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

                                   FORM 10-QSB
(Mark One)

[x]      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999.

[ ]      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                                     65-0594270
--------------------------------------       ----------------------------------
 (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(s), 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 16 sequentially numbered pages.


<PAGE>




TERRACE FOOD GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended June 30, 1999
--------------------------------------------------------------------------------
INDEX
--------------------------------------------------------------------------------
                                                                          Page
                                                                          ----
Part I.  FINANCIAL INFORMATION

Item 1:  Financial Statements

         Consolidated Balance Sheet as of June 30, 1999 (Unaudited)...     3

         Statements of Operations for the three months and
         six months ended June 30, 1999 and 1998 (Unaudited)..........     4

         Statements of Cash Flow for the six months ended
         June 30, 1999 and 1998 (Unaudited)...........................     5&6

         Notes to Financial Statements................................     7-12

Item 2:  Management's Discussion and Analysis.........................     13&14

Part II.  OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K.............................     15

         Signatures...................................................     16


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





















                                       2
<PAGE>

Item 1.
TERRACE FOOD GROUP, INC.
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1999
(UNAUDITED)
--------------------------------------------------------------------------------

Assets:
Current Assets:
   Accounts Receivable (Less Reserve for
     Doubtful Accounts of $110,860)                             $  3,694,455
   Inventory                                                       2,070,307
   Current Portion of Note Receivable - Stockholder                   53,000
   Other Current Assets                                              366,136
                                                                ------------

   Total Current Assets                                            6,183,898

Property and Equipment - At Cost,
   (Net of Accumulated Depreciation of $659,821)                   5,232,266

Note Receivable - Stockholder                                         53,000

Cost in Excess of Net Assets of Business Acquired
  (Net of Accumulated Amortization of $425,694)                    4,086,433

Other Assets - net                                                   388,729
                                                                ------------

   Total Assets                                                 $ 15,944,326
                                                                ============

Liabilities and Stockholders' Equity
Current Liabilities:
   Accounts Payable                                             $  3,303,791
   Cash Overdraft                                                  1,010,049
   Accrued Expenses                                                  574,291
   Current Portion of Long-Term Debt                                 623,672
   Line of Credit                                                  2,527,539
                                                                ------------
   Total Current Liabilities                                       8,039,342

Long-term Debt                                                     2,126,294
Convertible Subordinated Notes                                     2,807,379
Other Non-Current Liabilities                                        159,166
                                                                 ------------
   Total Liabilities                                              13,132,181
                                                                 ------------

   Commitments and Contingencies

Preferred Stock                                                    1,683,674

Stockholders' Equity:
    Common Stock - $.001 Par Value, 25,000,000 Shares
      Authorized, 948,342 Issued and Outstanding                         948
   Additional Paid-in Capital                                     10,658,239
   Accumulated Deficit                                            (9,530,716)
                                                                ------------
   Total Stockholders' Equity                                      1,128,471
                                                                ------------
   Total Liabilities and Stockholders' Equity                   $ 15,944,326
                                                                ============

See Notes to Financial Statements.




                                       3
<PAGE>


TERRACE FOOD GROUP, INC.
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      Three months ended              Six months ended
                                                      ------------------              ----------------
                                                           June 30,                        June 30,
                                                           --------                        --------
                                                     1999            1998            1999            1998
                                                ------------    ------------    ------------    ------------

<S>                                             <C>             <C>             <C>             <C>
Net Sales                                       $  9,768,011    $  6,176,446    $ 20,865,006    $ 13,429,518

   Cost of Sales                                   7,460,051       4,541,595      15,643,678       9,725,178
                                                ------------    ------------    ------------    ------------

   Gross Profit                                    2,307,960       1,634,851       5,221,328       3,704,340

Operating Expenses:
   Selling, General & Administrative               2,541,350       1,700,386       5,382,287       3,563,713
   Provision for Doubtful Accounts                    17,366         103,108          38,257         105,608
                                                ------------    ------------    ------------    ------------

   Total Operating Expenses                        2,558,716       1,803,494       5,420,544       3,669,321

   Income (Loss) from Operations                    (250,756)       (168,643)       (199,216)         35,019
Other Income (Expense)
Royalty Income                                          --            26,000            --            26,000
Interest Income                                        2,569           3,180           5,749           3,180
Interest Expense                                    (411,831)        (82,743)       (724,336)       (159,925)
                                                ------------    ------------    ------------    ------------

   Other (Expense), Net                             (409,262)        (53,563)       (718,587)       (130,745)


Loss from Continuing Operations                     (660,018)       (222,206)       (917,803)        (95,726)

Income (Loss) from Discontinued Operations              --            (7,465)           --                29
                                                ------------    ------------    ------------    ------------

   Net Loss                                     $   (660,018)   $   (229,671)   $   (917,803)   $    (95,697)
                                                ============    ============    ============    ============


Income (Loss) Per Share of Common Stock
   Loss from Continuing Operations              $       (.77)   $       (.42)   $      (1.04)   $       (.19)
   Income (Loss) from Discontinued Operations           --              (.02)           --              --
                                                ------------    ------------    ------------    ------------
   Basic and Diluted Net (Loss)                 $       (.77)   $       (.44)   $      (1.04)   $       (.19)
                                                ============    ============    ============    ============

Weighted Average Shares of Common
   Stock Outstanding                                 948,342         526,211         948,342         518,716

</TABLE>


Basic and  Diluted  Net Loss per Share of Common  Stock  include  the  effect of
$68,772,  $(.07) Per Share, of accrued Preferred Stock dividends for each of the
three and six month periods ended June 30, 1999.



See Notes to Financial Statements.





                                       4
<PAGE>


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

                                                                 Six months ended
                                                                 ----------------
                                                                     June 30,
                                                                     --------
                                                                1999           1998
                                                            -----------    -----------
Operating Activities:
<S>                                                         <C>            <C>
   Loss from Continuing Operations                          $  (917,803)   $   (95,726)

   Adjustments to Reconcile Loss to Net Cash
   (Used For) Provided by Operating Activities
     Depreciation and Amortization                              676,204        225,265
     Provision for Doubtful Accounts                             38,257         58,000

   Changes in Assets and Liabilities:
     (Increase) Decrease in:
      Accounts Receivable                                       275,440       (325,667)
      Inventory                                                (442,431)      (276,167)
      Other Current Assets                                     (199,705)      (355,636)
      Due from Related Party                                       --          122,752
      Note Receivable from Shareholder                           53,000       (159,000)
      Due on Sale of Discontinued Operations                       --           90,000
      Restricted Cash and Other Assets                          (34,879)      (122,550)

     Increase (Decrease) in:
      Accounts Payable and Cash Overdrafts                     (179,055)       553,403
      Accrued Expenses and other Current Liabilities           (182,232)      (153,491)
      Other Liabilities                                         (25,000)          --
                                                            -----------    -----------
   Total Adjustments                                            (20,401)      (343,091)

    Net Cash - Operating Activities                            (938,204)      (438,817)

Investing Activities:
   Acquisition of Equipment, Furniture & Fixtures              (297,956)      (712,316)
   Purchase of Business Net of Cash Acquired                       --         (745,948)
                                                            -----------    -----------

   Net Cash - Investing Activities                             (297,956)    (1,458,264)
                                                            -----------    -----------

Financing Activities:
   Net Borrowings Repayment Under Line of Credit               (318,270)      (289,355)
   Proceeds From Warrants Exercised                                --          156,250
   Long-term Debt Borrowing (Repayment)                        (145,471)       198,316
   Proceeds from Issuance of Preferred Stock and Warrants     1,699,901           --
   Proceeds from Issuance of Convertible
      Subordinated Notes                                           --        2,625,000
                                                            -----------    -----------
Net Cash-Financing Activities                                 1,236,160      2,690,211

Net (Decrease) Increase in Cash & Cash Equivalents                - 0 -        793,130


See notes to financial statements.







                                       5
<PAGE>

TERRACE FOOD GROUP, INC.
--------------------------------------------------------------------------------
STATEMENTS OF CASH FLOW, Sheet #2
(UNAUDITED)
--------------------------------------------------------------------------------

                                                                 Six months ended
                                                                 ----------------
                                                                     June 30,
                                                                     --------
                                                                1999           1998
                                                            -----------    -----------

   Net (Decrease) Increase in Cash and Cash Equivalents -
   Discontinued Operations                                        - 0 -             29
   Cash and Cash Equivalents - Beginning of Period                - 0 -          - 0 -
                                                            -----------    -----------

   Cash and Cash Equivalents - End of Period                $     - 0 -    $   793,159
                                                            ===========    ===========


Supplemental Disclosures of Cash Flow Information
Cash Paid During the Periods For:

   Interest                                                    $253,388       $165,689
   Taxes                                                           -0-             -0-
</TABLE>


During the second  quarter of 1999,  the Company  issued  $630,292 of additional
Convertible  Subordinated  Notes.  $280,292 of that amount was reclassified from
accrued expenses.

During the second quarter of 1999, the Company issued 19,618 shares of Preferred
Stock at a discount of $346,900  from  redemption  value.  The discount is being
amortized to Additional Paid-in Capital over the term of the Preferred Stock.



See Notes to Financial Statements.






















                                       6
<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-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 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 for the period ended December 31, 1998 included
in the Terrace Food Group, Inc. Form 10-KSB.

(2)      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.

(3)      Name Change

In August 1998 the Company's  shareholders  approved the change of the Company's
name to Terrace Food Group, Inc.

(4)      Loss Per Share

The  computation  of 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 1999 as they  were  considered
anti-dilutive.  Securities that could  potentially  dilute earnings per share in
the future include  warrants and options to purchase  common stock  representing
approximately  1,197,000 Common Shares. The Company has 948,342 shares of Common
Stock  issued  and  outstanding  at June 30,  1999.  In 1998,  the  Company  had
1,523,825  shares of Preferred Stock  outstanding,  which converted into 304,765
shares of Common Stock in July 1998.








                                       7
<PAGE>


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

(5) 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.

(6)  Line of Credit and Term Loan

The Company and its  subsidiaries  maintain a financing  arrangement with a bank
under which the bank provides a line of credit  subject to available  collateral
to a maximum of  $4,000,000  and a term loan.  The loans are  collateralized  by
virtually  all assets of the Company.  All cash  received by the Company must be
remitted to the bank so 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 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 2001,  with the  remaining  balance then due. At
June 30, 1999 the outstanding balance on the loan was $1,738,090.


(7) Convertible Subordinated Notes

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

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

On April 13,  1999,  the Company and the  private  investor  agreed to amend the
terms of the Notes. The maturity date extended to March 31, 2000, the Conversion
Price of the Notes to either Common or Preferred  Shares 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  $631,000 in Notes as
payment for accrued and unpaid  interest on the Notes through April 13, 1999 and
other  considerations.  The Company has also issued the private  investor 25,000
additional Warrants to purchase the Company's Common Stock at $9.00 per share.









                                       8
<PAGE>


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

(8)      Commitments

In connection with the  acquisition of A-One-A  Produce & Provisions,  Inc., the
Company  entered into 5- year  employment  agreements  with two of its officers,
effective  July 1, 1997.  The employment  agreements  call for aggregate  annual
compensation of $240,000.

In connection with the acquisition of Banner Beef and Seafood, Inc., the Company
entered into a 5-year employment agreement with its Operations Vice President at
an annual base salary of $200,000.

The Company has an employment  agreement with Jonathan S. Lasko,  Executive Vice
President,  through  August 31,  2000,  for a base salary of $125,000  per year.
Additionally,  the  agreement  provides  that  certain  other  benefits  be made
available to the Executive.

(9) Preferred Stock

As of April 23, 1999,  the Company  issued 19,618  shares of a newly  authorized
Series of Preferred  Stock together with Warrants to purchase  340,000 shares of
the Company's  Common Stock. The shares and warrants were purchased by a private
investor  group that  included  three of the  Company's  Directors.  The Company
received proceeds of approximately $1,700,000 in this transaction that are being
used for operating purposes.

The  Preferred  Stock was issued at a discount,  calculated  yield an  effective
annual  dividend of  approximately  15%. The Preferred  Stock is redeemable,  in
cash,  at the option of the  Company  through  March 30,  2000,  when it becomes
mandatorily  redeemable  either in cash or  through  conversion  into 17% Senior
Notes which would mature on March 31, 2003. The stock purchase  warrants,  which
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 $346,900
from the redemption value of $1,961,800 is being amortized to Additional Paid-in
Capital to March 31,2000.


(10) 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 Company's A-One-A Produce and Provisions, Inc. and Fresh, Inc.
subsidiaries and Food Processing and Manufacturing is represented by Banner Beef
and Seafood Co. Inc.

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







                                       9
<PAGE>


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

 (10) Segment Data - continued

Quarter ended June 30, 1999
---------------------------
<TABLE>
<CAPTION>
                                                                      Food
                                                  Food           Processing and
                                               Distribution       Manufacturing         Total
                                               ------------       -------------         -----

<S>                                              <C>                 <C>             <C>
Sales                                            $8,755,829          $1,012,182      $ 9,768,011
Depreciation and amortization                       139,288              39,837          179,125
Operating income (loss)                             362,072            (349,912)          12,170
Segment assets                                    9,507,183           5,809,708       15,316,891
Expenditures for segment property
     and equipment                                  111,885             108,153          220,038


Reconciliation of segment amounts to consolidated amounts:

Loss from continuing operations:
   Total segments                                                                    $    12,170
   Interest expense                                                                     (411,831)
   Amortization of deferred financing costs                                             (107,862)
   Interest income                                                                         2,569
   Corporate expenses                                                                   (155,064)
                                                                                      ----------
     Total                                                                           $  (660,018)
                                                                                      ==========

Assets:
    Total segments                                                                   $15,316,961
    Note Receivable                                                                      106,000
    Other Assets                                                                         388,729
    Other current assets                                                                 132,636
                                                                                      ----------
     Total                                                                           $15,944,326
                                                                                      ==========



Quarter ended June 30, 1998
                                                               Food
                                                           Distribution                 Total
                                                           ------------                 -----
Sales                                                        $6,176,446              $ 6,176,446
Depreciation and amortization                                   112,555                  112,555
Operating income                                               (147,333)                (147,333)
Segment assets                                                8,620,283                8,620,283
Expenditures for segment property
   and equipment                                                163,696                  163,696

</TABLE>




                                       10
<PAGE>


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

(10) Segment Data - continued

Reconciliation of segment amounts to consolidated amounts:

Income (Loss) from continuing operations:
   Segment                                                          $  (147,333)
   Interest expense                                                     (79,563)
   Corporate expenses                                                     4,690
                                                                    -----------
Total                                                               $  (222,206)
                                                                    ===========


Assets:
    Segment                                                         $ 8,525,786
    Other Assets                                                        298,424
    Notes Receivable                                                    159,000
    Restricted cash                                                      94,497
    Other current assets                                              1,114,062
                                                                    -----------
Total                                                               $10,191,769
                                                                    ===========


Six Months ended June 30, 1999
------------------------------
<TABLE>
<CAPTION>
                                                                      Food
                                                  Food           Processing and
                                               Distribution       Manufacturing         Total
                                               ------------       -------------         -----

<S>                                             <C>                  <C>             <C>
Sales                                           $18,771,224          $2,093,782      $20,865,006
Depreciation and amortization                       274,744                              274,744
Operating income (loss)                             894,724            (641,373)         253,351
Segment assets                                    8,718,816           5,766,354       14,485,170
Expenditures for segment property
and equipment                                       163,696             134,260          297,956



Reconciliation of segment amounts to consolidated amounts:

Loss from continuing operations:
   Total segments                                                                      $ 253,351
   Interest expense                                                                     (724,336)
   Amortization of deferred financing costs                                             (215,784)
   Interest income                                                                         5,749
   Corporate expenses                                                                   (236,783)
                                                                                      ----------
     Total                                                                            $ (917,803)
                                                                                      ==========
</TABLE>









                                       11
<PAGE>

TERRACE FOOD GROUP, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Sheet #6
(UNAUDITED)
--------------------------------------------------------------------------------

(10) Segment Data - continued

<TABLE>
<CAPTION>
Six months ended June 30, 1998
------------------------------
                                                               Food
                                                           Distribution                 Total
                                                           ------------                 -----
<S>                                                         <C>                      <C>
Sales                                                       $13,429,518              $13,429,518
Depreciation and amortization                                   211,962                  211,962
Operating income                                                217,347                  217,347
Segment assets                                                8,620,283                8,620,283
Expenditures for segment property
and equipment                                                   163,696                  163,696


Reconciliation of segment amounts to consolidated amounts:

Income (Loss) from continuing operations:
   Segment                                                                           $   217,347
   Interest expense                                                                     (156,745)
   Corporate expenses                                                                   (156,328)
                                                                                      ----------
                                                                                     $   (95,726)
                                                                                     ===========


</TABLE>




























                                       12
<PAGE>


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

The Company's distribution and produce processing subsidiary A-One-A Produce and
Provisions,   Inc.   distributes   fresh  produce  and  dairy  products  to  the
foodservice,  cruise ship and export  customers in South Florida.  The Company's
manufacturing and processing  subsidiary  Banner Beef and Seafood Company,  Inc.
operates in the value added Home Meal Replacement sector and sells to the retail
and foodservice markets. The Company's  consolidated revenues for the six months
ended June 30, 1999 were  approximately  $20, 865,000 compared to $13,429,00 for
the same period in 1998 or an  increase  of  approximately  55%.  The  Company's
operating segment income from operations increased approximately $36,000 for the
six months ended June 30, 1999 from the prior year period.

Management  believes  that  as  its  plan  for  growth  in  its  newly  acquired
manufacturing subsidiary continues to be implemented profitable operating levels
will be obtained at both A-One-A and Banner Beef.

SEGMENT ANALYSIS
----------------

Food Distribution
-----------------

The Company's food distribution  segment is comprised of its A-One-A Produce and
Provisions,  Inc. and Fresh, Inc.  operations which distribute and process fresh
produce and dairy products throughout South Florida as well as export and cruise
ship  customers  from  the  local  ports.  Revenues  for  this  segment  reached
$18,771,224  for the six months ended June 30, 1999 compared to $13,429,519  for
the six months ended June 30, 1998 and increase of approximately  40%. Operating
income was  $892,000  for the first six months of 1999  compared to $217,000 for
the same period in 1998. This increase of  approximately  311% resulted from the
large revenue increase in A-1-A sales as well as managements continued directive
towards expense control.  During the first six months the company was successful
in many of its bids for large Hotels,  Hospitals and Cruise Ship accounts  which
had a large impact on sales.  Through continued sales growth and further expense
control,  the Company's  A-One-A  segment will maintain and build on its current
levels of profitability. Management believes that as the year further progresses
and into future periods the investment  made into  technology and plant upgrades
will continue to pay off. The current  customer mix has helped smooth  A-One-A's
cyclical  history and by  continuing  the current  push  towards  larger  volume
accounts, this out of season sales trend should continue.

Food Processing and Manufacturing
---------------------------------

The Company's  food  processing  and  manufacturing  segment is comprised of its
Banner Beef and Seafood  subsidiary.  The company  purchased Banner to enter the
higher  margin,  value added  segment of the food  industry.  Management  sees a
strong  opportunity to participate in the Home Meal  Replacement  segment of the
industry.  Revenues for the six months ended June 30, 1999 were  $2,093,782 with
an operating loss of $641,000.  There are no comparable results for 1998, as the
Company did not own Banner Beef and Seafood. The test marketing that the Company
has been through in the first six months has been  successful  with major chains
around the Country.






                                       13

<PAGE>

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

The Company's  current prospect  exposure  encompasses over five thousand retail
and club  markets that  represent  over $150  billion in annual  sales.  Initial
feedback  and  startup  has  already  begun to take place and  initial  consumer
response has been very positive.  As these Home Meal  Replacement  opportunities
continue to materialize,  management  believes Banner sales will be dramatically
impacted. In addition,  as revenues continue to grow manufacturing  efficiencies
and  overhead  absorption  will be  realized  which  should  result in  positive
earnings for the Company.


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

At June 30, 1999 the Company had a cash deficit of approximately  $1,010,000 and
a working capital deficit of approximately $1,855,000.

During the first six months of 1999,  management  believes the food distribution
operations  have  improved  with  the  securing  of  substantial  new  business,
particularly  with high volume  institutional  accounts.  Management  intends to
continue its  aggressive  marketing  efforts in these areas as well as to cruise
line and export customers.

Management  further  believes that a key element in its plan is to substantially
increase sales volume at Banner,  where the Company has developed the capability
of producing  high  quality  innovative  products for the home meal  replacement
("HMR") market.

In April  1999,  the  Registrant  issued  19,618  shares  of a newly  authorized
Preferred  Stock  together  with  Warrants  to  purchase  340,000  shares of the
Registrant's  Common Stock.  The shares and warrants were purchased by a private
investor group that included three of the Registrant's Directors. The Registrant
received  proceeds of  approximately  $1,700,000 in this  transaction  which are
being used for working capital.

Management  believes  that  the  transactions   described  above  and  operating
improvements will be sufficient to provide for its continuing operations.





















                                       14

<PAGE>


Part II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits
         Number        Description
         ------        -----------
          4.1          Certificate of Designations for Series C Preferred Stock



=======================================

(b) Reports on Form 8-K

The Registrant filed a Report on Form 8-K dated April 26, 1999 to report a press
release announcing the completion of its $1.6 million preferred equity financing
and issuance of its Series C Preferred Stock.


































                                       15
<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 FOOD GROUP, INC.
                                        (Registrant)


Dated:  August 16, 1999                 By: /s/Jonathan S. Lasko
                                            -------------------------------
                                               Jonathan S. Lasko,
                                               Executive Vice President &
                                               Chief Operating Officer


Dated:  August 16, 1999                 By: /s/William P. Rodrigues, Jr.
                                            -------------------------------
                                               William P. Rodrigues, Jr.,
                                               Principal Financial Officer






















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