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

                                    FORM 10-Q

(Mark One)

[x]         QUARTERLY  REPORT  UNDER  SECTION  13 OR  15(d)  OF  THE  SECURITIES
            EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.

[ ]         TRANSITION  REPORT  UNDER  SECTION  13 OR  15(d)  OF THE  SECURITIES
            EXCHANGE ACT OF 1934

            FOR THE  TRANSITION  PERIOD FROM  __________ TO __________.

Commission file number:  0-27132

                            Terrace Food Group, Inc.
                  ---------------------------------------------
              (Exact Name of Small Business Issuer in its Charter)

            Delaware                                       65-054270
----------------------------------              --------------------------------
  (State or Other Jurisdiction of                     (I.R.S. Employer
  Incorporation or Organization)                      Identification No.)

1351 NW 22nd Street, Pompano Beach, FL                       33069
--------------------------------------          --------------------------------
(Address of Principal Executive Officer)                  (Zip Code)

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

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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 report),  and (2) has been
subject to such filing requirements for past 90 days. Yes /X/ No / /.

Applicable  only to  issuers  involved  in  bankruptcy  proceedings  during  the
preceding five years:

Check whether the  registrant  filed all  documents  and reports  required to be
filed by  Section  12 or 15(d) of the  Exchange  Act after the  distribution  of
securities under a plan confirmed by a court. Yes ___ No ___.

Applicable only to corporate issuers:

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable  date. As of the date of this report,  the
issuer had 948,342 shares of its common stock issued and outstanding.

Transitional Small Business Disclosure Format:

Check one:  Yes / /  No  /X/

                This is page 1 of 17 sequentially numbered pages.


<PAGE>

TERRACE FOOD GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTERLY REPORT
For the Three Months Ended March 31, 2000
INDEX

                                                                            Page
Part I.  FINANCIAL INFORMATION

Item 1:  Financial Statements

         Consolidated Balance Sheets as of March 31, 2000 (Unaudited)
         and December 31, 1999 .............................................  3

         Consolidated Statements of Operations for the three months ended
         March 31, 2000 and 1999 (Unaudited)................................  4

         Consolidated Statements of Cash Flows for the three months ended
         March 31, 2000 and 1999 (Unaudited)...............................   5

         Notes to Financial Statements.....................................6-11

Item 2:  Management's Discussion and Analysis.............................12-15

Part II. OTHER INFORMATION

Item 3:  Default Upon Senior Securities..................................... 16

Item 6:  Exhibits and Reports on Form 8-K................................... 16

Signatures.................................................................. 17

                             . . . . . . . . . . . .

                                       2
<PAGE>

Item 1.
TERRACE FOOD GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                            March 31,                December 31,
                                                                              2000                      1999
                                                                              ----                      ----
                                                                           (Unaudited)
Assets:
Current Assets:
<S>                                                                        <C>                       <C>
   Accounts Receivable (Less Reserve for Doubtful                         $  5,399,190              $  5,334,715
        Accounts of  $311,709 and $303,944)
   Inventories                                                               1,719,779                 1,878,081
   Current Portion of Note Receivable - Stockholder                             53,000                    53,000
   Other Current Assets                                                        439,743                   239,272
                                                                        --------------              ------------
   Total Current Assets                                                      7,611,712                 7,505,068
                                                                        --------------              ------------

Property and Equipment - At Cost,
   (Net of Accumulated Depreciation of $1,148,389 and $968,846)              4,684,815                 4,631,962

Cost in Excess of Net Assets of Business Acquired
(Net of Accumulated Amortization of $521,211 and $469,465)                   3,314,833                 3,366,679
Deferred Financing Cost
   (Net of Accumulated Amortization of $437,680 and $361,818)                  173,458                   249,322
Note Receivable - Stockholder                                                    - 0 -                    53,000
                                                                        --------------              ------------

   Total Assets                                                          $  15,784,818              $ 15,806,031
                                                                         =============              ============

Liabilities and Stockholders' Deficiency
Current Liabilities:
   Cash Overdraft                                                         $  1,435,890              $  1,510,380
   Accounts Payable                                                          4,623,919                 4,707,832
   Accrued Expenses                                                          1,664,727                 1,802,931
   Line of Credit                                                            4,460,000                 4,056,528
   Term Loan                                                                 1,308,900                 1,380,330
   Current Portion of Long-Term Debt                                           280,783                   271,788
   Convertible Subordinated Notes                                            3,255,292                 3,105,987
                                                                           -----------             -------------
   Total Current Liabilities                                                17,029,511                16,835,776

Note payable - related party                                                   625,000                   300,000
Long-Term Debt, Net of Current Portion                                         403,117                   477,496
Other Non-Current Liabilities                                                  124,166                   136,666
                                                                          ------------             -------------

   Total Liabilities                                                        18,181,794                17,749,938
                                                                          ------------             -------------

Commitments and Contingencies (Note 9)

Series C & D Redeemable Preferred Stock - $.001 Par Value,
   21,308 Shares Authorized; 20,772 Issued and Outstanding                   2,077,200                 1,927,989
                                                                          ------------             -------------

Stockholders' Deficiency:
   Common Stock - $.001 Par Value, 25,000,000 Shares
       Authorized; 948,342 Issued and Outstanding                                  948                       948
   Additional Paid-in Capital                                               10,364,713                10,513,923
   Accumulated Deficit                                                     (14,839,837)              (14,386,767)
                                                                          ------------             -------------
   Total Stockholders' Deficiency                                           (4,474,176)               (3,871,896)
                                                                          ------------             -------------

   Total Liabilities and Stockholders' Deficiency                          $15,784,818               $15,806,031
                                                                           ===========             =============
</TABLE>

See Notes to Financial Statements.

                                       3
<PAGE>

TERRACE FOOD GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     Three months ended
                                                                                         March 31,

                                                                                2000                  1999
                                                                                ----                  ----

<S>                                                                         <C>                   <C>
Net Sales                                                                   $ 12,998,410          $ 11,096,995

Cost of Sales                                                                 10,044,639             8,183,627
                                                                            ------------          ------------

   Gross Profit                                                                2,953,771             2,913,368
                                                                            ------------          ------------

Operating Expenses:
   Selling, General & Administrative                                           2,951,708             2,840,937
   Provision for Doubtful Accounts                                                15,727                20,891
                                                                            ------------          ------------
   Total Operating Expenses                                                    2,967,435             2,861,828
                                                                            ------------          ------------

   Income from Operations                                                        (13,664)               51,540
                                                                            ------------          ------------

Other Income (Expense)
   Interest Expense                                                             (440,907)            ( 312,505)
   Interest Income                                                                 1,501                 3,180
                                                                            ------------          ------------
   Other (Expense), Net                                                         (439,406)            ( 309,325)
                                                                            ------------          ------------

   Net Loss                                                                 $   (453,070)         $   (257,785)
                                                                            ============          ============

Basic and Diluted Net Loss Per Share of Common Stock                        $       (.64)         $       (.27)
                                                                            ============          ============

Basic and Diluted Weighted Average Shares of Common
   Stock Outstanding                                                             948,342               948,342
                                                                            ============          ============
</TABLE>

See Notes to Financial Statements.

                                       4
<PAGE>

TERRACE FOOD GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                              Three months ended
                                                                                    March 31,

                                                                              2000             1999
                                                                              ----             ----
Operating Activities:
<S>                                                                       <C>                <C>
   Net Loss                                                               $(453,070)         $(257,785)
                                                                          ---------          ---------

   Adjustments to Reconcile Net Loss to Net Cash
   Used For Operating Activities
      Depreciation and Amortization                                         456,557            299,098
      Provision for Doubtful Accounts                                        15,727             20,891

   Changes in Assets and Liabilities:
      (Increase) Decrease in:
        Accounts Receivable                                                 (80,202)          (842,026)
        Inventories                                                         158,302           (205,279)
        Note Receivable - Stockholder                                        53,000                -0-
        Other Current Assets                                               (200,471)           (76,855)
   Increase (Decrease) in:
     Accounts Payable and Cash Overdraft                                   (158,402)           549,306
     Accrued Expenses                                                      (138,204)            (7,592)
     Other Non-Current Liabilities                                          (12,500)           (15,000)
                                                                          ---------          ---------
   Total Adjustments                                                         93,807           (277,457)
                                                                          ---------          ---------

   Net Cash Used in Operating Activities                                   (359,263)          (535,242)
                                                                          ---------          ---------

Investing Activities:
   Acquisition of Equipment, Furniture & Fixtures                          (232,394)           (77,917)
                                                                          ---------          ---------

   Net Cash Used in Investing Activities                                   (232,394)           (77,917)
                                                                          ---------          ---------

Financing Activities:
   Borrowing Under Line of Credit                                           403,472            753,139
   Borrowings from Related Parties                                          325,000
   Net Long-term Debt and Term Loan Repayment                              (136,815)          (139,980)
                                                                          ---------          ---------

   Net Cash Provided by Financing Activities                                591,657            613,159
                                                                          ---------          ---------

   Net Change in Cash and Cash Equivalents                                      -0-                -0-

   Cash and Cash Equivalents - Beginning of Period                              -0-                -0-
                                                                          ---------          ---------


   Cash and Cash Equivalents - End of Period                              $     -0-          $     -0-
                                                                          =========          =========

Supplemental Disclosures of Cash Flow Information
Cash Paid During the Periods For:
   Interest                                                               $ 167,274          $ 124,380
                                                                          ---------          ---------
   Income Taxes                                                           $     -0-          $     -0-
                                                                          =========          =========
</TABLE>

   See Notes to Financial Statements.

                                        5
<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(1)      Basis of Reporting

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions to Form 10-Q and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.

In  the  opinion  of  Management,   such  statements   include  all  adjustments
(consisting only of normal recurring items),  which are considered  necessary in
order to make the financial statements not misleading. The results of operations
for the periods  presented are not  necessarily  indicative of the results to be
expected for the full year.

The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts of Terrace  Food Group,  Inc.  and its  subsidiaries.  All  significant
intercompany balances and transactions have been eliminated in consolidation.

It is suggested that these financial  statements be read in conjunction with the
financial  statements  and notes as of and for the year ended  December 31, 1999
included in the Terrace Food Group, Inc. Form 10-KSB.

(2)      Nature of 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,
cruise line and 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.  Banner is a
custom value added  processor  of meat,  seafood and poultry  products  marketed
nationally to retail and foodservice customers.

(3) Going Concern & Management Plans

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 March 31, 2000 there is a
working  capital  deficiency and a stockholders'  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 assets 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
                                       6

<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
(UNAUDITED)

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 their  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.

Food Distribution revenues for the first quarter of fiscal 2000 exceeded 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.

(4) 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.

(5) Loss Per Share

Loss per share of common stock is based on the weighted average number of common
shares  outstanding for each period  presented.  There were no potential  common
shares   included  for  either  period  as  they  were  all   considered  to  be
anti-dilutive.   The  following  is  a  reconciliation  of  the  numerators  and
denominators used in computing basic and diluted net loss per share.

                                                         2000          1999
                                                         ----          ----

Net loss                                           $   (453,070)    $  (257,785)

Amortization of preferred stock discount               (149,211)            -0-
                                                   ------------     ------------

Net loss (numerator), basic and diluted            $   (602,281)    $  (257,785)
                                                   ------------     ------------

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

Net loss per share, basic and diluted              $       (.64)    $      (.27)
                                                   ------------     ------------

                                       7
<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
(UNAUDITED)

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,  exercisable  for the number of shares of
Common Stock indicated:

                                           2000                     1999

Options                                   153,950                 114,300
Warrants                                1,049,943                 673,943
Convertible Subordinated Notes            542,549                 517,665
                                        ---------              ----------
Total                                   1,746,442               1,305,908
                                        ---------              ----------

(6) Inventories

Inventories for the Company's Food Distribution segment include produce, grocery
dry goods,  and dairy products.  Food Processing and  Manufacturing  inventories
include  raw  meat  and  seafood,  other  ingredients  and  processed  products.
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market. Inventories at March 31, 2000 consisted of:

         Raw Materials                       $   443,258
         Semi-Processed Goods                     49,428
         Finished Goods                        1,227,093
                                               ---------
         Total                                $1,719,779
                                               ---------

(7) 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
March  31,  2000 was  9.5%.  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. The interest rate at March 31, 2000 was 10%.

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
March 31, 2000 and December 31, 1999, and accordingly, the term loan is included
in  current  liabilities  in the  consolidated  balance  sheets.  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.

(8) 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

                                       8
<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #4
(UNAUDITED)

("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 was 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%.

In April,  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
$6.00 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  through  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 was amortized over the extended
term of the Notes.

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 sheets. The Company is negotiating with the holders of the
Notes to extend their  maturity,  convert them to common stock, or a combination
thereof.

(9) Commitments and Contingencies

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.

(10) 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  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  and 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 were  redeemable,  in cash, at the option of the Company through
March 30, 2000, when it became  mandatorily  redeemable either, at the option of
the Company, in cash or through conversion into 17% Senior Notes which would

                                       9
<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #5
(UNAUDITED)

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 has been amortized by charges to Additional Paid-in Capital.

(11) Segment Data

The  Company's  two  business   units  have   distinct   management   teams  and
infrastructures,  offer  different  products  and are  evaluated  separately  in
assessing performance and allocating  resources.  These units are being reported
as two segments:  Food Distribution and Food Processing and Manufacturing.  Each
segment  is  managed  separately,  has a  distinct  customer  base and  requires
different  strategic  and  marketing  efforts.  Food  Distribution  includes the
operations of the A-One-A and Fresh and Food  Processing  and  Manufacturing  is
represented by Banner.

The Company evaluates  performance based on operating profit before interest and
taxes. Accordingly, interest has not been allocated to the operating segments.

Quarter ended March  31, 2000
<TABLE>
<CAPTION>

                                                      Food         Food Processing
                                              Distribution         & Manufacturing              Total
                                              ------------         ---------------              -----

<S>                                           <C>                     <C>                <C>
Sales                                         $ 11,826,696            $  1,171,714       $ 12,998,410
Depreciation and amortization                      120,388                 111,000            231,388
Operating income (Loss)                            581,218                (317,460)           263,758
Segment assets                                  10,316,360               5,230,540         15,546,900
Expenditures for segment property
   and equipment                                   167,104                  65,290            232,394

Reconciliation of segment amounts to consolidated amounts:

Net Loss:
   Total segments, income from continuing operations                                     $    263,758
   Interest expense                                                                          (440,907)
   Amortization of deferred financing costs                                                   (59,544)
   Interest income                                                                              1,501
   Corporate expenses                                                                        (217,878)
                                                                                          -----------
     Total                                                                                $  (453,070)
                                                                                          ============

Assets:
    Total segments                                                                       $ 15,546,900
    Note receivable                                                                            53,000
    Other assets                                                                              173,458
    Other current assets                                                                       11,460
                                                                                         ------------
       Total                                                                             $ 15,784,818
                                                                                         ============
</TABLE>


                                       10

<PAGE>

TERRACE FOOD GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #6
(UNAUDITED)
<TABLE>
<CAPTION>

Quarter ended March 31, 1999
                                                       Food      Food Processing
                                               Distribution      & Manufacturing           Total

<S>                                             <C>                   <C>            <C>
Sales                                           $10,015,395           $1,081,600     $11,096,995
Depreciation and amortization                       135,225               55,981         191,206
Operating income (loss)                             532,652             (291,461)        241,191
Segment assets                                   10,464,107            5,667,753      16,131,860
Expenditures for segment property
  and equipment                                      51,811               26,106          77,917

Reconciliation of segment amounts to consolidated amounts:

Net Loss:
   Total Segment, income from operations                                             $   241,191
   Interest expense                                                                     (312,505)
   Amortization of Deferred Financing Cost                                              (107,892)
   Interest Income                                                                         3,180
   Corporate Expense                                                                     (81,759)
                                                                                     ------------
         Total                                                                       $  (257,785)
                                                                                     ============

Assets:
    Segment                                                                           16,131,860
    Other Assets                                                                         159,000
    Restricted cash                                                                      377,767
    Other current assets                                                                  92,131
                                                                                     -----------
    Total                                                                            $16,760,258
                                                                                     ===========
</TABLE>

                                       11
<PAGE>


Item 2.
TERRACE FOOD GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

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 A-One-A and Fresh.
A-One-A  distributes fresh and precut produce and dairy products to foodservice,
cruise lines and export  customers  throughout the South Florida  Region.  Fresh
processes fresh fruits and vegetables that are ready for use by its customers.
Fresh utilizes A-One-A's sales and marketing  organization as its primary source
of distribution.

The  Food  Processing  and   Manufacturing   segment  includes   Banner,   which
manufactures meat,  poultry and seafood products,  primarily in the ethnic foods
area for both retail and foodservice customers on a national basis.

Consolidated   revenues   for  the  three  months  ended  March  31,  2000  were
approximately $12,998,000 compared to $11,097,000 for the same period in 1999 an
increase of approximately 17%. The Company's  operating segment income increased
by 10% from  $241,000  for the first  quarter of 1999 to  $264,000  for the same
period  in 2000.  This  increase  resulted  from  continued  growth  at  A-One-A
predominantly  from the strong results of the cruise ship and export segments of
the  business.  The  Company's  net  loss  for the  first  quarter  of 2000  was
approximately  $453,000 of which  $269,000 was from a non-cash  interest  charge
related to the subordinated debt the Company issued in June of 1998.

Management  believes  that its  distribution  business  will  continue to report
strong   revenue  and  profit  results  as  the  growth  plan  continues  to  be
implemented.  In  addition,  the Company is  continuing  to reduce  expenses and
expand its product exposure at Banner Beef's current marketing opportunities are
aggressively  being  sought to grow Banner  business  base and should  result in
further  reduction of the  operating  loss the Company has incurred in the first
quarter of 2000.

SEGMENT ANALYSIS

Food Distribution

Segment  revenues for the three  months ended March 31, 2000 were  approximately
$11,827,000  compared to $10,015,000  for the same period in 1999 an increase of
approximately  18%. Income from  operations  increased by $49,000 or 9% from the
first quarter in 1999 to approximately  $581,000 from approximately  $532,000 in
1999.

Food Processing and Manufacturing

Segment  revenues for the three  months ended March 31, 2000 were  approximately
$1,172,000 compared to $1,082,000 for the same period in 1999. Segment loss from
operations  was  $317,000,  $26,000  higher than the loss for the same period in
1999. Depreciation expense of $111,000 was $55,000 higher than in 1999. Banner's
selling proposition has shifted focus with the changing market in the "Home Meal
Replacement"  sectors towards the carryout supply rather than the fully prepared
meal.  This change has come about from the continuous  desire to actually choose
all of the  components  that go along with a meal.  The  Company  has geared its
selling efforts towards ethnic products particularly the Hispanic prepared foods
market.

Liquidity and Capital Resources

At March 31, 2000, the Company had a cash deficit of approximately $1,436,000, a
working capital  deficiency and Stockholders'  Deficiency.  These conditions may
indicate  that the Company  may be unable to  continue as a going  concern for a
reasonable period of time.
                                       12

<PAGE>

TERRACE FOOD GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS (Sheet #2)

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

The  Company 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 Company, but there can be no assurance thereof.

The Company's  Convertible  Subordinated  Notes 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 Stock or some combination
thereof,   although  there  can  be  no  assurance  such  negotiations  will  be
successful.

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

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

During  April,  May and July of 1999,  the Company  issued  20,772 shares of the
Series C & D  Redeemable  Preferred  Stock  together  with  warrants to purchase
360,000 shares of the Company's Common Stock to a private investment group which
included  four  of  the  Company'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 Company on March 31, 2000
either in cash, or, at Company'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  Company is  negotiating  with the  holders  to  convert  their
interests therein to Common Stock of the Company. There can be no assurance that
such negotiations will be successful.

Forward-Looking Statements/Risk Factors

Certain  matters  discussed  in this  quarterly  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 Company 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 Company does not, nor should any
investor,  consider  these  projections  to be  representations  by the Company.
Potential  investors  of the  Company  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  and  Borrowing  Defaults.  The Company has  incurred
                  recurring  operating losses, has a significant working capital
                  and Stockholders' deficiencies,  and is in default of its bank
                  borrowing agreement.  In addition,  the Company's  Convertible
                  Subordinated Notes matured on March 31, 2000 and have not been
                  paid.  These  factors  may  indicate  that the  Company may be
                  unable to continue to operate for a reasonable  period of time
                  and there can be no assurance  that the  Company's  efforts to
                  restructure its indebtedness will be successful.


                                       13
<PAGE>

TERRACE FOOD GROUP, INC.
MANAGEMENT DISCUSSION AND ANAYLSIS (Sheet #3)



         2.       Need for Additional Financing. The Company 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
                  Company.  These  competitors  include  national,  regional and
                  local firms.  There can be no assurance  that  consumers  will
                  regard the  Company's  products and services as  significantly
                  distinguishable  from  competitive  products and services,  or
                  that substantially  equivalent products will not be introduced
                  by the Company's  competitors or that the Company 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  completing
                  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 Company's operations.

         5.       Current Seasonal Nature of Certain  Operations.  The Company'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 Regulations. 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 Company.  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  Company  has no
                  control.

         7.       PACA Licenses. A-One-A and Fresh 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  and  Fresh
                  currently  maintain PACA licenses to distribute fresh produce,
                  fruits and vegetables.  The ability of the Company 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 Company.

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




                                       14
<PAGE>

TERRACE FOOD GROUP, INC.
MANAGEMENT DISCUSSION AND ANAYLSIS (Sheet #4)


         9.       No Assurance of Continued  Public  Trading Market or Continued
                  Qualification  for  Continued  Listing on the Over the Counter
                  Bulletin  Board  ("OTCBB")   Inclusion;   "Penny  Stock."  The
                  Company's  Common  Stock and Warrants are listed on the OTCBB.
                  If a public trading market does not continue for the Company's
                  securities,  purchasers of the Company's  securities  may have
                  difficulty  selling their securities  should they desire to do
                  so. If the Company 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
                  Company  is  also  subject  to  the  Securities  and  Exchange
                  Commission's  "Penny  Stock"  regulations.  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   Company's
                  securities.



                                       15
<PAGE>

TERRACE FOOD GROUP
Part II.  OTHER INFORMATION

Item 3.   Defaults Upon Senior Securities

(a)   See  Footnotes  7  and  8 to  the  Consolidated  Financial  Statements  in
      reference to certain  provisions of the Company's  Line of Credit and Term
      Loan and to the Company's default on its Convertible Subordinated Notes.

Item 6.  Exhibits and Reports on Form 8-K

(a)         Exhibits
            Exhibit 27 - Financial Data Schedule

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

(b)  Reports  on Form 8-K - There were no  current  reports  filed for the first
quarter of 2000.







                                       16
<PAGE>

SIGNATURES



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


                                TERRACE FOOD GROUP, INC.



Dated: May 24, 2000             By: /s/Jonathan S. Lasko
                                    --------------------------------------------
                                    Jonathan S. Lasko, Executive Vice President
                                    & Chief Operating Officer


Dated:  May 24, 2000            By: /s/William P. Rodrigues, Jr.
                                    ----------------------------
                                    William P. Rodrigues, Jr.,
                                    Principal Financial Officer


                                       17