---

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549

FORM 10-KSB/A

(Mark One)

[ X] Annual Report Under Section 13 Or 15(d) Of The Securities
  Exchange Act Of 1934
  For the fiscal year ended April 30, 2006

[ ] Transition Report Under Section 13 Or 15(d) Of The Securities
  Exchange Act Of 1934 
  For the transition period from _____to _____

COMMISSION FILE NUMBER:000-50569

TERRACE VENTURES INC.(Name of small business issuer in its charter)

|NEVADA                                                         | 91-2147101                       
|-------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)
|                                                               |                                  
|Suite 202, 810 Peace Portal Drive,                             |                                  
|Blaine, WA                                                     | 98230                            
|(Address of principal executive offices)                       | (Zip Code)                       
|                                                               |                                  
|(360) 220-5218                                                
|Issuer's telephone number                                     

Securities registered under Section 12(b) of the Exchange Act:
  NONE.

Securities registered under Section 12(g) of the Exchange Act:
  Common Stock, $0.001 Par Value Per Share.

Check whether the issuer is not required to file reports pursuant
  to Section 13 or 15(d) of the Exchange Act. [ ]

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

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

State issuer's revenues for its most recent fiscal year. $NIL

State the aggregate market value of the voting and non-voting
  common equity held by non-affiliates computed by reference to the price at which
  the common equity was sold, or the average bid and asked price of such common
  equity, as of a specified date within the past 60 days. (See definition of affiliate
  in Rule 12b-2of the Exchange Act.): $4,537,473 as of April 28, 2006.

State the number of shares outstanding of each of the issuer's
  classes of common equity, as of the latest practicable date. 31,949,920 Shares
  of Common Stock as of April 30, 2006.

Transitional Small Business Disclosure Format (check one): Yes
  [ ] No [ X ]

---

EXPLANATORY NOTE

Terrace Ventures Inc. (the "Company") is amending this Annual
  Report on Form 10-KSB for the year ended April 30, 2006 for the following reasons:

|(i)   | The Companys independent registered accountants
        have made a minor correction to the audit report to the accompanying audited
        financials for the year ended April 30, 2006 (the Audited Financials)
        to state that the audit was conducted in accordance with the standards
        of the public company accounting oversight board.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                               
|(ii)  | The Company made minor corrections to the presentation
        of the net loss per share in the statements of operations and accumulated
        deficit in the accompanying Audited Financials to revise presentation
        of earnings per share to the nearest cent.                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                               
|(iii) | The Company revised Note 9 to the accompanying Audited
        Financials to disclose the issuance of 200,000 vested stock options issued
        in the fiscal year ended April 30, 2006.                                                                                                                                                                    

Other than the foregoing items, no part of the Annual Report
  on Form 10-KSB filed on August 14, 2006 is being amended, and the filing of
  this Amended Annual Report on Form 10-KSB/A should not be understood to mean
  that any other statements contained therein are untrue or incomplete as of any
  date subsequent to August 14, 2006.

ITEM 7. FINANCIAL STATEMENTS.

2

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TERRACE VENTURES INC.

FINANCIAL STATEMENTS

APRIL 30, 2006 AND APRIL 30, 2005









F-1

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INDEX TO FINANCIAL STATEMENTS

|                                                        |                                                         | Page
|------------------------------------------------------- | ------------------------------------------------------- | ----
|                                                        |                                                         |     
|Report of Independent Registered Public Accounting Firm | F-3                                                    
|                                                        |                                                         |     
|                                                        | Financial Statements:                                   |     
|                                                        |                                                         |     
|                                                        | Balance Sheets                                          | F-4 
|                                                        |                                                         |     
|                                                        | Statements of Operations and Accumulated Deficit        | F-5 
|                                                        |                                                         |     
|                                                        | Statements of Changes in Stockholders Equity (Deficit) | F-6 
|                                                        |                                                         |     
|                                                        | Statements of Cash Flows                                | F-8 
|                                                        |                                                         |     
|                                                        | Notes to Financial Statements                           | F-9 
|                                                        |                                                         |     
|                                                        | Supplemental Statement:                                 |     
|                                                        |                                                         |     
|                                                        | Statements of Operating Expenses                        | F-16

F-2

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors 
  Terrace Ventures Inc. 
  Blaine, Washington

We have audited the accompanying balance sheets of Terrace Ventures
  Inc., an exploration stage company, as of April 30, 2006 and April 30, 2005,
  and the related statements of operations and accumulated deficit, changes in
  stockholders equity (deficit), and cash flows for the years then ended,
  and for the period February 20, 2001 (date of inception) to April 30, 2006.
  These financial statements are the responsibility of Terrace Ventures Inc.s
  management. Our responsibility is to express an opinion on these financial statements
  based on our audits.

We conducted our audits in accordance with standards of the
  Public Company Accounting Oversight Board (United States). 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 audits provide
  a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
  fairly, in all material respects, the financial position of Terrace Ventures
  Inc., an exploration stage company, as of April 30, 2006 and April 30, 2005,
  and the results of its operations, changes in stockholders equity (deficit)
  and cash flows for the years then ended, and for the period February 20, 2001
  (date of inception) to April 30, 2006, in conformity with accounting principles
  generally accepted in The United States of America.

Our audit was made for the purpose of forming an opinion on the
  basic financial statements taken as a whole. The supplemental statement of operating
  expenses is presented for the purposes of additional analysis and is not a required
  part of the basic financial statements, and in our opinion, is fairly stated
  in all material respects in relation to the basic financial statements taken
  as a whole.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 5 to
  the financial statements, the Company has suffered recurring losses from operations,
  which raise substantial doubt about its ability to continue as a going concern.
  The financial statements do not include any adjustments that might result from
  the outcome of this uncertainty.



/s/ Sarna & Company

Sarna & Company, 
  Certified Public Accountants 
  Westlake Village, California 
  July 19, 2006

F-3

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  BALANCE SHEETS

|                                               |   | APRIL 30,  |   |   | APRIL 30, |  
|---------------------------------------------- | - | ---------- | - | - | --------- | -
|                                               |   | 2006       |   |   | 2005      |  
|                                               |   |            |   |   |           |  
|ASSETS                                         |  
|                                               |   |            |   |   |           |  
|Current Assets:                                |   |            |   |   |           |  
|Cash                                           | $ | 171        |   | $ | 22        |  
|Receivable 
      Trust                       |   | 576        |   |   | -0-       |  
|                                               |   |            |   |   |           |  
|Total Current Assets                           |   | 747        |   |   | 22        |  
|                                               |   |            |   |   |           |  
|Other Asset  Investment                       |   | -0-        |   |   | -0-       |  
|                                               |   |            |   |   |           |  
|TOTAL ASSETS                                   | $ | 747        |   | $ | 22        |  
|                                               |   |            |   |   |           |  
|                                               |   |            |   |   |           |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |  
|                                               |   |            |   |   |           |  
|Current Liabilities:                           |   |            |   |   |           |  
|Accounts Payable
      and                     |   |            |   |   |           |  
|Accrued
      Expenses                         | $ | 73,478     |   | $ | 51,250    |  
|Due to Shareholder                             |   | 21,150     |   |   | -0-       |  
|                                               |   |            |   |   |           |  
|Total Current Liabilities                      |   | 94,628     |   |   | 51,250    |  
|                                               |   |            |   |   |           |  
|Stockholders' Equity:                          |   |            |   |   |           |  
|Common Stock, $0.001 par value                 |   |            |   |   |           |  
|400,000,000 shares authorized,                 |   |            |   |   |           |  
|31,949,920
      and 7,042,500 shares          |   |            |   |   |           |  
|issued                                         |   | 31,950     |   |   | 704       |  
|Additional Paid in Capital                     |   | 996,280    |   |   | 82,546    |  
|Deficit Accumulated
      During               |   |            |   |   |           |  
|The Exploration Stage                          |   | (1,122,111 | ) |   | (134,478  | )
|                                               |   |            |   |   |           |  
|Total Stockholders' Equity (Deficit)           |   | (93,881    | ) |   | (51,228   | )
|                                               |   |            |   |   |           |  
|TOTAL LIABILITIES AND                          |   |            |   |   |           |  
|STOCKHOLDERS' EQUITY (DEFICIT)                 | $ | 747        |   | $ | 22        |  

See Notes to Financial Statements.

F-4

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

YEAR ENDED
      
      
      YEAR ENDED
      
      
      INCEPTION toAPRIL 30, 2006
      
      
      APRIL 30, 2005
      
      
      APRIL 30, 2006Revenues
      $
      -0-
      
      $
      -0-
      
      $
      -0-Operating Expenses
      
      (59,153
      )
      
      (37,532
      )
      
      (193,631
      )Loss Before Other IncomeAnd Expenses
      
      (59,153
      )
      
      (37,532
      )
      
      (193,631
      )Other Expense:Unrealized Losson Investment
      
      (928,480
      )
      
      -0-
      
      
      (928,480
      )Loss Before Provision forIncome Taxes
      
      (987,633
      )
      
      (37,532
      )
      
      (1,122,111
      )Provision for Income Taxes
      
      -0-
      
      
      -0-
      
      
      -0-Net Loss
      
      (987,633
      )
      
      (37,532
      )
      
      (1,122,111
      )Accumulated Deficit,Beginning of Period
      
      (134,478
      )
      
      (96,946
      )
      
      -0-Accumulated Deficit,End of Period
      $
      (1,122,111
      )
      $
      (134,478
      )
      $
      (1,122,111
      )Net Loss per Share
      $
      (0.03
      )
      $
      (0.00
      )
      $
      (0.04
      )Weighted AverageShares Outstanding
      
      31,949,920
      
      
      28,170,000
      
      
      25,659,722


See Notes to Financial Statements.

F-5

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY) 
  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

DeficitAccumulatedCommon Stock
      
      
      Additional
      
      
      During the
      
      
      TotalDollar
      
      
      Paid in
      
      
      Exploration
      
      
      Stockholders'Shares
      
      
      Amount
      
      
      Capital
      
      
      Stage
      
      
      Equity (Deficit)Inception,February 20, 2001
      
      ----
      
      $
      ----
      
      $
      ----
      
      $
      ----
      
      $
      ----Common Stock Issued$0.001 per shareApril 9, 2001
      
      4,000,000
      
      
      400
      
      
      3,600
      
      
      ----
      
      
      4,000Net Loss, Period EndedApril 30, 2001
      
      ----
      
      
      ----
      
      
      ----
      
      
      (1,410
      )
      
      (1,410
      )Balances, April 30, 2001
      
      4,000,000
      
      
      400
      
      
      3,600
      
      
      (1,410
      )
      
      2,590Common Stock Issued$0.01 per shareAugust 15, 2001
      
      2,500,000
      
      
      250
      
      
      24,750
      
      
      ----
      
      
      25,000Net Loss, Period EndedApril 30, 2002
      
      ----
      
      
      ----
      
      
      ----
      
      
      (19,196
      )
      
      (19,196
      )Balances, April 30, 2002
      
      6,500,000
      
      
      650
      
      
      28,350
      
      
      (20,606
      )
      
      8,394Common Stock Issued$0.10 per shareSeptember 30, 2002
      
      142,500
      
      
      14
      
      
      14,236
      
      
      ----
      
      
      14,250Net Loss, Period EndedApril 30, 2003
      
      ----
      
      
      ----
      
      
      ----
      
      
      (17,632
      )
      
      (17,632
      )Balances, April 30, 2003
      
      6,642,500
      
      
      664
      
      
      42,586
      
      
      (38,238
      )
      
      5,012Common Stock Issued$0.10 per shareNovember 6, 2003
      
      400,000
      
      
      40
      
      
      39,960
      
      
      ----
      
      
      40,000Net Loss, Period EndedApril 30, 2004
      
      ----
      
      
      ----
      
      
      ----
      
      
      (58,708
      )
      
      (58,708
      )Balances, April 30, 2004
      
      7,042,500
      
      
      704
      
      
      82,546
      
      
      (96,946
      )
      
      (13,696
      )Net Loss, Period EndedApril 30, 2005
      
      ----
      
      
      ----
      
      
      ----
      
      
      (37,532
      )
      
      (37,532
      )Balances, April 30, 2005
      
      7,042,500
      
      
      704
      
      
      82,546
      
      
      (134,478
      )
      
      (51,228
      )


See Notes to Financial Statements.

F-6

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

DeficitAccumulatedCommon Stock
      
      
      Additional
      
      
      During the
      
      
      TotalDollar
      
      
      Paid in
      
      
      Exploration
      
      
      Stockholders'Shares
      
      
      Amount
      
      
      Capital
      
      
      Stage
      
      
      Equity (Deficit)Balances, April 30, 2005
      
      7,042,500
      
      
      704
      
      
      82,546
      
      
      (134,478
      )
      
      (51,228
      )Common Stock Issued$1.00 per shareNovember 23,2005
      
      500,000
      
      
      50
      
      
      499,950
      
      
      ----
      
      
      500,0004-for-1 Stock Split,December 19, 2005
      
      22,627,500
      
      
      29,416
      
      
      (29,416
      )
      
      ----
      
      
      ----Common Stock Issued$0.25 per shareFebruary 3, 2006
      
      400,000
      
      
      400
      
      
      99,600
      
      
      ----
      
      
      100,000Common Stock Issued$0.25 per shareMarch 13, 2006
      
      380,000
      
      
      380
      
      
      94,620
      
      
      ----
      
      
      95,000Common Stock Issued$0.25 per shareMarch 31, 2006
      
      999,920
      
      
      1,000
      
      
      248,980
      
      
      ----
      
      
      249,980Net Loss, Period EndedApril 30, 2006
      
      ----
      
      
      ----
      
      
      ----
      
      
      (987,633
      )
      
      (987,633
      )Balances, April 30, 2006
      
      31,949,920
      
      $
      31,950
      
      $
      996,280
      
      $
      (1,122,111
      )
      $
      (93,881
      )


See Notes to Financial Statements.

F-7

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  STATEMENTS OF CASH FLOWS

|                                |   | YEAR ENDED         |   |   | YEAR ENDED         |   |   | INCEPTION to       |  
|------------------------------- | - | ------------------ | - | - | ------------------ | - | - | ------------------ | -
|                                |   | APR
      30, 2006 |   |   | APR
      30, 2005 |   |   | APR
      30, 2006 |  
|Cash Flows from                 |   |                    |   |   |                    |   |   |                    |  
|Operating Activities:           |   |                    |   |   |                    |   |   |                    |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Net Loss                        | $ | (987,633           | ) | $ | (37,532            | ) | $ | (1,122,111         | )
|Unrealized Loss on Investment   |   | 928,480            |   |   | -0-                |   |   | 928,480            |  
|(Increase) in Receivable-Trust  |   | (576               | ) |   | -0-                |   |   | (576               | )
|Increase in Accounts Payable    |   | 22,228             |   |   | 24,420             |   |   | 73,478             |  
|Increase in Due to Shareholder  |   | 21,150             |   |   | -0-                |   |   | 21,150             |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Net Cash Used by                |   |                    |   |   |                    |   |   |                    |  
|Operating
      Activities      |   | (16,351            | ) |   | (13,112            | ) |   | (99,579            | )
|                                |   |                    |   |   |                    |   |   |                    |  
|Cash Flows from                 |   |                    |   |   |                    |   |   |                    |  
|Investing Activities:           |   |                    |   |   |                    |   |   |                    |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Investment in Stock             |   | (928,480           | ) |   | -0-                |   |   | (928,480           | )
|                                |   |                    |   |   |                    |   |   |                    |  
|Net Cash Used by                |   |                    |   |   |                    |   |   |                    |  
|Investing
      Activities      |   | (928,480           | ) |   | -0-                |   |   | (928,480           | )
|                                |   |                    |   |   |                    |   |   |                    |  
|Cash Flows from                 |   |                    |   |   |                    |   |   |                    |  
|Financing Activities:           |   |                    |   |   |                    |   |   |                    |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Proceeds from Issuance of       |   |                    |   |   |                    |   |   |                    |  
|Common Stock                    |   | 944,980            |   |   | -0-                |   |   | 1,028,230          |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Net Cash Provided by            |   |                    |   |   |                    |   |   |                    |  
|Financing Activities            |   | -0-                |   |   | -0-                |   |   | 1,028,230          |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Net Increase (Decrease) in Cash |   | 149                |   |   | (13,112            | ) |   | 171                |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Cash at Beginning of Period     |   | 22                 |   |   | 13,134             |   |   | -0-                |  
|                                |   |                    |   |   |                    |   |   |                    |  
|Cash at End of Period           | $ | 171                |   | $ | 22                 |   | $ | 171                |  

See Notes to Financial Statements.

F-8

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Terrace Ventures Inc. was incorporated on February 20, 2001 in
  the state of Nevada. The Company acquires and develops certain mineral rights
  in Canada.

Basis of Presentation

The Company reports revenue and expenses using the accrual method
  of accounting for financial and tax reporting purposes.

Use of Estimates

Management uses estimates and assumptions in preparing these
  financial statements in accordance with generally accepted accounting principles.
  Those estimates and assumptions affect the reported amounts of assets and liabilities,
  the disclosure of contingent assets and liabilities, and the reported revenues
  and expenses.

Exploration Stage Company

The Company has been in the exploration stage since its formation
  and has not yet realized any revenues from its planned operations. The Company
  is primarily engaged in the acquisition and exploration of mining properties.
  Upon the location of commercially minable reserves, the Company plans to prepare
  for mineral extraction and enter the development stage.

Pro Forma Compensation Expense

The Company accounts for options and restricted stock granted
  to employees and directors in accordance with the fair value method of SFAS
  No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”),
  as amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition
  and Disclosure an amendment of FASB Statement No. 123 and related interpretations.
  As such, compensation expense is recorded on stock option and restricted stock
  grants based on the fair value of the options or restricted stock granted, which
  is estimated on the date of grant using the Black-Scholes option-pricing model
  for stock options granted, and is recognized on a straight-line basis over the
  vesting period.

F-9

---

TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Mineral Property Acquisition and Exploration Costs

The Company expenses all costs related to the acquisition and
  exploration of mineral properties in which it has secured exploration rights
  prior to establishment of proven and probable reserves. To date, the Company
  has not established the commercial feasibility of any exploration prospects,
  therefore, all costs are being expensed.

Depreciation, Amortization and Capitalization

The Company records depreciation and amortization when appropriate
  using both straight-line and declining balance methods over the estimated useful
  life of the assets (five to seven years). Expenditures for maintenance and repairs
  are charged to expense as incurred. Additions, major renewals and replacements
  that increase the property's useful life are capitalized. Property sold or retired,
  together with the related accumulated depreciation, is removed from the appropriate
  accounts and the resultant gain or loss is included in net income.

Income Taxes

The Company accounts for its income taxes in accordance with
  Statement of Financial Accounting Standards No. 109, "Accounting for Income
  Taxes". Under Statement 109, a liability method is used whereby deferred tax
  assets and liabilities are determined based on temporary differences between
  basis used for financial reporting and income tax reporting purposes. Income
  taxes are provided based on tax rates in effect at the time such temporary differences
  are expected to reverse. A valuation allowance is provided for certain deferred
  tax assets if it is more likely than not, that the Company will not realize
  the tax assets through future operations.

Fair Value of Financial Instruments

Financial accounting Standards Statement No. 107, "Disclosures
  About Fair Value of Financial Instruments", requires the Company to disclose,
  when reasonably attainable, the fair market values of its assets and liabilities
  which are deemed to be financial instruments. The Company's financial instruments
  consist primarily of cash and certain investments.

F-10

---

TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Investments

Investments that are purchased in other companies are valued
  at cost less any impairments in the value that are other than temporary in nature.

Per Share Information

The Company computes per share information by dividing the net
  loss for the period presented by the weighted average number of shares outstanding
  during such period.

NOTE 2 - PROVISION FOR INCOME TAXES

The provision for income taxes for the periods ended April 30,
  2006 and April 30, 2005 represents the minimum state income tax expense of the
  Company, which is not considered significant.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company currently rents administrative office space under
  a monthly renewable contract.

Litigation

The Company is not presently involved in any litigation.

NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements will have no significant
  impact on the Company and its reporting methods.

NOTE 5  GOING CONCERN

Future issuances of the Companys equity or debt securities
  will be required in order for the Company to continue to finance its operations
  and continue as a going concern. The Companys present revenues are insufficient
  to meet operating expenses.

F-11

---

TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS

NOTE 5  GOING CONCERN - CONTINUED

The consolidated financial statements of the Company have been
  prepared assuming that the Company will continue as a going concern, which contemplates,
  among other things, the realization of assets and the satisfaction of liabilities
  in the normal course of business. The Company has incurred cumulative net losses
  of $1,122,111 since its inception and requires capital for its contemplated
  operational and marketing activities to take place. The Company's ability to
  raise additional capital through the future issuances of common stock is unknown.
  The obtainment of additional financing, the successful development of the Company's
  contemplated plan of operations, and its transition, ultimately, to the attainment
  of profitable operations are necessary for the Company to continue operations.
  The ability to successfully resolve these factors raise substantial doubt about
  the Company's ability to continue as a going concern. The consolidated financial
  statements of the Company do not include any adjustments that may result from
  the outcome of these aforementioned uncertainties.

NOTE 6  STOCK SPLIT

On December 19, 2005, the Company completed a four-for-one forward
  split of its issued and outstanding common stock. As a result of this stock
  split, the Companys authorized capital increased from 100,000,000 shares
  of common stock with a par value of $0.001 per share, of which 7,542,500 shares
  were issued and outstanding, to 400,000,000 shares of common stock with a par
  value of $0.001 per share, of which 30,170,000 were issued and outstanding as
  of December 19, 2005.

As a result of this stock split, weighted average shares outstanding
  and earnings per share for the year ended April 30, 2005 and for the period
  February 20, 2001 to April 30, 2006 have been restated for the effect of the
  split.

F-12

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS

NOTE 7  INVESTMENT IN CLOSELY HELD STOCK

During the year ended April 30, 2006, the Company acquired a
  5.9% interest in Sporg Corporation, a Nevada Corporation located in Vancouver,
  Canada, with the intention of executing an Agreement and Plan of Merger. This
  investment was recorded under the cost method of accounting, as there is no
  available market for these shares. The cost of these 1,428,429 shares, totaling
  $928,480, have been reduced for a permanent decline in value to zero, with the
  resulting unrealized loss of $928,480 reported in the year ended April 30, 2006.

To fund this acquisition, on November 23, 2005 the Companys
  director authorized a private placement of 4,000,000 post-split shares of the
  Companys common stock, at a price of $0.25 per share. As of April 30,
  2006, 3,779,920 shares of the Companys common stock were issued at a price
  of $0.25 per share, for a total of $944,980.

NOTE 8  SUBSEQUENT EVENTS

On May 26, 2006, the Company entered into a merger agreement
  with Sporg Corporation. In connection with this agreement, the Company approved
  a private placement of its common stock of up to 2,000,000 shares at a price
  of $0.30 per share to permit it to provide up to $525,000 of interim financing
  to Sporg pending completion of the merger. On July 10, 2006, the merger agreement
  expired and was not extended by the parties.

On May 24, 2006, the Company issued 60,000 shares of its common
  stock at a price of $0.25 per share for a total of $15,000. This issuance represents
  part of a private placement of 4,000,000 shares of common stock approved by
  the Companys director on November 23, 2005.

On June 6, 2006, the Company issued 160,080 shares of its common
  stock at a price of $0.25 per share, for a total of $40,020. This issuance represents
  the balance of a private placement of 4,000,000 shares of common stock approved
  by the Companys director on November 23, 2005.

On June 5, 2006, the Company acquired on a private placement
  basis 161,538 shares of common stock of Sporg Corporation, at a price of $0.65
  per share, for a total of $105,000, in furtherance of the proposed merger agreement
  between the Company and Sporg Corporation.

F-13

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TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY)
  NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 – STOCK OPTIONS

On March 21, 2006, the Company entered into a stock option
  agreement with a director of the Company. The options provide for the purchase
  of 200,000 shares of Company common stock at $0.27 per share. Compensation cost
  for stock options is measured as the excess, if any, of the estimated fair market
  value of the Company’s stock at the date of grant over the amount the
  recipient must pay to acquire the stock. At the date of grant, fair market value
  approximated the strike price. The options expire on March 21, 2008.

F-14

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SUPPLEMENTAL STATEMENT









F-15

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TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY) 
  STATEMENT OF OPERATING EXPENSES

|                         |   | YEAR ENDED    |  |   | YEAR ENDED    |  |   | INCEPTION to   | 
|------------------------ | - | ------------- |  | - | ------------- |  | - | -------------- | 
|                         |   | APRIL 30,2006 |  |   | APRIL 30,2005 |  |   | APRIL 30, 2006 | 
|                         |   |               |  |   |               |  |   |                | 
|Operating Expenses       |   |               |  |   |               |  |   |                | 
|Accounting               | $ | 11,080        |  | $ | 7,240         |  | $ | 35,740         | 
|Exploration Expense      |   | -0-           |  |   | -0-           |  |   | 24,266         | 
|Legal                    |   | 34,039        |  |   | 19,102        |  |   | 76,138         | 
|Office Administration    |   | 6,000         |  |   | 6,000         |  |   | 26,500         | 
|Office Expenses          |   | 1,152         |  |   | 119           |  |   | 2,769          | 
|Regulatory Expenses/Fees |   | 3,882         |  |   | 1,747         |  |   | 9,923          | 
|Rent                     |   | 3,000         |  |   | 3,000         |  |   | 13,950         | 
|Telephone                |   | -0-           |  |   | -0-           |  |   | 1,344          | 
|Travel & Entertainment   |   | -0-           |  |   | 324           |  |   | 3,001          | 
|                         |   |               |  |   |               |  |   |                | 
|                         |   |               |  |   |               |  |   |                | 
|Total Operating Expenses | $ | 59,153        |  | $ | 37,532        |  | $ | 193,631        | 

See Notes to Financial Statements.

F-16

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**ITEM 13. EXHIBITS.**

|**Exhibit Number** | **Description of Exhibit**                                                                                                                                                                            
|------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                       
|3.1                | Articles of Incorporation.(1)                                                                                                                                                                         
|                   |                                                                                                                                                                                                       
|3.2                | Certificate of Change to Authorized Capital effective
        December 19, 2005.(2)                                                                                                                   
|                   |                                                                                                                                                                                                       
|3.3                | Bylaws.(1)                                                                                                                                                                                            
|                   |                                                                                                                                                                                                       
|10.1               | Mineral Claim Purchase Agreement dated August 15,
        2001 between Terrace Ventures Inc. and Don Archibald.(1)                                                                                    
|                   |                                                                                                                                                                                                       
|10.2               | 2006 Stock Incentive Plan.(4)                                                                                                                                                                         
|                   |                                                                                                                                                                                                       
|10.3               | Stock Option Agreement between Terrace Ventures
        Inc. and Howard Thomson dated March 31, 2006.(4)                                                                                              
|                   |                                                                                                                                                                                                       
|10.4               | Management Consulting Agreement dated March 21,
        2006 between Terrace Ventures Inc. and Howard Thomson.(4)                                                                                     
|                   |                                                                                                                                                                                                       
|10.5               | Agreement and Plan of Merger dated for reference
        May 24, 2006 among Terrace Ventures Inc., Sporg Technology Corp., Sporg
        Corporation and Gordon F. Burley.(5)                         
|                   |                                                                                                                                                                                                       
|14.1               | Code of Ethics.(3)                                                                                                                                                                                    
|                   |                                                                                                                                                                                                       
|21.1               | List Of Subsidiaries.(6)                                                                                                                                                                              
|                   |                                                                                                                                                                                                       
|31.1               | Certification of Chief
        Executive Officer and Chief Financial Officer pursuant to Section 302
        of the Sarbanes-Oxley Act of 2002.                                                       
|                   |                                                                                                                                                                                                       
|31.2               | Certification of Chief
        Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.

**Notes:**

|(1) | Filed with the SEC as an exhibit to our Registration Statement on Form
      10-SB originally filed on February 2, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------
|(2) | Filed with the SEC as an exhibit to our Current Report on Form 8-K filed
      on December 27, 2005.                    
|(3) | Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB
      filed on September 8, 2004.                  
|(4) | Filed with the SEC as an exhibit to our Quarterly Report on Form 10-QSB
      filed on March 22, 2006.                  
|(5) | Filed with the SEC as an exhibit to our Current Report on Form 8-K filed
      on May 31, 2006.                         
|(6) | Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB
      filed on August 14, 2006.                    

---

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
  registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

|                     | TERRACE VENTURES INC.
|-------------------- | ---------------------
|                     |                      
|                     |                      
|Date: March 29, 2007 | By:                  
|                     |                      
|                     |                      
|                     |                      
|                     |                      
|                     |                      

In accordance with the Exchange Act, this report has been signed
  below by the following persons on behalf of the registrant and in the capacities
  and on the dates indicated.

|Date: March 29, 2007 | By: | */s/ Howard Thomson*                                               
|-------------------- | --- | -------------------------------------------------------------------
|                     |     | HOWARD THOMSON                                                     
|                     |     | Chief Executive Officer, Chief Financial Officer,                  
|                     |     | President, Secretary and Treasurer                                 
|                     |     | (Principal Executive Officer and Principal Financial
      Officer)
|                     |     | Director                                                           
|                     |     |                                                                    
|                     |     |                                                                    
|                     |     |                                                                    
|                     |     |                                                                    
|Date: March 29, 2007 | By: | */s/ Gordon F. Burley*                                             
|                     |     | GORDON F. BURLEY                                                   
|                     |     | Director                                                           

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