TERRACE HOLDINGS INC, SB-2/A, 1998-04-29

TERRACE HOLDINGS INC
SB-2/A, 1998-04-29
EATING PLACES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1998

SEC FILE NO. 333-45195
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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

AMENDMENT NO. 1

TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

TERRACE HOLDINGS, INC.
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

AMENDING THE FACING SHEET, PROSPECTUS (INCLUDING UPDATED FINANCIALS)

AND FILING CERTAIN EXHIBITS

CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock..................... 5,435,150(2) $1.25(3) $ 6,793,937.50 $2,004.21
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Common Stock..................... 770,000(4) $2.44(5) $ 1,878,800.00 $ 554.25
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Common Stock..................... 3,047,650(6) $2.44(5) $ 7,436,266.00 $2,193.70
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Redeemable Common Stock Purchase
Warrants........................ 3,047,650(7) $1.25(8) $ 3,809,562.50 $1,123.82
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TOTAL............................ $ $19,918,566.00 $5,875.98
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.

(2) Represents 1,637,500 shares issuable upon exercise of redeemable common
stock purchase warrants ("Warrants") issued by the Registrant prior to and
in connection with its initial public offering in December, 1995; and
3,797,650 shares issuable upon exercise of warrants for resale by the
holders thereof.

(3) Represents the proposed temporary exercise prices.

(4) Represents 570,000 shares issuable upon exercise of warrants (exercisable
at $1.187 per share) and 200,000 shares for resale by the holders thereof.

(5) In accordance with Rule 457(c), the price represents the average of the
closing bid and asked price of the Company's Common Stock as of January
22, 1998.

(6) Issuable upon conversion of Preferred Stock (issued as a component of
"Units" privately placed by the Registrant in July, 1997) for resale by
the holders thereof.

(7) Issued as a component of "Units" privately placed by the Registrant in
July, 1995, for resale by the holders thereof.

(8) Pursuant to Rule 457(c), the price represents the average of the closing
bid and asked price of the Warrants as of January 22, 1998.

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THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PRELIMINARY PROSPECTUS DATED APRIL 29, 1998--SUBJECT TO COMPLETION

PROSPECTUS

TERRACE HOLDINGS, INC.

In December, 1995, Terrace Holdings, Inc., a Delaware corporation (the
"Company"), sold 1,437,500 redeemable common stock purchase warrants (the
"Public Warrants") and certain selling warrantholders sold 200,000 identical
warrants, which they had acquired in July 1995 ("Lenders Warrants"), to the
public. In August, 1997, the Company consummated a private placement of
1,523,825 units of its securities, including units issued as commissions, each
unit consisting of one share of preferred stock, $.001 par value ("Preferred
Stock"), each convertible into two shares of Common Stock, and two redeemable
common stock purchase warrants (the "Private Placement Warrants"), each to
purchase one share of common stock, $.001 par value ("Common Stock"). The
Private Placement Warrants are identical in all respects to the Public
Warrants, as are warrants to purchase 750,000 shares issued in July, 1997 to
Biltmore Securities, Inc., as an investment banking fee ("IB Warrants"). The
Public Warrants, Lenders Warrants, Private Placement Warrants and the IB
Warrants are sometimes hereinafter collectively referred to as the "Warrants".
This Prospectus covers the offer and sale of up to (1) 5,435,150 shares of
Common Stock reserved for issuance upon exercise of Warrants (3,797,650 thereof
for resale), and (2) 3,047,650 shares of Common Stock, reserved for issuance
upon conversion of the Preferred Stock, for resale. All of the Warrants are
exercisable at $4.00 per share. See "Description of Securities--Warrants,"
"Price Range of Securities," "Business--Recent Financing" and "Plan of
Distribution."

This Prospectus also covers the offer and sale by the holders thereof of the
3,047,650 Private Placement Warrants and up to an additional 200,000 shares of
Common Stock. See "Selling Securities Holders." Up to 570,000 additional shares
of Common Stock reserved for issuance upon exercise of warrants issued to (i)
Biltmore Securities, Inc., the Company's initial underwriter (250,000 shares),
(ii) the former members of DownEast Frozen Desserts, LLC, in connection with
the Company's acquisition of Deering Ice Cream, Inc. (250,000 shares), and
(iii) one of its directors (70,000 shares), are being registered so that if and
when such warrants are exercised such shares may be offered and resold to the
public.
(Continued on following page)

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
INCLUDED IN THE UNITS AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD
THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6 AND
"DILUTION."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OR THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
TEMPORARY SOLICITATION PROCEEDS TO
EXERCISE PRICE FEE SELLING
OR PRICE TO OR SALES PROCEEDS TO SECURITIES
PUBLIC COMMISSIONS COMPANY(3) HOLDERS
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<S> <C> <C> <C> <C>
Per Warrant(2)........................ $1.25(1) $.05 $1.20 -0-
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Per Share(2).......................... various(2) various(2) -0- various(2)
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TOTAL(4).............................. $6,793,937 $271,757 $6,525,180 various(2)
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</TABLE>
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(1) Holders of Warrants may exercise them at the $1.25 temporary exercise price
until , 1998, after which the exercise price will return to
the $4.00 per share exercise price stated in the Warrants. See "Description
of Securities--Warrants."

(2) Selling Securities Holders may sell their Warrants or shares of Common
Stock at any time at varying market prices and pay their respective brokers
various sales commissions charged by such brokers. The Company will not
receive any proceeds from such sales and will not pay any of the associated
brokerage commissions.

(3) Before deducting expenses of the offering payable by the Company estimated
at $120,000. See "Use of Proceeds."

(4) Assumes all 5,435,150 Warrants are exercised at the $1.25 temporary
exercise price. See "Use of Proceeds."

The Date of this Prospectus is May , 1998
<PAGE>

(Continued from previous page)

The Company will receive payments of the exercise prices of its various
outstanding warrants to the extent any of them are exercised. See "Use of
Proceeds from Warrant Exercises." There is no assurance, however, that any of
the various warrants will be exercised. Biltmore Securities, Inc., (the
"Soliciting Agent"), will be paid a warrant solicitation fee equal to 4% of
the exercise price of Warrants with respect to any Warrants exercised as a
result of solicitation of the Warrant holders by the Soliciting Agent,
provided that such solicitation is in compliance with applicable rules of the
National Association of Securities Dealers, Inc.. See "Use of Proceeds from
Warrant Exercises," and "The Soliciting Agent." The Company will not receive
proceeds from resales of Warrants or shares of Common Stock issued on
exercises of its various warrants, although costs incurred in connection with
their registration for resale are being borne by the Company. See "Selling
Securities Holders."

During the 60-day period commencing on the date of this Prospectus, to and
including 5:00 p.m., New York time, on , 1998, subject to
extension in the sole discretion of the Company ("Temporary Exercise Period"),
the Company has temporarily reduced the exercise price of the Warrants from
$4.00 to $1.25. After the expiration of the Temporary Exercise Period, the
exercise price of the Warrants will return to the original $4.00 per share.
See "Description of Securities--Warrants."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the offices of
the Commission's New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048 and the Chicago Regional Office at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of these materials
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street N.W., Washington, D.C. 20549 at prescribed rates. In addition, the
Commission maintains a website that contains reports, proxy and information
statements and other information regarding issuers such as the Company that
file electronically with the Commission. The address of such site is
http://www.sec.gov.

This Prospectus constitutes a part of a Registration Statement on Form SB-2
which the Company has filed with the Commission pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), relating to the Company's
securities (referred to herein, together with amendments and exhibits, as the
"Registration Statement"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the securities offered
hereby, reference is hereby made to the Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its "entirety" by such reference. Copies of the Registration Statement and the
exhibits may be inspected, without charge, at the offices of the Commission,
or obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary........... 3
Risk Factors................. 6
Price Range of Securities.... 12
Dilution..................... 13
Capitalization............... 14
Dividend Policy.............. 14
Selected Financial Data...... 15
Management's Discussion and
Analysis.................... 16
Use of Proceeds.............. 18
Business..................... 19
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management......................... 24
Certain Relationships and Related
Transactions...................... 32
Selling Securities Holders......... 33
Description of Securities.......... 34
Plan of Distribution............... 37
Experts............................ 38
Legal Matters...................... 38
Additional Information............. 38
Index to Financial Statements...... F-1
</TABLE>

2
<PAGE>

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by reference to the more detailed
information and the financial statements and notes thereto appearing elsewhere
herein. Unless otherwise specified, all information in this Prospectus assumes
no exercise of the Warrants. See "Description of Securities," "Underwriting"
and "Management--Employment Agreements." Each prospective investor is urged to
carefully read this Prospectus in its entirety, including but not limited to
the Risk Factors.

THE COMPANY

The food services and distribution subsidiaries are: A-One-A Produce &
Provisions, Inc. which is a Pompano Beach, Florida based produce distributor
that sells and distributes fresh fruit and vegetables and "dry" grocery
products to hotels, restaurants and other businesses in the south Florida
region; and Terrace Fresh Inc., which was organized to operate as an affiliate
of Terrace's A-One-A Produce & Provisions, Inc. subsidiary, to process and sell
fresh produce.

In December, 1997, the Company consummated the sale of the assets and related
liabilities of its wholly-owned subsidiary, Deering Ice Cream, Inc. for
$1,000,000, subject to later adjustment, in cash and certain royalty payments
over four years. At the closing of the sale, the purchase price was adjusted
down, as a result of working capital deterioration, to approximately $613,000.
Further, based on post-closing accounting, the Company has released to the
buyer the $200,000 of the purchase price held in escrow and is in discussions
with the buyer to finalize the purchase price. As of the date of this
Prospectus, the Company estimates it may have to refund up to an additional
approximately $50,000 to the buyer.While the Company believes such sale will
not have a material adverse effect on its longer term growth or ultimate
profitability, there is no assurance that the Company's belief will be borne
out. See "Business--Frozen Desserts."

The Company's executive offices are located at 1351 N.W. 22nd Street, Pompano
Beach, Florida 33069. Its telephone number is 954-917-7272.

THE OFFERING

<TABLE>
<S> <C>
Common Stock to be Issued by the Company
Upon the the Exercise of the Warrants and
Conversion of the Preferred Stock(1)....... 8,482,800 shares
Other Securities Offered by Securities
Holders.................................... 200,000 shares of Common Stock
3,047,650 Warrants
570,000 shares of Common Stock(4)
</TABLE>

3
<PAGE>

<TABLE>
<S> <C>
Securities Outstanding Prior to
this Prospectus
Common Stock(2)................. 5,006,400 Shares
Warrants(3)..................... 6,575,150 warrants
Preferred Stock................. 1,523,825 Shares(5)
NASDAQ SmallCap Marketsm Symbols.. Common Stock--THIS; Warrants--THISW
Use of Net Proceeds of Sale of For working capital and potential
Warrants......................... acquisitions
Risk Factors...................... The securities offered hereby are highly
speculative and involve a high degree of
risk and should be purchased only by
investors that can afford the loss of their
entire investment. See "Risk Factors." In
addition, there is immediate substantial
dilution. See "Dilution."
</TABLE>
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(1) Represents 5,435,150 and 3,047,650 shares of Common Stock issuable upon the
exercise of Warrants and 3,047,650 shares of Common Stock issuable upon
conversion of the Preferred Stock, respectively. Of the 8,482,800 shares,
6,845,300 shares are registered for resale by holders of the Private
Placement Warrants, IB Warrants and the Preferred Stock. See the Cover Page
of this Prospectus.

(2) Assumes that none of the various warrants are exercised and none of the
Preferred Stock is converted into shares of Common Stock.

(3) Includes 3,047,650 Private Placement Warrants and (i) 750,000 shares of
Common Stock issuable upon exercise of warrants issued to two executive
officers of the Company; (ii) 1,437,500 shares of Common Stock reserved for
issuance upon exercise of the Public Warrants; (iii) 250,000 shares of
Common Stock issuable upon exercise of warrants issued in connection with
the acquisition of DownEast Frozen Desserts, LLC; (iv) 90,000 shares of
Common Stock issuable upon exercise of warrants issued to two directors of
the Company; and (v) 1,000,000 shares of Common Stock issuable upon the
exercise of warrants issued to an investment banking firm which was the
underwriter of the Company's initial public offering. Does not include the
possible issuance of (i) 141,500 shares of Common Stock issuable upon
exercise of an option (the "Underwriter's Option") to purchase securities
of the Company sold to the Soliciting Agent in connection with the
Company's initial public offering in December, 1995 ("Initial Public
Offering"); (ii) 125,000 shares of Common Stock issuable upon exercise of
the Warrants included in the Underwriter's Option; (iii) 200,000 shares of
Common Stock issuable upon exercise of warrants ("Class B Warrants") which
were issued immediately following the effective date of the Company's
Initial Public Offering (the terms and conditions of the Class B Warrants
are identical to the Warrants except that the exercise price of the Class B
Warrants is $10.00).

(4) To be issued upon exercise of certain warrants. See the Cover Page of this
Prospectus.

(5) Automatically converts on July 31, 1998 into 3,047,650 shares of Common
Stock unless earlier converted by the holders thereof. See "Description of
Securities--Preferred Stock."

4
<PAGE>

SUMMARY FINANCIAL INFORMATION

The following table sets forth certain summary financial information prepared
in accordance with generally accepted accounting principles as of and for the
dates indicated and should be read in conjunction with the financial statements
and notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing elsewhere in this Prospectus. The
following information, insofar as it relates to the two years ended December
31, 1997 and 1996, have been derived from audited financial statements and
notes thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER CONSOLIDATED
31, (UNAUDITED)
----------------------- FOR THE PERIOD ENDED
1997 1996 12/31/97
---------- ----------- --------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $8,929,464 $ -- $17,110,152
Gross Profit..................... 2,075,957 -- 4,485,353
Operating Expenses............... 3,530,480 478,265 5,502,109
Loss from Continuing Operations.. (1,511,516) (458,927) (1,108,451)
Loss from Discontinued
Operations...................... (2,788,537) (697,100) --
Net Income (Loss)................ (4,300,053) (1,156,027) --
Net Income (Loss) per Share...... (.96) (.35) (.25)
Weighted Average of Common Shares
Outstanding..................... 4,454,034 3,312,500 4,454,034
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
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<S> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficit)...................................... $ (897,605)
Total Assets................................................... 6,927,342
Long-Term Debt................................................. 81,380
Total Liabilities.............................................. 3,586,917
Shareholders' Equity........................................... 3,340,425
</TABLE>

5
<PAGE>

UNLESS THE CONTEXT INDICATES OTHERWISE, ANY REFERENCE IN THIS PROSPECTUS TO
THE "COMPANY" MEANS AND REFERS TO THE COMPANY AND ITS WHOLLY-OWNED
SUBSIDIARIES.

RISK FACTORS

THE PURCHASE OF THE SECURITIES BEING OFFERED HEREBY IS SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. THE PURCHASE OF THESE
SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A
TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY. PROSPECTIVE INVESTORS, PRIOR TO
ANY PURCHASE, SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION CONTAINED IN
THIS PROSPECTUS AND, IN PARTICULAR, THE FOLLOWING FACTORS WHICH COULD
MATERIALLY AND ADVERSELY AFFECT THE OPERATIONS AND PROSPECTS OF THE COMPANY OR
AN INVESTMENT THEREIN, BEFORE MAKING A DECISION TO PURCHASE THE SECURITIES
BEING OFFERED HEREBY. THE FOLLOWING IS NOT INTENDED AS, AND SHOULD NOT BE
CONSIDERED, AN EXHAUSTIVE LIST.

1. No Assurance of Profitability. To date, the Company has generated net
losses. There is no assurance that the future operations of the Company will
result in revenues or will be profitable. Should the operations of the Company
be profitable, it is anticipated that the Company would retain all of its
earnings in order to finance future growth and expansion. See "Dividend
Policy" and "Business."

2. No Dividends on Common Stock. The Company does not anticipate payment of
any cash dividends on its Common Stock for the foreseeable future; it being
anticipated that any earnings would be retained by the Company to finance its
operations and future growth and expansion. See "Dividend Policy."

3. Proposed Expansion. The Company intends to continue to pursue a strategy
of growth by acquisition. To date, it has made three material acquisitions:
the purchase, in January, 1996, of three additional Passover vacation venues
(one of which was not operated after 1996), the acquisition, in February,
1997, of Deering Ice Cream, Inc. ("Deering"), the assets of which were sold in
December, 1997, and the acquisition, in July, 1997, of A-One-A Wholesale
Produce, Inc. There can be no assurance that the Company will make any
additional acquisitions in the near future, or if made, that any such
acquisitions will add profitability to the Company. Contrary to its initial
strategy in December, 1995, the Company has determined that proposed expansion
by establishing additional kosher dining facilities geographically dispersed
would entail substantial financial costs and additional personnel.
Accordingly, the Company has determined to seek growth not by establishing
additional kosher dining facilities but by acquisition of existing food and
food related operations. There is no assurance any such acquisitions will be
available to the Company or that its acquiring such operations will add to the
Company's profitability. Furthermore, competition in the Company's current
principal businesses could significantly increase. See "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

4. Dependence on Proceeds of Warrant Exercises to Implement Proposed
Expansion; Possible Need for Additional Financing; Possible Loss of Entire
Investment. The Company is dependent on and intends to use a significant
portion of the proceeds received upon exercise of the Warrants for working
capital to implement its proposed expansion plans. The Company anticipates the
proceeds of the exercise of Warrants, together with projected cash flow from
operations, will be sufficient to fund the Company's operations, including its
proposed expansion, during the twelve months following the date of this
Prospectus, although there cannot be any assurance of this. In the event that
the Company's plans change, there are any delays in implementing the proposed
expansion, its projections prove to be inaccurate or the proceeds from the
exercise of the Warrants prove to be insufficient, the Company may be required
to seek additional financing or curtail its current and expansion activities.
In such case, the Company will generally be required to seek additional debt
or equity financing to fund the costs of continuing operations or to expand
its operations. The Company has recently submitted to a bank a request for
additional and replacement financing. The bank is performing its normal review
process and, while the Company is presently not aware of any matter that would
prevent its completion,

6
<PAGE>

there can be no assurance that such financing will be available, or if
available, that it can be obtained on terms satisfactory to the Company.
Prospective investors should be aware that if the Company is not successful in
its operations, future acquisitions or facilities that it establishes, their
entire investment in the Company could become worthless. Even if the Company
is successful in its expansion plans, no assurances can be given that such
expansion will be successful or that investors will derive a profit from their
investment. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Results of Operations--Liquidity and Capital
Resources," "Use of Proceeds" and "Business."

5. Competition. The produce and grocery distribution industry is 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. See "Business--Competition."

6. Sale of Hospitality Subsidiaries. In February, 1997, the Company entered
into an Option Agreement with Samuel H. Lasko, the President, Treasurer and a
director of the Company, and Jonathan S. Lasko, the Executive Vice-President,
Secretary, Chief Operating Officer and a director of the Company, which gave
the Laskos, individually or collectively, the option to purchase all of the
stock or the assets, at their respective fair price, of The Lasko Companies,
Inc., A & E Management, Inc., and The Lasko Family Kosher Tours, Inc., each of
which was a wholly-owned subsidiary of the Company. The fair price was
determined by an independent evaluation and was approved by a committee of
disinterested directors, and is subject to ratification by the stockholders of
the Company. Samuel H. Lasko indicated to the Company that he intended to
exercise this option on the first date that it was exercisable in accordance
with the Option Agreement. As of March 13, 1998, Samuel H. Lasko purchased The
Lasko Family Kosher Tours, Inc. and A&E Management, Inc. for consideration
equal to $575,000. Dr. Lasko did not purchase The Lasko Companies, Inc.,
however, but agreed to manage it for the Company, without fee, until the
closing of a pending sale to a third party buyer. Jonathan S. Lasko did not
participate in the purchases. Management of the Company believes, although
such sales may have a material short term adverse effect on the Company, there
will not be material long term effects from such sales. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations--Hospitality," and "Business--Hospitality."

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

8. 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. See "Business."

As indicated elsewhere in this Prospectus, the Company has recently disposed
of its frozen dessert business and its food service and vacation businesses
and to concentrate on its food distribution and produce processing operations.
There is no assurance that such dispositions will cause the Company to become
profitable. See "Business."

9. Government Regulation. Food and food related businesses are subject to
various federal, state and local laws and regulations. The failure to obtain
and retain licenses or any other governmental approvals 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. See "Business--Government Regulation."

7
<PAGE>

10. Loss of PACA Licenses. The Company's A-One-A Produce & Provisions, Inc.
subsidiary and its affiliate, Terrace Fresh, Inc., are subject to The
Perishable Agricultural Commodities Act ("PACA") which regulates "commission
merchants," "brokers" and "dealers" engaged in the business of shipping or
receiving perishable agricultural commodities in interstate commerce. A-One-A
Produce and Terrace Fresh currently maintain PACA licenses to distribute fresh
produce, fruits and vegetables. The ability of the 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. See "Business."

11. Potential Liability and Possible Insufficiency of Insurance. The
Company's operations involve the offering of consumer products and services to
the public. The Company therefore may be exposed to a significant risk of
liability for property damage or personal injury. The Company maintains
general liability insurance (in the aggregate or per claim) for its various
businesses. The Company endeavors to contractually limit its potential
liability to the amount and terms of its insurance policies. However, the
Company is not always able to obtain such limitations on liability, and such
provisions, when obtained, may not adequately shelter the Company from
liability. Consequently, a partially or completely uninsured claim, if
successful and of sufficient magnitude, may have a material adverse effect on
the Company and its financial condition. See "Business."

12. Risk Borne by Public Shareholders Disproportionate to Risk Borne by
Present Shareholders. Investors through this offering may have paid
substantially more than the initial or present shareholders, and, accordingly,
bear a disproportionate amount of risk because of the disparity in purchase
price. See "Dilution."

13. Immediate and Substantial Dilution. An investor exercising the Warrants,
at the temporary exercise reduced price, may experience immediate and
substantial dilution of $.67, or approximately 54%, per share because the
exercise price of the Warrants exceeds the pro forma net tangible book value
per share of the Company after giving effect to the exercises, purchases and
divestitures. See "Dilution."

14. Broad Discretion in Application of Proceeds. Management of the Company
has broad discretion to adjust the application and allocation of any net
proceeds of funds received upon exercise of the Warrants, which proceeds will
be added to the Company's working capital, in order to address changed
circumstances and opportunities. As a result of the foregoing, the success of
the Company will be substantially dependent upon the discretion and judgment
of the management of the Company with respect to the application and
allocation of such net proceeds. See "Use of Proceeds."

15. No Assurance of Continued Public Trading Market or Continued
Qualification for NASDAQ Inclusion. The Company's Common Stock and Warrants
are listed on the NASDAQ SmallCapsm Market ("NASDAQ"). 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 quotation on NASDAQ, trading, if any, in the securities offered
hereby would be conducted in the over-the-counter market in what are commonly
referred to as the "pink sheets" or on the NASD OTC Electronic Bulletin Board
and may become subject to the Commission's "Penny Stock" regulations. See "23.
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. See "Description of
Securities."

16. Rule 144 Sales; Future Sales of Common Stock. 2,268,900 of the Company's
presently outstanding 5,006,400 shares of Common Stock are "restricted
securities" as that term is defined under Rule 144 promulgated under the
Securities Act and may only be sold pursuant to a registered offering or in
accordance with applicable exemptions from the registration requirements of
the Securities Act. Rule 144 provides for the sale of limited quantities of
restricted securities without registration under the Securities Act. In
general, under Rule 144, a person (or person whose shares are aggregated) who
has satisfied a one year holding period may, under certain circumstances,
sell, within any three month period, a number of shares which does not exceed
the

8
<PAGE>

greater of 1% of the then outstanding shares of common stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144(k) also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who is not an affiliate of the company and
who has satisfied a two-year holding period. The Company is unable to predict
the effects that future sales under Rule 144 may have on the then prevailing
market price of the Company's securities. Possible or actual sales of the
Company's outstanding Common Stock by certain of the present shareholders
under Rule 144 may, in the future, have a depressive effect on the price of
the Company's securities.

Prospective investors should be aware that the possibility of sales may, in
the future, have a depressive effect on the price of the Company's Common
Stock in any market and, therefore, the ability of any investor to sell his
securities may be dependent directly upon the number of securities that are
offered and sold. Affiliates of the Company may sell their securities during a
favorable movement in the market price of the Company's Common Stock which may
have a depressive effect on its price per share. See "Description of
Securities."

17. Future Issuances of Stock by the Company Without Shareholder Approval.
Assuming the exercise of all of the Company's various outstanding warrants,
the Company will have outstanding 16,620,700 shares of Common Stock out of a
total of 25,000,000 shares of Common Stock authorized. The Company also has
10,000,000 shares of Preferred Stock authorized, the rights, preferences,
conversions, terms and conditions of which may be set, from time to time, by
the Board of Directors. There are currently 1,523,825 shares of Preferred
Stock outstanding which, unless earlier converted at the option of the
holders, on July 31, 1998, each automatically convert into two shares of
Common Stock, or an aggregate of 3,047,650 shares. The remaining shares of
Common Stock not issued or reserved for specific purposes and the remaining
shares of Preferred Stock may be issued without any action or approval of the
Company's shareholders. Although there are no present plans, agreements or
undertakings involving the issuance of such shares, except as disclosed in
this Prospectus, any such issuance could be used as a method of discouraging,
delaying or preventing a change in control of the Company or could
significantly dilute the public ownership of the Company, which could
adversely affect the market. There can be no assurance that the Company will
not undertake to issue such shares if it deems it appropriate to do so.
Notwithstanding the foregoing, the current officers, directors, shareholders
and Private Placement Warrant holders have agreed not to sell, transfer,
assign or issue any securities of the Company prior to July, 1998 without the
consent of the Soliciting Agent. See "Dilution," "Description of Securities"
and "Plan of Distribution."

18. Exercise of Warrants May Have Dilutive Effect on Market. The Warrants
provide, during their term, an opportunity for the holder to profit from a
rise in the market price, of which there is no assurance, with resulting
dilution in the ownership interest in the Company held by the then present
shareholders. Holders of the Warrants most likely would exercise them and
purchase the underlying Common Stock at a time when the Company may be able to
obtain capital by a new offering of securities on terms more favorable than
those provided by such securities, in which event the terms on which the
Company may be able to obtain additional capital would be affected adversely.
See "Description of Securities."

19. Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants. The Company is able to issue shares of its Common Stock upon the
exercise of Warrants only if there is a current prospectus relating to the
Common Stock issuable upon the exercise of the Warrants under an effective
registration statement filed with the Commission and such Common Stock is then
qualified for sale or exempt therefrom under applicable state securities laws
of the jurisdictions in which the various holders of Warrants reside. There
can be no assurance, however, that the Company will be successful in
maintaining a current registration statement. After a registration statement
becomes effective, it may require updating by the filing of a post-effective
amendment. A post-effective amendment is required (i) any time after nine
months subsequent to the effective date of the prospectus when any financial
information contained in the prospectus is over sixteen months old, (ii) when
facts or events have occurred which represent a fundamental change in the
information contained in the registration statement, or (iii) when any
material change occurs in the information relating to the plan or distribution
of the securities registered by such registration statement. The Company
anticipates that the Registration Statement, of which this Prospectus is a
part, will remain effective for not more than nine months following the date
of this

9
<PAGE>

Prospectus, assuming a post-effective amendment is not filed by the Company.
The Company intends to qualify the securities in a limited number of states,
although certain exemptions under certain state securities ("blue sky") laws
may permit the securities to be transferred to purchasers in states other than
those in which they were initially qualified. The Company will be prevented,
however, from issuing Common Stock upon exercise of the Warrants in those
states where exemptions are unavailable and the Company has failed to qualify
the Common Stock issuable upon exercise of the Warrants. The Company may
decide not to seek, or may not be able to obtain, qualification of the
issuance of such Common Stock in all of the states in which the ultimate
purchasers of the Warrants reside. In such a case, the Warrants of those
purchasers will expire and have no value if such Warrants cannot be sold.
Accordingly, the market for the Warrants may be limited because of the
Company's obligation to fulfill the foregoing requirements. See "Description
of Securities."

20. Warrants Subject to Redemption; Temporary Exercise Price. The Warrants
are immediately exercisable. Each such Warrant entitles the holder to purchase
one share of Common Stock at $4.00 per share until December 5, 2000. The
Warrants are redeemable by the Company for $.05 per Warrant, at any time, upon
thirty days' prior written notice, if the last reported sale price or the
average closing bid price of the Common Stock, as reported by the principal
exchange on which the Common Stock is quoted, the NASDAQ or the National
Quotation Bureau Incorporated, as the case may be, equals or exceeds $9.00 per
share, for any twenty consecutive trading days ending within ten days of the
notice of redemption. Upon thirty days' written notice to all holders of the
Warrants, the Company shall have the right to reduce the exercise price or
extend the term of the Warrants, subject to the Company complying with
Commission Rule 13e-4. Notice of the redemption of the Warrants could force
the holders thereof to exercise the Warrants and pay the exercise price at a
time when it may be disadvantageous for them to do so, to sell the Warrants at
the current market price when they might otherwise wish to hold them or to
accept the redemption price which is likely to be substantially less than the
market value of the Warrants at the time of redemption. See "Description of
Securities--Warrants."

During the sixty day period commencing on the date of this Prospectus to and
including 5:00 p.m. New York time on , 1998, subject to extension
in the sole discretion of the Company ("Temporary Exercise Period"), the
Company has temporarily reduced the exercise price of the Warrants from $4.00
to $1.25. After the expiration of the Temporary Exercise Period, the exercise
price of the Warrants will return to the original $4.00 per share. See
"Description of Securities--Warrants."

21. Soliciting Agent's Influence on the Market. A significant amount of
securities of the Company are held by customers of the Soliciting Agent. Such
customers may engage in transactions for the sale or purchase of such
securities through or with the Soliciting Agent. Although it has no obligation
to do so, the Soliciting Agent may make a market in the Company's securities
and may otherwise effect transactions in such securities. If it participates
in the market, the Soliciting Agent may exert a dominating influence on the
market for the securities of the Company. Such market activity may be
discontinued at any time. The price and liquidity of the Company's securities
may be significantly affected by the degree, if any, of the Soliciting Agent's
participation in such market.

22. Relationship of Soliciting Agent to Trading. The Soliciting Agent may
act in a brokerage capacity with respect to the purchase or sale of the
Company's securities in the over-the-counter market. Unless exempt under
Regulation M promulgated by the Securities and Exchange Commission, the
Soliciting Agent, while engaged in any distribution of the Company's
securities, will be prohibited from engaging in any market making activity or
soliciting brokerage activities with regard to the Company's securities during
a period beginning five business days prior to the commencement of any such
activity and ending when its participation in such distribution ends. As a
result, the Soliciting Agent may be unable to continue to make a market for
the Company's securities during certain periods when the Warrants are
exercisable. Such a limitation, while in effect, could impair the liquidity
and market price of these securities.

23. "Penny Stock" Regulations. Securities laws require certain disclosures
in connection with trades in any stock defined as a "penny stock". Commission
regulations generally define a penny stock to be any equity security that has
a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions

10
<PAGE>

include any equity security listed on NASDAQ. Unless an exception is
available, Commission regulations require the broker/dealer to deliver, prior
to effecting any transaction involving a penny stock, certain information and
disclosures regarding the penny stock market and the risks associated
therewith.

In addition, applicable Commission regulations provide that unless the
transaction involving a penny stock is exempt under the regulations, a
broker/dealer cannot effect a transaction in the penny stock unless certain
sales practice requirements are met, which include the determination by the
broker/dealer that transactions in penny stocks are suitable investments for
the prospective purchaser and receipt by the broker/dealer from such person of
a written agreement to the transaction.

As of the date of this Prospectus, by reason of inclusion on NASDAQ, the
Company's securities are exempt from the definition of penny stock. If any of
the Company's securities were subsequently to become characterized as a penny
stock, the market liquidity for the Company's securities could be severely
affected. In such an event, the regulations on penny stocks could limit the
ability of broker/dealers to sell the Company's securities and thus the
ability of purchasers of the Company's securities in this offering to sell
their securities in the secondary market.

24. Limitation on Director Liability. As permitted by the Delaware General
Corporation Law, the Company's Certificate of Incorporation limits the
liability of directors to the Company or its shareholders for monetary damages
for breach of a director's fiduciary duty except for liability for (i) any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or which involved intentional
misconduct or knowing violation of law, (iii) unlawful payments of dividends
or unlawful stock purchases or redemptions as provided in Section 174 of the
Delaware General Corporation Law, or (iv) any transaction from which the
director derived an improper personal benefit. As a result of the Company's
charter provision and Delaware law, shareholders may have more limited rights
to recover against directors for breach of fiduciary duty. See "Management--
Limitation of Liability and Indemnification of Directors."

FOR ALL OF THE AFORESAID REASONS, AND OTHERS SET FORTH HEREIN, THESE
SECURITIES INVOLVE A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN INVESTMENT
IN THE SECURITIES OFFERED SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH
IN THIS PROSPECTUS. THESE SECURITIES SHOULD BE PURCHASED ONLY BY PERSONS WHO
CAN AFFORD A TOTAL LOSS OF THEIR ENTIRE INVESTMENT IN THE COMPANY AND HAVE NO
IMMEDIATE NEED FOR A RETURN OF THEIR INVESTMENT.

11
<PAGE>

PRICE RANGE OF SECURITIES

MARKET INFORMATION

Since the Company's initial public offering in early December, 1995, the
Company's Common Stock and Warrants have been traded in the NASDAQ SmallCap
Market.

Set forth below is the range of high and low sales prices of the Common
Stock and Warrants for each month since the Company's initial public offering
as reported by NASDAQ for those periods. The prices represent quotations
between dealers. The quotations do not include retail markups, markdowns, or
commissions and may not represent actual transactions.

<TABLE>
<CAPTION>
BID ASK
----------- -----------
TYPE OF SECURITY QUARTER ENDED HIGH LOW HIGH LOW
- ---------------- ------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Common Stock..................... December 29, 1995(1) 6 1/8 2 1/4 7 1/8 4 1/4
<CAPTION>
HIGH(2) LOW(2)
----------- -----------
<S> <C> <C> <C> <C> <C>
March 31, 1996 6 3/4 4 1/4
June 30, 1996 4 5/8 3
September 30, 1996 4 1/2 2 3/4
December 31, 1996 1 1/16 7/8
March 31, 1997 1 1/2 1 5/16
June 30, 1997 1 7/8 1 7/8
Sept. 30, 1997 2 1/8 2
December 31, 1997 1 1/4 1 1/8
March 31, 1998 2 7/16 2 1/8
April 1-April 24, 1998 2 1/4 2 1/4
<CAPTION>
QUARTER ENDED HIGH LOW HIGH LOW
------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Warrants......................... December 29, 1995(1) 1 1/2 3/4 2 1 1/2
<CAPTION>
HIGH(2) LOW(2)
----------- -----------
<S> <C> <C> <C> <C> <C>
March 31, 1996 2 1/2 1 1/4
June 30, 1996 1 3/4 1
September 30, 1996 1 5/8 1/2
December 31, 1996 5/16 5/16
March 31, 1997 5/8 5/8
June 30, 1997 3/4 3/4
September 30, 1997 2 1/8 1 7/8
December 31, 1997 1 3/16 1
March 31, 1998 1 7/16 1 1/4
April 1-April 24, 1998 1 1
</TABLE>
- --------
(1) Includes only the period December 6, 1996 through December 29, 1996.
(2) In February, 1996, NASDAQ changed its reporting system to no longer
including Bid and Ask amounts; therefore, the prices shown for these dates
only reflect the High and Low actual sales price.

HOLDERS

As of April 27, 1998, there were 45 and 37 holders of record of the
Company's Common Stock and Public Warrants, respectively. The Company believes
that it has a substantially greater number of shareholders and Public Warrant
holders because the Company believes that a substantial amount of its Common
Stock and Public Warrants are held of record in street name by broker-dealers
for their customers.

DIVIDENDS

The Company has not paid any dividends on its Common Stock and does not
expect to pay a cash dividend in the foreseeable future, but intends to devote
all funds to the operation of its business.

12
<PAGE>

DILUTION

As of December 31, 1997, the net tangible book value of the Company was
$(299,457), or approximately $(.06) per share of Common Stock. Net tangible
book value per share consists of total assets less intangible assets and
liabilities, divided by the total number of shares of Common Stock
outstanding. By giving effect to the exercise, at an assumed exercise price of
$1.25 per share, of the 5,435,150 shares of Common Stock issuable upon
exercise of the Warrants (resulting in net proceeds to the Company estimated
to be $6,793,900), the adjusted pro forma net tangible book value at December
31, 1997 would have been $6,102,722, or approximately $.58 per share. Thus, as
of December 31, 1997, the adjusted pro forma net tangible book value per share
of Common Stock owned by the Company's current shareholders would have
increased by approximately $.64 without any additional investment on their
part and the purchasers of the Common Stock upon conversion of the Preferred
Stock and exercise of the Warrants will incur an immediate dilution of
approximately $.67 per share from the current market price.(1) "Dilution"
means the difference between the exercise price of the Warrants and the
adjusted pro forma net tangible book value per share after giving effect to
the offering. Holders of Common Stock may be subjected to additional dilution
if (i) any additional securities are issued as compensation or to raise
additional financing, or (ii) any of the securities set forth in footnote (1)
below are issued. The following table illustrates the dilution which investors
participating in this offering will incur and the benefit to current
shareholders as a result of this offering.

<TABLE>
<S> <C> <C>
Exercise price of the Warrants............................. $1.25
Pro forma net tangible book value per share before
offering................................................ $(.06)
Increase in pro forma net tangible book value per share
attributable to Common Stock issued on exercise of
Warrants................................................ $ .64
Adjusted pro forma net tangible book value per share after
offering.................................................. $ .58
Dilution of net tangible book value per share to purchasers
exercising their Warrants(2).............................. $ .67(3)
=====
</TABLE>
- --------
(1) Does not reflect (i) 141,500 shares of Common Stock issuable upon exercise
of the Soliciting Agent's Purchase Option; (ii) 125,000 shares of Common
Stock issuable upon exercise of the Warrants included in the Soliciting
Agent's Purchase Option; (iii) 200,000 shares of Common Stock issuable
upon exercise of the Class B Warrants; or (iv) the issuance of any Options
under the 1997 Stock Option Plan. See "Description of Securities",
"Certain Transactions" and "Management".

(2) Assuming no exercise of the Soliciting Agent's Purchase Option, the
Warrants, the Class B Warrants or the issuance of any Options under the
1997 Stock Option Plan. See "Underwriting" and "Description of
Securities".

(3) After deduction of warrant solicitation fee.

13
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at December
31, 1997. This table should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.

<TABLE>
<S> <C>
Long-Term Debt.................................................... $ 81,380
Shareholders' Equity:
Convertible Preferred Stock..................................... 1,400
Common Stock, 25,000,000 shares authorized, $.001 par value,
5,006,400 shares issued; 10,441,550 as adjusted................ 5,006
Additional Paid-in Capital...................................... 9,175,407
Retained Earnings (Deficit)..................................... (5,841,448)
-----------
Total Shareholders' Equity.................................... 3,340,425
-----------
Total Capitalization.......................................... $ 3,421,805
===========
</TABLE>

DIVIDEND POLICY

Holders of the Company's Common Stock are entitled to dividends when, as and
if declared by the Board of Directors out of funds legally available therefor.
The Company has not paid and does not intend to pay cash dividends in the
foreseeable future on the shares of Common Stock. Cash dividends, if any, that
may be paid in the future to holders of Common Stock will be payable when, as
and if declared by the Board of Directors of the Company, based upon the
Board's assessment of the financial condition of the Company, its earnings,
need for funds, capital requirements, and other factors, including any
applicable laws. The Company intends to retain earnings, if any, to finance
its operations as well as the development and expansion of its business. In
addition, any financing which the Company may obtain in the future may contain
provisions restricting the Company's ability to pay dividends. Accordingly,
there can be no assurance that dividends of any kind or amount will ever be
paid in the future. Investors needing immediate or future income by way of
dividends should not purchase the securities of the Company. The Company
currently may be restricted from the payment of dividends under its financing
agreements with Foothill Capital Corporation and there is no assurance that
the Company can or will attempt to renegotiate such restrictions in the
foreseeable future.

14
<PAGE>

SELECTED FINANCIAL DATA

The financial data set forth below is derived from, should be read in
conjunction with and is qualified in its entirety by the more detailed
financial statements and notes thereto, and should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, appearing elsewhere in this Prospectus.

15
<PAGE>

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

The following discussion and analysis should be read in conjunction with the
historical financial statements and footnotes thereto and with the Pro Forma
Combined Financial Statements of the Company and notes thereto included
elsewhere in this Prospectus.

RESULTS OF OPERATIONS

TERRACE HOLDINGS, INC. (CONSOLIDATED)

Year ended December 31, 1997, compared to year ended December 31, 1996.

The Company's consolidated net loss for 1997 was approximately $4,300,000,
compared to a net loss of approximately $1,156,000 for 1996. The substantial
increase was due to several factors. The primary factor was the loss on the
disposition of several of the Company's operating subsidiaries. In November,
1997, Management and the Board of Directors restructured the focus and
objective of the Company going forward. A major part of this restructuring
included the concentration on the processing and distribution of produce and
other food related items. The Company's plan called for the sale of its ice
cream and hospitality units. For the year ended December 31, 1997, the sale of
these operations (the ice cream business in December, 1997, and the two major
hospitality units effective January, 1998) resulted in losses on disposal of
approximately $2,789,000. The balance of the operating losses primarily
resulted from the underperfomance of the ice cream unit due to increased cost
associated with production as well as increased selling, general, and
administrative costs.

In addition, the Company incurred losses from its A-One-A Produce and
Provisions, Inc. subsidiary in the six-months it was owned by the Company in
1997. These losses were due primarily to costs associated with its moving into
its new facility, increased labor costs and the increased cost in selling,
general, and administrative expenses. See Below.

Continuing Operations:

A-One-A Produce and Provisions, Inc., the Company's subsidiary that
distributes produce, dairy, and other grocery items, operates in Pompano
Beach, Florida, out of its 55,000 sq. ft. warehouse. There are no comparable
results for 1996, as A-One-A Produce & Provisions, Inc. was not part of the
Company's organization. For the six-month period ended December 31, 1997, A-
One-A Produce and Provisions, Inc. sustained a loss of approximately $437,000.
This loss, was primarily due to costs associated with moving into its new
facility, increased labor costs and the increased cost in selling, general,
and administrative expenses due to the Company's plan to develop the business
in a very aggressive manner. In addition, the Company moved into its new
facility September 7, 1997, and incurred additional costs of approximately
$150,000 as a result of inefficiency within its operations. The Company has
taken steps to increase efficiency, including technological upgrades, to
overcome initial inefficiencies and realize greater profitability from its
distribution sector. The Company also purchased two small distribution
companies in late 1997 and early 1998 to expand and consolidate with A-One-A's
current operation. Management believes that as it continues to attempt to
increase value, both through increased produce sales as well as varying its
product lines, the Company will realize greater profitability.

Discontinued Operations:

Passover Holiday Segments:

For the Passover season in 1997, the Company operated three venues, the
Registry Resort & Spa in Fort Lauderdale, Florida, the Fountainbleau Hotel in
Miami Beach, Florida, and the Rye Town Hilton in Westchester, New York.
Revenue for this segment was approximately $3,475,000, in 1997 compared to
$3,750,000 in 1996. The Company originally acquired the contracts to operate
vacation venues at the Fountainbleau, Rye Town

16
<PAGE>

Hilton and Tamiment Resort in 1996 for $675,000. The full amount was recorded
as intangible assets. The decrease in revenue was a result of the Company's
decision not to renew 1997 operations at the Tamiment Hotel in Pennsylvania.
As a result of non-operation at this facility, the Company expensed the
remainder of the amortized value directly associated with that hotel.
Management decided that the growth and income trend of this segment was not in
the ultimate plans of the Company, and accordingly decided to exit this
segment of the Company's business. Subsequent to the year ended December 31,
1997, the Company sold these operations retroactive to the beginning of 1998
and subject to shareholder ratification. These operations and one of the food
services subsidiaries were sold to Samuel H. Lasko, President, pursuant to Mr.
Lasko's exercise of his option to purchase the hospitality subsidiaries for an
aggregate purchase price of $575,000, which is the value of the businesses as
determined by an independent fairness opinion.

Food Service Segment

The Company decided in November, 1997 to discontinue its food service units.
For 1997, the Company's reported loss for its A & E Management, Inc. and The
Lasko Companies, Inc. subsidiaries was approximately $98,000 compared to a
loss of approximately $189,000 in 1996. The substantial decrease was due
primarily to cost cutting measures taken by the Company at the end of 1996.
The Company's decision to discontinue these operations was primarily a result
of Management's belief that it would be unable to reach a level of
profitability in either 1998 or 1999. As mentioned above, while the Company
has already sold, subject to shareholder ratification, the A & E Management
Corp. subsidiary to Samuel H. Lasko, it expects to sell the Terrace Oceanside
Restaurant, which is the only business of The Lasko Companies, Inc.
subsidiary, in the second quarter of 1998. Presently, the Company has entered
into a Management Agreement with Samuel H. Lasko, under which Mr. Lasko will
continue to manage the restaurant until such a sale of its operations is
consummated.

Deering Ice Cream, Inc.

In February, 1997, the Company purchased the assets and related liabilities
of DownEast Frozen Desserts, LLC. The loss incurred for the year ended
December 31, 1997, was approximately $738,000. The losses were incurred from
operations as well as from the disposal of the ice cream business. Management
decided to dispose of this segment because the revenues in the ice cream
subsidiary took a downturn. As a result, profitability was not obtained.
Management of the Company believed it would have had to infuse substantial
funding to compete with some of the larger competition, whether in the form of
equity capital or debt financing. Such financing did not appear to be
reasonably available.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, the Company had a deficit in cash and working capital
of approximately $(235,000) and $(898,000), respectively. The Company, A-One-A
Produce & Provisions, Inc. and Terrace Fresh, Inc. have relied principally on
internally generated funds to fund their working capital needs.

Management has initiated a financing plan with a bank and a number of its
investors to provide the necessary funds to continue to operate its businesses
and to provide additional capital for a possible acquisition.

The Company has received a letter of intent from a bank to provide financing
to the Company. The bank has commenced its normal due diligence investigation
which should be completed shortly. Management is not presently aware of any
matter which would prevent the completion of the financing.

The Company, by this Prospectus is offering to its Warrantholders the
opportunity to exercise their Warrants and purchase common stock at a
temporarily reduced exercise price. Several Warrantholders have indicated they
intend to exercise their Warrants, once the registration statement is declared
effective. In addition, if so requested by the Company, a private investor has
indicated his intent to purchase equity capital in the Company if sufficient
proceeds are not realized by the Company from such Warrant exercises.

17
<PAGE>

Management believes that actions presently being taken to revise the
Company's operating and financial requirements provide the opportunity for the
Company to continue as a going concern. However, the success of Management's
plans is not assured.

SEASONALITY

The continuing operations of the Company are seasonal due to the increased
business in south Florida during the winter months. However, the Company's
Management believes that continuing operations will be less seasonal than the
hospitality and ice cream units have been. Additionally, Management believes
that through additional acquisitions in the food processing and distribution
areas it may minimize these seasonal effects, though there is no assurance
that any further acquisitions will be successfully made or that less seasonal
effects will be accomplished.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the resale of any of
the Common Stock or Warrants offered under this Prospectus by the Selling
Securities Holders. The Company, however, may receive net proceeds of
$6,405,180, if all of the Warrants to purchase Common Stock are exercised in
full, at the $1.25 temporary exercise price, after deducting the Soliciting
Agent's 4% Solicitation Fee ($271,757) and the estimated other expenses of
this offering ($120,000).

18
<PAGE>

BUSINESS

GENERAL

Terrace Holdings, Inc., was incorporated under the laws of the State of
Delaware on June 15, 1995, to change the state of incorporation of Bon
Adventure Kosher Tours, Inc., a Florida corporation, formerly known as Embassy
Kosher Tours of South Florida, Inc. The Company currently has three wholly-
owned operating subsidiaries, having recently sold two in the "hospitality"
group and two in the "food services and distribution" group. The sold
hospitality subsidiaries are A&E Management Corp., which manages the food and
beverage operations of a non-kosher restaurant and catering operation at The
Club at Emerald Hills in Hollywood, Florida; and The Lasko Family Kosher
Tours, Inc., which operates Passover holiday vacations at three locations
within the United States. The Lasko Companies, Inc., which owns and operates
on leased property the Company's kosher, casual dining restaurant, Terrace
Oceanside Restaurant, in Hallandale, Florida, is the subject of an agreement
of sale with an unaffiliated third party scheduled to close on or about June
15, 1998. See "Hospitality." The food services and distribution subsidiaries
are: A-One-A Produce & Provisions, Inc. which is a Pompano Beach, Florida
based produce distributor that sells and distributes fresh fruit and
vegetables and "dry" grocery products to hotels, restaurants and other
businesses in the southern Florida region; and Terrace Fresh Inc., which was
organized to operate as an affiliate of Terrace's A-One-A Produce &
Provisions, Inc. subsidiary. In December, 1997, the Company disposed of its
frozen desserts manufacturing business. See "Frozen Desserts."

FOOD SERVICES AND DISTRIBUTION

Produce. In August, 1997, but effective as of July 1, 1997, the Company's
wholly-owned subsidiary, A-One-A Produce & Provisions, Inc. ("A-One-A
Produce") acquired the assets and related liabilities of A-One-A Wholesale
Produce, Inc. ("A-One-A Wholesale"). Effective January, 1998, the Company
acquired the assets and related liabilities of A One A Wholesale's affiliate,
Fresh, Inc. Both corporations were unaffiliated with the Company. A-One-A
Produce distributes fresh produce, fruits and vegetables to restaurants,
country clubs, hotels, airline food service, and other institutional food
service providers in the south Florida region. A-One-A Produce's warehouse
encompasses 55,000 square feet on 3.5 acres, with 24 loading docks, 1,700
pallet locations and includes 30,000 square feet of refrigerated warehouse
space. A-One-A Produce also operates a fleet of 28 refrigerated delivery
trucks.

Frozen Desserts. In February, 1997, in consideration of the issuance of
918,900 shares of the Company's Common Stock, warrants to purchase an
additional 250,000 shares of Common Stock at $1.1875 per share and
approximately $114,000 in cash, the Company's wholly owned subsidiary, Deering
Ice Cream, Inc., acquired all of the assets and related liabilities of
DownEast Frozen Desserts, LLC, a Delaware limited liability company
unaffiliated with the Company, which manufactured and marketed frozen desserts
under the names Deering Ice Cream and Howard Johnson, as well as co-packing
for approximately 15 other unaffiliated companies. The Company also issued
warrants to purchase 250,000 shares at $1.1875 to Biltmore Securities, Inc.,
and 75,000 shares of Common Stock to Barclay Partners, L.L.C. as investment
banking and finder's fees, and warrants to purchase 50,000 shares at $1.1875
to Bruce Phillips, a director of the Company, in recognition of his efforts
successfully to negotiate and consummate the acquisition. In December, 1997,
however, the Company consummated the sale of the assets and certain
liabilities of its wholly-owned subsidiary, Deering Ice Cream, Inc. to a
subsidiary of Fieldbrook Farms, Inc., Dunkirk, New York, for approximately
$613,000 cash at closing, subject to later adjustment, plus certain royalties
over four years. See "Prospectus Summary--The Company." During the relatively
short period in which the Company owned and operated Deering Ice Cream, Inc.,
it became evident that the Company could not effect profitable operations
without a substantial increase of financial resources to frozen dessert
manufacturing, which resources have not been available to the Company.
Additionally, the Company's management determined that concentrating on food
distribution and processing would better serve its overall goals over time.
Accordingly, the Company determined to dispose of its frozen dessert
manufacturing operations and concentrate on its food distribution businesses
in an attempt to enhance shareholder value over the longer term. There is no
assurance, however, that the Company will be successful in accomplishing this.

19
<PAGE>

HOSPITALITY

Restaurant. From October, 1993 through May, 1995, the founders of the
Company owned and operated the Terrace-on-the-Lake Restaurant, a casual,
upscale kosher restaurant in Hollywood, Florida. In its short existence,
Terrace-on-the-Lake developed a following among tourists visiting south
Florida who observe the Jewish dietary laws. Because both the kitchen and the
facilities were not large enough to serve adequately the needs of this
restaurant, it was closed at the end of May, 1995, and in October, 1995, the
Company opened a new restaurant, "Terrace Oceanside Restaurant", in
Hallandale, Florida. The Company's initial plan was to establish a chain of
kosher restaurants, which were to be called Terrace restaurants, along the
Eastern seaboard and possibly later in the Midwestern United States. During
1996, however, Management of the Company determined that the proposed
expansion by establishing additional kosher Terrace restaurants would entail
substantial financial costs and additional personnel, and determined, instead,
to seek possible acquisitions of going concerns in the food--or food
distribution--related industries.

On March 23, 1998, an agreement was entered into under which the restaurant
business will be sold to an unaffiliated third party for an aggregate purchase
price of $90,000. Closing of the sale is scheduled for June 15, 1998. Pending
such closing, Dr. Samuel H. Lasko is managing the restaurant, without fee, on
behalf of the Company. If for any reason this sale is not completed, Dr. Lasko
will continue his management of the restaurant until the earlier of
approximately one year or a new buyer is found and purchases the Restaurant.
See "Sale of Hospitality Segments."

Food and Beverage Management. The Company, until March 13, 1998, through its
wholly-owned subsidiary, A&E Management Corp., managed a non-kosher restaurant
and catering operation at The Club at Emerald Hills, an upscale country club
in Hollywood, Florida. See "Sale of Hospitality Segments."

Holiday Vacations. The Company, until March 13, 1998, through its wholly-
owned subsidiary, The Lasko Family Kosher Tours, Inc, operated kosher Passover
holiday vacation venues. Passover occurs each spring. See "Sale of Hospitality
Segments."

In January, 1996, the Company consummated an agreement with an unaffiliated
entity, to assume operation of the annual Passover vacation venues at the
Fontainebleau Hilton Hotel, Miami Beach, the Rye Town Hilton Hotel, Rye, New
York, and the Tamiment Resort & Conference Center, Tamiment, Pennsylvania. As
a result, for the 1996 Passover holiday, the Company operated holiday
vacations at four different locations. The contract to operate a Passover
vacation at the Tamiment Hotel expired after the 1996 Passover holiday and was
not renewed for the 1997 Passover holiday.

Sale of Hospitality Segments. In November, 1997, Samuel H. Lasko, President,
notified the Company of his intention to exercise his option to purchase the
hospitality subsidiaries of the Company at a purchase price equal to the "fair
value" of the subsidiaries. Dr. Lasko's exercise of his option is subject to
the Company securing an independent fairness opinion and the affirmative vote
of the majority of the Company's shareholders. A committee of disinterested
members of the Board of Directors retained an independent consulting and
valuation firm to render such an opinion and that opinion was acceptable to
Dr. Lasko. Accordingly, on March 13, 1998, the A&E Management, Inc., and The
Lasko Family Kosher Tours, Inc. subsidiaries of the Company were sold to him
effective as of January 1, 1998, subject to the affirmative shareholder vote
required, for consideration aggregating $575,000 in accordance with the
independent fairness opinion received by the Company. The consideration
consisted of Dr. Lasko tendering his employment agreement with the Company
having approximately three years remaining (independently valued at $417,807)
and 114,322 of his warrants to purchase Common Stock at $1.1875 per share
(independently valued at $157,193). Additionally, Dr. Lasko agreed to manage
the business of The Lasko Companies, Inc. (The Terrace Oceanside Restaurant)
for the Company, without fee, until the Company consummates the sale thereof
to an unaffiliated third party. On March 23, 1998, the Company entered into
such an agreement with an unaffiliated third party for an aggregate sales
price of $90,000. Closing is set for June 15, 1998, although there can be no
assurance that the purchaser will complete the purchase.

20
<PAGE>

As disclosed elsewhere in this Prospectus, during the second half of 1997,
the Board of Directors of the Company determined that its initial strategy of
attempting to expand by establishing additional kosher dining facilities and
Passover vacation venues geographically dispersed would entail substantial
financial costs and additional personnel. Accordingly, the Board of Directors
determined to seek Company growth by acquisition of existing food services and
distribution operations. Thus, on November 12, 1997, the Board of Directors
determined to discontinue the "hospitality" segments of its business and
shortly thereafter Dr. Lasko notified the Board of Directors of his intention
to acquire those segments. In connection with that transaction, Dr. Lasko has
submitted his resignation as President of the Company effective immediately
upon the affirmative vote of the Company's stockholders at its upcoming Annual
Meeting ratifying the transaction. In accordance with the agreement, Dr. Lasko
ceased drawing salary from the Company effective as of January 1, 1998. See
"Management--Directors and Officers."

FOOD SERVICES AND DISTRIBUTION

A-One-A Produce & Provisions, Inc. Effective July 1, 1997, the Company's
wholly-owned subsidiary, A-One-A Produce & Provisions, Inc. ("A-One-A
Produce") acquired the assets and related liabilities of A-One-A Wholesale
Produce, Inc. ("A-One-A Wholesale") for a purchase price of $3,100,000 in cash
and the issuance of a total of 500,000 shares of Common Stock to the two
shareholders of A-One-A Wholesale. Effective January, 1998, the Company
acquired the assets and related liabilities of A-One-A Wholesale's affiliate,
Fresh, Inc. for a purchase price of $105,000 and the issuance of a total of
138,948 shares of Common Stock. Both corporations were unaffiliated with the
Company. A-One-A Produce distributes fresh produce, fruits and vegetables to
restaurants, country clubs, hotels, airline food service, and other
institutional food service providers in the South Florida region.

A-One-A Wholesale was founded in 1987 by Virgil D. Scarbrough and Scott
Davis. Messrs. Scarbrough and Davis are now Co-Chief Operating Officers of A-
One-A Produce under employment agreements expiring on June 30, 2002. See
"Management--Employment Agreements and Aggregate Options Holdings." The
business is located in Pompano Beach, Florida and is currently housed in
55,000 square feet of rented space. In addition, the Company incorporated
Terrace Fresh, Inc. to operate the business of A-One-A Wholesale's affiliate,
Fresh, Inc. Revenue in 1996, prior to the Company's acquisition, for A-One-A
Wholesale was approximately $14.5 million dollars. A-One-A Produce employs
approximately 105 people.

A-One-A Produce delivers seven days per week and its customers rely on daily
deliveries. The served area reaches southward to Homestead, Florida, and as
far as Jupiter, Florida, to the north, principally on the east coast of the
state. Service is a major component of the business' competitive strength. A-
One-A Produce does not attempt to be the low cost provider, but, rather, seeks
to distinguish itself as a provider of high quality products and exceptional
service. Most orders are received in the afternoon and delivered the next
morning. Customers are supported by a sales manager and nine regional sales
representatives to ensure optimum service and communication. A-One-A Produce
operates a fleet of 28 delivery trucks, all of which are refrigerated and
equipped with two-way radios.

Mr. Davis is primarily responsible for buying produce, pricing the produce
to the customers and identifying and selling the new larger accounts. Mr.
Scarbrough generally is responsible for office administration, personnel,
warehouse and delivery operations. For the most part, each of Messrs. Davis
and Scarbrough is capable of performing the other's basic day-to-day duties.
Jonathan S. Lasko, Executive Vice-President and Chief Operating Officer of the
Company is the President and Chief Executive Officer of A-One-A Produce.

Produce is purchased through approximately six brokers. The Company has also
recently joined a produce buying co-operative, Pro*Act, and is currently
buying a portion of its requirements through it. The Company also purchases
directly from farmers in the Florida market depending upon seasonal
availability. Pricing to customers is set on a weekly basis in accordance with
market conditions. The Company's pricing formulas are very complex and take
into effect a number of qualitative factors. Pricing is set at a detailed item
by item level for each type of produce by customer. A small number of the
larger accounts, in terms of sales, have pricing arrangements that represent a
margin above cost. Some of the Company's larger customers currently include
Boston Market, TGI Friday's, Darden (Red Lobster and Olive Garden), and
Applebee's. No individual customer accounts for more than 7% of the Company's
produce sales.

21
<PAGE>

Terrace Fresh, Inc. supplies cut produce through A-One-A Produce and also to
process food manufacturers directly. This business is approximately two years
old. Its revenues in 1996 were approximately $1,500,000; approximately
$1,000,000 of which represents sales to A-One-A for resale. The produce is
processed by Fresh primarily by means of washing or peeling and cutting. The
produce is then vacuum sealed in dated plastic bags and boxed for immediate
delivery. The pre-cut, pre-packaged produce market is currently in its infancy
in southern Florida. Although there can be no assurance, it is anticipated
that this business segment will contribute material growth in revenues and
profits in the future.

A-One-A Produce leases a building housing its offices, warehouse and
processing operations in Pompano Beach, Florida. This property is a 55,000
square foot warehouse on 3.5 acres and should allow for further expansion. The
building has 24 loading docks (approximately half of which are refrigerated),
1,700 pallet locations, and includes 30,000 square feet of refrigerated
warehouse space. The building is leased from an affiliate of Messrs.
Scarbrough and Davis. The lease was negotiated in connection with the
acquisition of A-One-A Wholesale and Fresh, to become effective on the
property's purchase by the affiliate of Messrs. Davis and Scarbrough.

In September, 1997, the Company acquired the assets of Dry Dock
Distributors, Inc. a Florida corporation d/b/a Bay Purveyors ("Bay
Purveyors"), which distributes "dry" grocery items in the south Florida
region. The purchase price was $310,000. The business of Bay Purveyors is
conducted as part of A-One-A Produce.

In January, 1998, the Company acquired the assets of D.M.S. Food
Distributors, Inc., a Florida corporation, d/b/a Gourmet Distributors
("Gourmet Distributors"), which distributes "dry" grocery items in the south
Florida region. The purchase price was $125,000. The business of Gourmet
Distributors is conducted as part of A-One-A Produce.

SALE OF FROZEN DESSERTS BUSINESS

In December, 1997, the Company's wholly-owned subsidiary, Deering Ice Cream,
Inc. ("Deering"), sold substantially all of its assets and related liabilities
to a subsidiary of Fieldbrook Farms, Inc. ("Fieldbrook"), for an aggregate
purchase price of $1,000,000, subject to later adjustment. In conjunction with
the sale, Milton Namiot, Chief Executive Officer of the Company and President
of Deering, and Joseph Dane, Controller of the Company and Chief Financial
Officer of Deering, resigned their respective positions with the Company.

Under the agreement with Fieldbrook, $200,000 of the purchase price was
placed in escrow for 60 days pending receipt by the parties of a post-closing
accounting of Deering, any third party claims against Deering relating to
matters prior to the closing and certain other matters. In addition, there was
a downward adjustment of the purchase price made at closing of $387,142 as a
result of the working capital deterioration at Deering from September 30, 1997
to closing. On March 20, 1998, the Company released the full escrow amount to
Fieldbrook and is currently in discussion to finalize the purchase price based
on the post-closing accounting. The Company presently estimates it may have to
refund approximately $50,000 more of the purchase price.

The Company will receive annual royalties from Fieldbrook for four years at
the rates of 2%, 2%, 1% and 1%, respectively, of net sales by Fieldbrook of
products under the Howard Johnsons and Deering labels. At this time, the
Company cannot estimate whether or if such royalties, if received, will be
material.

ADVERTISING AND MARKETING

The Company currently markets its products and services through the use of
mailing lists and various trade publications. The Company presently is
considering engaging in the future outside professional marketing firms to
conduct its marketing activities, none of whom yet have been engaged. Such
marketing activities may include

22
<PAGE>

an evaluation of all aspects of the Company's products and services. Depending
upon the outcome of any such marketing evaluations, the Company may decide to
make changes with respect to the marketing of its products and services.

COMPETITION

The wholesale fresh produce and grocery businesses are very competitive, and
the Company's subsidiaries face competition from other low-cost produce
providers. However, A-One-A Produce and Fresh strive to maintain high quality
and exceptional service in the market by making quality products and efficient
service its priority. Food related businesses are often affected by arbitrary
changes in consumer tastes, national, regional and local economic conditions,
demographic trends, traffic patterns, the number and locations of competing
businesses and employment trends.

GOVERNMENT REGULATION

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

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

EMPLOYEES

The Company employs approximately 105 people which includes administrative,
transportation and warehouse personnel, as well as executive management.

PROPERTIES

A-One-A Produce & Provisions, Inc. leases approximately 55,000 square feet
at 1351 N.W. 22nd Street, Pompano Beach, Florida, for use as its principal
offices and warehouse. The lease term is for five years with two five year
options to extend expiring July 31, 2002, at a rental of $220,000 per year.
The Pompano Beach facility is owned by an affiliate of Messrs. Scarbrough and
Davis. A lease for this facility was negotiated as part of the A-One-A
transaction. Under the lease, the Company has an option to purchase the land
and building in Pompano Beach, Florida at a purchase price of $2,000,000 until
December, 1998, though there is no assurance that such will be the case.

Until August 1, 1997, the Company leased approximately 2,000 square feet at
2699 Stirling Road in Ft. Lauderdale, Florida, for use as its executive
offices and reservations center. The Company's executive offices are now
located in the A-One-A Produce facility in Pompano Beach, Florida. Management
believes that the above facilities will be sufficient for its operations in
the foreseeable future.

RECENT FINANCING

In August, 1997, the Company guaranteed payment on a Loan and Security
Agreement between Foothill Capital Corporation of Mechanicsville, Virginia and
the Company's wholly-owned subsidiaries, Deering Ice Cream, Inc. and A-One-A
Produce & Provisions, Inc. under which Foothill has provided revolving loans
in a total amount of approximately $4,200,000, which were being used to
refinance the principal accounts receivable and inventory financing with
respect to Deering Ice Cream, Inc., and also to provide for the ongoing
working capital needs of A-One-A Produce & Provisions, Inc. In connection with
the sale of the Deering subsidiary's business in December, 1997, these loans
were paid down in the amount of $1,396,913, leaving a principal balance of
approximately $1,400,000. As a result of the foregoing transaction, the
Company's guaranty was adjusted accordingly.

23
<PAGE>

MANAGEMENT

DIRECTORS AND OFFICERS

The following table sets forth certain information with respect to the
Company's directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
Dr. Samuel H. Lasko*.... 52 President, Treasurer and Director
Jonathan S. Lasko....... 26 Executive Vice-President, Secretary, Chief Operating
Officer and Director
Bruce S. Phillips....... 54 Director
Steven Shulman.......... 57 Chairman of the Board of Directors and Chief
Executive Officer
Richard Power........... 49 Director
Bernard Rubin, M.D...... 49 Director
Fred A. Seigel.......... 42 Director
</TABLE>
- --------

* In connection with the sale of the "hospitality" businesses, Dr. Lasko has
resigned as an officer of the Company effective on the ratification of the
sale by the Company's shareholders (later this year). Dr. Lasko has also
advised that he will not stand for re-election as a director at that time.

Directors are elected on an annual basis. All directors of the Company hold
office until the next annual meeting of the shareholders or until their
successors are elected and qualified. At present, the Company's by-laws
provide for not less than one director nor more than seven. Until the DownEast
acquisition in February, 1997, there were five directors, and as of February
17, 1997, there have been seven directors. The Company's by-laws permit the
Board of Directors to fill any vacancy and such director may serve until the
next annual meeting of shareholders or until his successor is elected and
qualified. Officers are elected to serve, subject to the discretion of the
Board of Directors, until their successors are appointed.

DR. SAMUEL H. LASKO, age 52, has been President, Treasurer and a director of
the Company since its inception in October, 1988, and was Chairman of the
Board of Directors and Chief Executive Officer from August, 1995 until
February 17, 1997, immediately following the DownEast transaction. Dr. Lasko
has also been president of A&E Management Corp. since October 27, 1993, The
Lasko Companies, Inc. since May 11, 1995, and Prime Concern Kosher Foods, Inc.
since December, 1995. Dr. Lasko holds a B.A. from Yeshiva University in New
York City and received his Ed.D. in 1984 from the University of Maryland. Dr.
Lasko is the father of Jonathan S. Lasko, currently the Executive Vice-
President, Secretary, the Chief Operating Officer of the Company and one of
its directors, and the brother-in-law of Bruce S. Phillips, a director of the
Company.

JONATHAN S. LASKO, age 26, has been a director of the Company since
September, 1994, and its Chief Operating Officer and Secretary since August,
1995. He has also been the Company's Executive Vice-President since May, 1993.
Mr. Lasko has also been vice-president of A&E Management Corp. since October
27, 1993, The Lasko Companies, Inc. since May 11, 1995 and Prime Concern
Kosher Foods, Inc. since December, 1995. He is also President and Chief
Executive Officer of A-One-A Produce and Provisions, Inc. Mr. Lasko attended
Yeshiva University, New York, New York, in 1988 and 1989, and Bernard Baruch
College of City University of New York, New York in 1990 and 1991. From
January, 1990 until October, 1993, when he became a full-time employee of the
Company, Mr. Lasko was a part-time employee of the Company and managed its
food and beverage operations for its Passover holiday vacation. Mr. Lasko is
the son of Dr. Samuel H. Lasko, the President and Treasurer of the Company and
one of its directors, and the nephew of Bruce S. Phillips, a director of the
Company.

24
<PAGE>

BRUCE S. PHILLIPS, age 54, has been a director of the Company since August,
1995. He is a graduate of City College of New York. From April, 1988 until
August, 1994, Mr. Phillips was president and director of Frem Corp., a
plasticware manufacturer. Since August, 1994, Mr. Phillips has owned PFS
Venture Group, a business management and financial consulting firm. Mr.
Phillips is the brother-in-law of Dr. Samuel H. Lasko, a director of the
Company and its President and Treasurer, and the uncle of Jonathan S. Lasko, a
director of the Company and its Executive Vice-President, Secretary and Chief
Operating Officer.

STEVEN SHULMAN, age 57, is a Managing Director of Latona Associates, Inc.,
an investment banking firm involved in advisory services and principal
investments. He serves as a director of a number of public and private
companies and is currently a director of WPI Group, Inc., Ermanco
Incorporated, Beacon Capital Partners, L.P. and Corinthian Directory, Inc. Mr.
Shulman holds an M.S. in Industrial Management from the Stevens Institute of
Technology, where he currently serves as Vice Chairman of its Board. Since
February, 1997, Mr. Shulman has served as the Chairman of the Board of
Directors and since February 18, 1998, has also served as the Chief Executive
Officer of the Company.

RICHARD POWER, age 49, has been Vice-President of Tyco Fire and Safety
Services since May, 1997, and the President of Carlisle Plastics, Inc., from
January, 1997, to May 1997, both divisions of Tyco International Ltd., a New
York Stock Exchange listed corporation. He served as a consultant to Tyco in
Mergers and Acquisitions from 1995 through 1996, Vice President and Chief
Financial officer of Abex Inc. a New York Stock Exchange listed corporation
between 1994 and 1995, and was the Managing Director of a private investment
company from 1992 through 1994. Mr. Power holds a B.S. and an M.B.A. from
Boston College. Since February, 1997, Mr. Power has served as a director of
the Company.

BERNARD RUBIN, M.D., age 49, was a director of the Company from August,
1995, to February 17, 1997, when he voluntarily resigned. He was re-elected a
director at the Company's 1997 Annual Meeting of Shareholders. For the past
approximately 19 years, Dr. Rubin has been a practicing cardiologist in
Baltimore, Maryland, where, for the past six years he has been the President
of Baltimore Heart Associates, an 18-member cardiology group. Dr. Rubin has
served as President of the Medical Staff and is currently Chief of Cardiology
and Medical Director of the Critical Care Unit at Northwest Hospital Center in
Baltimore. He holds undergraduate degrees from Yeshiva University and a
medical degree from New York Medical College, both in New York. Dr. Rubin is a
Fellow in the American College of Cardiology.

FRED A. SEIGEL, age 42, was elected a Director on February 18, 1998, to fill
a vacancy. Mr. Seigel is a founder, President and a Director of Energy Capital
Partners, a privately-held, Boston-based company organized in September, 1993,
providing financing for energy efficiency projects for commercial, industrial
and institutional property owners throughout the United States. He has more
than twenty years experience in the energy field. From January, 1988 to
October, 1994, he served as a limited partner in two large-scale energy co-
generation projects in New York state, representing a total investment of
$350,000,000. From March, 1984 to November, 1986, Mr. Seigel was a project
manager for Wheelabrator-Frye, Inc., in that company's Resource Recovery
Division. From January, 1981 to January, 1993, he was the Director of the
Executive Office for Energy for the State of New Hampshire. Mr. Seigel holds a
B.A. from New England College, Henniker, New Hampshire.

DIRECTOR COMPENSATION

Directors are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors and commencing in fiscal 1996,
non-employee directors were paid $750 for each directors' meeting attended.
The Company anticipates that the Board of Directors will continue to meet at
least four times a year.

25
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth all compensation paid or distributions made
during the fiscal years ended December 31, 1997, 1996 and 1995, by the Company
or any of its subsidiaries to the Chief Executive Officer of the Company and
to each of its most highly compensated executive officers, other than the
Chief Executive Officer, whose compensation exceeded $100,000.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
YEAR ENDED ANNUAL OTHER
NAME & PRINCIPAL POSITION DECEMBER 31 SALARY COMPENSATION OPTIONS
- ------------------------- ----------- -------- ------------ -------
<S> <C> <C> <C> <C>
Samuel H. Lasko.............. 1995 $ 31,403 $169,081(2) 750,000(5)
President and Treasurer 1996 $125,000 $ 9,517(3)(4)
1997 $150,000 $ 22,502(3)
Jonathan S. Lasko............ 1995 $ 24,592 $169,081(2) 750,000(5)
Executive Vice President,
Secretary and 1996 $ 70,000 $ 7,255(3)
Chief Operating Officer 1997 $ 95,000 $ 21,727(3)
Milton Namiot................ 1997 $175,000 $ 9,500(3) 125,000(6)
Chief Executive Officer(6)
</TABLE>
- --------

(1) Paid by A&E Management Corp. ("A&E").

(2) Represents combined "S" corporation distributions in the nature of
dividends through December 5, 1995, when the Company first offered and
sold its securities to the public.

(3) Represents amounts paid for lease of automobile, automobile insurance,
cell phone and health insurance.

(4) Does not include repayments of loans from A&E, The Lasko Companies, Inc.
and the Company.

(5) In connection with the DownEast acquisition in February, 1997, each of
Samuel Lasko and Jonathan Lasko surrendered their respective right to
performance options, contained in their respective employment agreements
and, in lieu thereof, the Company issued to each of Samuel H. Lasko and
Jonathan D. Lasko warrants to purchase 375,000 shares of the Company's
common stock at $1.1875 per share exercisable immediately and expiring
August 31, 2000. Dr. Lasko tendered to the Company 114,322 of such
warrants in partial consideration of his purchase of the Company's
"hospitality" businesses.

(6) In connection with the sale of the Company's Deering Ice Cream, Inc.
business, Mr. Namiot resigned as an officer. He was an officer and
director of the Company from February 17, 1997, until the closing of the
Deering transaction. In connection with his resignation and the
termination of this three year employment contract, 50% of the options
theretofore granted Mr. Namiot, or options to purchase 125,000 shares of
the Company's common stock, were made immediately exercisable. Mr. Namiot
did not exercise any of the options and they have expired.

26
<PAGE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

The following table sets forth options exercised by the Company's chief
executive officer and the Company's two other most highly compensated
executive officers during fiscal 1996, and the number and value of all
unexercised options at year end. The value of "in-the-money" options refers to
options having an exercise price which is less than the market price of the
Company's stock at fiscal year-end. On that date, none of the Company's
executive officers held exercisable options which were "in-the-money".

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
------------- -------------
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Milton Namiot(1)... -- -- -- --
Samuel H. Lasko.... -- -- 0/750,000(2) $0/0
Jonathan S. Lasko.. -- -- 0/750,000(2) $0/0
</TABLE>
- --------
(1) Mr. Namiot was not an officer of the Company in 1996. He was elected an
officer on February 17, 1997, following the DownEast transaction, and
resigned in December, 1997 following the sale of the Deering business.
(2) Represents options (based on performance by the Company) contained in the
Lasko's employment agreements. In connection with the DownEast
acquisition, effective February 17, 1997, each of Messrs. Samuel and
Jonathan Lasko voluntarily surrendered their respective right to these
options and, in lieu thereof, the Company issued to each of Samuel H.
Lasko and Jonathan D. Lasko warrants to purchase 375,000 shares of the
Company's common stock at $1.1875 per share exercisable immediately and
expiring August 31, 2000.

EMPLOYMENT AGREEMENTS AND AGGREGATE OPTIONS HOLDINGS

The Company has 5-year employment agreements, ending August 31, 2000, with
each of Dr. Samuel H. Lasko and Jonathan S. Lasko. Dr. Samuel H. Lasko
tendered to the Company the balance of his employment agreement in partial
consideration of his purchase of the Company's "hospitality" segments. See
"Business--Sale of Hospitality Segments."

Under his employment agreement, Dr. Samuel H. Lasko received an annual base
salary of $95,000 for the first two years and was to receive $125,000 for the
third year, $150,000 for the fourth year and $175,000 for the fifth year of
his employment. Under his employment agreement, Jonathan S. Lasko receives an
annual base salary of $70,000 for the first two years, $95,000 for the third
year, $115,000 for the fourth year and $125,000 for the fifth year of his
employment. In connection with the DownEast transaction, by amendments dated
February 17, 1997, to their respective employment agreements, Dr. Lasko and
Jonathan Lasko each voluntarily surrendered their one-time performance based
options under their respective employment agreements to purchase up to an
aggregate of 750,000 shares of common stock, and in lieu thereof, the Company
issued to each of Samuel Lasko and Jonathan Lasko, warrants to purchase
375,000 shares of its common stock at an exercise price of $1.1875 per share.
(Dr. Lasko tendered to the Company 114,322 of such warrants in partial
consideration of his purchase of the Company's "hospitality" businesses.) The
employment agreements also entitle the individuals to the use of an automobile
and to employee benefit plans, such as group life, health, hospitalization and
life insurance. Under each of these employment agreements, employment
terminates upon death or total disability of the employee and may be
terminated by the Company for "cause," which is defined, among other things,
as the willful failure to perform duties, embezzlement, conviction of a
felony, or breach of the employee's covenant not to compete or maintain
confidential certain information. On February 18, 1998, the Board of Directors
accepted the recommendation of its Compensation Committee and increased
Jonathan S. Lasko's base compensation for 1998 to $125,000.

27
<PAGE>

In connection with the DownEast transaction, the Company entered into a 3-
year employment agreement, effective February 17, 1997, and ending August 31,
2000, with Milton Namiot under which Mr. Namiot served as the President and
Chief Executive Officer of Deering and Chief Executive Officer of the Company.
As a result of the sale of the Deering business, Mr. Namiot resigned from his
positions as an officer and director of the Company.

In connection with the A-One-A transaction, the Company entered into 5 year
employment agreements, effective July 1, 1997, and ending July 30, 2002, with
both Virgil D. Scarbrough and Scott Davis under which Messrs. Scarbrough and
Davis will serve as Co-Chief Operating Officers of the Company's wholly-owned
subsidiaries A-One-A Produce & Provision, Inc. and Terrace Fresh, Inc. Under
their respective employment agreements, Messrs. Scarbrough and Davis each
receive a annual base salary of $120,000.

In connection with the Bay Purveyors acquisition, the Company's wholly-owned
subsidiary, A-One-A Produce, entered into a 5 year employment agreement
effective September 1, 1997, with Kenneth Cohen under which Mr. Cohen will
serve in an upper level management position for A-One-A Produce. Under his
employment agreement, Mr. Cohen receives an annual base salary of $65,000.

In connection with the Gourmet Distributors acquisition, the Company entered
into a three year consulting agreement with Phyllis Forstein, to assist in and
consult concerning the business acquired. Ms. Forstein receives an annual
consulting fee of approximately $92,000.

THE 1997 STOCK OPTION PLAN AND PARTICIPANTS

The Company recently adopted the 1997 Stock Option Plan (the "Plan") which
enables it to grant options for shares of its Common Stock. The Plan
authorizes the grant of options to purchase up to an aggregate of 1,250,000
shares of the Company's Common Stock, to (i) officers and other full-time
salaried employees of the Company and its subsidiaries with managerial,
professional or supervisory responsibilities, and (ii) consultants and
advisors who render bona fide services to the Company and its subsidiaries, in
each case, where the Compensation Committee determines that such officer,
employee, consultant or advisor has the capacity to make a substantial
contribution to the success of the Company. The number of individuals who
currently would be eligible to receive options pursuant to the Plan is
approximately seven. As used herein with respect to the Plan, references to
the Company include subsidiaries of the Company.

The purposes of the Plan are to enable the Company to attract and retain
persons of ability as officers and other key employees with managerial,
professional or supervisory responsibilities, to retain able consultants and
advisors, and to motivate such persons to use their best efforts on behalf of
the Company by providing them with an equity participation in the Company. The
full text of the Plan is set forth as an exhibit to this Registration
Statement, and the following description is qualified in its entirety by
reference thereto.

The Plan is administered by the Compensation Committee, which was appointed
by the Company's Board of Directors, and consists of three members of the
Board of Directors, two of whom are "disinterested" persons within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934. Under the terms of
the Plan, the Committee will have the authority to determine, subject to the
terms and conditions of the Plan, the persons to whom options are granted, the
number of options granted to each optionee, and the terms and conditions of
each option, including its duration.

The Plan can be amended, suspended, reinstated or terminated by the Board of
Directors; provided, however, that without approval of the Company's
shareholders, no amendment shall be made which (i) increases the maximum
number of shares of Common stock which may be subject to stock options granted
under the Plan, except for specified adjustment provisions, (ii) extends the
term of the Plan, (iii) materially increases the benefits accruing to
optionees under the Plan, (iv) materially modifies the requirements as to
eligibility for participation ion the Plan, or (v) will cause stock options
granted under the Plan to fail to meet the requirements of Rule 16b-3. Unless
previously terminated or extended by the Board of Directors, the Plan will
terminate on February 20, 2007.

28
<PAGE>

Stock options may be granted to purchase Common Stock under the Plan at not
less than the fair market value of the shares as of the date of grant. The
maximum number of shares for which options may be issued to an employee of the
Company during any calendar year may not exceed 250,000. Other than the limit
of 250,000 options per year, there is no limitation on the aggregate number of
stock options which may be granted to any optionee pursuant to the Plan.

As of the date hereof, 758,000 options have been granted, including 380,000
to Samuel H. Lasko, Jonathan S. Lasko, and Steven Shulman.

Stock options may be granted for a term of up to ten years. The Plan
provides that if a stock option, or portion thereof, expires, lapses without
being exercised or is terminated, canceled or surrendered for any reason
without being exercised in full, the unpurchased shares of Common Stock which
were subject to such stock option or portion thereof shall be available for
future grants of stock options under the Plan.

Pursuant to the terms of the Plan, the option price for all options must be
paid in cash, by check, bank draft or money order payable in United States
dollars to the order of the Company, or with Common Stock of the Company owned
by the optionee and having a fair market value on the date of exercise equal
to the aggregate exercise price of the shares to be so purchased, or a
combination thereof.

Options granted pursuant to the Plan will not be assignable or transferable
except by will or the laws of intestate succession. Options acquired pursuant
to the Plan may be exercised by the optionee (or the optionee's legal
representative) only while the optionee is employed by the Company, or within
six months after termination of employment due to a permanent disability, or
within three months after termination of employment due to a permanent
disability, or within three months after termination of employment due to
retirement. The executor or administrator of a deceased optionee's estate or
the person or persons to whom the deceased optionee's rights thereunder have
passed by will or by the laws of descent or distribution shall be entitled to
exercise the option within the sixth month after the decedent's death. Options
expire immediately in the event an optionee is terminated with or without
cause or resigns; provided, however, in the event the Company terminates the
employment of an optionee who at the time of such termination was an officer
of the Company and had been continuously employed by the Company during the
two year period immediately preceding such termination, for any reason except
"good cause" (as defined in the Plan), each stock option held by such optionee
(which had not then previously lapsed or terminated and which had been held by
such optionee for more than six months prior to such termination) shall be
exercisable for a period of three months after such termination to the extent
otherwise exercisable during that period. All of the aforementioned exercise
periods set forth in this paragraph are subject to the further limitation that
an option shall not, in any case, be exercisable beyond its stated expiration
date.

The purchase price and the number and kind of shares that may be purchased
upon exercise of options granted pursuant to the Plan, and the number of
shares which may be granted pursuant to the Plan, are subject to adjustment in
certain events, including stock splits, recapitalizations, mergers, and
reorganizations.

29
<PAGE>

In February, 1997, the following officers, directors, significant employees
and other employees have received the number of options as is designated
opposite their respective names:

<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS(1)
---- --------------------
<S> <C>
Samuel H. Lasko.................................... 125,000
Jonathan S. Lasko.................................. 125,000
Steven Shulman..................................... 130,000(2)
Bruce Phillips..................................... 20,000(2)
Richard Power...................................... 20,000(2)
Milton Namiot(3)................................... 125,000
Joseph Dane(3)..................................... 25,000
Hersh Taubenfeld................................... 20,000
Keith Stuart....................................... 20,000
Amy Lasko.......................................... 15,000
Vivian Cypkin...................................... 5,000
Other Employees(4)................................. 128,000
-------
TOTAL............................................ 758,000
=======
</TABLE>
- --------

(1) Unless otherwise stated, these options were granted at an exercise price
of $1.185 per share, such options become exercisable one third per year
over three years from the date granted.

(2) All of Mr. Phillips' and Mr. Power's options, as well as 30,000 of Mr.
Shulman's options, became exercisable at the time they were granted.

(3) In connection with the Company's sale of its Deering subsidiary's
business, Messrs. Namiot and Dane are no longer affiliated with the
Company. The Company's Compensation Committee determined that the number
of options listed became exercisable after consummation of such sale on
such date the options would have been exercisable had Messrs. Namiot and
Dane stayed affiliated with the Company. See footnote 8 to "Executive
Compensation" table.

(4) Includes options granted to 20 individual employees of the Company's
subsidiaries at an exercise price of $2.31 per share, such options become
exercisable one third per year over three years from the date granted.

30
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table provides information concerning the beneficial ownership
of common stock of the Company by each director, certain executive officers,
and by all directors and officers of the Company as a group as of March 1,
1998. In addition, the table provides information concerning the beneficial
owners known to the Company to hold more than 5 percent of the outstanding
common stock of the Company as of March 1, 1998.

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(1)(2) OWNERSHIP CLASS
- ------------------------ ------------ ----------- --------------- ----------
<S> <C> <C> <C> <C>
Dr. Samuel H. Lasko....... 383,750(3) 7.6% -0- -0-
Jonathan S. Lasko......... 380,000 7.5% 25,000(4) *
Richard Power............. 204,154 * 50,000 *
Steven Shulman............ 346,154 6.8% 50,000 *
Bernard Rubin, M.D........ -0- -0- 15,000 *
Fred A. Seigel............ 64,577 * -0- -0-
Bruce S. Phillips......... -0- -0- -0- -0-
Milton Namiot(5)..........
All Directors and
Executive Officers as a
Group
(7 persons).............. 1,378,635(6) 27.1% 140,000 9.2%
</TABLE>
- --------
*Less than five percent
(1) In each case the beneficial owner has sole voting and investment power
except that shares held by Dr. Samuel H. Lasko are held in joint tenancy
with his wife Arlene Lasko and the shares held by Jonathan S. Lasko are
held in joint tenancy with his wife Ellen J. Lasko.
(2) The calculation of percent of class is based upon the number of shares of
common stock outstanding as of September 30, 1997.
(3) Includes 3,750 shares held for the benefit of Dr. Lasko's minor child.

(4) Held for the benefit of Jordana Lasko, a minor.

(5) In December, 1997, following the sale of the Deering subsidiary's
business, Mr. Namiot resigned as an officer and director of the Company.

(6) Does not include stock options granted. See "1997 Stock Option Plan and
Participants." Also does not include Warrants to purchase Common Stock at
a price of $1.875 in the following amounts: Samuel H. Lasko--260,678;
Jonathan S. Lasko--375,000; Steven Shulman--36,666.7; Richard Power--
31,666.7; Fred A. Seigel--15, 833.3; Bernard Rubin, M.D.--20,000; and
Bruce S. Phillips--70,000.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS

As permitted by the Delaware General Corporation Law ("DGCL"), the Company
has included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, as
provided in Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. The effect of this
provision in the Company's Certificate of Incorporation is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a Director
for breach of the fiduciary duty of care as a Director except in the
situations described in (i) through (iv) above. This provision does not limit
nor eliminate the rights of the Company or any stockholder to seek non-
monetary relief such as an injunction or rescission in the event of a breach
of a Director's duty of care. These provisions will not alter the liability of
Directors under federal securities laws.

31
<PAGE>

The Certificate of Incorporation and the by-laws of the Company provide that
the Company is required and permitted to indemnify its officers and directors,
employees and agents under certain circumstances. In addition, the Company is
required to advance expenses to its officers and directors as incurred in
connection with proceedings against them for which they may be indemnified
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to indemnification. At present, the Company is not aware of any
pending or threatened litigation or proceeding involving a director, officer,
employee or agent of the Company in which indemnification would be required or
permitted. The Company may obtain directors and officers insurance in amounts
it deems necessary. The Company believes that its charter provisions and
indemnification agreements are necessary to attract and retain qualified
persons as directors and officers. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors and officers of
the Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Samuel H. Lasko loaned Terrace Holdings, Inc., The Lasko Companies, Inc. and
A&E Management Corp. the sums of $7,276, $42,715 and $235,558, respectively,
or an aggregate of $285,549. Each loan provided interest at the prime rate of
interest and principal and interest due on demand. $100,000 of principal of
these loans was repaid from the proceeds of the Company's offering. Pursuant
to agreements, the remaining principal of $185,549, together with all accrued
interest, was payable out of the Company's working capital in twelve equal
monthly installments commencing in December, 1995. At December 31, 1996, the
principal balance of these loans was paid in full.

In connection with the DownEast acquisition, the Company issued to each of
Samuel H. Lasko and Jonathan D. Lasko (collectively the "Laskos") warrants to
purchase 375,000 shares of the Company's common stock at $1.1875 per share.
The Laskos surrendered their respective performance options to purchase up to
750,000 shares of the Company's common stock, contained in their respective
employment agreements. In addition, they entered into an option agreement to
purchase the businesses, assets or capital stock of three of the Company's
wholly owned subsidiaries, The Lasko Family Kosher Tours, Inc., The Lasko
Companies, Inc. and A&E Management, Inc. at the fair market value thereof to
be independently determined. The option was exercised by Samuel H. Lasko alone
and on March 13, 1998, he purchased The Lasko Family Kosher Tours, Inc. and
A&E Management, Inc. for consideration equal to $575,000 in accordance with a
"fairness opinion" received by the Company and Dr. Lasko from an independent
valuation firm. The sale is subject to shareholders' approval. See "Business--
Sale of Hospitality Segments."

A-One-A Produce & Provisions, Inc. leases approximately 55,000 square feet
at 1351 N.W. 22nd Street, Pompano Beach, Florida, for use as its principal
offices and warehouse. The lease term is for five years with two five year
options to extend expiring July 31, 2002 at an annual rental of $220,000. The
Pompano Beach facility is owned by an affiliate of Messrs. Scarbrough and
Davis. A lease for this facility was negotiated as part of the A-One-A
acquisition. Under the lease, the Company has an option to purchase the land
and building in Pompano Beach, Florida at a purchase price of $2,000,000 until
December, 1998.

In July, 1997, the Company loaned $30,000 to its then wholly-owned
subsidiary, Deering Ice Cream, Inc. As a result of the consummation of the
sale of the assets of Deering to a subsidiary of Fieldbrook Farms, Inc., this
loan was terminated.

32
<PAGE>

SELLING SECURITIES HOLDERS

The following table sets forth the record and beneficial ownership by each
of the Selling Securities Holders, the number of shares of Common Stock or
Warrants to be offered for resale by each as of the date of this Prospectus.
No person owned of record or beneficially more than 10% of the Common Stock of
the Company. The Selling Securities Holders will not pay any of the expenses
incident to the offering made by this Prospectus other than any sales,
commissions or concessions applicable to the securities offered by them
hereby.

<TABLE>
<CAPTION>
COMMON
NAME STOCK(/1/) WARRANTS(/2/)
- ---- ---------- -------------
<S> <C> <C> <C> <C> <C>
Aboukhater, Houssam..................... 100,000 100,000
Abresch, John P......................... 25,000 25,000
Anom Trust, The......................... 50,000 50,000
Bear Stearns as IRA Custodian f/b/o:
Jack Shaffer........................... 25,000 25,000
Biltmore Securities, Inc................ 562,650(3) 1,062,650
Carpionato, Alfred...................... 250,000 250,000
Dunn, Bryan R........................... 25,000 25,000
Feinberg, Michael....................... 200,000(4)
Gelfand, Mark E......................... 25,000 25,000
Gildea, John W.......................... 25,000 25,000
Haber, Sidney and Linda................. 50,000 50,000
Healthcare Financial Corporation, LLC... 50,000 50,000
Herman, Bryan........................... 125,000 125,000
Katz Investments II..................... 100,000 100,000
Kaufman, Howard......................... 250,000 250,000
Kraut, Dr. Irving....................... 250,000 250,000
Kulman, Craig........................... 25,000 25,000
Lipsky, Alan............................ 125,000 125,000
Lyons Community Property Trust, Phillip
N. Lyons, Trustee...................... 300,000 300,000
Masada I Limited Partnership............ 25,000 25,000
NAC Group, Inc.......................... 50,000 50,000
Namiot, Milton.......................... 25,000 25,000
O'Donnell, William P.................... 25,000 25,000
O'Herron, Jonathan...................... 100,000 100,000
PaineWebber as IRA Custodian f/b/o
Thomas L. Rea.......................... 17,000 17,000
PaineWebber as SEP-IRA Custodian f/b/o
Thomas L. Rea.......................... 8,000 8,000
Bruce S. Phillips....................... 70,000(5)
Pollis, II, John P...................... 25,000 25,000
Pronesti, Thomas M...................... 25,000 25,000
Riggio, Roy A........................... 25,000 25,000
Rothstein, Martin....................... 200,000 200,000
Shriver, III, Robert S., P/S/P dated
1/1/89,
Robert S. Shriver, Trustee............. 25,000 25,000
Sitzer, Marc J.......................... 25,000 25,000
Waldman, Cory........................... 50,000 50,000
Westport Capital Markets, LLC........... 30,000 30,000
--------- ---------
TOTAL................................. 3,287,650 3,517,650
========= ========= ===
</TABLE>
- --------

(1) Unless otherwise indicated, includes Common Stock issuable upon conversion
of preferred stock. See "Description of Securities--Preferred Stock."

(2) Represents Warrants or, upon exercise of the Warrants, the Common Stock
underlying such Warrants.

(3) Includes 250,000 shares underlying Warrants exercisable at $1.1875,
Biltmore Securities has notified the Company that it intends to exercise
the warrants to purchase these shares.

(4) Represents shares of Common Stock previously issued for resale by the
holder thereof.

(5) Underlying warrants exercisable at $1.1875.

33
<PAGE>

DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $.001 per share, of which 5,006,400 shares are currently outstanding.
Assuming exercise of all the Warrants, there will be 11,856,550 shares of
Common Stock outstanding.

Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors out of funds available therefor, subject to any
priority as to dividends for any preferred stock that may be outstanding. The
Preferred Stock currently authorized and outstanding is non-voting stock
unless or until it is converted into Common Stock. Each share of Preferred
Stock is convertible into two shares of Common Stock. Holders of Common Stock
are entitled to cast one vote for each share held at all shareholder meetings
for all purposes, including the election of Directors. The holders of more
than fifty percent of the Common Stock issued and outstanding and entitled to
vote, present in person or by proxy, constitute a quorum at all meetings of
shareholders and the vote of the holders of a majority of Common Stock present
at such a meeting will decide any question brought before such meeting, except
for certain actions such as the election of directors, amendments to the
Company's Certificate of Incorporation, mergers or dissolutions which require
the vote of the holders of a majority of the outstanding Common Stock. Upon
liquidation or dissolution, the holder of each outstanding share of Common
Stock will be entitled to share equally in the assets of the Company legally
available for distribution to such shareholder after the payment of all debts
and other liabilities and after distributions to preferred shareholders, if
any, legally entitled hereto. No holder of Common Stock has any preemptive or
preferential rights to purchase or subscribe for any part of any unissued or
any additional authorized stock or any securities of the Company convertible
into shares of its stock. The outstanding shares of Common Stock are, and the
Common Stock offered hereby will be, fully paid and nonassessable.

PREFERRED STOCK

The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$.001 par value, of which 1,523,825 shares are currently outstanding. The
Preferred Stock may be issued in one or more series at such time or times and
for such consideration as shall be authorized from time to time by the Board
of Directors. The Board of Directors is authorized to fix the designation of
each series of Preferred Stock and the relative rights, preferences,
limitations, qualifications, powers or restrictions thereof, including the
number of shares comprising each series, the dividend rates, redemption
rights, rights upon voluntary or involuntary liquidation, provisions with
respect to a retirement or sinking fund, conversion rights, voting rights, if
any, preemptive rights, other preferences, qualifications, limitations,
restrictions and the special or relative rights of each series not
inconsistent with the provisions of the Certificate of Incorporation. The
outstanding shares of Preferred Stock are each convertible into two shares of
Common Stock at the option of the holder and automatically are converted on
July 31, 1998, if not converted prior to that date.

WARRANTS

In addition to the 6,575,150 Warrants currently outstanding, an aggregate of
250,000 warrants were issued by the Company in connection with the DownEast
transaction ("DownEast Warrants"), 40,000 warrants have been issued to two
directors in recognition of their services to the Company ("Directors
Warrants") and 200,000 Class B Warrants were issued prior to the Company's
initial public offering. All of these warrants are identical to the Warrants,
except that the exercise price of the DownEast Warrants and the Directors
Warrants is $1.1875, and the exercise price of the Class B Warrants is $10.00.
Each Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $4.00 per share, subject to adjustment, until December 5,
2000. No holder, as such, of Warrants shall be entitled to vote or receive
dividends or be deemed the holder of shares of Common Stock for any purpose
whatsoever until such Warrants have been duly exercised and the purchase price
has been paid in full. Each Warrant is redeemable by the Company for $.05 per
Warrant, at any time, upon thirty days' prior written notice, if the last
reported sale price or average closing bid price of the Common Stock, as

34
<PAGE>

reported by the principal exchange on which the Common Stock is traded, NASDAQ
or the National Quotation Bureau Incorporated, as the case may be, exceeds
$9.00 per share for twenty consecutive trading days ending within ten days
prior to the date of the notice of redemption. Any right to exercise a Warrant
will terminate at 5:00 p.m. (New York time) on the business day immediately
preceding the date of redemption.

Upon thirty days' written notice to all holders of Warrants, the Company has
the right, subject to compliance with applicable Commission rules, to reduce
the exercise price or extend the term of the Warrants. The Warrants will be
entitled to the benefit of adjustments in the exercise price of the Warrants
and in the number of shares of Common Stock or other securities delivered upon
the exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.

During the 60-day period commencing on the date of this Prospectus, to and
including 5:00 p.m., New York time, on July , 1998, subject to extension in
the sole discretion of the Company ("Temporary Exercise Period"), the Company
has reduced temporarily the exercise price of the Warrants from $4.00 to
$1.25. After the expiration of the Temporary Exercise Period, the exercise
price of the Warrants will return to the original $4.00 per share for the
balance of the term of the Warrants. See "Plan of Distribution."

The fundamental business reasons for the temporary reduction in the exercise
price of the Warrants are, first, to attempt to secure additional cash
liquidity for immediate working capital and, second, to increase the Company's
equity capital base. Management believes that temporarily reducing the Warrant
exercise price is a substantially less expensive alternative to additional
borrowings for its current and future cash and capital needs. There is no
assurance, however, that the temporary exercise price reduction will
successfully cause material exercises or that any resulting cash liquidity
will benefit the Company. See "Risk Factors--20. Warrants Subject to
Redemption; Temporary Exercise Price."

The Warrants may be exercised when there is a current effective registration
statement covering the shares of Common Stock underlying the Warrants. If the
Company does not or is unable to maintain a current effective registration
statement, the Warrant holders will be unable to exercise the Warrants and the
Warrants may become valueless. Moreover, if the shares of Common Stock
underlying the Warrants are not registered, or qualified for sale in the state
in which a Warrant holder resides, such Warrant holder might not be permitted
to exercise the Warrants.

Warrant certificates may be exchanged for new certificates of different
denominations and may be exercised or transferred by presenting them at the
office of the transfer agent. Holders of the Warrants may sell the Warrants if
a market exists rather than exercise them. However, there can be no assurance
that a market will continue as to such Warrants. If the Company is unable to
qualify its Common Stock underlying such Warrants for sale in any state,
holders of the Warrants in those states will have no choice but to either sell
such Warrants or allow them to expire.

Each Warrant may be exercised by surrendering the Warrant certificate, with
the formal election to purchase on the reverse side of the Warrant certificate
properly completed and executed, together with payment of the exercise price
to the Warrant Agent. Prior to their expiration or redemption by the Company,
the Warrants may be exercised in whole or, from time to time, in part. If less
than all of the Warrants evidenced by a Warrant certificate are exercised, a
new Warrant certificate will be issued for the remaining number of Warrants.

Holders of the Warrants are protected against dilution of the equity
interest represented by the underlying shares of Common Stock upon occurrence
of certain events, including, but not limited to, issuance of stock dividends.
If the Company merges, reorganizes or is acquired in such a way as to
terminate the Warrants, they may be exercised immediately prior to such
action. In the event of liquidation, dissolution or winding up of the Company,
holders of the Warrants are not entitled to participate in any distribution of
the Company's assets.

For the life of the Warrants, the holders thereof are given the opportunity,
at nominal cost, to profit from a rise in the market price of the Common Stock
of the Company. The exercise of the Warrants will result in the dilution of
the then book value of the Common Stock of the Company held by the public
investors and will also

35
<PAGE>

result in a dilution of their percentage ownership of the Company. The terms
upon which the Company may obtain additional capital may be adversely effected
through the period that the Warrants remain exercisable. The holders of these
Warrants may be expected to exercise them at a time when the Company would, in
all likelihood, be able to obtain equity capital on terms more favorable than
those provided for by the Warrants.

Because the Warrants may be transferred, it is possible that they may be
acquired by persons residing in states where the Company has not registered,
or is exempt from registration, such that the shares of Common Stock
underlying the Warrants may not be sold or transferred upon exercise of the
Warrants. Warrant holders residing in those states would have no choice but to
attempt to sell their Warrants or let them expire unexercised. Also, it is
possible that the Company may be unable, for any reason, to cause a
registration statement covering the Common Stock underlying the Warrants to be
in effect when they are exercisable. In such event, the Warrants may expire
unless extended by the Company because a registration statement, including
audited financial statements, must be in effect in order for Warrant holders
to exercise their Warrants.

SHARES ELIGIBLE FOR FUTURE SALE

2,268,900 of the 5,006,400 shares of Common Stock currently are "restricted
securities" as that term is defined under the Securities Act and in the future
may only be sold in compliance with Rules 144 and 144A promulgated under the
Securities Act or pursuant to an effective registration statement. Rule 144
provides, in essence, that a person (including a group of persons whose shares
are aggregated) and including any person who may be deemed an "affiliate" of
the Company, as that term is defined under the Securities Act, who has
satisfied a one-year holding period for such restricted securities may sell
within any three-month period, under certain circumstances, an amount of
restricted securities which does not exceed the greater of 1% of that class of
the Company's outstanding securities or the average weekly trading volume of
that class of securities during the four calendar weeks prior to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about
the Company. In addition, pursuant to Rule 144, persons who are not affiliated
with the Company and who have held their restricted securities for at least
two years are not subject to the quantity limitations or the manner of sale
restrictions of the rule.

Sales of shares by the Company's current shareholders, whether pursuant to
Rule 144 or otherwise, may have a depressing effect upon the market price of
the Common Stock in any market for the Company's securities that may develop.
To the extent that these shares enter the market, the value of the Common
Stock in the over-the-counter market may be reduced. See "Risk Factors" and
"Description of Securities."

Commission Rule 144A permits unlimited resales of restricted securities of
any issuer provided that the purchaser is a qualified institutional buyer (as
that term is defined therein) that at the end of its most recent fiscal year
has assets invested in securities of non-affiliated entities that were
purchased for a total of more than $100 million. Rule 144A allows holders of
restricted shares of the Company to sell such shares to such institutions
without regard to any volume or other restrictions.

In the event that shares of Common Stock which are not currently saleable
become saleable by means of registration, eligibility for sale under Rule 144
or otherwise and the holders of such shares of Common Stock elect to sell such
shares of Common Stock in the public market, there is likely to be a negative
effect on the market price of the Company's securities and on the ability of
the Company to obtain additional equity financing. No predictions can be made
as to the effect, if any, that sales of the Common Stock or the exercise of
the Warrants or the availability of Common Stock for sale will have on the
market price of such securities prevailing from time to time. Nevertheless,
the foregoing could adversely affect prevailing market prices. See "Risk
Factors" and "Description of Securities."

Sales of substantial amounts of shares of Common Stock, pursuant to Rule
144, Rule 144A or otherwise, could adversely affect the market prices of the
Common Stock, and/or the Warrants, and may make it more difficult for the
Company to sell equity securities in the future at a time and price that it
deems appropriate. See "Risk Factors."

36
<PAGE>

TRADING SYMBOLS

The Common Stock and the Warrants are listed for quotation on NASDAQ under
the symbols "THIS" and "THISW", respectively. There can be no assurances that
an active trading market will continue. See "Risk Factors--15. No Assurance of
Continued Public Trading Market or Continued Qualification for NASDAQ
Inclusion."

TRANSFER AGENT AND WARRANT AGENT

The transfer agent for the Company's Common Stock and its Warrant Agent for
the Public and Preferred Warrants is American Stock Transfer and Trust
Company, New York, New York.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is not subject to the provisions of Section 203 of the Delaware
General Corporation Law. That section provides, with certain exemptions, that
a Delaware corporation may not engage in any of a broad range of business
combinations with a person or affiliate or associate of such person who is an
"interested shareholder" for a period of three years from the date that such
person became an interested shareholders unless: (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the shareholder becoming an interested
shareholder, or (ii) upon consummation of the transaction which resulted in
the shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting of
shareholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
shareholder. An "interested shareholder" is defined to include any person, and
the affiliates and associates of such person that (i) is the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the three-
year period immediately prior to the date on which it is sought to be
determined whether such person is an interested shareholder.

PLAN OF DISTRIBUTION

WARRANT SOLICITATION FEE

To the extent not inconsistent with the guidelines of the National
Association of Securities Dealers, Inc. and the rules and regulations of the
Commission, the Company has agreed to pay to the Soliciting Agent a warrant
solicitation fee equal to 4% of the then current exercise price for each
solicited Warrant exercised, payable upon exercise of the Warrant. However, no
compensation will be paid to the Soliciting Agent in connection with the
exercise of the Warrants if (a) the market price of the underlying shares of
Common Stock is lower than the then current exercise price of the Warrants,
(b) the Warrants are held in a discretionary account, except where prior
specific written approval for the exercise has been received, (c) the Warrants
are exercised in an unsolicited transaction, (d) the Soliciting Agent has not
provided bona fide services in connection with the solicitation of the
Warrant, (e) the holder of the Warrant has not in writing designated the
Soliciting Agent as the party to receive the solicitation fee, or (f) these
compensation arrangements have not been disclosed at the time of the exercise.
In addition, unless exempt from Regulation M promulgated by the Commission,
the Soliciting Agent will be prohibited from engaging in any market making
activities or solicited brokerage activities with regard to the Company's
securities until the later of the termination of such solicitations activities
or the termination by waiver or otherwise of any right the Soliciting Agent
may have to receive a fee for the exercise of the Warrants following such
solicitation.

37
<PAGE>

RECENT PRIVATE PLACEMENT AND INVESTMENT BANKING AGREEMENT

On July 1, 1997, the Company entered into an Investment Banking Agreement
with Biltmore Securities under which for a period of three years Biltmore is
to provide services including, without limitation, (i) review of business
plans and projections; (ii) review of financial data as it relates to raising
financing; (iii) advising on the Company's capital structure and on
alternatives for raising capital; (iv) reviewing and advising on prospective
mergers and acquisitions, and on any financing required to complete such
transactions; (v) advising on issues relating to public offerings;(vi)
providing fairness opinions; (vii) reviewing managerial needs; and (viii)
advising on issues relating to financial public relations. In consideration,
the Company issued to Biltmore and its assignees Warrants to purchase 750,000
shares of Common Stock of the Company.

As the Company's investment banker, Biltmore Securities, Inc., was its
placement agent with respect to the private offer and sale to accredited
investors of 1,352,500 units, each Unit consisting of one share of convertible
Preferred Stock and two Warrants. Each share of Preferred Stock is convertible
into two shares of the Company's Common Stock. In connection with this
placement of its securities the Company issued an additional 156,325 Units to
Biltmore Securities, Inc., and 15,000 Units to Westport Capital Markets, LLC.
See "Selling Securities Holders."

SALES OF SHARES OF COMMON STOCK

Certain current shareholders of Common Stock or persons who become
shareholders of Common Stock upon exercise of warrants or conversion of
Preferred Stock may sell their shares from time to time following the date of
this Prospectus through the Soliciting Agent or any other registered
broker/dealer. Any commissions paid to such broker/dealers will be paid by
those certain current shareholders and not the Company. Any of those certain
current shareholders may be required to deliver a copy of this Prospectus with
such sales. Accordingly, the Company may be required to update and amend this
Prospectus to keep it current in accordance with applicable laws, rules and
regulations. See "Selling Securities Holders."

EXPERTS

The financial statements included in this Prospectus have been audited by
Moore Stephens, P.C., New York, New York, independent certified public
accountants, to the extent and for the periods set forth in their reports
appearing elsewhere herein, and are included in reliance upon such reports
given upon the authority of said firm as experts in auditing and accounting.

LEGAL MATTERS

Certain legal matters, including the legality of the issuance of the
securities offering hereby, are being passed upon for the Company by Fishman,
Merrick, Miller, Genelly, Springer, Klimek & Anderson, P.C., 125 South Wacker
Drive, Suite 2800, Chicago, Illinois 60606.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, a
registration statement under the Securities Act on Form SB-2 ("Registration
Statement") with respect to the securities offered hereby. No distribution of
these securities will be made until the Registration Statement, as it may be
amended, has been declared effective. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement and the exhibits thereto. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement and the exhibits
thereto. All of these documents may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10007
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies may be obtained at the prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington,
D.C. In addition, the Commission maintains a website that contains reports,
proxy and information statements and other information regarding issuers such
as the Company that file electronically with the Commission. The address of
such site is http://www.sec.gov. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

38
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE(S)
--------
<S> <C>
Pro Forma Condensed Combined Financial Statements (Unaudited)......... P-2
Pro Forma Condensed Combined Statement of Operations for the year
ended December 31, 1997.............................................. P-3
Notes to Pro Forma Financial Statement................................ P-4
Report of Independent Auditors (Terrace Holdings, Inc.)............... F-1
Financial Statements
Consolidated Balance Sheet as of December 31, 1997................... F-2
Consolidated Statements of Operations for the years ended December
31, 1997 and 1996................................................... F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996.......................................... F-4
Consolidated Statements of Cash Flows for the years ended December
31, 1997 and 1996................................................... F-5-F-6
Notes to Consolidated Financial Statements........................... F-7-F-20
</TABLE>

P-1
<PAGE>

TERRACE HOLDINGS, INC.

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

The following pro forma condensed combined statement of operations for the
year ended December 31, 1997, give effect to the following:

(1) A-One-A Wholesale Produce, Inc. Acquisition--On July 1, 1997, the
Registrant acquired all of the assets and related liabilities of A-One-A
Wholesale Produce, Inc. ["A-One-A"]. In consideration for the acquisition,
the Registrant issued to A-One-A 500,000 unregistered shares of the
Company's common stock valued at $1,000,000. The asset purchase agreement
also provides for contingent consideration based upon the achievement of
specified earnings levels in future periods. The Registrant also paid A-
One-A $3,130,000 in cash. The total cost of the acquired company was
approximately $4,100,000. The acquisition was accounted for as a purchase
effective July 1, 1997. The operations of A-One-A will be included in the
Registrant's results of operations from that date. Goodwill of $3,534,242
was recorded as part of this acquisition. The excess purchase price is
allocated to goodwill because the amounts are in effect inseparable from
goodwill. The items sold by A-One-A are not unique in any way and the asset
represents the relationships, reputation and the value of past services
rendered provided to its customers.

The pro forma condensed combined statement of operations gives effect to
these transactions as if they had occurred at the beginning of the fiscal year
presented and were carried forward through the period presented.

The pro forma combined statement has been prepared by the Company's
management based upon the historical financial statements of the Company and
A-One-A Wholesale, Inc. This pro forma statement may not be indicative of the
results that actually would have occurred if the divestments had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the historical
financial statements and notes contained elsewhere herein.

P-2
<PAGE>

TERRACE HOLDINGS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997.

(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICALS
-----------------------
A-ONE-A
TERRACE WHOLESALE,
HOLDINGS, INC. SIX
INC. YEAR MONTHS
ENDED ENDED
DECEMBER JUNE 30, PRO FORMA PRO FORMA
31, 1997 1997* ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue................... $ 8,929,464 $8,180,688 $ -- $17,110,152
Cost of Sales............. 6,853,507 5,771,292 -- 12,624,799
----------- ---------- --------- -----------
Gross Profit.............. 2,075,957 2,409,396 -- 4,485,353
----------- ---------- --------- -----------
Selling, General and
Administrative Expenses.. 3,470,480 1,883,273 88,356(2) 5,442,109
Bad Debts................. 60,000 -- -- 60,000
Total Operating
Expenses............... 3,530,480 1,883,273 88,356 5,502,109
----------- ---------- --------- -----------
(Loss) Income from
Operations............... (1,454,523) 526,123 (88,356) (1,016,756)
Other Income (Expense):
Interest (Expense)........ (56,993) (17,432) (19,619)(3) (94,044)
----------- ---------- --------- -----------
(Loss) Income from
Continuing Operations
Before Income Taxes...... (1,511,516) 508,691 (107,975) (1,110,800)
Income Taxes.............. -- 203,476 (203,476)(1) --
----------- ---------- --------- -----------
(Loss) Income from
Continuing Operations.... $(1,511,516) $ 305,215 $ 95,501 $(1,110,800)
=========== ========== ========= ===========
(Loss) Per Share.......... $ (.34) $ (.25)
=========== ===========
Weighted Average Shares
Outstanding.............. 4,454,034 4,454,034
=========== ===========
</TABLE>
- --------

* The Registrant's December 31, 1997 statement of operations includes the
statement of operations for A-One-A Wholesale, Inc. for the six months then
ended.

P-3
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

As of December 17, 1997, the Company sold its Deering Ice Cream, Inc.
subsidiary and anticipates the sale of its Hospitality Subsidiaries during the
second quarter of 1998.

INCOME STATEMENT ADJUSTMENTS:

<TABLE>
<S> <C>
(1) To reflect reduction of income tax expense as computed on a
consolidated basis. $203,476
--------
(2) To reflect six months' amortization of goodwill associated
with the A-One-A acquisition. The total amount of goodwill,
$3,534,242, has been amortized over 20 years using the
straight-line method. $ 88,356
--------
(3) To reflect six months of interest cost incurred for the
acquisition of A-One-A approximately $356,700 @ 11%. $ 19,619
--------
</TABLE>

P-4
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of

Terrace Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Terrace
Holdings, Inc. and its subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Terrace Holdings, Inc. and its subsidiaries as of December 31, 1997, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

Moore Stephens, P. C.

Certified Public Accountants

New York, New York

March 13, 1998

F-1
<PAGE>

TERRACE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 1997.

ASSETS
<TABLE>
<S> <C>
Current Assets:
Accounts
Receivable
(Less
Allowance for
Doubtful
Accounts of
$60,000)........$ 1,869,198
Inventories.... 280,458
Due from
Related Party. 122,752
Restricted
Cash.......... 137,701
Due on Sale of
Discontinued
Operations.... 90,000
Other Current
Assets........ 107,823
-----------
Total Current
Assets...... 2,607,932
Property and
Equipment--Net.. 665,282
Cost in Excess of
Net Assets of
Businesses
Acquired--Net of
Accumulated
Amortization of
$88,148......... 3,639,882
Other Assets..... 14,246
-----------
Total Assets. $ 6,927,342
===========
Current
Liabilities:
Cash Overdraft. $ 372,451
Accounts
Payable....... 892,742
Accrued
Expenses...... 653,890
Current Portion
of Long-Term
Debt.......... 162,370
Line of Credit. 1,354,084
Provision for
Phase-Out
Costs......... 20,000
Other Current
Liabilities... 50,000
-----------
Total Current
Liabilities. 3,505,537
-----------
Long-Term Debt... 81,380
-----------
Total
Liabilities. 3,586,917
-----------
Commitments and
Contingencies... --
-----------
Stockholders'
Equity:
Convertible
Preferred
Stock, $.001
Par Value,
10,000,000
Shares Autho-
rized,
1,400,000
Shares Issued
and Outstand-
ing........... 1,400
Common Stock--
$.001 Par
Value,
25,000,000
Shares
Authorized,
5,006,400
Issued and
Outstanding... 5,006
Additional
Paid-in
Capital....... 9,175,467
Accumulated
Deficit....... (5,841,448)
-----------
Total
Stockholders'
Equity...... 3,340,425
-----------
Total
Liabilities
and
Stockholders'
Equity...... $ 6,927,342
===========
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY

See Notes to Consolidated Financial Statements.

F-2
<PAGE>

TERRACE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net Sales............................................ $ 8,929,464 $ --
Cost of Sales........................................ 6,853,507 --
----------- -----------
Gross Profit....................................... 2,075,957 --
----------- -----------
Operating Expenses:
Selling, General and Administrative Expenses....... 3,470,480 348,439
Loss on Disposal................................... -- 129,826
Provision for Doubtful Accounts.................... 60,000 --
----------- -----------
Total Operating Expenses......................... 3,530,480 478,265
----------- -----------
(Loss) from Operations............................. (1,454,523) (478,265)
----------- -----------
Other (Expense) Income:
Interest Expense................................... (79,594) --
Interest Income.................................... 22,601 19,338
----------- -----------
Total Other (Expense)............................ (56,993) 19,338
----------- -----------
(Loss) From Continuing Operations.................. (1,511,516) (458,927)
Discontinued Operations:
(Loss) from Operations of Discontinued Business
Segments (Net of Income Taxes of $-0-)............ (813,795) (697,100)
(Loss) on Disposal of Business Segments, including
Provision of $20,000 for Operating Loss during the
Phase Out Period (Net of Income Taxes of $-0-).... (1,974,742) --
----------- -----------
Net (Loss)....................................... $(4,300,053) $(1,156,027)
=========== ===========
(Loss) Per Share of Common Stock:
(Loss) from Continuing Operations.................. $ (.34) $ (.14)
(Loss) from Operations of Discontinued Business
Segments (Net of Income Tax of $-0-).............. (.18) (.21)
(Loss) on Disposal of Discontinued Business
Segments.......................................... (.44) --
----------- -----------
Basic and Diluted Net (Loss) Per Share of Common
Stock............................................... $ (.96) $ (.35)
=========== ===========
Weighted Average Shares of Common Stock Outstanding.. 4,454,034 3,312,500
=========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE>

TERRACE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.

<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
---------------- ---------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ --------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--January 1,
1996................... -- $ -- 3,312,500 $3,313 $3,945,948 $ (385,368) $ 3,563,893
Net (Loss).............. -- -- -- -- -- (1,156,027) (1,156,027)
--------- ------ --------- ------ ---------- ----------- -----------
Balance--December 31,
1996................... -- -- 3,312,500 3,313 3,945,948 (1,541,395) 2,407,866
Asset Acquisitions...... -- -- 1,493,900 1,493 2,057,819 -- 2,059,312
Private Placement....... 1,400,000 1,400 -- -- 2,771,900 -- 2,773,300
Stock Issuances......... -- -- 200,000 200 219,800 -- 220,000
Stock Based
Compensation........... -- -- -- -- 180,000 -- 180,000
Net (Loss).............. -- -- -- -- -- (4,300,053) (4,300,053)
--------- ------ --------- ------ ---------- ----------- -----------
Balance--December 31,
1997................... 1,400,000 $1,400 5,006,400 $5,006 $9,175,467 $(5,841,448) $ 3,340,425
========= ====== ========= ====== ========== =========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE>

TERRACE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.

<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Operating Activities:
Net (Loss) from Continuing Operations................ $(1,511,516) $(458,927)
----------- ---------
Adjustments to Reconcile Net (Loss) to Net Cash (Used
for) Provided by Operating Activities:
Depreciation and Amortization...................... 157,613 --
Stock Based Compensation........................... 180,000 --
Provision for Doubtful Accounts.................... 60,000 --
Changes in Assets and Liabilities:
(Increase) Decrease in:............................
Accounts Receivable.............................. (541,699) --
Inventory........................................ (102,069) --
Other Current Assets............................. 17,638 --
Other Assets..................................... (1,728) --
Increase (Decrease) in:
Accounts Payable................................... 182,082 --
Accrued Expenses................................... 186,955 --
----------- ---------
Total Adjustments.............................. 138,792 --
----------- ---------
Net Cash--Continuing Operations--Forward....... (1,372,724) (458,927)
----------- ---------
Discontinued Operations:
(Loss) From Discontinued Business Segments........... (2,788,537) (697,100)
Adjustments to Reconcile (Loss) to Net Cash:
Depreciation and Amortization...................... 180,115 340,086
(Loss) on Disposal of Business Segments (Including
Provision of $20,000 for Operating Loss During
Phase Out Period)................................. 1,974,742 --
Changes in Net Assets, Liabilities................. (1,787,219) (165,304)
----------- ---------
Net Cash--Discontinued Operations--Forward..... (2,420,899) (522,318)
----------- ---------
Investing Activities--Continuing Operations:
Acquisition of Assets................................ (201,744) (179,308)
Purchase of Business--Net of Cash Acquired........... (3,616,993) --
----------- ---------
Net Cash--Investing Activities--Continuing
Operations--Forward........................... (3,818,737) (179,308)
----------- ---------
Investing Activities--Discontinued Operations:
Acquisition of Intangible Assets..................... -- (675,000)
Purchase and Disposal of DownEast Frozen Desserts,
LLC--Net of Cash Acquired........................... 288,900 --
Acquisition of Assets................................ (40,933) --
----------- ---------
Net Cash--Investing Activities--Discontinued
Operations--Forward........................... $ 247,967 $(675,000)
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE>

TERRACE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net Cash--Continuing Activities--Forwarded........... $(1,372,724) $ (458,927)
----------- -----------
Net Cash--Discontinued Operations--Forwarded......... (2,420,899) (522,318)
----------- -----------
Net Cash--Investing Activities--Continuing
Operations--Forwarded............................... (3,818,737) (179,308)
----------- -----------
Net Cash--Investing Activities--Discontinued
Operations--Forwarded............................... 247,967 (675,000)
----------- -----------
Financing Activities--Continuing Operations:
Proceeds from Notes Payable........................ 100,000 --
Payment of Notes Payable........................... (64,467) (10,000)
Payments of Demand Notes Payable--Stockholders and
Related Parties................................... -- (185,549)
Proceeds from Line of Credit....................... 1,354,085 --
Restricted Cash.................................... (137,701) --
Bank Overdrafts.................................... 372,448 --
Proceeds from Issuance of Convertible Preferred
Stock............................................. 2,773,300 --
Proceeds from Issuance of Common Stock............. 220,000 --
----------- -----------
Net Cash--Financing Activities--Continuing
Operations.................................. 4,617,665 (195,549)
----------- -----------
Financing Activities--Discontinued Operations:
Proceeds of Demand Notes Payable................... 1,175,821 --
----------- -----------
Net (Decrease) in Cash and Cash Equivalents.. (1,570,907) (2,031,102)
Cash and Cash Equivalents--Beginning of Years........ 1,570,907 3,602,009
----------- -----------
Cash and Cash Equivalents--End of Years.............. $ -- $ 1,570,907
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest......................................... $ 51,093 $ 9,020
Income Taxes..................................... $ -- $ --
</TABLE>

Supplemental Disclosures of Non-Cash Financing Activities:

During the quarter ending March 31, 1997, the Company issued 993,900 shares
of common stock valued at approximately $853,000 in connection with the
acquisition of DownEast Frozen Desserts, LLC.

During the third quarter, the Company issued 500,000 shares of its common
stock valued at $1,000,000 in connection with the acquisition of A-One-A
Wholesale Produce, Inc.

See Notes to Consolidated Financial Statements.

F-6
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Terrace Holdings, Inc. ("Terrace" or the "Company"), was incorporated under
the laws of the State of Delaware on June 15, 1995, to change the state of
incorporation of Bon Adventure Kosher Tours, Inc., a Florida corporation,
formerly known as Embassy Kosher Tours of South Florida, Inc. During 1997, the
Board of Directors determined to dispose of the net assets of the Company's
frozen dessert and hospitality business segments (See Note 3). The Company's
continuing operations focus on the food services and distribution business
through its wholly-owned subsidiary, A-One-A Produce & Provisions, Inc. ("A-
One-A"). A-One-A is a Pompano Beach, Florida based produce distributor that
sells and distributes fresh fruit and vegetables and dry grocery products to
hotels, restaurants and other businesses in southern Florida.

Consolidation Policy--The consolidated financial statements include the
accounts of Terrace and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

The consolidated financial statements as of and for the year ended December
31, 1997, include the accounts of Terrace and its wholly-owned subsidiaries,
A&E Management Corp. ("A&E"), The Lasko Family Kosher Tours, Inc. ("LFKT"),
The Lasko Companies ("Lasko") (together, the "Hospitality Group"), and A-One-
A. A-One-A's fiscal year ends on the Saturday nearest to December 31. LFKT was
incorporated on February 14, 1997 for the purpose of managing and operating
the Passover holiday vacation business, which was subsequently disposed of in
December 1997 (See Note 3B). On February 10, 1997, Deering Ice Cream, Inc.
("Deering") was incorporated to acquire certain assets and related liabilities
from DownEast Frozen Desserts, LLC ("DownEast"), to manufacture and market
frozen desserts. This subsidiary was disposed of in December 1997 (See Note
3A).

The consolidated financial statements for the year ended December 31, 1996,
include the accounts of Terrace, A&E, Lasko and Prime Concern Kosher Foods,
Inc. ["Prime"]. In July 1996, the Company disposed of all of the operating
assets of Prime which operated a kosher delicatessen/fast food operation in
Boca Raton, Florida incurring a loss of $129,826.

Cash and Cash Equivalents--The Company considers certain highly liquid
investments, with a maturity of three months or less when purchased to be cash
equivalents. The Company did not have any cash equivalents at December 31,
1997.

Inventories--Inventories are recorded at the lower of cost or market. Cost
is determined on the first-in, first-out ("FIFO") basis. Inventories consist
of fresh fruit, vegetables and dry goods.

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

<TABLE>
<S> <C>
Transportation Equipment....................................... 7-10 Years
Equipment, Furniture and Fixtures.............................. 5- 7 Years
Leasehold Improvements......................................... 5-10 Years
</TABLE>

Cost in Excess of Net Assets of Businesses Acquired--The cost in excess of
net assets of businesses acquired is being amortized on a straight-line basis
over 20 years. Amortization expense amounted to $88,148 for the year ended
December 31, 1997.

F-7
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Impairment--The Company's policy is to record an impairment loss against the
balance of a long-lived asset in the period when it is determined that the
carrying amount of the asset may not be recoverable. This determination is
based on an evaluation of such factors as the occurrence of a significant
event, a significant change in the environment in which the business assets
operate or if the expected future non-discounted cash flows of the business
was determined to be less than the carrying value of the assets. If impairment
is deemed to exist, the assets will be written down to fair value. Management
also evaluates events and circumstances to determine whether revised estimates
of useful lives is warranted. As of December 31, 1997, management expects its
long-lived assets to be fully recoverable.

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

Concentration of Credit Risk--Financial instruments that potentially subject
the Company to concentration of credit risk include cash and cash equivalents
and accounts receivable arising from its normal business activities. The
Company places its cash and cash equivalents with high credit quality
financial institutions. The Company had approximately $452,000 at December 31,
1997 in a financial institution subject to normal credit risk beyond insured
amounts. The Company does not require collateral on its financial instruments.

The Company extends credit to its customers, which results in accounts
receivable arising from its normal business activities. The Company routinely
assesses the financial strength of its customers and, based upon factors
surrounding the credit risk of its customers, believes that its receivable
credit risk exposure is limited. The Company's estimate of the financial
strength of its customers may be subject to change in the near term.

Other Concentrations--In December 1997, A-One A became a full-time member of
a cooperative of independent distribution specialists (the "Cooperative")
which enables the Company to enter group negotiations which results in better
pricing on purchases. Although the Company purchased approximately 37% through
the Cooperative, management believes that there is no business vulnerability
regarding this concentration of purchases from the Cooperative as the produce
purchased is available from other sources.

Business Risk--The Company is subject to the Perishable Agricultural
Commodities Act ("PACA") which regulates certain entities engaged in the
business of shipping or receiving perishable agricultural commodities in
interstate commerce. Currently, the Company maintains a PACA license to
distribute fresh produce, fruits and vegetables. The ability of the Company to
continue distribution and sales of its fresh produce, fruits and vegetables is
dependent upon its continued compliance with the PACA statute. Loss of its
PACA license would have a materially adverse effect on the Company.

Advertising--Advertising costs, which were not material at December 31, 1997
and 1996, are expensed as incurred.

Earnings Per Share--The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which is effective for financial statements issued for periods ending
after December 15, 1997. Accordingly, earnings per share data in the financial
statements for the year ended December 31, 1997, have been calculated in
accordance with SFAS No. 128. Prior period earnings per share data have been
recalculated as necessary to conform prior year data to SFAS No. 128.

F-8
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15,
"Earnings per Share," and replaces its primary earnings per share with a new
basic earnings per share representing the amount of earnings for the period
available to each share of common stock outstanding during the reporting
period. SFAS No. 128 also requires a dual presentation of basic and diluted
earnings per share on the face of the statement of operations for all
companies with complex capital structures. Diluted earnings per share reflects
the amount of earnings for the period available to each share of common stock
outstanding during the reporting period, while giving effect to all dilutive
potential common shares that were outstanding during the period, such as
common shares that could result from the potential exercise or conversion of
securities into common stock.

The computation of diluted earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on earnings per share (i.e., increasing earnings per share or reducing
loss per share). The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options
and warrants will have a dilutive effect only when the average market price of
the common stock during the period exceeds the exercise price of the options
or warrants. Securities that could potentially dilute earnings per share in
the future are disclosed in Notes 13 and 14.

(2) BUSINESS ACQUISITIONS

In August 1997, but effective as of July 1, 1997, the Company acquired all
of the assets and related liabilities of A-One-A in a transaction accounted
for as a purchase. The operations of A-One-A have been included in the
Company's results of operations from that date.

In consideration for the acquisition, the Company issued 500,000
unregistered shares of its common stock valued at $1,000,000, and paid
$3,130,000 in cash. Additionally, an adjustment to the purchase price of
approximately $148,000 was made subsequent to the acquisition date and has
been accrued at December 31, 1997.

In connection with the acquisition, the Company entered into 5 year
employment agreements with two officers, effective July 1, 1997, and ending
July 30, 2002. The employment agreements, call for aggregate annual
compensation of $240,000.

Also in connection with the A-One-A acquisition, the Company entered into an
agreement to lease space for use as its principal offices and warehouse. The
lease term is for ten years with three five year options to extend expiring
June 30, 2007, at an annual rental of approximately $222,000 including sales
tax. The Pompano Beach facility is owned by an affiliate of A-One-A officers.
Under the lease, the Company has an option to purchase the land and building
at a purchase price of $2,000,000 until December, 1998 (See Note 12A).

During 1997, the Company acquired all of the assets and related liabilities
of Dry Dock Distributors, Inc. d/b/a Bay Purveyors, ("Bay Purveyors") a Miami,
Florida based dry goods distributor which sells and distributes dry goods and
dairy goods to various restaurants and other business in Southern Florida. The
acquisition was deemed immaterial by management of the Company. Bay Purveyors
has operated as a division of A-One-A since its October 1, 1997 effective
purchase date. In connection with the Bay Purveyors acquisition, the Company
entered into an employment agreement with an uppper level manager.

F-9
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

In consideration for the acquisition, the Company paid the shareholders of
Dry Dock Distributors, Inc. $340,000. The acquisition has been accounted for
as a purchase.

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

<TABLE>
<S> <C>
Current Assets:
Cash........................................................ $ 20,445
Accounts Receivables........................................ 1,383,703
Inventories................................................. 178,389
Other....................................................... 123,082
----------
Total..................................................... 1,705,619
----------
Property, Plant and Equipment................................. 545,475
Cost in Excess of Net Assets Acquired (Including Acquisition
Costs of $239,725)........................................... 3,728,030
Other Assets.................................................. 4,366
----------
Total..................................................... 5,983,490
----------
Current Liabilities:
Accounts Payable and Accrued Expenses....................... 914,206
Other....................................................... 221,960
----------
Total..................................................... 1,136,166
----------
Aggregate Consideration Paid.................................. $4,847,323
==========
</TABLE>

The cost in excess of net assets acquired recorded for the acquisitions is
to be amortized over 20 years using the straight-line method.

The following pro forma information presents the results of the combined
operations of Terrace and A-One-A, treating the latter as if it was a
subsidiary of the Terrace for the full period then ended. This pro forma
information does not purport to be indicative of what would have occurred had
the acquisitions been completed as of January 1, 1996 or results which may
occur in the future.

Pro forma unaudited information:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Total Revenues................................. $17,117,271 $14,497,109
Net (Loss) Income.............................. $(1,090,825) $ (179,669)
Basic and Diluted Net (Loss) Income Per Share
of Common Stock............................... $ (.24) $ (.05)
</TABLE>

(3) DISCONTINUED OPERATIONS

(A) Frozen Desert Business Segment--On February 17, 1997, the Company
acquired certain of the assets and related liabilities of DownEast, which
manufactured and marketed frozen desserts under the name Deering Ice Cream.
The assets acquired included accounts receivable, inventories, and certain
furniture and equipment. The stated liabilities assumed were principally trade
payables and certain long-term debt.

F-10
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

In consideration for the acquisition, the Company issued: (1) 993,900 shares
of its common stock, including 75,000 shares of common stock issued for
investment banking and finders fees, valued at approximately $853,000 and (2)
warrants to purchase 250,000 additional shares of the Company's common stock
at an exercise price of $1.1875 per share, (exercisable commencing February
17, 1997, through August 31, 2000), and paid approximately $114,000 in cash.
The acquisition was accounted for as a purchase, effective January 1, 1997.

The total cost of the consideration tendered and the liabilities assumed in
excess of the assets purchased, including acquisition costs, was approximately
$1,800,000.

In November 1997, the Company adopted a formal plan to sell Deering. The
disposal occurred in December 1997. The net proceeds on disposal was
approximately $373,000. The loss on disposal was approximately $1,233,000
(including estimated disposal costs of $50,000).

Operating results of Deering, including net sales of approximately
$6,360,000 are included in discontinued operations, in the statement of
operations for the year ended December 31, 1997.

Assets and liabilities disposed of consisted of the following at the
disposal date:

<TABLE>
<S> <C>
Cash.......................................................... $ 43,784
Accounts Receivable........................................... 573,808
Inventories................................................... 581,648
Property, Plant and Equipment--Net............................ 1,667,520
Intangible Assets--Net........................................ 922,790
Other......................................................... 486,281
----------
Total Assets.............................................. 4,275,831
----------
Accounts Payable and Accrued Expenses......................... 1,543,930
Notes Payable and Lines of Credit............................. 1,175,821
----------
Total Liabilities............................................. 2,719,751
----------
Net Assets Disposed of.................................... $1,556,080
==========
</TABLE>

(B) Hospitality Business Segment--In November 1997, the Company adopted a
formal plan to sell the Hospitality Group to Samuel H. Lasko ("Dr. Lasko")
(See Note 11) and to an unrelated party (See Notes 16 and 17). The disposal is
expected to be completed within one year. The assets of the Hospitality Group
to be sold consist primarily of accounts receivable, inventories, property and
equipment and intangible assets.

The estimated loss on the disposal of the Hospitality Group of approximately
$742,000, includes a provision of $20,00 for expected losses during the phase-
out period. The Company is to receive $90,000 from the unrelated party. Dr.
Lasko relinquished his employment contract and certain warrants (See Note 11).

Operating results, including net sales of approximately $4,853,000 and
$4,557,000, respectively, of the Hospitality Group for the years ended
December 31, 1997 and 1996 are included in discontinued operations, in the
statements of operations. The statement of operations for 1996 has been
restated. For the two years ended December 31, 1997, the Hospitality Group
operated kosher Passover holiday vacation venues, kosher and non-kosher
restaurants and a catering operation in southern Florida and New York. The
Passover holiday usually occurs in the second quarter of the calendar year.
The Company managed and operated three Passover holiday vacation venues in
1997 and four in 1996.

F-11
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Assets and liabilities of the Hospitality Group to be disposed of consisted
of the following at December 31, 1997:

<TABLE>
<S> <C>
Accounts Receivable............................................ $ 164,929
Intangible Assets--Net......................................... 335,000
Other Current Assets........................................... 105,540
Property and Equipment--Net.................................... 469,277
---------
Total Assets............................................... 1,074,746
---------
Accounts Payable and Accrued Expenses.......................... 149,512
Deferred Revenue............................................... 113,750
---------
Total Liabilities.......................................... 263,262
---------
Net Assets to Be Disposed of................................... $ 811,484
=========
</TABLE>

Assets are shown at their expected net realizable values and payables and
deferred revenue are shown at their face amounts.

There is no income tax benefit on the loss from operations of discontinued
business segments or on the loss on disposal of discontinued business
segments.

(4) GOING CONCERN CONSIDERATIONS

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has suffered recurring
losses from operations and has a working capital deficiency of approximately
$900,000 at December 31, 1997. These factors had raised substantial doubt
about the ability of the Company to continue as a going concern. Such
substantial doubt has been alleviated primarily due to management's plans for
dealing with the possible adverse effects of these factors.

The Company has a pending registration statement covering a proposed offer
to its warrantholders to exercise their warrants and purchase common stock at
a temporarily reduced exercise price. Several warrantholders have indicated
they intend to exercise their warrants, once the registration statement is
declared effective. In addition, if so requested by the Company, a private
investor has indicated his intent to purchase equity capital in the Company if
sufficient proceeds are not realized by the Company from such warrant
exercises.

F-12
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

(5) RESTRICTED CASH

In connection with a financing agreement (See Note 8) the Company entered
into a trust indenture with a bank, pursuant to which, the bank debits monthly
principal and interest loan payments.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments," which requires disclosing fair value, to the extent practicable,
for financial instruments which are recognized or unrecognized in the balance
sheet. The fair value of the financial instruments disclosed herein is not
necessarily representative of the amount that could be realized or settled,
nor does the fair value amount consider the tax consequences of realization or
settlement.

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

(7) PROPERTY AND EQUIPMENT

The following is a summary of property and equipment:

<TABLE>
<S> <C>
Transportation Equipment........................................ $608,820
Office Equipment, Furniture and Fixtures........................ 113,696
Leasehold Improvements.......................................... 12,231
--------
Total....................................................... 734,747
Less: Accumulated Depreciation.................................. 69,465
--------
Property and Equipment--Net..................................... $665,282
========
</TABLE>

Depreciation expense related to property and equipment amounted to $69,465
for the year ended December 31, 1997.

(8) LINE OF CREDIT

During 1997, the Company had a working capital line of credit with Suntrust
Bank, South Florida, N.A. amounting to $300,000, at a variable interest rate
at .75% over the bank's prime-based rate. The working capital revolver was
secured by a blanket lien on all Company assets, excluding amounts due from
affiliates. The principal was paid in full on March 31, 1997, and the account
was closed.

In August 1997, the Company guaranteed payment on a Loan and Security
Agreement between Foothill Capital Corporation of Mechanicsville, Virginia
("Foothill") and the Company's then wholly-owned subsidiaries, Deering and A-
One-A under which Foothill agreed to provide revolving loans subject to
available collateral to a maximum of $3,200,000. The principal balance of
approximately $1,360,000 at December 31, 1997 represents substantially all
credit available under the facility at that date. The balance incurs interest
at 2.5% above the bank's prime rate. The prime rate at December 31, 1997, was
8.5%. The loan is collateralized by virtually all assets of the Company.

F-13
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

(9) LONG-TERM DEBT

At December 31, 1997, long-term debt consisted of the following:

<TABLE>
<S> <C>
Note payable in thirty-six monthly total installments of
$6,583, including interest at 9.1% per annum, through June
1999, collateralized by certain transportation equipment...... $110,370
Note payable in thirty-six monthly total installments of
$1,154, including interest at 9.8% per annum, through December
1999, collateralized by certain transportation equipment...... 25,071
Note payable in thirty-six monthly total installments of
$1,150, including interest at 9.8% per annum, through December
1999, collateralized by certain transportation equipment...... 24,976
Note payable--bank in eighteen monthly total installments of
$5,556, plus interest of 2.5% above a variable interest rate
(prime rate), per annum, through February 1999, collateralized
by certain transportation equipment........................... 83,333
--------
Total...................................................... 243,750
Less: Current Portion.......................................... 162,370
--------
Total...................................................... $ 81,380
========
</TABLE>

Long-term debt at December 31, 1997, matures as follows:

<TABLE>
<S> <C>
1998............................ $162,370
1999............................ 81,380
2000............................ --
2001............................ --
2002............................ --
Thereafter...................... --
--------
Total....................... $243,750
========
</TABLE>

The Company is subject to restrictive covenants including restrictions on
the use of proceeds, and collateral, and assurance of the maintenance of
marketable title to collateral. Management believes the Company was in
compliance with all debt covenants at December 31, 1997.

The weighted average interest rate on short-term borrowings as of December
31, 1997, was 11%.

(10) INCOME TAXES

Under generally accepted accounting principles, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which temporary differences are expected to
be recovered or settled. Temporary differences include different tax and book
bases of property and equipment and intangible assets. Generally accepted
accounting principles requires the establishment of a deferred tax asset for
all deductible temporary differences and operating loss carryforwards. The
operating loss carryforwards at December 31, 1997, (assuming all operating
loss carryforwards will be available) amount to

F-14
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

approximately $5,550,000. Such loss carryforwards will expire at the rate of
$4,000,000 in 2012, $1,200,000 in 2011 and $350,000 in 2010. At December 31,
1997, based on the amount of operating loss carryforwards, the Company would
have had a deferred tax asset of approximately $1,900,000. However, because of
the uncertainty that the Company will generate income in the future sufficient
to fully or partially utilize these carryforwards, a valuation allowance of
$1,900,000 has been established representing an increase of $1,374,000 from
December 31, 1996. Accordingly, no deferred tax asset is reflected in these
financial statements.

(11) RELATED PARTIES TRANSACTIONS

During 1996, the Hospitality Group paid off an outstanding loan due to a
stockholder, which was payable on demand plus interest. The interest rate on
the loan was 8.5%. Interest expense related to this loan amounted to $7,667
for the period ended December 31, 1996.

A-One-A had sales to a related entity whose shareholders include
shareholders of the Company. Sales to the related entity totaled $203,327 for
the period July 1 (effective purchase date) to December 27, 1997.

A-One-A also purchased goods from the same related party totaling $357,425
for the period July 1 (effective purchase date) to December 27, 1997. The
Company had net receivables of $122,752 (net of a payable of $56,964) due from
the related party at December 27, 1997, which will be collected and paid
within one year, during the normal course of business. The Company purchased
the related entity in February 1998 (See Note 16).

In February 1997, the Company entered into an option agreement with Dr.
Lasko, the President, Treasurer, and a Director of the Company and his son,
Jonathan S. Lasko, the Executive Vice-President, Secretary, Chief Operating
Officer and a Director of the Company, which gave the Laskos, individually or
together, the option to purchase the businesses, assets or capital stock of
the Hospitality Group at the fair market value thereof. The option is
exercisable for approximately three years commencing April 1, 1998 until
February 17, 2001, or earlier under certain circumstances, exercise of the
option, is subject to shareholders' approval. The Company and Dr. Lasko agreed
to accelerate the exercise of his option, and in March 1998, he purchased
(subject to shareholder approval) LFKT and A&E in exchange for the
relinquishment of his employment contract and certain warrants. Dr. Lasko did
not purchase The Lasko Companies, Inc. however, but has agreed to manage it
for the Company (See Notes 16 and 17).

(12) COMMITMENTS AND CONTINGENCIES

(A) Operating Leases--The Company's operating facilities are leased from an
affiliate of A-One-A's officers. Future minimum rentals payments under
operating leases with terms in excess of one year are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
<S> <C>
1998.......................... $ 240,852
1999.......................... 228,492
2000.......................... 221,544
2001.......................... 221,544
2002.......................... 221,544
Thereafter.................... 996,948
----------
Total..................... $2,130,924
==========
</TABLE>

F-15
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Rent expense related to the leases for the years ended December 31, 1997 and
1996 was $142,630 and $15,900, respectively.

(B) Employment Agreements--In addition to the A-One-A employment agreements
(See Note 2), the Company has an employment agreement with Jonathan S. Lasko,
through August 31, 2000, for a base salary of $125,000 per year. The
employment agreement was amended in February 1997. The amendment eliminated
certain options in the agreement in consideration of the issuance of warrants
to purchase 375,000 shares of the Company's common stock. Additionally, the
agreement was amended to provide that certain other benefits be made available
to the executive.

In connection with the Bay Purveyors acquisition (See Note 2), A-One-A
entered into a 5-year employment agreement effective September 1, 1997 with an
upper level manager for a base salary of $65,000 per year.

(C) Standby Letter of Credit--The Company has available a standby letter of
credit in the amount of $100,000, which is being maintained as security for
payments related to purchases of inventory. The letter of credit expires May
1, 1998 and is collateralized by a blanket lien on the Company's assets. At
December 31, 1997, there was no balance outstanding pursuant to the letter of
credit.

(13) DESCRIPTION OF SECURITIES

(A) Convertible Preferred Stock--The Company is authorized to issue
10,000,000 shares of convertible preferred stock (the "Convertible Preferred
Stock"), par value $.001 per share. Pursuant to an offering memorandum dated
July 7, 1997, the Company offered 1,750,000 units of its securities at $2 per
unit (the "Preferred Units"). Each Preferred Unit consisted of one share of
Convertible Preferred Stock and two warrants, each to purchase one share of
Company common stock at an exercise price of $4 per share. As of December 31,
1997, 1,400,000 Preferred Units were issued for aggregate consideration of
$2,773,300 net of offering costs. Each share of Convertible Preferred Stock is
non-voting, unless converted into common stock of the Company. The Convertible
Preferred Stock is entitled to preference in the declaration of dividends if
and when any dividends are declared or paid. The Convertible Preferred Stock
is entitled to preference over the common stock in the event of dissolution,
liquidation or winding-up the Company. Each share of Convertible Preferred
Stock is convertible into two shares of common stock of the Company at the
option of the holder. All shares of the Convertible Preferred Stock not
converted on or prior to July 31, 1998 will be automatically converted, based
on that ratio, into shares of common stock of the Company on that date. The
Company issued 156,325 Preferred Units to Biltmore Securities, Inc., and
15,000 Preferred Units to Westport Capital Markets, LLC, as placement fees in
connection with the offering. Additionally, the Company issued to Biltmore and
its assignees, warrants to purchase 750,000 shares of Company common stock at
a price of $4.00 per share, exercisable through and including December 4,
2000.

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

Holders of common stock are entitled to dividends when, as and if declared
by the Board of Directors, subject to any priority as to dividends for any
preferred stock that may be outstanding. Holders of common stock are entitled
to cast one vote for each share held at all stockholder meetings for all
purposes, including the election of Directors.

In November 1997, the Company sold 200,000 shares of unregistered common
stock to an unrelated party for $1.10 per share. The issuance of these shares
resulted in a charge to operations of $180,000.

F-16
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

(C) Options and Warrants--In December 1995, the Company completed a public
offering (the "Offering") of 1,437,500 units ("Units") of its securities at
$3.75 per Unit.

Each Unit consisted of one share of common stock and one redeemable common
stock purchase warrant exercisable at $4.00 per share during the four year
period commencing one year after the December 5, 1995 effective date of the
Offering. The warrants ("Public Warrants") are redeemable under certain
conditions. The Offering resulted in net proceeds of approximately $4,347,000
to the Company. In connection with the Offering, the underwriter purchased an
option from the Company to purchase up to 125,000 Units (each Unit identical
to the Units sold in the Offering) and up to 16,500 shares of common stock.
The option is exercisable for a four-year period, which commenced December 5,
1996, and entitles the underwriter to purchase each unit and each share of
common stock at an exercise price of $4.50, subject to adjustment under
certain circumstances.

During 1995, prior to the Offering, the Company received an aggregate of
$400,000 in bridge loans. The loans were repaid from the proceeds of the
Offering. As additional consideration, solely for making the loans, the
Company granted the lenders the right to receive an aggregate of 200,000 units
("Bridge Units") which were substantially similar to the units sold in the
Offering.

Additionally, at December 31, 1997, the Company also had warrants
outstanding (the "Bridge Warrants") to purchase 200,000 shares of its common
stock at ten dollars ($10.00) per share. The terms and conditions of the
Bridge Warrants (other than the exercise price) are identical to the terms and
conditions of the Public Warrants.

On February 17, 1997, in connection with the Deering acquisition, the
Company issued; (i) warrants to purchase 250,000 shares of its common stock to
Biltmore Securities, Inc. as its investment banking fee; and (ii) warrants to
purchase 50,000 shares of its Common Stock to Bruce S. Phillips, a director of
the Company, in recognition of his efforts successfully to negotiate and
consummate this transaction. These warrants have an exercise price of $1.1875
exercisable commencing February 17, 1997, the closing date of the transaction,
and expiring on August 31, 2000.

(D) Reduction in Warrant Price--During a 60-day period ("Temporary Exercise
Period") commencing with the effective date of a pending registration
statement, the Company will temporarily reduce the exercise price of certain
warrants with an exercise price of $4.00 per share to $1.25 to attempt to
secure additional cash liquidity for immediate working capital and to increase
the Company's equity capital base. After the expiration of the Temporary
Exercise Period, the exercise price of the warrants will return to the
original $4.00 per share for the balance of the term of the warrants.

(14) STOCK OPTION PLAN AND WARRANTS

The Company adopted the 1997 Stock Option Plan (the "Plan") which enables
its Board of Directors to grant options for the purchase of shares of its
common stock. The Plan authorizes the grant of options to purchase up to an
aggregate of 1,250,000 shares of the Company's Common Stock, to (i) officers
and other full-time salaried employees of the Company and its subsidiaries
with managerial, professional or supervisory responsibilities, and (ii)
consultants and advisors who render bona fide services to the Company and its
subsidiaries, in each case, where the compensation committee of the Board of
Directors determines that such officer, employee, consultant or advisor has
the capacity to make a substantial contribution to the success of the Company.
The purposes of the Plan are to enable the Company to attract and retain
persons of ability as officers and other key employees with managerial,
professional or supervisory responsibilities, to retain able consultants and
advisors, and to motivate such persons to use their best efforts on behalf of
the Company by providing them with an equity participation in the Company.

F-17
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Pursuant to the Plan, in February 1997, the Board of Directors granted
certain officers, directors and significant employees 630,000 options to
purchase Company common stock at an exercise price of $1.185 per share. The
options of which the majority vest over a 3 year period, one-third per year
and expire on February 20, 2007.

In July and September 1997, the Board of Directors granted certain employees
108,000 options to purchase Company common stock at an exercise price of $2.31
per share. The options vest over a 3 year period , one-third per year and
expire on June 30, and September 21, 2007.

As per the amended employment agreements with an executive, he received
warrants to purchase 375,000 shares of Company common stock at $1.1875 per
share which warrants are immediately exercisable at any time through August
31, 2000.

The Company also issued two directors warrants to purchase 40,000 shares of
the Company common stock at $1.1875 per share which are exercisable at any
time through August 31, 2000.

During 1997, the Company issued 300,000 stock options to consultants at an
exercise price of $1.1875 at the date of grant, and having a weighted average
exercise price of $1.1875. The total cost of issuing these stock options to
consultants during 1997 is approximately $207,000 which is being charged to
operations for the year ended December 31, 1997. The weighted average fair
value of stock options granted to consultants during 1997 is estimated at $.69
using the Black-Scholes option-pricing model and using a weighted average
risk-free interest rate of 6% and a weighted average expected life of 3.8
years with an estimated volatility of 75%. No dividends are expected to be
paid during the expected life of the options.

A summary of the options and warrants is as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995............... -- $ --
Granted...................................... -- --
Exercised.................................... -- --
Expired/Canceled............................. -- --
--------- -----
Outstanding at December 31, 1996............... -- --
Granted...................................... 1,453,000 1.27
Exercised.................................... -- --
Expired/Canceled............................. -- --
--------- -----
Outstanding at December 31, 1997............... 1,453,000 $1.27
========= =====
Exercisable at December 31, 1997............... 717,667 $1.24
========= =====
</TABLE>

If compensation cost (totaling approximately $890,000), for options issued
under the Plan had been determined based on the fair value at the grant dates
for awards under Plan, consistent with the alternative method set forth under
SFAS No. 123, the Company's net loss and basic and diluted net loss per share
of common stock would have been reduced on a pro forma basis as indicated
below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net Loss:
As Reported................................. $(4,300,053) $(1,156,027)
Pro Forma................................... $(5,190,053) $(1,156,027)
Basic and Diluted Net Loss Per Share of Common
Stock:
As Reported................................. $ (.96) $ (.35)
Pro Forma................................... $ (1.17) $ (.35)
</TABLE>

F-18
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the grants awarded in 1997 and 1996, respectively:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
--------- ----
<S> <C> <C>
Dividend Yields.......................................... 0% -- %
Expected Volatility...................................... 76% -- %
Risk-Free Interest Rate.................................. 6.0% -- %
Expected Lives........................................... 4.0 Years --
</TABLE>

The weighted-average fair value of options granted was $.76 and $-0- for the
years ended December 31, 1997 and 1996, respectively.

The following table summarizes information about stock options and warrants
at December 31, 1997:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
------------------------ --------- ---------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$1.185-$1.1875.......... 1,345,000 9.2 Years $1.186 681,667 $1.186
$2.31................... 108,000 9.5 Years $ 2.31 36,000 $ 2.31
--------- --------- ------ ------- ------
Totals.............. 1,453,000 9.3 Years $ 1.27 717,667 $ 1.40
========= ========= ====== ======= ======
</TABLE>

(15) NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No.
130 establishes standards for reporting and display of comprehensive income
and its components in the financial statements. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Earlier application is
permitted. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. Management is in the process of
determining its preferred format. The adoption of SFAS No. 130 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 changes how operating
segments are reported in annual financial statements and requires the
reporting of selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 131 is effective for
periods beginning after December 15, 1997, and comparative information for
earlier years is to be restated. SFAS No. 131 need not be applied to interim
financial statements in the initial year of its application. The Company is in
the process of evaluating the disclosure requirements. The adoption of SFAS
No. 131 will have no impact on the Company's consolidated results of
operations; financial position or cash flows.

In February 1998, the FASB issued SFAS No. 132, "Employers Disclosure about
Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997. The modified disclosure requirements
are not expected to have a material impact on the Company's results of
operations, financial position or cash flows.

F-19
<PAGE>

TERRACE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

(16) SUBSEQUENT EVENTS

In January 1998, the Company entered into an employment agreement with its
Chief Financial Officer. The compensation for services rendered under this
agreement is $90,000 per annum and includes an incentive bonus. The agreement
also includes options to purchase the Company's stock and a severance package.

In January 1998, the Company purchased certain non-cash assets of D.M.S.
Food Distributors, Inc., a Florida Corporation d/b/a Gourmet Distributors
("Gourmet"). Gourmet is a wholesaler of dry goods. In consideration for the
purchase, the Company paid approximately $254,000 including inventory and
furniture and fixtures, which resulted in costs in excess of net assets of
approximately $125,000 which will be allocated to intangible assets.

In February 1998, the Company purchased all of the outstanding stock of
Fresh, Inc., ("Fresh") a related entity (See Note 11). Fresh is a wholesaler
which sells packaged and cut fresh produce. In consideration for the purchase,
the Company paid $105,000 in cash and issued 138,948 shares of common stock
valued at $270,000. The acquisition resulted in costs in excess of net assets
of approximately $350,000 which will be allocated to intangible assets.

In March 1998, the Company entered into a management agreement with Samuel
H. Lasko (the "Manager"). The Manager is to operate and manage the business
and activities of The Lasko Companies, Inc. ("TLC") which operates a
restaurant business (the "Restaurant"). The agreement will terminate upon the
sale or other disposition of the Restaurant or the The Lasko Companies (See
Notes 3 and 17).

(17) SUBSEQUENT EVENTS--UNAUDITED (SUBSEQUENT TO THE DATE OF THE REPORT OF
INDEPENDENT AUDITORS)

On March 23, 1998, the Company entered into a contract to sell its wholly-
owned subsidiary, The Lasko Companies, Inc. The sale price $90,000 to be paid
as follows, with $25,000 paid at the execution of the agreement (currently
held in escrow by the seller's attorney) and $65,000 to be paid by cash or
certified check upon execution and delivery of Bill of Sale.

F-20
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 27. EXHIBITS.

<TABLE>
<C> <S>
4.1 Form of Specimen Preferred Stock Certificate
4.2 Form of Specimen Private Placement Warrant Certificate**
4.3 Certificate of Resolutions designating rights and preferences of
Preferred Stock
5.1 Opinion of Fishman, Merrick, Miller, Genelly, Springer, Klimek &
Anderson P.C., regarding the legality of the securities being
registered
10.5 Employment Agreement, dated as of July 1, 1997, between Terrace
Holdings, Inc. and Scott Davis*
10.6 Employment Agreement, dated as of July 1, 1997, between Terrace
Holdings, Inc. and Virgil Scarbrough*
10.7 Employment Agreement, dated as of July 17, 1997, between Terrace
Holdings, Inc. and Kenneth Cohen*
10.14 Investment Banking Agreement, dated July 1, 1997 between Terrace
Holdings, Inc. and Biltmore Securities, Inc.*
10.18 Asset Acquisition Agreement, dated July 6, 1997 between Terrace
Holdings, Inc. and A One A Wholesale Produce, Inc.*
10.19 Stock Purchase Agreement, dated February 2, 1998, between
Terrace Holdings, Inc. and Virgil Scarbrough and Scott Davis*
10.20 Sale of Assets Agreement, dated September 1, 1997, between
Terrace Holdings, Inc. and Bay Purveyors*
10.21 Guaranty dated August 7, 1997, by Terrace Holdings, Inc. in
favor of Foothill Capital Corporation*
10.22 Option Agreement, dates as of February 17, 1997, between Terrace
Holdings, Inc. and Samuel H. Lasko and Jonathan S. Lasko.
10.23 Agreement to Sell and Purchase, dated as of March 2, 1998,
between the Registrant and Samuel H. Lasko, relating to The
Lasko Family Kosher Tours, Inc. and A&E Management, Inc.*
10.24 Management Agreement dated as of March 2, 1998, relating to the
Terrace Oceanside Restaurant*
10.25 Terrace Holdings, Inc. 1997 Stock Option Plan*
10.26 Asset Purchase Agreement, dated December 31, 1997, between
D.M.S. Food Distributors, Inc. (Gourmet Distributors) and the
Registrant*
10.27 Form of Contract for Sale of Business between The Lasko Family
Companies, Inc. and Steven Newman, relating to the Terrace
Oceanside Restaurant*
23.1 Consent of Moore Stephens, P.C. (located on page II-3)
23.2 Consent of Fishman, Merrick, Miller, Genelly, Springer, Klimek &
Anderson P.C. (included in Exhibit 5.1)
</TABLE>
--------

* Heretofore filed as an exhibit to the Registrant's Form 10-KSB,
as amended, for the year ended December 31, 1997 and by this
reference incorporated as an exhibit hereto.

** Heretofore filed as an exhibit to the Registrant's Registration
Statement on Form SB-2 (Commission File No. 33-96892)

II-1
<PAGE>

SIGNATURES

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED THIS AMENDMENT
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOLLYWOOD, STATE OF FLORIDA, ON THE
29TH DAY OF APRIL, 1998.

Terrace Holdings, Inc.

/s/ Samuel H. Lasko
By: _________________________________
Samuel H. Lasko
President

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ Samuel H. Lasko President and Director April 29, 1998
____________________________________
Samuel H. Lasko

/s/ Jonathan S. Lasko* Executive Vice-President, April 29, 1998
____________________________________ Secretary, Chief Operating
Jonathan S. Lasko Officer, Principal
Financial Officer and
Director

/s/ Bruce S. Phillips Director April 28, 1998
____________________________________
Bruce S. Phillips

/s/ Steven Shulman* Director, Principal April 29, 1998
____________________________________ Executive Officer
Steven Shulman

/s/ Bernard Rubin, M.D. Director April 28, 1998
____________________________________
Bernard Rubin, M.D.

/s/ Richard Power* Director April 29, 1998
____________________________________
Richard Power*

/s/ Mario Jacobs Principal Accounting Officer April 28, 1998
____________________________________
Mario Jacobs

/s/ Fred A. Seigel Director April 29, 1998
____________________________________
Fred A. Seigel
<CAPTION>
</TABLE>

/s/ Samuel H. Lasko

*By: _____________________

Samuel H. Lasko, pursuant
to Power of Attorney
heretofore filed

II-2
<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form SB-2
(File No. 333-45195) of our report dated March 13, 1998, on our audits of the
financial statements of Terrace Holdings, Inc. We also consent to the
reference to our firm under the captions "Experts."

/s/ Moore Stephens, P.C.

By: ____________________________

MOORE STEPHENS, P.C.

Certified Public Accountants

New York, New York

April 28, 1998

II-3
<PAGE>

REGISTRATION NO. 333-45196
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

EXHIBITS

AMENDMENT NO. 1

FORM SB-2

REGISTRATION STATEMENT

TERRACE HOLDINGS, INC.

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

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

ON APRIL 29, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
------- -------- ----------
<C> <S> <C>
4.1 Form of Specimen Preferred Stock Certificate
4.2 Form of Specimen Private Placement Warrant Certificate**
4.3 Certificate of Resolutions designating rights and
preferences of Preferred Stock
5.1 Opinion of Fishman, Merrick, Miller, Genelly, Springer,
Klimek & Anderson P.C., regarding the legality of the
securities being registered
10.5 Employment Agreement, dated as of July 1, 1997, between
Terrace Holdings, Inc. and Scott Davis*
10.6 Employment Agreement, dated as of July 1, 1997, between
Terrace Holdings, Inc. and Virgil Scarbrough*
10.7 Employment Agreement, dated as of July 17, 1997, between
Terrace Holdings, Inc. and Kenneth Cohen*
10.14 Investment Banking Agreement, dated July 1, 1997 between
Terrace Holdings, Inc. and Biltmore Securities, Inc.*
10.18 Asset Acquisition Agreement, dated July 6, 1997 between
Terrace Holdings, Inc. and A One A Wholesale Produce,
Inc.*
10.19 Stock Purchase Agreement, dated February 2, 1998, between
Terrace Holdings, Inc. and Virgil Scarbrough and Scott
Davis*
10.20 Sale of Assets Agreement, dated September 1, 1997,
between Terrace Holdings, Inc. and Bay Purveyors*
10.21 Guaranty dated August 7, 1997, by Terrace Holdings, Inc.
in favor of Foothill Capital Corporation*
10.22 Option Agreement, dated as of February 17, 1997, between
Terrace Holdings, Inc. and Samuel H. Lasko and Jonathan
S. Lasko.
10.23 Agreement to Sell and Purchase, dated as of March 2,
1998, between the Registrant and Samuel H. Lasko,
relating to The Lasko Family Kosher Tours, Inc. and A&E
Management, Inc.*
10.24 Management Agreement dated as of March 2, 1998, relating
to the Terrace Oceanside Restaurant*
10.25 Terrace Holdings, Inc. 1997 Stock Option Plan*
10.26 Asset Purchase Agreement, dated December 31, 1997,
between D.M.S. Food Distributors, Inc. (Gourmet
Distributors) and the Registrant*
10.27 Form of Contract for Sale of Business between The Lasko
Family Companies, Inc. and Steven Newman, relating to the
Terrace Oceanside Restaurant*
23.1 Consent of Moore Stephens, P.C. (located on page II-3)
</TABLE>
- --------

* Heretofore filed as an exhibit to the Registrant's Form 10-KSB, as
amended, for the year ended December 31, 1997 and by this reference
incorporated as an exhibit hereto.

** Heretofore filed as an exhibit to the Registrant's Registration
Statement on Form SB-2 (Commission File No. 33-96892)

<PAGE>

JT 1335 1/2

Number SHARES
P-
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

Terrace Holdings, Inc.
- --------------------------------------------------------------------------------

This Certifies That is the owner of
----------------------------------------------

- ----------------------------------------------------full paid and non-assessable
SHARES OF THE PREFERRED STOCK OF Terrace Holdings, Inc.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon the surrender of this Certificate properly
endorsed.

The corporation will furnish without charge to each stockholder who so
requests, the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation, this day of A.D. 1997.
---- ---------------

/s/ Jonathan S. Lasko /s/ Samuel H. Lasko
- ---------------------------- --------------------------
Jonathan S. Lasko, SECRETARY Samuel H. Lasko, PRESIDENT

<PAGE>

For Value Received, hereby sell, assign and transfer unto
---- -------------------

- ------------------------------------------------------------------------Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.

Dated 19
----------------------- ------
In presence of

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

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or any state securities law. No
transfer or sale of these securities, or any interest therein, may be made
except in connection with an effective registration statement under the Act or
unless the issurer has received an opinion of counsel satisfactory to it that
such transfer or sale does not require registration under the Act.

-----------------------------
THIS SPACE IS NOT TO BE
COVERED IN ANY WAY
-----------------------------

<PAGE>

Exhibit 4.3

TERRACE HOLDINGS, INC.

CERTIFICATE OF RESOLUTIONS
DESIGNATING RIGHTS AND PREFERENCES
OF PREFERRED STOCK
------------------

The undersigned does hereby certify that he is the elected and acting
Assistant Secretary of Terrace Holdings, Inc., a Delaware corporation (the
"Corporation"), and set forth below is a true and complete copy of resolutions
duly adopted by unanimous written consent of the Board of Directors of the
Corporation as of July 7, 1997, and that said resolutions have not been revoked,
amended or modified in any way and continue in full force and effect.

RESOLVED, that an issue of a series of the Preferred Stock of the Company
is hereby provided for, the designation of which shall be Convertible Preferred
Stock. The number of shares of Convertible Preferred Stock issued shall be no
less than 1,250,000 and no more 1,750,000, and each share of the Convertible
Preferred Stock shall be issued in a private placement and not as part of a
public offering, as part of a Unit, each Unit consisting of one share of
Convertible Preferred Stock and two Common Stock Purchase Warrants, each warrant
allowing the holder thereof to purchase one share of the Company's Common Stock
at an exercise price of $1.1875, at a price of $2.00 per Unit.

FURTHER RESOLVED, that the preferences and relative participating, optional
and other special rights, and qualifications, limitations and restrictions
thereof, of the Convertible Preferred Stock are as follows:

SECTION 1. DIVIDENDS

1.1. Preferential Dividends. The holders of the Convertible Preferred Stock
will be entitled to preference in the declaration of dividends if and when any
dividends are paid. No dividend may be declared and paid on the Common Stock
until a dividend is first declared and paid on the Convertible Preferred Stock.

SECTION 2. LIQUIDATION

2.1. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, the holders of the Convertible
Preferred Stock will be entitled to payment or distribution before any
distribution or payment is made upon any share of Common Stock. If upon such
liquidation, dissolution, or winding-up of the Company, whether voluntary or
involuntary, the assets to be distributed among the holders of the Convertible
Preferred Stock shall be insufficient to permit payments in full to the holders
of the Convertible Preferred Stock, the entire assets of the Company to be so
distributed shall be distributed ratably among holders of Convertible Preferred
Stock.

2.2. Notice. Written notice of such liquidation, dissolution or winding up,
stating the payment date and the place where said payments shall be made, shall
be given by certified mail, return receipt
<PAGE>

requested, not less than 20 days prior to the payment date stated therein, to
holders of the Convertible Preferred Stock, such notice to be addressed to each
holder at its address as shown by the records of the Company.

SECTION 3. CONVERSION

The holders of the Convertible Preferred Stock shall have the following
conversion rights:

3.1 Right to Convert; Automatic Conversion. Each share of Preferred Stock
shall be convertible into two shares of Common Stock of the Company at the
option of the holder. All shares of the Preferred Stock not so converted on or
prior to July 31, 1998 shall automatically be converted into shares of Common
Stock of the Company on that date.

3.2 Mechanics of Conversion. Before any holder of shares of Preferred
Stock shall be entitled to convert the same into shares of Common Stock (or, in
the case of an automatic conversion under Section 3.1, to obtain the
certificates for the Common Stock into which the Preferred Stock shall have been
converted), such holder shall surrender the certificate or certificates for the
shares of Preferred Stock, duly endorsed, at the office of the Company or of any
transfer agent for such shares, and shall give written notice by registered or
certified mail, postage prepaid, to the Company at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued, (A holder of Preferred Stock may not effect a transfer of shares
pursuant to a conversion unless all applicable restrictions on transfer are
complied with.) The Company shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of shares of Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as provided
above. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the certificate or
certificates representing the shares of Preferred Stock being converted (except
in the case of an automatic conversion under section 3.1, which shall be
effective on the date of the event giving rise thereto), and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.

3.3 Conversion Adjustments. The number of shares into which the Preferred
Stock are convertible shall be subject to adjustment if the publicly-reported
closing market price for the Company's Common Stock is below $1.00 per share
upon the effective date of the registration statement to be filed covering the
Convertible Preferred Stock, among other securities.

3.4 Recapitalization. If at any time or from time to time there shall be
a recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section),
provision shall be made (in form and substance satisfactory to the holders of a
majority of the Convertible Preferred Stock then outstanding) so that the
holders of the Convertible Preferred Stock shall thereafter be entitled to
receive, upon conversion of the Convertible Preferred Stock, such shares or
other securities or property of the Company or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
<PAGE>

application of the provisions of this Section with respect to the rights of the
holders of the Convertible Preferred Stock after the recapitalization to the end
that the provisions of this section (including adjustments of the Conversion
Price then in effect and the number of shares purchasable upon conversion of
shares of Convertible Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.

3.5. No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but shall at all times in good faith assist in the carrying out of all
the provisions of this Section and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Convertible Preferred Stock against impairment; provided that in
any event, any provisions of this Section may be amended with the approval of
the holders of a majority of the outstanding shares of Convertible Preferred
Stock (in addition to all other approvals required by law).

3.6. Fractional Shares and Certificate as to Adjustments.

A. In lieu of issuing fractional shares upon a conversion of
Convertible Preferred Stock, the Company may pay cash equal to the fraction
multiplied by the then fair market value of a share of Common Stock, as
determined by the Board of Directors. Whether or not fractional shares would be
issuable upon much conversion shall be determined on the basis of the total
number of shares of Convertible Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.

B. Upon the occurrence of each adjustment of the Conversion Price
pursuant to this Section, the Company, at its expense, shall promptly compute
such adjustment in accordance with the terms hereof and prepare and furnish to
each holder of shares of Convertible Preferred Stock a certificate setting forth
such adjustment and showing in detail the facts upon which such adjustment is
based.

3.7. Notices of Record Date. In the event of any taking by the Company of
a record of its stockholders for the purpose of determining stockholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for purchase or otherwise acquire any shares of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each holder of shares of Convertible Preferred Stock, at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution, or right.

3.8. Reservation of Common Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Convertible Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Convertible Preferred Stock; and if at any time the number
<PAGE>

of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Convertible Preferred
Stock, the Company shall take such corporate action as may, in the opinion of
its Counsel, be necessary to increase its authorized but unissued shares of
common Stock to such number of shares as shall be sufficient for such purpose.

3.9. Notices. Any notice required by the provisions of this Section to be
given to the holders of shares of Convertible Preferred Stock shall be deemed to
be delivered when deposited in the United States mail, postage prepaid,
registered or certified, and addressed to each holder of record at the address
of such holder appearing on the stock transfer books of the Company.

SECTION 4. VOTING RIGHTS.

4.1. General. Except as provided herein and except as otherwise required
by law, the holders of the Convertible Preferred Stock shall no voting rights
unless and until such Preferred Shares are converted to Common Stock at which
point such holder would have the same voting rights as all holders of Common
Stock.

4.2. Amendments. Provisions of the terms of the Convertible Preferred
Stock may be amended, modified or waived only by the Board of Directors.

WITNESS my hand this 18th day of March, 1998.

/s/ Gerald L. Fishman
--------------------------------------
Gerald L. Fishman, Assistant Secretary

<PAGE>

Exhibit 5.1

FISHMAN, MERRICK, MILLER, GENELLY,
SPRINGER, KLIMEK &
ANDERSON, P.C.

125 SOUTH WACKER DRIVE
SUITE 2800
CHICAGO, ILLINOIS 60606-4402
(312) 726-1224
FACSIMILE (312) 726-2649
EMAIL [email protected]

April 28, 1998

Terrace Holdings, Inc.
1351 N.W. 22nd Street
Pompano Beach, FL 33069

Attention: President

Re: Terrace Holdings, Inc.
Registration Statement on Form SB-2

Ladies and Gentlemen:

Terrace Holdings, Inc. (the "Company") has filed with the United States
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form SB-2 (Commission Registration No. 333-45195), with respect to which this
opinion is to be an exhibit, relating to the proposed sale by the Company and
resale by certain selling securities holders of shares of the Company's common
stock, $.001 par value ("Common Stock") and redeemable warrants to purchase
Common Stock (collectively, "Warrants') consisting of:

1. up to 1,437,500 previously registered but unissued shares of
Common Stock underlying 1,437,500 previously issued and registered
redeemable Warrants;

2. up to 200,000 previously registered but unissued shares of its
Common Stock underlying 200,000 previously issued and registered Warrants
("Lenders' Warrants");

3. 3,047,650 previously issued Warrants ("Private Placement
Warrants");

4. 3,047,650 previously unissued shares of its Common Stock
underlying the Private Placement Warrants;

5. 3,047,650 previously unissued shares of its Common stock reserved
for issuance upon conversion of its previously issued 1,523,825 shares of
Preferred Stock, $.001 par value ("Preferred Stock");

6. 200,000 shares previously issued shares of its Common Stock;

7. Up to 750,000 previously issued Warrants ("IB Warrants");
<PAGE>

Terrace Holdings, Inc.
April 28, 1998
Page 2

8. Up to 750,000 previously unissued shares of its Common Stock
underlying the IB Warrants;

9. Up to 250,000 previously unissued shares of Common Stock,
underlying 250,000 redeemable warrants previously issued as a finder's fee;
and

10. Up to 320,000 previously unissued shares of its Common Stock,
underlying 320,000 previously issued redeemable warrants issued to a
director and in connection with a prior acquisition from an unaffiliated
third party.

The Registration Statement, as amended, is herein referred to as the
"Registration Statement".

We have acted as securities counsel for the Company in connection with the
transactions that are the subject matter of the Registration Statement and are
familiar with the various corporate proceedings relating thereto. In connection
with the Registration Statement, we have examined such corporate records of the
Company and such other instruments, documents and certificates as we have deemed
necessary as a basis for this opinion. For purposes of this opinion, we have
assumed (i) the accuracy and completeness of all data supplied by the Company,
its officers, directors or agents, (ii) that the Commission shall have issued an
order under the Securities Act of 1933, as amended, declaring effective the
Registration Statement, and (iii) that all requisite authorizations, approvals,
consents or exemptions under the securities laws of the various states and other
jurisdictions of the United States of America shall have been obtained.

Based upon the foregoing, we are of the opinion that, the Common Stock and
the Warrants, to be sold in accordance with the Registration Statement, are duly
authorized and issued, or upon issuance, delivery and sale thereof, for the
consideration specified in the Registration Statement, are or will be legally
issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as a part of, or as an exhibit to, any document that
may be filed with respect to the proposed transactions under the securities laws
of the various states and other jurisdictions of the United States. We also
consent to be named in the Registration Statement and in the Prospectus which
<PAGE>

Terrace Holdings, Inc.
April 28, 1998
Page 3

constitutes a part thereof as the counsel that will pass upon certain legal
matters for the Company in connection with the sale of the Company's securities.

Very truly yours,

/s/ Fishman, Merrick, Miller, Genelly,
Springer, Klimek & Anderson, P.C.

Fishman, Merrick, Miller, Genelly,
Springer, Klimek & Anderson, P.C.

FM/BJS/cak

<PAGE>

EXHIBIT 10.22

OPTION AGREEMENT
----------------

THIS OPTION AGREEMENT ("Agreement") made as of the 17th day of February,
1997, by and among Terrace Holdings, Inc., a Delaware corporation (the
"Optionor"), and Samuel H. Lasko and Jonathan S. Lasko (individually and
collectively, the "Optionee").

RECITALS
--------

WHEREAS, the Optionor is the owner of all of the issued and outstanding
Stock of The Lasko Companies, Inc. and A&E Management, Inc. and is or will be
the owner of all of the issued and outstanding stock of a subsidiary to be
formed in which all of the business of the Optionor's operations currently
conducted under the name "The Lasko Family Kosher Tours" will continue to be
conducted (each of such companies are hereinafter individually and collectively
referred to as the "Company" and the stock of each Company is hereinafter
individually and collectively referred to as the "Option Stock"); and

WHEREAS, the Optionee may desire to acquire all of the Option Stock or all
or substantially all of the business and assets (the "Subject Business") of the
Company (the "Subject Acquisition"); and

WHEREAS, the Optionee and Optionor each believe that the Subject
Acquisition on the terms and conditions herein set forth will be in the best
interests of the stockholders of the Optionor, and the Optionor is willing to
grant to the Optionee the right, on the terms and conditions set forth in this
Agreement, to acquire the Option Stock or the Subject Business as the Optionee,
in the Optionee's sole discretion; and

WHEREAS, in accordance with the provisions of, and as part of the
consideration of the transactions consummated pursuant to the provisions of,
that certain Asset Acquisition Agreement by and between Optionor, or its
assignee, and DownEast Frozen Desserts LLC, dated as of the 9th day of December,
1996, and amended as of February 7, 1997 (the "Acquisition Agreement"), Optionor
is hereby granting the Option (hereinafter defined);

NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements set forth, and other good and valuable considerations,
the receipt and adequacy of which are hereby acknowledged, the parties,
intending to be legally bound, do hereby agree as follows:
<PAGE>

1. The Option. Optionee shall have the right (the "Call" or the "Option")
during the Option Period to purchase all but not less than all of either (i) the
Option Stock at the Option Price or (ii) the Subject Business at the Purchase
Price.

For purposes of this Option Agreement, the following terms shall have the
following respective meanings:

(a) The term "Option Period" shall mean (i) the period during which
the Option is exercisable which shall commence on April 1, 1998 (or
earlier, as provided below) and end on the earlier of (i) four years after
the date hereof, or (ii) the voluntary surrendering or cancellation hereof
by Optionee.

(b) The terms "Option Price" and "Purchase Price" shall mean and refer
to the price to be paid by Optionee for the Subject Acquisition. The
Option Price (which is the price for the Option Stock) and the Purchase
Price (which is the price for the Subject Business) shall each be the fair
market value of the Subject Acquisition at the time the Option is
exercised, and shall be subject to the acceptance of such fair market value
determination by Optionee and shall be subject to the prior approval and
recommendation thereof by a committee of disinterested directors of the
Optionor appointed therefor. Such fair market value shall be determined by
an independent investment banking firm or other appropriate financial
services entity expert in and engaged for such purpose at Optionor's sole
expense, determining the fair market value of the Option Stock or Subject
Business and such Option Price or Purchase Price (the "Fairness Opinion").

1. Exercise.

(a) The Option shall be exercisable by the Optionee, or either of
them, upon the first to occur of (i) termination of either of their
respective employments by Optionor regardless of the reason for such
termination, (ii) April 1, 1998, which is the date immediately subsequent
to the date on which the Optionor's Annual Report for fiscal 1997 on Form
10-KSB is required to be filed with the Securities and Exchange Commission,
(iii) the date on which Optionor's common stock is no longer listed for
quotation on the NASDAQ Stock Market, or (iv) any attempt by Optionor to
sell any of the Option Stock or any Subject Business to any party or entity
other than Optionee. At any time as the Option is exercisable hereunder,
the Optionee may exercise the Call, in whole but not in part, by giving
written notice (the "Exercise Notice") to the

2
<PAGE>

Optionor prior to 5:00 p.m., Florida time, on the last day of the Option
Period. The Exercise Notice shall specify whether the Call is being
exercised with respect to the Option Stock or the Subject Business. If the
call is exercised with respect to the Subject Business, the Optionor and
the Optionee will execute and deliver the Agreement to Sell and Purchase, a
copy of which is attached hereto as Attachment A. If the Call is exercised
with respect to the Option Stock, the Optionor and the Optionee will
execute an agreement selling the Option Stock and containing
representations and warranties customarily found in such an agreement and
similar in terms and conditions to Attachment A.

(b) If the Optionor attempts to sell or notifies the Optionee of the
Optionor's intent to sell all or any part of the Subject Business or the
Option Stock to a bona-fide third party, the Optionor shall specify in such
notice all of the terms and conditions of such sale, and then, and only in
such event, the following shall be applicable:

(i) The Optionee shall have a period of sixty days from the
receipt of such attempt or notice within which to notify the Optionor
that it elects to exercise the Option;

(ii) If the Optionee does not exercise the Option within such
sixty day period, the Optionor shall be free to sell the Subject
Business or the Option Stock to such bona-fide third party solely on
the terms and conditions specified in the notice. Any proposed sale
or other transfer by the Optionor of the Subject Business or the
Option Stock for any price less than that at, or on any terms and
conditions other than those by which, the Optionee could have
purchased the Subject Business or the Option Stock pursuant to the
provisions hereof shall be subject to the first right in the Optionee
to purchase the Subject Business or the Option Stock at such lesser
price, subject to such other terms and conditions, and Optionee shall
have a period of thirty days from the receipt of such notice within
which to notify the Optionor that the Optionee elects to purchase the
Subject Business or the Option Stock on such other terms and
conditions. To assure that the intent of these provisions will be
carried out, it is expressly agreed that the Optionor will provide in
any agreement or document, of any kind or nature, relating to the sale
or other transfer of the Subject Business or the Option

3
<PAGE>

Stock to any bona-fide third party that such offer, agreement or other
document is subject to the provisions hereof.

2. Representations and Warranties. The Optionor represents and warrants
that it owns and will own all of the Option Stock and the Subject Business
throughout the Option Period, free and clear of all encumbrances and will, in
the event the Call is exercised, deliver to the Optionee good and marketable
title to the Option Stock and the Subject Business, free and clear of all
encumbrances. The Optionor covenants and agrees that it will not, during the
Option Period, transfer any of the Option Stock or the Subject Business except
pursuant to this Agreement.

3. Company Revenues, Expenses and Income. If the Optionee exercises the
Option to purchase the Subject Business, at or prior to the closing of the
Agreement to Sell and Purchase (Attachment A hereto), Optionor shall cause the
books, records and financial statements of the Company for the fiscal year in
which the Option is exercised to reflect only the direct revenues, expenses,
income, charges and similar matters directly related to the operation of the
Subject Business and no corporate overhead in such fiscal year items shall be
allocable thereto except for the following:

(a) no more than 80% of the compensation paid to or accrued for the
Optionee shall be allocable to the Subject Business; and

(b) a percentage of the legal and accounting fees equal to the
percentage that the revenues of the Subject Business bear to the total
revenues of the Optionor in the aggregate, shall be allocable to the
Subject Business.

4. Closing. Payment for the Option Stock or the Subject Business
purchased (the "Closing") will be made, against delivery of the certificates
representing the Option Stock, or, the Subject Business, by appropriate
instruments of transfer, including but not limited to warranty bills of sale,
certificates evidencing all the shares of capital stock of the Company with
stock powers duly endorsed in blank, signature guaranteed, attached, or such
other appropriate instruments, on a date not later than sixty days following the
later of the giving of the Exercise Notice or the receipt of the Fairness
Opinion, as the Optionee shall specify in the Exercise Notice, at the offices of
Fishman & Merrick, P.C., 30 North LaSalle Street, Suite 3500, Chicago, Illinois
60602, or such other place as shall be mutually agreed between the parties.

4
<PAGE>

5. Public Announcements. Until such time as may be mutually agreed upon
by the parties to this Agreement, neither party hereto shall, without the
approval of the other party, make or cause to be made any press release or other
public announcement concerning the transactions contemplated by this Agreement
except and as to the extent required by law or regulation, including without
limitation applicable federal and state securities laws and regulations.

6. Expenses. Except as otherwise expressly set forth herein, the
Optionor shall pay or reimburse expenses of the Optionee incident to the
performance and enforcement of this Agreement (including all fees and expenses
of respective counsel, accountants and other consultants, advisors and
representatives), whether or not the transactions contemplated hereby are
consummated.

7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, arrangements, covenants, promises, conditions, understandings,
inducements, representations and negotiations, expressed or implied, written or
oral, between them as to such subject matter.

8. Specific Performance; Other Rights and Remedies. The parties
recognize that certain of their rights under this Agreement are unique and,
accordingly, in addition to such other remedies as may be available to any of
them at law or in equity, the parties shall have the right to enforce their
rights hereunder by actions for injunctive relief and specific performance to
the extent permitted by law, without bond.

9. Waivers; Amendments. Any amendments to or modifications of this
Agreement or any waivers of requirements or breaches shall be made only with the
written consent of the party entitled to the benefit thereof. Any such waiver
shall not operate as a further or continuing waiver hereunder, nor shall any
failure to enforce or require strict performance operate as a waiver hereunder
except as is expressly set forth herein and no such waiver shall be effective
unless in writing.

10. Assignments; Successors and Assigns. This Agreement shall not be
assignable by any party without the prior written consent of the other;
provided, however, that notwithstanding the foregoing, the Optionee shall have
the right to designate an Affiliate or Affiliates to receive the Option Stock or
the Subject Business or to enter into the Agreement to Sell and Purchase or any
other agreement to purchase the Subject Business.

5
<PAGE>

This Agreement shall be binding and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns, including
without limitation successors by operation of law pursuant to any merger,
consolidation or sale of assets involving any of the parties.

11. Notices. All notices and other communications permitted or required
under this Agreement shall be given in writing and shall be (a) mailed by First
Class or Express Mail, postage prepaid, (b) sent by facsimile or other form of
rapid transmission, confirmed thereafter as in (a) above, or (c) personally
delivered to the receiving party. All such notices and communications shall be
mailed, sent or delivered as follows:

If to the Optionor, at:

Terrace Holdings, Inc.
2699 Stirling Road
Suite C-405
Fort Lauderdale, Florida 33312
Facsimile: (954) 894-0993

With a copy to:

Gerald L. Fishman, Esq.
Fishman & Merrick, P.C.
30 North LaSalle Street
Suite 3500
Chicago, Illinois 60602
Facsimile: (312) 726-2649

If to the Optionee, at:

Samuel H. Lasko and Jonathan S. Lasko
c/o 4201 North Hills Drive
Hollywood, Florida 33312
Facsimile: (954) 981-9121

or to such other persons as the party to receive such communication or notice
may have designated by written notice to the other party. Notice shall be
effective when given, except in the case of notice by mail, which shall become
effective two business days after mailing provided there is written proof of
such mailing.

12. Severability. The invalidity, illegality or unenforceability of any
of the provisions of this Agreement shall

6
<PAGE>

not invalidate the balance hereof, but this Agreement shall be reformed and
construed as if such invalid, illegal or unenforceable provision(s) were not
contained herein. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provisions, the economic effect of which comes as close as possible
to that of the invalid, illegal or unenforceable provision(s).

13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument binding upon the parties hereto.

14. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by and construed under the laws
of the State of Florida without giving effect to any choice or conflicts of laws
provisions.

15. Consent to Jurisdiction and Service. Each of the parties hereby
consents and submits to the jurisdiction of the courts of the State of Florida
and of any federal court located in said jurisdiction in connection with any
actions or proceedings brought against it by any other party to this Agreement
arising out of or relating to this Agreement and hereby agrees that any and all
claims in respect of any such act or proceeding may be heard and determined in
any such court.

The Optionor hereby irrevocably designates and appoints Samuel H. Lasko as
its authorized agent and to receive service of process in the State of Florida
when and as such legal actions or proceedings may be brought and such service of
process shall be deemed complete upon the date of delivery thereof to the
Optionor. It is understood that a copy of said process served on such agent as
soon as practicable will be forwarded to the Optionor, at its address set forth
herein, but its failure to receive such copy shall not affect in any way the
service of said process on said agent as the agent of the Optionor.

16. Inspection and Information. The Optionee may on or prior to the
Closing hereunder, through its representatives and counsel, make such
investigation of the business, properties and assets, and of the financial legal
condition of the Optionor as it may deem necessary or advisable, and the
Optionor agrees, at its expense, to cooperate therewith and make all persons and
documents relevant to such inquiry reasonably available.

7
<PAGE>

17. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning of
interpretation of hits Agreement.

18. Certain Terminology. Whenever used herein, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders, except where the context otherwise requires,
reference to "this section" or words of similar import shall be deemed to refer
to the entire section and not a particular subsection and references to
"hereunder," "herein," "hereof" or words of similar import shall be deemed to
refer to the entire Agreement and not the particular section or subsection.

19. Further Acts. The parties hereto each agree that at any time, and
from time to time, before and after the consummation of the transactions
contemplated by this Agreement, it/he will do all such things and execute and
deliver all such agreements, assignments, instruments, other documents and
assurance, as any other party or its/his counsel reasonably deems necessary or
desirable in order to carry out the terms and conditions of this Agreement and
the transactions contemplated hereby or to facilitate the enjoyment of any of
the rights created hereby or to be created hereunder.

20. No Presumption. This Agreement shall be construed without regard to
any presumption or other rule requiring construction against the party causing
this Agreement to be drafted.

21. Definitions. As used herein, unless context otherwise requires, the
following terms shall have the following respective meanings:

(a) "Acquisition Agreement" is defined in the preamble of this
Agreement.

(b) "Affiliate" of any person shall mean any person which directly or
indirectly owns or controls or is under common ownership or control with or
is controlled by such person.

(d) "Company" is defined in the Recitals to this Agreement.

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(e) "Fairness Opinion" is defined in Section 1 of this Agreement.

(f) "Option" is defined in Section 1 of this Agreement.

(g) "Optionee" is defined in the Preamble to this Agreement.

(h) "Optionor" is defined in the Preamble to this Agreement.

(i) "Option Price" is defined in Section 1 of this Agreement.

(j) "Purchase Price" is defined in Section 1 of this Agreement.

(k) "Subject Acquisition" is defined in the Recitals to this
Agreement.

(l) "Subject Business" is defined in the Recitals to this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first above written, which date coincides with the closing of the
transactions consummated in accordance with the Acquisition Agreement.

TERRACE HOLDINGS, INC.

By:___________________________

______________________________
Samuel H. Lasko

______________________________
Jonathan S. Lasko