UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the quarter ended     September 30, 1996    Commission File Number   0-27132

                             TERRACE HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                     65-0594270
            (State or other jurisdiction of              (I.R.S. Employer
            incorporation or organization)              Identification No.)

            2699 Stirling Road, Suite C-405
            Ft. Lauderdale, Florida                             33312
            (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:             (954) 894-6000
                                                        ----------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 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


Number of shares outstanding of each of the issuer's classes of common stock, as
of November 15, 1996 was 3,312,500.


<PAGE>



TERRACE HOLDINGS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


INDEX
------------------------------------------------------------------------------




                                                                        Page
Part I.  FINANCIAL INFORMATION

Item 1:  Financial Statements

   Consolidated Balance Sheet as of September 30, 1996 [Unaudited]....  1

   Statements of Operations for the three and nine months ended
   September 30, 1996 and 1995 [Unaudited]............................  2.....3

   Statements of Cash Flows for the nine months ended
   September 30, 1996 and 1995 [Unaudited]............................  4.....5

   Notes to Financial Statements......................................  6.....7

Item 2:  Management's Discussion and Analysis of Financial Condition
         and Results of Operations....................................  8.....9

Part II.  OTHER INFORMATION

   Item 6. Exhibits and Reports on Form 8-K...........................  10

   Exhibit 11.........................................................  11

   Signatures.........................................................  12





                    .   .   .   .   .   .   .   .   .   .   .


<PAGE>

<TABLE>


Item 1.
TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------


<S>                                                                    <C> 
Assets:
Current Assets:
  Cash and Cash Equivalents                                             $ 1,795,277
  Accounts Receivable                                                       103,072
  Inventory                                                                  42,670
  Other Current Assets                                                       19,298
                                                                        -----------

  Total Current Assets                                                    1,960,317

Furniture, Fixtures and Equipment - At Cost [Net of
  Accumulated Depreciation of $61,804]                                      403,870

Intangible Assets [Net of Accumulated Amortization of $259,875]             415,125

Other Assets                                                                 74,564

  Total Assets                                                          $ 2,853,876
                                                                        ===========

Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                                      $   138,102
  Accrued Expenses and Other Payables                                         2,906
  Accrued Payroll and Payroll Taxes                                          28,067
  Deferred Revenue                                                           71,864
  Due to Related Party                                                        9,105
  Net Liabilities of Discontinued Operations                                  4,429
                                                                        -----------

  Total Current Liabilities                                                 254,473

Commitments and Contingencies                                                    --

Stockholders' Equity:
  Common Stock - $.001 Par Value, 10,000,000 Shares
   Authorized, 3,312,500 Issued and Outstanding                               3,313

  Additional Paid-in Capital                                              3,945,948

  Retained Earnings [Deficit]                                            (1,349,858)

  Total Stockholders' Equity                                              2,599,403

  Total Liabilities and Stockholders' Equity                            $ 2,853,876
                                                                        ===========



See Notes to Financial Statements.


</TABLE>

                                         1

<PAGE>

<TABLE>


TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------


                                       Three months ended       Nine months ended
                                          September 30,           September 30,
                                          -------------           -------------
                                       1 9 9 6     1 9 9 5     1 9 9 6     1 9 9 5
                                       -------     -------     -------     -------
<S>                                <C>           <C>         <C>          <C> 

                                   [Consolidated][Combined][Consolidated][Combined]

Revenue                             $   265,626 $   137,686 $ 4,990,801 $ 2,421,115

Cost of Sales                           148,136      80,511   3,634,322   1,477,198
                                    ----------- ----------- ----------- -----------

  Gross Profit                          117,490      57,175   1,356,479     943,917
                                    ----------- ----------- ----------- -----------

Operating Expenses:
  Selling, General and Administrative
   Expenses                             325,537      50,614   1,440,526     248,427
  Payroll and Related Expenses          200,346     101,811     748,355     325,241
                                    ----------- ----------- ----------- -----------

  Total Operating Expenses              525,883     152,425   2,188,881     573,668
                                    ----------- ----------- ----------- -----------

  [Loss] Income from Operations        (408,393)    (95,250)   (832,402)    370,249
                                    ----------- ----------- ----------- -----------

Other Income [Expense]:
  Other Income                               --         557          --         557
  Interest Income                        17,078          --      78,849          --
  Interest Expense                       (1,514)     (8,366)     (6,986)    (15,590)
                                    ----------- ----------- ----------- -----------

  Other Income [Expense] - Net           15,564      (7,809)     71,863     (15,033)
                                    ----------- ----------- ----------- -----------

  [Loss] Income from Continuing
   Operations Before Pro Forma
   Income Taxes                        (392,829)   (103,059)   (760,539)    355,216

Pro Forma Income Taxes                       --          --          --     117,773
                                    ----------- ----------- ----------- -----------

  Net [Loss] Income from Continuing
   Operations                          (392,829)   (103,059)   (760,539)    237,443

Discontinued Operations:
  [Loss] from Operations of Discontinued
   Division [Net of Income Taxes of $-0-](21,407)   (56,509)    (74,125)   (173,342)
  Loss on Disposal of Division, including
   Provision of $29,500 for Operating
   Losses during the Phase-Out Period
   [Less Applicable Income Taxes of $-0-](129,826)       --    (129,826)         --
                                         -------- --------- ----------- -----------

  Net [Loss] Income                 $  (544,062)$  (159,568)$  (964,490)$    64,101
                                    =========== =========== =========== ===========


See Notes to Financial Statements.

                                         2
</TABLE>


<PAGE>


<TABLE>

TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------



                                       Three months ended       Nine months ended
                                          September 30,           September 30,
                                          -------------           -------------
                                       1 9 9 6     1 9 9 5     1 9 9 6     1 9 9 5
                                       -------     -------     -------     -------

                                   [Consolidated][Combined][Consolidated][Combined]
<S>                                 <C>           <C>        <C>               <C>        <C>

Loss [Income] Per Share:
  [Loss] Income from Continuing
   Operations                       $      (.10)$      (.06)$      (.21)$       .14
  [Loss] from Operations of Discontinued
   Business Segment [Net of Income Tax]    (.01)       (.03)       (.02)       (.10)
  [Loss] on Discontinued Business Segment  (.04)         --        (.03)         --
                                         ------ ----------- ----------- -----------

  Net [Loss] Income Per Share       $      (.15)$      (.09)$      (.26)$       .04
                                    =========== =========== =========== ===========

  Weighted Average Common Shares
   Outstanding                        3,312,500   1,675,000   3,312,500   1,675,000
                                    =========== =========== =========== ===========




</TABLE>

See Notes to Financial Statements.

                                         3

<PAGE>

<TABLE>


TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------


                                                                Nine months ended
                                                                  September 30,
                                                               1 9 9 6     1 9 9 5
                                                               -------     -------
                                                           [Consolidated][Combined]
<S>                                                         <C>           <C> 
                                                             
Operating Activities:
  Net [Loss] Income                                         $  (760,539)$   355,216
                                                            ----------- -----------
  Adjustments  to Reconcile Net [Loss] Income to Net Cash
   [Used for] Provided by
   Operating Activities:
   Depreciation and Amortization                                309,900       3,859

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                         (4,089)      6,801
     Inventory                                                  (16,642)      9,876
     Other Current Assets                                       (11,462)     (4,416)
     Other Assets                                                19,383      43,310

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                     (114,428)    223,973
     Accrued Payroll and Payroll Taxes Payable                   (4,437)    (11,135)
     Deferred Revenue                                           (92,196)    (75,829)
                                                            ----------- -----------

   Total Adjustments                                             86,029     196,439
                                                            ----------- -----------

  Net Cash - Operating Activities from Continuing Operations   (674,510)    551,655
                                                            ----------- -----------

  Loss from Discontinued Operations:
  Net [Loss]                                                   (203,951)   (173,342)
  Adjustments to Reconcile Net [Loss] from Discontinued
   Operations to Net Cash [Used for] Operating Activities:
   Depreciation and Amortization                                 13,720      19,004
   Loss on Disposal of Assets                                    97,693          --
   Net Change in Assets and Liabilities                         (29,668)      8,623
                                                            ----------- -----------

  Net Cash - Operating Activities from Discontinued Operations (122,206)   (145,715)
                                                              --------- -----------

  Net Cash - Operating Activities - Forward                    (796,716)    405,940
                                                            ----------- -----------

Investing Activities:
  Acquisition of Intangible Assets                             (675,000)         --
  Acquisition of Assets                                        (177,091)   (118,349)
  Deferred Costs                                                     --    (373,850)
                                                            ----------- -----------

  Net Cash - Investing Activities - Forward                 $  (852,091)$  (492,199)



See Notes to Financial Statements.

                                         4
</TABLE>

<PAGE>


<TABLE>

TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------


                                                                Nine months ended
                                                                  September 30,
                                                               1 9 9 6     1 9 9 5
                                                               -------     -------
                                                             (consolidated][Combined]

<S>                                                         <C>         <C> 
 
  Net Cash - Operating Activities - Forwarded               $  (796,716)$   405,940
                                                            ----------- -----------

  Net Cash - Investing Activities - Forwarded                  (852,091)   (492,199)
                                                            ----------- -----------

Financing Activities:
  Proceeds from Demand Notes Payable                                 --      85,000
  Payment of Demand Notes Payable                               (10,000)   (130,000)
  Proceeds from Bridge Loan                                          --     400,000
  Proceeds from Demand Notes Payable - Stockholders
   and Related Parties                                               --     135,894
  Payment of Demand Notes Payable - Stockholders and Related Parties(153,380)    --
  Subchapter S Distributions                                         --    (338,161)

  Net Cash - Financing Activities                              (163,380)    152,733
                                                            ----------- -----------

  Net [Decrease] Increase in Cash and Cash Equivalents       (1,812,187)     66,474

Cash and Cash Equivalents - Beginning of Periods              3,602,009      30,407
                                                            ----------- -----------

  Cash and Cash Equivalents - End of Periods                $ 1,789,822 $    96,881
                                                            =========== ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                                 $     2,269 $        --
   Taxes                                                    $        -- $        --


See Notes to Financial Statements.

                                         5

<PAGE>


</TABLE>

TERRACE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
[UNAUDITED]
------------------------------------------------------------------------------




[1] Basis of Reporting

The accompanying  unaudited  consolidated and combined financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial  information and with the instructions to Form 10-QSB and Item
310(b)  of  Regulation  S-B.  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 for a
fair presentation of the financial position of the Company at September 30, 1996
and the  results of its  operations  for the three and nine month  periods  then
ended and its cash flows for the nine month  periods then ended.  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 for the periods
ending in 1996 include the accounts of Terrace Holdings,  Inc. and subsidiaries.
The combined  financial  statements  for 1995  included  the same  entities on a
combined basis. All significant intercompany balances and transactions have been
eliminated in consolidation and combination.

In July  1996,  the  Company  disposed  of all of the  operating  assets  of its
subsidiary,  Prime  Concern  Kosher  Foods,  Inc.  [doing  business as "The Deli
Maven"]. Management believed that in order to fully realize both revenue and net
income  potential,  the  physical  size of The Deli  Maven had to be  increased.
Management  could  not  increase  the  physical  size  of The  Deli  Maven  and,
accordingly,  closed the  operation.  The disposal is reflected as  discontinued
operations  in  the  accompanying  financial  statements.   Net  Assets  of  the
discontinued  subsidiary are presented  separately in the  accompanying  balance
sheet.

It is suggested that these financial  statements be read in conjunction with the
financial  statements  and notes for the period ended December 31, 1995 included
in the Company's annual report on Form 10- KSB.

[2] [Loss] Income Per Share

[Loss] income per share of common stock is based on weighted  average  number of
common shares  outstanding for each period  presented.  Common stock equivalents
are included if dilutive.  Historical  earnings per share for the periods ending
in 1995  are  not  indicative  of the  capital  structure  of the  Company  upon
completion of the business  combinations  which were completed in December 1995.
Therefore, 1,675,000 shares have been used in the computation for such periods.

[3] Common Stock

At  September  30, 1996,  3,312,500  shares of the  Company's  common stock were
issued and outstanding.

[4] Intangible Assets

In January 1996,  the Company  entered into an  assignment  agreement to operate
Passover vacations at hotels located in Miami,  Florida,  Rye Town, New York and
Tamiment,   Pennsylvania.  The  Company  paid  $675,000  for  these  agreements.
Amortization  is computed  over the term of the  agreements  [four years for the
hotels  located  in Miami and  Ryetown  and one year for the hotel in  Taminent]
using the straight-line  method.  Amortization  expense amounted to $259,875 for
the nine month period ending September 30, 1996.




                                        6

<PAGE>



TERRACE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
------------------------------------------------------------------------------



[5] Seasonality

The Company's  holiday  vacation  operations are limited to Passover,  which, in
date occurrence,  approximates  Easter.  While the Passover vacation  operations
generate  revenue and income and require  year-round  management  activity,  the
concentrations of revenues and expenses occur during the second quarter.

[6] Deferred Revenue

Deferred  revenue  consists of deposits  collected  for future  vacations at the
Kosher holiday  vacation venue and deposits on hand for future catering  events.
Deferred revenue totaled $71,864 at September 30, 1996.

[7] Inventories

Inventories  consist  of food and  beverages  for the  Kosher  holiday  vacation
venues,  restaurant and catering  operations and are stated at the lower of cost
[determined by the first-in, first-out method] or market.








                      .   .   .   .   .   .   .   .   .   .

                                        7

<PAGE>



Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
[Rounded to Thousands of Dollars]
------------------------------------------------------------------------------


Results of Operations - Terrace Holdings, Inc. [Passover Holiday Vacations]

Nine months ended September 30, 1996 compared to nine months ended September 30,
1995.

In addition to being a holding  company,  the Registrant  directly  operates the
Passover holiday  vacation  segment of its business.  Through Passover 1995, the
Registrant  operated one Passover vacation venue at the Bonaventure Resort & Spa
in  Fort  Lauderdale,  Florida.  In  January,  1996,  the  Registrant  purchased
additional Passover holiday contracts for three other venues.

Revenues for the nine months ended  September 30, 1996 were $3,750,000 or 111.6%
higher  than the  $1,772,000  recorded  in the  comparable  period of 1995.  The
substantial  increase in revenue  resulted  from the addition of three  Passover
holiday contracts. Cost of revenues increased by 155% from $1,229,000 in 1995 to
$3,135,000 in 1996.  This increase is due to the three  additional  venues.  The
gross profit  percentage  decreased to 16% from 31% at September 30, 1995 mainly
because  increased costs  associated with the new venues.  Management  currently
believes that it can realize maximum  profitability  potential from these venues
by next year, although no assurance can be given.

Selling,  general and administrative expenses increased by 926% from $122,000 in
1995 to $1,252,000  in 1996.  The increase is due primarily to the costs related
to the purchase of the additional  holiday venues.  These costs include a charge
to amortization expense of $260,000,  as well as other costs associated with the
new venues,  such as travel expense  associated  with new  locations.  Operating
expenses  also  increased  due to  professional  fees  associated  with  Terrace
Holdings  expansion  into  the  public  marketplace.  The  companies  aggressive
attempts at possible  acquisition  candidates  has also increased the associated
fees even though the  benefits  have not yet been  realized.  As a result of the
above,  the net loss for the nine months ending  September 30, 1996 was $567,000
as compared to net income of $277,000 for the corresponding period of 1995.

Results of Operations -  A & E Management Corp.

Nine months ended September 30, 1996 compared to nine months ended September 30,
1995.

The Registrant's  operations at The Club at Emerald Hills in Hollywood,  Florida
are derived  from its  operations  of the  Reflections  Restaurant  and catering
private functions.  During 1996, the golf club where the restaurant and catering
facility are located  changed its  membership  policies  resulting in a slightly
higher  number of golfers  and,  thus,  people using the  Registrant's  food and
beverage  operations there. This translated into slightly higher revenues in the
restaurant of  approximately  $666,000 for the nine months ending  September 30,
1996 compared to approximately $649,000 for the nine months ending September 30,
1995.

Net loss for the nine months ended September 30, 1996 was approximately  $38,000
as compared  to net loss of  approximately  $61,462  for the nine  months  ended
September  30,  1995.  This  decrease  in loss was  primarily  due to an overall
decrease in cost of sales.

Results of Operations - The Lasko Companies, Inc.

The Lasko Companies,  Inc. commenced generating revenues with the opening of the
Terrace  Oceanside  Restaurant on October 23, 1995. Some  significant  period of
time will be necessary before pre-operating expenses and costs are recovered, if
at all, and any income is generated.

Net loss for the nine months ended September 30, 1996 was $95,000 as compared to
a net  loss of  $3,000  for the nine  months  ended  September  30,  1995.  This
increased loss is  attributable  primarily to start up cost  associated with the
normal  course of  business.  The Company  currently  feels that the cost it has
incurred associated with its initial start up will be non-recurring and that the
Company will be able to realize its maximum  profitability in the coming season,
although no assurance can be given.

                                        8

<PAGE>



Item 2.

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



Results of Operations - Terrace Holdings, Inc. [Consolidated]

Nine months ended September 30, 1996 compared to nine months ended September 30,
1995.

The  Registrant's  consolidated net loss for the nine months ended September 30,
1996 was  approximately  $964,000  compared  with its  combined  net  income  of
approximately  $64,000  for the nine  months  ended  September  30,  1995.  This
substantial  decrease  is due to the  following  factors.  In 1996,  the Company
purchased additional Passover holiday contracts, which resulted in a net loss of
$434,000.  Selling,  General and Administrative  Expenses increased by 481% from
$248,000  in  1995  to  $1,440,000  in  1996   primarily  due  to  increases  in
professional  fees,  payroll and related  expenses and costs associated with the
purchases of the new holiday venues.

Discontinued Operations - Prime Concern Kosher Foods, Inc.

On March 1, 1995, Prime Concern Kosher Foods, Inc.  commenced  operations of The
Deli Maven.  The Deli Maven remained  opened until July 5, 1995 at which time it
temporarily  suspended operations in order to renovate its facilities.  The Deli
Maven  reopened on August 28, 1995 under the  Registrant's  management,  and the
Registrant acquired The Deli Maven in December, 1995.

In July  1996,  the  Company  disposed  of all of the  operating  assets  of its
subsidiary,  Prime  Concern  Kosher Foods,  Inc.  [trading as "The Deli Maven"].
Management  believed  that in order to fully realize both revenue and net income
potential,  the physical size of The Deli Maven had to be increased.  Management
could not increase the physical  size of The Deli Maven and  accordingly  closed
the  operation.  The  disposal is reflected as  discontinued  operations  in the
accompanying financial statements. Net Assets of the discontinued subsidiary are
presented separately in the accompanying balance sheet.

Liquidity and Capital Resources

At September 30, 1996, the Registrant had cash of  approximately  $1,795,000 and
working capital of approximately  $1,706,000,  substantially  all of which was a
result of the proceeds  received from the  Registrant's  public  offering of its
securities.  Prior to its public offering, the Registrant, and its subsidiaries,
relied  principally  on certain  bridge and related  party loans and  internally
generated funds to fund its working capital expenditures.

Seasonality

The  Registrant's  sales  in its  restaurant  operations  in South  Florida  are
expected to be seasonal,  with the third quarter being  substantially lower than
the other  quarters  of the year,  due to weather  and the dining  habits of the
Registrant's guests. Additionally,  the seasonal nature of Passover holiday will
also continue to affect that aspect of the Registrant's business.




                                        9

<PAGE>



Part II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

      (3)(i) Articles of Incorporation *

      (3)(ii) By-laws *

      (4) Instruments defining the rights of holders *

      (10) Material Contracts **

      (11) Statement Re: Computation of per Share Earnings

      See Exhibit 11 filed herewith.

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


 *    Incorporated by this reference to the Registrant's registration statement
      # 33-96892-A. **    All material contracts presently in full force and
      effect and heretofore filed with the Commission are hereby  incorporated 
      by this reference to  Registrant's  registration  statement  #33-96892-A, 
      and to its Form 10-KSB,  which was filed with the
      Commission April 15,1996.

(b)  Reports on Form 8-K

      The  Registrant  filed Current  Reports on Form 8-K dated January 12, 1996
and  January  31,  1996  for  the  purpose  of  reporting   its  purchase   from
International  Tours and  Catering by  Ambassador,  Inc.,  the rights to operate
three Passover vacation venues.


                                       10

<PAGE>
<TABLE>



TERRACE HOLDINGS, INC.
------------------------------------------------------------------------------


EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
------------------------------------------------------------------------------



                                       Three months ended       Nine months ended
                                          September 30,           September 30,
                                          -------------           -------------
                                       1 9 9 6     1 9 9 5     1 9 9 6     1 9 9 5
                                       -------     -------     -------     -------
                                   [Consolidated][Combined][Consolidated][Combined]

                                     <C>         <C>         <C>          <C>
Fully Diluted:*
  Average Shares Outstanding
   Disregarding Potentially Dilutive
   Common Stock Purchased Warrants    3,312,500   1,675,000   3,312,500   1,675,000

  Assuming Conversion of Warrants [1]        --          --          --          --
                                     ---------- ----------- ----------- -----------

  Common Shares Outstanding           3,312,500   1,675,000   3,312,500   1,675,000
                                    =========== =========== =========== ===========

  [Loss] Income from Continuing
   Operations for Fully Diluted
   Calculations                     $  (392,829)$  (103,059)$  (760,539)$   237,443
                                    =========== =========== =========== ===========

  [Loss] from Discontinued Operations
   for Fully Diluted Calculations   $  (151,233)$   (56,509)$  (203,951)$  (173,342)
                                    =========== =========== =========== ===========

  Fully Diluted [Loss] Income Per
   Common Share from Continuing
   Operations                       $      (.10)$      (.06)$      (.21)$       .14
                                    =========== =========== =========== ===========

  Fully Diluted Loss Per Common Share
   from Discontinued Operations     $      (.05)$      (.03)$      (.05)$      (.10)
                                    =========== =========== =========== ===========

  Fully Diluted Net [Loss] Income Per
   Common Share                     $      (.15)$      (.09)$      (.26)$       .04
                                    =========== =========== =========== ===========

</TABLE>

[1] Class A and Class B warrants are excluded  from the  calculation  as they do
not become exercisable until December 5, 1996.  However,  if effect was given to
the exercise of all such  warrants,  common shares  outstanding  would have been
increased by 1,981,250.

*  This calculation is submitted in accordance with Securities Exchange Act of
    1934 Release No. 9083, although not required by Footnote 2 to Paragraph 14
    of APB Opinion No. 15 because it results in dilution of less than 3%.

                                         11

<PAGE>


SIGNATURES
------------------------------------------------------------------------------




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


                                   TERRACE HOLDINGS, INC.
                                   (Registrant)



Dated: November 19, 1996           By:Samuel H. Lasko, President and Principal
                                       Financial Officer
                                      ------------------------------------------
                                      Samuel H. Lasko,
                                      President and Principal Financial Officer


                                       12

<PAGE>