Exhibit 99.1 Gladstone Capital Reports Second Quarter Financial Results for March 31, 2004 MCLEAN, Va., May 13 /PRNewswire-FirstCall/ -- Gladstone Capital Corp. (Nasdaq: GLAD) announced today that its Net Increase in Stockholders' Equity Resulting from Operations for the second quarter ended March 31, 2004 was $2,828,583 or $0.27 per diluted common share as compared to $3,662,015 or $0.36 per diluted common share for the quarter ended March 31, 2003, a decrease of 23%. The decrease was due to $305,475 in unrealized depreciation in the quarter ended March 31, 2004, compared to the unrealized appreciation of $742,424 in the quarter ended March 31, 2003. The Net Investment Income for the quarter ended March 31, 2004 increased from $2,919,591 or $0.29 per diluted common share from the prior year's quarter to $3,121,558 or $0.30 per diluted common share, an increase of $201,967 or 7%. The Company pays its dividends based on Net Investment Income. Total assets were $244,291,070 at March 31, 2004 and $214,566,663 at September 30, 2003. Net Increase in Stockholders' Equity Resulting from Operations for the six months ended March 31, 2004 was $4,209,657 or $0.41 per diluted common share as compared to $6,074,170 or $0.60 per diluted common share for the six months ended March 31, 2003. This was a decrease of $1,864,513 or 31%. Net Investment Income for the six months ended March 31, 2004 was $6,060,194 or $0.59 per diluted common share as compared to $5,331,746 or $0.53 per diluted common share for the six months ended March 31, 2003. This was an increase of $728,448 or 14%. "In the second quarter, the Company added two new loans to the portfolio, Medassets, Inc. at $6 million and Woven Electronics Corp. at $14.5 million. Since the quarter ended, Wingstop Restaurants International, Inc., the franchisor of quick-casual restaurants, paid off their entire loan of $5.5 million. The third quarter is looking strong with a number of loans set to close." For further information please contact Harry Brill, Chief Financial Officer or Skye Breeden, Director of Shareholder Relations at 703-286-7000. The Company will have a conference call at 10:30 am EDT, May 14, 2004. Please call 866-253-6509 and use the ID code 465085 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 888-266-2081 and use ID code 465085 to access the call. Readers should obtain our Form 10-Q for the period ended March 31, 2004 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. GLADSTONE CAPITAL CORPORATION CONSOLIDATED BALANCE SHEETS March 31, September 30, 2004 2003 (Unaudited) ASSETS Investments at fair value (Cost 3/31/2004: $140,626,669; 9/30/2003: $109,529,893) $138,541,292 $109,307,553 Cash and cash equivalents 6,809,323 21,143,972 Cash and cash equivalents pledged as collateral 95,004,939 80,022,249 Interest receivable - investments in debt securities 1,270,800 1,041,943 Interest receivable - cash and cash equivalents 361 955 Interest receivable - officers 109,262 108,657 Due from custodian 225,000 1,207,000 Prepaid assets 1,334,538 1,479,815 Other assets 995,555 254,519 TOTAL ASSETS $244,291,070 $214,566,663 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $86,795 $23,247 Dividends payable - 3,327,009 Borrowings under line of credit 20,500,000 - Accrued expenses and deferred liabilities 2,184,166 1,965,025 Repurchase agreement 93,105,000 78,449,000 Total Liabilities $115,875,961 $83,764,281 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized and 10,105,178 and 10,081,844 shares issued and outstanding, respectively $10,105 $10,082 Capital in excess of par value 140,723,063 140,416,674 Notes receivable - officers (9,232,698) (8,985,940) Net unrealized depreciation on investments (2,085,377) (222,340) Undistributed/(overdistributed) net investment income (999,984) (416,094) Total Stockholders' Equity $128,415,109 $130,802,382 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $244,291,070 $214,566,663 GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2004 (UNAUDITED) COMPANY (1) INDUSTRY INVESTMENT COST FAIR VALUE America's Water heater Senior Term Water Heater rentals and Debt(2)(4) $12,000,000 $12,060,000 Rentals, servicing LLC ARI Holdings, Manufacturing Senior Term Inc. auto parts Debt(2)(3)(4) 3,583,675 3,243,226 Senior Term Debt(2) 1,387,500 1,332,000 Burt's Bees, Personal and Senior Term Inc. household Debt 991,667 1,000,344 products Coyne Industrial Senior Term International services Debt(2)(3)(4) 15,578,330 15,403,074 Enterprises 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) 3,237,500 3,213,219 Inc. Senior Term Debt(4) 1,499,999 1,494,374 GQM Designer and Senior Term Acquisition assembler of Debt 7,312,500 7,312,500 Corp. quilting Senior Term d/b/a machines and Debt 7,000,000 7,000,000 Gammill, Inc. accessories Home Care Medical Senior Term Supply, Inc. equipment Debt(2)(4)(5) 18,000,000 18,696,600 rental Inca Metal Material Senior Term Products handling Debt(2)(4) 2,488,164 2,239,347 Corp. and Kingway storage Acquisition, products Inc. Clymer Acquisitions, Inc. Marcal Manufacturing Senior Paper paper Subordinated Mills, Inc. products Term Debt(2)(4) 6,800,000 6,205,000 First Mortgage Debt(3) 9,210,334 9,210,334 Medassets, Pharmaceutical Inc. and healthcare GPOs 6,000,000 6,000,000 Mistras Nondestructive Senior Term Holdings, testing Debt(2) 10,000,000 9,775,000 Inc. instruments, Senior Term systems and Debt(2) 5,000,000 4,837,500 services Wingstop Restaurant - Senior Term Restaurants fast food Debt(4) 3,500,000 3,473,750 International, Senior Term Inc. Debt(4) 2,000,000 1,987,500 Woven Cable and Senior Term Electronics wire harness Debt(2) 2,500,000 2,500,000 Corp. assemblers Senior Term Debt(2) 6,000,000 6,000,000 Senior Term Debt(2) 6,000,000 6,000,000 $140,626,669 $138,541,292 (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 $516,600. 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 servicing LLC 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 Industrial Senior Term International services Debt(2)(3)(4) 15,421,740 15,306,077 Enterprises 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, supplies Debt(4) 3,412,500 3,412,500 Inc. 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 handling and Debt(2)(4) 5,775,000 4,995,375 Corp. storage Kingway products Acquisition, Inc. Clymer Acquisitions, Inc. Kozy Shack Food Senior Term Enterprises, production Debt(2)(4) 900,000 909,000 Inc. and sales Marcal Manufacturing Senior Paper paper Subordinated Mills, Inc. products 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 March 31, March 31, 2004 2003 INVESTMENT INCOME Interest income - investments $3,878,817 $3,275,962 Interest income - cash and cash equivalents 17,334 113,338 Interest income - notes receivable from officers 109,538 109,737 Managerial assistance fees 356,231 358,000 Other income 6,000 2,256 Total Investment Income $4,367,920 $3,859,293 EXPENSES Salaries and benefits $419,769 $477,861 Rent 33,964 54,525 Professional fees 282,292 86,577 Directors fees 32,877 20,857 Insurance 63,274 73,686 Stockholder related costs 67,320 74,342 Financing fees 149,039 - Interest 24,602 - General and administrative 173,225 151,854 Total Expenses $1,246,362 $939,702 NET INVESTMENT INCOME $3,121,558 $2,919,591 Realized gain on sale of investment 12,500 - Net unrealized (depreciation) appreciation on investments (305,475) 742,424 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $2,828,583 $3,662,015 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $0.28 $0.36 Diluted $0.27 $0.36 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,087,615 10,071,844 Diluted 10,375,281 10,100,062 GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Six Months Six Months Ended Ended March 31, March 31, 2004 2003 INVESTMENT INCOME Interest income - investments $7,418,513 $6,203,625 Interest income - cash and cash equivalents 65,955 311,504 Interest income - notes receivable from officers 218,170 219,341 Managerial assistance fees 611,231 358,000 Other income 22,000 2,256 Total Investment Income $8,335,869 $7,094,726 EXPENSES Salaries and benefits $810,476 $911,101 Rent 71,724 109,145 Professional fees 459,950 201,267 Directors fees 57,210 34,357 Insurance 137,285 144,841 Stockholder related costs 119,980 111,432 Financing fees 294,035 - Interest 24,602 - General and administrative 300,413 250,837 Total Expenses $2,275,675 $1,762,980 NET INVESTMENT INCOME $6,060,194 $5,331,746 Realized gain on sale of investment 12,500 - Net unrealized (depreciation) appreciation on investments (1,863,037) 742,424 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $4,209,657 $6,074,170 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $0.42 $0.60 Diluted $0.41 $0.60 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,084,729 10,071,844 Diluted 10,354,405 10,112,129 GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Three Months Ended Ended March 31, March 31, 2004 2003 Per Share Data (1) Net asset value at beginning of period $12.79 $12.98 Net investment income 0.31 0.29 Realized gain on sale of investment - - Net unrealized (loss)/gain on investments (0.03) 0.07 Issuance of common stock under stock option plan (0.03) - Distributions from net investment income (0.33) (0.25) Repayment of principal on notes receivable - - Net asset value at end of period $12.71 $13.09 Per share market value at beginning of period $22.35 $16.47 Per share market value at end of period 2.41 16.18 Total return (2)(3) 1.76% -0.24% Shares outstanding at end of period 10,105,178 10,071,844 Ratios/Supplemental Data Net assets at end of period $128,415,109 $131,902,958 Average net assets $127,521,641 $132,125,265 Ratio of operating expenses to average net assets - annualized 3.87% 2.85% Ratio of net investment income to average net assets - annualized 9.68% 11.09% Six Months Six Months Ended Ended March 31, March 31, 2004 2003 Per Share Data (1) Net asset value at beginning of period $12.97 $12.97 Net investment income 0.60 0.53 Realized gain on sale of investment - - Net unrealized (loss)/gain on investments (0.18) 0.07 Issuance of common stock under stock option plan (0.03) - Distributions from net investment income (0.66) (0.48) Repayment of principal on notes receivable 0.01 - Net asset value at end of period $12.71 $13.09 Per share market value at beginning of period $19.45 $16.88 Per share market value at end of period 22.41 16.18 Total return (2)(3) 18.76% -1.30% Shares outstanding at end of period 10,105,178 10,071,844 Ratios/Supplemental Data Net assets at end of period $128,415,109 $131,902,958 Average net assets $128,261,840 $131,844,204 Ratio of operating expenses to average net assets - annualized 3.55% 2.67% Ratio of net investment income to average net assets - annualized 9.45% 9.21% (1) Basic per share data. (2) Amounts were not annualized for the results of the three and six month periods ended March 31, 2004 and March 31, 2003. (3) Total return equals the increase of the ending market value over the beginning market value plus monthly distributions divided by the monthly beginning market value. 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. SOURCE Gladstone Capital Corp. -0- 05/13/2004 /CONTACT: Harry Brill, Chief Financial Officer, or Skye Breeden, Director of Shareholder Relations, both 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