U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB
(Mark One)

[ x ]    Annual report under Section 13 or 15(d) of the Securities  Exchange Act
         of 1934 (Fee required) for the fiscal year ended December 31, 1999.

[   ]    Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act  of  1934  (No  fee  required)  for  the  transition   period  from
         ___________________ to _____________________________

         Commission file number    0-27132
                                -------------
                            Terrace Food Group, Inc.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                   Delaware                                65-0594270
                   --------                                ----------
         (State or Other Jurisdiction of                  (I.R.S. Employer
         Incorporation or Organization)                   Identification No.)

         1351 N.W. 22nd Street, Pompano Beach, Florida          33069
         ---------------------------------------------          -----
                    (Address of Principal Executive Office)   (Zip Code)

                                 (954) 917-7272
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                         Name of Each Exchange
         Title of Each Class                              on Which Registered
         -------------------                              -------------------

____________________________________                  __________________________

____________________________________                  __________________________


Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
--------------------------------------------------------------------------------
                                (Title of Class)

                    Redeemable Common Stock Purchase Warrants
--------------------------------------------------------------------------------
                                (Title of Class)

         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 past 90 days.

Yes         /X/                 No / /

            Check if there is no disclosure of delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/

         Issuer's revenues for its most recent fiscal year: $42,390,476.

         Aggregate  market  value of the  voting  stock  held by  non-affiliates
computed by reference  to the price of which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days. The aggregate market value on March 31, 2000: $1,189,116.

         As of December  31, 1999,  the total number of shares of common  stock,
 .001 par value (the "Common Stock"), of the Registrant outstanding: 948,342.

                                       1
<PAGE>

PART I

ITEM 1 - DESCRIPtION OF BUSINESS

(a)       Business Development

          Terrace Food Group, Inc., a Delaware  corporation (the  "Registrant"),
was organized in 1989. The Registrant currently has three wholly-owned operating
subsidiaries:  A-One-A Produce & Provisions, Inc. ("A-One-A Produce"), a Pompano
Beach,  Florida-based produce distributor that sells and distributes fresh fruit
and vegetables and dairy products to hotels, restaurants, cruise lines and other
businesses in the southern Florida region;  Fresh,  Inc.  ("Fresh"),  in Pompano
Beach,  Florida,  which processes,  packages and sells fresh produce principally
through  A-One-A  Produce;  and Banner Beef & Seafood Co.,  Inc.  ("Banner"),  a
Miami,  Florida-based custom value-added  processor of meat, seafood and poultry
that  manufactures  and sells  food  service  products  to retail  and  discount
supermarkets,   restaurants,  airlines  and  other  industries.  The  Registrant
acquired the business of Banner in July, 1998.

(b)       Businesses of Issuer

Food Distribution

          A-One-A  Produce  distributes  fresh  fruits,   vegetables  and  dairy
products  to  restaurants,   country  clubs,  hotels,  cruise  lines  and  other
institutional  food  service  providers  in the South  Florida  region.  A-One-A
Produce  delivers seven days per week and its customers  typically rely on daily
deliveries.  The served area reaches southward to Homestead,  Florida and as far
as Jupiter,  Florida, to the north,  principally on the East Coast of the state.
Service is a major  component of the  business's competitive  strength.  A-One-A
Produce  does not attempt to be the low cost  provider,  but,  rather,  seeks to
distinguish  itself as a  provider  of high  quality  products  and  exceptional
service.  Most  orders are  received in the  afternoon  and  delivered  the next
morning.  Customers  are  supported  by a sales  manager and 12  regional  sales
representatives  to ensure optimum  service and  communication.  A-One-A Produce
operates  a fleet of 34  delivery  trucks,  all of which  are  refrigerated  and
equipped with two-way radios.

          A-One-A  Produce was founded in 1987 by Virgil D. Scarbrough and Scott
Davis. Messrs. Scarbrough and Davis are now senior executives of A-One-A Produce
under  employment  agreements  expiring  on June 30,  2002.  Revenue in 1999 for
A-One-A  Produce  was  approximately  $37.2  million.  A-One-A  Produce  employs
approximately 190 people.

          Mr.  Davis  is  responsible  for   purchasing,   pricing  and  overall
operations.  Mr.  Scarbrough  generally is responsible  for office and personnel
administration.  Jonathan S. Lasko, Executive Vice-President and Chief Operating
Officer  of the  Registrant  is the  President  and Chief  Executive  Officer of
A-One-A Produce.

          A-One-A Produce is a member of a produce buying co-operative, Pro*Act,
and is currently buying a substantial  portion of its  requirements  through it.
Purchasing is also performed directly from farmers.  Pricing to customers is set
on a weekly basis in accordance with market conditions. The Registrant's pricing
formulas  are  complex  and take into  effect a number of  qualitative  factors.
Pricing  is set at a  detailed  item by item  level for each type of

                                       2

<PAGE>

produce by customer. A small number of larger accounts have pricing arrangements
that represent a margin above cost. Some of the  Registrant's  larger  customers
currently include TGI Friday's,  Sodexho Marriott, Darden (Red Lobster and Olive
Garden)  and  Apollo  Ship  Chandlers.  One  customer,  Apollo  Ship  Chandlers,
accounted  for 13.7% of revenues in 1999.  This  customer is expected to account
for a lower percentage of revenues in 2000 as the Registrant is expected to have
a larger customer base.

           Effective   January  1998,  the  Registrant   purchased  all  of  the
outstanding stock of A-One-A Produce's former affiliate,  Fresh, for $105,000 in
cash and 13,895 shares of Common Stock as well as forgiving accounts  receivable
in the amount of  $141,986.  Fresh  supplies  cut  produce  principally  through
A-One-A Produce and also to process food manufacturers directly.

Food Processing and Manufacturing.

           Banner  has  been in  business  since  1965 as a  custom  value-added
processor of meat, seafood and poultry. It manufactures food products customized
to  customer   specifications  for  the  retail  and  discount  store,  airline,
restaurant  and other  industries.  Banner  continues its  concentration  on the
prepared foods market which is believed to be one of the fastest growing sectors
of the food processing industry. It has, however, redirected its marketing focus
from fully  packaged  meals toward meal  components,  concentrating  on prepared
latin ethnic products.

           On July 15, 1998, the Registrant  acquired  substantially  all of the
assets and assumed  substantially all the liabilities of Banner for an aggregate
purchase price of approximately $2,652,000.  The acquisition was financed with a
portion  of the funds  received  through a credit  facility  with a bank and the
issuance of Convertible Subordinated Notes described herein.

           Banner currently employs  approximately 76 persons,  9 administrative
personnel and 67 processing,  warehousing  and similar  personnel.  There are no
union  contracts and management of Banner  believes that its labor relations are
satisfactory.

           Banner has no predominant supplier of raw materials and all materials
are available from numerous sources.

Advertising And Marketing

           The Registrant  currently  markets its products and services  through
its direct sales force,  brokers and agents.  The  Registrant is evaluating  all
aspects of the Registrant's products and services. Depending upon the outcome of
any such marketing  evaluations,  the Registrant may decide to make changes with
respect to the marketing of its products and services.

Competition

           The  wholesale   fresh  produce  and  grocery   businesses  are  very
competitive,  and the  Registrant's  subsidiaries  face  competition  from other
low-cost produce  providers.  The food processing and manufacturing  industry is
also very  competitive.  Some of the large volume  processing and  manufacturing
competitors have  substantially  greater capital  resources,  more sophisticated
promotional  practices and substantially larger and more developed  distribution
networks than the Registrant's subsidiaries.  However, the Registrant strives to
maintain high quality and  exceptional  service in the market by making  quality
products and efficient service its priority.  Food related  businesses are often
affected by arbitrary changes in consumer tastes,


                                       3
<PAGE>

national,  regional and local economic conditions,  demographic trends,  traffic
patterns,  and the number and locations of competing  businesses  and employment
trends.

Government Regulation

            The Registrant is subject to various  federal,  state and local laws
affecting its businesses.  Each of the Registrant's  food service  operations is
subject to licensing regulation by numerous  governmental  authorities which may
include building, health and safety and fire agencies. Difficulties in obtaining
or failures to obtain or maintain the necessary licenses or approvals could have
a material adverse effect on the Registrant's operations.

            A-One-A  Produce and Fresh  maintain  licenses  under the Perishable
Agricultural  Commodities Act ("PACA") which regulates  "commission  merchants,"
"brokers"  and  "dealers"  engaged in the  business  of  shipping  or  receiving
perishable agricultural commodities in interstate commerce.

            Both of Banner's manufacturing plants are regulated and inspected by
the U.S. Department of Agriculture.

Employees

            The Registrant and its subsidiaries employ  approximately 350 people
which includes approximately 27 administrative,  60 transportation, 33 sales and
customer  service  representatives,  225 warehouse and processing  personnel and
five executive management. None of the Registrant's employees are represented by
a union nor have there been any work stoppages.

ITEM 2 - DESCRIPtION OF PROPERTY

           A-One-A  Produce leases  approximately  55,000 square feet at 1351 NW
22nd  Street,  Pompano  Beach,  Florida,  for use as its  principal  offices and
warehouse.  The building has 24 loading docks  (approximately  half of which are
refrigerated),  1,700  pallet  locations  and  includes  30,000  square  feet of
refrigerated  warehouse space. The lease term is for ten years expiring June 30,
2007,  with three  five-year  options to  extend,  at a rental of  approximately
$222,000  per year.  The  Pompano  Beach  facility is owned by an  affiliate  of
Messrs.  Scarbrough  and Davis. A lease for this facility was negotiated as part
of the acquisition of A-One-A Produce.

            Fresh leases from an unaffiliated  third party  approximately  6,500
square feet at 1280 SW 29th Avenue,  Pompano  Beach,  Florida,  for its offices,
processing and warehouse.  The lease is for a term of three years with an option
to extend for an additional three years at an average annual rental of $59,000.

            In  connection  with  the  acquisition  of  Banner,  the  Registrant
acquired land and buildings in Miami, Florida, where Banner maintains processing
facilities  and offices.  The  Registrant  considers  the building to be in good
condition.

                                       4
<PAGE>

            Banner leases a 22,000 square foot facility in Hialeah, Florida, for
use as an additional  processing  facility and warehouse.  The lease term is for
five years  expiring in July 2003,  at a rental of  approximately  $128,000  per
year.  During  the term of the  lease,  Banner  has an option to  purchase  this
property for the lesser of  $1,270,000  or its  independently  appraised  value,
provided  it is not in breach of the lease.  The owners of this real  estate are
the two  former  principal  shareholders  of  Banner,  prior  to its sale to the
Registrant,  each of whom has  executed  a  non-competition  agreement  with the
Registrant.

            The  Registrant's  executive  offices  are  located  in the  A-One-A
Produce facility in Pompano Beach,  Florida.  Management believes that the above
facilities will be sufficient for its operations for the reasonably  foreseeable
future.

ITEM 3 - LEGAL PROCEEDINGS

            The   Registrant  is  a  defendant  in  an  action  brought  by  ALR
Corporation  and Arne L. Rotne filed with the 11th  Judicial  Circuit in and for
Miami Dade  County,  Florida in  December  1999,  alleging  breach of  contract,
misappropriation of trade secrets, unfair competition and violation of Florida's
Deceptive  and Unfair Trade  Practices  Act.  The  complaint  seeks  unspecified
damages.   The   Registrant  is  vigorously   defending  the  matter  and,  when
appropriate, expects to assert counterclaims.

            See  also  Note 10 to the  Consolidated  Financial  Statements  with
respect to a claim by a former employee for compensation.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            During the fourth  quarter of the past fiscal year,  the  Registrant
did not submit any matter to a vote of security holders, through solicitation of
proxies or otherwise.


                                       5
<PAGE>

PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

            (a) Reverse Split of Common  Stock.  Effective  March 15, 1999,  the
shareholders  of the  Registrant  approved a  one-for-ten  reverse  split of the
Registrant's  outstanding  Common  Stock.  This reverse split did not affect the
number of shares authorized or its par value. Therefore, unless otherwise stated
explicitly,  all per share and share amounts for all periods presented have been
adjusted to reflect this reverse split.

            (b) Market  Information.  Until the close of business  September 29,
1998,  the  Registrant's   Common  Stock  and  common  stock  purchase  warrants
(collectively  the "Warrants") were listed on the NASDAQ SmallCap Market.  Since
September 30, 1998, the  Registrant's  securities have been listed on the NASDAQ
Over the Counter Bulletin Board.

           Set  forth  below is the  range of high and low  sales  prices of the
Common  Stock and  Warrants  for each  quarter for the last two fiscal  years as
reported by NASDAQ for those periods.  Common Stock and Warrant prices take into
account the Registrant's  1-for-10 reverse split of its Common Stock. The prices
represent  quotations  between  dealers.  The  quotations do not include  retail
markups, markdowns, or commissions and may not represent actual transactions.

Type of Security           Quarter Ended         High            Low
----------------           -------------         ----            ---

Common Stock               March 31, 1998        32 1/2          10 5/8
                           June 30, 1998         25               8 3/4
                           September 30, 1998    19 1/16          9 3/8
                           December 31, 1998     15 5/8           5
                           March 31, 1999         6 13/16         3 1/8
                           June 30, 1999          3 1/4           2 1/2
                           September 30, 1999     3 1/2           2 15/16
                           December 30, 1999      3 1/16          1 1/2
                           March 31, 2000         3 3/8           1 1/2

Warrants                   March 31, 1998        $1.75           $1.00
                           June 30, 1998          1.50             .19
                           September 30, 1998      .875            .25
                           December 31, 1998       .594            .06
                           March 31, 1999          .02             .02
                           June 30, 1999           .035            .02
                           September 30, 1999      .035            .03
                           December 31, 1999       .04             .02
                           March 31, 2000          .04             .01

Holders

            As of May 5,  2000,  there  were 72 and 17  holders of record of the
Registrant's  Common Stock and Warrants,  respectively.  The Registrant believes
that the number of beneficial  owners of the shares of Common Stock and Warrants
are higher  because a substantial  number of shares


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<PAGE>

of Common Stock and Warrants are held of record in street name by broker-dealers
for their customers.

Dividends

            The  Registrant  has not paid any  dividends on its Common Stock and
does not expect to pay a cash dividend in the foreseeable future, but intends to
devote all funds to the operation of its business.  There are also  restrictions
on the payment of dividends in the Registrant's bank loan statement.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS Of FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

Terrace Food Group (Consolidated)

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

            The Registrant's  consolidated  net loss for 1999 was  approximately
$5,774,000 including one time write off's and non-recurring  expenses. This loss
was  substantially  higher than its loss in 1998 of $2,719,000.  Several factors
contributed to the losses in 1999. The Registrant incurred  substantial non-cash
interest  costs  associated  with the  issuance of its  subordinated  debt.  The
Registrant is currently  negotiating with the holders to restructure this debt a
substantial  portion of which may be  converted  to shares of Common  Stock.  In
addition,  the  Registrant  wrote off goodwill from some of the  businesses  the
Company is no longer operating.  An additional  bad-debt reserve was established
to ensure the Company's  level of accrual was  sufficient to handle the exposure
from  its  receivables.  The  Company  also  incurred  a loss  from  its  Banner
processing operation (see Food Processing and Manufacturing  below). The Company
has made some  major  changes  in Banner  during  the first  quarter  of 2000 to
dramatically  reduce operating cost structure.  The Company's food  distribution
segment had operating  earnings  before  impairment  change of $550,000 for 1999
compared to a net loss of $276,000 in 1998.  A-One-A  continued sales growth and
expense  control has led to this strong  profitability  and management  believes
this growth will continue into 2000, although there can be no assurance thereof.

Operations

Food Distribution

            The Registrant's  distribution segment had operating earnings before
impairment  charge of $550,000 for the year ended  December 31, 1999 compared to
an operating  loss of $276,000  for the  comparable  period in 1998.  The strong
profit  contribution  during  1999 can be  attributed  to several  factors.  The
Registrant's  marketing program concentrating on large volume chain restaurants,
institutions,  hotel  and  healthcare  accounts  has had a strong  impact on the
Registrant's  sales volume and delivery  costs.  In addition,  A-One-A  Produces
cruise ship and export  business  lines of business have  realized  strong sales
growth  with  revenue in excess of $10 million  during  1999.  Current  contract
opportunities  with large volume new  customers  may enable  A-One-A  Produce to
continue its sales growth.  A-One-A  Produce's strong reputation for quality and
customer service has made it a major competitor in the South


                                       7

<PAGE>

Florida marketplace. As further economies of scale are realized from new account
acquisitions and further cost control programs even greater profit levels may be
recognized in the future.

Food Processing and Manufacturing

            The  Registrant's   manufacturing   business,   Banner  incurred  an
operating loss of approximately  $3,130,000 for the year ended December 31, 1999
compared to a loss of $753,000 for the  six-month  period the  Registrant  owned
Banner in 1998. As a result of a change in the home meal replacement business of
the  prepared  foods  industry  from fully  packaged  meals to a meal  component
approach,  management has redirected its sales focus.  Substantial write offs of
approximately  $750,000 were recognized at year-end to account for the inventory
and marketing costs associated with the fully packaged meal program.  Banner has
now focused its efforts  toward the prepared  latin ethnic foods market.  In the
fiscal year 2000,  Banner expects to take  definitive  steps,  including but not
limited to payroll reduction, purchasing, scheduling, and manufacturing control,
to reduce the cost structure at Banner.

Liquidity and Capital Resources

            At  December  31,  1999,  the  Registrant  had  a  cash  deficit  of
approximately  $1,510,000,  a working  capital  deficiency  of  $9,331,000,  and
Stockholders'  Deficiency of  $3,872,000.  The  conditions may indicate that the
Company may be unable to continue as a going concern for a reasonable  period of
time.

            The Registrant is exploring a restructuring of most of its long term
indebtedness  although  there  can be no  assurance  that such  efforts  will be
successful.

            The Registrant  has not complied with certain  covenants of its bank
borrowing agreement.  Although the lender has continued to provide funding under
terms of the agreement and temporarily  increased the line of credit, it has not
formally waived its rights under the borrowing  agreement.  Negotiations  are in
process to replace the current  bank  borrowing  arrangement  with one that will
provide for additional  working capital with a higher line of credit to fund the
Company's continued growth. Several lenders have expressed interest in providing
financing to the Registrant.

            The Registrant's  Convertible Subordinated Notes (as defined herein)
matured on March 31, 2000. Based upon negotiations, the holders of the notes are
expected to agree to extend the term of the notes,  convert their  interest into
Common Shares or some  combination  thereof,  although there can be no assurance
thereof.

            Management  believes  the  implementation  of a new  bank  borrowing
arrangement,  the  restructuring  of  its  Convertible  Subordinated  Notes  and
improved  operating  performance  will  provide  for the  Registrant's  improved
liquidity, although there can be no assurance thereof.

            In  December  1999,  January  2000  and  February  2000  two  of the
Registrant's Executive Officers loaned the Registrant a total of $625,000.  Each
has  expressed  a  willingness  to convert  his loans into  common  stock of the
Registrant.

            During April,  May and July of 1999,  the  Registrant  issued 20,772
shares of the Series C & D Redeemable  Preferred Stock together with warrants to
purchase 360,000 shares of the Registrant's Common Stock to a private investment
group  which  included  four of the  Registrant's  Directors.  The  proceeds  of
approximately  $1,800,000 were used for working capital purposes. The Series C &
D Redeemable Preferred Stock became mandatorily  redeemable by the Registrant on
March 31, 2000 either in cash, or, at Registrant's  election, by the issuance of
17% notes maturing March 31, 2003. The Series C & D Redeemable  Preferred  Stock
has not been  redeemed  as the  Registrant  is  negotiating  with the holders to
convert their interests therein to Common Stock of the Registrant.  There can be
no assurance that such negotiations will be successful.

                                       8
<PAGE>

            On June 25,  1998,  the  Registrant  issued  to a  private  investor
$2,625,000  principal  amount  of  12%,  which  subsequently  increased  to 14%,
Convertible  Subordinated Notes ("Convertible  Subordinated Notes") and warrants
to purchase 400,000 shares of Common Stock of the Registrant.  The proceeds from
these Notes, combined with those from the senior secured financing, were used to
repay senior indebtedness, acquire Banner and for working capital.

            On October 5, 1998, the Registrant,  through its prospectus  offered
to its warrant  holders the  opportunity to exercise their warrants and purchase
Common Stock at a  temporarily  reduced  exercise  price.  On December 31, 1998,
23,785 warrants were exercised at the temporarily reduced exercise price.

            In  October  and  November  1998,   the  Registrant   issued  78,000
unregistered  shares of Common  Stock  together  with  warrants  and  options to
purchase 40,500 shares of Common Stock to investors including private investors,
directors, officers and an employee of the Registrant. The shares were issued at
prices  ranging from $9.30 to $10.00 per share.  Proceeds of $760,000  were used
for working capital.

Seasonality

            Due to the seasonal nature of the food-distribution  market in South
Florida,  A-One-A Produce has  historically  been affected by the summer month's
business  slowdown.  With the continued sales growth in all business segments of
the  Registrant,  most  noticeably  the export and cruise  ship  divisions,  the
seasonal  slowdown in the local  market will have a much  smaller  impact on the
Company's  total  sales in the  traditional  off season  months.  In addition as
Banner's sales levels increase, the nationwide shipment of latin ethnic products
will help reduce the seasonal  impact of Registrant's  consolidated  revenue and
allow for a more predicable sales and profit trend.

Forward-Looking Statements/Risk Factors

         Certain matters discussed in this annual report may be  forward-looking
statements that are subject to risks and  uncertainties  that could cause actual
results to differ  materially  from those  projected.  Although  the  Registrant
believes  that  the  assumptions  underlying  the  forward-  looking  statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore,  there  can  be no  assurance  that  the  forward-looking  statements
included in the projections  will prove to be accurate,  and the Registrant does
not, nor should any investor,  consider these projections to be  representations
by the Registrant.  Potential investors of the Registrant are cautioned that all
forward-looking  statements  involve  risks  and  uncertainty.  Such  risks  and
uncertainties include, but are not limited to, the risk factors set forth below.

         1.  Deficits  ad  Borrowing  Defaults.  The  Registrant  has  increased
recurring  operating losses and has significant  working capital  deficiency and
Stockholder's  Deficit  and is in default of its bank  borrowing  agreement.  In
addition, the Registrant's  Convertible  Subordinated Notes matured on March 31,
2000 and have not been paid.  These  factors raise  substantial  doubt as to the
Registrant's  ability  to  continue  as a  going  concern  and  there  can be no
assurance that the Registrant's  efforts to restructure its indebtedness will be
successful.

         2. Need for Additional  Financing.  The Registrant  will be required to
obtain  additional debt and/or equity  financing to fund the costs of continuing
operations  and there can be no  assurance  that it will be able to obtain  such
financing.

         3. Competition. The produce distribution and food processing businesses
are  highly  competitive  and there are  numerous  well-established  competitors
possessing  substantially  greater  financial,  marketing,  personnel  and other
resources than the Registrant.  These competitors include national, regional and
local  firms.  There  can  be  no  assurance  that  consumers  will  regard  the
Registrant's  products  and  services  as  significantly   distinguishable  from
competitive  products and services,  or that substantially  equivalent  products
will not be introduced by the  Registrant's  competitors  or that the Registrant
will be able to compete successfully.

         4.  Changes  and Other  Factors  Affecting  Business.  The  produce and
grocery  distribution  and food  processing  industries  are often  affected  by
changes in consumer tastes,  national,  regional and local economic  conditions,
demographic  trends,  traffic  patterns  and the type,  number and  location  of
competing facilities.  In addition, the labor intensiveness of these businesses,
as well as factors such as inflation, increased food, labor and employee benefit
costs and  availability of experienced  management and hourly employees may also
adversely affect the Registrant's operations.


                                       -9-

<PAGE>

         5. Current  Seasonal  Nature of Certain  Operations.  The  Registrant's
current operations are located in south Florida and are seasonal in nature since
such operations  rely, to a certain  degree,  on tourism in the winter months to
sustain them.

         6.  Government  Regulation.  Food  businesses  are  subject  to various
federal, state and local laws and regulations.  The failure to obtain and retain
licenses or any other  governmental  approvals or to pass periodic  governmental
inspections would have a material adverse effect on the Registrant. In addition,
food  processing  and other  operating  costs are  affected by  increases in the
minimum hourly wage,  unemployment  tax rates,  sales taxes and similar  matters
over which the Registrant has no control.

         7. PACA Licenses.  The Registrant's A-One-A Produce & Provisions,  Inc.
subsidiary  and its  affiliate,  Fresh,  Inc.,  are  subject  to The  Perishable
Agricultural  Commodities Act ("PACA") which regulates  "commission  merchants,"
"brokers"  and  "dealers"  engaged in the  business  of  shipping  or  receiving
perishable agricultural commodities in interstate commerce.  A-One-A Produce and
Terrace Fresh  currently  maintain PACA  licenses to distribute  fresh  produce,
fruits and  vegetables.  The ability of the  Registrant  to continue  successful
distribution and sales of its fresh produce,  fruits and vegetables is dependent
upon its continued  compliance  with PACA. Loss of its PACA license would have a
materially adverse effect on the Registrant.

            8. Dependence on Key Personnel.  The Registrant's success depends to
a  significant  extent  on the  continued  service  of  certain  key  management
personnel,  the loss or  interruption of services of which could have a material
adverse affect on the Registrant.

            10. No  Assurance of Continued  Public  Trading  Market or Continued
Qualification  for  continued  listing on the Over the  counter  Bulletin  Board
("OTCBB")  Inclusion.  The Registrant's  Common Stock and Warrants are listed on
the OTCBB.  If a public  trading  market does not continue for the  Registrant's
securities,  purchasers  of the  Registrant's  securities  may  have  difficulty
selling  their  securities  should  they desire to do so. If the  Registrant  is
unable to satisfy the requirements for continued listing on OTCBB,  trading,  if
any, in the  securities  offered hereby would be conducted in the "pink sheets".
The  Registrant is subject to the Securities  and Exchange  Commission's  "Penny
Stock"  regulations (as discussed  below).  As a result, an investor may find it
more  difficult to dispose or to obtain  accurate  quotations as to the price of
the  securities  offered  hereby.  The  above-described   rules  may  materially
adversely affect the liquidity of the market for the Registrant's securities.


                                      -10-

<PAGE>


ITEM 7 - FINANCIAL STATEMENTS

            The financial statements to this Form 10-KSB are attached commencing
on Page F-1.

ITEM 8 - CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

            The  Registrant   engaged  Deloitte  and  Touche  LLP  to  serve  as
independent  accountants  and  auditors  for the year ended  December  31,  1999
succeeding  Moore  Stephens,  P.C.  The  Registrant  did not have  any  material
disagreements  on accounting and financial  disclosure  with its  accountants in
1999.


                                       12
<PAGE>

PART III

ITEM 9 - DIRECTORS,   EXECUTIVE   OFFICERS.   PROMOTERS  AND  CONTROl   PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

            As of December 31, 1998,  the  Registrant's  directors and executive
officers were:

Name                           Age       Position Held

Steven Shulman                 59        Chairman of the Board of Directors,
                                         President and Chief Executive Officer

Jonathan S. Lasko              29        Executive Vice-President, Secretary,
                                         Chief Operating Officer and Director

Richard Power                  51        Director

Fred A. Seigel                 43        Director

Houssam T. Aboukhater          28        Director

Salvatore J. Bommarito         51        Director

William P. Rodrigues, Jr.      56        Vice-President -- Finance, Treasurer
                                         and Chief Financial Officer

            Directors  are  elected on an annual  basis.  All  directors  of the
Registrant  hold office  until the next annual  meeting of the  shareholders  or
until their successors are elected and qualified.  At present,  the Registrant's
by-laws  provide for not less than one director nor more than seven.  Currently,
there are six directors.  The Registrant's by-laws permit the Board of Directors
to fill any vacancy and such director may serve until the next annual meeting of
shareholders  or until his  successor  is elected and  qualified.  Officers  are
elected to serve,  subject to the  discretion of the Board of  Directors,  until
their successors are appointed.

            STEVEN  SHULMAN,  age 59, has served as the Chairman of the Board of
Directors since February,  1997, and since February 18, 1998, he has also served
as the Chief Executive Officer of the Company. He is also a Managing Director of
Latona  Associates,  Inc.  ("Latona  Associates");  an  investment-banking  firm
involved in providing advisory services and capital.  He served as a director of
a number of public and  private  companies  and is  currently  a director of WPI
Group,  Inc., SI Handling,  Inc. and Beacon Capital  Partners,  L.P. Mr. Shulman
holds an M.S. in Industrial Management from the Stevens Institute of Technology,
where he currently serves as Vice Chairman of its Board.

            JONATHAN  S. LASKO,  age 29, has been a director  of the  Registrant
since September,  1994, and its Chief Operating  Officer since August,  1995. He
has also been the Company's Executive  Vice-President since May, 1993. Mr. Lasko
is responsible for all day-to-day business conducted by the Company and oversees
the operations of the subsidiaries of the Registrant.  Mr. Lasko


                                       13
<PAGE>

was the Vice-President of A&E Management  Corporation from October 27, 1993 and,
The Lasko  Companies,  Inc.  from May 11, 1995.  He is also  President and Chief
Executive Officer of A-One-A Produce.  Mr. Lasko attended Bernard Baruch College
in New York.

            RICHARD POWER, age 51, has served as a director of the Company since
February,  1997.  Currently  Mr.  Power  is  Executive  Vice-President  of  Tyco
International  Ltd.,  a New  York  Stock  Exchange  listed  corporation.  He was
Vice-President  of Tyco Fire and Safety  Services from May 1997 to March,  1999,
and the  President of Carlisle  Plastics,  Inc.  from January to May 1997,  both
divisions  of Tyco  International  Ltd.  He  served as a  consultant  to Tyco in
Mergers and  Acquisitions  from 1995 to 1996, Vice President and Chief Financial
Officer of Abex, Inc. a New York Stock Exchange listed corporation  between 1994
and 1995,  and was the Managing  Director of a private  investment  company from
1992 through 1994. Mr. Power holds a B.S. and an M.B.A. for Boston College

            FRED A. SEIGEL,  age 43, has served as a Director since February 18,
1998.  Mr. Seigel joined Latona  Associates,  a leading  investment and advisory
firm,  as a Managing  Director  in  September  1999.  In addition to his work at
Latona Associates, he currently serves as Executive Vice President of Operations
of ProcureNet,  Inc. the pioneer and leading  provider of Internet B2B solutions
and services. Prior to Latona Associates,  Mr. Seigel founded and served for six
years as  President  and  Director of Energy  Capital  Partners,  a company that
provided financing for energy efficiency  projects throughout the United States.
The company was sold to a Global 100 company in February,  1999.  He also served
as a limited partner to two large-scale  co-generation  projects  representing a
total investment of $350 million and as a project manager for Wheelabrator-Frye,
Inc. In  addition,  Mr.  Siegel  served as Director of the  Executive  Office of
Energy for the State of New  Hampshire.  Mr.  Seigel  received a Bachelor of Art
degree from New England College.

            HOUSSAM T.  ABOUKHATER,  age 28,  has  served as a  Director  of the
Company since August 1998. Mr.  Aboukhater is Vice President of Prestolite Wire,
a  privately-held,  Southfield,  Michigan-based  company,  which  is  a  leading
producer of telecommunications wire. From 1993 to 1996, Mr. Aboukhater served as
Vice President of Balcrank Products,  an automotive  components  division of the
GenTek,  a New York Stock  Exchange  listed  corporation.  Mr.  Aboukhater  also
currently  serves as  Director  of Market  Analysis  for Latona  Associates,  an
investment-banking firm involved in advisory services and principal investments.
Mr.  Aboukhater holds a B.A. in business  administration  from the University of
San Diego, San Diego, California.

            SALVATORE  J.  BOMMARITO,  age 51, has  served as a Director  of the
Company since May 1999. Mr.  Bommarito is the founder of Twin Capital,  Inc./New
Street  Investments,  L.P.  a  New  York  city-based  investment  banking  firm,
organized  in January  1994,  which  services  include  advising  on mergers and
acquisitions and private placements and providing general corporate advice. From
June 1990 to  January  1994,  Mr.  Bommarito  served as a Managing  Director  at
Chemical  Securities,  Inc.  in New York where he was founder and co-head of its
high yield bond  underwriting  business.  From December  1984 to June 1990,  Mr.
Bommarito  served as a Managing  Director at Bankers  Trust  Company in New York
where he was the Senior Banker in the Merchant  Banking  Group,  which  services
included  advising on mergers and  acquisitions,  private  placement and venture
capital.  Mr. Bommarito holds an M.B.A. from Fordham University and an A.B. from
the University of Notre Dame.


                                       14

<PAGE>

            WILLIAM P. RODRIGUES,  JR., age 56, was appointed  Vice-President of
Finance and Chief Financial  Officer on July 18, 1998.  Previously,  he had been
Controller of Mueller Company,  a unit of Tyco  International,  Inc. since 1989.
From 1976 to 1987, he was Vice-President of Finance and Controller of Clearfield
Cheese  Company,  a subsidiary of H.P. Hood Inc., a Boston-based  dairy products
company. Mr. Rodrigues holds an A.B. degree from Boston College.

            Section 16(a) Beneficial Ownership Reporting Compliance

            Section  16(a) of the  Securities  Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent  of a  registered  class of the  Company's  equity  securities,  to file
reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with
the Securities and Exchange Commission ("SEC").  Such officers and directors and
10%  stockholders  are also required by SEC rules to furnish to the Company with
copies of all Section 16(a) forms they file.

            Based  solely on its review of the copies of such forms  received by
it, or written  representations  from  certain  reporting  persons,  the Company
believes that,  during the fiscal year ended  December 31, 1999,  that there was
compliance  with  all  Section  16(a)  filing  requirements  applicable  to  its
officers, directors and 10% stockholders.

ITEM 10 - EXECUTiVE COMPENSATION

            The   following   table   sets  forth  all   compensation   paid  or
distributions  made during the fiscal years ended  December  31, 1999,  1998 and
1997,  by the  Registrant  or any of its  subsidiaries  to the  Chief  Executive
Officer of the Registrant and to each of its most highly  compensated  executive
officers,  other than the Chief Executive Officer,  whose compensation  exceeded
$100,000.
<TABLE>
<CAPTION>

                                                       Annual Compensation
                                   Year Ended       Annual          Other
Name & Principal Position          December 31      Salary          Compensation    Options
-------------------------          -----------      ------          ------------    -------
<S>                                <C>              <C>             <C>             <C>
Samuel H. Lasko,
President and                      1997             $150,000        $22,502(2)
Treasurer(1)                       1998             $   -0-         $   -0-

Jonathan S. Lasko,
Executive Vice                     1997             $  95,000       $21,727(2)      12,500(4)
President, Secretary and           1998             $125,000        $14,058          8,000(4)
Chief Operating Officer            1999             $125,000        $23,955(2)       5,000(4)

Steven Shulman                     1997             $  -0-          $  -0-          13,000(4)
Chief Executive Officer            1998             $  -0-          $  -0-          15,000(4)
and President(3)                   1999             $  -0-          $  -0-          20,000(4)

William P. Rodrigues, Jr.
Vice President Finance and
Chief Financial Officer            1999             $100,000        $ 6,096(5)

Milton Namiot,                     1997             $175,000        $ 9,500(2)      12,500(6)
Chief Executive Officer(5)
----------------------------------------------------------------------------------------------------
</TABLE>

(1)     Resigned effective August 26, 1998.
(2)     Represents  amounts paid for lease of automobile,  automobile  insurance
        and health insurance.
(3)     Steven  Shulman  became Chief  Executive  Officer of the  Registrant  in
        February,  1998,  subsequent  to the  resignation  of former  CEO Milton
        Namiot. Mr. Shulman became President of the Registrant in August,  1998,
        subsequent to the resignation of Samuel H. Lasko.
(4)     Represents  options  to  purchase  shares of  Common  Stock  granted  to
        directors  and  executive  officers  under the  Registrant's  1997 Stock
        Option Plan.
(5)     Represents amount paid for health insurance.
(6)     In connection with the sale of the Registrant's  Deering Ice Cream, Inc.
        business,  Mr.  Namiot  resigned  as an  officer.  He was an officer and
        director of the  Registrant  from February 17, 1997 until the closing of
        the  Deering  transaction.  In  connection  with  his  resignation,  the
        termination of his three year  employment  contract,  50% of the options
        theretofore  granted Mr. Namiot, or options to purchase 12,500 shares of
        Common Stock were made immediately exercisable. They have since expired,
        unexercised.

                                       15
<PAGE>

                    Option/SAR Grants in the Last Fiscal Year
                                Individual Grants
<TABLE>
<CAPTION>

                                   Number of          % of Total
                                  Securities         Options/SARs
                                  Underlying          Granted to
                                 Options/SARs          Employees            Exercise or
                Name              Granted(#)        in Fiscal Year       Base Price ($/Sh)      Expiration Date
                ----           ----------------     --------------       -----------------      ---------------

<S>                                <C>                   <C>                  <C>                 <C>
Steven Shulman                     20,000                33.8%                $ 3.19              May 18, 2009
Jonathan S. Lasko                   5,000                8.5%                 $ 3.19              May 18, 2009
</TABLE>


Director Compensation

            Directors  are   reimbursed  for  expenses   actually   incurred  in
connection with attending meetings of the Board of Directors. In addition to the
foregoing,  directors are also granted options annually through the Registrant's
1997 Stock  Option Plan.  At the Meeting held May 18, 1999,  the Chairman of the
Board and President,  Mr. Shulman, was granted 20,000 options, Mr. Richard Power
was granted  20,000  options,  Mr.  Jonathan Lasko was granted 5,000 options and
each of the other three  directors  was  granted  3,000  options  for 1999.  The
Registrant  anticipates  that the Board of  Directors  will  continue to meet at
least four times a year.

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

            The following table sets forth options exercised by the Registrant's
chief executive  officer and the Registrant's two other most highly  compensated
executive  officers  during  fiscal  1999,  and  the  number  and  value  of all
unexercised  options at year end. The value of "in-the-money"  options refers to
options  having an  exercise  price  which is less than the market  price of the
Registrant's  stock at fiscal  year-end.  On that date, none of the Registrant's
executive officers held exercisable options which were "in-the-money".

                                       16
<PAGE>
<TABLE>
<CAPTION>

                                                                               Number of
                                                                              Securities                  Value of
                                                                              Underlying                 Unexercised
                                                                             Unexercised                In-The-Money
                                                                             Options/SARs               Options/SARs
                                                                             at FY-End (#)              at FY-End ($)

                                  Shares Acquired            Value           Exercisable/               Exercisable/
Name                               On Exercise (#)        Realized ($)       Unexercisable              Unexercisable
----                               ---------------        ------------       -------------              -------------

<S>                                      <C>                   <C>           <C>                            <C>
Steven Shulman                           -0-                   -0-           14,667/33,333                  $0/0

Jonathan S. Lasko                        -0-                   -0-           11,005/14,495                  $0/0

William P. Rodrigues, Jr.                -0-                   -0-            4,167/8,333                   $0/0
</TABLE>

Employment Agreements and Aggregate Options Holdings

            The Registrant has a five-year employment  agreement,  ending August
31, 2000, with Jonathan S. Lasko. Under his employment  agreement,  Mr. Lasko is
to receive an annual base salary of  $115,000  for the fourth year and  $125,000
for the  fifth  year of his  employment.  On  February  18,  1998,  the Board of
Directors accepted the recommendation of its Compensation Committee of the Board
of Directors (the  "Compensation  Committee") and increased  Jonathan S. Lasko's
base compensation for 1998 and 1999 to $125,000.  The employment  agreement also
entitles Mr. Lasko to the use of an automobile  and to employee  benefit  plans,
such as group  life,  health,  hospitalization  and life  insurance.  Under  the
employment  agreement,  employment  terminates upon death or total disability of
the employee  and may be  terminated  by the  Registrant  for "cause,"  which is
defined,  among  other  things,  as  the  willful  failure  to  perform  duties,
embezzlement,  conviction of a felony, or breach of the employee's  covenant not
to compete or maintain confidential certain information.

            In August,  1998,  Dr.  Samuel H. Lasko  resigned  as an officer and
director  of the  Registrant.  As was done by  Jonathan  Lasko,  Dr.  Lasko also
surrendered his one-time performance based option to purchase up to an aggregate
of 75,000 shares of common stock in connection  with the sale by the  Registrant
and, in lieu  thereof,  received  warrants to purchase  37,500  shares of common
stock at an exercise price of $11.875 per share.

            In connection with the A-One-A Produce  transaction,  the Registrant
entered into five-year employment agreements, effective July 1, 1997, and ending
June 30,  2002,  with both Virgil D.  Scarbrough  and Scott  Davis.  Under these
employment agreements,  Messrs.  Scarbrough and Davis serve as senior executives
of the  Registrant's  wholly-owned  subsidiaries  A-One-A Produce and Fresh, and
each receive a annual base salary of $120,000,  an annual discretionary bonus, a
performance  incentive bonus of 20% of annual salary,  which  percentage will be
increased  incrementally  if the  pre-tax  income of A-One-A  Produce  and Fresh
exceed specified  levels,  and all other benefits  available to other Registrant
executives.


                                       17
<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF CERTaIN BENEFICIAL OWNERS AND MANAGEMENT

          The following  table  provides  information  concerning the beneficial
ownership of Common Stock of the Registrant by each director,  certain executive
officers,  and by all directors and officers of the  Registrant as a group as of
December 31, 1999. In addition,  the table provides  information  concerning the
beneficial  owners known to the Registrant to hold more than five percent of the
948,342 shares of outstanding  Common Stock of the Registrant as of December 31,
1999.

                                                  Common Stock
                                                  Beneficial         Percent of
Name of Beneficial Owner                          Ownership(1)       Class(1)
------------------------                          ------------       --------

Jonathan S. Lasko                                  104,167(2)         10.0%
Richard Power                                       94,250(3)          9.4%
Steven Shulman                                     130,284(4)         12.0%
Fred A. Seigel                                      20,458(5)          1.7%
Houssam T. Aboukhater                               21,000(6)          1.8%
Salvatore Bommanito                                 40,000(9)          3.4%
William P. Rodrigues                                 6,666(7)          *
Michael Feinberg                                    57,500(8)          6.0%

All Directors, Executive Officers and 5%
    Holders as a Group (8 persons)                 474,325            40.4%
-----------------------------------
          *Less than one percent.

(1)       In each case the beneficial owner has sole voting and investment power
          except that 38,000  shares held by Jonathan S. Lasko are held in joint
          tenancy with his wife Ellen J. Lasko.
(2)       Includes  2,500 shares held for the benefit of Jordana Lasko, a minor.
          Includes 15,167 Options and 37,500 Warrants exercisable within 60 days
          of this Report.
(3)       Includes 6,333 Options and 43,167 Warrants  exercisable within 60 days
          of this Report.
(4)       Includes 43,667 Warrants exercisable within 60 days of this Report.
(5)       Includes 1,000 Options and 11,583 Warrants  exercisable within 60 days
          of this Report.
(6)       Includes 1,000 Options exercisable within 60 days of this Report.
(7)       Includes 4,166 Options exercisable within 60 days of this Report.
(8)       Includes 7,500 warrants exercisable within 60 days of this Report.
(9)       Includes 40,000 warrants exercisable within 60 days of this Report.


ITEM 12 - CERTAIN RELATIONSHiPS AND RELATED TRANSACTIONS

          Samuel H. Lasko and  Jonathan  S. Lasko  (collectively  the  "Laskos")
entered into an option  agreement to purchase the businesses,  assets or capital
stock of three of the Registrant's wholly owned  subsidiaries,  The Lasko Family
Kosher Tours,  Inc., The Lasko Companies,  Inc. and A&E Management,  Inc. at the
fair  market  value  thereof  to be  independently  determined.  The  option was
exercised by Samuel H. Lasko alone and on March 13, 1998, he purchased The Lasko
Family Kosher Tours, Inc. and A&E Management,  Inc. for  consideration  equal to
$575,000  in  accordance  with "fair  value"  and  "fairness"  opinions  from an
independent  valuation  firm. The sale was ratified by the  shareholders  at the
1998 Annual Meeting on August 26, 1998.

          A-One-A Produce leases  approximately  55,000 square feet at 1351 N.W.
22nd  Street,  Pompano  Beach,  Florida,  for use as its  principal  offices and
warehouse.  The lease term is for ten years  expiring  July 31,  2007,  with two
five-year options to extend at an annual rental of approximately  $222,000.  The
Pompano Beach facility is owned by an affiliate of Messrs. Scarbrough and Davis.
A lease for this facility was negotiated as part of the A-One-A acquisition.

          On December 16, 1999 and February 9, 2000 Steven  Shulman,  President,
Chairman of the Board of Directors and Chief Executive Officer made two loans to
the  Registrant  of  $300,000  each.  The loans are  evidenced  by 8 1/2% Senior
Subordinated Notes, due December 10, 2000 and February 2001, respectively.

                                       18

<PAGE>

          On January 10, 2000,  Jonathan  Lasko,  Executive  Vice  President and
Chief Operating Officer, loaned the Registrant $25,000. The loan is evidenced by
an 81/2% Senior Subordinated Note due January 10, 2001.

ITEM 13 - EXHIBITS ANd REPORTS ON FORM 8-K

(a) Exhibits

          (3)(i) Articles of Incorporation *

          (3)(ii) By-laws *

          (3)(iii) Instruments defining the rights of holders *

          (10) Material Contracts **

          (21) Subsidiaries of the Registrant

          The Registrant's three operating wholly owned subsidiaries are:

          1.    A One A Produce & Provisions, Inc.
                1351 NW 22nd Street
                Pompano Beach, Florida 33069

          2.    Fresh, Inc.
                1351 NW 22nd Street
                Pompano Beach, Florida 33069

          3.    Banner Beef & Seafood Co., Inc.
                1111 NW 21st Terrace
                Miami, Florida 33127
--------------------------------------

 *        Incorporated  by  this  reference  to  the  Registrant's  registration
          statement # 33-96892-A.
**        All  material  contracts  presently  in  full  force  and  effect  and
          heretofore  filed with the Commission are hereby  incorporated by this
          reference to  Registrant's  registration  statements  #33-96892-A  and
          #333-45195; to Registrant's Form 10-KSB and amendments thereto for the
          year ended December 31, 1998,  Commission file number 0-27132;  and to
          Registrant's Reports on Form 8-K filed with the Commission on July 30,
          1998.

b) Reports on Form 8-K

          The Registrant  filed Current  Reports on Form 8-K (i) on May 3, 1999,
to  report  a press  release  announcing  the  completion  of its  $1.6  million
preferred equity financing and issuance of its Series C Preferred Stock, (ii) on
August 20, 1999 to report the dismissal of Moore  Stephens  P.C. as  independent
accountants and (iii) on November 12, 1999 report the engagement of Deloitte and
Touche LLP as independent accountants and auditors for 1999.


                                       19
<PAGE>
                                   SIGNATURES

          In  accordance  with  Section 13 of the Exchange  Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                            TERRACE FOOD GROUP, INC.
--------------------------------------------------------------------------------
                                   Registrant

By:                      /s/ Steven Shulman, President
--------------------------------------------------------------------------------
                            Steven Shulman, President

Date:                              May 11, 1999
--------------------------------------------------------------------------------

                                POWER OF ATTORNEY

          Terrace Food Group, Inc. and each of the undersigned do hereby appoint
Messrs.  Steven Shulman and Jonathan Lasko,  its or his true and lawful attorney
to  execute  on  behalf  of the  Registrant  and  the  undersigned  any  and all
amendments  to the  Annual  Report on Form  10-KSB and to file the same with all
exhibits  thereto  and  other  documents  in  connection  therewith,   with  the
Securities and Exchange Commission.

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this  Amendment has been signed below by the following  persons on behalf of the
Company and in the capacities and on the dates indicated.


Signature                  Title                                   Date
---------                  -----                                   ----

/s/ Steven Shulman         Chairman of the Board, Chief            May 11, 2000
---------------------      Executive Officer, President
Steven Shulman             and Director



/s/ Jonathan S. Lasko      Executive Vice-President, Chief         May 11, 2000
----------------------     Operating Officer, Secretary
Jonathan S. Lasko          and Director



                           Director
----------------------
Richard D. Power



/s/ Fred A. Seigel         Director                                May 11, 2000
-----------------------
Fred A. Seigel



/s/ Houssam T. Aboukhater   Director                               May 11, 2000
-------------------------
Houssam T. Aboukhater


                                       20
<PAGE>

                                 Director
--------------------------
Salvatore J. Bommarito



/s/ William P. Rodrigues, Jr.    Vice President-Finance,           May 11, 2000
-------------------------------  Treasurer and Chief Financial
William P. Rodrigues, Jr.         Officer




                                       21
<PAGE>
TERRACE FOOD GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS
--------------------------------------------------------------------------------

                                                                            Page

INDEPENDENT AUDITORS' REPORTS                                              F 2-3

CONSOLIDATED  FINANCIAL  STATEMENTS  AS OF  DECEMBER  31, 1999
 AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998:

   Consolidated Balance Sheet                                                F 4

   Consolidated Statements of Operations                                     F 5

   Consolidated Statements of Changes in Stockholders' Equity (Deficiency)   F 6

   Consolidated Statements of Cash Flows                                     F 7

   Notes to Consolidated Financial Statements                                F 9



                                      F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors of
  Terrace Food Group, Inc.

We have  audited the  accompanying  consolidated  balance  sheet of Terrace Food
Group,  Inc. and  subsidiaries  (the "Company") as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity (deficiency)
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Terrace
Food Group,  Inc. and  subsidiaries  as of December 31, 1999, and the results of
their  operations  and their cash flows for the year then ended,  in  conformity
with accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements for 1999 have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements,  the Company's recurring losses from
operations,  negative  cash  flows from  operations  and  stockholders'  capital
deficiency  raise  substantial  doubt  about its  ability to continue as a going
concern.  Management's plans concerning these matters are also described in Note
1. These consolidated  financial  statements do not include any adjustments that
might result from the outcome of this uncertainty.


DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
May 5, 2000

                                      F-2

<PAGE>
                         REPORT OF INDEPENDENT AUDITORS


To the Stockholders and Board of Directors of
   Terrace Food Group, Inc.



         We have audited the accompanying consolidated statements of operations,
changes in stockholders'  equity, and cash flows of Terrace Food Group, Inc. and
its  subsidiaries  for the year ended  December  31,  1998.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

         We conducted our audit in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that  our  audit
provides a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of Terrace  Food Group,  Inc. and its  subsidiaries  for the year
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.






                                         MOORE STEPHENS, P. C.
                                         Certified Public Accountants.

New York, New York
April 2, 1999

                                      F-3

<PAGE>

TERRACE FOOD GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS:
Accounts receivable (less allowance for
<S>                                                                                       <C>
   doubtful accounts of $303,944)                                                         $  5,334,715
  Inventories                                                                                1,878,081
  Current portion of note receivable - stockholder                                              53,000
  Other current assets                                                                         239,272
                                                                                          ------------

           Total current assets                                                              7,505,068

  Property and equipment, net                                                                4,631,962
  Note receivable - stockholder, net of current portion                                         53,000
  Cost in excess of net assets of businesses acquired -
    net of accumulated amortization of $469,465                                              3,366,679
  Deferred Financing Costs, net of accumulated amortization of $361,818                        249,322
                                                                                          ------------

TOTAL                                                                                     $ 15,806,031
                                                                                          ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Cash overdraft                                                                          $  1,510,380
  Accounts payable                                                                           4,707,832
  Accrued expenses                                                                           1,802,931
  Line of credit                                                                             4,056,528
  Term loan                                                                                  1,380,330
  Current portion of long-term debt                                                            271,788
  Convertible subordinated notes                                                             3,105,987
                                                                                          ------------

           Total current liabilities                                                        16,835,776

  Note payable - related party                                                                 300,000
  Long term debt, net of current portion                                                       477,496
  Other non-current liabilities                                                                136,666
                                                                                          ------------

           Total liabilities                                                                17,749,938

COMMITMENTS AND CONTINGENCIES (Note 10)

SERIES C and D REDEEMABLE PREFERRED STOCK,
  $.001 par value, 21,308 shares authorized, 20,772 shares issued and outstanding            1,927,989
                                                                                          ------------

STOCKHOLDERS' DEFICIENCY:
  Preferred stock, $.001 par value, 10,000,000
    shares authorized, none issued or outstanding                                                 --
  Common stock - $.001 par value, 25,000,000
    shares authorized, 948,342 issued and outstanding                                              948
  Additional paid-in capital                                                                10,513,923
  Accumulated deficit                                                                      (14,386,767)
                                                                                          ------------

           Total stockholders' deficiency                                                   (3,871,896)
                                                                                          ------------
TOTAL                                                                                     $ 15,806,031
                                                                                          ============
</TABLE>

See notes to the consolidated financial statements.

                                      F-4
<PAGE>
TERRACE FOOD GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
------------------------------------------------------------------------------------------------------------

                                                                           1999                     1998

<S>                                                                   <C>                       <C>
Net sales                                                             $ 42,390,476              $ 31,011,197
Cost of sales                                                           33,287,117                23,624,475
                                                                      ------------              ------------
             Gross profit                                                9,103,359                 7,386,722
                                                                      ------------              ------------

OPERATING EXPENSES:
  Selling, general and administrative expenses                          12,239,202                 9,065,269
  Provision for doubtful accounts                                          403,142                   241,855
  Impairment charge                                                        606,708                      --
                                                                      ------------              ------------
           Total operating expenses                                     13,249,052                 9,307,124
                                                                      ------------              ------------
  Loss from operations                                                  (4,145,693)               (1,920,402)
                                                                      ------------              ------------

OTHER (EXPENSE) INCOME:
  Interest expense                                                      (1,638,056)                 (670,128)
  Interest income                                                            9,894                    10,549
                                                                      ------------              ------------
           Total other expense                                          (1,628,162)                 (659,579)
                                                                      ------------              ------------

  Loss from continuing operations                                       (5,773,855)               (2,579,981)

DISCONTINUED OPERATIONS:
  Loss on disposal of discontinued businesses
    (net of income taxes of $0)                                               --                    (139,483)
                                                                      ------------              ------------
           Net loss                                                   $ (5,773,855)             $ (2,719,464)
                                                                      ============              ============

BASIC AND DILUTED LOSS PER
  SHARE OF COMMON STOCK:
    Loss from continuing operations                                   $      (6.52)             $      (3.84)
    Loss on disposal of discontinued businesses                               --                       (0.20)
                                                                      ------------              ------------
    Basic and diluted net loss per share of common stock              $      (6.52)             $      (4.04)
                                                                      ============              ============
    Basic and diluted weighted average shares of common
      stock outstanding                                                    948,342                   672,620
                                                                      ============              ============
</TABLE>


See notes to the consolidated financial statements.


                                      F-5
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Total
                                              Convertible                             Additional                       Stockholders'
                                            Preferred Stock           Common Stock      Paid-in        Accumulated        Equity
                                           Shares      Amount       Shares    Amount    Capital         Deficit         (Deficiency)
                                           ------      ------       ------    ------    -------         -------         ------------

<S>                                       <C>          <C>         <C>        <C>     <C>              <C>              <C>
BALANCE - DECEMBER 31, 1997               1,523,825    $ 1,524     500,640    $ 501   $ 9,079,848      $ (5,893,448)    $ 3,188,425

  Asset acquisition - Fresh, Inc.                                   13,895       14       269,986                           270,000
  Conversion of preferred
    to common                            (1,523,825)    (1,524)    304,765      305         1,219
  Net proceeds from issuance
    of common stock                                                 78,000       78       759,922                           760,000
  Net costs from exercise
    of common stock purchase
     warrants                                                       26,951       26       (23,571)                          (23,545)
  Asset acquisition - Banner                                         3,000        3        37,497                            37,500
  Deering acquisition liability
    conversion                                                      10,091       10       126,122                           126,132
  A-One-A acquisition liability
    conversion                                                      11,000       11       109,989                           110,000
  Warrants and options issued with
    convertible subordinated notes                                                        281,000                           281,000

  Net loss                                                                                              (2,719,464)      (2,719,464)
                                                 ---      ----     -------    -----   -----------        -----------     -----------
BALANCE - DECEMBER 31, 1998                       -          -     948,342      948    10,642,012       (8,612,912)       2,030,048

  Issuance of common stock purchase
    warrants related to the
    Series C & D Redeemable
    Preferred Stock                                                                       277,200                           277,200
  Amortization of Series C and D
    Redeemable Preferred Stock discount                                                  (405,289)                         (405,289)

  Net loss                                                                                               (5,773,855)     (5,773,855)
                                                 ---      ----     -------    -----   -----------        -----------     -----------
BALANCE - DECEMBER 31, 1999                       -        $ -     948,342    $ 948   $10,513,923      $(14,386,767)    $(3,871,896)
                                                 ==       ====     =======    =====   ===========      ============     ===========
</TABLE>


See notes to the consolidated financial statements.

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
-------------------------------------------------------------------------------------------------------------------

                                                                                     1999                   1998

OPERATING ACTIVITIES:
<S>                                                                              <C>                   <C>
  Loss from continuing operations                                                $(5,773,855)          $(2,579,981)
                                                                                 -----------           -----------
  Adjustments to reconcile net loss from continuing
    operations to net cash used in operating activities:
      Depreciation and amortization                                                2,025,291               769,466
      Provision for doubtful accounts                                                403,142               241,855
      Impairment charge                                                              606,708                  --
      Gain on sale of equipment                                                      (91,614)                 --
  Changes in Assets and Liabilities:
    (Increase) decrease in:
      Restricted cash                                                                   --                 137,701
      Accounts receivable                                                         (1,729,704)           (1,924,768)
      Inventories                                                                   (250,205)             (573,885)
      Note receivable - stockholder                                                   53,000              (159,000)
      Other current assets                                                           (72,842)               47,779
      Deferred financing costs                                                       (47,536)              (35,033)
    Increase (decrease) in:
      Accounts payable and cash overdrafts                                         1,725,316             2,563,373
      Accrued expenses                                                               748,065               392,590
      Other noncurrent liabilities                                                   (47,500)              184,166
                                                                                 -----------           -----------

           Total adjustments                                                       3,322,121             1,644,244
                                                                                 -----------           -----------

           Net cash used in continuing operations                                 (2,451,734)             (935,737)
                                                                                 -----------           -----------
  Discountinued Operations:

    Loss from discontinued businesses                                                   --                (139,483)
                                                                                 -----------           -----------

           Net cash used in discontinued operations                                     --                (139,483)
                                                                                 -----------           -----------

           Net cash used in operations                                            (2,451,734)           (1,075,220)
                                                                                 -----------           -----------

INVESTING ACTIVITIES - CONTINUING OPERATIONS:
  Purchase of property and equipment                                                (749,033)           (2,382,604)
  Purchase of businesses - net of cash acquired                                                         (3,389,668)
  Proceeds from sale of equipment                                                    637,919                  --
                                                                                 -----------           -----------

           Net cash used in investing activities - continuing operations            (111,114)           (5,772,272)
                                                                                 -----------           -----------
</TABLE>

                                                                     (Continued)
                                      F-7
<PAGE>

TERRACE FOOD GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------

                                                                                      1999                1998

FINANCING ACTIVITIES - CONTINUING OPERATIONS:
<S>                                                                                <C>
  Proceeds from issuance of convertible subordinated notes
    with warrants and options                                                           --              2,500,000
  Proceeds from sale of Series C & D Preferred Stock with warrants                 1,799,900                 --
  Borrowing of long-term debt                                                        380,000            3,001,684
  Repayment of long-term debt                                                     (1,127,771)            (368,049)
  Borrowing under line of credit                                                   1,210,719            2,845,810
  Repayment of line of credit                                                           --             (1,354,085)
  Borrowings from related party                                                      300,000                 --
  Net proceeds from issuance of common stock
    and exercise of common stock purchase warrants                                      --                736,455
  Incurrence of deferred financing costs                                                --               (514,323)
                                                                                 -----------          -----------

           Net cash provided by financing activities - continuing operations       2,562,848            6,847,492
                                                                                 -----------          -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                 --                   --

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                           --                   --
                                                                                 -----------          -----------

CASH AND CASH EQUIVALENTS - END OF YEAR                                          $      --            $      --
                                                                                 ===========          ===========

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
    Cash paid during the years for:
      Interest                                                                   $   615,311          $   345,097
                                                                                 ===========          ===========
      Income taxes                                                               $      --            $      --
                                                                                 ===========          ===========
</TABLE>

SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
  During the first  quarter of 1998,  the Company  issued  13,895  shares of its
    common stock valued at $270,000 in connection with the acquisition of Fresh,
    Inc.  and in the third  quarter  issued  3,000 shares of its common stock in
    connection with the acquisition of Banner Beef and Seafood, Inc.
    valued at $37,500.

  During the third  quarter of 1998,  the Company  issued  21,091  shares of its
     common  stock  valued at  $236,132 to satisfy  liabilities  relating to the
     purchase of A-One-A and Deering.

  The Company's convertible subordinated notes were issued in 1998 at a discount
    of $406,000 that is being amortized over the term of the notes (see Note 7).

  In 1998, the Company's outstanding  convertible  preferred stock automatically
    converted to common stock (see Note 12).

                                                                     (Concluded)

See notes to the consolidated financial statements.


                                      F-8
<PAGE>
TERRACE FOOD GROUP, INC. and subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 and 1998
--------------------------------------------------------------------------------


1.      NATURE OF  OPERATIONS,  MANAGEMENT'S  PLANS AND  SUMMARY OF  SIGNIFICANT
        ACCOUNTING POLICIES

        Operations - Terrace Food Group,  Inc. (the  "Company")  operates in two
        segments of the food industry, Food Distribution and Food Processing and
        Manufacturing.

        The Food  Distribution  segment includes the operations of the Company's
        A-One-A  Produce  and  Provisions,  Inc.  ("A-One-A")  and  Fresh,  Inc.
        ("Fresh")  subsidiaries.  A-One-A  distributes fresh and precut produce,
        and  dairy  products  to  foodservice,  to  cruise  lines  and to export
        customers throughout South Florida. Fresh processes precut produce which
        is marketed primarily by A-One-A.

        The Food Processing and Manufacturing segment includes the operations of
        the Company's Banner Beef & Seafood Co., Inc. ("Banner") subsidiary (See
        Note 2). Banner is a custom value added  processor of meat,  seafood and
        poultry   products   marketed   nationally  to  retail  and  foodservice
        customers.

        Going Concern - The accompanying  consolidated financial statements have
        been  prepared  on  a  going  concern  basis,   which  contemplates  the
        realization of assets and the  satisfaction of liabilities in the normal
        course of business. The Company has incurred recurring operating losses.
        At  December  31,  1999  there is a  working  capital  deficiency  and a
        stockholder's  deficiency;  the  Company  is  in  default  of  its  bank
        borrowing agreement.  These conditions may indicate that the Company may
        be unable to continue  as a going  concern  for a  reasonable  period of
        time.

        The  consolidated  financial  statements do not include any  adjustments
        relating to the  recoverability  and  classification  of recorded  asset
        amounts or the amounts and  classifications of liabilities that might be
        necessary  should the Company be unable to continue as a going  concern.
        Management of the Company is taking  several  actions in its attempts to
        alleviate this situation.

        Management  Plans -  Negotiations  are in process to replace the current
        bank  borrowing  arrangement  with a new  arrangement  with a  different
        financial  institution that would provide for additional working capital
        which would enable the Company to fund its  operations  and  obligations
        for  at  least  fiscal  2000.  Several  lenders  expressed  interest  in
        providing  financing  to the  Company.  The Company is in the process of
        negotiating terms with the prospective lenders.

        The Company's Convertible  Subordinated Notes matured on March 31, 2000;
        however,  the Company is in negotiations  with the holders to extend the
        maturity.  As part of the  negotiations,  the  holders  of the notes are
        being asked to convert all or part of the notes into common stock.

        Management  has taken  actions to  improve  operations  at Banner.  Cost
        reduction programs have reduced salaries and overhead.  The product line
        has been streamlined and marketing  efforts have been targeted at proven
        and growing market  segments.  Banner's ethnic product line revenues for
        the first  quarter of fiscal 2000 have  exceeded  the  revenues  for the
        entire fiscal 1999 year and, as such,  management  expects that revenues
        for the full fiscal 2000 will be  significantly in excess of fiscal 1999
        as a result of the product line continuing to receive market acceptance.


                                      F-9
<PAGE>
        Food Distribution  revenues for the first quarter of fiscal 2000 exceeds
        similar revenues of fiscal 1999 by approximately  18% and the Company is
        in the process of negotiating for new food service contracts with cruise
        lines. Accordingly, management expects the Food Distribution business to
        grow substantially during fiscal 2000.

        Management   believes  the   implementation  of  a  new  bank  borrowing
        arrangement, the restructuring of its Convertible Subordinated Notes and
        improved   operating   performance   would  provide  for  the  Company's
        continuing operations through fiscal 2000.

        Reverse  Split  of  Common  Stock  -  Effective   March  15,  1999,  the
        shareholders of the Company  approved a one for ten reverse split of the
        Company's common stock without any other changes in  authorization,  par
        value or  otherwise.  All per share and share  amounts  for all  periods
        presented have been adjusted to reflect this reverse split.

        Consolidation Policy - The consolidated financial statements include the
        accounts of Terrace and its subsidiaries.  All significant  intercompany
        balances and transactions have been eliminated. The subsidiaries' fiscal
        years end on the Saturday  closest to December 31, which does not have a
        significant impact on the consolidated financial statements.

        Inventories -  Inventories  are recorded at the lower of cost or market.
        Cost is determined on the first-in, first-out ("FIFO") basis.

        Deferred Financing Costs - The Company  amortizes,  using a method which
        approximates the interest method,  deferred  financing costs incurred in
        connection with its financing  agreements over the related period.

        Property and  Equipment - Property and  equipment  are recorded at cost.
        Expenditures  for normal repairs and  maintenance are charged to expense
        as  incurred.  When assets are retired or  otherwise  disposed of, their
        costs and related accumulated depreciation are removed from the accounts
        and  the  resulting   gains  or  losses  are  included  in   operations.
        Depreciation is recorded using the straight-line method over the shorter
        of the estimated lives of the related asset or the remaining lease term,
        if applicable.

           Estimated useful lives are as follows:

            Buildings                                           30 Years
            Machinery and Equipment                             5 - 7 Years
            Transportation Equipment                            7 - 10 Years
            Office Equipment, Furniture and Fixtures            5 - 10 Years
            Leasehold Improvements                              5 - 10 Years

        Cash  and  Cash  Equivalents  -  The  Company  considers  highly  liquid
        investments,  with a maturity of three months or less when acquired,  to
        be cash  equivalents.  The Company did not have any cash  equivalents at
        December 31, 1999.

        Cost in Excess of Net Assets of Businesses Acquired - The cost in excess
        of net assets of businesses acquired  ("Goodwill") is being amortized on
        a straight-line basis over 20 years.

        Impairment  - The  Company's  policy  is to record  an  impairment  loss
        against  the  balance of a  long-lived  asset in the  period  when it is
        determined that the carrying amount of the asset may not be recoverable.

                                      F-10

<PAGE>

        This  determination  is based on an  evaluation  of such  factors as the
        occurrence  of a  significant  event  or a  significant  change  in  the
        environment in which the business assets operate.  The Company considers
        assets to be impaired when the expected future non-discounted cash flows
        of the business is determined to be less than the carrying  value of the
        assets.  If  impairment  is deemed to exist,  the assets will be written
        down to fair value.  Management also evaluates events and  circumstances
        to determine  whether  revised  estimates of useful lives is  warranted.
        During 1999, the Company recorded an impairment  charge of approximately
        $607,000 related to goodwill  associated with prior  acquisitions and is
        recorded  as  Impairment   Charge  in  the   accompanying   consolidated
        statements of operations.  As of December 31, 1999,  management  expects
        the carrying value of its long-lived assets to be fully recoverable.

        Income  Taxes - Deferred  income  taxes  reflect  the net tax effects of
        temporary  differences  between  the  carrying  amounts  of  assets  and
        liabilities  for financial  reporting  purposes and the bases for income
        tax purposes, and operating loss and tax credit carryforwards.

        Use of Estimates - The preparation of financial statements in conformity
        with generally accepted  accounting  principles  requires  management to
        make certain  estimates and assumptions that affect the reported amounts
        of assets and  liabilities  and the disclosure of contingent  assets and
        liabilities  at the date of the financial  statements,  and the reported
        amounts of revenue and  expenses  during the  reporting  period.  Actual
        results could differ from those estimates.

        Concentrations  of  Risk -  A-One-A  is a  member  of a  cooperative  of
        independent  distributors  through which it obtains advantageous pricing
        on purchases.  Although A-One-A purchased 27% of consolidated  purchases
        through  this  cooperative,  management  believes  there is no  business
        vulnerability regarding this concentration of purchases, as the products
        are readily available from other sources.

        New Accounting  Pronouncement  - In June 1998, the Financial  Accounting
        Standards  Board  ("FASB")  issued  Statement  of  Financial  Accounting
        Standards  ("SFAS") No. 133,  Accounting for Derivative  Instruments and
        Hedging  Activities.  Among other  provisions,  SFAS No. 133 establishes
        accounting and reporting  standards for derivative  instruments  and for
        hedging  activities.  SFAS No. 133 requires that an entity recognize all
        derivatives  as either  assets or  liabilities  in the balance sheet and
        measure those  instruments at fair value.  In June 1999, the FASB issued
        SFAS No. 137,  which deferred the effective date of adoption of SFAS No.
        133 for all fiscal quarters of all fiscal years beginning after June 15,
        2000. Management has not determined what effect, if any, the adoption of
        SFAS No. 133 will have on the consolidated financial statements.

        Loss Per Share - Basic EPS excludes dilution and is computed by dividing
        earnings (loss) available to common stockholders by the weighted-average
        number of common stock shares  outstanding  for the period.  Diluted EPS
        assumes  conversion  of options and  warrants and the issuance of common
        stock for all other  potentially  dilutive shares,  unless the effect of
        issuance would have an anti-dilutive effect.

2.      BUSINESS ACQUISITIONS

        On January 2, 1998, the Company  purchased certain assets of D.M.S. Food
        Distributors,  Inc., a Florida  Corporation  d/b/a Gourmet  Distributors
        ("Gourmet").  Gourmet is a wholesaler of dry goods. In consideration for
        the purchase,  the Company paid $453,764  primarily for inventory  which
        resulted in goodwill of $400,000. The acquisition has been accounted for
        as a  purchase.  The  operations  of Gourmet  have been  included in the
        Company's results of operations from the date of acquisition. Management
        has deemed the operations of this  acquisition  immaterial for pro forma
        purposes.  During 1999,  the Company  determined  that the remaining net
        carrying  value of the goodwill  associated  with this  acquisition  was

                                      F-11

<PAGE>

        impaired  and  not  recoverable  and,   accordingly,   charged  such  to
        operations as an impairment charge in the consolidated 1999 statement of
        operations.

        In February 1998,  effective  January 1, 1998, the Company purchased all
        of the  outstanding  stock of Fresh,  a related entity because of common
        shareholders.  The  operations  of  Fresh  have  been  included  in  the
        Company's  results  of  operations  from  the  date of  acquisition.  In
        consideration  for the  purchase,  the  Company  paid  $105,000 in cash,
        issued  13,895 shares of common stock valued at $270,000 and forgave net
        accounts  receivable of $141,986.  The  acquisition,  accounted for as a
        purchase, resulted in goodwill of $373,004.

        On July 15, 1998, the Company acquired the assets and  substantially all
        the  liabilities  of Banner  through an  acquisition  accounted for as a
        purchase.  The  operations of Banner have been included in the Company's
        results  of  operations  from the date of  acquisition.  The cost of the
        purchase  included  a base  cash  price of  $1,800,000,  the  payoff  of
        existing debt of $670,536,  and other costs of $181,212. The cost of the
        acquisition  was primarily  allocated to property,  plant and equipment.
        There was no goodwill recorded in connection with this acquisition.

        A summary of the allocation of the aggregate  consideration paid for the
        aforementioned  acquisitions,  based  on the  fair  market  value of the
        assets acquired and liabilities assumed, is as follows:

         CURRENT ASSETS:
           Accounts receivable                            $   448,535
           Inventories                                        773,533
           Other                                               23,893
                                                          -----------

         Total                                              1,245,961

          Property, plant and equipment                     2,289,286
          Goodwill                                            773,004
                                                          -----------
         Total                                              4,308,251
                                                          -----------

         CURRENT LIABILITIES:
          Accounts payable and accrued expenses               679,452
          Other                                                 6,301
                                                          -----------
         Total                                                685,753
                                                          -----------
         Aggregate consideration                          $ 3,622,498
                                                          ===========


                                      F-12

<PAGE>
        The following pro forma information  presents the results of the Company
        for the year ended  December 31, 1998 as if the above  acquisitions  had
        occurred at the beginning of the period presented:

                                                             For the Year
                                                                Ended
                                                            December 31, 1998

              Total revenues                                $ 33,832,500
                                                            ============
              Loss from continuing operations               $ (3,016,591)
                                                            =============

              Basic and diluted loss from continuing
               operations per share of common stock         $      (4.48)
                                                            ============

        The pro forma consolidated results of operations are based on historical
        financial  information  of the Company and include  adjustments  to give
        effect to the following:  additional  amortization of goodwill and other
        intangibles  arising  from  the  transactions;   increased  interest  on
        borrowing to finance the  acquisitions;  and certain other  adjustments.
        These  unaudited pro forma  results have been  prepared for  comparative
        purposes  only and do not  purport to be  indicative  of the  results of
        operations  which  would have  actually  resulted  had the  acquisitions
        occurred on the date  indicated,  or of future  results of operations of
        the consolidated entities.

3.      DISCONTINUED OPERATIONS AND DIVESTITURES

        During  1998 the  Company  incurred  costs of  $139,483 in excess of the
        amounts  provided  in 1997 for  expected  losses  during  the  phase out
        periods for two businesses it divested in 1997.

4.      INVENTORIES

        Inventories at December 31, 1999 consisted of:

          Raw Materials                              $  551,436
          Semi-Processed Goods                           43,102
          Finished Goods                              1,283,543
                                                     ----------
          Total                                      $1,878,081
                                                     ==========


                                      F-13

<PAGE>

5.      PROPERTY AND EQUIPMENT

        The  following  is a summary of property  and  equipment at December 31,
1999:

          Land                                            $  197,951
          Buildings                                        1,322,475
          Machinery and equipment                          3,067,713
          Transportation equipment                            32,174
          Office equipment, furniture and fixtures           620,184
          Leasehold improvements                             360,311
                                                          ----------

          Total at cost                                    5,600,808
          Less: accumulated depreciation                    (968,846)
                                                         -----------
          Property and equipment, net                    $ 4,631,962
                                                         ===========

        Included  in the total  cost  above are assets  acquired  under  capital
        leases in the gross amount of $1,452,688. Depreciation expense for these
        assets  acquired  under capital leases was $204,945 and $117,109 for the
        years  ended  December  31,  1999 and  1998,  respectively.  Accumulated
        depreciation  for these assets  acquired under capital lease at December
        31, 1999 was $212,561.

        Total depreciation expense related to property and equipment amounted to
        $760,145 and  $335,217  for the years ended  December 31, 1999 and 1998,
        respectively.

6.      LINE OF CREDIT AND TERM LOAN

            In July  1998,  the  Company  and its  subsidiaries  entered  into a
financing  agreement with a bank under which the bank provided a line of credit,
subject to available  collateral,  as defined in the agreement,  to a maximum of
$4,000,000  and a term  loan of  $2,000,000.  The loans  are  collateralized  by
virtually  all of the assets of the  Company.  All cash  received by the Company
must be remitted to the bank as long as there is an  outstanding  balance  under
the line of  credit,  which  will  expire on July 15,  2001.  The line of credit
accrues interest at .5% over the bank's prime lending rate. The interest rate on
the line of credit at  December  31,  1999 was 9%.  The term loan is  payable in
thirty-six monthly  installments of $23,810 plus annual interest of 1% above the
bank's prime rate through July 15, 2001,  with the  remaining  balance then due.
The interest rate for the term loan at December 31, 1999 was 9.5%. Costs related
to the  financing,  included in  deferred  financing  costs in the  consolidated
balance sheet, are being amortized over its term.  Amortization expense recorded
for the  years  ended  December  31,  1999 and 1998 was  $134,292  and  $93,747,
respectively.

The loan agreement requires the Company to maintain certain financial ratios. In
addition,  the loan agreement  restricts  additional  borrowings,  dividends and
acquisitions,  as defined.  The Company was in default of certain  covenants  at
December  31,  1999 and,  accordingly,  the term  loan is  included  in  current
liabilities in the consolidated balance sheet. The bank has continued to provide
funds under the agreement and the line has been temporarily increased.

The Company is negotiating with several other banks to replace this arrangement.
F-14

<PAGE>

7.      CONVERTIBLE SUBORDINATED NOTES

        In 1998, the Company issued to a private investor  $2,625,000  principal
        amount of Convertible Subordinated Notes ("Notes"), warrants to purchase
        40,000  shares of common stock and options to purchase  50,000 shares of
        common stock of the Company.  The options expired December 31, 1998. The
        exercise price of the warrants and the conversion  rate of the Notes are
        at $6 a share.  The Notes can be  converted at the option of the Company
        into Redeemable  Convertible 8% Cumulative  Preferred Stock  ("Preferred
        Stock") of the  Company.  The Notes,  warrants and any  Preferred  Stock
        issued to the private investor are subject to anti-dilution adjustments,
        registration  rights,  interest and dividend  adjustments and payment by
        the  Company  of  certain  fees  and  expenses  in  connection  with the
        transaction.  The Company received proceeds of $2,500,000, with $281,000
        attributed to the warrants and options and $2,219,000 to the Notes.  The
        discount on the Notes in the amount of $406,000 is being  amortized over
        the term of the Notes.

        The Notes agreement  required the Company to attain a specified earnings
        level for 1998,  which was not  attained.  Accordingly,  the Company has
        issued to the private  investor  additional  warrants to purchase 25,000
        shares of common stock of the Company that are  exercisable at $6.00 per
        share and the interest rate of the notes was increased to 14%.

        On April 13, 1999, the Company and the private  investor agreed to amend
        the terms of the Notes.  The  maturity  date was  extended  to March 31,
        2000,  and the Notes are able to be converted to either  common stock or
        Preferred  Stock at a rate of $6 per share and the exercise price of the
        warrants  was set at $6.00 per share  through  the  maturity  date.  Any
        default which may have occurred under the agreement was waived or deemed
        cured.  The  Company  has  issued the  private  investor  an  additional
        $631,090  in Notes as payment  for  accrued  and unpaid  interest on the
        Notes though April 13, 1999 and other  considerations.  The Company also
        issued the private investor 25,000  additional  warrants to purchase the
        Company's  common  stock at $9.00 per  share.  Of this  amount  $350,000
        represented additional discount to the Notes and is being amortized over
        the extended term of the Notes.

        Total  discount  amortization  related  to the  notes was  $491,000  and
        $116,000 for the years ended December 31, 1999 and 1998, respectively.

        As of March 31,  2000,  the  Company has not paid the  principal  or any
        accrued  interest on the Notes and the holders  have not  converted  the
        Notes.  Accordingly,  the convertible  subordinated  debt is included in
        current  liabilities in the  consolidated  balance sheet. The Company is
        negotiating  with the holders of the Notes to extend  their  maturity to
        convert them to common stock or a combination thereof.


                                      F-15

<PAGE>

8.      LONG-TERM DEBT AND CAPITAL LEASE

        At December 31, 1999, long-term debt consisted of the following:
<TABLE>
<CAPTION>
<S>                                                                             <C>
        Note payable in thirty-six monthly total installments of $5,647
          including interest at 9.3% per annum, through October 2001,
          collateralized by certain manufacturing equipment.                    $ 109,044
        Capital lease obligation payable in thirty-six monthly total
          installments of $12,170 including interest at 10.69% per
          annum through July 2002, collateralized by certain
          manufacturing equipment.                                                328,384
        Capital lease obligation payable in forty-two monthly
          installments of $7,223 including interest at 11.12%
          per annum through February 2003, collateralized by
          certain packaging equipment                                             229,565
        Various notes payable in thirty-six total monthly
          installments of $1,377-$2,142 including interest
          at 14.6%-16.1% per annum collateralized by certain
          computer equipment and software                                          82,291
                                                                                ---------

        Total                                                                     749,284
        Less: current portion                                                    (271,788)
                                                                                ---------
        Total                                                                   $ 477,496
                                                                                =========
</TABLE>

        Long-term debt at December 31, 1999 matures as follows:

        2000                                       $271,788
        2001                                        274,279
        2002                                        185,806
        2003                                         17,411
                                                   --------
        Total                                      $749,284
                                                   ========

9.      INCOME TAXES

        Deferred income tax assets and liabilities are recognized for the future
        tax  consequences  attributable  to  temporary  differences  between the
        financial  statement carrying amounts of existing assets and liabilities
        and  their  respective  tax  bases.   Deferred  income  tax  assets  and
        liabilities  are measured  using enacted tax rates  expected to apply to
        taxable income in the years in which temporary  differences are expected
        to be recovered or settled.  Temporary differences include different tax
        bases and  accounting  carrying  values of property  and  equipment  and
        intangible  assets.  Deferred  income tax assets are established for all
        deductible temporary  differences and operating loss carryforwards.  The
        operating  loss  carryforwards  at  December  31,  1999,  (assuming  all
        operating loss  carryforwards will be available) amount to approximately
        $14,000,000.  Such  loss  carryforwards  will  expire  at  the  rate  of
        $5,100,000 in 2014,  $3,350,000 in 2013,  $4,000,000 in 2012, $1,200,000
        in 2011 and $350,000 in 2010. At December 31, 1999,  based on the amount
        of the operating loss  carryforwards,  the Company would have a deferred
        tax  asset  of  approximately   $4,750,000.   However,  because  of  the
        uncertainty  that  the  Company  will  generate  income  in  the  future
        sufficient  to  fully  or  partially  utilize  these  carryforwards,   a
        valuation  allowance of $4,750,000 has been established  representing an
        increase of $1,750,000 from December 31, 1998. Accordingly,  no deferred
        income  tax  asset  is   reflected  in  these   consolidated   financial
        statements.
                                      F-16

<PAGE>

10.     COMMITMENTS AND CONTINGENCIES

        Operating  Leases - Future minimum rental payments under  noncancellable
        operating leases,  including  equipment leases,  with terms in excess of
        one year are as follows:

        Year ending
        December 31,                                         Amount

        2000                                               $1,028,181
        2001                                                1,059,849
        2002                                                  975,440
        2003                                                  795,532
        2004                                                  703,883
        Thereafter                                          1,440,741
                                                           ----------
        Total                                              $6,003,626
                                                           ==========

        A-One-A's main operating  facility is leased from an affiliate of two of
        A-One-A's  officers at an annual rate of approximately  $222,000 through
        June 2007. The lease provides the Company with three  five-year  renewal
        options.

        The Company also leases a plant located in Hialeah, Florida at an annual
        rate of approximately $128,000. The lease term is for five years through
        June 2003.  During the term of the lease,  the  Company has an option to
        purchase this property for the lesser of $1,270,000 or its independently
        appraised value. There is no renewal option for this lease.

        Rent expense related to the leases for the years ended December 31, 1999
        and 1998 was $689,894 and $462,005, respectively.

        Employment Agreements - The Company has an employment agreement with its
        Executive Vice President and Chief Operating Officer, through August 31,
        2000,  for a base salary of  $125,000  per year.  Additionally,  A-One-A
        produce has employment  agreements  with two of its  executives  through
        June 30, 2002, for base salaries of $120,000 each per year.

        Standby Letter of Credit - The Company has available a standby letter of
        credit in the amount of $25,000,  which is being  maintained as security
        for payments related to purchases of inventory.  The letter of credit is
        collateralized through the Company's bank line of credit.

        Litigation  - The  Company  is a party to  litigation  arising  from the
        normal  course of  business.  The  Company is a  defendant  in an action
        brought  by a  former  marketing  agent  alleging  breach  of  contract,
        misappropriation  of trade assets,  unfair  competition and violation of
        Florida's  Deceptive and Unfair Trade Practices Act. The complaint seeks
        unspecified damages. The Company is vigorously defending the matter and,
        when appropriate,  expects to assert  counterclaims.  Additionally,  the
        Company is  currently in dispute  with a former  employee  relating to a
        compensation matter. In management's opinion, the litigation and dispute
        will not materially affect the Company's financial position,  results of
        operations or cash flows.

11.     SERIES C & D REDEEMABLE PREFERRED STOCK

        In the second and third  quarters  of 1999,  the Company  issued  20,772
        shares  of newly  authorized  Series C & D  Redeemable  Preferred  Stock
        together  with  warrants to  purchase  360,000  shares of the  Company's

                                      F-17

<PAGE>

        common stock.  The Series C & D Redeemable  Preferred Stock and warrants
        were  purchased by a private  investor  group that  included four of the
        Company's  Directors.  The Company  received  proceeds of  approximately
        $1,800,000 in these transactions was used for operating purposes.

        The Series C & D Preferred Stock was issued at a discount, calculated to
        yield an effective annual dividend of approximately  15%. The Series C &
        D Redeemable  Preferred  Stock is redeemable,  in cash, at the option of
        the  Company  through  March  30,  2000,  when  it  becomes  mandatorily
        redeemable  either,  at the  option of the  Company,  in cash or through
        conversion  into 17% Senior  Notes which would mature on March 31, 2003.
        As of March 31, 2000,  the Series C & D Redeemable  Preferred  Stock had
        not been redeemed by the Company as discussions were being held with the
        holders to convert such stock to common stock of the Company.  The stock
        purchase warrants, valued at $277,200, expire four years from their date
        of issue,  provide for the purchase of  Company's  common stock at $9.00
        per share during the first year,  $7.50 per share during the second year
        and  $6.00 per share  thereafter.  The  discount  of  $554,400  from the
        redemption  value  of  $2,077,200  is  being  amortized  by  changes  to
        Additional Paid-in Capital - ($405,289) for 1999 through March 31, 2000.

12.     DESCRIPTION OF SECURITIES

        Common Stock - The Company is authorized to issue  25,000,000  shares of
        common stock, par value $.001 per share.

        Holders  of common  stock are  entitled  to  dividends  when,  as and if
        declared  by the  Board of  Directors,  subject  to any  priority  as to
        dividends for any preferred stock that may be outstanding.

        In September  1998,  the Company  issued 10,091  unregistered  shares to
        repay $126,132 of outstanding  loans related to its 1997  acquisition of
        the Deering Ice Cream business.

        In October  and  November  1998,  the Company  sold 78,000  unregistered
        shares  at  prices  ranging  from  $9.30 to  $10.00,  with  proceeds  of
        $760,000.  Unrelated  investors  purchased  50,000 shares and directors,
        officers and employees purchased 28,000 shares.

        In October 1998,  warrant holders exercised  warrants to purchase 26,951
        shares of the Company's common stock for $306,704.  Transaction costs in
        the amount of $330,249 were incurred in the  registration  of the shares
        related to the  exercise of the  warrants,  which  resulted in net costs
        associated with this transaction in the amount of $23,545.

        In November  1998,  the Company  issued  11,000  unregistered  shares to
        satisfy $110,000 of indebtedness to the former owners of A-One-A related
        to its acquisition in 1997.

        Preferred  Stock - During 1997 the Company  issued  1,523,825  Preferred
        Units,  each consisting of one share of Convertible  Preferred Stock and
        two warrants,  each to purchase  one-tenth of a share of Company  common
        stock at $40 per share, for aggregate  consideration of $2,637,300,  net
        of offering costs.  In connection with the offering,  the Company issued
        the  soliciting  agent and its  assignees,  warrants to purchase  75,000
        shares of Company common stock at a price of $40 per share,  exercisable
        through  December 4, 2000.  There were no dividends  declared or paid on
        the  Convertible  Preferred  Stock during 1998. On July 31, 1998, all of
        the outstanding shares of the Convertible  Preferred Stock automatically
        converted  on  the  basis  of  one-fifth  of a  common  share  for  each
        convertible preferred share into shares of common stock of the Company.

                                      F-18

<PAGE>

        Options and Warrants - The Company has outstanding  options and warrants
        to purchase  shares of its common stock at December 31, 1999,  which are
        described in the following paragraphs.

        Options - In  connection  with the  initial  public  offering  of Common
        Shares, the underwriter purchased an option from the Company to purchase
        up to 125,000  units each  consisting  of one-tenth of a share of common
        stock and a warrant to purchase one-tenth of a share of common stock and
        1,650 shares of common stock. The option is exercisable through December
        4, 2000 at $45.00 for each unit and each share of common stock.

        See Note 13 for more  information  regarding a stock  option plan of the
        Company.

        Warrants -

                                                           Number of    Exercise
                                                            Shares        Price
                                                            ------        -----

        Issued in connection  with initial public
         offering of Common Shares in 1995 and
         the sale of Convertible Preferred Stock
         Units in 1997; exercisable through
         December 4, 2000.                                  445,610      $ 40.00
        Issued in connection with Deering purchase
         and to one current and one former executive
         of the Company in 1997; exercisable through
         August 31, 2000.                                   121,833       11.875
        Issued in connection with Convertible
          Subordinated Notes in 1998; exercisable
          through June 30, 2002                              65,000        6.00
                                                             25,000        9.00
        Issued in connection with sales of Common Shares
          in 1998; exercisable through November 30, 2003.    12,500       10.00
        Issued prior to initial public offering in 1995;
          exercisable through December 4, 2000.              20,000      100.00
        Issued in connection with Series C & D Preferred
          Stock in 1999, exercisable through April 30,
          2003                                              360,000       *

        *Through  April 20, 2000 at $9.00
         April 21, 2000 - April 20, 2001 at $7.50
         April 21, 2001 - April 20, 2003 at $ 6.00

13.     STOCK OPTION PLAN

        The  Company  adopted  the 1997 Stock  Option  Plan (the  "Plan")  which
        enables its Board of  Directors  to grant  options  for the  purchase of
        shares of its common stock.  The Plan, as amended,  authorizes the grant
        of options  to  purchase  up to an  aggregate  of 350,000  shares of the
        Company's  common stock,  to (i) officers and other  full-time  salaried
        employees  of  the  Company  and  its   subsidiaries   with  managerial,
        professional or supervisory  responsibilities,  and (ii) consultants and
        advisors  who  render  bona  fide   services  to  the  Company  and  its
        subsidiaries,  in each case,  where the  compensation  committee  of the
        Board of Directors determines that such officer, employee, consultant or
        advisor  has the  capacity  to make a  substantial  contribution  to the
        success  of the  Company.  The  purposes  of the Plan are to enable  the
        Company to attract and retain  persons of ability as officers  and other
        key   employees   with    managerial,    professional   or   supervisory
        responsibilities,  to  retain  able  consultants  and  advisors,  and to
        motivate such persons to use their best efforts on behalf of the Company
        by providing them with an equity participation in the Company.


                                      F-19
<PAGE>

        Pursuant  to the Plan,  the Board of  Directors  has made the  following
        grants:

                                             Exercise
                                    Shares      Price         Expiration

1998                                1,000    $  16.90     January, 2008
                                    1,000       23.10     March, 2008
                                   10,000       15.60     July, 2008
                                   17,000       13.75     August, 2008
                                   28,000       10.00     November, 2008

1999                               59,000        3.19     May 17, 2009

        The options generally vest over a three-year period, one-third per year.

        A summary of the option under the Plan for 1999 and 1998 is as follows:

                                                          Weighted Average
                                              Shares       Exercise Price
                                              ------       --------------

OUTSTANDING AT DECEMBER 31, 1997               73,800        $ 13.50
  Granted                                      57,000          12.45
  Exercised                                     -               -
  Expired/Canceled                            (16,500)         12.53
                                             --------

OUTSTANDING AT DECEMBER 31, 1998              114,300          13.11
  Granted                                      59,000           3.19
  Exercised                                    -                -
  Expired/Canceled                            (19,350)         12.64
                                             --------

OUTSTANDING AT DECEMBER 31, 1999              153,950           9.37
                                             ========

EXERCISABLE AT DECEMBER 31, 1999               44,916         13.51
                                             ========

        If compensation cost of $156,000 and $492,000,  for options issued under
        the Plan in 1999 and 1998,  respectively,  had been determined  based on
        the fair value at the grant dates for awards under Plan,  the  Company's
        net loss and basic and diluted net loss per share of common  stock would
        have been increased on a pro forma basis as indicated below:

                                                       Years ended
                                                       December 31,
                                                 1999                 1998
                                            ---------------    ----------------

NET LOSS:
  As Reported                               $ (5,773,855)      $ (2,719,464)
  Pro forma                                 $ (5,929,855)      $ (3,211,464)

BASIC AND DILUTED NET LOSS PER
 SHARE OF COMMON STOCK:
  As Reported                               $      (6.52)      $     (4.04)
  Pro forma                                 $      (6.68)      $     (4.77)


                                      F-20

<PAGE>
        The fair value of each option  grant is  estimated  on the date of grant
        using  the  Black-Scholes   option-pricing   model  with  the  following
        weighted-average  assumptions  used for the  grants  awarded in 1999 and
        1998, respectively:

                                              Years ended
                                              December 31,
                                        1999                 1998
                                        ----                 ----

        Divident yields                   0 %                  0 %
        Expected Volatility             116 %                 92 %
        Risk-free interest rate         5.2 %                4.7 %
        Expected lives                  4 years              3.8 years

        The  weighted-average  fair value of options granted was $2.65 and $8.63
        for the years ended December 31, 1999 and 1998, respectively.

        The  following  table  summarizes  information  about stock  options and
        warrants at December 31, 1998:

<TABLE>
<CAPTION>

                                                        Outstanding                  Exercisable
                                        ------------------------------------------------------------------
                                            Weighted             Weighted                      Weighted
         Range of                          Remaining              Average                      Average
     Exercise Prices        Shares       Contractual Life     Exercise Price    Shares      Exercise Price
<S>    <C>                   <C>              <C>                <C>            <C>              <C>
          $3.19              59,000           9.40                3.19             -            $ 0.00
       $10.00-11.85          57,500           8.00               10.95          29,674           11.27
       $13.75-16.90          28,000           8.60               14.52           9,333           14.52
          $23.10              9,450           7.50               23.10           5,969           23.10
                            -------           ----               -----          ------           -----
                            153,950           8.61               $9.37          44,976          $13.51
                            =======           ====               =====          ======           =====
</TABLE>

14.     SEGMENT DATA

        At December 31, 1999 and 1998,  the  Company's  two business  units have
        distinct  management  teams and  infrastructures  that  offer  different
        products  which are evaluated  separately in assessing  performance  and
        allocating  resources.  These  business  units have been reported as two
        reportable   segments,   Food   Distribution  and  Food  Processing  and
        Manufacturing.  Each segment has a distinct  customer  base and requires
        different  strategic and marketing efforts.  Food Distribution  includes
        the operations of the Company's A-One-A and Fresh  subsidiaries and Food
        Processing and Manufacturing is represented by Banner.


                                      F-21
<PAGE>
        The Company  evaluates  performance  based on  operating  profit  before
        interest and taxes. Accordingly,  interest has not been allocated to the
        operating segments.

<TABLE>
<CAPTION>

                                                                                        Food
                                                                 Food              Processing and
                                                              Distribution          Manufacturing              Total
                                                            ---------------      -----------------         ------------


<S>                                                         <C>                     <C>                    <C>
Sales                                                       $ 37,441,017            $ 4,949,459            $ 42,390,476
Depreciation and amortization                                    529,541                456,690                 986,231
Operating income (loss) before impairment charge                 550,313             (3,129,690)             (2,579,377)
Impairment charge                                                606,708                      -                 606,708
Operating income (loss)                                          (56,395)            (3,129,690)             (3,186,085)
Segment assets                                                10,343,870              5,087,180              15,431,050
Expenditures for segment property
  and equipment                                                  409,106                339,427                 749,033

RECONCILIATION OF SEGMENT AMOUNTS
TO CONSOLIDATED AMOUNTS:
  Loss from continuing operations:
    Total segments                                                                                         $ (3,186,085)
    Interest expense                                                                                         (1,638,056)
    Amortization of deferred financing costs                                                                   (202,791)
    Interest income                                                                                               9,894
    Corporate expenses                                                                                         (756,817)
                                                                                                           -------------

TOTAL                                                                                                      $ (5,773,855)
                                                                                                           =============

ASSETS:
  Total segments                                                                                           $ 15,431,050
  Note receivable                                                                                               106,000
  Other assets                                                                                                  249,322
  Other current assets                                                                                           19,659
                                                                                                          -------------

TOTAL                                                                                                      $ 15,806,831
                                                                                                          =============
</TABLE>

                                      F-22
<PAGE>

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------------------------

                                                                                     Food
                                                              Food               Processing and
                                                            Distribution          Manufacturing             Total
                                                            ------------          -------------             -----


<S>                                                      <C>                     <C>                    <C>
Sales                                                    $ 27,981,862            $ 3,029,335            $ 31,011,197
Depreciation and amortization                                 478,383                 81,039                 559,422
Operating loss                                               (276,394)              (753,454)             (1,029,848)
Segment assets                                              9,837,572              5,358,607              15,196,179
Expenditures for segment property
  and equipment                                               872,161              1,697,865               2,570,026

RECONCILIATION OF SEGMENT AMOUNTS
TO CONSOLIDATED AMOUNTS:
  Loss from continuing operations:
    Total segments                                                                                      $ (1,029,848)
    Interest expense                                                                                        (670,128)
    Amortization of deferred financing costs                                                                 (61,550)
    Interest income                                                                                           10,549
    Corporate expenses                                                                                      (829,004)
                                                                                                            ---------

TOTAL                                                                                                   $ (2,579,981)
                                                                                                        =============

ASSETS:
  Total segments                                                                                        $ 15,196,179
  Note receivable                                                                                            159,000
  Other assets                                                                                               426,368
  Other current assets                                                                                        38,622
                                                                                                             -------

TOTAL                                                                                                   $ 15,820,169
                                                                                                        ============
</TABLE>

        Major  Customer -  Revenues  from one  customer  of the  Company's  food
        distribution  segment  represents  approximately  13.7% of the Company's
        consolidated revenues.

15.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        In assessing the fair value of financial instruments, the Company used a
        variety of methods and  assumptions,  which were based on  estimates  of
        market   conditions  and  risks  existing  at  that  time.  For  certain
        instruments,  including trade receivables, related party balances, trade
        payables,  and letter of credit, it was assumed that the carrying amount
        approximated  fair value for these  instruments  because of their  short
        maturities.  It was estimated that the carrying  amount of the Company's
        long-term debt, term loan,  convertible  subordinated  notes and line of
        credit  approximated  its fair value based on quoted  market  prices for
        similar issues.

        The fair  value of the  financial  instruments  disclosed  herein is not
        necessarily  representative  of the  amount  that could be  realized  or
        settled, nor does the fair value amount consider the tax consequences of
        realization or settlement.

                                      F-23

<PAGE>

16.     LOSS PER SHARE

        The following is a  reconciliation  of the numerators  and  denominators
        used in computing basic and diluted net loss per share.

                                                        1999           1998

Net loss                                           $ (5,773,855)   $ (2,719,464)

Amortization of preferred stock discount               (405,289)          -
                                                   ------------    -------------

Net loss (numerator), basic and diluted            $ (6,179,144)   $ (2,719,464)
                                                   ============    =============

Shares (denominator):
  Weighted average common shares outstanding,
    basic and diluted                                   948,342         672,620
                                                   ============    ============

Net loss per share, basic and diluted              $      (6.52)   $      (4.04)
                                                   ============    ============

        For the above mentioned periods, the Company had securities  outstanding
        which could  potentially  dilute basic earnings per share in the future,
        but were  excluded in the  computation  of diluted net loss per share in
        the periods  presented,  as their effect  would have been  antidilutive.
        Such outstanding securities consist of the following:


                                             1999              1998

Outstanding options                         153,950          114,300
Warrants                                  1,049,943          648,943
                                          ---------          -------

Total                                     1,203,893          763,243
                                          =========          =======


                                   * * * * * *
                                      F-24