Exhibit 99.1 Gladstone Capital Reports Third Quarter Financial Results for June 30, 2003 Net Increase in Stockholders' Equity Resulting From Operations in the Third Quarter Was $0.23 Per Diluted Common Share, a 4.6% Increase From the Prior Year's Quarter of $0.22 Per Diluted Common Share; Net Investment Income Increased From $2,224,574 or $0.22 to $3,115,736 Or $0.30 Per Diluted Common Share, a 40% Increase MCLEAN, Va., Aug. 14 /PRNewswire-FirstCall/ -- Gladstone Capital Corp. (Nasdaq: GLAD) announced today that its Net Increase in Stockholders' Equity Resulting from Operations for the third quarter ended June 30, 2003 was $2,370,899 or $0.23 per diluted common share for the quarter as compared to $2,224,574 or $0.22 per diluted common share for the quarter ended June 30, 2002, an increase of $146,325 or 4.6%. As stated above, the Net Investment Income for the quarter ended June 30, 2003, increased from $2,224,574 or $0.22 to $3,115,736 or $0.30 per diluted common share, a 40% increase from the prior year's quarter. Total assets were $199,857,436 at the end of June 2003 and $172,922,039 at the end of September 2002. Net Increase in Stockholders' Equity Resulting from Operations for the nine months ended June 30, 2003 was $8,445,069 or $0.83 per diluted common share as compared to $4,830,036 or $0.47 per diluted common share for the previous nine months ended June 30, 2002. This was an increase of $3,615,033 or 74.8%. Net Investment Income for the nine months ended June 30, 2003 was $8,447,482 or $0.83 per diluted common share as compared to $4,830,036 or $0.47 per diluted common share for the previous nine months ended June 30, 2002. This was an increase of $3,617,446 or 74.9%. Information about investments is on our web site, www.GladstoneCapital.com. The attached financial statements are without footnotes so readers should obtain our Form 10-Q for the period ended June 30, 2003 and review the notes as well. We have filed this Form 10-Q with the Securities and Exchange Commission ('SEC') which can be retrieved at the SEC website at www.SEC.gov or from Gladstone Capitals web site at www.GladstoneCapital.com. A paper copy can be obtained by writing to us at 1616 Anderson Road, McLean, VA 22102. For further information please contact Skye Breeden or Harry Brill at 703-286-7000. The company will have a conference call at 10:30am EDT, August 15, 2003. Please call 1-800-513-1181 and use the ID code 234811 and you will be placed on hold until the conference starts. An operator will monitor the call and set a queue for the questions. The replay number will be available for approximately 30 days. The replay number is 1-800-615-3210 and use ID code 234811. This press release may include statements that may constitute "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regard to the future performance of the Company. Words such as "believes," "expects," "projects" and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward- looking statements include, among others, those factors listed under the caption "Risk factors" of the Company's Form 10-K for the Fiscal Year Ended September 30, 2002, as filed with the Securities and Exchange Commission on December 11, 2002. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. GLADSTONE CAPITAL CORPORATION CONSOLIDATED BALANCE SHEETS June 30, September 30, 2003 2002 (Unaudited) ASSETS Investments at fair value (Cost 6/30/2003: $104,977,557; 9/30/2002: $79,718,354) $104,975,144 $79,718,354 Cash and cash equivalents 27,066,673 51,930,529 Cash and cash equivalents pledged as collateral 65,006,677 39,998,799 Interest receivable - investments in debt securities 1,088,168 685,274 Interest receivable - cash and cash equivalents - 4,389 Interest receivable - officers 109,736 109,874 Prepaid assets 1,432,593 357,955 Other assets 178,445 116,865 TOTAL ASSETS $199,857,436 $172,922,039 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $330,269 $- Dividends payable 2,920,835 2,115,087 Accrued expenses and deferred liabilities 1,547,310 944,960 Repurchase agreement 63,706,000 39,198,719 Total Liabilities $68,504,414 $42,258,766 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized and 10,071,844 shares issued and outstanding $10,072 $10,072 Capital in excess of par value 140,266,684 140,266,684 Notes receivable - officers (8,983,796) (8,983,796) Net unrealized depreciation on investments (2,413) - Undistributed/(overdistributed) net investment income 62,475 (629,687) Total Stockholders' Equity $131,353,022 $130,663,273 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $199,857,436 $172,922,039 GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2003 (UNAUDITED) COMPANY (1) INDUSTRY INVESTMENT COST FAIR VALUE America's Water heater Senior Water Heater rentals Term Debt Rentals, and (2)(4) LLC servicing $12,000,000 $12,015,000 ARI Holdings, Manufacturing Junior Inc. auto Subordinated parts Term Debt (3) 8,565,416 8,565,416 Coyne Industrial Senior International services Term Debt Enterprises (2)(3)(4) 20,334,866 20,233,192 Corp. Finn Manufacturing Senior Corporation landscape Subordinated equipment Term Debt (4) 10,500,000 10,479,000 Common Stock Warrants for 2% Ownership 37,000 431,111 Fugate & Imaging Senior Associates, supplies Term Debt 2,000,000 2,000,000 Inc. Senior Term Debt 3,500,000 3,500,000 Home Care Medical Senior Supply, Inc. equipment Term Debt rental (2)(4)(5) 18,000,000 18,405,900 Inca Metal Material Senior Products handling Term Debt Corp. and (2)(4) Kingway storage Acquisition, products Inc. Clymer Acquisitions, Inc. 5,850,000 5,191,875 Kozy Shack Food Senior Enterprises, production Term Debt Inc. and (2)(4) sales 2,400,000 2,406,000 Marcal Paper Manufacturing Senior Mills, Inc. paper Subordinated products Term Debt (2)(4) 7,150,000 7,114,250 First Mortgage Debt (3) 9,140,275 9,140,275 Wingstop Restaurant - Senior Restaurants fast food Term Debt International, (4) 2,000,000 1,997,500 Inc. Senior Term Debt (4) 3,500,000 3,495,625 $104,977,557 $104,975,144 (1) We do not "Control," and are not an "Affiliate" of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). In general, under the 1940 Act, we would "Control" a portfolio company if we owned 25% or more of its voting securities and would be an "Affiliate" of a portfolio company if we owned 5% or more of its voting securities. (2) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt. (3) Has some paid in kind (PIK) interest. Refer to Note 2 "Summary of Significant Accounting Policies" of Form 10-K for the fiscal year ended September 30, 2002. (4) Fair value was based on valuation prepared and provided by Standard & Poor's Loan Evaluation Services. (5) Includes a success fee with a fair value of $473,400. GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2002 COMPANY (1) INDUSTRY INVESTMENT COST FAIR VALUE ARI Holdings, Manufacturing Junior Inc. auto Subordinated parts Term Debt (3) $8,250,803 $8,250,803 Coyne International Industrial Senior Term Enterprises services Debt Corp. (2)(3) 16,054,268 16,054,268 Finn Manufacturing Senior Corporation landscape Subordinated equipment Term Debt 10,500,000 10,500,000 Common Stock Warrants for 2% Ownership 37,000 37,000 Home Care Medical Senior Term Supply, Inc. equipment Debt (2) rental 18,000,000 18,000,000 Inca Metal Material Senior Term Products handling Debt (2) Corp. and storage products 6,000,000 6,000,000 Kozy Shack Food Senior Term Enterprises, production Debt (2) Inc. and sales 4,300,000 4,300,000 Marcal Paper Manufacturing Senior Mills, Inc. paper Subordinated products Term Debt (2) 7,500,000 7,500,000 First Mortgage Debt (3) 9,076,283 9,076,283 $79,718,354 $79,718,354 (1) We do not "Control," and are not an "Affiliate" of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). In general, under the 1940 Act, we would "Control" a portfolio company if we owned 25% or more of its voting securities and would be an "Affiliate" of a portfolio company if we owned 5% or more of its voting securities. (2) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt. (3) Has some paid in kind (PIK) interest. Refer to Note 2 "Summary of Significant Accounting Policies" of Form 10-K for the fiscal year ended September 30, 2002. GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Three Months Ended Ended June 30, June 30, 2003 2002 INVESTMENT INCOME Interest income - investments $3,684,284 $1,808,834 Interest income - cash and cash equivalents 79,073 351,726 Interest income - notes receivable from officers 109,737 108,691 Managerial assistance fees 125,000 645,898 Other income 61,650 - Total Investment Income $4,059,744 $2,915,149 EXPENSES Salaries and benefits $493,901 $364,253 Rent 54,899 36,095 Professional fees 101,211 119,322 Directors fees 20,290 7,000 Insurance 71,883 49,802 Stockholder related costs 12,227 7,210 Financing fees 62,355 - General and administrative 127,242 106,893 Total Expenses $944,008 $690,575 NET INVESTMENT INCOME $3,115,736 $2,224,574 Net unrealized appreciation on investments (744,837) - NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $2,370,899 $2,224,574 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $0.24 $0.22 Diluted $0.23 $0.22 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,071,844 10,071,844 Diluted 10,256,790 10,201,052 GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Nine Months Nine Months Ended Ended June 30, June 30, 2003 2002 INVESTMENT INCOME Interest income - investments $9,887,909 $3,735,461 Interest income - cash and cash equivalents 390,577 1,360,811 Interest income - notes receivable from officers 329,078 323,518 Managerial assistance fees 483,000 1,286,809 Other income 63,906 47,500 Total Investment Income $11,154,470 $6,754,099 EXPENSES Salaries and benefits $1,405,002 $968,595 Rent 164,044 83,375 Professional fees 302,478 334,804 Directors fees 54,647 14,000 Insurance 216,724 147,466 Stockholder related costs 123,659 78,472 Financing fees 62,355 - General and administrative 378,079 297,351 Total Expenses $2,706,988 $1,924,063 NET INVESTMENT INCOME $8,447,482 $4,830,036 Net unrealized appreciation on investments (2,413) - NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $8,445,069 $4,830,036 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $0.84 $0.48 Diluted $0.83 $0.47 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,071,844 10,071,844 Diluted 10,160,350 10,176,944 GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Three Months Ended Ended June 30, June 30, 2003 2002 Per Share Data (1) Net asset value at beginning of period $13.09 $12.91 Net investment income 0.31 0.22 Net unrealized (loss)/gain on investments (0.07) - Distributions from net investment income (0.29) (0.21) Net asset value at end of period $13.04 $12.92 Per share market value at beginning of period $16.18 $17.80 Per share market value at end of period 20.48 18.05 Total return (2)(3) 28.37% 2.58% Shares outstanding at end of period 10,071,844 10,071,844 Ratios/Supplemental Data Net assets at end of period $131,353,022 $129,991,136 Average net assets $132,823,516 $130,560,626 Ratio of operating expenses to average net assets - annualized 2.86% 2.12% Ratio of net investment income to average net assets - annualized 7.18% 6.82% Nine Months Nine Months Ended Ended June 30, June 30, 2003 2002 Per Share Data (1) Net asset value at beginning of period $12.97 $13.05 Net investment income 0.84 0.48 Net unrealized (loss)/gain on investments - - Distributions from net investment income (0.77) (0.60) Offering costs - (0.01) Effect of anti-dilution - (0.01) Net asset value at end of period $13.04 $12.91 Per share market value at beginning of period $16.88 $16.38 Per share market value at end of period 20.48 18.05 Total return (2)(3) 25.89% 13.86% Shares outstanding at end of period 10,071,844 10,071,844 Ratios/Supplemental Data Net assets at end of period $131,353,022 $129,991,136 Average net assets $132,170,641 $130,888,323 Ratio of operating expenses to average net assets - annualized 2.74% 1.96% Ratio of net investment income to average net assets - annualized 8.54% 4.92% (1) Basic per share data. (2) Amounts were not annualized for the results of the three and nine month periods ended June 30, 2003 and June 30, 2002. (3) Total return equals the increase of the ending market value over the beginning market value plus distributions divided by the beginning market value. SOURCE Gladstone Capital Corp. -0- 08/14/2003 /CONTACT: Skye Breeden or Harry Brill of Gladstone Capital Corp., +1-703-286-7000/ /Web site: http;//www.gladstonecapital.com/ (GLAD) CO: Gladstone Capital Corp. ST: Virginia IN: FIN SU: ERN