Exhibit 99.1 Gladstone Capital Reports First Quarter Financial Results for December 31, 2003 MCLEAN, Va., Feb. 17 /PRNewswire-FirstCall/ -- Gladstone Capital Corp. (Nasdaq: GLAD) announced today that its Net Increase in Stockholders' Equity Resulting from Operations for the first quarter ended December 31, 2003 was $1,381,074 or $0.13 per diluted common share as compared to $2,412,154 or $0.24 per diluted common share for the quarter ended December 31, 2002, a decrease of 46%. The decrease was due to unrealized depreciation. The Net Investment Income for the quarter ended December 31, 2003, increased from $2,412,154 or $0.24 per diluted common share to $2,938,636 or $0.28 per diluted common share, a $526,482 or 22% increase from the prior year's quarter. The Company pays its dividends based on Net Investment Income. Total assets were $224,211,301 at December 31, 2003 and $214,566,663 at September 30, 2003. "The depreciation of several loans was the primary reason for the change in stockholders' value this quarter. To date, all of our loans are current. The Company pays dividends from its Net Investment Income," said a spokesperson for the Company. "While loan production has been slow, we expect 2004 to be a good year." For further information please contact Skye Breeden or Harry Brill at 703-286-7000. The company will have a conference call at 9:30 a.m. EST, February 18, 2004. Please call 1-877-625-9185 and use the ID code 390377 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 1-888-266-2081 and use ID code 390377 to access the call. The attached financial statements are without footnotes so readers should obtain our Form 10-Q for the period ended December 31, 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. 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, 2003, as filed with the Securities and Exchange Commission on December 11, 2003. 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 December 31, September 30, 2003 2003 (Unaudited) (Audited) ASSETS Investments at fair value (Cost 12/31/2003: $120,663,277; 9/30/2003: $109,529,893) $118,883,375 $109,307,553 Cash and cash equivalents 7,252,566 21,143,972 Cash and cash equivalents pledged as collateral 95,001,094 80,022,249 Interest receivable -- investments in debt securities 1,043,095 1,041,943 Interest receivable -- cash and cash equivalents 1,302 955 Interest receivable -- officers 19,543 108,657 Due from custodian 37,500 1,207,000 Prepaid assets 1,473,355 1,479,815 Other assets 499,471 254,519 TOTAL ASSETS $224,211,301 $214,566,663 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $91,052 $23,247 Dividends payable - 3,327,009 Accrued expenses and deferred liabilities 2,059,550 1,965,025 Repurchase agreement 93,101,000 78,449,000 Total Liabilities $95,251,602 $83,764,281 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized and 10,081,844 and 10,071,844 shares issued and outstanding, respectively $10,082 $10,082 Capital in excess of par value 140,416,674 140,416,674 Notes receivable -- officers (8,882,688) (8,985,940) Net unrealized depreciation on investments (1,779,902) (222,340) Undistributed/(overdistributed) net investment income (804,467) (416,094) Total Stockholders' Equity $128,959,699 $130,802,382 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $224,211,301 $214,566,663 GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2003 (UNAUDITED) COMPANY(1) INDUSTRY INVESTMENT COST FAIR VALUE America's Water heater Senior Term Water Heater rentals Debt(2)(4) $12,000,000 $12,000,000 Rentals, and LLC servicing ARI Holdings, Manufacturing Senior Term Inc. auto parts Debt(2)(3)(4) 3,547,683 3,543,248 Senior Term Debt(2) 1,425,000 1,423,219 Burt's Bees, Personal and Senior Term Inc. household Debt 1,000,000 1,005,000 products Coyne Industrial Senior Term International services Debt Enterprises (2)(3)(4) 15,499,837 15,325,464 Corp. Finn Manufacturing Senior Corporation landscape Subordinated equipment Term Debt(4) 10,500,000 9,121,875 Common Stock Warrants for 2% Ownership 37,000 435,649 Fugate & Imaging Senior Term Associates, supplies Debt(4) 3,325,000 3,325,000 Inc. Senior Term Debt(4) 1,666,666 1,666,666 GQM Designer and Senior Term Acquisition assembler Debt 7,500,000 7,500,000 Corp. of quilting Senior Term d/b/a machines Debt 7,000,000 7,000,000 Gammill, and Inc. accessories Home Care Medical Senior Term Supply, Inc. equipment Debt rental (2)(4)(5) 18,000,000 18,494,100 Inca Metal Material Senior Term Products handling Debt(2)(4) 2,500,000 2,246,875 Corp. and Kingway storage Acquisition, products Inc. Clymer Acquisitions, Inc. Marcal Paper Manufacturing Senior Mills, Inc. paper Subordinated products Term Debt (2)(4) 6,975,000 6,155,438 First Mortgage Debt(3) 9,187,091 9,187,091 Mistras Nondestructive Senior Term Holdings, testing Debt (2) 10,000,000 9,987,500 Inc. instruments, Senior Term systems and Debt (2) 5,000,000 4,993,750 services Wingstop Restaurant -- Senior Term Restaurants fast food Debt (4) 3,500,000 3,482,500 International, Senior Term Inc. Debt (4) 2,000,000 1,990,000 $120,663,277 $118,883,375 (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, 2003. (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, 2003 (UNAUDITED) COMPANY(1) INDUSTRY INVESTMENT COST FAIR VALUE America's Water heater Senior Term Water Heater rentals and Debt(2)(4) $12,000,000 $12,000,000 Rentals, LLC servicing ARI Holdings, Manufacturing Senior Term Inc. auto parts Debt(2)(3) 3,511,667 3,511,667 Senior Term Debt(2) 1,500,000 1,500,000 Coyne International Industrial Senior Term Enterprises services Debt(2)(3)(4) 15,421,740 15,306,077 Corp. Finn Manufacturing Senior Corporation landscape Subordinated equipment Term Debt(4) 10,500,000 10,421,250 Common Stock Warrants for 2% Ownership 37,000 431,111 Fugate & Imaging Senior Term Associates, Inc. supplies Debt(4) 3,412,500 3,412,500 Senior Term Debt(4) 1,833,333 1,833,333 Home Care Medical Senior Term Supply, Inc. equipment Debt(2)(4)(5) 18,000,000 18,428,400 rental Inca Metal Material Senior Term Products Corp. handling Debt(2)(4) 5,775,000 4,995,375 Kingway and storage Acquisition, products Inc. Clymer Acquisitions, Inc. Kozy Shack Food Senior Term Enterprises, production Debt(2)(4) 900,000 909,000 Inc. and sales Marcal Paper Manufacturing Senior Mills, Inc. paper products Subordinated Term Debt(2)(4) 6,975,000 6,922,687 First Mortgage Debt(3) 9,163,653 9,163,653 Mistras Nondestructive Senior Term Holdings, testing Debt(2) 10,000,000 10,000,000 Inc. instruments, Senior Term systems and Debt (2) 5,000,000 5,000,000 services Wingstop Restaurant - Senior Term Restaurants fast food Debt(4) 3,500,000 3,482,500 International, Senior Term Inc. Debt(4) 2,000,000 1,990,000 $109,529,893 $109,307,553 (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, 2003. (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 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Three Months Ended Ended December 31, December 31, 2003 2002 INVESTMENT INCOME Interest income -- investments $3,539,696 $2,927,663 Interest income -- cash and cash equivalents 48,621 198,166 Interest income -- notes receivable from officers 108,632 109,603 Managerial assistance fees 255,000 - Other income 16,000 - Total Investment Income $3,967,949 $3,235,432 EXPENSES Salaries and benefits $390,707 $433,240 Rent 37,760 54,620 Professional fees 177,658 114,690 Directors fees 24,333 13,500 Insurance 74,011 71,154 Stockholder related costs 52,660 11,565 Financing fees 144,996 - General and administrative 127,188 124,509 Total Expenses $1,029,313 $823,278 NET INVESTMENT INCOME $2,938,636 $2,412,154 Net unrealized depreciation on investments (1,557,562) - NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $1,381,074 $2,412,154 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $0.14 $0.24 Diluted $0.13 $0.24 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,081,844 10,071,844 Diluted 10,333,529 10,124,197 GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Three Months Ended Ended December 31, December 31, 2003 2002 Per Share Data(1) Net asset value at beginning of period $12.97 $12.97 Net investment income 0.29 0.24 Net unrealized (loss)/gain on investments (0.15) - Distributions from net investment income (0.33) (0.23) Repayment of principal on notes receivable 0.01 - Net asset value at end of period $12.79 $12.98 Per share market value at beginning of period $19.45 $16.88 Per share market value at end of period 22.35 16.47 Total return(2)(3) 16.71% -1.07% Shares outstanding at end of period 10,081,844 10,071,844 Ratios/Supplemental Data Net assets at end of period $128,959,699 $130,758,904 Average net assets $129,002,039 $131,563,142 Ratio of operating expenses to average net assets -- annualized 3.19% 0.63% Ratio of net investment income to average net assets -- annualized 9.11% 1.83% (1) Basic per share data. (2) Amounts were not annualized for the results of the three month periods ended December 31, 2003 and December 31, 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- 02/17/2004 /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 CCA