all Unfulfilled Repurchase Requests have been satisfied. Additionally, during such time as there remains any Unfulfilled Repurchase Requests outstanding from such period, the Manager and the Sub-Manager will defer their total return incentive fee until all such Unfulfilled Repurchase Requests have been satisfied. “Investable assets” includes net proceeds from new subscription agreements, unrestricted cash, proceeds from marketable securities, proceeds from the distribution reinvestment plan, and net cash flows after any payment, accrual, allocation, or liquidity reserves or other business costs in the normal course of owning, operating or selling our acquired businesses, debt service, repayment of debt, debt financing costs, current or anticipated debt covenants, funding commitments related to our businesses, customary general and administrative expenses, customary organizational and offering costs, asset management and advisory fees, performance or actions under existing contracts, obligations under our organizational documents or those of our subsidiaries, obligations imposed by law, regulations, courts or arbitration, or distributions or establishment of an adequate liquidity reserve as determined by our board of directors.

During the three months ended March 31, 2020, we received requests for the repurchase of approximately $1.9 million (70,822 shares) of our common shares, which exceeded proceeds received from our distribution reinvestment plan in the fourth quarter of 2019 by approximately $1.6 million. Our board of directors approved the use of other sources to satisfy repurchase requests received in excess of proceeds received from the distribution reinvestment plan. The following table summarizes the shares repurchased during the three months ended March 31, 2020:



	Three Months Ended March 31, 2020
	Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA shares	54,800	$	1,510,288	$	27.56
Class A shares	2,242	59,969		26.75
Class I shares	13,780	371,909		26.99
Total	70,822	$	1,942,166	$	27.42

There were no repurchases during the three months ended March 31, 2019.

Results of Operations

As of March 31, 2020 and 2019, the fair value of our investment portfolio totaled ~~approximately $77.5 million. Our investments at March 31, 2018 consisted of two debt investments~~$163.3 million and ~~two equity investments.~~$82.8 million, respectively. See ~~section entitled “Overview – Portfolio~~“Portfolio and Investment Activity” above for discussion of the general terms and characteristics of our investments, and for information regarding investment activities during the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~

2020 and 2019.

The following is a summary of our operating results for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018:~~

Total investment income
   $ 728,216
Net operating expense
   425,375


Net investment income
   302,841
Net change in unrealized appreciation
   524,449


Net increase in net assets resulting from operations
   $ 827,290

2020 and 2019:

Three Months Ended March 31,
2020 2019
Total investment income $ 2,296,037
$ 1,769,785
Total operating expenses (1,257,703 ) (855,473 )
Expense support 607,630
216,073
Net investment income 1,645,964
1,130,385
Net change in unrealized (depreciation) appreciation on investments (3,393,662 ) 281,000
Net (decrease) increase in net assets resulting from operations $ (1,747,698 ) $ 1,411,385

Investment Income

Investment income consisted of the following for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018:~~

Interest income
   $ 728,216


Total investment income
   $ 728,216

2020 and 2019:



	Three Months Ended March 31,
	2020		2019
Interest income	$	2,109,291	$	1,363,280
Dividend income	186,746		406,505
Total investment income	$	2,296,037	$	1,769,785

The majority of our interest income is generated from our debt investments, all of which had fixed rate interest as of March 31, 2020 and 2019. As of March 31, ~~2018,~~2020 and 2019, our weighted average annual yield on our accruing debt investments was 15.5% and 16.0% based on amortized cost, respectively, as defined above in ~~“Overview – Portfolio~~“Portfolio and Investment Activity.” ~~As of March 31, 2018, all of~~Interest income from our debt investments ~~had fixed rate interest. Interest~~was approximately $2.0 million and $1.2 million for the three months ended March 31, 2020 and 2019, respectively, while interest income earned on our cash accounts was approximately $0.1 million and $0.2 million, respectively. The increase in interest income during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, is primarily attributable to additional debt investments during the twelve months ended March 31, 2020 of approximately $22.9 million.

We received dividend income of approximately $0.2 million and $0.4 million during the three months ended March 31, 2020 and 2019, respectively, from our equity investments in our portfolio companies.

We do not believe that our interest income, dividend income and total investment income ~~for the period February 7, 2018 (commencement of operations) through March 31, 2018 was $728,216. We believe that our interest income and total investment income is not~~

are representative of either our stabilized performance or our future performance. We expect aninvestment income to increase ~~in interest income and dividend income~~ in future periods ~~due to an increasing~~as we increase our base of investments that we expect to result from ~~the~~existing cash, borrowings and an expected increase in capital available for investment ~~as related to our Public Offering.~~

using proceeds from the Offerings.

Operating Expenses

Our operating expenses for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018~~2020 and 2019 were as follows:

Organization and offering expenses
   $ 221,564
Base management fees
   88,562
Professional services
   73,581
Director fees and expenses
   37,070
Administrative services
   32,493
Custodian and accounting fees
   15,000
Other
   317


Total operating expenses
   468,587
Expense support
   (43,212 )


Net expenses
   $ 425,375

~~Operating expenses were partially offset by expense support of $43,212 for the period from February 7, 2018 (commencement of operations) through March 31, 2018.~~



	Three Months Ended March 31,
	2020			2019
Organization and offering expenses	$	221,889		$	185,701
Base management fees	515,598			241,638
Professional services	332,758			227,515
Pursuit costs	6,949			—
Director fees and expenses	51,133			57,699
General and administrative expenses	8,854			28,056
Custodian and accounting fees	41,290			62,150
Insurance expense	52,873			45,945
Distribution and shareholder servicing fees	26,359			6,769
Total operating expenses	1,257,703			855,473
Expense support	(607,630		)	(216,073		)
Net expenses	$	650,073		$	639,400

We consider the following expense categories to be relatively fixed in the near term: ~~administrative services,~~insurance expenses and director fees and ~~expenses, and custodian and accounting fees.~~expenses. Variable operating expenses include general and administrative, custodian and accounting fees, professional services, pursuit costs, base management fees, ~~performance–based~~total return incentive fees, and distribution and shareholder servicing ~~fees, and a component of other operating expenses related to transfer agency services and shareholder services.~~fees. We expect these variable operating expenses to increase either in connection with the growth in ~~the~~our asset base ~~(investment advisory~~(base management fees and total return incentive fees), the number of shareholders and open accounts (transfer agency services and shareholder services, distribution and shareholder servicing fees) and the complexity of our investment processes and capital structure (professional services).

Organization and Offering Expenses

Organization expenses are expensed on our condensed consolidated statement of operations as incurred. Offering expenses, which consist of amounts incurred for items such as legal, accounting, regulatory and printing work incurred related to ~~our~~the Offerings, are capitalized on our ~~statement~~statements of assets and liabilities as deferred offering expenses and expensed to our statement of operations over the lesser of the offering period or 12 months; however, the end of the deferral period will not exceed 12 months from the date the offering expense is incurred by the Manager and theSub-Manager.

We expensed organization and offering expenses of approximately $0.2 million during each of the three months ended March 31, 2020 and 2019.

Base Management Fee

Our base management fee is calculated for each share class at an annual rate of (i) for the~~non-founder~~ Non-founder shares, 2% of the product of (x) our average gross assets and (y) the ratio of~~non-founder~~ Non-founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital and (ii) for the ~~founder~~Founder shares, 1% of the product of (x) our average gross assets and (y) the ratio of outstanding ~~founder~~Founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears.

We incurred base management fees of approximately $0.5 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively. The increase in base management fees is primarily attributable to the increase in our average gross assets since March 31, 2019.

Total Return Incentive Fee

The Manager andSub-Manager are ~~also~~ eligible to receive incentive fees based on the Total Return to Shareholders, as defined in the Management Agreement andSub-Management Agreement, for each share class in any calendar year, payable annually in arrears. We ~~will~~ accrue (but do not pay) the total return incentive fee on a quarterly basis, to the extent that it is earned, and ~~will~~ perform a final reconciliation at completion of each calendar ~~year and the~~year. The total return incentive fee ~~shall be~~is due and payable to the Manager and Sub-Manager no later than ninety (90) calendar days following the end of the applicable calendar year. The total return incentive fee may be reduced or deferred by the Manager and theSub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement.

We did not incur ~~any~~ total return incentive fees during the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~

2020 and 2019. We incurred a total return incentive fee of approximately $0.8 million for the year ended December 31, 2019 and may incur a total return incentive fee during the year ended December 31, 2020.

Pursuit Costs

Pursuit costs relate to transactional expenses incurred for investments that did not close, including fees and expenses associated with performing the due diligence reviews. We incurred pursuit costs of $6,949 during the three months ended March 31, 2020. We did not incur pursuit costs during the three months ended March 31, 2019.

Other Operating Expenses

Other operating expenses (consisting of professional services, director fees and expenses, general and administrative expenses, custodian and accounting fees, and insurance expense) were approximately $0.5 million and $0.4 million during the three months ended March 31, 2020 and 2019, respectively. The increase in other operating expenses during the three months ended March 31, 2020 is primarily attributable to an increase in accounting, legal, tax and valuation professional services resulting from an increase in the number of shareholders and investments, as compared to the three months ended March 31, 2019.

Distribution and Shareholder Servicing Fee

The Managing Dealer is eligible to receive a distribution and shareholder servicing fee, subject to certain limits, with respect to our Class T and Class D shares sold in the Public Offering (excluding Class T shares and Class D shares sold through our distribution reinvestment plan and those received as share distributions) in an amount equal to 1.00% and 0.50%, respectively, of the current net asset value per share.

We incurred distribution and shareholder servicing fees of $26,359 and $6,769 during the three months ended March 31, 2020 and 2019, respectively. The increase in distribution and shareholder servicing fees during the three months ended March 31, 2020, is attributable to an increase in Class T and Class D shareholders.

Expense Support and Conditional Reimbursement Agreement

Expense support from the Manager and Sub-Manager partially offsets operating expenses. Expense support totaled approximately $0.6 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively. The actual amount of expense support is determined as of the last business day of each calendar year and is paid within 90 days after each year end per the terms of the Expense Support and Conditional Reimbursement Agreement described below.

We have entered into an Expense Support and Conditional Reimbursement Agreement with the Manager and theSub-Manager, pursuant to which each of the Manager and theSub-Manager agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Manager and theSub-Manager under the Management Agreement and theSub-Management Agreement, as applicable, to the extent that our annual regular cash distributions exceed our annual net income (with certain adjustments). Expense Support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of our distribution reinvestment plan) to shareholders minus (b) the available operating funds. The Expense Support amount ~~will be~~is borne equally by the Manager and theSub-Manager and ~~will be~~is calculated as of the last business day of the calendar year. ~~Beginning on February 7, 2018~~The Manager and ~~continuing until the Expense Support and Conditional Reimbursement Agreement is terminated, the Manager and~~Sub-Manager ~~shall~~ equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement has the same initial term and renewal terms as the Management Agreement or theSub-Management Agreement, as applicable to the Manager or theSub-Manager.

If, on the last business day of the calendar year, ~~there are Excess~~the annual (calendar year) year-to-date available operating funds exceeds the sum of the annual (calendar year) year-to-date distributions paid per share class (the “Excess Operating ~~Funds,~~Funds”), we will use such Excess Operating Funds to pay the Manager and theSub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to the Conditional Reimbursements as described further in the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

We did not have any Excess Operating Funds as of March 31, 2020 for any share class which had received expense support.

Net Change in Unrealized (Depreciation) Appreciation

~~For~~

During the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018,~~2020 and 2019, net change in unrealized (depreciation) appreciation on investments consisted of the following:

Unrealized appreciation
   $ 524,449
Unrealized depreciation
   —


Total net unrealized appreciation
   $ 524,449

~~The~~



	Three Months Ended March 31,
	2020			2019
Unrealized appreciation	$	—		$	281,000
Unrealized depreciation	(3,393,662		)	—
Net change in unrealized (depreciation) appreciation	$	(3,393,662	)	$	281,000

Unrealized (depreciation) appreciation is based on the current fair value of our investments as determined by our board of directors based on inputs from the Sub-Manager and our independent valuation firm and consistent with our valuation policy, which take into consideration, among other factors, actual results of our portfolio companies in comparison to budgeted results for the year, future growth prospects, and the valuations of publicly traded comparable companies as determined by our independent valuation firm. Due to the significant market dislocation in March 2020 caused by the COVID-19 pandemic, the fair values of our portfolio companies were impacted by a combination of variability in EBITDA, decreases in public market multiples and increases in the risk premium in discount rates used to value the portfolio companies. As a result, during the three months ended March 31, 2020, we recognized unrealized depreciation of approximately $3.4 million on our equity investments in Lawn Doctor, Polyform and Roundtables.

During the three months ended March 31, 2019, we recognized unrealized appreciation of ~~$524,449 pertains solely to~~approximately $0.3 million on our equity investment in ~~the equity~~Lawn Doctor as a result of Lawn ~~Doctor,~~Doctor’s strong performance in comparison to budgeted results.

Net Assets

During the three months ended March 31, 2020 and 2019, the change in net assets consisted of the following:



	Three Months Ended March 31,
	2020			2019
Operations	$	(1,747,698	)	$	1,411,385
Distributions to shareholders	(2,091,351		)	(1,235,971		)
Capital share transactions	24,289,780			10,674,258
Change in net assets	$	20,450,731		$	10,849,672

Operations decreased by approximately $3.2 million during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. The decrease in operations is primarily due to a decrease of approximately $3.7 million in the net change in unrealized (depreciation) appreciation during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, partially offset by an increase of approximately $0.5 million in net investment income.

Distributions increased approximately $0.9 million during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, primarily as a result of ~~among other things, strong performance above expectations~~an increase in shares outstanding.

Capital share transactions increased approximately $13.6 million during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. The increase was primarily due an increase of approximately $13.1 million in sales of Class FA shares, an increase of approximately $1.9 million in sales of shares through our Public Offering, approximately $0.2 million in sales of Class S shares and an increase of approximately $0.3 million in proceeds received through our distribution reinvestment plan. Such increases in capital share transactions during the ~~future growth opportunities~~three months ended March 31, 2020 were offset by the repurchasing of ~~Lawn Doctor.~~

approximately $1.9 million in shares under the Share Repurchase Program.

The following table illustrates cumulative total returns with and without upfront selling commissions and placement agent / dealer manager fees (“sales load”), as applicable, from the date the first share was issued for each respective share class to March 31, 2020. All cumulative total returns with sales load assume full upfront selling commissions and placement agent / dealer manager fees.



	Cumulative Total Return	Period
Class FA (no sales load)	19.4%	February 7, 2018 to March 31, 2020
Class FA (with sales load)	11.7%	February 7, 2018 to March 31, 2020
Class A (no sales load)	15.6%	April 10, 2018 - March 31, 2020
Class A (with sales load)	5.7%	April 10, 2018 - March 31, 2020
Class I	16.5%	April 10, 2018 - March 31, 2020
Class T (no sales load)	12.3%	May 25, 2018 - March 31, 2020
Class T (with sales load)	7.0%	May 25, 2018 - March 31, 2020
Class D	10.8%	June 26, 2018 - March 31, 2020
Class S (no sales load)	(1.5)%	March 31, 2020
Class S (with sales load)	(4.9)%	March 31, 2020

We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our investments, other than those described above and the risk factors ~~if any,~~ identified in ~~Part II,~~ Item 1A ~~of this report, and the “Risk Factors”~~in Part I of our ~~Prospectus.~~

~~Net Assets~~

~~Net assets increased approximately $82.0 million during~~Form 10-K for the ~~period February 7, 2018 (commencement of operations) through March~~year ended December 31, ~~2018. The most significant increase in net assets during the quarter ended March 31, 2018 was attributable to capital transactions~~2019 and this Quarterly Report, including the ~~issuance~~negative impacts from the continued spread of Class FA shares resulting in net proceeds of approximately $81.5 million. Additionally, during the quarter ended March 31, 2018, our operations resulted in an increase in net assets of approximately $0.8 million. These increases in net assets were partially offset by distributions to shareholders of approximately $0.3 million during the quarter ended March 31, 2018.

COVID-19.

Our shares are illiquid investments for which there currently is ~~currently not a~~no secondary market. ~~You~~Investors should not expect to be able to resell ~~your~~their shares regardless of how we perform. If ~~you~~investors are able to sell ~~your~~their shares, ~~you~~they will likely receive less than ~~your~~their purchase price. Our net asset value and annualized returns — which are based in part upon determinations of fair value of Level 3 investments by our board of directors, not active market quotations — are inherently uncertain. Past performance is not a guarantee of future results.

~~Liquidity and Capital Resources~~

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments, fund and maintain our assets and operations, repay borrowings, make distributions to our shareholders and other general business needs. We will use significant cash to fund acquisitions, repay principal and interest on our borrowings, make distributions to our shareholders and fund our operations. Our primary sources of cash will generally consist of:

~~the net proceeds of the Public Offering;~~

~~distributions, interest earned and fees from our assets;~~

~~proceeds from sales of assets and principal repayments from our assets; and~~Hedging Activities

~~unused borrowing capacity under our financing sources.~~

We expect we will have sufficient cash from current sources to meet our liquidity needs for the next twelve months. However, we may opt to supplement our equity capital and increase potential returns to our shareholders through the use of prudent levels of borrowings. We may use debt when the available terms and conditions are favorable to long-term investing and well-aligned with our business strategy. In determining whether to borrow money, we seek to optimize maturity, covenant packages and rate structures. Most importantly, the risks of borrowing within the context of our business outlook and the impact on our businesses are extensively analyzed by the Manager and our board of directors in making this determination.

As of March 31, ~~2018 and December 31, 2017,~~2020, we had ~~approximately $5.6 million and $0.2 million of cash and cash equivalents, respectively.~~

~~We raised approximately $81.5 million~~not entered into any derivatives or other financial instruments. However, in net proceeds (3.3 million shares of Class FA shares) during the period February 7, 2018 (commencement of operations) through March 31, 2018 under the Private Placement, which included a $2.4 million~~non-cash~~ ~~contribution by ourSub-Manager,~~ ~~as described above under “Overview – Our Common Shares Offering.” As of March 31, 2018 we had approximately 947 million common shares available for sale through our Public Offering.~~

During the period February 7, 2018 (commencement of operations) through March 31, 2018, we generated cash flows primarily from interest earned on our debt investments. We used approximately $74.4 million of the cash proceeds from our Private Placement to purchase our initial businesses. We also declared four weekly distributions in March 2018 totaling approximately $0.3 million, which were paid to shareholders in April 2018. See “Distributions” below for information regarding our distribution policy.

~~Hedging Activities~~

In an effort to stabilize our revenue and input costs where applicable, we may enter into derivatives or other financial instruments in an attempt to hedge our commodity risk. With respect to any potential financings, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. We may seek to stabilize our financing costs as well as any potential decline in our assets by entering into derivatives, swaps or other financial products in an attempt to hedge our interest rate risk. In the event we pursue any assets outside of the United States we may have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We may in the future, enter into derivatives or other financial instruments in an attempt to hedge any such foreign currency exchange risk. It is difficult to predict the impact hedging activities may have on our results of operations.

~~Distributions~~

Subject to our board of directors’ discretion and applicable legal restrictions, our board of directors intends to declare cash distributions to shareholders based on weekly record dates and we intend to pay such distributions on a monthly basis. Shareholders may elect to reinvest their distributions as additional common shares under our distribution reinvestment plan. Distributions are taxable to our shareholders even if they are reinvested in additional shares of our common shares. The following table reflects, by share class, the cash distributions per share and the total amount of distributions that we have declared on our common shares during the period February 7, 2018 (commencement of operations) through March 31, 2018:

   Quarter Ended
March 31, 2018
   Per Share    Amount
March 31, 2018 (4 record dates)

Class FA shares
   $ 0.092718    $ 302,841
Class A shares
   0.092718    —
Class T shares
   0.074177    —
Class D shares
   0.083449    —
Class I shares
   0.092718    —

Our board of directors also declared cash distributions on the outstanding shares of all classes of our common shares based on weekly record dates for the time period beginning on April 3, 2018 through and including May 29, 2018, as set forth below:

We calculate each shareholder’s specific distribution amount for the period using record and declaration dates. Distributions are made on all classes of our shares at the same time. Amounts distributed are allocated among each class in proportion to the number of shares of each class outstanding. Amounts distributed to each class are allocated among the holders of our shares in such class in proportion to their shares. The per share amount of distributions on Class A, Class T, Class D and Class I shares will differ because of different allocations of certain class-specific expenses. Specifically, distributions on Class T shares and Class D shares will be lower than distributions on Class A, Class FA and Class I shares because the company is required to pay ongoing annual distribution and shareholder servicing fees with respect to the Class T shares and Class D shares sold in the primary offering. Additionally, distributions on the~~non-founder~~ ~~shares will likely be lower than distributions on Class FA shares because we are required to pay higher management and incentive fees to the Manager and theSub-Manager~~ ~~with respect to thenon-founder~~ shares. There is no assurance that we will pay distributions in any particular amount, if at all. See Note 6. “Distributions” in Item 1. “Financial Statements” for additional disclosures regarding distributions.

We do not expect to use equity capital or borrowed funds to pay distributions to shareholders nor do we expect any portion of our distributions paid in 2018 to be treated as a return of capital for tax purposes. See Note 6. “Distributions” in Item 1. “Financial Statements” for a discussion of the sources of funds used to pay distributions on a GAAP basis for the periods presented.

~~Distribution Reinvestment Plan~~

We have adopted a distribution reinvestment plan pursuant to which shareholders who purchase shares in our Public Offering (other than shareholders who are residents of Alabama, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oregon, Washington (collectively the “Opt-in-States”) and clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan) will have their cash distributions automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable, unless such shareholders elect to receive distributions in cash. Shareholders who are residents of~~Opt-in~~ States, holders of Class FA shares and clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan will automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares. Cash distributions paid on Class FA shares will be reinvested in additional shares of Class A shares. The following discussion summarizes the principal terms of this plan.

The purchase price for shares purchased under our distribution reinvestment plan will be equal to the most recently determined and published net asset value per share of the applicable class of shares. Because the annual distribution and shareholder servicing fee is calculated based on net asset value, it reduces net asset value and/or distributions with respect to Class T shares and Class D shares, including shares issued under the distribution reinvestment plan with respect to such share classes. To the extent newly issued shares are purchased from us under the distribution reinvestment plan or shareholders elect to reinvest their cash distribution in our shares, we will retain and/or receive additional funds for acquisitions and general purposes including the repurchase of shares under our share repurchase program.

We will not pay selling commissions or dealer manager fees on shares sold pursuant to our distribution reinvestment plan. However, the amount of the annual distribution and shareholder servicing fee payable with respect to Class T or Class D shares, respectively, sold in this offering will be allocated among all Class T or Class D shares, respectively, including those sold under our distribution reinvestment plan and those received as distributions.

Contractual Obligations

We have entered into the Management Agreement with the Manager and theSub-Management Agreement with the Manager and theSub-Manager pursuant to which the Manager and theSub-Manager are entitled to receive a base management fee and ~~the~~ reimbursement of certain expenses. Certain incentive fees based on our performance are payable to the Manager and theSub-Manager after our performance thresholds are met. Each of the Manager and theSub-Manager is entitled to 50% of the base management fee and incentive fees, subject to any reduction or deferral of any such fees pursuant to the terms of the Expense Support and Conditional Reimbursement Agreement.

If, on the last business day of the calendar year, there are Excess Operating Funds, we will use such Excess Operating Funds to pay the Manager and the Sub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to certain conditions as described further in the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements will automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

As of March 31, 2020, the amount of expense support collected from the Manager and Sub-Manager since inception is approximately $1.8 million. The following table reflects the expense support that may become reimbursable, subject to the conditions of reimbursement defined in the Expenses Support and Conditional Reimbursement Agreement:

As of March 31, 2020, management believes that reimbursement payments by the Company to the Manager and Sub-Manager are not probable under the terms of the Expense Support and Conditional Reimbursement Agreement.

We have also entered into the Administrative Services Agreement with the Administrator and theSub-Administration ~~Agreement~~ agreement with the Administrator and theSub-Administrator pursuant to which the Administrator and theSub-Administrator will provide us with administrative services and are entitled to reimbursement of expenses for such services. For a discussion of the compensation we pay in connection with the management of our business, see Note 5. “Related Party Transactions” of in Item 1. “Financial Statements.”

Off-Balance Sheet Arrangements

We currently have nooff-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Inflation

We do not anticipate that inflation will have a significant effect on our results of operations. However, in the event of a significant increase in inflation, interest rates could rise and our assets may be materially adversely affected.

Seasonality

We do not anticipate that seasonality will have a significant effect on our results of operations.

Critical Accounting Policies and Use of Estimates

~~Our most critical accounting policies will involve decisions~~

See our Form 10-K for the year ended December 31, 2019 and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our financial statements are based are reasonable at the time made and based upon information available to us at that time. Our critical accounting policies and accounting estimates will be expanded over time as we continue to implement our business and operating strategy. Our significant accounting policies are described in Note 2. “Significant Accounting Policies” of ~~Item 1. “Financial Statements.” Those material accounting policies and estimates that we initially expect to be most critical to an investor’s understanding~~Part I of this Quarterly Report for a summary of our ~~financial results and condition, as well as those that require complex judgment decisions by our management, are discussed below.~~

~~Basis of Presentation~~

~~Our financial statements are prepared in accordance with GAAP, which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties.~~

Although we are organized and intend to conduct our business in a manner so that we are not required to register as an investment company under the Investment Company Act, our financial statements are prepared using the specializedcritical accounting principles of ASC Topic 946 to utilize investment company accounting. We obtain funds through the issuance of equity interests to multiple unrelated investors, and provide such investors with investment management services. Further, our business strategy is to acquire interests in middle-market businesses to provide current income and long term capital appreciation, while protecting invested capital. Overall, we believe that the use of investment company accounting on a fair value basis is consistent with the management of our assets on a fair value basis, and make our financial statements more useful to investors and other financial statement users in facilitating the evaluation of an investment in us as compared to other investment products in the marketplace.

~~Valuation of Investments~~

We have adopted, and our valuation policy is performed in accordance with, ASC Topic 820, as described in Note 2. “Significant Accounting Policies” of Item 1. “Financial Statements”. As of March 31, 2018, all of our investments were categorized as Level 3. Our investments are valued utilizing a market approach, an income approach (i.e. discounted cash flow approach), a transaction approach, or a combination of such approaches, as appropriate. The market comparables approach uses prices, including third party indicative broker quotes, and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The transaction approach uses pricing indications derived from recent precedent merger and acquisition transactions involving comparable target companies. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) that are discounted based on a required or expected discount rate to derive a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors we may take into account to determine the fair value of our investments include, as relevant: available current market data, including an assessment of the credit quality of the security’s issuer, relevant and applicable market trading and transaction comparables, applicable market yields and multiples, illiquidity discounts, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, data derived from merger and acquisition activities for comparable companies, and enterprise values, among other factors.

Our board of directors is ultimately responsible for determining in good faith the fair value of our investments in accordance with the valuation policy and procedures approved by the board of directors, based on, among other things, the input of the Manager, the~~Sub-Manager,~~policies. management, our audit committee, and independent third-party valuation firm. The determination of the fair value of our assets requires judgment, especially with respect to assets for which market prices are not available. For most of our assets, market prices will not be available. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a readily available market value existed for such assets, and the differences could be material. Because the calculation of our net asset value is based, in part, on the fair value of our assets, our calculation of net asset value is subjective and could be adversely affected if the determinations regarding the fair value of its assets were materially higher than the values that we ultimately realize upon the disposal of such assets. Furthermore, through the valuation process, our board of directors may determine that the fair value of our assets differs materially from the values that were provided by the independent valuation firm.

~~U.S. Federal Income Taxes~~

We believe that we are properly characterized as a partnership for U.S. Federal income tax purposes and expect to continue to qualify as a partnership (and not be treated as a publicly traded partnership or otherwise be treated as a taxable corporation) for such purposes. As a partnership, we are generally not subject to U.S Federal income tax at the entity level.

~~Recently Issued Accounting Pronouncements~~

~~We will adopt all authoritative accounting standards relevant to our financial statements as required.~~

~~JOBS Act~~

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act, enacted on April 5, 2012. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory~~“say-on-pay”~~ votes on executive compensation and shareholder advisory votes on golden parachute compensation. Although these exemptions will be available to us, we do not expect these exemptions to have a material impact on our public reporting and disclosure. Because we are not a “large accelerated filer” or an “accelerated filer” under the Exchange Act, and will not be so long as our shares are not traded on a securities exchange, we are not subject to the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. In addition, because we have no employees, we do not have any executive compensation or golden parachute payments to report in our periodic reports and proxy statements.

~~Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:~~

~~the last day of the fiscal year during which we have total annual gross revenues of $1.07 billion or more;~~

~~the last day of the fiscal year following the fifth anniversary of the completion of this offering;~~

~~the date on which we have, during the previous three-year period, issued more than $1 billion innon-convertible~~ ~~debt; and~~

the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our~~non-affiliates~~ as of the last day of our most recently completed second fiscal quarter, (ii) been a public company for at least 12 months and (iii) filed at least one annual report with the SEC. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

The JOBS Act also provides that an “emerging growth company” can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we are choosing to opt out of that extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We anticipate that our primary market risks will be related to the credit quality of our counterparties, market interest rates and ~~foreign currency changes.~~changes in exchange rates. We will seek to manage these risks while, at the same time, seeking to provide an opportunity to shareholders to realize attractive returns through ownership of our shares.

Many of these risks have been magnified due to the continuing economic disruptions caused by the COVID-19 pandemic; however, while we continue to monitor the pandemic, its impact on such risks remains uncertain and difficult to predict.

Credit Risk

We expect to encounter credit risk relating to (i) the businesses and other assets we acquire and (ii) ~~any potential~~our ability to access the debt ~~financing we may obtain.~~markets on favorable terms. We will seek to mitigate this risk by deploying a comprehensive review and asset selection process, including ~~worst case~~scenario analysis, and careful ongoing monitoring of our acquired businesses and other assets as well as mitigation of negative credit effects through back up planning. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

Changes in Market Interest Rates

We are subject to financial market risks, including changes in interest rates. Our debt investments are currently structured with fixed interest rates. Returns on investments that carry fixed rates are not subject to fluctuations in ~~interest rates,~~payments we receive from our borrowers, and will not adjust should rates move up or down. However, wethe fair value of our debt investments may be negatively impacted by rising interest rates. We may also invest in floating interest rate debt investments in the future.

We had not borrowed any money as of March 31, 2020. However, to the extent that we borrow money to make investments, our net investment income will be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of rising interest rates, our cost of funds ~~would~~may increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

~~Foreign Currency Risk~~

~~All of our investments are currently denominated in U.S. Dollars. Therefore, the current portfolio does~~

Exchange Rate Sensitivity

At March 31, 2020, we were not ~~present currency risk~~exposed to ~~U.S. shareholders. In the future, we may hedge against~~any foreign currency exchange rate risks that could have a material effect on our financial condition or results of operations. Although we do not have any foreign operations, some of the portfolio companies we invest in conduct business in foreign jurisdictions and ~~interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us from adverse~~therefore our investments have an indirect exposure to risks associated with changes in ~~currency~~foreign exchange rates and interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates or favorable changes in currency exchange rates.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by us in the reports we filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

~~PART II. OTHER INFORMATION~~

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there were no changes in internal control over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


PART II.	OTHER INFORMATION


Item 1.	Legal Proceedings

From time to time, we and individuals employed by us may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our businesses. In addition, our business and the businesses of the Manager, the Sub-Manager and the Managing Dealer are subject to extensive regulation, which may result in regulatory proceedings. Legal proceedings, lawsuits, claims and regulatory proceedings are subject to many uncertainties and their ultimate outcomes are not predictable with assurance.

As of March 31, ~~2018,~~2020, we were not involved in any legal proceedings.

Additionally, there is no action, suit or proceeding pending before any court, or, to our knowledge, threatened by any regulatory agency or other third party, against the Manager, the Sub-Manager or the Managing Dealer that would have a material adverse effect on us.


Item 1A.	Risk Factors

We have disclosed under the heading “Risk Factors” in our ~~Prospectus,~~Form 10-K for the year ended December 31, 2019, risk factors which materially affect our business, financial condition or results of operations. The following risk ~~factors replace and/or supplement~~factor replaces the similar risk ~~factors set forth~~factor included in our ~~Prospectus.~~Form 10-K. You should carefully consider the risk factors set forth in our ~~Prospectus~~Form 10-K and ~~Item 1A in Part II of this Quarterly Report.~~herein. You should be aware that these risk factors and other information may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The outbreak of highly infectious or contagious diseases, including the current outbreak of the novel coronavirus (“COVID-19”), could materially and adversely impact our business, our operating businesses, our financial condition, results of operations and cash flows. Further, the spread of COVID-19 outbreak has caused severe disruptions in the U.S. ~~Department of Labor, or the Department of Labor, has issued regulations that revise the definition~~and global economy and financial markets and could potentially create widespread business continuity issues of an ~~ERISA fiduciary,~~as yet unknown magnitude and ~~these regulations could~~duration.

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 180 countries, including every state in the United States. In March 2020, the World Health Organization declared COVID-19 a ~~significant effect~~pandemic, and on ~~an investment~~March 13, 2020 the United States declared a national emergency with respect to COVID-19. Since March 13, 2020, there have been a number of federal, state and local government initiatives to manage the spread of the virus and its impact on the economy, financial markets and continuity of businesses of all sizes and industries. For example, on March 27, 2020, Congress approved, and President Trump signed, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which provides approximately $2 trillion in ~~our shares.~~

financial assistance to individuals and businesses resulting from the outbreak of the COVID-19 pandemic. The ~~U.S. Department~~CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of ~~Labor issued in 2016 its final regulation redefining “investment advice fiduciary” under ERISA~~financing and loan forgiveness/forbearance. In addition, the Trump administration has indicated that it may sign additional legislation relating to the COVID-19 pandemic. It is currently unclear how or if the CARES Act or any future legislation would impact or benefit us, but we continue to analyze the relevant legislative and regulatory developments and the ~~Code.~~potential impact they may have on our business (including our businesses), results of operations, financial condition and liquidity. The ~~final regulation significantly expanded~~outbreak of the ~~class~~COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of ~~advisers~~the outbreak has been rapidly evolving and many countries, including the ~~scope~~United States, have reacted by instituting quarantines, mandating business and school closures, requiring restrictions on travel, and issuing “shelter-in-place” and/or “stay-at-home” orders. Such actions are creating disruption in global supply chains, and adversely impacting a number of ~~investment advice~~industries. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession.

Outbreaks of pandemic or contagious diseases, such as the current outbreak of COVID-19, could materially and adversely affect our business, our operating businesses, our financial condition, results of operations and cash flows. The Manager, the Sub-Manager and our businesses could be prevented from conducting business activities for an indefinite period of time. Since certain aspects of the services provided by our businesses involve face to face interaction, the related COVID-19 quarantines and work and travel restrictions may reduce participation or result in a loss of business. Additionally, since certain of the products offered by our businesses are ~~subject to fiduciary standards, imposing the same fiduciary standards on advisers to IRAs that have historically only applied to plans covered by ERISA. The Department~~manufactured in a facility or distributed through retail stores, a closure of ~~Labor also finalized certain prohibited transaction exemptions that allow investment advisers to receive compensation~~such facility or loss in business for ~~providing investment advice under arrangements that would otherwise be prohibited~~such retail store due to ~~conflicts~~COVID-19 would have an adverse impact on product sales. For example, as a result of ~~interest. Financial institutions that had been relying on~~ the ~~“Best Interest Contract Exemption” were permitted~~outbreak and a “stay-at-home” order issued by the state of Illinois, the manufacturing facility used by Polyform temporarily closed starting in late March 2020. Further, if the U.S. and global economy continue to ~~comply with only a limited set~~slow down or consumer behavior shifts due to the COVID-19 outbreak (including the continued threat or perceived threat of ~~requirements through July 1, 2019. The United States Court of Appeals~~such outbreak), the demand for the ~~Fifth Circuit is currently expected~~products or services offered by our operating businesses may be reduced. The rapid development and fluidity of this situation precludes any prediction as to ~~issue an order vacating~~ the ~~entire final regulation, the two special prohibited transaction exemptions that had come with the new rule, including the Best Interest Contract Exemption,~~

ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty and amendments to other long-standing prohibited transaction exemptions. The Department of Labor has announced that it intends to issue appropriate guidance in the future that will address the consequences of the disposition of the final regulation. Because the status of the final regulation is still developing and the application of the final regulation remains uncertain, plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development.

Our business could be adversely affected if we fail to maintain our qualification as a venture capital operating company, or VCOC, under the “plan assets” regulation under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

We sold and issued our Class FA shares in the private offering and used a substantial portion of the net proceeds from the private offering to acquire our initial businesses. We currently qualify as a VCOC, as defined in the regulations governing plan assets, or the Plan Asset Regulations, promulgated under ERISA by the Department of Labor, and therefore are not subject to the ERISA fiduciary requirementsrisk with respect to our ~~assets. However, if we fail to satisfy the requirements to qualify as a VCOC for any reason~~business, our operating businesses, our financial condition, results of operations and no other exception under the Plan Asset Regulations applies, such failure could materially interfere with our activities or expose us to risks related to our failure to comply with the requirements. If no exception under the Plan Asset Regulations applied, the fiduciary responsibility standards of ERISA would apply to us, including the requirement of investment prudence and diversification, and certain transactions that we enter into, or may have entered into, in the ordinary course of business, might constitute or result in non-exempt prohibited transactions under Section 406 of ERISA or Section 4975 of the Code. A non-exempt prohibited transaction, in addition to imposing potential liability upon fiduciaries of a plan subject to Title I of ERISA or Section 4975 of the Code, may also result in the imposition of an excise tax under the Code upon a “party in interest” (as defined in ERISA) or “disqualified person” (as defined in the Code) with whom we engaged in the transaction. Therefore, our business could be adversely affected if we fail to quality as a VCOC under the Plan Asset Regulations.

cash flows.


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

Unregistered Sales of Equity Securities

~~We were capitalized through~~

During the ~~purchase by CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC of 4,000 shares of~~three months ended March 31, 2020, we sold approximately 0.5 million Class FA shares ~~each~~under the Class FA Private Offering and Follow-On Class FA Private Offering for ~~the aggregate consideration~~net proceeds of ~~$200,000 in June 2017.~~

~~From April 2017 to February 2018, we~~approximately $13.2 million. We conducted the ~~Private Placement of up to $200 million in shares of our~~ Class FA Private Offering and Follow-On Class ~~A shares.~~FA Private Offering pursuant to the applicable exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated under the Securities Act. We offered the shares in the Class FA Private ~~Placement~~Offering and are conducting the Follow-On Class FA Private Offering only to persons that were “accredited investors,” as that term is defined under the Securities Act and Regulation D promulgated thereunder. AsThere were no selling commissions or placement agent fees for the sale of ~~February 8, 2018,~~Class FA shares under the ~~date~~Class FA Private Offering. Under the Follow-On Class FA Private Offering we ~~terminated~~paid the Placement Agent a selling commission of up to 5.5% and placement agent fee of up to 3.0% of the sale price for each Class FA share sold, except as a reduction or sales load waiver that may apply.

During the three months ended March 31, 2020, we sold 9,030 Class S shares under the Class S Private ~~Placement, we received aggregate gross~~Offering for net proceeds of approximately ~~$81.7 million~~$0.2 million. We are currently conducting the Class S Private Offering pursuant to the applicable exemption from registration under Section 4(a)(2) of the ~~sale~~Securities Act and Rule 506(c) of ~~approximately 3.3 million shares of our Class FA~~Regulation D promulgated under the Securities Act. We are offering the shares in the Class S Private ~~Placement. The $81.7 million~~Offering only to persons that were “accredited investors,” as that term is defined under the Securities Act and Regulation D promulgated thereunder. Under the Class S Private Offering, we pay the Placement Agent a selling commission of up to 2.0% and a placement agent fee of up to 1.5% of the sale price for each Class S share sold, except as a reduction or sales load waiver that may apply.

See Note 7. “Capital Transactions” in ~~gross proceeds included a cash capital contribution of $2.4 million from~~Item 1. “Financial Statements” for additional information related to the ~~Manager in exchange for 96,000~~Class FA Private Offering, Follow-On Class FA Private Offering and Class S Private Offering. Class FA shares and ~~a cash capital contribution of $9.5 million from CNL Strategic Capital Investment, LLC, which is indirectly controlled by James M. Seneff, Jr., the chairman of the Company, in exchange~~Class S shares are not offered for ~~380,000 Class FA shares. The $81.7 million also included 96,000 Class FA shares received in exchange for $2.4 million ofnon-cash~~ ~~consideration~~sale in the ~~form of equity interests in Lawn Doctor received from an affiliate of theSub-Manager~~Public Offering. pursuant to Exchange Agreement. The $81.7 million in gross proceeds also included a cash capital contribution of approximately $0.4 million in exchange for 15,000 Class FA shares, from other individuals affiliated with the Manager. No selling commissions or dealer manager fees were charged in connection with the sales of Class FA shares.

Each of the recipients of our shares has represented to us that they are an accredited investor. Based upon these representations, we believe that the issuances of our shares were exempt from the registration requirements of the Securities Act, pursuant to Section 4(2) thereof and Regulation D promulgated thereunder.

Use of Proceeds

On March 7, 2018, the Registration Statement covering the Public Offering, of up to $1,100,000,000 ~~Shares,~~shares, was declared effective under the Securities Act. The Public Offering commenced on March 7, 2018, and is currently expected to terminate on or before ~~Mach~~March 7, ~~2020,~~2021, unless further extended by our board of directors.

Through CNL Securities Corp., the Managing Dealer for the Public Offering, we are offering to the public on a best efforts basis up to $1,000,000,000 ~~Shares~~shares consisting of Class A shares, Class T shares, Class D shares and Class I shares.

We are also offering up to $100,000,000 ~~Shares~~shares to be issued pursuant to our distribution reinvestment plan.

The ~~Shares~~shares being offered can be reallocated among the different classes and between the primary Public Offering and the distribution reinvestment plan.

~~As of March 31, 2018, we had not yet raised any~~ The following table presents the net offering proceeds received from the Public Offering ~~so there are not yet~~through March 31, 2020:



	Total			Payments to Affiliates ⁽¹⁾		Payments to Others
Aggregate price of offering amount registered ⁽²⁾	$	1,000,000,000
Shares sold ⁽³⁾	2,543,422

Aggregate amount sold ⁽³⁾	$	69,663,517
Payment of underwriting compensation ⁽⁴⁾	(2,069,136		)	(2,069,136	)	—
Net offering proceeds to the issuer	67,594,381
Investments in portfolio companies ⁽⁵⁾	(47,726,224		)	—		(47,726,224	)
Distributions to shareholders ⁽⁶⁾	(1,155,063		)	(253	)	(1,154,810	)
Remaining proceeds from the Offering	$	18,713,094

FOOTNOTES:


⁽¹⁾	Represents direct or indirect payments to our directors or officers, the Manager, the Sub-Manager and their respective affiliates; to persons owning 10% or more of any class of our shares; and to our affiliates.

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⁽²⁾	We are also offering up to $100,000,000 of shares to be issued pursuant to our distribution reinvestment plan. The shares being offered can be reallocated among the different classes and between the primary Public Offering and the distribution reinvestment plan.

⁽³⁾

Excludes approximately $1.3 million (48,026 shares) issued pursuant to our distribution reinvestment plan, approximately $0.2 million (8,000 shares) of unregistered shares issued to the Manager and the Sub-Manager in a private transaction exempt from the registration requirements pursuant to section 4(a)(2) of the Securities Act, approximately $81.5 million (3.3 million shares) of unregistered Class FA shares sold in the 2018 Private Offering, approximately $40.8 million (1.5 million shares) of unregistered Class FA shares sold in the Class FA Private Offering and Follow-on Class FA Private Offering, and approximately $0.3 million (9,030 shares) of unregistered Class S shares sold in the Class S Private Offering.


⁽⁴⁾	Underwriting compensation includes selling commissions and dealer manager fees paid to the Managing Dealer; all or a portion of which may be reallowed to participating broker-dealers.


⁽⁵⁾	Excludes approximately $108.1 million funded using proceeds from the 2018 Class FA Private Offering, Class FA Private Offering and the Follow-On Class FA Private Offering.


⁽⁶⁾	Until such time as we have sufficient operating cash flows from our assets, we will pay cash distributions, debt service and/or operating expenses from net proceeds of the Public Offering. The amounts presented above represent the net proceeds used for such purposes.

Repurchase of Shares and Issuer Purchases of Equity Securities

In March 2019, our board of directors approved and adopted a share repurchase program, as further amended in January 2020 (the “Share Repurchase Program”). The total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares will be limited to up to 2.5% of the aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of the aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of the Company’s trailing four quarters). Unless our board of directors determines otherwise, we will limit the number of shares to be repurchased during any ~~expenses in connection~~calendar quarter to the number of shares we can repurchase with the ~~issuance~~proceeds received from the sale of shares under our distribution reinvestment plan in the previous quarter. Notwithstanding the foregoing, at the sole discretion of our board of directors, we may also use other sources, including, but not limited to, offering proceeds and ~~distribution~~borrowings to repurchase shares. Our board of ~~securities~~directors, in its sole discretion, may amend, suspend or terminate the Share Repurchase Program or waive any of its specific conditions to the extent it is in our best interest, including to ensure our ability to qualify as a partnership for ~~which~~U.S. federal income tax purposes.

During the quarter ended March 31, 2020, we ~~are responsible.~~

repurchased the following shares:



Period	Total Number of Shares Repurchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Value of Shares That May Yet Be Purchased Under the Plan ⁽¹⁾
January 1, 2020 to January 31, 2020	—	$	—	—	$	297,950
February 1, 2020 to February 29, 2020	—	—		—	297,950
March 1, 2020 to March 31, 2020	70,822	27.42		70,822	—

FOOTNOTE:

⁽¹⁾

Repurchases are limited under the Share Repurchase Program as described above. During the quarter ended March 31, 2020, we received requests for the repurchase of approximately $1.9 million of our common shares, which exceeded proceeds from our distribution reinvestment plan in the fourth quarter of 2019 by approximately $1.6 million. The Company’s board of directors approved the use of other sources to satisfy repurchase requests received in excess of proceeds received from our distribution reinvestment plan.


Item 3.	Defaults Upon Se~~nior~~Senior Securities –~~None~~

None.


Item 4.	Mine Safety ~~Disclosures~~ –~~Not applicable~~Disclosures

Not applicable.


Item 5.	Other In~~formation~~ –~~None~~Information

Not applicable.


Item 6.	Exhibits –~~The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.~~

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are file or incorporated as part of this report.

EXHIBIT INDEX

The following exhibits are filed or incorporated as part of this ~~report~~

report.




1.1* 1.1		~~Managing Dealer~~Placement Agent Agreement dated as of ~~March 7, 2018 between~~January 31, 2020 by and among CNL Strategic Capital, LLC and CNL Securities Corp. (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2020).

~~2.1~~
1.2		Selected Dealer Agreement ~~and Plan of Merger~~ dated as of ~~October 20, 2017~~February 24, 2020 by and among CNL Strategic Capital, LLC ~~LD Merger Sub, Inc.~~ and ~~LD Parent, Inc.~~CNL Securities Corp. (incorporated by reference to Exhibit ~~2.1~~1.1 to the ~~Registration Statement~~Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on February ~~12, 2018)~~25, 2020).

~~2.2~~
1.3		Cost Reimbursement Agreement ~~and Plan of Merger~~ dated as of ~~October 20, 2017~~February 24, 2020 by and among CNL Strategic Capital, LLC ~~PFHI Merger Sub, Inc.~~ and ~~Polyform Holdings,~~American Enterprise Investment Services Inc. (incorporated by reference to Exhibit ~~2.2~~1.2 to the ~~Registration Statement~~Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on February ~~12, 2018)~~25, 2020).

~~2.3~~		First Amendment to Agreement and Plan of Merger dated as of February 6, 2018 by and among CNL Strategic Capital, LLC, LD Merger Sub, Inc. and LD Parent, Inc. (incorporated by reference to Exhibit 2.3 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~2.4~~ 3.1		First Amendment to Agreement and Plan of Merger dated as of February 6, 2018 by and among CNL Strategic Capital, LLC, PFHI Merger Sub, Inc. and Polyform Holdings, Inc. (incorporated by reference to Exhibit 2.4 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~3.1~~		Certificate of Formation of CNL Strategic Capital, LLC dated August 8, 2016 (incorporated by reference to Exhibit 3.1 to the Registration Statement on FormS-1 (FileNo. 333-222986) filed with the SEC on February 12, 2018).

3.2		~~Third~~Fifth Amended and Restated Limited Liability Company Operating Agreement of CNL Strategic Capital, LLC (incorporated by reference to Exhibit ~~3.2~~3.1 to the~~Pre-Effective~~ ~~Amendment No. 1 to the Registration Statement~~ Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on ~~March 1, 2018)~~February 5, 2020).

4.1		Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to the Registration Statement on FormS-1 (FileNo. 333-222986) filed with the SEC on February 12, 2018).

4.2		Form of Subscription Agreement (incorporated by reference to Appendix B to the Prospectus filed pursuant to Rule 424(b)(3) with the SEC on March 7, 2018).

4.3		Second Amended and Restated Share Repurchase ~~Program~~Agreement (incorporated by reference to Exhibit ~~4.3~~4.1 to the ~~Registration Statement~~Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on February ~~12, 2018)~~5, 2020).

10.1		~~Second~~Third Amended and Restated Management Agreement dated as of ~~February 28, 2018~~January 31, 2020 by and between ~~the Registrant~~CNL Strategic Capital and CNL Strategic Capital Management, LLC (incorporated by reference to Exhibit 10.1 to the~~Pre-Effective~~ ~~Amendment No. 1 to the Registration Statement~~ Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on ~~March 1, 2018)~~February 5, 2020).

~~10.2~~
10.2		~~Second Amended and RestatedSub-Management~~Third Amendment to Escrow Agreement ~~dated as of February 28, 2018~~ by and among ~~the Registrant,~~ CNL Strategic Capital, ~~Management,~~ LLC and ~~Levine Leichtman Strategic Capital, LLC~~CNL Securities Corp. (incorporated by reference to Exhibit 10.2 to the~~Pre-Effective~~ ~~Amendment No. 1 to the Registration Statement~~ Company’s Current Report on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on March 1, 2018).~~

10.3*		~~Escrow Agreement dated as of February 14, 2018 by and between CNL Strategic Capital, LLC, UMB Bank, N.A. and CNL Securities Corp.~~

~~10.4~~		Amended and Restated Administrative Services Agreement dated as of February 7, 2018 by and between the Registrant and CNL Strategic Capital Management, LLC (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ 8-K filed with the SEC on February ~~12, 2018)~~5, 2020).

  ~~10.5~~
~~Amended and RestatedSub-Administration~~ Agreement dated as of February 7, 2018 by and among the Registrant, CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  ~~10.6~~
31.1*    Amended and Restated Expense Support and Conditional Reimbursement Agreement dated as of February 7, 2018 by and among the Registrant, CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  ~~10.7~~
~~Form of Indemnification Agreement (incorporated by reference to Exhibit 10.7 to the Registration Statement on FormS-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  ~~10.8~~
Note Purchase Agreement dated as of February 7, 2018 by and among Lawn Doctor, Inc., LD Strategic Capital Debtco, LLC and Aspire Capital Group, LLC (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  ~~10.9~~
Note Purchase Agreement dated as of February 7, 2018 by and among Polyform Products Company, Inc. and Polyform Strategic Capital Debtco, LLC (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  ~~10.10~~
Service Agreement dated as of February 7, 2018 by and between CNL Capital Markets Corp. and CNL Strategic Capital Management, LLC (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~
  31.1*
Certification of Chief Executive Officer of CNL Strategic Capital, LLC, Pursuant to Rule13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*

31.2*
Certification of Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to Rule13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1*

32.1*
Certification of Chief Executive Officer and Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
   The following materials from CNL Strategic Capital, LLC Quarterly Report on Form10-Q for the ~~quarter~~three months ended March 31, ~~2018,~~2020, formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated ~~Statement~~Statements of Assets and Liabilities, (ii) Condensed Consolidated ~~Statement~~Statements of Operations, (iii) Condensed Consolidated ~~Statement~~Statements of Changes in Net Assets, (iv) Condensed Consolidated ~~Statement~~Statements of Cash Flows, (v) ~~Condensed~~ Consolidated ~~Schedule~~Schedules of Investments, and (vi) Notes to the Condensed Consolidated Financial Statements.



*	Filed herewith

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the ~~15th~~14th day of May, ~~2018.~~

2020.




	CNL STRATEGIC CAPITAL, LLC

~~By:~~
	By:	/s/ Chirag J. Bhavsar
		CHIRAG J. BHAVSAR
		Chief Executive Officer
		(Principal Executive Officer)

~~By:~~
	By:	/s/ Tammy J. Tipton
		TAMMY J. TIPTON
		Chief Financial Officer
		(Principal Financial and Accounting Officer)


	March 31, 2018 (unaudited)		December 31, 2017
Assets
Investments, at fair value (amortized cost $76,931,763 and $— as of March 31, 2018 and December 31, 2017, respectively)	$	77,456,212	$	—
Cash and cash equivalents		5,633,760		199,683
Deferred offering expenses		485,482		317

Total assets		83,575,454		200,000

Liabilities
Due to related parties (Note 5)	$	772,290	$	—
Distributions payable		302,841		—
Payable for investments purchased		181,126		—
Accounts payable and other accrued expenses		115,345		—
Accrued directors’ fees		22,903		—

Total liabilities		1,394,505		—

Commitments and contingencies (Note 8)
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value 50,000,000 shares authorized and unissued	$	—	$	—
Common shares, $0.001 par value 94,660,000 Class A shares authorized and unissued		—		—
Common shares, $0.001 par value 3,400,000 Class FA shares authorized; 3,266,260 and 8,000 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively		3,266		8
Common shares, $0.001 par value 662,620,000 Class T shares authorized and unissued		—		—
Common shares, $0.001 par value 94,660,000 Class D shares authorized and unissued		—		—
Common shares, $0.001 par value 94,660,000 Class I shares authorized and unissued		—		—
Capital in excess of par value		81,653,234		199,992
Accumulated net unrealized appreciation on investments		524,449		—

Total Members’ Equity	$	82,180,949	$	200,000


Net assets, Class FA shares	$	82,180,949	$	200,000

Total Members’ Equity	$	82,180,949	$	200,000


	For the Period from February 7, 2018 (Commencement of Operations) to March 31, 2018
Investment Income
Interest income	$	728,216

Total investment income		728,216

Operating Expenses
Organization and offering expenses		221,564
Base management fees		88,562
Professional services		73,581
Director fees and expenses		37,070
Administrative services		32,493
Custodian and accounting fees		15,000
Other		317

Total operating expenses		468,587
Expense support		(43,212	)

Net expenses		425,375

Net investment income		302,841
Net change in unrealized appreciation on investments		524,449

Net increase in net assets resulting from operations	$	827,290


Class FA common stock:
Net investment income per share	$	0.09

Diluted and basic earnings per share	$	0.25

Weighted average number of common shares outstanding (basic and diluted)		3,266,430

Distributions declared per share	$	0.09


	For the Period from February 7, 2018 (Commencement of Operations) to March 31, 2018
Operations:
Net investment income	$	302,841
Net change in unrealized appreciation on investments		524,449

Net increase in net assets resulting from operations		827,290

Distributions to shareholders from:
Net investment income		(302,841	)

Net decrease in net assets resulting from distributions to shareholders		(302,841	)

Capital share transactions:
Issuance of Class FA shares		81,456,500

Net increase in net assets resulting from capital share transactions		81,456,500

Total increase in net assets		81,980,949
Net assets at beginning of period		200,000

Net assets at end of period	$	82,180,949

Capital share activity:
Issuance of Class FA shares		3,258,260

Net increase in shares outstanding		3,258,260



	Common Shares					Capital in Excess of Par Value			Distributable Earnings			Total Net Assets
	Number of Shares		Par Value			Capital in Excess of Par Value			Distributable Earnings			Total Net Assets
Balance as of December 31, 2019	6,354,831		$	6,355		$	164,349,125		$	9,927,411		$	174,282,891
Net investment income	—		—			—			1,645,964			1,645,964
Net change in unrealized depreciation on investments	—		—			—			(3,393,662		)	(3,393,662		)
Distributions to shareholders	—		—			—			(2,091,351		)	(2,091,351		)
Issuance of common shares through the Offerings	948,194		948			25,850,811			—			25,851,759
Issuance of common shares through distribution reinvestment plan	14,160		14			380,173			—			380,187
Repurchase of common shares pursuant to share repurchase program	(70,822	)	(71		)	(1,942,095		)	—			(1,942,166		)
Balance as of March 31, 2020	7,246,363		$	7,246		$	188,638,014		$	6,088,362		$	194,733,622


	For the Period from February 7, 2018 (Commencement of Operations) to March 31, 2018
Operating Activities:
Net increase in net assets resulting from operations	$	827,290
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Purchases of investments, net		(74,531,763	)
Net change in unrealized appreciation on investments		(524,449	)
Amortization of deferred offering expenses		196,041
Increase in payable to related parties		772,290
Increase in payable for investments purchased		181,126
Increase in accrued directors’ fees		22,903
Increase in accounts payable and other accrued expenses		115,345
Increase in deferred offering expenses		(681,206	)

Net cash used in operating activities		(73,622,423	)

Financing Activities:
Proceeds from issuance of common shares		79,056,500

Net cash provided by financing activities		79,056,500

Net increase in cash		5,434,077
Cash and cash equivalents, beginning of period		199,683

Cash and cash equivalents, end of period	$	5,633,760

Supplemental disclosure of cash flow information andnon-cash financing activities:
Amounts incurred but not paid (including amounts due to related parties):
Distributions payable	$	302,841
Offering costs	$	681,523
Non-cash contribution fromSub-Manager	$	2,400,000
Non-cash purchase of investments	$	(2,400,000	)


Company^(a)	Industry	Interest Rate			Base Floor		Maturity Date		No. Shares/ Principal Amount		Cost		Fair Value
Senior Secured Loan – First Lien–19.1%
Polyform Products, Co.	Modeling Clay		16.0	%		N/A		8/7/2023	$	15,700,000	$	15,700,000	$	15,700,000
Senior Secured Loan – Second Lien–18.3%
Lawn Doctor	Commercial and Professional Services		16.0	%		N/A		8/7/2023		15,000,000		15,000,000		15,000,000

Total Senior Secured Loans											$	30,700,000	$	30,700,000

Equity–56.9%
Polyform Products, Co.	Modeling Clay									10,820	$	15,756,212	$	15,756,212
Lawn Doctor	Commercial and Professional Services									7,746		30,475,551		31,000,000

Total Equity											$	46,231,763	$	46,756,212

TOTAL INVESTMENTS–94.3%											$	76,931,763	$	77,456,212

OTHER ASSETS IN EXCESS OF LIABILITIES–5.7%														4,724,737

NET ASSETS–100.0%													$	82,180,949



Company ⁽¹⁾		Industry	Interest Rate	Maturity Date	Principal Amount / No. Shares		Cost		Fair Value
Senior Secured Note – First Lien–9.1%
Auriemma U.S. Roundtables		Information Services and Advisory Solutions	8.0%	11/13/2020	$	2,000,000	$	2,000,000	$	2,000,000
Polyform Products, Co.		Hobby Goods and Supplies	16.0%	8/7/2023	15,700,000		15,700,000		15,700,000
Total Senior Secured Notes – First Lien							$	17,700,000	$	17,700,000

Senior Secured Note – Second Lien–18.5%
Auriemma U.S. Roundtables		Information Services and Advisory Solutions	16.0%	8/1/2025	12,114,338		12,114,338		12,114,338
Blue Ridge ESOP Associates		Business Services	15.0%	3/24/2026	2,640,844		2,640,844		2,640,844
Lawn Doctor, Inc.		Commercial and Professional Services	16.0%	8/7/2023	15,000,000		15,000,000		15,000,000
Milton Industries Inc.		Manufacturing	15.0%	11/21/2025	3,353,265		3,353,265		3,353,265
Resolution Economics, LLC		Business Services	15.0%	1/2/2026	2,834,007		2,834,007		2,834,007
Total Senior Secured Notes - Second Lien							$	35,942,454	$	35,942,454

Total Senior Secured Notes							$	53,642,454	$	53,642,454

Equity–56.3%
Auriemma U.S. Roundtables	⁽²⁾	Information Services and Advisory Solutions			32,386		$	32,385,662	$	31,000,000
Blue Ridge ESOP Associates		Business Services			9,859		9,859,156		9,859,156
Lawn Doctor, Inc.	⁽²⁾	Commercial and Professional Services			7,746		30,475,551		40,284,000
Milton Industries Inc.		Manufacturing			6,647		6,646,735		6,646,735
Polyform Products, Co.	⁽²⁾	Hobby Goods and Supplies			10,820		15,598,788		14,703,000
Resolution Economics, LLC		Business Services			7,166		7,165,993		7,165,993
Total Equity							$	102,131,885	$	109,658,884

TOTAL INVESTMENTS–83.9%	⁽³⁾						$	155,774,339	$	163,301,338
OTHER ASSETS IN EXCESS OF LIABILITIES–16.1%									31,432,284
NET ASSETS–100.0%									$	194,733,622


	As of March 31, 2018
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio			Fair Value Percentage of Net Assets
Senior debt
Senior secured debt - first lien	$	15,700,000	$	15,700,000		20.3	%		19.1	%
Senior secured debt - second lien		15,000,000		15,000,000		19.4			18.3

Total senior debt	$	30,700,000	$	30,700,000		39.7			37.4
Equity		46,231,763		46,756,212		60.3			56.9

Total investments	$	76,931,763	$	77,456,212		100.0	%		94.3	%


	Period February 7, 2018⁽¹⁾ through March 31, 2018
Revenues	$	3,118,748
Expenses		(3,087,288	)

Income before taxes		31,460
Income tax expense		(7,825	)

Net Income	$	23,635


	As of March 31, 2018
Current assets	$	7,016,164
Non-current assets	$	28,927,037
Current liabilities	$	4,081,423
Non-current liabilities	$	38,785,943
Stockholders’ Equity	$	(6,924,165	)


	Period February 7, 2018⁽¹⁾ through March 31, 2018
Revenues	$	2,417,593
Expenses		(2,897,329	)

Net loss before taxes		(479,736	)
Income tax benefit		48,000

Net loss	$	(431,736	)


	As of March 31, 2018
Current assets	$	5,771,064
Non-current assets	$	22,436,533
Current liabilities	$	1,167,304
Non-current liabilities	$	20,567,473
Stockholders’ Equity	$	6,472,820


⁽²⁾	Organization reimbursements are expensed on the Company’s statements of operations as incurred. Offering reimbursements are capitalized on the Company’s statements of assets and liabilities as deferred offering expenses and expensed to the Company’s statements of operations over the lesser of the offering period or 12 months.


⁽³⁾	Includes reimbursement of third-party fees incurred for investments that did not close, including fees and expenses associated with performing the due diligence reviews.


Due from related parties:
Expense Support	$	43,212

Total due from related parties		43,212
Due to related parties:
Organization and offering expenses		707,046
Base management fees		88,562
Operating, administrative and compliance expense reimbursement		19,894

Total due to related parties		815,502

Net due to related parties	$	(772,290	)


	Period from February 7, 2018 (commencement of operations) through March 31, 2018
	Class FA
	Per Share		Amount		Allocation
Total Declared Distributions	$	0.09	$	302,841		100.0	%
From net investment income	$	0.09	$	302,841		100.0	%


⁽⁵⁾	Approximately $5.4 million of net proceeds for shares sold and issued on March 31, 2020 was received in cash in April 2020. The proceeds are recorded in receivable for shares sold in the condensed consolidated statement of assets and liabilities as of March 31, 2020.


	Period ended March 31, 2018⁽¹⁾
	Class FA Shares⁽²⁾
OPERATING PERFORMANCE PER SHARE
Net Asset Value, Beginning of Period	$	25.00

Net investment income, before expense support⁽³⁾		0.08
Expense support⁽³⁾		0.01

Net investment income⁽³⁾		0.09
Net realized and unrealized gains⁽³⁾⁽⁴⁾		0.16

Net increase resulting from investment operations		0.25

Distributions from net investment income⁽⁵⁾		(0.09	)

Net Asset Value, End of Period	$	25.16

Net assets, end of period	$	82,180,949
Average net assets⁽⁶⁾	$	81,716,492
Shares outstanding, end of period		3,266,260
Weighted average shares outstanding		3,266,430
Total investment return based on net asset value⁽⁷⁾		1.01	%
RATIOS/SUPPLEMENTAL DATA (annualized):
Ratios to average net assets:⁽⁶⁾⁽⁸⁾
Total operating expenses before expense support		3.95	%
Total operating expenses after expense support		3.58	%
Net investment income		2.55	%
Portfolio turnover rate		—	%


Distribution Record Date	Distribution Payment Date	Declared Distribution Per Share for Each Share Class
		Class FA		Class A		Class T		Class D		Class I
April 3, 2018	May 10, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
April 10, 2018	May 10, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
April 17, 2018	May 10, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
April 24, 2018	May 10, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
May 1, 2018	June 11, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
May 8, 2018	June 11, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
May 15, 2018	June 11, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
May 22, 2018	June 11, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038
May 29, 2018	June 11, 2018	$	0.024038	$	0.024038	$	0.019231	$	0.021635	$	0.024038


	Period February 7, 2018⁽¹⁾ through March 31, 2018
Net Income (GAAP)	$	23,635
Interest and Debt Related Expenses		606,186
Depreciation and Amortization		127,088
Income Tax Expense		7,825
Transaction Costs		313,895

Adjusted EBITDA(non-GAAP)	$	1,078,629


Total investment income	$	728,216
Net operating expense		425,375

Net investment income		302,841
Net change in unrealized appreciation		524,449

Net increase in net assets resulting from operations	$	827,290


	Quarter Ended March 31, 2018
	Per Share		Amount
March 31, 2018 (4 record dates)
Class FA shares	$	0.092718	$	302,841
Class A shares		0.092718		—
Class T shares		0.074177		—
Class D shares		0.083449		—
Class I shares		0.092718		—



~~10.5~~		~~Amended and RestatedSub-Administration~~ Agreement dated as of February 7, 2018 by and among the Registrant, CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~10.6~~ 31.1*		Amended and Restated Expense Support and Conditional Reimbursement Agreement dated as of February 7, 2018 by and among the Registrant, CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~10.7~~		~~Form of Indemnification Agreement (incorporated by reference to Exhibit 10.7 to the Registration Statement on FormS-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~10.8~~		Note Purchase Agreement dated as of February 7, 2018 by and among Lawn Doctor, Inc., LD Strategic Capital Debtco, LLC and Aspire Capital Group, LLC (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~10.9~~		Note Purchase Agreement dated as of February 7, 2018 by and among Polyform Products Company, Inc. and Polyform Strategic Capital Debtco, LLC (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~10.10~~		Service Agreement dated as of February 7, 2018 by and between CNL Capital Markets Corp. and CNL Strategic Capital Management, LLC (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

31.1*		Certification of Chief Executive Officer of CNL Strategic Capital, LLC, Pursuant to Rule13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*
31.2*		Certification of Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to Rule13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*
32.1*		Certification of Chief Executive Officer and Chief Financial Officer of CNL Strategic Capital, LLC, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from CNL Strategic Capital, LLC Quarterly Report on Form10-Q for the ~~quarter~~three months ended March 31, ~~2018,~~2020, formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated ~~Statement~~Statements of Assets and Liabilities, (ii) Condensed Consolidated ~~Statement~~Statements of Operations, (iii) Condensed Consolidated ~~Statement~~Statements of Changes in Net Assets, (iv) Condensed Consolidated ~~Statement~~Statements of Cash Flows, (v) ~~Condensed~~ Consolidated ~~Schedule~~Schedules of Investments, and (vi) Notes to the Condensed Consolidated Financial Statements.

~~Exhibit Index~~
PART I.

~~Signatures~~

FINANCIAL INFORMATION