U.S. SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C.   20549

                              FORM 10-QSB

(Mark One)

XX  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______.

                        COMMISSION FILE NUMBER 000-31143
                                               ---------

                                 GAVELLA CORP.
                              ------------------
         (Exact name of business issuer as specified in its charter)

            Delaware                             22-3742159
            --------                             ----------
     (State or other jurisdiction             (IRS Employer Identification
         of incorporation)                               number)

    215 West Main Street, Maple Shade, New Jersey   08052
    ---------------------------------------------- -------
    (Address of principal executive offices)     (Zip code)

    (856) 667-0600
    --------------
    (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days)

Yes  XX      No
    ----         ----

The Company had 6,750,000 shares of common stock, par value $.001 per share,
outstanding as of July 21, 2004.

Transitional Small Business Disclosure Format (Check one): Yes [  ]   No [XX]


                                 -1-
<PAGE>


             GAVELLA CORP. AND SUBSIDIARIES
                      INDEX
                                                                   PAGE
PART 1.   FINANCIAL INFORMATION                                   ----

      ITEM 1.   FINANCIAL STATEMENTS

                GAVELLA CORP. AND SUBSIDIARIES
                ----------------------------

                CONSOLIDATED BALANCE SHEETS AS OF
                JUNE 30, 2004 AND DECEMBER 31, 2003.....................3

                CONSOLIDATED STATEMENTS OF OPERATIONS FOR
                THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003.............4

                CONSOLIDATED STATEMENT OF CHANGES IN
                STOCKHOLDERS' DEFICIT FOR THE SIX MONTHS
                ENDED JUNE 30, 2004 ....................................5

                CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
                THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003.............6-7

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..............8-9


      ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS....................10

      ITEM 3.   CONTROLS AND PROCEDURES ................................17

PART II.  OTHER INFORMATION..........................................18

          ITEM 1    LEGAL PROCEEDINGS ...............................18

          ITEM 2    CHANGES IN SECURITIES ...........................18

          ITEM 3    DEFAULTS ON SENIOR SECURITIES ...................19


          ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF
                    SECURITY HOLDERS ................................19

          ITEM 5    OTHER INFORMATION ...............................19

          ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K ................19

      SIGNATURES.....................................................20




                                 -2-
<PAGE>
                      GAVELLA CORP. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS
                   JUNE 30, 2004 AND DECEMBER 31, 2003
                               (Unaudited)

                                  ASSETS
                                                 June 30,       December 31,
                                           2004            2003
                                               -----------        -----------
Rental property, net                           $ 3,131,806        $ 3,152,995
Cash                                               233,879            265,850
Cash held in escrow                                 88,787             85,047
Accounts receivable, net of
  allowance for doubtful accounts
  of $7,750 and $5,400                              13,576             12,827
Notes receivable                                   108,822            101,219
Interest receivable                                    -0-              6,783
Prepaid expenses                                    47,024             70,124
Deferred financing costs, net                       79,312             85,576
Investments, at cost                                33,250             33,250
                                               -----------        -----------
    Total Assets                               $ 3,736,456        $ 3,813,671
                                               ===========        ===========


                   LIABILITIES AND STOCKHOLDERS' DEFICIT


Liabilities
  Mortgage notes payable                        $3,965,149        $ 3,995,082
  Notes payable                                    292,500            292,500
  Accounts payable                                   3,361                731
  Accrued expenses                                  13,645             18,656
  Security deposits payable                         86,089             86,189
  Deferred revenue                                     -0-             12,500
  Other liabilities                                 14,640             15,476
                                               -----------        -----------
     Total Liabilities                           4,375,384          4,421,134
                                               -----------        -----------

Minority interest                                      -                   -
                                               -----------        -----------

Stockholders' Deficit
 Common stock, $.001 par value,
  15,000,000 and 8,000,000 shares
  authorized, 6,750,000 and 6,000,000
  shares issued and outstanding
  in 2004 and 2003                                   6,750              6,000
 Additional paid in capital                        820,700            746,950
 Accumulated deficit                           ( 1,466,378)        (1,360,413)
                                               -----------        -----------
     Total stockholders' deficit               (   638,928)        (  607,463)
                                               -----------        -----------
Total Liabilities and Stockholders'
  Deficit                                       $3,736,456        $ 3,813,671
                                               ===========        ===========

                                 -3-
<PAGE>
                       GAVELLA CORP. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                               (Unaudited)

                                           2004            2003
                                                 -----------      -----------
Revenues
  Rental real estate                               $ 488,487      $   441,084
  Other revenue                                       12,500           56,250
                                                 -----------      -----------
    Total revenues                                   500,987          497,334

Operating expenses
  Administrative expenses                            192,418          146,789
  Utilities expense                                   84,722           77,294
  Operating and maintenance                           69,205           69,924
  Taxes and insurance relating to operations          84,613           78,319
  Depreciation and amortization                       77,437           68,893
                                                 -----------      -----------
     Total operating expenses                        508,395          441,219
                                                 -----------      -----------

Operating income (loss)                          (     7,408)          56,115
                                                 -----------      -----------
Other income (expense)
  Interest income                                      6,587            7,944
  Interest expense                              (    116,301)   (     154,508)
  Gain on sale of investment                          11,157              -0-
                                                 -----------      -----------
      Total other income (expense)              (     98,557)   (     146,564)
                                                 -----------      -----------
Net loss                                        ( $  105,965)   (   $  90,449)
                                                 ===========      ===========



Basic net loss per share                        ($      .02)     ($      .03)
                                                 ===========      ===========

Average number of common shares outstanding -
  Basic                                            6,016,393        2,923,343
                                                 ===========      ===========

                                 -4-
<PAGE>

                       GAVELLA CORP. AND SUBSIDIARIES
             CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                 FOR THE SIX MONTHS ENDED JUNE 30, 2004

                                   (UNAUDITED)
<TABLE>
<S>                           <C>         <C>      <C>           <C>          <C>
                                   Common Stock      Additional                   Total
                                     Issued            Paid-in    Accumulated  Stockholders'
                                Shares     Amount      Capital      Deficit      Deficit
                               ---------  -------  ---------    ----------    -------------
Balance, January 1, 2004       6,000,000  $ 6,000  $ 746,950   $(1,360,413)       $(607,463)

Issuance of 750,000 shares
 common stock, net of
 stock issuance costs
 of $500                         750,000      750     73,750          -0-            74,500

Net Loss                                                         (105,965)         (105,965)
                               ---------  -------  ---------    ----------    -------------
Balance, June 30, 2004        6,750,000  $ 6,750  $ 820,700   $(1,466,378)       $(638,928)
                               =========  =======  =========    ==========    =============
</TABLE>

                                    -5-
<PAGE>
                       GAVELLA CORP. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                               (Unaudited)

                                           2004            2003
                                                 -----------     -----------
Cash flows from operating activities:
  Net loss                                       ($  105,965)      ($ 90,449)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization                     77,437          68,893
    Issuance of stock for services                     7,500             -0-
    Gain on sale of investment                    (   11,157)            -0-
    Bad debt provision                                 2,350       (   2,000)
    Interest income on note receivable                   -0-       (   5,000)
    Loan facilitation fee                                -0-       (  50,000)
    (Increase) decrease in:
      Accounts receivable                         (    3,099)         23,933
      Prepaid expenses                                23,100          21,311
      Interest receivable                              6,783       (   2,720)
      Cash held in escrow                         (    3,740)      (  44,860)
     Increase (decrease) in:
      Accounts payable                                 2,630       (  18,101)
      Accrued interest                                   -0-           6,000
      Accrued expenses                            (    5,011)      (   3,756)
      Other liabilities                           (      836)      (   1,183)
      Deferred revenue                            (   12,500)      (   6,250)
      Security deposits payable                   (      100)         13,780
                                                 -----------     -----------
Net cash used in operating activities             (   22,608)      (  90,402)
                                                 -----------     -----------
Cash flows from investing activities:
  Purchases of property and equipment           (     49,984)     (   85,979)
  Loans made                                    (     14,885)     (   97,500)
  Collections of loans                                 7,282             -0-
  Proceeds from sale of investments                   11,157             -0-
                                                 -----------     -----------
Net cash used in investing activities           (     46,430)     (  183,479)
                                                 -----------     -----------
Cash flows from financing activities:
  Repayment of mortgage notes payable           (     29,933)    (    23,753)
  Proceeds from notes payable                            -0-         125,000
  Payments on notes payable                              -0-     (     7,000)
  Increase in additional paid-in capital                 -0-          50,000
  Issuance of common stock, net                       67,000         135,000
                                                 -----------     -----------
Net cash provided by financing activities             37,067         279,247
                                                 -----------     -----------
Increase (decrease) in cash                     (     31,971)          5,366

Cash, beginning                                      265,850          88,849
                                                 -----------     -----------
Cash, ending                                      $  233,879       $  94,215
                                                 ===========     ===========


                                 -6-
<PAGE>

                       GAVELLA CORP. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
             FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

                             (UNAUDITED)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                                        2004           2003

 Cash paid for interest                      $116,301       $148,508
                                        ========       ========

 Proceeds from issuance of common stock during the six months ended June 30,
2004 and 2003 follows:

    Issuance of common stock                   $ 75,000         $  155,000
    Common stock issued for services           (  7,500)               -0-
    Common stock subscription                       -0-            (19,700)
    Stock issuance costs                       (    500)         (     300)
                                         --------          ---------
    Net proceeds from issuance of common
      stock                                    $ 67,000         $  135,000
                                        ========          =========


During the six months ended June 30, 2003, the Company entered into the
following agreements with Intelisys Aviation Systems, Inc.  ("Intelisys"),
formerly known as Apta Holdings, Inc., an unrelated entity:

The Company will provide consulting services to InteliSys over a two year
period.  In exchange for its services, the Company received 500,000 shares of
InteliSys' common stock valued at $.05 per share, or $25,000.  As of June 30,
2004 and 2003, the Company recognized $12,500 and $6,250 of consulting fee
revenue which is included in other revenue.

The Company loaned $50,000 to InteliSys in the form of $25,000 cash and
assumption of $25,000 accounts payable to a related party.  As consideration for
making the loan, the Company received 100,000 shares of common stock of
InteliSys valued at $5,000, or $.05 per share.  The $5,000 fee is recorded as
interest income.

The Company  assumed an additional $16,219 of InteliSys's accounts payable to a
related party in exchange for a promissory note receivable from InteliSys.

The Company also loaned InteliSys $72,500 in order to settle certain bank debt
of InteliSys at a discount.  For its efforts in favorably settling InteliSys'
debt, the Company received a $50,000 loan facilitation fee in the form of a
promissory note receivable from InteliSys.   The promissory note is convertible
into 1,000,000 shares of InteliSys' common stock.  The $50,000 loan facilitation
fee is recorded as other revenue.

In January 2004, the Company acquired the stock of H. James Santoro, Inc., a
related entity, for its net book value of $334.

In May 2004, the Company issued 75,000 shares of common stock to consultants,
all of whom are also shareholders, in exchange for services provided, valued
at $7,500, or $.10 per share.

                                    -7-
<PAGE>

GAVELLA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
(UNAUDITED)

Note 1 - Organization

              Gavella Corp. ("Gavella" ) was incorporated on June 21, 2000 in
the State of Delaware.  Gavella is currently engaged in two lines of business,
owning and operating income producing real estate and investing in and providing
consulting services to small, established companies with defined growth plans.

On September 30, 2003, Gavella transferred all of the assets and liabilities of
its 100% wholly owned subsidiary, Spring Village Holdings, Inc. plus a $350,000
promissory note from SVG Properties, L.P., to Bartram Holdings, Inc.
("Bartram"), a newly formed Delaware corporation, also a 100% wholly owned
subsidiary of Gavella, in exchange for 6,500,000 shares of  $.001 par value
Bartram common stock.  Spring Village Holdings, Inc. owns a 4.5% general
partnership interest and a 26.5% limited partnership interest (a 31% controlling
interest in total) in SVG Properties, L.P., a New Jersey limited partnership.
The Partnership owns a 124 unit apartment complex. The transfer of Spring
Village Holdings, Inc. to Bartram was the result of a decision by Gavella's
Board of Directors to separate their investment and consulting business from
their real estate business.  On January 3, 2004, Gavella purchased the stock of
H. James Santoro, Inc., an entity owned by a stockholder/officer/director for
its net book value of $334 pursuant to a Stock Purchase agreement.

Note 2   Summary of Significant Accounting Policies

     The summary of significant accounting policies is included in the notes to
the consolidated financial statements for the years ended December 31, 2003 and
2002, which were audited and appear in the Form 10-KSB previously filed by the
Company.

Note 3   Unaudited Financial Statements

     The consolidated balance sheet as of June 30, 2004 and the related
consolidated statements of operations and changes in stockholders' deficit, and
cash flows for the six months ended June 30, 2004 and 2003, and the related
information contained in these notes have been prepared by management without
audit.  In the opinion of management, all accruals (consisting of normal
recurring accruals), which are necessary for a fair presentation of financial
position and results of operations for such periods, in conformity with
generally accepted accounting principles, have been made.  Results for an
interim period should not be considered as indicative of results for a full
year.



                                    -8-
<PAGE>


GAVELLA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2004 AND 2003

(UNAUDITED)


Note 4   Stocked Based Compensation

     Effective January 31, 2003, the Company adopted the fair value
recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based
Compensation", for stock-based employee compensation. Under the modified
prospective method of adoption selected by the Company, stock-based
compensation cost recognized in 2003 is the same as that which would have
been recognized had the fair value recognition provisions of Statement 123
been applied to all awards granted after October 15, 1995. The Company issued
250,000 options to purchase common shares at a price of $.10 per share during
the periods ended June 30, 2004 and 2003.  These options had no value at the
time of issuance.  In May 2004, the Company issued 75,000 shares of stock to
consultants, all of whom are also shareholders, for services rendered, which
were valued at $7,500, and which is properly recorded as an expense.

Note 5 - Related Party Transactions

     During the quarter ended June 30, 2004, the Company issued 75,000 shares
of its common stock, valued at $7,500, to consultants, all of whom are also
shareholders.  The Company also purchased a $14,885 note receivable from Beran
Corp., a company controlled by Harry J. Santoro, our President and a Director.
The note has a fair market value of $14,885, the purchase price.


                                    -9-
<PAGE>


ITEM 2.     MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Form 10-QSB and in the previously filed Form 10-KSB for the period
ending December 31, 2003.

General
--------

Gavella Corp. ("we", "our", "Gavella" or the "Company") is a holding company.
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.  We have two wholly owned
subsidiaries, Bartram Holdings, Inc. ("Bartram"), and H. James Santoro, Inc..
Bartram owns Spring Village Holdings, Inc.  Spring Village Holdings, Inc.
owns a 31% controlling interest in SVG Properties, L.P., a New Jersey limited
partnership (the "Partnership").  The Partnership owns a 124 unit apartment
complex.  The chart below depicts our corporate structure:

                         ------------------
                        |   Gavella Corp.  | -----------owns 100% of
                         ------------------        H. James Santoro, Inc.
                            owns 100% of
                                 |
                        ----------------------
                       |Bartram Holdings, Inc.|
                        ----------------------
                            owns 100% of
                                 |
                    -----------------------------
                   | Spring Village Holdings, Inc.|
                    -----------------------------
                            owns 31% of
                                 |
                       ----------------------
      20%-Unrelated---| SVG Properties, L.P. |---49%-Harry J. Santoro
    limited partners   ----------------------

The following discussion of our business includes the business of Bartram
Holdings, Inc., H. James Santoro, Inc., Spring Village Holdings, Inc. and SVG
Properties, L.P.  Unless the context otherwise requires, all references in
this report to "we", "us", "our", the "Company" or "Gavella" refer
collectively to Gavella, Bartram, H. James Santoro, Inc., Spring Village
Holdings, Inc. and SVG Properties, L.P.

We have had a history of losses and as of December 31, 2003 reported an
accumulated deficit of $1,360,413.  We did not generate a positive cash flow
from operations in the last two fiscal years, due to unanticipated rising
costs and one time charges.  In 2003 and 2002, we had a negative cash flow
from operations of $221,198 and $35,166, respectively.  However, due to the
refinancing of our real estate business on November 7, 2003, we anticipate
breakeven cash flow from operations in the fiscal year 2004. We expect to
cover most, if not all of our cash requirements in 2004 from internally
generated funds and existing cash revenues.  However, there can be no
assurance that we will be successful in our efforts to generate sufficient
cash flow or to raise capital to meet our scheduled debt service or other
cash requirements.


                                      -10-
<PAGE>
Business Objectives and Operating Strategy
------------------------------------------

Our principal business objective is to maximize the economic returns on our
real estate and other investments to provide our shareholders with the
greatest possible return and value.  To achieve this objective, we intend to
continue to pursue the following goals and strategies:

     -    own and operate our apartment complex so as to provide a stable and
predictable cash flow to sustain our operations,

     -    take an opportunistic approach to buying, selling or investing in
real estate or other business ventures,

     -    manage our capital structure to provide for growth in earnings and
cash flow with sufficient liquidity to take advantage of business
opportunities as they arise.

To further these goals, we shall:

     (1)  raise additional capital through debt and/or equity offerings to
strengthen our capital structure,

     (2)  reinvest some of our cash flow and capital in our real estate
business in order to increase our cash flow from operations and enhance our
properties' long term value,

     (3)  make new investments and/or sell off some or all of our existing
investments with a goal of developing new sources of profits and cash flow.


Real Estate Operations
-----------------------

We are in the business of owning and renting income producing real estate,
primarily residential dwelling units, to individuals.

In 1987, SVG acquired the Mill Spring Apartments (subsequently renamed Spring
Village Apartments).  At the time of the acquisition, the property was
severely in need of rehabilitation.  We have renovated the property, and we
believe it is now in good condition.  We currently own 31% of the Partnership
which owns the real estate.

On September 28, 2003, we incorporated Bartram Holdings, Inc. in the State of
Delaware as a wholly owned subsidiary.  On September 30, 2003, to separate
our real estate business from our other business activities, we transferred
our 100% owned subsidiary, Spring Village Holdings, Inc., plus a $350,000
promissory note from S.V.G. Properties, L.P., to Bartram in exchange for
6,500,000 shares of $.001 par value Bartram common stock.  Spring Village
Holdings, Inc. owns a 4.5% general partnership interest and a 26.5% limited
partnership interest (31% total) in S.V.G. Properties, L.P., a New Jersey
Limited Partnership ("SVG").  Spring Village Holdings, Inc. is the sole
general partner and completely controls SVG. SVG owns a 124 unit apartment
complex.

On November 7, 2003, we successfully refinanced our real estate business.  We
borrowed $4,000,000 from New York Community Bank ("NYCB").  The new first
mortgage from NYCB bears a fixed rate of interest of 4.875% for the term of
seven years.  Payments are based on a 30 year amortization.  The mortgage

                                 -11-
<PAGE>
note contains a provision that will allow us to borrow additional amounts in
the future from NYCB up to 75% of the appraised value of the underlying real
estate.  This refinancing has significantly improved our financial position
and puts us in a much better position to carry out our business plan going
forward.

The consolidated financial statements include the accounts of Gavella Corp.,
Bartram Holdings, Inc., H. James Santoro, Inc., Spring Village Holdings, Inc.
and SVG Properties, L.P.  All significant intercompany transactions and
accounts have been eliminated. The outside investors' limited partnership
interests have been reflected as minority interests.

Our primary focus is to own and operate apartment complexes.

We focus on the broad middle-market segment of the apartment market that
generally consists of renters-by-necessity.  This group consists of young and
old singles, blue-collar families, single parent households, immigrants, non-
related parties sharing an apartment, and families saving to buy a home.  We
believe this segment provides a considerable amount of stability,
consistency, and offers some opportunity for rent growth.  We believe this
segment of the market is growing and offers excellent profit potential.

We believe that our market is highly competitive and that we are well
positioned to compete.  Some competing communities offer features and
amenities that we do not offer, but generally their rents are considerably
higher than ours.  Some competing communities use concessions or discounts to
obtain competitive advantages.  We have not had to use concessions or
discounts to attract or retain tenants.  Some competing communities are
larger and/or newer than ours, but again, generally charge higher rents than
we do.  We believe our competitive advantages include:

..     We offer safe, clean, reasonably well maintained units

..     We offer studio apartments as well as one and two bedroom units

..     Though our complex is older, it is a relatively modern garden style
      apartment complex.  Many competing communities in this segment are
      three story flat roof complexes and are not as physically attractive

..     We are convenient to public transportation to the City of Philadelphia

..     Our rents are very competitive

Because it costs more to build a new apartment unit than to acquire an
existing unit and due to lack of suitable construction sites in the area,
competition is limited to existing apartment complexes and should be
manageable.



                                   -12-
<PAGE>
Substantially all of our leases are for a term of one year or less, which may
enable us to realize increased rents upon renewal of existing leases or the
beginning of new leases.  Such short term leases generally minimize the risk
to us of the adverse effects of inflation.  Historically, we have been able
to increase our rents at or above the rate of inflation.  During 2003, our
average rental rate was increased by 5%.  Now that we have completed a
renovation and refinancing of our apartment complex, we expect our rental
revenues and cash flow from our real estate operations will increase annually
for at least the next few years.

Investment and Consulting Business
----------------------------------

We also utilize our contacts, business expertise and knowledge of the
securities markets to identify and invest in small, established private
companies with well defined growth plans. We may also assist such companies
by utilizing various strategies to maximize their long term value.  These
strategies may include preparing the company to become a public company,
assisting with mergers and acquisitions, and facilitating additional capital
raising activities.  In order to enhance our shareholder value, we intend to
liquidate our interest in such companies over time. There is no assurance
that such companies can be identified or once identified, that any
investments made in such companies will prove to be profitable.  We intend to
limit our investment activities so that we shall not become a regulated
investment company.

On September 30, 2001, we invested $25,000 in DATANET Office Solutions, Inc.
in exchange for 500,000 shares of common stock.   On July 31, 2002, we sold
our investment in DATANET for $50,000.

DATANET Office Solutions, Inc. is in the business of providing office
supplies, printing, print management, ad specialties and a number of related
services.  The investment in DATANET was accounted for using the equity
method of accounting.  Accordingly, our proportionate share of DATANET's net
profit or loss subsequent to September 30, 2001 is reflected in our financial
statements.

On October 31, 2001, we invested $3,750 in Eastern Envelopes & Graphics, Inc.
("Eastern").  We invested an additional $5,250 in 2002.  Eastern is in the
business of commercial printing, primarily envelopes.  The investment in
Eastern has been written off.

On March 25, 2003, we invested $50,000 into InteliSys Aviation Systems, Inc.
(formerly Apta Holdings, Inc.) in the form of a secured promissory note.  We
received 100,000 shares of InteliSys' restricted common stock, valued at
$5,000, as a fee for making the loan.  InteliSys' stock is quoted on the NASD
OTC Bulletin Board under the symbol "IYSA".  We also entered into an
agreement with InteliSys whereby we shall provide certain consulting services
to InteliSys over a two-year period to help InteliSys make the transition to
becoming a public company.  We received 500,000 shares of InteliSys'
restricted common stock, valued at $25,000, pursuant to this agreement.

During the second quarter of 2003, we invested an additional $88,719 in the
form of  secured promissory notes.  Of the proceeds, $72,500 was used by
InteliSys to settle certain bank debt.  For our efforts in assisting
InteliSys in settling the bank debt, we received a loan facilitation fee in
the form of a $50,000 convertible promissory note.  We subsequently converted

                                   -13-
<PAGE>
the note into 1,000,000 shares of restricted common stock.  During the
quarter ended December 31, 2003, we invested an additional $62,500 in the
form of secured promissory notes.  We sold 935,000 restricted InteliSys
shares in private transactions, recognizing a gain of $23,750.  Prior to
December 31, 2003, InteliSys repaid $100,000.  On June 30, 2004, we owned
665,000 shares of restricted common stock in InteliSys, and hold options to
acquire an additional 155,000 shares of restricted common stock for $15,500
($.10 per share.) InteliSys, through its wholly owned subsidiary, InteliSys
Aviation Systems, is a provider of integrated software and hosting services
to regional, mid-size airlines and fleet operators.  InteliSys is not yet
profitable, and the investment in InteliSys is highly speculative.  The
investment in InteliSys will be carried at cost.

On January 3, 2004, we acquired H. James Santoro, Inc. from Harry J. Santoro,
our President and a Director, for nominal consideration.  H. James Santoro,
Inc. is a consulting company which provides management and administrative
services to us and consulting services to unrelated companies.  Prior to
January 1, 2004, H. James Santoro, Inc. billed us for services provided to
Gavella and our subsidiaries.

Employees
---------

In addition to Harry J. Santoro, the President and Treasurer, and Stephen M.
Robinson, the  Vice President and Secretary, we employ five other people on a
regular basis who manage and maintain the apartment complex and perform
administrative functions.


Facilities
----------

The Company currently maintains its principal executive offices in
approximately 500 square feet of leased office space at 215 West Main Street,
Maple Shade, New Jersey, 08052.


Results of Operations
----------------------

The following discussion is for the six months ended June 30, 2004 and  2003,
respectively.

We reported total revenues of $500,987 and $497,334 in 2004 and 2003,
respectively.  Total revenues increased by $3,653, or .7%.  Occupancy was
approximately 98.9% and 93.6%, respectively. Average unit rental rates
increased by 4.3%. Our vacancy rate decreased to 1.1% from 6.4%.  Increasing
rental rates and decreasing vacancy resulted in an increase in net rental
income of $44,953, or 10.7%. Tenant charges increased by $2,450 to $21,865.
Other revenue in 2004 and 2003 consisted of fees for consulting services
provided to other companies.

Below is an analysis of our revenues.


                                     -14-
<PAGE>                            2004         2003      change    %change
                           -------     -------     ------     ----
Gross rent potential      $472,022    $452,425    $19,597      4.3
Less:  vacancy               5,400      25,356    (19,956)   (78.7)
                           -------     -------     ------     ----
Net rental income          466,622     421,669     44,953     10.7
Tenant charges & misc.      21,865      19,415      2,450     12.6
Other revenues              12,500      56,250    (43,750)   (77.8)
                           -------     -------     ------     ----
Total revenues            $500,987    $497,334      3,653      0.7

Total operating expenses increased from $441,219 in 2003 to $508,395 in 2004,
an increase of $67,176 or 15.2%.

Administrative expenses increased to $192,418 in 2004 from $146,789 in 2003.
The increase in administrative expenses arose primarily from added public
company overhead.  Utilities increased by $7,428 as a result of a significant
increase in the price of natural gas used for heating and rising water and
sewer costs.  Operating and maintenance expense decreased from $69,924 in
2003 to $69,205 in 2004.  Taxes and insurance relating to operations
increased by $6,294, from $78,319 in 2003 to $84,613 in 2004, primarily due
to increases in property insurance and real estate taxes.  Depreciation
increased by $8,544 to $77,437 in 2004, as a result of recent capital
improvements being depreciated.  Operating loss was ($7,408) in 2004.  The
increase in revenues was not large enough to offset the increases in total
expenses discussed above.  Our first half is usually our worst half
operationally in that heating costs and weather related costs are highest in
our first quarter.  Now that the winter is over, we are expecting our
operating results to improve over the next few quarters.

Net interest expense decreased by $36,850 from $146,564 in 2003 to $109,714
in 2004.  We refinanced our debt at lower rates in November 2003  Going
forward, our interest expense will be lower in 2004 when compared to 2003.

We realized an $11,157 capital gain on sale of an investment in 2004, the
proceeds of which will be used for new investments.

Net loss increased from ($90,449) in 2003 to ($105,965) in 2004.  Rising
revenues and lower interest costs were not enough to offset the increase in
operating costs discussed above.  Basic net loss per share decreased from
($.03) in 2003 to ($.02) in 2004.

We are taxed as a C-corporation for federal and state income tax purposes.
As such, we will pay taxes on our net income as defined by the Internal
Revenue Code.  None of our tax attributes flow through to our shareholders
except for the regular taxation of dividends paid, if any.

Liquidity and Capital Resources
--------------------------------

At June 30, 2004, we had $270,592 in working capital, including cash held in
escrow for anticipated future expenses.  However, we need additional
financing to expand our business, to carry out our business plan and to
reduce debt.

On January 1, 2004, we had $265,850 in cash, exclusive of $85,047 in cash
held in escrow accounts.



                                    -15-
<PAGE>During the six months ended June 30, 2004, we used $22,608 to fund
operations.  We received $11,157 from the sale of an investment. We made
loans of $14,885 and collected $7,282 of notes receivable.  We used $49,984
for capital expenditures, primarily renovations, and reduced mortgage debt by
$29,933.  We realized $67,000 in net proceeds from the sale of stock.  The
net decrease in cash for the period was $31,971.  We had $233,879 in cash on
June 30, 2004, exclusive of $88,787 in cash held in escrow accounts.

We started a significant renovation of property in June of 2003 which is
nearing completion.  We expect future capital improvements and equipment
replacements to return to more historical levels going forward, generally
around $40,000 per year.

We project near breakeven cash flow from operations in the fiscal year 2004.
We believe we have sufficient cash on hand to fund our operations for the
next twelve months.  However,  there can be no assurance that we will be
successful in our efforts to generate sufficient cash flow to meet our
scheduled debt service or other cash requirements.

On April 5, 2004, we commenced a private offering of 675,000 shares of our
common stock at $.10 per share, and we raiseed $67,000 in net cash proceeds
prior to June 30, 2004.  The proceeds of this offering will be used to fund
our operations and make investments in other businesses.

Our balance sheet is highly leveraged.  We plan to reduce this leverage
through future equity offerings as well as by utilizing funds generated from
operations to reduce debt.  We believe we can support operations and planned
capital expenditures for at least twelve months.  Thereafter, our continued
success will be dependant upon our ability to maintain occupancy at 95% or
above and to keep operating costs under control.

In the event that our plans change or our assumptions change or prove to be
inaccurate, we may be required to seek additional financing sooner than
currently anticipated.  We have not identified any potential sources of debt
or equity financing and there can be no assurance that we will be able to
obtain additional financing if and when needed or that, if available,
financing will be on acceptable terms.

Forward Looking Statements
---------------------------

We are making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.

The foregoing discussion includes forward-looking statements relating to our
business.  Forward-looking statements contained herein or in other statements
made by us herein are made based on our management's expectations and beliefs
concerning future events impacting our business and are subject to
uncertainties and factors relating to our operations  and business
environment, all of which are difficult to predict and many of  which are
beyond our control, that could cause our actual results to differ materially
from those matters expressed in or implied  by forward-looking statements.
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) the effect of changes in interest rates; (b) the rental rate and
demand for apartment rental units; (c) fluctuations in the costs to operate
the properties we own; (d) uninsurable risks; (e) unexpected losses, and (f)
general economic conditions.

For a more detailed discussion of the risk factors which affect our business,
please read this report in conjunction with our previously filed Form 10-KSB.

                                    -16-
<PAGE>
ITEM 3    CONTROLS AND PROCEDURES

(a)     Evaluation of Disclosure Controls and Procedures. The Company carried
out an evaluation, under the supervision and the participation of its
management, of the effectiveness of its disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the period
covered by this report.  Based on this evaluation, the Company's principal
executive officer and principal financial officer concluded that its
disclosure controls and procedures were effective.  It should be noted that
design of any system controls is based in part upon certain assumptions, and
there can be no assurance that any design will succeed in achieving its
stated goal.

(b)     Changes in Internal Controls.  There were no significant changes in
the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of the
evaluation.


                                    -17-
<PAGE>
PART II

OTHER INFORMATION
------------------


ITEM 1    LEGAL PROCEEDINGS

NONE


ITEM 2    CHANGES IN SECURITIES


Recent Sales of Unregistered Securities
---------------------------------------

      The  following  information  sets  forth  certain  information  for all
securities of the Company sold during the quarter ending June 30, 2004
without registration under the Securities Act of 1933 (the "Securities
Act").  The following pertains to each of the transactions:

     .   There were no underwriters involved in any of the transactions.

     .   All of the securities issued were restricted common stock of the
Company, and each of the certificates issued was stamped with the following
restrictive legend:

"The shares represented by this certificate have not been registered under
the Securities Act of 1933.  The shares have been acquired for investment and
may not be sold, transferred or assigned in the absence of an effective
registration statement for these shares under the Securities Act of 1933 or
an opinion of the Company's counsel that registration is not required under
such Act."

     .   No form of advertising or general solicitation was utilized in
connection with any of the offers or sales of such securities.

     .   Redistribution of the common stock was subject to the provisions of
Rule 144 of the Securities Act.

     .   Each of the offerees were furnished with the Registrant's latest
Form 10-KSB, Form 10-QSB's for the fiscal periods subsequent to the end of
the fiscal period, and all forms 8-K filed by the Registrant since the end of
the fiscal period.

     .   Each of the purchasers represented that the purchaser was acquiring
the securities for the purchaser's own account, for investment only, and not
with a view toward the resale, fractionalization, division or distribution
thereof, and further, the investors each represented that they had no present
plans to enter into any contract, undertaking, agreement, or arrangement for
any such resale, distribution, division or fractionalization thereof.

     We issued 675,000 shares of our common stock to five investors for
consideration of $67,500, in reliance upon Rule 506 of Regulation D of the
Securities Act.

     We issued 75,000 shares of our common stock valued at $7,500 to
thirteen individuals, all of whom are shareholders, as compensation for
services rendered, in reliance upon Rule 506 of Regulation D of the
Securities Act.

                                    -18-
<PAGE>


ITEM 3    DEFAULTS ON SENIOR SECURITIES

NONE


ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

ITEM 5    OTHER INFORMATION

     Gavella has been approved by the NASD for quotation on the NASD OTC
Bulletin Board under the symbol GVLA.OB. As of July 21, 2003, the Company's
common stock has been thinly traded at a price range between $.06 and $.25
per share.

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     Exhibit 3.01(a) - Amendment to the Certificate of Incorporation of
Gavella Corp. dated June 7, 2001.

     Exhibit 3.01(b) - Amendment to the Certificate of Incorporation of
Gavella Corp. dated August 20, 2003.

     Exhibit 3.01(c) - Amendment to the Certificate of Incorporation of
Gavella Corp. dated June 30, 2004.

      Exhibit 10.15 - Stock Purchase Agreement between Gavella Corp. and H.
James Santoro, Inc., dated January 3, 2004.

     Exhibit 31.1  Certification of Chief Executive Officer Pursuant to Rule
13a-14(a).

     Exhibit 31.2  Certification of Chief Financial Officer Pursuant to Rule
13a-14(a).

     Exhibit 32.1  Certification of Chief Executive Officer/Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002.


     (b) Reports on Form 8-K

         None




                                    -19-
<PAGE>
                                 SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                            GAVELLA CORP.


Dated: August 4, 2004         /s/ Harry J. Santoro
                            ----------------------------------------
                            Harry J. Santoro
                            President, Chief Executive Officer and
                            Principal Financial Officer






                                      -20-
<PAGE>