Exhibit 99.1 Gladstone Capital Reports Financial Results for the Nine Months Ended June 30, 2004. Net Increase in Stockholders' Equity Per Share Increased 14% Compared to the Nine Months Ended June 2003. MCLEAN, Va., Aug. 10 /PRNewswire-FirstCall/ -- Gladstone Capital Corp. (Nasdaq: GLAD) announced earnings for the quarter ended June 30, 2004 today. Net Increase in Stockholders' Equity Resulting from Operations for the three months ended June 30, 2004 was $5,609,893, or $0.54 per diluted weighted average common share, compared to $2,370,899, or $0.23 per diluted weighted average common share for the three months ended June 30, 2003, an increase of $3,238,994, or 137%. On a diluted weighted average common share basis there was a 135% increase. For the nine months ended June 30, 2004, Net Increase in Stockholders' Equity Resulting from Operations was $9,819,550, or $0.95 per diluted weighted average common share, compared to $8,445,069, or $0.83 per diluted weighted average common share for the nine months ended June 30, 2003, an increase of $1,374,481, or 16%. On a diluted weighted average common share basis there was a 14% increase. Net Investment Income for the three months ended June 30, 2004 was $4,595,988, or $0.45 per diluted weighted average common share, compared to the three months ended June 30, 2003 of $3,115,736, or $0.30 per diluted weighted average common share, an increase of $1,480,252, or 48%. Net Investment Income for the nine months ended June 30, 2004 was $10,656,182, or $1.03 per diluted weighted average common share, compared to the nine months ended June 30, 2003 of $8,447,482, or $0.83 per diluted weighted average common share. This was an increase of $2,208,700 or 26%. The Company pays its dividend based on taxable income which is close to Net Investment Income. The Company is currently paying a monthly dividend of $0.12 per share ($0.36 per quarter). Total assets were $220,533,798 at June 30, 2004 and $214,566,663 at September 30, 2003. "In the third quarter, the Company added five new investments with an aggregate investment amount of $42.7 million. These new investments bring the total number of private companies in our portfolio to seventeen. During the third quarter, Home Care Supply, Inc. repaid its entire loan of $18.0 million and Wingstop Restaurants International, Inc. repaid its outstanding loan obligation of approximately $5.4 million. Both companies paid conditional interest and prepayment fees in the aggregate amount of approximately $1.9 million. Also the Company increased its position by $1.0 million in Mistras Holdings, Inc., and provided MedAssets, Inc., with an additional $2.5 million for the quarter ended June 30, 2004. We believe that the third quarter showed positive growth in our potential in the marketplace. We feel good about our achievements thus far and are working diligently to continue our successes for our shareholders and employees. Our goal is to continue making good investments so that we can increase our monthly dividend for shareholders," said a spokesperson for the Company. The Company will have a conference call at 10:30 am EDT, August 11, 2004. Please call 866-244-4742 and use the ID code 902555 and you will be placed on hold until the conference starts. An operator will monitor the call and set a queue for the questions. To hear the replay please dial 888-266-2081 and use the ID code 902555 to access the call. The replay number will be available for approximately 30 days. For further information please contact Harry Brill, Chief Financial Officer or Skye Breeden, Director of Shareholder Relations at 703-286-7000. The financial statements below are without footnotes so readers should obtain and carefully review our Form 10-Q for the period ended June 30, 2004, including the footnotes to the financial statements contained therein. We have filed the Form 10-Q today with the Securities and Exchange Commission ("SEC") and the Form 10-Q can be retrieved at the SEC website at http://www.SEC.gov or the website for Gladstone Capital at http://www.GladstoneCapital.com. 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," "feel," "expects," "projects," "goals," 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 June 30, September 30, 2004 2003 (Unaudited) ASSETS Investments at fair value (Cost 6/30/2004: $158,318,500; 9/30/2003: $109,529,893) $ 157,247,029 $ 109,307,553 Cash and cash equivalents 4,895,459 21,143,972 Cash and cash equivalents pledged as collateral 55,006,917 80,022,249 Interest receivable - investments in debt securities 789,623 1,041,943 Interest receivable - cash and cash equivalents 170 955 Interest receivable - officers 22,868 108,657 Due from custodian 627,672 1,207,000 Prepaid assets 1,512,345 1,479,815 Other assets 431,715 254,519 TOTAL ASSETS $ 220,533,798 $ 214,566,663 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $ 146,132 $ 23,247 Dividends payable - 3,327,009 Borrowings under lines of credit 33,520,666 - Accrued expenses and deferred liabilities 2,289,829 1,965,025 Repurchase agreement 53,908,596 78,449,000 Total Liabilities $ 89,865,223 $ 83,764,281 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized and 10,113,444 and 10,081,844 shares issued and outstanding, respectively $10,114 $10,082 Capital in excess of par value 140,852,913 140,416,674 Notes receivable - officers (9,232,698) (8,985,940) Net unrealized depreciation on investments (1,071,472) (222,340) Undistributed/(overdistributed) net investment income 109,718 (416,094) Total Stockholders' Equity $ 130,668,575 $ 130,802,382 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 220,533,798 $ 214,566,663 GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2004 (UNAUDITED) COMPANY(1) INDUSTRY INVESTMENT COST FAIR VALUE A and G, Inc. Activewear Senior Term (d/b/a Alstyle) products Debt(2) $12,250,000 $12,250,000 America's Water Household Senior Term Heater Rentals appliances Debt(3)(5)(7) 12,000,000 12,720,000 rental ARI Holdings, Manufacturing Senior Term Inc. - auto parts Debt(5) 1,283,891 1,277,472 Second Lien Term Debt(5) 3,620,033 3,570,257 Bear Creek Premium Second Lien Corporation horticultural Term Debt(6) 6,000,000 6,090,000 and food products Benetech, Inc. Dust management Senior Term systems for the Debt 3,250,000 3,250,000 coal and Senior Term electric Debt(2) 3,250,000 3,250,000 utility industries Burt's Bees, Personal & Senior Term Inc. household Debt(6) 983,333 995,625 products Coyne Industrial Senior Term International services Debt(2)(4)(5) 15,658,088 15,501,507 Enterprises Finn Manufacturing - Senior Corporation landscape Subordinated equipment Term Debt(5) 10,500,000 9,240,000 Common Stock Warrants 37,000 492,284 Fugate and Aggregator & Senior Term Associates, Reseller - Debt(5) 1,333,332 1,329,999 Inc. (d/b/a Printer Senior Term ERS Imaging) Cartridges, Debt(2)(5) 3,150,000 3,134,250 etc. Gammill, Inc. Designer and Senior Term assembler of Debt(5) 4,835,256 4,853,388 quilting Senior Term machines and Debt(2)(5) 4,750,000 4,767,813 accessories Inca Metal Material Senior Term Products handling Debt(2)(5) 2,446,733 2,189,826 Corporation and storage Kingway products Acquisition, Inc. Clymer Acquisition, Inc. Maidenform, Intimate apparel Second Lien Inc. Term Debt(6) 10,003,705 10,012,500 Marcal Paper Manufacturing - Senior Mills, Inc. paper products Subordinated Term Debt(5) 6,800,000 6,205,000 First Mortgage Loan 9,231,598 9,231,598 MD Beauty, Inc. Cosmetic and Second Lien skin care Term Debt 8,000,000 8,000,000 products MedAssets, Inc. Pharmaceuticals Senior Term and healthcare Debt(6) 1,938,015 1,933,392 GPO Second Lien Term Debt(6) 6,503,516 6,565,000 Mistras Nondestructive Senior Term Holdings Corp. testing Debt(2)(5) 10,000,000 9,925,000 instruments, Senior Term systems Debt(2)(5) 5,000,000 4,950,000 and services Senior Term Debt (2)(5) 1,000,000 1,000,000 Woven Custom electrical Senior Term Electronics cable assemblies Debt(2)(5) 2,494,000 2,497,118 Corporation Senior Term Debt (3)(5) 12,000,000 12,015,000 Total: $158,318,500 $157,247,029 (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) 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, however the debt is junior to another Last Out Tranche. (4) 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. (5) Fair value was based on valuation prepared and provided by Standard & Poor's Loan Evaluation Services. (6) Marketable securities are valued based on the bid price, as of June 30, 2004, from the respective originating syndication agent's trading desk. (7) Includes a success fee with a fair value of $600,000 and no cost basis. GLADSTONE CAPITAL CORPORATION SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2003 (UNAUDITED) COMPANY(1) INDUSTRY INVESTMENT COST FAIR VALUE America's Water Water heater Senior Term Heater Rentals, rentals and Debt(2)(4) $12,000,000 $12,000,000 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 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 Corp. handling and Debt(2)(4) 5,775,000 4,995,375 Kingway storage Acquisition, products Inc. Clymer Acquisitions, Inc. Kozy Shack Food production Senior Term Enterprises, and sales Debt(2)(4) 900,000 909,000 Inc. 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, Inc. testing Debt(2) 10,000,000 10,000,000 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 Total: $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 June 30, June 30, 2004 2003 INVESTMENT INCOME Interest income - investments $ 5,700,139 $ 3,684,284 Interest income - cash and cash equivalents 15,268 79,073 Interest income - notes receivable from officers 112,528 109,737 Managerial assistance fees 399,375 125,000 Other income 482,500 61,650 Total Investment Income $ 6,709,810 $ 4,059,744 EXPENSES Salaries and benefits 1,253,073 493,901 Rent 34,873 54,899 Professional fees 59,279 101,211 Directors fees 28,000 20,290 Insurance 63,369 71,883 Stockholder related costs 10,643 12,227 Financing fees 185,855 62,355 Interest 133,735 - Loss on derivative 114,376 - General and administrative 230,619 127,242 Total Expenses $ 2,113,822 $ 944,008 NET INVESTMENT INCOME $ 4,595,988 $ 3,115,736 Net unrealized appreciation (depreciation) on investments 1,013,905 (744,837) NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $ 5,609,893 $ 2,370,899 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $ 0.56 $ 0.24 Diluted $ 0.54 $ 0.23 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,105,270 10,071,844 Diluted 10,301,390 10,256,790 GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Nine Months Nine Months Ended Ended June 30, June 30, 2004 2003 INVESTMENT INCOME Interest income - investments $ 13,118,652 $ 9,887,909 Interest income - cash and cash equivalents 81,223 390,577 Interest income - notes receivable from officers 330,698 329,078 Managerial assistance fees 1,010,606 483,000 Other income 504,500 63,906 Total Investment Income $ 15,045,679 $ 11,154,470 EXPENSES Salaries and benefits 2,063,549 1,405,002 Rent 106,597 164,044 Professional fees 519,229 302,478 Directors fees 85,210 54,647 Insurance 200,654 216,724 Stockholder related costs 130,623 123,659 Financing fees 479,890 62,355 Interest 158,337 - Loss on derivative 114,376 - General and administrative 531,032 378,079 Total Expenses $ 4,389,497 $ 2,706,988 NET INVESTMENT INCOME $ 10,656,182 $ 8,447,482 Realized gain on sale of investment 12,500 - Net unrealized (depreciation) appreciation on investments (849,132) (2,413) NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $ 9,819,550 $ 8,445,069 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE Basic $ 0.97 $ 0.84 Diluted $ 0.95 $ 0.83 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING Basic 10,091,576 10,071,844 Diluted 10,336,733 10,160,350 GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Three Months Ended Ended June 30, June 30, 2004 2003 Per Share Data (1) Net asset value at beginning of period $ 12.71 $ 13.09 Net investment income 0.45 0.31 Realized gain on sale of investment - - Net unrealized gain/(loss) on investments 0.10 (0.07) Issuance of common stock under stock option plan (0.01) - Distributions from net investment income (0.34) (0.29) Repayment of principal on notes receivable - - Net asset value at end of period $ 12.91 $ 13.04 Per share market value at beginning of period $ 22.41 $ 16.18 Per share market value at end of period 20.15 20.48 Total Return (2)(3) -5.73% 28.37% Shares outstanding at end of period 10,113,444 10,071,844 Ratios/Supplemental Data Net assets at end of period $ 130,668,575 $ 131,353,022 Average net assets $ 128,285,309 $ 132,823,516 Ratio of operating expenses to average net assets - annualized 6.59% 2.86% Ratio of net investment income to average net assets - annualized 14.33% 7.18% Nine Months Nine Months Ended Ended June 30, June 30, 2004 2003 Per Share Data (1) Net asset value at beginning of period $ 12.97 $ 12.97 Net investment income 1.06 0.84 Realized gain on sale of investment - - Net unrealized loss on investments (0.08) - Issuance of common stock under stock option plan (0.04) - Distributions from net investment income (1.01) (0.77) Repayment of principal on notes receivable 0.01 - Net asset value at end of period $ 12.91 $ 13.04 Per share market value at beginning of period $ 19.45 $ 16.88 Per share market value at end of period 20.15 20.48 Total Return (2)(3) 8.61% 25.89% Shares outstanding at end of period 10,113,444 10,071,844 Ratios/Supplemental Data Net assets at end of period $ 130,668,575 $ 131,353,022 Average net assets $ 128,269,663 $ 132,170,641 Ratio of operating expenses to average net assets - annualized 4.56% 2.74% Ratio of net investment income to average net assets - annualized 11.08% 8.54% (1) Basic per share data. (2) Amounts were not annualized for the results of the three and nine month periods ended June 30, 2004 and June 30, 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. SOURCE Gladstone Capital Corp. -0- 08/10/2004 /CONTACT: Harry Brill, Chief Financial Officer, or Skye Breeden, Director of Shareholder Relations, 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