UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM10-Q~~

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

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

2022

☐
☐			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~~
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

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 ☐☒ 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 ☒ 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~~

Smaller reporting company

☐☒

Emerging growth company

☒

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,~~11, 2022, the Company had ~~3,266,260~~4,420,872 Class FA shares, ~~299~~1,676,654 Class A shares, ~~and 17,948~~1,761,125 Class T shares, 1,232,899 Class D shares, 6,434,499 Class I shares and 1,766,079 Class S shares outstanding.

~~CNL STRATEGIC CAPITAL, LLC~~

Table of Contents

INDEX


		PAGE
PART I. FINANCIAL INFORMATION

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

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

	Condensed Consolidated ~~Statement~~Statements 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

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

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

	Notes to Condensed Consolidated Financial Statements		7	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34	46

Item 4.	Controls and Procedures		34	47

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		35	48

Item 1A.	Risk Factors		35	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		35	48

Item 3.	Defaults Upon Senior Securities		36	49

Item 4.	Mine Safety Disclosures		36	49

Item 5.	Other Information		36	49

Item 6.	Exhibits		36	50

Exhibit Index		37	50

Signatures		39	51

Table of Contents

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

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

(in thousands, except per share data)

March 31, 2022 (Unaudited) December 31, 2021
Assets
Investments at fair value (amortized cost of $388,642 and $387,754, respectively) $ 468,654 $ 455,997
Cash 75,566 58,704
Receivable for shares sold 12,864 —
Prepaid expenses and other assets 91 143
Total assets 557,175 514,844
Liabilities
Due to related parties (Note 5) 5,429 9,922
Payable for shares repurchased 5,240 509
Deferred tax liabilities, net 2,355 1,877
Distributions payable 1,680 1,566
Accounts payable and other accrued expenses 761 661
Total liabilities 15,465 14,535
Commitments and contingencies (Note 11)
0 0
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000 shares authorized and unissued — —
Class FA Common shares, $0.001 par value, 7,400 shares authorized; 4,844 shares issued; 4,421 and 4,559 shares outstanding, respectively 4 5
Class A Common shares, $0.001 par value, 94,660 shares authorized; 1,639 and 1,486 shares issued, respectively; 1,610 and 1,461 shares outstanding, respectively 2 1
Class T Common shares, $0.001 par value, 558,620 shares authorized, respectively; 1,747 and 1,654 shares issued, respectively; 1,695 and 1,609 shares outstanding, respectively 2 2
Class D Common shares, $0.001 par value, 94,660 shares authorized; 1,181 and 1,020 shares issued, respectively; 1,170 and 1,009 shares outstanding, respectively 1 1
Class I Common shares, $0.001 par value, 94,660 shares authorized; 6,281 and 5,519 shares issued, respectively; 6,160 and 5,410 shares outstanding, respectively 6 5
Class S Common shares, $0.001 par value, 100,000 shares authorized; 1,770 shares issued and 1,766 shares outstanding 2 2
Capital in excess of par value 473,961 442,752
Distributable earnings 67,732 57,541
Total Members’ Equity $ 541,710 $ 500,309
Net assets, Class FA shares $ 147,112 $ 148,717
Net assets, Class A shares 50,399 44,958
Net assets, Class T shares 53,038 49,328
Net assets, Class D shares 36,225 30,607
Net assets, Class I shares 195,476 168,704
Net assets, Class S shares 59,460 57,995
Total Members’ Equity $ 541,710 $ 500,309

See notes to condensed consolidated financial statements.

Table of Contents

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)

(in thousands, except per share data)

Three Months Ended March 31,
2022 2021
Investment Income
Interest income $ 5,837 $ 3,058
Dividend income 5,905 901
Total investment income 11,742 3,959
Operating Expenses
Total return incentive fees 2,892 2,293
Base management fees 1,863 834
Organization and offering expenses 530 414
Professional services 423 385
Pursuit costs 160 —
Distribution and shareholder servicing fees 159 64
Custodian and accounting fees 121 54
Insurance expense 59 55
Director fees and expenses 51 51
General and administrative expenses 26 38
Total operating expenses 6,284 4,188
Expense support — (2,650)
Reimbursement of expense support 1,630 —
Net operating expenses 7,914 1,538
Net investment income before taxes 3,828 2,421
Income tax benefit 218 —
Net investment income 4,046 2,421
Net unrealized appreciation on investments:
Net change in unrealized appreciation on investments 11,769 13,912
Net change in deferred taxes on investments (696) 67
Net increase in net assets resulting from operations $ 15,119 $ 16,400
Common shares information:
Net investment income per share $ 0.25 $ 0.23
Net increase in net assets resulting from operations per share $ 0.93 $ 1.53
Weighted average number of common shares outstanding 16,208 10,729

See notes to condensed consolidated financial statements.

Table of Contents

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

~~Condensed Consolidated Statement of Changes~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(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

thousands)

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2021 15,814 $ 16 $ 442,752 $ 57,541 $ 500,309
Net investment income — — — 4,046 4,046
Net change in unrealized appreciation on investments — — — 11,769 11,769
Net change in deferred taxes on investments — — — (696) (696)
Distributions to shareholders — — — (4,928) (4,928)
Issuance of common shares through the Public Offerings 1,118 1 34,883 — 34,884
Issuance of common shares through distribution reinvestment plan 50 — 1,566 — 1,566
Repurchase of common shares pursuant to share repurchase program (160) — (5,240) — (5,240)
Balance as of March 31, 2022 16,822 $ 17 $ 473,961 $ 67,732 $ 541,710

Common Shares Capital in Excess of Par Value Distributable Earnings Total Net Assets
Number of Shares Par Value
Balance as of December 31, 2020 10,458 $ 10 $ 278,908 $ 30,044 $ 308,962
Net investment income — — — 2,421 2,421
Net change in unrealized appreciation on investments — — — 13,912 13,912
Net change in deferred taxes on investments — — — 67 67
Distributions to shareholders — — — (3,290) (3,290)
Issuance of common shares through the Public Offerings 844 1 24,857 — 24,858
Issuance of common shares through distribution reinvestment plan 26 — 758 — 758
Repurchase of common shares pursuant to share repurchase program (41) — (1,211) — (1,211)
Balance as of March 31, 2021 11,287 $ 11 $ 303,312 $ 43,154 $ 346,477

See notes to condensed consolidated financial statements.

Table of Contents

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~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(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.~~

thousands)

Three Months Ended March 31,
2022 2021
Operating Activities:
Net increase in net assets resulting from operations $ 15,119 $ 16,400
Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating activities:
Purchases of investments (1,125) —
Net change in unrealized appreciation on investments (11,769) (13,912)
Proceeds from return of capital on investments 237 —
Amortization of deferred offering expenses — 35
Amortization of deferred financing costs 5 16
Decrease in due to related parties (4,493) (1,346)
Increase in accounts payable and other accrued expenses 100 179
Increase in deferred offering expenses — (7)
Increase (decrease) in deferred tax liability, net 478 (67)
Decrease in prepaid expenses and other assets 47 64
Net cash (used in) provided by operating activities (1,401) 1,362
Financing Activities:
Proceeds from issuance of common shares 22,020 24,858
Shares repurchased (509) (1,969)
Distributions paid, net of distributions reinvested (3,248) (2,426)
Net cash provided by financing activities 18,263 20,463
Net increase in cash 16,862 21,825
Cash, beginning of period 58,704 82,688
Cash, end of period $ 75,566 $ 104,513
Supplemental disclosure of cash flow information and non-cash financing activities:
Distributions reinvested $ 1,566 $ 758
Amounts incurred but not paid (including amounts due to related parties):
Distributions payable $ 1,680 $ 1,123
Offering costs $ 195 $ 161
Payable for shares repurchased $ 5,240 $ 1,211

See notes to condensed consolidated financial statements.

Table of Contents

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)~~

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

AS OF MARCH 31, 2022

(in thousands except share data)


Company (1)(2)	Industry	Interest Rate	Maturity Date	Principal Amount / No. Shares		Cost		Fair Value
Senior Secured Note – First Lien – 18.8%
ATA Holding Company, LLC	Real Estate Services	15.0%	4/1/2027	$	37,000	$	37,000	$	37,000
Auriemma U.S. Roundtables	Information Services and Advisory Solutions	8.0%	11/13/2022	2,000		2,000		2,000
Clarion Safety Systems, LLC	Visual Safety Solutions	15.0%	12/9/2028	22,500		22,500		22,500
Healthcare Safety Holdings, LLC	Healthcare Supplies	15.0%	7/16/2027	24,400		24,400		24,400
Polyform Products, Co.	Hobby Goods and Supplies	16.0%	8/7/2023	15,700		15,700		15,700
Total Senior Secured Notes – First Lien						101,600		101,600
Senior Secured Note – Second Lien – 9.4%
Auriemma U.S. Roundtables	Information Services and Advisory Solutions	16.0%	8/1/2025	$	12,114	$	12,114	$	12,114
Blue Ridge ESOP Associates	Business Services	15.0%	12/28/2028	2,641		2,641		2,641
Douglas Machines Corp.	Sanitation Products	16.0%	10/7/2028	15,000		15,000		15,000
Lawn Doctor, Inc.	Commercial and Professional Services	16.0%	7/7/2026	15,000		15,000		15,000
Milton Industries Inc.	Engineered Products	15.0%	12/19/2027	3,353		3,353		3,353
Resolution Economics, LLC	Business Services	15.0%	1/2/2026	2,834		2,834		2,834
Total Senior Secured Notes – Second Lien						50,942		50,942
Total Senior Secured Notes						152,542		152,542
Equity – 58.4%
ATA Holding Company, LLC(3)	Real Estate Services			37,985		$	37,125	$	42,383
Auriemma U.S. Roundtables(3)	Information Services and Advisory Solutions			32,386		32,386		39,390
Blue Ridge ESOP Associates	Business Services			9,859		9,859		15,344
Clarion Safety Systems, LLC(3)	Visual Safety Solutions			46,759		46,759		46,760
Douglas Machines Corp.(3)	Sanitation Products			35,500		35,500		35,866
Healthcare Safety Holdings, LLC(3)	Healthcare Supplies			17,320		17,320		29,226
Lawn Doctor, Inc.(3)	Commercial and Professional Services			7,746		27,776		61,294
Milton Industries Inc.	Engineered Products			6,647		6,647		10,113
Polyform Products, Co.(3)	Hobby Goods and Supplies			10,820		15,599		22,500
Resolution Economics, LLC	Business Services			7,166		7,129		13,236
Total Equity						236,100		316,112
TOTAL INVESTMENTS – 86.6%						$	388,642	$	468,654
OTHER ASSETS IN EXCESS OF LIABILITIES – 13.4%								73,056
NET ASSETS – 100.0%								$	541,710

FOOTNOTES:

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

(2) Percentages represent fair value as a percentage of net assets for each investment category.

(3) As of March 31, 2022, the Company owned a controlling interest in this portfolio company.

See notes to condensed consolidated financial statements.

Table of Contents

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

~~Notes~~

CONDENSED CONSOLIDATED SCHEDULE OF INVESTMENTS

AS OF DECEMBER 31, 2021

(in thousands except share data)

Company (1)(2)
Industry Interest
Rate Maturity
Date Principal
Amount /
No. Shares Cost Fair Value
Senior Secured Note – First Lien – 23.3%
ATA Holding Company, LLC Real Estate Services 15.0% 4/1/2027 37,000 $ 37,000 $ 37,000
Auriemma U.S. Roundtables Information Services and Advisory Solutions 8.0% 11/13/2022 2,000 2,000 2,000
Clarion Safety Systems, LLC Visual Safety Solutions 15.0% 12/9/2028 22,500 22,500 22,500
Douglas Machines Corp. Sanitation Products 16.0% 10/7/2028 15,000 15,000 15,000
Healthcare Safety Holdings, LLC Healthcare Supplies 15.0% 7/16/2027 24,400 24,400 24,400
Polyform Products, Co. Hobby Goods and Supplies 16.0% 8/7/2023 15,700 15,700 15,700
Total Senior Secured Notes – First Lien 116,600 116,600
Senior Secured Note – Second Lien – 7.2%
Auriemma U.S. Roundtables Information Services and Advisory Solutions 16.0% 8/1/2025 12,114 $ 12,114 $ 12,114
Blue Ridge ESOP Associates Business Services 15.0% 12/28/2028 2,641 2,641 2,641
Lawn Doctor, Inc. Commercial and Professional Services 16.0% 7/7/2026 15,000 15,000 15,000
Milton Industries, Inc. Engineered Products 15.0% 12/19/2027 3,353 3,353 3,353
Resolution Economics, LLC Business Services 15.0% 1/2/2026 2,834 2,834 2,834
Total Senior Secured Notes – Second Lien 35,942 35,942
Total Senior Secured Notes 152,542 152,542
Equity – 60.7%
ATA Holding Company, LLC(3)
Real Estate Services 36,980 $ 36,000 $ 41,612
Auriemma U.S. Roundtables(3)
Information Services and Advisory Solutions 32,386 32,386 40,902
Blue Ridge ESOP Associates Business Services 9,859 9,859 12,731
Clarion Safety Systems, LLC(3)
Visual Safety Solutions 46,759 46,759 46,760
Douglas Machines Corp.(3)
Sanitation Products 35,500 35,500 35,500
Healthcare Safety Holdings, LLC(3)
Healthcare Supplies 17,320 17,320 24,117
Lawn Doctor, Inc.(3)
Commercial and Professional Services 7,746 28,013 56,806
Milton Industries, Inc. Engineered Products 6,647 6,647 9,286
Polyform Products, Co.(3)
Hobby Goods and Supplies 10,820 15,599 24,116
Resolution Economics, LLC Business Services 7,166 7,129 11,625
Total Equity 235,212 303,455
TOTAL INVESTMENTS – 91.2% $ 387,754 $ 455,997
OTHER ASSETS IN EXCESS OF LIABILITIES – 8.8% 44,312
NET ASSETS – 100.0% $ 500,309
FOOTNOTES:

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

(2) Percentages represent fair value as a percentage of net assets for each investment category.

(3) As of December 31, 2021, the Company owned a controlling interest in this portfolio company.

See notes to ~~Financial Statements (Unaudited)~~

condensed consolidated financial statements.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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 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.~~

~~The Company targets, for acquisition,~~target businesses that are highly cash flow generative, with annual revenues of primarily between ~~$25~~$15 million and ~~$500 million.~~$250 million and whose management teams seek an ownership stake in the company. The Company’s business strategy is to acquire controlling equity ~~stakes~~interests in combination with ~~loan~~debt positions and in ~~middle-market businesses. The Company’s business strategy seeks to~~doing so, provide long-term capital appreciation and current income while protecting invested capital. The Company seeks to structure its investments with limited, if any, third-party senior leverage.

The Company intends for a significant majority of its total assets to be comprised of long-term controlling equity interests and debt positions in the businesses it acquires. 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~~and minority equity ~~stakes and loan positions viaco-investments~~interests in combination with other funds managed by ~~affiliates of~~ the~~Sub-Manager.~~ Sub-Manager from co-investments with other partnerships managed by the 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 and intends to operate~~commenced its ~~business in a manner that will permit it to avoid registration under the Investment Company Act~~initial public offering 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~~$1.1 billion of ~~Class FA~~its limited liability company interests ~~(the “Class FA” shares, or the “founder~~ (“shares”) ~~and~~on March 7, 2018 (the “Initial Public Offering”), which included up to ~~$115~~$100.0 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~~being offered through its distribution reinvestment plan, pursuant to a registration statement on FormS-1, as amended (the “Initial Registration Statement”). On November 1, 2021, the Company commenced a follow-on public offering of up to $1.1 billion of shares (the “Follow-On Public Offering” and together with the Initial Public Offering, the “Public Offerings”), which included up to $100.0 million of shares pursuant to a registration statement on Form S-1 (the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”) ~~in connection with~~. Upon commencement of the ~~proposed offering of shares of its limited liability company interests (the “Public Offering” and together with~~Follow-On Public Offering, the ~~Private Placement, the “Offerings”). The~~Initial Registration Statement ~~for~~was deemed terminated.

Through the ~~Public Offering was declared effective by the SEC on March 7, 2018. Through its~~Follow-On Public Offering, the Company is offering, in any combination, ~~four~~4 classes of shares: Class A shares, Class T shares, Class D shares and Class I shares (collectively, the~~“non-founder~~ “Non-founder shares”). There are differing selling fees and ~~together with~~commissions and dealer manager fees for each share class. The Company also pays distribution and shareholder servicing fees, subject to certain limits, on the ~~Founder Shares,~~Class T and Class D shares sold in the ~~“Shares”)~~Follow-On Public Offering (excluding sales pursuant to its distributions investment plan). See Note 7. “Capital Transactions” and Note 13. “Subsequent Events” for additional information related to the Public Offerings.

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.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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 novel coronavirus (“COVID-19”) pandemic has continued to impact the U.S. and global economies. The U.S. financial markets have experienced disruption and constrained credit conditions within certain sectors. Although more normalized activities have resumed, at this time the Company cannot predict the full extent of the impacts of the COVID-19 pandemic on the Company and its portfolio companies and the COVID-19 pandemic could have a delayed adverse impact on the Company's financial results. The Company will continue to monitor the pandemic's effects on a daily basis and will adjust its operations as necessary.

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 pandemic and the spread and severity of COVID-19 variants, (ii) the effectiveness of the United States public health response, including the efficacy of the vaccines or other remedies and the speed of their distribution and administration, (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, and (vi) the negative impact on its portfolio companies.

Cash ~~Equivalents~~

Cash consists of demand deposits at commercial ~~banks~~banks. Demand deposits are carried at cost plus accrued interest, which approximates fair value. The Company deposits its cash with ~~original maturities of three months or less from~~highly-rated banking corporations and, at times, cash deposits may exceed the ~~date of purchase.~~

insured limits under applicable law.

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~~statements in conformity with generally accepted accounting principles. ~~Actual~~The uncertainty of future events, including the impact of 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.

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CNL STRATEGIC CAPITAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022

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 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.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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 on investments 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 loan investments.

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 are 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.

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 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~~condensed consolidated 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 Public Offerings, are capitalized on the Company’s condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to the Company’s condensed consolidated 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 theSub-Manager.

Distribution and Shareholder Servicing Fees

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 the Company’s condensed consolidated statements of operations as they are incurred.

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CNL STRATEGIC CAPITAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022
Deferred Financing Costs
Financing costs, including upfront fees, commitment fees and legal fees related to borrowings (as further described in Note 8. “Borrowings”) are 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 Company’s condensed consolidated 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 (reimbursement) and certain transfer agent fees, are allocated to each share class of common shares in accordance with how such expenses 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 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. Class S shares do not participate in the distribution reinvestment plan.

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 Company’s condensed consolidated 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 holds certain equity investments in taxable subsidiaries (the “Taxable Subsidiaries”). The Taxable Subsidiaries permit the Company ~~entered into~~to hold equity investments in portfolio companies which are “pass through” entities for tax purposes. The Taxable Subsidiaries are not consolidated with the Company for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a ~~merger agreement with LD Merger Sub, Inc., a wholly owned subsidiary~~result of the ~~Company,~~Taxable Subsidiaries’ ownership of certain portfolio investments. The income tax expense, or benefit, if any, and ~~LD Parent, Inc.,~~related tax assets and liabilities are reflected in the ~~parent company of Lawn Doctor, Inc. (“Lawn Doctor”). The merger agreement was amended on February 6, 2018. On February 7, 2018, pursuant to~~Company’s condensed consolidated financial statements. See Note 9. “Income Taxes” for additional information.

During the ~~terms of the merger agreement~~three months ended March 31, 2022 and ~~an exchange agreement between~~2021, the Company did not incur any material interest or penalties. Tax years ending December 31, 2021, 2020 and ~~the Leichtman-Levine Living Trust, an affiliate~~2019 remain subject to examination by major tax jurisdictions.

Table of ~~theSub-Manager~~ ~~(the “Exchange Agreement”),~~Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

3. Investments

In February 2022, the Company ~~acquired~~made an ~~approximately 63.9%~~additional equity ~~interest in Lawn Doctor from an affiliate of theSub-Manager,~~ ~~through an investment consisting of common equity and a debt~~ investment in ~~the form~~ATA 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$1.1 million.

The Company’s investment portfolio is summarized as follows as of March 31, ~~2018, the cost basis of~~2022 and December 31, 2021 (in thousands):


	As of March 31, 2022
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior secured debt
First lien	$	101,600	$	101,600	21.7	%	18.8	%
Second lien	50,942		50,942		10.8		9.4
Total senior secured debt	152,542		152,542		32.5		28.2
Equity	236,100		316,112		67.5		58.4
Total investments	$	388,642	$	468,654	100.0	%	86.6	%


	As of December 31, 2021
Asset Category	Cost		Fair Value		Fair Value Percentage of Investment Portfolio		Fair Value Percentage of Net Assets
Senior secured debt
First lien	$	116,600	$	116,600	25.6	%	23.3	%
Second lien	35,942		35,942		7.9		7.2
Total senior secured debt	152,542		152,542		33.5		30.5
Equity	235,212		303,455		66.5		60.7
Total investments	$	387,754	$	455,997	100.0	%	91.2	%

Collectively, 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 is subject to adjustment based on, among other factors, Lawn Doctor’s working capital and indebtedness at the closing with a~~true-up~~ ~~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 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.~~15.3% and have weighted average remaining years to maturity of 4.8 years as of March 31, 2022. The note purchase agreements contain customary covenants and events of default.

As of March 31, ~~2018,~~2022, 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,~~2022 and December 31, 2021, none of the Company’s debt investments were onnon-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~~2022 and December 31, 2021 were as follows:


~~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.~~


Industry	March 31, 2022		December 31, 2021
Real Estate Services	16.8	%	17.2	%
Commercial and Professional Services	16.3		15.8
Visual Safety Solutions	14.8		15.2
Information Services and Advisory Solutions	11.4		12.1
Healthcare Supplies	11.4		10.6
Sanitation Products	10.9		11.1
Hobby Goods and Supplies	8.2		8.7
Engineered Products	2.9		2.8
Business Services	7.3		6.5
Total	100.0	%	100.0	%

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

All ~~portfolio companies~~investment positions held at March 31, ~~2018~~2022 and December 31, 2021 were denominated in U.S. ~~dollars.~~

dollars and located in the United States based on their country of domicile.

In May 2022, the Company acquired a controlling equity interest and made a debt investment in Vektek Holdings, LLC (“Vektek”) and its subsidiaries totaling approximately $81.3 million. See Note 13. “Subsequent Events” for additional information.

Summarized ~~Operating Data~~

Portfolio Company Financial Information

The following tables present unaudited summarized operating data for ~~Lawn Doctor and Polyform (the “initial businesses”) for~~ the ~~period February 7, 2018 (the date we acquired~~Company’s portfolio companies in which it owned a controlling equity interest during the ~~initial businesses) through~~three months ended March 31, ~~2018~~2022 and ~~unaudited~~2021, and summarized balance sheet data as of March 31, ~~2018:~~

~~Lawn Doctor~~

2022 (unaudited) and December 31, 2021, as applicable (in thousands):

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, 2022
	Lawn Doctor		Polyform		Round-tables		HSH		ATA		Douglas		Clarion
Revenues	$	9,664	$	5,823	$	3,543	$	9,606	$	14,158	$	5,399	$	3,619
Expenses	(8,868)		(5,391)		(3,724)		(8,767)		(15,574)		(5,824)		(2,833)
Income (loss) before taxes	796		432		(181)		839		(1,416)		(425)		786
Income tax (expense) benefit	(203)		(124)		43		(185)		—		104		(228)
Consolidated net income (loss)	593		308		(138)		654		(1,416)		(321)		558
Net loss attributable to non-controlling interests	39		—		—		—		—		—		—
Net income (loss)	$	632	$	308	$	(138)	$	654	$	(1,416)	$	(321)	$	558


	Three Months Ended March 31, 2021
	Lawn Doctor		Polyform		Roundtables		HSH
Revenues	$	8,794	$	6,793	$	2,852	$	7,963
Expenses	(7,978)		(5,312)		(2,971)		(7,535)
Income (loss) before taxes	816		1,481		(119)		428
Income tax (expense) benefit	(224)		(423)		26		(94)
Consolidated net income (loss)	592		1,058		(93)		334
Net loss attributable to non-controlling interests	75		—		—		—
Net income (loss)	$	667	$	1,058	$	(93)	$	334

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 )

~~Polyform~~

~~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 )

~~Summarized Balance Sheet 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⁾	~~February 7, 2018 is the date the Company acquired the portfolio companies.~~


	As of March 31, 2022
	Lawn Doctor			Polyform			Roundtables			HSH			ATA			Douglas			Clarion
Current assets	$	12,135		$	10,333		$	10,759		$	14,354		$	5,571		$	13,684		$	3,628
Non-current assets	91,009			28,584			61,307			38,697			90,606			35,528			65,710
Current liabilities	9,592			2,136			13,374			6,715			5,806			5,210			372
Non-current liabilities	63,818			21,548			19,786			28,481			43,458			15,711			22,500
Non-controlling interests	(539)			—			—			—			—			—			—
Stockholders’ equity	30,273			15,233			38,906			17,855			46,913			28,291			46,466

Ownership percentage(1)	61		%	87		%	81		%	75		%	75		%	90		%	99		%

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022


	As of December 31, 2021
	Lawn Doctor			Polyform			Roundtables			HSH			ATA			Douglas			Clarion
Current assets	$	13,926		$	9,940		$	2,043		$	14,260		$	10,029		$	13,177		$	3,084
Non-current assets	92,309			28,948			61,955			39,653			90,510			40,311			66,182
Current liabilities	7,961			2,290			4,738			7,341			9,002			4,159			420
Non-current liabilities	63,576			21,557			19,771			28,536			43,458			15,711			22,500
Non-controlling interests	(500)			—			—			—			—			—			—
Stockholders’ equity	35,198			15,041			39,489			18,036			48,079			33,618			46,346

Ownership percentage(1)	61		%	87		%	81		%	75		%	75		%	90		%	99		%

FOOTNOTE:

(1) Represents the Company’s undiluted ownership percentage as of the end of the period presented, rounded to the nearest percent.

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~~2022 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 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. 2021 (in thousands):


	As of March 31, 2022								As of December 31, 2021
Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Senior Debt	$	—	$	—	$	152,542	$	152,542	$	—	$	—	$	152,542	$	152,542
Equity	—		—		316,112		316,112		—		—		303,455		303,455
Total investments	$	—	$	—	$	468,654	$	468,654	$	—	$	—	$	455,997	$	455,997

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of March 31, ~~2018~~2022 and December 31, 2021 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

follows (in thousands):

⁽¹⁾

~~Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.~~

⁽²⁾March 31, 2022

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

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

⁽³⁾Average)(1)

~~This column represents the directional change in the fair value of the Level 3 investments that would result~~

Impact to Valuation from an ~~increase~~Increase in

Input(2)

Senior Debt

152,542

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% – 13.5% (11.3%)

5.0x – 14.3x (10.0x)

6.5x – 13.0x (10.5x)

Decrease
Increase
Increase

Equity

316,112

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

9.0% – 13.5% (11.3%)

5.0x – 14.3x (10.0x)

6.5x – 13.0x (10.5x)

Decrease
Increase
Increase

Total

468,654

December 31, 2021

Asset Group

Fair Value

Valuation Techniques

Unobservable Inputs

Range

(Weighted Average)(1)

Impact to ~~the corresponding unobservable input.~~ Valuation from an Increase in

Input(2)

Senior Debt

130,042

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

8.5% – 13.0% (11.4%)

4.1x – 15.2x (8.9x)

6.0x – 12.5x (9.6x)

Decrease
Increase
Increase

22,500

Transaction Precedent

Transaction Price

N/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.~~

N/A

Equity

256,695

Discounted Cash Flow
Market Comparables
Transaction Method

Discount Rate
EBITDA Multiple
EBITDA Multiple

8.5% – 13.0% (11.4%)

4.1x – 15.2x (8.9x)

6.0x – 12.5x (9.6x)

Decrease
Increase
Increase

46,760

Transaction Precedent

Transaction Price

N/A

Total

455,997

FOOTNOTES:

(1) Discount rates are relative to the enterprise value of the portfolio companies and are not the market yields on the associated debt investments. Unobservable inputs were weighted by the relative fair value of the investments.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(2) 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.~~2022 and December 31, 2021. 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 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.

The following tables provide ~~reconciliations for the period from February 7, 2018 (commencement of operations) through March 31, 2018~~a 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

⁽¹⁾	~~Included in net change in unrealized appreciation in the consolidated statement of operations.~~

~~No securities were transferred into or out of~~value for the ~~Level 3 hierarchy during the period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018. All realized~~2022 and 2021 (in thousands):


	Three Months Ended March 31, 2022
	Senior Debt		Equity		Total
Fair value balance as of January 1, 2022	$	152,542	$	303,455	$	455,997
Additions	—		1,125		1,125
Return of capital(1)	—		(237)		(237)
Net change in unrealized appreciation(2)	—		11,769		11,769
Fair value balance as of March 31, 2022	$	152,542	$	316,112	$	468,654
Change in net unrealized appreciation on investments held as of March 31, 2022(2)	$	—	$	11,769	$	11,769


	Three Months Ended March 31, 2021
	Senior Debt		Equity		Total
Fair value balance as of January 1, 2021	$	78,042	$	153,155	$	231,197

Net change in unrealized appreciation(2)	—		13,912		13,912
Fair value balance as of March 31, 2021	$	78,042	$	167,067	$	245,109
Change in net unrealized appreciation on investments held as of March 31, 2021(2)	$	—	$	13,912	$	13,912

FOOTNOTES:

(1) Represents portion of distributions received which were accounted for as a return of capital. See Note 2. “Significant Accounting Policies” for information on the accounting treatment of distributions from portfolio companies.

(2) Included in net change in unrealized ~~gains and losses are included~~appreciation on investments in ~~earnings and are reported as separate line items within~~ the ~~Company’s statement~~condensed consolidated statements of ~~operations.~~

operations

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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:

~~Placement Agent/~~

Managing Dealer ~~Manager~~

Commissions — ~~Under the Private Placement, there was no selling commission for the sale of Class FA shares. Under the Public Offering, the~~The Company ~~will pay~~pays CNL Securities Corp. (the “Managing Dealer” ~~in connection with~~), an affiliate of the ~~Public Offering and the “Placement Agent” in connection with the Private Placement)~~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 Follow-On Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). The Managing Dealer may reallow all or a portion of the selling commissions to participating broker-dealers.

~~Placement Agent/~~

Dealer Manager Fee— ~~Under the Private Placement, there was no placement agent fee for the sale of Class FA shares. Under the Public Offering, the~~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 Follow-On Public Offering (excluding sales pursuant to the Company’s distribution reinvestment plan). The Managing Dealer may reallow all or a portion of such dealer manager 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~~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 sold in the Public Offerings (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/orSub-Manager

Organization and Offering Costs — ~~Under each of the Private Placement and Public Offering, the~~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 Private Placement 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~~Offerings. The Company ~~had~~ incurred an obligation to reimburse the Manager andSub-Manager for ~~approximately $0.7 million in~~ organization and offering costs based on actual amounts raised through the Public Offerings of ~~Class FA shares under its Private Placement, all~~approximately $0.5 million and $0.4 million during the three months ended March 31, 2022 and 2021, respectively. The Manager and the Sub-Manager have incurred additional organization and offering costs of ~~which was outstanding~~approximately $4.0 million on behalf of the Company in connection with the Public Offerings (exceeding the respective limitations) as of March 31, ~~2018.~~

2022. These costs will be recognized by the Company in future periods as the Company receives future offering proceeds from the Follow-On Public Offering to the extent such costs are within the 1.5% limitation.

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 $1.9 million and $0.8 million during the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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~~is 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. 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.~~appreciation or depreciation. 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.month. “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~~upfront selling commissions and dealer manager ~~fees)~~fees (“sales load”), 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 recorded total return incentive fees of approximately $2.9 million and $2.3 million during the three months ended March 31, 2022 and 2021, respectively.

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. 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.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

•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~~years ended December 31, ~~2018,~~2022 and 2021, the High Water ~~Mark will be $24.75.~~Marks were as follows:


For the year ended:	Class FA		Class A		Class T		Class D		Class I		Class S
December 31, 2022	$	32.62	$	30.78	$	30.66	$	30.35	$	31.18	$	32.84
December 31, 2021	29.97		28.76		28.67		28.24		29.06		30.08

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 and Pursuit Costs — The Company ~~will reimburse~~reimburses the Manager and theSub-Manager and their respective affiliates for certain third party operating ~~costs~~expenses and ~~expenses of third parties~~pursuit costs 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.

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 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.

Expense support is paid by the Manager and Sub-Manager annually in arrears.

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.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Since inception and through March 31, 2021, the Company received cumulative Expense Support of approximately $5.1 million. The Company recorded Expense Support due from the Manager and Sub-Manager of approximately $2.6 million during the three months ended March 31, 2021, which was ultimately reversed as the Company reimbursed approximately $1.8 million of Expense Support to the Manager and Sub-Manager for the year ended December 31, 2021. As of March 31, 2022, the amount of Expense Support collected from the Manager and Sub-Manager subject to reimbursement was approximately $3.2 million. The Company recorded reimbursement of Expense Support in the condensed consolidated statements of operations of approximately $1.6 million during the three months ended March 31, 2022.

The following table summarizes Expense Support received (excluding years for which reimbursement eligibility has expired), Expense Support reimbursed and the remaining Expense Support that may become reimbursable, subject to the conditions of reimbursement defined in the Expense Support and Conditional Reimbursement Agreement, as of March 31, 2022 (in thousands):


For the Year Ended	Amount of Expense Support Received		Expense Support Reimbursed(1)		Expense Support Subject to Reimbursement(2)		Reimbursement Eligibility Expiration
December 31, 2019	$	1,372	$	(970)	$	402	March 31, 2023
December 31, 2020	3,301		(509)		2,792		March 31, 2024
	$	4,673	$	(1,479)	$	3,194

FOOTNOTES:

(1)Represents Expense Support reimbursed to the Manager and Sub-Manager accrued as of December 31, 2021 and paid during the three months ended March 31, 2022, related to Expense Support received for the years ended December 31, 2020 and 2019. The Company also reimbursed $(353) related to Expense Support received for the year ended December 31, 2018.

(2)Represents remaining Expense Support that is subject to reimbursement, which is calculated by share class and subject to limitations as defined in the Expense Support and Conditional Reimbursement Agreement. During the three months ended March 31, 2022, management accrued reimbursement of expense support of $1,630. Management believes that Expense Support reimbursement payments by the Company to the Manager and Sub-Manager for unreimbursed Expense Support in excess of this accrual amount are not probable under the terms of the Expense Support and Conditional Reimbursement Agreement as of March 31, 2022.

Distributions

Individuals and entities affiliated with the Manager and Sub-Manager owned approximately 0.4 million and 0.6 million shares as of March 31, 2022 and 2021, respectively and received distributions from the Company of approximately $0.1 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Related party fees and expenses incurred ~~during~~for the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018~~2022 and 2021 are summarized ~~below:~~


~~Related Party~~	~~Source Agreement & Description~~	~~Period from February 7,~~ ~~2018 (commencement of~~ ~~operations) through~~ ~~March 31, 2018~~
~~Manager and Sub-Manager~~	~~Management Agreement andSub-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.~~

below (in thousands):


		Three Months Ended March 31,
Related Party	Source Agreement & Description		2022		2021
Managing Dealer	Managing Dealer Agreement: Commissions		$	287	$	254
	Dealer manager fees		148		131
	Distribution and shareholder servicing fees		159		64
Manager and Sub-Manager	Management Agreement and Sub-Management Agreement: Organization and offering reimbursement(1)(2)		530		386
	Base management fees(1)		1,863		834
	Total return incentive fees(1)		2,892		2,293
Manager and Sub-Manager	Expense Support and Conditional Reimbursement Agreement: Expense Support		—		(2,650)

	Reimbursement of Expense Support		1,630		—
Manager	Administrative Services Agreement: Reimbursement of third-party operating expenses(1)		22		28
Sub-Manager	Sub-Management Agreement: Reimbursement of third-party pursuit costs(1)(3)		160		—

FOOTNOTES:

(1)Expenses subject to Expense Support.

(2)Organization reimbursements are expensed on the Company’s condensed consolidated statements of operations as incurred. Offering reimbursements are capitalized on the Company’s condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to the Company’s condensed consolidated 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 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 of March 31, 2022 and December 31, ~~2017.~~

~~Other Related Party Transactions~~

~~Prior to~~2021 (in thousands):


	March 31, 2022		December 31, 2021




Total return incentive fee	$	2,892	$	7,283
Reimbursement of Expense Support	1,630		1,831
Base management fees	650		578
Organization and offering expenses	195		176
Distribution and shareholder servicing fees	56		53
Reimbursement of third-party operating expenses and pursuit costs	6		1
Total due to related parties	$	5,429	$	9,922

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

6. Distributions

The Company’s board of directors declared distributions on a monthly basis in each of the three months ended March 31, 2022 and 2021 (three record dates). Declared distributions are paid and reinvested monthly in arrears. The following table reflects the total distributions declared during the three months ended March 31, 2022 and 2021 (in thousands except per share data):


	Three Months Ended March 31,
	2022						2021
Distribution Period(5)	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested (2)		Distributions Declared(1)(2)		Distributions Reinvested (2)		Cash Distributions Net of Distributions Reinvested (2)
First Quarter	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501



	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501

FOOTNOTES:

(1) The Company’s ~~acquisition~~board of ~~Lawn Doctor and Polyform~~directors declared distributions per share on a monthly basis. See Note 12. “Financial Highlights” for distributions declared by share class. Monthly distributions declared per share for each share class were as ~~described in Note 3. “Investments,” Lawn Doctor and Polyform were majority owned by an affiliate of theSub-Manager.~~

~~6. Distributions~~

follows:


Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S
January 1, 2022 - March 31, 2022	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167
January 1, 2021 - March 31, 2021	0.104167		0.104167		0.083333		0.093750		0.104167		0.104167

(2) Amounts based on distribution record date.

The ~~total and the~~ sources of declared distributions on a GAAP basis ~~for the period from February 7, 2018 (commencement of operations) through March 31, 2018 are presented in 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 %

were as follows (in thousands):


	Three Months Ended March 31,
	2022				2021
	Amount		% of Distributions Declared		Amount		% of Distributions Declared
Net investment income(1)	$	4,046	82.1	%	$	2,421	73.6	%
Distributions in excess of net investment income(2)	882		17.9		869		26.4
Total distributions declared	$	4,928	100.0	%	$	3,290	100.0	%

FOOTNOTES:

(1) Net investment income includes Expense Support (reimbursement) of ~~$43,212 which supported distributions of $302,841 during~~$(1,630) and $2,650 for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~

~~7. Capital 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~~2022 and~~Sub-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.~~

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. 2021, respectively. See Note 5. “Related Party Transactions” for additional ~~information~~information.

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

In March 2022, the Company’s board of directors declared a monthly cash distribution on the outstanding shares ~~issued to the Manager,Sub-Manager~~ ~~and their affiliates.~~

~~Private Placement~~

~~The Company offered through the Private Placement up to $85 million~~ of all classes of common shares of record on April 28, 2022 of $0.104167 per share for Class FA shares, ~~and up to $115 million of~~$0.104167 per share for Class A shares, ~~on a best efforts basis, which meant that~~$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 $0.104167 per share for Class S shares.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

7. Capital Transactions

Public Offerings

Under the ~~Placement Agent, used its best efforts but was not required to sell any specific amount of shares. On February 7, 2018,~~Public Offerings, the Company ~~met the minimum offering requirement of $80 million in Class FA shares under the Private Placement~~has offered and the Company 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. There was no selling commission or Placement Agent fee for the sale of Class FA shares. The Class FA shares and Class A shares in the Private Placement were offered for sale onlycontinues 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.~~

~~Public Offering~~

~~Once the Registration Statement became effective on March 7, 2018, the Company began offering~~offer up to ~~$1,000,000,000~~$1.0 billion of ~~Shares,~~shares, on a best efforts basis, which means that CNL Securities Corp., as the Managing Dealer of the Public ~~Offering, will use~~Offerings, 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 Follow-On 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~~Offerings (excluding sales pursuant to the Company’s distribution reinvestment plan). ~~See Note 10. “Subsequent Events” for information on changes to the Public Offering~~The public offering price, selling commissions and dealer manager fees per share ~~class.~~

class are determined monthly as approved by the Company’s board of directors. As of March 31, 2022, the public offering price was $33.97 per Class A share, $32.44 per Class T share, $30.62 per Class D share and $31.49 per Class I share.

The Company is also offering, in any combination, up to ~~$100,000,000~~$100.0 million 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.~~13. “Subsequent Events” for additional information related to the Follow-On Public Offering.

The following ~~table summarizes~~tables summarize the total shares issued and proceeds received by share class in connection with the ~~Private Placement~~Public 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

⁽¹⁾	~~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.~~

~~8. Commitment & Contingences~~

2022 and 2021 (in thousands except per share data):


	Three Months Ended March 31, 2022
	Proceeds from Public Offerings							Distributions Reinvested(1)			Total
Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares	Proceeds to Company		Shares	Net Proceeds to Company(3)		Average Net Proceeds per Share

Class A	140	$	4,658	$	(307)	$	4,351	12	$	375	152	$	4,726	$	31.01
Class T	85	2,744		(128)		2,616		8	253		93	2,869		30.85
Class D	156	4,773		—		4,773		5	164		161	4,937		30.58
Class I	737	23,144		—		23,144		25	774		762	23,918		31.37

	1,118	$	35,319	$	(435)	$	34,884	50	$	1,566	1,168	$	36,450	$	31.21


	Three Months Ended March 31, 2021
	Proceeds from Public Offerings							Distributions Reinvested(1)			Total
Share Class	Shares Issued	Gross Proceeds		Sales Load(2)		Net Proceeds to Company		Shares	Proceeds to Company		Shares	Net Proceeds to Company		Average Net Proceeds per Share

Class A	96	$	3,040	$	(226)	$	2,814	10	$	303	106	$	3,117	$	29.19
Class T	109	3,347		(159)		3,188		3	97		112	3,285		29.25
Class D	61	1,763		—		1,763		3	76		64	1,839		28.81
Class I	578	17,093		—		17,093		10	282		588	17,375		29.60

	844	$	25,243	$	(385)	$	24,858	26	$	758	870	$	25,616	$	29.45

FOOTNOTES:

(1)Amounts are based on distribution reinvestment date. Distributions are declared monthly and paid or reinvested one month in arrears.

(2)The Company incurs selling commissions and dealer manager fees on the sale of Class A and Class T shares sold through the Public Offerings. See Note 5. “Related Party Transactions” for additional information regarding up-front selling commissions and dealer manager fees.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(3)Approximately $12.9 million of net proceeds for shares sold and issued on March 31, 2022 was received in cash in April 2022. The proceeds are recorded in receivable for shares sold in the condensed consolidated statement of assets and liabilities as of March 31, 2022.

Share Repurchase Program

In accordance with 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 is 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 limits the number of shares to be repurchased during any calendar quarter to the number of shares the Company 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, 2022 and 2021, the Company received requests for the repurchase of approximately $5.2 million and $1.2 million, respectively, of the Company’s common shares which exceeded proceeds from its distribution reinvestment plan in the applicable periods by approximately $3.8 million and $0.5 million, respectively. 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, 2022 and 2021 (in thousands except per share data):


	Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA	138	$	4,555	$	33.00
Class A	5	147		31.08
Class T	5	157		30.90
Class D	—	8		30.62
Class I	12	373		31.49
Three Months Ended March 31, 2022	160	$	5,240	$	32.76


	Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA	2	$	62	$	30.95
Class A	14	411		29.65
Class T	11	325		29.53
Class D	4	116		29.11
Class I	10	297		29.97
Three Months Ended March 31, 2021	41	$	1,211	$	29.71

As of March 31, 2022 and December 31, 2021, the Company had a payable for shares repurchased of approximately $5.2 million and $0.5 million, respectively, which were paid in April and January 2022, respectively.

Share Conversions

Class T and Class D shares are converted into Class A shares once the maximum amount of distribution and shareholder servicing fees for those particular shares has been met. The shares to be converted are multiplied by the applicable conversion rate, the numerator of which is the net asset value per share of the share class being converted and the denominator of which is the net asset value per Class A share.

During the three months ended March 31, 2022, 1,704 Class T shares were converted to 1,688 Class A shares at a conversion rate of 0.99. There were no share conversions during the three months ended March 31, 2021.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

8. Borrowings

In September 2021, the Company entered into a second amended and restated loan agreement (the “Loan Agreement”) and related promissory note with United Community Bank (d/b/a Seaside Bank and Trust, referred to as “Seaside”) for a $25.0 million line of credit (the “Line of Credit”). The Loan Agreement amended and replaced the previous loan agreements between the Company and Seaside dated June 2019, as amended. The Line of Credit is available for advances through August 16, 2022.

The Company is required to pay a fee to Seaside with each advance under the Loan Agreement in an amount equal to 0.05% of the amount of each borrowing with a maximum fee of $20,000 over a 364-day period. Under the Loan Agreement, the Company is required to pay interest on the borrowed amount at a rate per year equal to the greater of (a) the 30-day LIBOR plus 2.75% and (b) 3.00%. 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 or 60 days (depending on the facility drawn upon) of the borrowing date. Under the Loan Agreement, the Company is required to comply with certain covenants including the provision of financial statements on a quarterly basis, a restriction from incurring any debt, and restrictions on the transfer and sale of assets held by certain subsidiaries. Additionally, the Company has a covenant related to its fair market value of investments as a multiple of borrowings outstanding.

In connection with the Loan Agreement, in September 2021, the Company entered into an amended 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 Public Offerings to pay down the outstanding debt to the extent there are any borrowings outstanding under the Loan Agreement above the minimum cash balance of $2.5 million.

The Company had not borrowed any amounts under the Line of Credit as of March 31, 2022.

9. Income Taxes

The Company incurs income tax expense (benefit) related to its Taxable Subsidiaries. The components of income tax expense (benefit) were as follows during the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended March 31,
		2022		2021
Current:
Federal		$	(174)	$	—
State		(44)		—
Total current tax benefit		(218)		—

Deferred:
Federal		512		(46)
State		184		(21)
Total deferred tax expense (benefit)		696		(67)
Income tax expense (benefit)		$	478	$	(67)

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2022 and December 31, 2021 were as follows (in thousands):


	March 31, 2022		December 31, 2021
Deferred tax assets:
Carryforwards for net operating loss	$	779	$	533
Other	19		18
Valuation Allowance	(23)		(22)
Total deferred tax assets	775		529
Deferred tax liabilities:
Investment basis	—		—
Unrealized appreciation on investments	(3,130)		(2,406)
Total deferred tax liabilities	(3,130)		(2,406)
Deferred tax liabilities, net	$	(2,355)	$	(1,877)

10. Concentrations of Risk

The Company had 3 portfolio companies (Lawn Doctor, Polyform and HSH) which met at least one of the significance tests under Rule 8-03(b) of Regulation S-X (the “Significance Tests”) for at least one of the periods presented in the condensed consolidated financial statements.

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.

11. 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.~~

9.Offerings and for the reimbursement of Expense Support.

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, 2022, the Company was not involved in any legal proceedings.

In addition, in the normal course of business, the Company enters into contracts with its vendors and others that provide for general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company. However, based on experience, the Company expects that risk of loss to be remote.

Table of Contents

CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

12. 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
   —   %

⁽¹⁾	~~Operations commenced on February 7, 2018.~~

⁽²⁾	~~As of March 31, 2018, the Company had not sold any Class A, Class T, Class D or Class I shares.~~

⁽³⁾	~~The per share data was derived by using the weighted average shares outstanding during the period.~~

⁽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 for the period because of the timing of sales of the Company’s shares in relation to fluctuating market values for the portfolio.

⁽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 the monthly value of net assets.~~

⁽⁷⁾

Total investment return based on asset value is a measure of 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 share on the last day of the period, of (A) one 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. 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 results over a full fiscal year consisting of 365 days; however, this may not be indicative of actual results over a full fiscal year.~~

~~10.~~2022 and 2021 (in thousands except per share data):


	Three Months Ended March 31, 2022
	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	$	32.62		$	30.78		$	30.66		$	30.35		$	31.18		$	32.84
Net investment income, before reimbursement of Expense Support(1)	0.49			0.29			0.21			0.24			0.28			0.47
Reimbursement of Expense Support(1)(2)	(0.20)			(0.13)			—			—			(0.10)			—
Net investment income(1)	0.29			0.16			0.21			0.24			0.18			0.47
Net realized and unrealized gains, net of taxes(1)(3)	0.68			0.68			0.66			0.66			0.68			0.67
Net increase resulting from investment operations	0.97			0.84			0.87			0.90			0.86			1.14
Distributions to shareholders(4)	(0.31)			(0.31)			(0.25)			(0.28)			(0.31)			(0.31)

Net decrease resulting from distributions to shareholders	(0.31)			(0.31)			(0.25)			(0.28)			(0.31)			(0.31)
Net Asset Value, End of Period	$	33.28		$	31.31		$	31.28		$	30.97		$	31.73		$	33.67

Net assets, end of period	$	147,112		$	50,399		$	53,038		$	36,225		$	195,476		$	59,460
Average net assets(5)	$	149,800		$	46,920		$	50,365		$	31,922		$	178,731		$	58,456
Shares outstanding, end of period	4,421			1,610			1,695			1,170			6,160			1,766
Distributions declared	$	1,424		$	473		$	408		$	294		$	1,777		$	552
Total investment return based on net asset value before total return incentive fee(6)	3.34		%	3.40		%	3.55		%	3.68		%	3.43		%	3.88		%
Total investment return based on net asset value after total return incentive fee(6)	2.95		%	2.75		%	2.85		%	2.98		%	2.78		%	3.49		%
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:(5)(7)
Total operating expenses before total return incentive fee	0.33		%	0.80		%	0.98		%	1.00		%	0.83		%	0.37		%
Total operating expenses before reimbursement of Expense Support	0.66		%	1.49		%	1.71		%	1.77		%	1.53		%	0.75		%
Total operating expenses after reimbursement of Expense Support	1.24		%	1.91		%	1.71		%	1.77		%	1.85		%	0.75		%
Net investment income before total return incentive fee(8)	1.22		%	1.20		%	1.41		%	1.55		%	1.28		%	1.80		%
Net investment income	0.90		%	0.52		%	0.68		%	0.78		%	0.58		%	1.42		%

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022


	Three Months Ended March 31, 2021
	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	$	29.97		$	28.76		$	28.67		$	28.24		$	29.06		$	30.08
Net investment income (loss) before Expense Support(1)	0.10			(0.13)			(0.21)			(0.17)			(0.20)			0.06
Expense Support(1)(2)	0.18			0.28			0.24			0.25			0.37			0.25
Net investment income(1)	0.28			0.15			0.03			0.08			0.17			0.31
Net realized and unrealized gains, net of taxes(1)(3)	1.28			1.28			1.29			1.29			1.29			1.27
Net increase resulting from investment operations	1.56			1.43			1.32			1.37			1.46			1.58
Distributions to shareholders(4)	(0.31)			(0.31)			(0.25)			(0.28)			(0.31)			(0.31)

Net decrease resulting from distributions to shareholders	(0.31)			(0.31)			(0.25)			(0.28)			(0.31)			(0.31)

Net Asset Value, End of Period	$	31.22		$	29.88		$	29.74		$	29.33		$	30.21		$	31.35

Net assets, end of period	$	142,896		$	33,685		$	22,485		$	15,062		$	76,841		$	55,510
Average net assets(5)	$	139,658		$	31,449		$	19,893		$	13,486		$	63,678		$	54,199
Shares outstanding, end of period	4,577			1,127			756			514			2,544			1,770
Distributions declared	$	1,431		$	335		$	170		$	132		$	668		$	553
Total investment return based on net asset value before total return incentive fee(6)(8)	5.20		%	5.05		%	4.73		%	4.99		%	5.06		%	5.29		%
Total investment return based on net asset value after total return incentive fee(6)	5.20		%	5.01		%	4.63		%	4.88		%	5.06		%	5.29		%
RATIOS/SUPPLEMENTAL DATA (not annualized):
Ratios to average net assets:(5)(7)
Total operating expenses before total return incentive fee and Expense Support	0.34		%	0.72		%	1.08		%	0.89		%	0.98		%	0.44		%
Total operating expenses before Expense Support	0.85		%	1.72		%	2.04		%	1.90		%	2.01		%	0.96		%
Total operating expenses after Expense Support	0.25		%	0.75		%	1.20		%	1.03		%	0.76		%	0.16		%
Net investment income before total return incentive fee(8)	0.92		%	0.54		%	0.22		%	0.42		%	0.57		%	1.02		%
Net investment income	0.92		%	0.51		%	0.10		%	0.28		%	0.57		%	1.02		%

FOOTNOTES:

(1)The per share amounts presented are based on weighted average shares outstanding.

(2)Expense support (reimbursement) is accrued throughout the year and is subject to a final calculation as of the last business day of the calendar year.

(3)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 investments for the period because of the timing of sales and repurchases of the Company’s shares in relation to fluctuating fair values for the portfolio investments.

(4)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.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(5)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 month.

(6)Total investment return is calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. Class FA assumes distributions are reinvested in Class A shares and all other share classes assume distributions are reinvested in the same share class, including Class S shares which do not participate in the distribution reinvestment plan. Amounts are not annualized and are not representative of total return as calculated for purposes of the total return incentive fee described in Note 5. “Related Party Transactio ns.” Total returns before total return incentive fees also exclude related Expense Support, if applicable. See footnote (8) below for information regarding the percentage of total return incentive fees covered by Expense Support by share 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.

(7)Actual results may not be indicative of future results. Additionally, an individual investor’s ratios may vary from the ratios presented for a share class as a whole.

(8)Amounts represent net investment income before total return incentive fee and related Expense Support as a percentage of average net assets. For the three months ended March 31, 2022, none of the total return incentive fees were covered by Expense Support as the Company recorded reimbursement of Expense Support during this period. For the three months ended March 31, 2021, 100% of total return incentive fees for Class FA, Class I and Class S shares were covered by Expense Support and approximately 97%, 88% and 86% of total return incentive fees for Class A, Class T and Class D shares, respectively, were covered by Expense Support.

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CNL STRATEGIC CAPITAL, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022

13. Subsequent Events

~~The~~

Investments

In May 2022, the Company, through a wholly-owned subsidiary, acquired an approximate 84% equity ownership interest in Vektek for consideration of approximately $56.9 million, subject to certain post-closing adjustments (the “Acquisition”). Additionally, on the closing date of the Acquisition, the Company, through a wholly-owned subsidiary, made a debt investment of approximately $24.4 million in the form of a senior secured note issued by Vektek.

Distributions

In April 2022, 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 27, 2022 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,~~2022, the Company’s board of directors ~~also~~ approved new per share ~~public~~ offering prices for each share class in the Follow-On Public Offering. The new ~~public~~ offering prices ~~became~~are effective onas of April 27, ~~2018.~~2022. 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 Follow-On Public 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
Effective April 27, 2022:
Offering Price, Per Share	$	34.22	$	32.84	$	30.97	$	31.73
Selling Commissions, Per Share	2.05		0.99		—		—
Dealer Manager Fees, Per Share	0.86		0.57		—		—

Capital Transactions

During the period April 1, ~~2018~~2022 through May ~~10, 2018,~~11, 2022, the Company received additional net proceeds ~~of $450,000~~ from the ~~sale of 17,948 Class I shares from its~~Follow-On Public Offering and ~~net proceeds of $7,500 from the issuance of 299 Class A shares through its~~ distribution reinvestment ~~plan.~~

plan of the following (in thousands except per share data):


	Proceeds from Follow-On Public Offering							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 A	56	$	1,897	$	(146)	$	1,751	7	$	224	63	$	1,975	$	31.30
Class T	64	2,093		(94)		1,999		6	176		70	2,175		31.26
Class D	59	1,833		—		1,833		4	121		63	1,954		30.96
Class I	256	8,113		—		8,113		18	581		274	8,694		31.72

	435	$	13,936	$	(240)	$	13,696	35	$	1,102	470	$	14,798	$	31.49

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~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

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~~2022 and December 31, 2021, and for the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~2022 and 2021. Amounts as of December 31, 2021 included in the unaudited condensed consolidated statements of assets and liabilities 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, 2021 (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 quarterly period ~~February 7, 2018 (commencement of operations) through~~ended March 31, ~~2018 (“Quarterly~~2022 (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.

Table of Contents

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” insections of the Company’s ~~prospectus~~documents filed from time to time with the ~~SEC pursuant~~U.S. Securities and Exchange Commission, including, but not limited to, ~~Rule 424(b)(3)~~our Form 10-K and ~~dated March 7, 2018 (our “Prospectus”) and Item 1A in Part II of~~ this Quarterly Report.

Although more normalized activities have resumed, at this time the Company cannot predict the full extent of the impacts of the COVID-19 pandemic on the Company and its portfolio companies and the COVID-19 pandemic could have a delayed adverse impact on the Company's financial results.

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 target, for acquisition,~~

Since we commenced operations on February 7, 2018, we have acquired equity and debt investments in middle market U.S. businesses ~~that~~with annual revenues primarily between $15 million and $250 million. Our businesses have a track record of stable and predictable operating performance, are highly cash flow generative ~~with annual revenues~~and have management teams who have a meaningful ownership stake in their respective company. As of ~~primarily between $25 million and $500 million. Our business strategy is to acquire~~March 31, 2022, we had seven investments structured as controlling equity ~~stakes~~interests in combination with ~~loan~~debt positions ~~in middle-market businesses. Our business strategy seeks to provide long-term capital appreciation~~ and current income, while protecting invested capital. In addition and to a lesser extent, we intend to acquire other debt and minority equity positions, which may include acquiring debt in the secondary market as wellthree investments structured as minority equity ~~stakes and loan positions via co-investments~~interests in combination with ~~other funds managed by theSub-Manager~~ ~~or their affiliates. We expect that these positions will comprise a minority~~debt positions. All of ~~its total assets.~~

our debt investments were current as of March 31, 2022.

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.

Our Common Shares Offerings

Public Offerings

On March 7, 2018, ~~as described below.~~

Wewe commenced the Initial Public Offering of up to $1.1 billion of shares, which included up to $100.0 million of shares being offered through ~~a private placement~~our distribution reinvestment plan, pursuant to the Initial Registration Statement. On November 1, 2021, we commenced the Follow-On Public Offering of up to ~~$85~~$1.1 billion of shares, which includes up to $100.0 million of shares being offered through our distribution reinvestment plan, of our shares, upon which the Initial Registration Statement was deemed terminated.

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Through March 31, 2022, we had received net proceeds from the Public Offerings of approximately $317.4 million, including approximately $8.7 million received through our distribution reinvestment plan. As of March 31, 2022, the public offering price was $33.97 per Class ~~FA limited liability company interests~~A share, $32.44 per Class T share, $30.62 per Class D share and ~~up to $115~~$31.49 per Class I share. See Note 7. “Capital Transactions” and Note 13. “Subsequent Events” in Item 1. “Financial Statements” for additional information regarding the Initial Public Offering.

Through March 31, 2022, we had incurred selling commissions and dealer manager fees of approximately $5.8 million from the sale of Class A ~~limited liability company interests (one~~shares and Class T shares in the Public Offerings. The Class D shares and Class I shares sold through March 31, 2022 were not subject to selling commissions and dealer manager fees. We also incurred obligations to reimburse the Manager and Sub-Manager for organization and offering costs of approximately $4.7 million based on actual amounts raised through the ~~classes~~Public Offerings through March 31, 2022. These organization and offering costs related to the Public Offerings were advanced by the Manager and Sub-Manager, as described further in Note 5. “Related Party Transactions” of ~~Shares that constitutenon-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, weItem 1. “Financial Statements.”

We are currently 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.”

~~Our Common Shares 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~~(collectively, “Non-founder shares”) 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.

Follow-On Public ~~Offering~~

Once the Registration Statement became effective on March 7, 2018, we began offering up to $1,000,000,000 of Shares, on a best efforts basis, which means that CNL Securities Corp., as the Managing Dealer of the Public Offering, will use its best efforts, but is not required to sell any specific amount of Shares. We are offering, in any combination, four classes of 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.Offering. There are differing selling fees and commissions for each share 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~~Offerings (excluding sales pursuant to ~~the Company’s~~our distribution reinvestment plan).

In April ~~2018,~~2022, our board of directors approved new per share public offering prices for each share class in the Follow-On Public Offering. The new public offering prices ~~became~~are effective onas of April 27, ~~2018.~~2022. 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 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 of theFollow-On Public Offering through ~~the sale of more than $80 million in Class FA shares under the Private Placement.~~

April 30, 2022:


	Class A		Class T		Class D		Class I
Effective April 27, 2022:
Public Offering Price, Per Share	$	34.22	$	32.84	$	30.97	$	31.73
Selling Commissions, Per Share	2.05		0.99		—		—
Dealer Manager Fees, Per Share	0.86		0.57		—		—

Portfolio and Investment Activity

In October 2017, we entered into a merger agreement with LD Merger Sub, Inc., a wholly owned subsidiary of the Company, and LD Parent, Inc., the parent company 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 the~~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, we own approximately 62.9% of the outstanding equity in Lawn Doctor.

As of March 31, ~~2018, the cost basis of our investments~~2022, we had invested in Lawn Doctor was approximately $30.5 million of common equity and $15.0 million of a debt investment. The purchase price is subject to adjustment based on, among other factors, Lawn Doctor’s working capital and indebtedness at closing.

In October 2017, we entered into a merger agreement with PFHI Merger Sub, Inc., a wholly owned subsidiary of the Company, and Polyform. The merger agreement was amended on February 6, 2018. On February 7, 2018, pursuant to the terms of the merger agreement, we acquired an approximately 87.1% equity interest in Polyform from an affiliate of the~~Sub-Manager,~~ ~~through an investment~~ten portfolio companies, 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 our~~ 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 table below presents our investments by portfolio company (in millions):


		As of March 31, 2022
		Equity Investments				Debt Investments(1)
Portfolio Company	Initial Investment Date	Ownership %		Cost Basis		Senior Secured Debt	Interest Rate		Maturity Date	Cost Basis		Total Cost Basis(2)
Lawn Doctor	2/7/2018	61	%	$	27.8	Second Lien	16.0	%	7/7/2026	$	15.0	$	42.8
Polyform	2/7/2018	87		15.6		First Lien	16.0		8/7/2023	15.7		31.3
Roundtables	8/1/2019	81		32.4		Second Lien	16.0		8/1/2025	12.1		44.5
Roundtables	11/13/2019	—		—		First Lien	8.0		11/13/2022	2.0		2.0
Milton	11/21/2019	13		6.6		Second Lien	15.0		12/19/2027	3.4		10.0
Resolution Economics	1/2/2020	8		7.1		Second Lien	15.0		1/2/2026	2.8		9.9
Blue Ridge	3/24/2020	16		9.9		Second Lien	15.0		12/28/2028	2.6		12.5
HSH	7/16/2020	75		17.3		First Lien	15.0		7/16/2027	24.4		41.7
ATA (3)	4/1/2021	75		37.1		First Lien	15.0		4/1/2027	37.0		74.1
Douglas	10/7/2021	90		35.5		Second Lien	16.0		10/7/2028	15.0		50.5
Clarion	12/9/2021	99		46.8		First Lien	15.0		12/9/2028	22.5		69.3
				$	236.1					$	152.5	$	388.6

FOOTNOTES:

(1) The note purchase agreements contain customary covenants and events of default.

As of March 31, ~~2018, our investment portfolio included four distinct investment positions and the fair value~~2022, all of our portfolio ~~was comprised~~companies were in compliance with their respective debt covenants.

(2) See the Schedule 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~~

~~Lawn Doctor is a leading franchisor of residential lawn care programs~~Investments 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~~^® ~~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 is well regarded for its high quality, comprehensive line of polymer clays, clay molds, children kits,wax-base~~ ~~clays,non-dry~~ clays, clay tools and accessories. Polyform’s strong brand recognition, unique product attributes and strong customer network have earned it one of the leading market share positions in 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 directly to 48 countries worldwide.

~~See~~ Note 3. “Investments” of Item 1. “Financial Statements” for additional information related to our ~~investments.~~

investments, including fair values as of March 31, 2022.

(3) Includes $1.1 million equity investment made in February 2022.

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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 our results of operations and cash flows from operations, which would impact our ability to make distributions to shareholders. See our Form 10-K for the year ended December 31, 2021 for additional information regarding our portfolio companies and their related business activities.
In May 2022, we, through a wholly-owned subsidiary, acquired an approximate 84% interest in the common equity of Vektek for consideration of approximately $56.9 million, subject to certain post-closing adjustments. Additionally, on the closing date of the Acquisition, we, through a wholly-owned subsidiary, made a debt investment of approximately $24.4 million in the form of a senior secured note issued by Vektek.
Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains financial measures utilized by management to evaluate the operating performance and liquidity of our portfolio companies that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Each of these measures, Adjusted EBITDA

and Adjusted Free Cash Flow (“FCF”), should not be considered in isolation from or as superior to or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities, or other financial measures determined in accordance with GAAP. We use these non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our portfolio companies. We present these non-GAAP measures quarterly for our portfolio companies in which we own a controlling equity interest and annually for all of our portfolio companies.

You are encouraged to evaluate the adjustments to Adjusted EBITDA and Adjusted FCF, including the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted FCF, you should be aware that in the future our portfolio companies may incur expenses that are the same as or similar to some of the adjustments in this presentation. The presentations of Adjusted EBITDA and Adjusted FCF should not be construed as an inference that the future results of our portfolio companies will be unaffected by unusual or non-recurring items.

We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted Free Cash Flow may not be comparable to similar measures disclosures by other companies, because not all companies calculate these non-GAAP measures in the same manner. Because of these limitations and additional limitations described below, Adjusted EBITDA and Adjusted FCF should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on the GAAP results and using Adjusted EBITDA and Adjusted FCF only as supplemental measures.

Additionally, we provide our proportionate share of each non-GAAP measure because our ownership percentage of each portfolio company varies. We urge investors to consider our ownership percentage of each portfolio company when evaluating the results of each of our portfolio companies.

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. 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 other~~non-recurring~~ items that we do not consider indicative of the ongoing operating performance of our initial businesses. 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 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 will be unaffected by unusual or~~non-recurring~~ ~~items.~~

~~We present Adjusted EBITDA~~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.

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 other non-recurring items that we do not consider indicative of the ongoing operating performance of our portfolio companies. These further adjustments are itemized below. Our proportionate share of Adjusted EBITDA is calculated based on our equity ownership percentage at period end.

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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~~

The tables below reconcile our proportionate share of Adjusted EBITDA of our portfolio companies from net income (loss) of such portfolio companies for the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended March 31, 2022(1)
	Lawn Doctor(2)			Polyform			Roundtables			HSH			ATA			Douglas			Clarion
Net income (loss) (GAAP)	$	632		$	308		$	(138)		$	654		$	(1,416)		$	(321)		$	558
Interest and debt related expenses	1,160			720			640			933			1,500			600			843
Depreciation and amortization	615			455			507			928			1,089			134			244
Income tax expense (benefit)	203			124			(43)			185			—			(104)			228

Adjusted EBITDA (non-GAAP)	$	2,610		$	1,607		$	966		$	2,700		$	1,173		$	309		$	1,873

Our Ownership Percentage(3)	61		%	87		%	81		%	75		%	75		%	90		%	99		%
Our Proportionate Share of Adjusted EBITDA (non-GAAP)	$	1,580		$	1,400		$	780		$	2,012		$	880		$	279		$	1,856


	Three Months Ended March 31, 2021(1)
	Lawn Doctor(2)			Polyform			Roundtables			HSH
Net income (loss) (GAAP)	$	667		$	1,058		$	(93)		$	334
Interest and debt related expenses	1,003			721			641			935
Depreciation and amortization	624			434			379			929
Income tax expense (benefit)	224			423			(26)			94

Adjusted EBITDA (non-GAAP)	$	2,518		$	2,636		$	901		$	2,292

Our Ownership Percentage(3)	61		%	87		%	81		%	75		%
Our Proportionate Share of Adjusted EBITDA (non-GAAP)	$	1,548		$	2,296		$	728		$	1,719

FOOTNOTES:

(1)Excludes three portfolio companies in which we owned a minority equity interest as of March 31, 2022 and 2021.

(2)Excludes amounts attributable to non-controlling interests.

(3)Represents our undiluted ownership percentage as of the end of the period presented, rounded to the nearest percent.

Adjusted Free Cash Flow

We monitor Adjusted FCF to measure the liquidity of our portfolio companies. We present Adjusted FCF as a supplemental measure of the performance of our portfolio companies since such measure reflects the cash generated by the operating activities of our portfolio companies and to the extent such cash is not distributed to us, it generally represents cash used by the portfolio companies for the repayment of debt, investing in expansions or acquisitions, reserve requirements or other corporate uses by such portfolio companies, and such uses reduce our potential need to make capital contributions to the portfolio companies for our proportionate share of cash needed for such items. We use Adjusted FCF as a key factor in our planning for, and consideration of, acquisitions, the payment of distributions and share repurchases.

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We define Adjusted FCF as cash from operating activities less capital expenditures, net of proceeds from the sale of property and equipment, of our portfolio companies, as further adjusted for certain non-recurring items. These further adjustments are itemized below. Our proportionate share of Adjusted FCF is calculated based on our equity ownership percentage at period end. Adjusted FCF does not represent cash available to our business except to the extent it is distributed to us, and to the extent actually distributed to us, we may not have control in determining the timing and amount of distributions from our portfolio companies, and therefore, we may not receive such cash.

Adjusted FCF has limitations as an analytical tool. Some of these limitations are: (i) Adjusted ~~EBITDA~~FCF does not account for future contractual commitments; (ii) Adjusted FCF excludes required debt service payments; (iii) Adjusted FCF does not reflect the impact of certain cash charges resulting from matters we do not consider to be indicative of the on-going operations of our portfolio companies; and (iv) other companies in similar industries as our portfolio companies may calculate Adjusted FCF differently, limiting its usefulness as a comparative measure. This non-GAAP measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes or as ~~a substitute for performance measures calculated~~an alternative to operating cash flows presented in accordance with GAAP. ~~We compensate~~

The tables below reconcile our proportionate share of Adjusted FCF of our portfolio companies from cash provided by (used in) operating activities of such portfolio companies for ~~these limitations~~the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended March 31, 2022(1)
	Lawn Doctor			Polyform			Round-tables			HSH			ATA			Douglas			Clarion
Cash provided by (used in) operating activities (GAAP)	$	3,568		$	(410)		$	4,623		$	(201)		$	(3,845)		$	(658)		$	784
Capital expenditures(2)	(58)			(138)			(36)			(11)			(8)			(153)			—
Adjusted FCF (non-GAAP)	$	3,510		$	(548)		$	4,587		$	(212)		$	(3,853)		$	(811)		$	784

Our Ownership Percentage(3)	61		%	87		%	81		%	75		%	75		%	90		%	99		%
Our Proportionate Share of Adjusted FCF (non-GAAP)	$	2,125		$	(477)		$	3,704		$	(158)		$	(2,890)		$	(732)		$	777


	Three Months Ended March 31, 2021(1)
	Lawn Doctor			Polyform			Roundtables			HSH
Cash provided by operating activities (GAAP)	$	2,879		$	754		$	4,756		$	821
Capital expenditures(2)	(29)			(99)			—			(107)
Adjusted FCF (non-GAAP)	$	2,850		$	655		$	4,756		$	714

Our Ownership Percentage(3)	61		%	87		%	81		%	75		%
Our Proportionate Share of Adjusted FCF (non-GAAP)	$	1,752		$	571		$	3,841		$	532

FOOTNOTES:

(1)Excludes three portfolio companies in which we owned a minority equity interest as of March 31, 2022 and 2021.

(2)Capital expenditures relate to the purchase of property, plant and equipment.

(3)Represents our undiluted ownership percentage as of the end of the period presented, rounded to the nearest percent.

Our aggregate proportionate share of Adjusted FCF was approximately $2.3 million and $9.0 million for the three months ended March 31, 2022 and 2021, respectively. As discussed above, cash not distributed to us is used by ~~relying primarily on the GAAP results~~our portfolio companies for various reasons, including, but not limited to, repayment of debt, investing in acquisitions 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

~~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

~~(1)~~

~~February 7, 2018 is the date we acquired the portfolio companies.~~

general cash reserves.

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~~operating 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 to make distributions to our shareholders.

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COVID-19
See Item 1A. “Risk Factors” in Part I and Item 7. “Management’s Discussion of Analysis of Financial Condition and Results of Operations” in Part II of our Form 10-K for the year ended December 31, 2021 for information regarding the risks of COVID-19. The Company and the operations of its portfolio companies have not been materially adversely affected as a result of the COVID-19 pandemic.

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. Furthermore, economic growth remains affected by inflationary pressure and supply chain related disruptions and could be slowed or halted by significant external events. Some of our portfolio companies have experienced supply chain related disruptions from time to time. In some instances, strategic decisions to hold more inventory have been made as a result of ongoing supply chain related disruptions. 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. 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; 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,~~2022 and December 31, 2021, we had cash of approximately $75.6 million and $58.7 million, respectively.

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Sources of Liquidity and Capital Resources

Offerings. We received approximately $22.0 million and $24.9 million in net proceeds during the three months ended March 31, 2022 and 2021, respectively, from the Public Offerings, which excludes approximately $1.6 million and $0.8 million raised through our distribution reinvestment plan, respectively. As of March 31, 2022, we had approximately 832 million authorized common shares remaining for sale.

Operating Activities. We used operating cash flows (excluding amounts related to purchases of investments) of approximately $0.3 million during the three months ended March 31, 2022, and we generated operating cash flows of approximately $1.4 million during the three months ended March 31, 2021. The decrease in operating cash flows (excluding amounts related to purchases of investments) for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 is primarily attributable to an increase in annual payments to our Manger and Sub-Manager related to total return incentive fees and Expense Support (reimbursement), partially offset by an increase in investment income.

Borrowings. We had not borrowed any amounts under our $25.0 million Line of Credit as of March 31, 2022. The purpose of the Line of Credit is for general Company working capital and acquisition financing purposes. See Note 8. “Borrowings” of Item 1. “Financial Statements” for additional information regarding the Line of Credit.

Uses of Liquidity and Capital Resources

Investments.We used approximately $1.1 million of cash to purchase an additional equity investment in one of our portfolio companies during the three months ended March 31, 2022. We did not purchase investments during the three months ended March 31, 2021.

Distributions.We paid distributions to our shareholders of approximately $3.2 million and $2.4 million (which excludes distributions reinvested of approximately $1.6 million and $0.8 million, respectively) during the three months ended March 31, 2022 and 2021, respectively. See “Distributions Declared” below for additional information.

Share Repurchases. We paid approximately $0.5 million and $2.0 million during the three months ended March 31, 2022 and 2021, respectively, to repurchase shares in accordance with our Share Repurchase Program.

Reimbursement of Expense Support. During the three months ended March 31, 2022, we reimbursed the Manager and Sub-Manager approximately $1.8 million for Expense Support received in previous years. The Manager and Sub-Manager have provide approximately $3.2 million of Expense Support that has not been reimbursed and that may become subject to reimbursement in the future, of which the Company had accrued approximately $1.6 million as of March 31, 2022. Expense Support is received or Expense Support reimbursement paid annually. As of March 31, 2022, management believes that reimbursement payments by the Company to the Manager and Sub-Manager for the remaining unreimbursed Expense Support are not probable under the terms of 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. See Note 5. “Related Party Transactions” of Item 1. “Financial Statements” for additional information.

Distributions Declared

The Company’s board of directors declared distributions on a monthly basis during the three months ended March 31, 2022 and 2021 (three record dates), and such distributions are paid monthly in arrears. The following table reflects the total distributions declared during three months ended March 31, 2022 and 2021 (in thousands except per share data):


	Three Months Ended March 31,
	2022						2021
Distribution Period(5)	Distributions Declared(1)		Distributions Reinvested(2)		Cash Distributions Net of Distributions Reinvested (2)		Distributions Declared(1)(2)		Distributions Reinvested (2)		Cash Distributions Net of Distributions Reinvested (2)
First Quarter	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501



	$	4,928	$	1,630	$	3,298	$	3,290	$	789	$	2,501

FOOTNOTES:

(1) Monthly distributions declared per share for each share class were as follows:

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Record Date Period	Class FA		Class A		Class T		Class D		Class I		Class S
January 1, 2022 – March 31, 2022	$	0.104167	$	0.104167	$	0.083333	$	0.093750	$	0.104167	$	0.104167
January 1, 2021 – March 31, 2021	0.104167		0.104167		0.083333		0.093750		0.104167		0.104167

(2) Amounts based on distribution record date.

Cash distributions declared net of distributions reinvested were funded from the following sources noted below (in thousands):


	Three Months Ended March 31,
	2022				2021
	Amount		% of Cash Distributions Declared, Net of Distributions Reinvested		Amount		% of Cash Distributions Declared, Net of Distributions Reinvested
Net investment income before Expense Support (reimbursement)	$	5,676	172.1	%	$	(229)	(9.2)	%
Expense Support (reimbursement)	(1,630)		(49.4)		2,650		106.0
Net investment income	4,046		122.7		2,421		96.8
Cash distributions net of distributions reinvested in excess of net investment income(1)	—		—		80		3.2
Cash distributions declared net of distributions reinvested(2)	$	3,298	100.0	%	$	2,501	100.0	%

FOOTNOTES:

(1) Consists of offering proceeds for the three months ended March 31, 2021.

(2)Excludes $1,630 and $789 of distributions reinvested pursuant to our distribution reinvestment plan during the three months ended March 31, 2022 and 2021, respectively.

Distribution amounts and sources of distributions declared vary among share classes. We calculate each shareholder’s specific distribution amount for the period using record and declaration dates. Distributions are declared on all classes of our shares at the same time. Amounts distributed to each class are allocated among the holders of our shares in such class in proportion to their shares. Distributions on the Non-founder shares may be lower than distributions on Founder shares because we are required to pay higher management and total return incentive fees to the Manager and the Sub-Manager with respect to the Non-founder shares. Additionally, distributions on Class T and Class D shares are lower than distributions on Class FA, Class A, Class I and Class S shares because we are required to pay ongoing distribution and shareholder servicing fees with respect to Class T and Class D 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 for each share class and sources of total distributions for the periods presented.

Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan pursuant to which shareholders who purchase shares in the Public Offerings 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, Oklahoma, Oregon, Vermont 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. Class S shares do not participate in the distribution reinvestment plan.

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.

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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 Offerings 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 amended, 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, 2022 and 2021, we received requests for the repurchase of approximately $5.2 million and $1.2 million, respectively, of our common shares, which exceeded proceeds received from our distribution reinvestment plan in the applicable periods by approximately $3.8 million and $0.5 million, respectively. 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.

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The following table summarizes the shares repurchased during the three months ended March 31, 2022 and 2021 (in thousands except per share data):


	Shares Repurchased	Total Consideration		Average Price Paid per Share
Class FA shares	138	$	4,555	$	33.00
Class A shares	5	147		31.08
Class T shares	5	157		30.90
Class D shares	—	8		30.62
Class I shares	12	373		31.49

Three Months Ended March 31, 2022	160	$	5,240	$	32.76

Class FA shares	2	$	62	$	30.95
Class A shares	14	411		29.65
Class T shares	11	325		29.53
Class D shares	4	116		29.11
Class I shares	10	297		29.97
Three Months Ended March 31, 2021	41	$	1,211	$	29.71

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.

Through March 31, 2022, we had acquired equity and debt investments in ten portfolio companies using the net proceeds from our Public Offerings. As of March 31, 2022 and 2021, the fair value of our ~~investment~~ portfolio totaled approximately ~~$77.5 million. Our investments at March 31, 2018 consisted of two debt investments~~$468.7 million and ~~two equity investments.~~$245.1 million, respectively. See ~~section entitled “Overview – Portfolio~~“Portfolio and Investment Activity” above for discussion of the general terms and characteristics of our ~~investments,~~assets, and for information regarding ~~investment activities during the period from February 7, 2018 (commencement of operations) through March 31, 2018.~~

our portfolio companies.

The following ~~is a summary of~~table summarizes 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

2022 and 2021 (in thousands):

Three Months Ended March 31,
2022 2021
Total investment income $ 11,742 $ 3,959
Total operating expenses (6,284) (4,188)
Expense support (reimbursement) (1,630) 2,650
Net investment income before taxes 3,828 2,421
Income tax expense 218 —
Net investment income 4,046 2,421
Net change in unrealized appreciation on investments 11,769 13,912
Net change in deferred taxes on investments (696) 67
Net increase in net assets resulting from operations $ 15,119 $ 16,400

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

2022 and 2021 (in thousands):


	Three Months Ended March 31,
		2022		2021
Interest income		$	5,837	$	3,058
Dividend income		5,905		901
Total investment income		$	11,742	$	3,959

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The majority of our interest income is generated from our debt investments, all of which had fixed rate interest as of March 31, 2022 and 2021. As of March 31, ~~2018,~~2022 and 2021, our weighted average annual yield on our accruing debt investments was ~~16.0%~~15.3% and 15.4%, respectively, based on amortized cost 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 $5.8 million and $3.0 million for the three months ended March 31, 2022 and 2021. The increase in interest income during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, is primarily attributable to additional debt investments during the twelve months ended March 31, 2022 of approximately $74.5 million. Additionally, we earn a nominal amount of interest income on our cash accounts.

Dividend income is recorded on the record date for privately issued securities, but excludes any portion of distributions that are treated as a return of capital. Dividend income was approximately $5.9 million and $0.9 million during the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, we received dividend income from all seven of our majority-owned portfolio companies, as compared to dividend income from three of our majority-owned portfolio companies during the three months ended March 31, 2021.

Our total investment income for the three months ended March 31, 2022, resulted in annualized cash yields ranging from 3.2% to 35.3% based on our investment cost, as compared to 3.2% to 12.4% for the three months ended March 31, 2021.

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~~assets that we expect to ~~result~~acquire from ~~the~~existing cash, borrowings and an expected increase in capital available for investment ~~as related to our~~using proceeds from the Public ~~Offering.~~

Offerings.

Operating Expenses

Our operating expenses for the ~~period from February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018~~2022 and 2021 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.~~ follows (in thousands):


	Three Months Ended March 31,
		2022		2021
Total return incentive fees		$	2,892	$	2,293
Base management fees		1,863		834
Organization and offering expenses		530		414
Professional services		423		385
Pursuit costs		160		—
Distribution and shareholder servicing fees		159		64
Custodian and accounting fees		121		54
Insurance expense		59		55
Director fees and expenses		51		51
General and administrative expenses		26		38


Total operating expenses		6,284		4,188
Expense support		—		(2,650)
Reimbursement of expense support		1,630		—
Net expenses		$	7,914	$	1,538

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 ~~professional services,~~total return incentive fees, base management fees, ~~performance–based incentive fees,~~organization and offering expenses, professional services, distribution and shareholder servicing fees, custodian and ~~a component of other operating expenses related to transfer agency services~~accounting fees, general and ~~shareholder services.~~administrative, and pursuit costs. 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)~~fees, accounting fees and general and administrative expenses), the number of shareholders and open accounts ~~(transfer agency services and shareholder~~(professional services, distribution and shareholder servicing fees and custodian fees) ~~and~~, and/or the complexity of our investment processes and capital structure (professional services).

Total Return Incentive Fee

The Manager and Sub-Manager are eligible to receive incentive fees based on the Total Return to Shareholders, as defined in the Management Agreement and Sub-Management Agreement, for each share class in any calendar year, payable annually in arrears. We accrue (but do not pay) the total return incentive fee on a quarterly basis, to the extent that it is earned, and perform a final reconciliation at completion of each calendar year. The total return incentive fee 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 the Sub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement.

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We recorded total return incentive fees of approximately $2.9 million and $2.3 million during the three months ended March 31, 2022 and 2021, respectively. The increase in total return incentive fees during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, is primarily due to an increase in net investment income before total return incentive fees, offset partially by a decrease in the change in unrealized appreciation on investments, net of deferred taxes.
Base Management Fee
Our base management fee is calculated for each share class at an annual rate of (i) for the Non-founder shares, 2% of the product of (x) our average gross assets and (y) the ratio of Non-founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital and (ii) for the Founder shares, 1% of the product of (x) our average gross assets and (y) the ratio of outstanding Founder share Average Adjusted Capital to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears.
We incurred base management fees of approximately $1.9 million and $0.8 million during the three months ended March 31, 2022 and 2021, respectively. The increase in base management fees is primarily attributable to the increase in our average gross assets which were approximately $462.9 millionand $239.3 million during the three months ended March 31, 2022 and 2021, respectively.

Organization and Offering Expenses

Organization expenses are expensed on our ~~statement~~condensed consolidated 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 ~~our~~the Public Offerings, are capitalized on our ~~statement~~condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to our ~~statement~~condensed consolidated 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 theSub-Manager.

~~Base Management Fee~~

~~Our base management fee is calculated for each share class at an annual rate~~

We expensed organization and offering expenses of ~~(i) for~~approximately $0.5 million and $0.4 million during the~~non-founder~~ ~~shares, 2%~~ three months ended March 31, 2022 and 2021, respectively.

Pursuit Costs

Pursuit costs relate to transactional expenses incurred to identify, evaluate and negotiate acquisitions that ultimately were not consummated. We incurred pursuit costs of approximately $0.2 million during the ~~product of (x) our average gross assets and (y) the ratio ofnon-founder~~ share Average Adjusted Capital for a particular class to total Average Adjusted Capital and (ii) for the founder shares, 1% of the product of (x) our average gross assets and (y) the ratio of outstanding founder share Average Adjusted Capital to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears.

~~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 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 total return incentive fee shall be due and payable to the 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 the~~Sub-Manager~~ ~~under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement.~~three months ended March 31, 2022. We did not incur ~~any total return incentive~~pursuit costs during the three months ended March 31, 2021.

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 Offerings (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 approximately $0.2 million and $0.1 million during the three months ended March 31, 2022 and 2021, respectively. The increase in distribution and shareholder servicing fees during the ~~period February 7, 2018 (commencement of operations) through~~three months ended March 31, ~~2018.~~

2022, is attributable to an increase in Class T and Class D shareholders.

Other Operating Expenses

Other operating expenses (consisting of professional services, insurance expense, custodian and accounting fees, director fees and expenses, and general and administrative expenses) were approximately $0.7 million and $0.6 million during the three months ended March 31, 2022 and 2021, respectively. The increase in other operating expenses during the three months ended March 31, 2022 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, 2021.

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Expense Support and Conditional Reimbursement Agreement

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.~~funds (the “Expense Support”). 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.

Expense Support (Reimbursement) totaled approximately $(1.6) million and $2.7 million during the three months ended March 31, 2022 and 2021, respectively. The actual amount of Expense Support or Expense Support Reimbursement 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 above. See Note 5. “Related Party Transactions” of Item 1. “Financial Statements” for additional information.

Other Expenses and Changes in Net Assets

Income Tax Benefit (Expense)

We incur income tax expense or benefit to the extent we have or expect to have taxable income or loss for the current period related to our Taxable Subsidiaries. During the three months ended March 31, 2022, we recorded current income tax benefit of approximately $0.2 million in the condensed consolidated statements of operations, which primarily relates to our controlling equity interest in ATA acquired in April 2021. We did not record current income tax benefit during the three months ended March 31, 2021.

Additionally, we recorded deferred income tax (expense) benefit of approximately $(0.7) million and $0.1 million during the three months ended March 31, 2022 and 2021, respectively, primarily related to unrealized appreciation on investments held by our Taxable Subsidiaries. As of March 31, 2022, two of our equity investments were held in Taxable Subsidiaries, as compared to one equity investment held in Taxable Subsidiaries as of March 31, 2021.

Net Change in Unrealized Appreciation

~~For~~ on Investments

Unrealized appreciation is based on the ~~period February 7, 2018 (commencement~~current fair value of ~~operations) through~~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.

During the three months ended March 31, ~~2018,~~2022 and 2021, we recognized a net change in unrealized appreciation on investments of approximately $11.8 million and $13.9 million, respectively, due to EBITDA growth in a substantial portion of our portfolio companies. EBITDA growth is partially attributable to accretive add-on acquisitions made by our portfolio companies.

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Net Assets

During the three months ended March 31, 2022 and 2021, the net increase in net assets consisted of the ~~following:~~

Unrealized appreciation
   $ 524,449
Unrealized depreciation
   —


Total net unrealized appreciation
   $ 524,449

following (in thousands):


	Three Months Ended March 31,
		2022		2021
Operations		$	15,119	$	16,400
Distributions to shareholders		(4,928)		(3,290)
Capital transactions		31,210		24,405
Net increase in net assets		$	41,401	$	37,515

Operations decreased by approximately $1.3 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease in operations is primarily due to a decrease of approximately $2.9 million in the net change in unrealized appreciation on investments, net of ~~$524,449 pertains solely~~deferred taxes, offset partially by an increase in net investment income of approximately $1.6 million.

Distributions increased approximately $1.6 million during the three months ended March 31, 2022, as compared to ~~our investment in~~ the ~~equity of Lawn Doctor,~~three months ended March 31, 2021, primarily as a result of ~~among~~an increase in shares outstanding.

Capital share transactions increased approximately $6.8 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to an increase in proceeds received through the Public Offerings of approximately $10.0 million and an increase in proceeds received through our distribution reinvestment plan of approximately $0.8 million, offset partially by an increase in share repurchases of approximately $4.0 million.

Total Returns

The following table illustrates year-to-date (“YTD”), trailing 12 months (“One Year”), trailing 36 months (“Three Year”), Three Year annual average and cumulative total returns with and without upfront selling commissions and dealer manager fees (“sales load”), as applicable. All total returns with sales load assume full upfront selling commissions and dealer manager fees. Total returns are calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. Class FA assumes distributions are reinvested in Class A shares and all other ~~things, strong~~share classes assume distributions are reinvested in the same share class. Management believes total return is a useful measure of the overall investment performance ~~above expectations and~~of our shares.


	Year-To-Date Total Return		One Year Total Return(1)		Three Year Total Return(2)		Three Year Annual Average Total Return(2)		Cumulative Total Return(3)		Cumulative Total Return Period(3)
Class FA (no sales load)	3.0	%	10.5	%	40.7	%	13.6	%	58.2	%	February 7, 2018 - March 31, 2022
Class FA (with sales load)	(3.7)	%	3.3	%	31.5	%	10.5	%	47.9	%	February 7, 2018 - March 31, 2022
Class A (no sales load)	2.8	%	9.1	%	35.4	%	11.8	%	49.8	%	April 10, 2018 - March 31, 2022
Class A (with sales load)	(6.0)	%	(0.2)	%	23.9	%	8.0	%	37.1	%	April 10, 2018 - March 31, 2022
Class I	2.8	%	9.3	%	36.3	%	12.1	%	51.5	%	April 10, 2018 - March 31, 2022
Class T (no sales load)	2.9	%	8.7	%	31.2	%	10.4	%	42.8	%	May 25, 2018 - March 31, 2022
Class T (with sales load)	(2.0)	%	3.5	%	25.0	%	8.3	%	36.0	%	May 25, 2018 - March 31, 2022
Class D	3.0	%	9.6	%	33.5	%	11.2	%	43.0	%	June 26, 2018 - March 31, 2022
Class S (no sales load)	3.5	%	11.6	%	N/A		N/A		32.5	%	March 31, 2020 - March 31, 2022
Class S (with sales load)	(0.1)	%	7.7	%	N/A		N/A		27.9	%	March 31, 2020 - March 31, 2022

FOOTNOTES:

(1) For the ~~future growth opportunities~~period from April 1, 2021 to March 31, 2022.

(2) For the period from April 1, 2019 to March 31, 2022. The Three Year annual average total return is calculated as a simple average of ~~Lawn Doctor.~~

the Three Year total return.

(3) For the period from the date the first share was issued for each respective share class to March 31, 2022.

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~~2021 and this Quarterly Report, including the ~~issuance~~negative impacts from the continued spread of ~~Class FA shares resulting in net proceeds~~COVID-19.

Table 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.

Contents

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~~total 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~~

~~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.

~~While we generally intend to hold our assets for the long term, certain assets~~ Current performance 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.

higher or lower than the performance data quoted.

Hedging Activities

As of March 31, ~~2018 and December 31, 2017,~~2022, we had ~~approximately $5.6 million and $0.2 million of cash and cash equivalents, respectively.~~

We raised approximately $81.5 million 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~~not entered into any derivatives or other financial ~~instruments in an attempt to hedge our commodity risk.~~instruments. 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

Inflation

Inflation 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 sharesaffect the fair value of our ~~common shares. The following table reflects, by share class,~~investments or affect the performance of our portfolio companies. As inflation increases, the fair value of our portfolio companies could decline. Rising inflation has impacted labor rates and input costs at some of our portfolio companies, which may impact margins. We anticipate further cost increases in 2022. Some of our portfolio companies have implemented or will be implementing price increases to minimize the impact on inflationary costs increases on their margins. However, any increases in price may not be sufficient to cover increases in expenses of our portfolio companies. Margin reductions could impact the cash our portfolio companies have available for distributions, ~~per share and the total amount of distributions that we have declared on~~which may reduce 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. We have also entered into the Administrative Services Agreement with the Administrator and the~~Sub-Administration~~ ~~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 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.

dividend income.

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, 2021 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,~~ 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:~~

policies.

~~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~~

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.

Table of Contents

We had not borrowed any money as of March 31, 2022. 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, 2022, 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~~

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.

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.

Table of Contents

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

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,~~2022, 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~~

Item 1A. Risk Factors

We have disclosed under the heading “Risk Factors” in our ~~Prospectus,~~Form 10-K for the year ended December 31, 2021, risk factors which materially affect our business, financial condition or results of operations. ~~The following risk factors replace and/or supplement the similar risk factors set forth in our Prospectus.~~ You should carefully consider the risk factors set forth in our ~~Prospectus and Item 1A in Part II of this Quarterly Report.~~Form 10-K. 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 U.S. Department of Labor, or the Department of Labor, has issued regulations that revise the definition of an ERISA fiduciary, and these regulations could have a significant effect on an investment in our shares.

The U.S. Department of Labor issued in 2016 its final regulation redefining “investment advice fiduciary” under ERISA and the Code. The final regulation significantly expanded the class of advisers and the scope of investment advice that 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 of Labor also finalized certain prohibited transaction exemptions that allow investment advisers to receive compensation for providing investment advice under arrangements that would otherwise be prohibited due to conflicts of interest. Financial institutions that had been relying on the “Best Interest Contract Exemption” were permitted to comply with only a limited set of requirements through July 1, 2019. The United States Court of Appeals for the Fifth Circuit is currently expected 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, 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 requirements with respect to our assets. However, if we fail to satisfy the requirements to qualify as a VCOC for any reason 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.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2. Unregistered Sales of Equity Securities

and Use of Proceeds

Use of Proceeds

We ~~were capitalized through~~are currently offering and selling shares under the ~~purchase by CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC of 4,000 shares of Class FA shares each for~~Follow-On Public Offering pursuant to the ~~aggregate consideration of $200,000 in June 2017.~~

~~From April 2017~~Follow-On Registration Statement initially filed with the SEC on February 19, 2021, as amended from time to ~~February 2018,~~time. As permitted under applicable securities laws, we ~~conducted the Private Placement of up~~continued to ~~$200 million in shares of~~offer our ~~Class FA and Class A shares. We offered the~~common shares in the ~~Private Placement only~~Initial Public Offering until November 1, 2021 (the effective date of the Follow-On Registration Statement), upon which the Initial Registration Statement was deemed terminated. We intend to persons that were “accredited investors,” as that term is defined under the Securities Act and Regulation D promulgated thereunder. As of February 8, 2018, the date we terminated the Private Placement, we received aggregate gross proceeds of approximately $81.7 million from the sale of approximately 3.3 million shares ofoffer our ~~Class FA~~common shares in the 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 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~~Follow-On Public Offering ~~of up to $1,100,000,000 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 7, 2020,~~until November 2023, unless extended by our board of directors.

Through CNL Securities Corp., the Managing Dealer for the Follow-On Public Offering, we are offering to the public on a best efforts basis up to ~~$1,000,000,000 Shares~~$1.0 billion 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~~$100.0 million 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 Follow-On Public Offering and the distribution reinvestment plan.

~~As of~~

The following table presents the net offering proceeds received from the Public Offerings through March 31, ~~2018, we had not yet raised~~2022 (in thousands):


	Total		Payments to Affiliates(1)	Payments to Others
Aggregate price of offering amount registered(2)	$	1,000,000
Shares sold(3)	10,549

Aggregate amount sold(3)	$	314,441
Payment of underwriting compensation(4)	(5,766)		(5,766)	—
Net offering proceeds to the issuer	308,675
Investments in portfolio companies(5)	(224,811)		—	(224,811)
Distributions to shareholders(6)	(8,567)		(2)	(8,565)
Remaining proceeds from the Offering	$	75,297

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.

(2) We also offered up to $100.0 million of shares to be issued pursuant to our distribution reinvestment plan. The shares offered were permitted to be reallocated among the different classes and between the Public Offerings and the distribution reinvestment plan.

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(3)Excludes approximately $8.7 million (299,229 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 our private offering of up to $85 million of Class FA shares and up to $115 million of Class A shares (the “2018 Private Offering”), approximately $43.5 million (1.6 million shares) of unregistered Class FA shares sold in our separate private offerings of up to $50 million each of Class FA shares (the “Class FA Private Offering” and the “Follow-on Class FA Private Offering,” respectively) in 2019, and approximately $52.4 million (1.8 million shares) of unregistered Class S shares sold in our private offering of up to $50 million of Class S shares (the “Class S Private Offering”) in 2020.

(4)Underwriting compensation includes selling commissions and dealer manager fees paid to the Managing Dealer on shares sold in the Public Offerings; all or a portion of which were permitted to be reallowed to participating broker-dealers. Excludes selling commissions and placement agent fees paid to the Managing Dealer for shares sold in the Follow-On Class FA Private Offering and Class S Private Offering.

(5) Excludes approximately $166.5 million funded using proceeds from the 2018 Private Offering, Class FA Private Offering, Follow-On Class FA Private Offering and Class S 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 so there are not yet~~Offerings. 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 amended (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 borrowings to repurchase shares. Our board of 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 U.S. federal income tax purposes.

During the quarter ended March 31, 2022, we repurchased the following shares (in thousands except per share data):


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, 2022 to January 31, 2022	—	$	—	—	$	1,445
February 1, 2022 to February 28, 2022	—	—		—	1,445
March 1, 2022 to March 31, 2022	160	$	32.76	160	—

FOOTNOTE:

(1) Repurchases are limited under the Share Repurchase Program as described above. During the three months ended March 31, 2022, we received requests for the repurchase of approximately $5,240 of our common shares, which exceeded proceeds from our distribution reinvestment plan in the previous quarter by approximately $3,795. Our board of ~~securities for which we~~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 Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The exhibits required by this item are ~~responsible.~~

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

~~Item 4.~~

~~Mine Safety Disclosures~~ –~~Not applicable~~

~~Item 5.~~

~~Other Information~~ –~~None~~

~~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.~~

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.


3.1
1.1*		~~Managing Dealer Agreement dated as of March 7, 2018 between CNL Strategic Capital, LLC and CNL Securities Corp.~~

~~2.1~~	Agreement and Plan of Merger dated as of October 20, 2017 by and among CNL Strategic Capital, LLC, LD Merger Sub, Inc. and LD Parent, Inc. (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~2.2~~	Agreement and Plan of Merger dated as of October 20, 2017 by and among CNL Strategic Capital, LLC, PFHI Merger Sub, Inc. and Polyform Holdings, Inc. (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form~~S-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on February 12, 2018).~~

~~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~~	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)~~April 18 , 202 2 ).

4.3			Third Amended and Restated Share Repurchase Program (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)~~June 16, 2021).

~~10.1~~ 31.1*			Second Amended and Restated Management Agreement dated as of February 28, 2018 by and between the Registrant and CNL Strategic Capital Management, LLC (incorporated by reference to Exhibit 10.1 to the~~Pre-Effective~~ ~~Amendment No. 1 to the Registration Statement on FormS-1~~ ~~(FileNo. 333-222986)~~ ~~filed with the SEC on March 1, 2018).~~

~~10.2~~	~~Second Amended and RestatedSub-Management~~ Agreement dated as of February 28, 2018 by and among the Registrant, CNL Strategic Capital Management, LLC and Levine Leichtman Strategic Capital, LLC (incorporated by reference to Exhibit 10.2 to the~~Pre-Effective~~ ~~Amendment No. 1 to the Registration Statement on FormS-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)~~ ~~filed with the SEC on February 12, 2018).~~

  ~~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~~
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*
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*
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,~~2022, formatted in ~~XBRL (Extensible~~iXBRL (Inline 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.
104 Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

*
*			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.

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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~~13th day of May, ~~2018.~~

2022.



			CNL STRATEGIC CAPITAL, LLC

~~CNL STRATEGIC CAPITAL, LLC~~

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

			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


	March 31, 2022 (Unaudited)		December 31, 2021
Assets
Investments at fair value (amortized cost of $388,642 and $387,754, respectively)	$	468,654	$	455,997
Cash	75,566		58,704

Receivable for shares sold	12,864		—


Prepaid expenses and other assets	91		143
Total assets	557,175		514,844
Liabilities

Due to related parties (Note 5)	5,429		9,922
Payable for shares repurchased	5,240		509
Deferred tax liabilities, net	2,355		1,877
Distributions payable	1,680		1,566

Accounts payable and other accrued expenses	761		661


Total liabilities	15,465		14,535
Commitments and contingencies (Note 11)	0		0
Members’ Equity (Net Assets)
Preferred shares, $0.001 par value, 50,000 shares authorized and unissued	—		—
Class FA Common shares, $0.001 par value, 7,400 shares authorized; 4,844 shares issued; 4,421 and 4,559 shares outstanding, respectively	4		5
Class A Common shares, $0.001 par value, 94,660 shares authorized; 1,639 and 1,486 shares issued, respectively; 1,610 and 1,461 shares outstanding, respectively	2		1
Class T Common shares, $0.001 par value, 558,620 shares authorized, respectively; 1,747 and 1,654 shares issued, respectively; 1,695 and 1,609 shares outstanding, respectively	2		2
Class D Common shares, $0.001 par value, 94,660 shares authorized; 1,181 and 1,020 shares issued, respectively; 1,170 and 1,009 shares outstanding, respectively	1		1
Class I Common shares, $0.001 par value, 94,660 shares authorized; 6,281 and 5,519 shares issued, respectively; 6,160 and 5,410 shares outstanding, respectively	6		5
Class S Common shares, $0.001 par value, 100,000 shares authorized; 1,770 shares issued and 1,766 shares outstanding	2		2
Capital in excess of par value	473,961		442,752
Distributable earnings	67,732		57,541
Total Members’ Equity	$	541,710	$	500,309

Net assets, Class FA shares	$	147,112	$	148,717
Net assets, Class A shares	50,399		44,958
Net assets, Class T shares	53,038		49,328
Net assets, Class D shares	36,225		30,607
Net assets, Class I shares	195,476		168,704
Net assets, Class S shares	59,460		57,995
Total Members’ Equity	$	541,710	$	500,309


	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
Balance as of December 31, 2021	15,814	$	16	$	442,752	$	57,541	$	500,309
Net investment income	—	—		—		4,046		4,046
Net change in unrealized appreciation on investments	—	—		—		11,769		11,769
Net change in deferred taxes on investments	—	—		—		(696)		(696)
Distributions to shareholders	—	—		—		(4,928)		(4,928)
Issuance of common shares through the Public Offerings	1,118	1		34,883		—		34,884
Issuance of common shares through distribution reinvestment plan	50	—		1,566		—		1,566
Repurchase of common shares pursuant to share repurchase program	(160)	—		(5,240)		—		(5,240)
Balance as of March 31, 2022	16,822	$	17	$	473,961	$	67,732	$	541,710


	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


	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


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	%


	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


	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


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


Unrealized appreciation	$	524,449
Unrealized depreciation		—

Total net unrealized appreciation	$	524,449


	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~~	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*		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*		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,~~2022, formatted in ~~XBRL (Extensible~~iXBRL (Inline 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.

104		Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)