UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
          [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly
                period ended March 31, 2004

          [ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934 For the transition period from ____________
                to ____________ .

                        Commission File Number 000-26463
                                               ---------

                           MILITARY RESALE GROUP, INC.
 -------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)


               New York                                   11-2665282
  --------------------------------          ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)

                              2180 Executive Circle
                        Colorado Springs, Colorado 80906
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (719) 391-4564
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

As of March 31, 2004, there were 26,895,571 shares of the issuer's common stock
outstanding.

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


<PAGE>


                           MILITARY RESALE GROUP, INC.

                                   FORM 10-QSB


                                      INDEX



                                                                        Page No.


PART I.       Financial Information

Item 1.       Financial Statements

              Balance Sheets - March 31, 2004 and December 31, 2003.......... 1

              Statements of Operations - three months ended March 31, 2004
                and 2003..................................................... 2

              Statements of Cash Flows - three months ended March 31, 2004
                and 2003..................................................... 3

              Notes to Financial Statements.................................. 5

Item 2.       Management's Discussion and Analysis or Plan of Operation...... 9

Item 3.       Controls and Procedures........................................13

PART II.      Other Information

Item 2.       Changes in Securities and Small Business Issuer Purchases
                 of Equity Securities........................................14

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

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



                                       i

<PAGE>

ITEM 1.  FINANCIAL INFORMATION

                           MILITARY RESALE GROUP, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS
                                                                   MARCH 31,    DECEMBER 31,
                                                                    2004            2003
                                                                 -----------    -----------
CURRENT ASSETS:                                                   (UNAUDITED)
<S>                                                              <C>            <C>
  Cash                                                           $   113,889    $     2,862
  Accounts receivable - trade                                        980,402        765,851
  Inventory                                                          386,827        334,950
  Prepaid consulting                                                 205,679        484,506
  Deposits                                                            38,618         33,218
  Prepaid interest                                                    69,574         92,681
  Prepaid expenses                                                     9,341             --
                                                                 -----------    -----------
     Total Current Assets                                          1,804,330      1,714,068
                                                                 -----------    -----------

PREPAID INTEREST, NET OF CURRENT PORTION                             132,038        132,038

EQUIPMENT
  Office equipment                                                    22,379         15,047
  Warehouse equipment                                                159,444        159,444
  Software                                                            16,324         16,324
                                                                 -----------    -----------
                                                                     198,147        190,815
  Less accumulated depreciation                                     (115,545)      (106,103)
                                                                 -----------    -----------
    Net equipment                                                     82,602         84,712

     Total Assets                                                $ 2,018,970    $ 1,930,818
                                                                 ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable and accrued expenses                          $ 2,510,556    $ 2,507,544
  Accounts payable, related party                                     49,349         72,632
  Current maturities of capital lease obligations                     32,489         51,981
  Deferred rent                                                        2,729          2,729
  Current portion of accrued interest payable                        117,248         99,561
  Current portion of notes payable                                    31,025         90,235
  Current portion of convertible notes payable                        85,000         85,000
                                                                 -----------    -----------
     Total Current Liabilities                                     2,828,396      2,909,682

OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT
MATURITIES                                                            36,351         36,351

DEFERRED RENT, NET OF CURRENT PORTION                                 21,832         21,832

RELATED PARTIES CONVERTIBLE NOTES PAYABLE                            370,000        370,000

NOTES PAYABLE, NET OF CURRENT PORTION                                 98,975         98,975

CONVERTIBLE NOTES PAYABLE, NET OF CURRENT PORTION                    150,000        150,000
                                                                 -----------    -----------
     Total Liabilities                                             3,505,554      3,586,840
                                                                 -----------    -----------
STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred stock, par value $.0001, 10,000,000
  shares authorized, -0- issued and outstanding                           --             --
  Common stock, par value $.0001, 50,000,000
  shares authorized, 26,895,571
  and 21,448,011 issued and outstanding                                2,690          2,144
  Additional paid-in capital                                       4,933,251      4,248,547
  Accumulated (deficit)                                           (6,422,525)    (5,906,713)
                                                                 -----------    -----------
     Total Stockholders' Equity (Deficit)                         (1,486,584)    (1,656,022)
                                                                 -----------    -----------
     Total Liabilities and Stockholders' Equity (Deficit)        $ 2,018,970    $ 1,930,818
                                                                 ===========    ===========
</TABLE>

            SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                        1
<PAGE>

                           MILITARY RESALE GROUP, INC.
                            STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                        2004            2003
                                                     -----------    -----------
<S>                                                  <C>            <C>
REVENUES:
  Resale revenue                                     $ 1,961,544    $ 1,612,597
  Commission revenue                                     173,432        146,366
                                                     -----------    -----------
        Total Revenues                                 2,134,976      1,758,963

COST OF GOODS SOLD                                     1,782,561      1,512,326
                                                     -----------    -----------
GROSS PROFIT                                             352,415        246,637

OPERATING EXPENSES:
  Stock based compensation                               410,827        206,369
  Salary and payroll taxes                               162,789        117,138
  Professional fees                                       29,092         64,034
  Occupancy                                               59,356         59,356
  General and administrative                             139,614        150,059
  Depreciation and amortization                            9,442         14,991
                                                     -----------    -----------
        Total Expenses                                   811,120        611,947
                                                     -----------    -----------
        Net (Loss) From Operations                      (458,705)      (365,310)

OTHER (EXPENSES):
  Interest expense                                       (57,107)      (135,385)
                                                     -----------    -----------
        Total Other (Expense)                            (57,107)      (135,385)
                                                     -----------    -----------
NET (LOSS)                                           $  (515,812)   $  (500,695)
                                                     ===========    ===========
NET (LOSS) PER COMMON SHARE BASIC AND DILUTED        $     (0.02)   $     (0.04)
                                                     ===========    ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND  DILUTED                     23,497,984     11,684,156
                                                     ===========    ===========
</TABLE>

            SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                        2
<PAGE>

                           MILITARY RESALE GROUP, INC.
                            STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                  2004           2003
                                                              -----------    -----------
<S>                                                           <C>            <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:

   Net (loss)                                                 $  (515,812)   $  (500,695)
   Adjustments to reconcile net (loss) to net cash
       used in operating activities:

     Depreciation and amortization                                  9,442         14,911
     Amortization of option based interest expense                 23,107        100,000
     Stock issued for services                                    374,827        153,924
     Options issued for services                                   36,000             --
     Beneficial conversion feature                                     --         15,000
   Changes in assets and liabilities:
     Decrease (Increase) in accounts receivable                  (214,551)       (69,768)
     Decrease (Increase) in inventory                             (51,877)         9,220
     Decrease in other assets                                          --             68
     (Increase) in deposits                                        (5,400)            --
     (Increase) in prepaid expenses                                (9,341)            --
     Increase in accounts payable and accrued
      expenses                                                      3,012        133,805
     (Decrease) in related party accounts payable                 (23,283)            --
     Increase in accrued interest payable                          33,477             --
     Increase  in deferred rent obligation                             --          2,047
     Increase in other liabilities                                     --         25,007
                                                              -----------    -----------
      Net Cash Used In Operating Activities                      (340,399)      (116,481)
                                                              -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchase of fixed assets                                        (7,332)        (1,683)
                                                              -----------    -----------
      Net Cash Used in Investing Activities                        (7,332)        (1,683)
                                                              -----------    -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:

   Payments on capital lease obligations                          (19,492)        (6,762)
   Payments on notes payable                                      (25,000)            --
   Proceeds from issuance of notes                                     --        125,000
   Proceeds from issuance of common stock, net                    503,250             --
                                                              -----------    -----------
      Cash Flows Provided by Financing Activities                 458,758        118,238
                                                              -----------    -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                         111,027             74

CASH AND CASH EQUIVALENTS, beginning of period                      2,862          2,072
                                                              -----------    -----------
CASH AND CASH EQUIVALENTS, end of period                      $   113,889    $     2,146
                                                              ===========    ===========
Supplementary information:
     Cash paid for:

   Interest paid                                              $        --    $       466
                                                              ===========    ===========
   Income taxes                                               $        --    $        --
                                                              ===========    ===========
</TABLE>


            SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                        3
<PAGE>


                           MILITARY RESALE GROUP, INC.
                      STATEMENTS OF CASH FLOWS (CONTINUED)
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                           2004          2003
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
Non-cash investing and financing activities:

Issuance of stock and options in exchange for services                 $   132,000   $   205,146
                                                                       ===========   ===========
Issuance of common stock and options as payment of notes payable       $    50,000   $        --
                                                                       ===========   ===========

Issuance of common stock in payment of accrued compensation            $        --   $    32,912
                                                                       ===========   ===========
</TABLE>


            SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                        4
<PAGE>

                           MILITARY RESALE GROUP, INC.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with accounting  principles  generally  accepted in the United States of America
for interim  financial  information and with the instructions to Form 10-QSB and
Item  310  of  Regulation  S-B.  Accordingly,  they  do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for  complete  financial  statements.   The  accompanying   unaudited  financial
statements  reflect all  adjustments  that,  in the opinion of  management,  are
considered necessary for a fair presentation of the financial position,  results
of  operations,  and cash  flows  for the  periods  presented.  The  results  of
operations  for such  periods  are not  necessarily  indicative  of the  results
expected  for the full fiscal year or for any future  period.  The  accompanying
financial  statements  should be read in conjunction with the audited  financial
statements  of  Military  Resale  Group,  Inc.,  included in Form 10-KSB for the
fiscal year ended December 31, 2003.

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates continuity of operations,  realization of assets and liquidation of
liabilities in the normal course of business.

The Company has suffered  recurring losses from operations,  and is in a working
capital  deficit  position  that raises  substantial  doubt about its ability to
continue as a going concern.

The Company's  management is currently  pursuing equity and/or debt financing in
an effort to continue  operations.  The future  success of the Company is likely
dependent  on its ability to attain  additional  capital to develop its proposed
products  and  ultimately,   upon  its  ability  to  attain  future   profitable
operations.  There can be no assurance  that the Company will be  successful  in
obtaining  such  financing,  or that it will  attain  positive  cash  flow  from
operations.  The financial  statements do not include any adjustments that might
result from the outcome of this uncertainty.

NOTE 2 - EARNINGS PER SHARE

The Company  computes  earnings per common share in accordance with Statement of
Financial  Accounting Standards No. 128, Earnings per Share (SFAS No. 128). This
Statement  simplifies  the  standards  for  computing  earnings  per share (EPS)
previously  found in Accounting  Principles  Board Opinion No. 15,  Earnings Per
Share, and makes them more comparable to international  EPS standards.  SFAS No.
128 replaces the  presentation  of primary EPS with a presentation of basic EPS.
In addition,  the Statement  requires dual presentation of basic and diluted EPS
on the face of the  income  statement  for all  entities  with  complex  capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS  computation  to the  numerator  and  denominator  of the  diluted EPS
computation.  However,  such  presentation  is not  required  if the  effect  is
antidilutive. Accordingly, no such presentation has been made.

NOTE 3 - PREPAID CONSULTING

Prepaid  consulting  expenses are recorded in  connection  with common stock and
options  issued to  consultants  for future  services and are amortized over the
agreement  term.  During the three  months  ended  March 31,  2004,  the Company
incurred  prepayments  of  $20,000  and  stock-based   compensation  expense  of
$298,827.


                                        5
<PAGE>

                           MILITARY RESALE GROUP, INC.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS


NOTE 4 - PREPAID INTEREST

Prepaid interest is recorded in connection with the issuances of options for the
extension of various notes payable. The prepaid interest is being amortized over
the extension period,  with $23,107 charged to interest expense during the three
months ended March 31, 2004.

NOTE 5 - RELATED PARTY TRANSACTIONS

On March 31, 2004 pursuant to a consulting  agreement  with the Company's  chief
executive officer, the Company issued 247,560 shares of common stock and granted
options  to  purchase  247,560  shares of  common  stock at $.25 per share for a
period of five years for services  rendered valued at $72,000.  The value of the
stock and the value of the options was  $36,000  each based on $12,000  each per
month.  The  number of shares and  options  issued was  determined  by  dividing
$36,000 by 80% of the average low price of the common stock in each quarter.

NOTE 6 - SECURITIES ISSUED FOR SERVICES

During the three months ended March 31,  2004,  the Company  issued an aggregate
200,000 of the Company's common shares to a consultant for services provided and
expensed $40,000 (the value of the services) as stock based compensation.

During the three months ended March 31, 2004 the Company  issued  100,000 shares
of the Company's  common stock valued at $9,000 to a consultant  for services to
be provided.  The value of the stock is recorded as prepaid  consulting and will
be amortized over the term of the agreement.

On January 29, 2004 the Company  issued  50,000 shares of common stock valued at
$11,000 as a retainer  fee for  services  to be  performed  in  connection  with
raising of capital  (See Note 9). This amount is recorded as prepaid  consulting
and is being amortized over the term of the agreement.

During the three months ended March 31, 2004 pursuant to a consulting  agreement
with an unrelated party, the Company granted warrants to purchase 320,000 shares
of the  Company's  common  stock at  $.125  for a period  of five  years.  These
warrants were valued at $52,870, the fair value using the Black-Scholes European
Pricing  Model.  The average risk free interest rate used was 3.39%,  volatility
was  estimated at 96% and the expected  life was five years.  The warrants  were
granted as compensation to the Company's  investment banker for raising $500,000
by selling  4,000,000  shares of common stock.  This investment  banker was also
paid $40,000 as commission for the sale of stock.


                                        6
<PAGE>


                           MILITARY RESALE GROUP, INC.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS


NOTE 7 - COMMON STOCK

During the three months ended March 31, 2004 the Company sold  4,000,000  shares
of  common  stock  to  several   individuals   at  $.125  per  share  for  total
consideration  of  $460,000,  net of  offering  costs  paid  of  $40,000.  These
individuals  were also given  warrants  to purchase  2,000,000  shares of common
stock (50% of shares  issued) at $.25 per share for a period of five years.  The
terms of the stock subscription agreements provide that in the event the average
closing bid price of the common stock for the ten days  preceding  the effective
date of the  Registration  Statement  (to be filed)  is $.17 or below,  then the
purchase  price for the shares  shall be reset to a purchase  price equal to the
average  price minus $.05,  provided  that the  purchase  price is not less than
$.065 per share. Upon the occurrence of the price  adjustment,  the Company will
issue to each  subscriber the additional  shares they are entitled to based upon
the adjusted price. In addition, if the Registration  Statement (to be filed) is
not declared  effective on or before June 30, 2004, then commencing on the first
day of each month  thereafter  until December 1, 2004 or the declared  effective
date of the Registration Statement,  the Company will issue each subscriber,  as
liquidated damages, additional shares of common stock equal to 10% of the number
of shares purchased by each subscriber.

During the three months ended March 31, 2004 the Company sold 450,000  shares of
common  stock to  several  individuals  for $.10 to $.125  per  share  for total
consideration  of $43,250,  net of offering costs of $4,250.  In accordance with
the terms of the stock subscription  agreements,  if the Company's  Registration
Statement  (to be filed) is not  declared  effective on or before June 30, 2004,
then commencing on the first day of each month thereafter until December 1, 2004
or the declared effective date of the Registration  Statement,  the Company will
issue each subscriber,  as liquidated  damages and not as a penalty,  additional
shares of common  stock equal to 10% of the number of shares  purchased  by each
subscriber.

NOTE 8 - PROMISSORY NOTE PAYABLE

On March 27, 2003, the Company issued a promissory  note for $100,000 to Romano,
Ltd.  The note bears  interest  at 15% per annum and was due on March 26,  2004,
subject to the following  contingent payment terms upon the Company's raising or
securing additional funding from any third party source:

<TABLE>
<CAPTION>
Additional Funding      Terms Modification
---------------------   ---------------------------------------------
<S>                     <C>
$250,000                Payment of 10% of outstanding principal and accrued interest
$500,000                Payment of 15% of outstanding principal and accrued interest
$1,000,000 or more      Payment of 100% of outstanding principal and accrued interest
</TABLE>

When  the  Company  failed  to  secure  any of the  above-referenced  additional
funding,  nor another  significant  event,  such as a merger or  acquisition  of
another company,  the Company was required to pay $8,000 per month commencing on
July 1, 2003 until the full obligation was paid.


                                        7
<PAGE>

                           MILITARY RESALE GROUP, INC.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS


NOTE 8 - PROMISSORY NOTE PAYABLE (CONTINUED)

During the three  months  ended March 31, 2004 the Company  reached an agreement
with  Romano,  Ltd.  Since  March 31,  2003  $50,000  cash was paid  towards the
original  $100,000 note, of which $25,000 was paid during the three months ended
March 31, 2004.  The Company  signed a $30,000 note with Romano,  Ltd.,  for the
accrued  interest on the original  $100,000 loan with interest at 15% per annum,
payable beginning on April 1, 2004 with equal consecutive  installments  payable
on the  fifteenth  of every month in the amount of $5,000  until paid in full or
March 26, 2005. In addition,  the Company  issued 400,000 shares of common stock
and  granted  warrants to purchase  250,000  shares of common  stock at $.25 per
share for three years as full  satisfaction of the remaining  $50,000 balance of
the loan.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

On January 29, 2004 the Company  entered  into a business  consulting  agreement
with an unrelated party for financial  advisory and investment  banking services
and issued the  consultant  50,000 shares of its common stock valued at $11,000.
The consultant will advise the Company as to issues of capital formation, assist
the  Company on the market  awareness  of its stock by setting up road shows and
will assist the Company in raising $300,000 through the issuance of common stock
at $.125 and warrants to purchase  1,200,000 shares of common stock  exercisable
at $.25 per share for five years.  Upon successful  closing of the above raising
of capital,  the Company will pay the consultant a cash fee commission of 10% of
the capital raised plus a cash non-accountable  expense allowance of 2.5% of the
capital raised.  In addition,  upon raising the capital,  the consultant will be
entitled to 300,000  warrants  with similar terms as those issued in the capital
raise.

The Company was the  plaintiff in a litigation  with one of its vendors.  During
the three  months  ended March 31, 2004 the Company  entered  into a judgment in
which they were  ordered to pay the vendor  $5,356 with the amount due  accruing
interest  at 8% per annum.  As of March 31,  2004 the  Company  had not paid any
amount to this vendor. Subsequent to March 31, 2004, the Company received a Writ
of Garnishment and are expecting to have the original  judgment amount of $5,356
plus  interest  and  other  charges  of $181  garnished  from one of their  bank
accounts.

NOTE 10 - SUBSEQUENT EVENTS

On April  1,  2004 the  Company  entered  into a  one-year  business  consulting
agreement  with an  unrelated  party for  management  and  financial  consulting
services.  Under the terms of the agreement the  consultant  will receive $5,000
per month for the term of the  agreement  and receive  250,000  shares of common
stock.

On May 10,  2004  the  Company  issued  100,000  shares  of  common  stock  to a
consultant for services to be rendered over a period of 180 days.

On May 11, 2004 the Company  issued  200,000  shares of common stock and granted
200,000  options to purchase common stock at $.25 per share to a stockholder for
services rendered.


                                        8


<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

           Certain statements in this Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. The
words "believe", "expect", "anticipate", "intend" and "plan" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made. Because our common stock is considered a "penny
stock," as defined by the regulations of the Securities and Exchange Commission,
the safe harbor for forward-looking statements does not apply to statements by
our company.

           Our business and results of operations are affected by a wide variety
of factors that could materially and adversely affect us and our actual results,
including, but not limited to: (1) the availability of additional funds to
enable us to successfully pursue our business plan; (2) the uncertainties
related to the addition of new products and suppliers; (3) our ability to
maintain, attract and integrate management personnel; (4) our ability to
complete the development of our proposed product line in a timely manner; (5)
our ability to effectively market and sell our products and services to current
and new customers; (6) our ability to negotiate and maintain suitable strategic
partnerships and corporate relationships with suppliers and manufacturers; (7)
the intensity of competition; and (8) general economic conditions. As a result
of these and other factors, we may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect our business, financial condition, operating results and stock
price.

           Any forward-looking statements herein speak only as of the date
hereof. We undertake no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The following discussion should be read in conjunction
with the financial statements and related notes appearing elsewhere in this
Report.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2003

           Revenues. Total revenue for the three months ended March 31, 2004 of
$2,134,976 reflected a increase of $376,013, or approximately 21.4%, compared to
total revenue of $1,758,963 for the three months ended March 31, 2003. Our
revenues are derived in either one of two ways. In the majority of instances, we
purchase products from manufacturers and suppliers for resale to the
commissaries we service. In such cases, we resell the manufacturer's or
supplier's products to the commissaries at generally the same prices we pay for
such products, which prices generally are negotiated between the manufacturer or


                                        9
<PAGE>

supplier and the Defense Commissary Agency ("DeCA"). Revenue is recognized as
the gross sales amount received by us from such sales ("resale revenues"), which
includes (i) the purchase price paid by the commissary plus (ii) a negotiated
storage and delivery fee paid by the manufacturer or supplier. In the remaining
instances, we act as an agent for the manufacturer or supplier of the products
we sell, and earn a commission paid by the manufacturer or supplier, generally
in an amount equal to a percentage of the manufacturer's or supplier's gross
sales amount ("commission revenues"). In such cases, revenue is recognized as
the commission we receive on the gross sales amount. The increase in our total
revenues was primarily due to the addition of the frozen chicken line of Tyson
Foods, Inc. in December 2003, a line of health and beauty aids manufactured by
Alberto Culver, Inc. in January 2004 and a frozen vegetable line produced by VIP
Sales Company Inc. in January 2004, all of which we sell to commissaries on a
resale basis.

           Resale revenue for the three months ended March 31, 2004 of
$1,961,544 reflected an increase of $348,947, or approximately 21.6%, compared
to resale revenue of $1,612,597 for the three months ended March 31, 2003. For
the three months ended March 31, 2004, approximately 50.8% of our gross profit
was derived from sales involving resale revenue compared to approximately 40.7%
for the three months ended March 31, 2003. These increases were attributable
primarily to addition of the suppliers discussed above. We cannot be certain as
to whether this trend will continue. However, in the long term, we are seeking
to increase the ratio of our sales of products sold on a resale basis, rather
than a commission basis, because we believe we can increase our profitability on
such sales by taking advantage of payment discounts frequently offered by the
manufacturers and suppliers of such products. Provided we can generate
sufficient cash from operations or financing activities, we intend to do so by
seeking to add new products that we can offer to commissaries on a resale basis
from our existing manufactures and suppliers and from others with whom we do not
currently have a working relationship.

           Commission revenues for the three months ended March 31, 2004 of
$173,432 reflected an increase of $27,066, or approximately 18.5%, compared to
commission revenues of $146,366 for the three months ended March 31, 2003. For
the three months ended March 31, 2004, approximately 49.2% of our gross profit
was derived from sales involving commission revenues as compared to
approximately 59.3% for the three months ended March 31, 2003. The increase in
commission revenues was attributable primarily to a change in our supplier of
fresh chicken products in the third quarter of 2003 from Tyson Foods, Inc.,
whose products we sold on a resale basis, to ConAgra Foods, Inc., whose products
we sell on a commission basis.

           Management believes our long-term success will be dependent in large
part on our ability to add additional product offerings to enable us to increase
our sales and revenues. However, we believe our ability to add additional
product offerings is dependent on our ability to obtain additional capital to
fund new business development and increased sales and marketing efforts. We are
currently in discussions with a number of other manufacturers and suppliers in
an effort to reach an agreement under which we can distribute their products to
the military market. While there can be no assurance that we will do so, we
believe we will be successful in negotiating agreements with a number of such
suppliers and manufacturers.


                                       10
<PAGE>

           To date, all of our sales revenue has been generated from customers
located in the United States.

           Cost of Goods Sold. Cost of goods sold consists of our cost to
acquire products from manufacturers and suppliers for resale to commissaries. In
instances when we sell products on a commission basis, there is no cost of goods
sold because we act as an agent for the manufacturer or supplier and earn only a
commission on such sales. During the three months ended March 31, 2004, cost of
goods sold increased by $270,235, or approximately 17.9%, to $1,782,561 from
$1,512,326 for the three months ended March 31, 2003. This increase was
attributable primarily to increased sales of products that we sold on a resale
basis as discussed above. We cannot be certain as to whether or not this trend
will continue; however, in the long term we are seeking to increase the ratio of
our sales on a resale basis, as discussed above.

           Gross Profit. Gross profit for the three months ended March 31, 2004
increased by $105,778, or approximately 42.9%, compared to the three months
ended March 31, 2003, from $246,637 for the three months ended March 31, 2003 to
$352,415 for the three months ended March 31, 2004. This increase was
attributable primarily to slightly higher storage and delivery fees that we
began charging to new customers in December 2003.

           Operating Expenses. Total operating expenses aggregated $811,120 for
the three months ended March 31, 2004 as compared to $611,947 for the three
months ended March 31, 2003, representing an increase of $199,173, or
approximately 32.5%. The increase in total operating expenses was attributable
primarily to an increase of $204,458 in stock-based compensation expense
resulting primarily from the issuance of shares of our common stock and options
to purchase shares of our common stock to our consultants. In addition, salary
and payroll taxes increased by $45,651 resulting primarily from the addition of
new employees.

           Interest Expense. Interest expense of $57,107 for the three months
ended March 31, 2004 reflected a decrease of $78,278 as compared to interest
expense of $135,385 for the three months ended March 31, 2003. The decrease in
interest expense was attributable primarily to decreased interest expense
resulting from the recognition of the beneficial conversion feature (the right
to convert debt into shares of our common stock at a discount to the fair market
value of our common stock) of convertible promissory notes. We issued $50,000
aggregate principal amount of convertible promissory notes in the three months
ended March 31, 2003, but did not issue any convertible notes in the three
months ended March 31, 2004.

           Net Loss. Primarily as a result of the increased operating expenses
discussed above, we incurred a net loss of $515,812 for the three months ended
March 31, 2004 as compared to a net loss of $500,695 for the three months ended
March 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

           At March 31, 2004, we had a cash balance of approximately $113,889.
Since 2001, we have funded our operations primarily from borrowings of
approximately $850,000 through the issuance of demand notes and convertible


                                       11
<PAGE>

notes bearing interest at either 8% or 9% per annum and having original maturity
dates of three to five months following the date of issuance of such convertible
notes. At March 31, 2004, none of such demand notes was outstanding and $605,000
aggregate principal amount of convertible notes were outstanding, of which
$540,000 mature on or about June 3, 2006 and $65,000 aggregate principal amount
have matured but have not yet been paid. Such convertible notes require us to
register under the Securities Act of 1933 the shares our common stock issuable
upon conversion of such convertible notes not later than June 3, 2006.

           Our current cash levels, together with the cash flows we generate
from operating activities, are not sufficient to enable us to execute our
business strategy. As a result, we intend to seek additional capital through the
sale of shares of our common stock. In December 2001, we filed with the
Securities and Exchange Commission a registration statement relating to such
shares for gross sales proceeds of up to $5,000,000. Such registration statement
has not yet been declared effective, and there can be no assurance that the
Securities and Exchange Commission will declare such registration statement
effective in the near future, if at all. In the interim, we intend to fund our
operations based on our cash position and the near term cash flow generated from
operations, as well as additional borrowings and the sale of unregistered shares
of our common stock in private placements to accredited investors. In the three
months ended March 31, 2004, we sold and issued shares of our common stock to
accredited investors for aggregate gross proceeds of $547,500. Such proceeds
were used for the repayment of current liabilities and for working capital
purposes.

           In the event we are able to generate sales proceeds of at least
$750,000 in our proposed public offering, we believe that the net proceeds of
such sale, together with anticipated revenues from sales of our products, will
satisfy our capital requirements for at least the next 12 months. However, we
would require additional capital to realize our strategic plan to expand
distribution capabilities and product offerings. These conditions raise
substantial doubt about our ability to continue as a going concern. Our actual
financial results may differ materially from the stated plan of operations. Our
independent auditors have indicated in its report on our 2003 financial
statements that our recurring losses from operations and our difficulties in
generating sufficient cash flow to meet our obligations and sustain our
operations raise substantial doubt about our ability to continue as a going
concern. Such qualification may hinder our ability to raise or obtain the
capital we require or have an adverse impact on the terms upon which we are able
to attract or obtain such capital. In addition, such qualification may adversely
impact our ability to attract and maintain new customer accounts.

           Assuming that we receive net proceeds of at least $750,000 from our
proposed offering (of which there can be no assurance), we expect capital
expenditures to be approximately $100,000 during the next 12 months, primarily
for the acquisition of an inventory control system and a web-based marketing
software program. It is expected that our principal uses of cash during that
period will be to provide working capital, to finance capital expenditures, to
repay indebtedness and for other general corporate purposes, including sales and
marketing and new business development. The amount of spending for any
particular purpose is dependent upon the total cash available to us and the
success of our public offering of common stock.


                                       12
<PAGE>

           At March 31, 2004, we had liquid assets of $1,094,291, consisting of
cash and accounts receivable derived from operations, and other current assets
of $710,039, consisting primarily of inventory of products for sale and/or
distribution and prepaid expenses. Long term assets of $330,185 consisted
primarily of warehouse equipment used in operations and the long-term portion of
prepaid interest.

           Current liabilities of $2,828,396 at March 31, 2004 consisted
primarily of $2,559,905 of accounts payable and accrued expenses, including
related party amounts.

           Our working capital deficit was $1,024,066 as of March 31, 2004 for
the reasons described above.

           During the three months ended March 31, 2004, we used cash of
$340,399 in operating activities, primarily as a result of the net loss we
incurred during this period.

           During the three months ended March 31, 2004, we used net cash of
$7,332 in investing activities, all of which was used for capital expenditures.

           Financing activities, consisting primarily of proceeds from the sale
and issuance of shares of our common stock, provided net cash of $458,758 during
the three months ended March 31, 2004.

OFF BALANCE SHEET ARRANGEMENTS

           At March 31, 2004, we had no off-balance sheet arrangements that had
or were reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our stockholders.


ITEM 3.    CONTROLS AND PROCEDURES

           (a) Disclosure Controls and Procedures. Our management, with the
participation of our chief executive officer and chief financial officer, has
evaluated the effectiveness of our company's disclosure controls and procedures
(as much term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, our chief executive
officer and chief financial officer have concluded that, as of the end of such
period, our company's disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act.

           (b) Internal Control Over Financial Reporting. There have been not
been any changes in our internal control over financial reporting (as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the


                                       13
<PAGE>

period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

PART II.   OTHER INFORMATION

ITEM 2.    CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
           SECURITIES

           (c) Recent Sales of Unregistered Securities.

           (i) In the three months ended March 31, 2004, we issued to investors
in a private placement investment units consisting of an aggregate of 4,000,000
shares of our common stock and five-year warrants to purchase an aggregate of
2,000,000 shares of our common stock at $0.25 per share for gross proceeds to us
of $500,000, less sales commissions of $40,000. In connection with such
issuances, we granted registration rights to such investors. Such shares and
warrants were issued in reliance upon the exemption from registration provided
by Section 4(2) of the Securities Act of 1933, as amended, on the basis that
such issuance did not involve a public offering and such persons were
"accredited investors" as defined in Regulation D under the Securities Act of
1933, as amended.

           (ii) In the three months ended March 31, 2004, we issued 450,000
shares of our common stock to investors in a private placement for gross
proceeds to us of $47,500, less sales commissions of $4,250. In connection with
such issuances, we granted registration rights to such investors. Such shares
were issued in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended, on the basis that such issuance
did not involve a public offering and such persons were "accredited investors"
as defined in Regulation D under the Securities Act of 1933, as amended.

           (iii) In the three months ended March 31, 2004, we issued 400,000
shares of our common stock and three-year warrants to purchase an aggregate of
250,000 shares of our common stock at $0.25 per share to one of our lenders in
full satisfaction of $50,000 of our indebtedness to such lender. Such shares and
warrants were issued in reliance upon the exemption from registration provided
by Section 3(a)(9) of the Securities Act of 1933, as amended.

           (iv) In the three months ended March 31, 2004, we issued 247,560
shares of our common stock and five-year options to purchase 247,560 shares of
our common stock at $0.25 per share to our Chief Executive Officer for services
rendered during the three months ended March 31, 2004 pursuant to the terms of
his employment arrangement. The services were valued at $72,000. Such shares
were issued in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended, on the basis that such issuance
did not involve a public offering, no underwriter fees or commissions were paid
in connection with such issuance and such person was an "accredited investor" as
defined in Regulation D under the Securities Act of 1933, as amended.


                                       14
<PAGE>

           (v) In the three months ended March 31, 2004, we issued an aggregate
of 300,000 shares of our common stock to two consultants for services rendered
or to be rendered to the Company, which services were valued at $49,000 in the
aggregate. Such shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended,
on the basis that such issuance did not involve a public offering, no
underwriter fees or commissions were paid in connection with such issuance and
such persons were "accredited investors" as defined in Regulation D under the
Securities Act of 1933, as amended.

           (vi) In the three months ended March 31, 2004, we issued five-year
warrants to purchase an aggregate of 320,000 shares of our common stock at
$0.125 per share to a consultant for services rendered to the Company. Such
warrants were valued at $52,870 and were issued in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act of 1933, as
amended, on the basis that such issuance did not involve a public offering and
such persons were "accredited investors" as defined in Regulation D under the
Securities Act of 1933, as amended.

           (vii) In the three months ended March 31, 2004, we issued 50,000
shares of our common stock to a consultant for business consulting services to
be rendered. Such shares were valued at $11,000 and were issued in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act
of 1933, as amended, on the basis that such issuance did not involve a public
offering, no underwriter fees or commissions were paid in connection with such
issuance and such persons were "accredited investors" as defined in Regulation D
under the Securities Act of 1933, as amended.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a) Exhibits. The following exhibits are filed herewith or are
incorporated by reference to Exhibits previously filed.

EXHIBIT NO.  DESCRIPTION
-----------  -----------

10.1         Form of Warrant issued to certain investors during the three months
             ended March 31, 2004.


                                       15
<PAGE>

10.2         Description of Registration Rights granted to certain investors
             during the three months ended March 31, 2004.

31.1         Certification of our Principal Executive Officer, Edward T. Whelan,
             pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2         Certification of our Principal Financial Officer, Ethan D. Hokit,
             pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1         Certification of our Principal Executive Officer, Edward T. Whelan,
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2         Certification of our Principal Financial Officer, Ethan D. Hokit,
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

   (b)   Reports on Form 8-K.

         (i)      On January 6, 2004, we filed a Current Report on Form 8-K
                  providing a press release dated January 6, 2004 announcing
                  certain financial projections.

         (ii)     On March 30, 2004, we filed a Current Report on Form 8-K to
                  report the change in our certifying accountants on March 29,
                  2004.


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<PAGE>


                                   SIGNATURES


           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in Colorado Springs,
Colorado on June 2, 2004.


                                     MILITARY RESALE GROUP, INC.


                                     By: /s/ Ethan D. Hokit
                                         ----------------------------
                                         Name:  Ethan D. Hokit
                                         Title: President (Principal Accounting
                                                Officer and Principal Financial
                                                Officer)



                                       17
<PAGE>


                                  EXHIBIT INDEX


EXHIBIT NO.   DESCRIPTION
-----------   -----------

10.1          Form of Warrant issued to certain investors during the three
              months ended March 31, 2004.

10.2          Description of Registration Rights granted to certain investors
              during the three months ended March 31, 2004.

31.1          Certification of our Principal Executive Officer, Edward T.
              Whelan, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2          Certification of our Principal Financial Officer, Ethan D. Hokit,
              pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1          Certification of our Principal Executive Officer, Edward T.
              Whelan, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2          Certification of our Principal Financial Officer, Ethan D. Hokit,
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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