MAPLE SHADE, N.J., Oct. 29, 2004 (PRIMEZONE) -- Gavella Corp. (OTCBB:GVLA):
We are pleased to report that we are making considerable progress on implementing our business plan, as outlined in our annual report. We are currently engaged in two lines of business: owning and operating income producing real estate, and making investments in and providing consulting services to other businesses.
During 2003 we changed management of our real estate business, substantially completed a major renovation of our apartment complex, and successfully completed a refinancing of our mortgage debt. We anticipated that the renovation would result in higher revenues and that the refinancing would lower our interest costs going forward. For the nine months ending September 30, 2004, our real estate revenues increased from $678,002 to $739,736, an increase of $61,734 or 9.1%. We reported total revenues of $754,336 up from the prior period. Our interest expense net of interest income decreased by $72,420 from $236,356 to $163,936. Our operating costs, including depreciation, increased to $753,831 primarily due to increases in our corporate overhead related to the acquisition in January of H. James Santoro, Inc. That acquisition, however, enhances our ability to execute on the second part of our business plan which is to invest in and provide consulting services to other businesses. We realized a $12,734 gain on the sale of an investment which was partially offset by an $11,220 write down of a long-term asset. Our net loss from operations was $161,917, after deducting $116,156 in depreciation. After adjusting for depreciation, non-cash charges, and other adjustments, our operations generated a positive cash flow of $3,653, a substantial improvement from last year. We expect to generate positive cash flow from operations at year end assuming our operations continue to improve as forecasted.
As discussed in our periodic filings, our primary business is to own and operate income-producing real estate. However, due to the high prices being paid for multi-family real estate, and hence low returns, we see little reason to invest in additional multi-family units at the present time. Now that the capital requirements of our existing real estate business are winding down, we plan to use our real estate business as a base, but plan to invest our surplus cash in other businesses and business opportunities in 2004. At September 30, 2004 we had $203,230 in cash on hand.
In order to fully implement our business plan we believe it is essential to raise additional capital. Our Board of Directors and certain stockholders of the Company holding approximately 65% of the total outstanding shares of the outstanding common stock adopted a resolution to allow the Board to take the following corporate actions:
1. Increase the authorized shares of Common Stock to 100,000,000
shares;
2. Authorize up to 1,000,000 shares of a new class of
undesignated Preferred Stock;
3. Effectuate a 1 for 2 Reverse Stock Split;
4. Change the Company's name.
As of the date of this Press Release, none of these actions have been taken by the Board of Directors. However, if the Directors believe it is in the best interest of the Company to do so, they may effectuate these actions without further shareholder action. The Directors believe that these actions might enable the Company to raise cash through sales of its common stock or securities convertible into common stock to public and private investors. Additionally, the share increase may enhance the ability of the Company to raise additional capital through acquisitions of companies or assets or through transactions which the Board believes provides the potential for growth and profit.
Certain statements made in this Press Release are "forward looking statements". Without limiting the generality of the foregoing, such information can be identified by the use of forward-looking terminology such as "anticipate", "will", "would", "expect", "hope", "intend", "plans to" or "believes", or other variations thereon, or comparable terminology. Actual results, performance or developments may differ materially from those expressed or implied by such forward-looking statements as a result of market uncertainties or industry factors. We believe that the following factors, among others, could affect our future performance and cause our actual results to differ materially from those expressed in or implied by forward-looking statements made by us or on our behalf: (a) changes in interest rates; (b) the rental rate and demand for apartment rental units; (c) fluctuations in the costs to operate our business; (d) uninsurable risks; (e) general economic conditions; (f) acts of terror, and other risks described in periodic reports we file with the Securities and Exchange Commission including Form 10KSB. Gavella Corp. disclaims any obligation or responsibility to update any such forward-looking statements.