EXHIBIT 10.1

THIS  CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS  AMENDED,  OR ANY STATE  SECURITIES  OR BLUE SKY  LAWS,  AND MAY NOT BE SOLD,
OFFERED  FOR  SALE,  TRANSFERRED,  PLEDGED,  OR  HYPOTHECATED  UNLESS  IT  IS SO
REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                           MILITARY RESALE GROUP, INC.
                               8% CONVERTIBLE NOTE



Principal Amount:   $50,000                                       August 7, 2002


       MILITARY RESALE GROUP, INC., a New York corporation (the "Company"),  for
value received,  hereby promises to pay to Atlantic Investment Trust, or assigns
("Holder"),  on July 30, 2003, the principal  amount of Fifty  Thousand  Dollars
($50,000) (or so much thereof as shall not have been prepaid or surrendered  for
conversion)  in such coin or currency of the United  States of America as at the
time of  payment  shall be legal  tender for the  payment of public and  private
debts,  together with interest  (computed on the basis of 360-day year of twelve
30-day  months) on the  unpaid  portion of the  principal  amount  hereof at the
annual  rate of eight  percent  (8%)  from the date  hereof  until the date such
unpaid portion of such principal amount shall have become due and payable.

       Section 1.   DEFINITIONS.

              Section  1.01.  TERMS  DEFINED.  The terms defined in this Section
1.01  (except as herein  otherwise  expressly  provided  or unless  the  context
otherwise  requires)  for all purposes of this  Convertible  Note shall have the
respective meanings specified in this Section 1.01.

              COMMON  STOCK.  The  term  "Common  Stock"  means  shares  of  the
Company's Common Stock, par value $.0001 per share.

              COMPANY.  The term "Company" means MILITARY RESALE GROUP,  INC., a
New York corporation,  and any successor  corporation to the Company  (including
the corporation surviving any subsequent merger).

              CURRENT  CONVERSION  PRICE.  The term "Current  Conversion  Price"
means the Conversion Price as most recently adjusted pursuant to Section 3.06.

              EVENT OF  DEFAULT.  The term  "Event of  Default"  means any event
specified in Section  2.01,  continued for the period of time, if any, and after
the giving of notice, if any, therein designated.

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              MATURITY.  The term  "Maturity"  when  used with  respect  to this
Convertible Note means the date on which the principal (and premium,  if any) of
this Convertible Note becomes due and payable as herein provided, whether at (a)
July 30, 2003, (b) declaration of acceleration or (c) otherwise.

              REGISTRATION STATEMENT.  The term "Registration Statement" means a
Registration Statement on Form SB-2 filed by the Company with the Securities and
Exchange  Commission  pursuant to which the shares of Common Stock issuable upon
conversion of this Convertible Note are registered under the Securities Act.

              SECURITIES ACT. The term "Securities Act" means the Securities Act
of 1933, as amended.

       Section 2.    REMEDIES.

              Section 2.01.  EVENTS OF DEFAULT.  An "Event of Default" occurs if
one or more of the following shall happen (for any reason whatsoever and whether
such happening shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order,  rule or  regulation of any  administrative  or
governmental body):

                     (a)    if  default be made in the  punctual  payment of the
principal of (or premium,  if any) or interest on this Convertible Note when and
as the same shall become due and payable; or

                     (b)    the Registration Statement is not declared effective
by the  Securities  and Exchange  Commission on or before  December 30, 2002, or
such Registration Statement does not remain effective for at least 90 days; or

                     (c)    the Company pursuant to or within the meaning of any
Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an
order for relief against it in an involuntary  case, (iii) to the appointment of
a Custodian  of it or for any  substantial  part of its  property,  (iv) makes a
general assignment for the benefit of its creditors; or

                     (d)    a court of competent jurisdiction enters an order or
decree under any  Bankruptcy  Law that: (i) is for relief against the Company in
an  involuntary  case,  (ii)  appoints  a  Custodian  of the  Company or for any
substantial  part of its property,  (iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 30 days.

              The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.  The term "Custodian"  means any
receiver, trustee, assignee, liquidator,  sequestrator or similar official under
any Bankruptcy Law.

              Section 2.02.  REMEDIES.  In case any one or more of the Events of
Default  specified in Section 2.01 shall have  occurred and be  continuing,  the
Holder of this Convertible

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<PAGE>


Note may proceed to protect and enforce its rights by suit in equity,  action at
law or by other  appropriate  proceedings  or  both,  whether  for the  specific
performance of any covenant or agreement  contained in this  Convertible Note or
in aid of the exercise of any power  granted in this  Convertible  Note,  or may
proceed to enforce the payment of this  Convertible Note or to enforce any other
legal or equitable right of the Holder of this Convertible Note.

              Section 2.03. REMEDIES CUMULATIVE. No remedy herein conferred upon
the Holder of this  Convertible  Note is intended to be  exclusive  of any other
remedy  and each and  every  such  remedy  shall be  cumulative  and shall be in
addition to every other remedy given  hereunder or now or hereafter  existing at
law or in equity or by statute or otherwise.

              Section 2.04. ENFORCEMENT.  If there shall be any Event of Default
under this  Convertible  Note and this  Convertible  Note shall be placed in the
hands of an attorney for  collection,  or shall be collected  through any court,
including any bankruptcy  court, the Company promises to pay to the order of the
Holder hereof the Holder's  reasonable  attorneys' fees and court costs incurred
in  collecting or attempting to collect or securing or attempting to secure this
Convertible Note or enforcing the holder's rights with respect to any collateral
securing this  Convertible  Note, to the extent allowed by the laws of the State
of New  York or any  state in  which  any  collateral  for  this  Note  shall be
situated.

       Section 3.   CONVERSION.

              Section 3.01. RIGHT OF CONVERSION, CONVERSION PRICE.

                     Subject to and upon  compliance with the provisions of this
Section 3, following the date the Registration  Statement is declared  effective
by the Securities and Exchange  Commission,  the Holder shall have the right, at
his option, at any time during usual business hours to convert the principal and
accrued  interest of this  Convertible  Note owned by the Holder into fully paid
and  nonassessable  shares of Common Stock that have been  registered  under the
Securities Act pursuant to the Registration  Statement,  at the rate of $0.50 of
principal for each share of Common Stock  (provided,  that the closing price per
share of Common  Stock,  as reported on the OTC Bulletin  Board,  on the date of
conversion, is at least $0.75 per share, or if such price is less than $0.75 per
share, a proportionate  reduction to the $0.50 price,  but in no event less than
$0.25 per share, so that the Holder will be able to immediately sell such shares
on the OTC  Bulletin  Board and  receive  a 50% rate of return on the  principal
amount of this Note) (the  "Conversion  Price"),  which price per share shall be
payable by surrender of this Convertible Note.

              Section 3.02. MANNER OF EXERCISE.

                     (a)    In order  to  exercise  the  conversion  right,  the
Holder of this  Convertible  Note shall surrender this  Convertible  Note at the
office of the Company,  accompanied by written notice to the Company stating (i)
that the Holder  elects to convert  this  Convertible  Note or, if less than the
entire principal amount of this Convertible Note is to be converted, the portion
thereof (a multiple of $1,000) to be converted, and (ii) the name or names (with
addresses) in which the certificate or  certificates  for shares of Common Stock
issuable on

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<PAGE>


such conversion shall be issued.  Convertible  Notes  surrendered for conversion
shall be accompanied by proper assignment thereof to the Company or in blank for
transfer if the shares are to be issued in a name other than that of the Holder.

                     (b)    In  the  event  this   Convertible   Note  which  is
converted  in part only,  upon such  conversion  the Company  shall  execute and
deliver to the Holder, at the expense of the Company,  a new Convertible Note of
authorized denominations in principal amount equal to the unconverted portion of
this Convertible Note.

              Section 3.03. ISSUANCE OF SHARES OF COMMON STOCK ON CONVERSION.

                     (a)    As promptly as practicable after the receipt of such
notice and the  surrender of this  Convertible  Note as  aforesaid,  the Company
shall issue, at its expense,  and shall deliver to the Holder, or on his written
order, at the aforesaid  office of the Company (i) a certificate or certificates
for the number of full shares of Common Stock  issuable  upon the  conversion of
this Convertible Note (or specified portion thereof),  and (ii) a certificate or
certificates for any fractional  shares of Common Stock issuable upon conversion
of this  Convertible  Note (or specified  portion  thereof) or, at the Company's
option, cash in lieu of scrip for any fraction of a share to which the Holder is
entitled upon conversion as provided in Section 3.05.

                     (b)    Such  conversion   shall  be  deemed  to  have  been
effected  immediately  prior to the close of business  on the date  ("Conversion
Date") on which the  Company  shall  have  received  both  such  notice  and the
surrendered  Convertible  Note as aforesaid,  and at such time the rights of the
Holder of this  Convertible  Note shall cease and the Person or Persons in whose
name or names any certificate or  certificates  for shares of Common Stock shall
be issuable  upon such  conversion  shall be deemed to have become the holder or
the Holder of record of the shares represented thereby.

                     (c)    In the event this  Convertible  Note is converted in
whole or in part into shares of Common Stock pursuant to Section 3.01(b) hereof,
the certificates  representing  such shares shall contain an appropriate  legend
indicating  that the shares  represented  thereby  are  "restricted  securities"
within the meaning of the  Securities  Act,  and may not be  transferred  unless
registered  under the  Securities  Act or  transferred  pursuant to an exemption
therefrom.


              Section 3.04. NO ADJUSTMENTS FOR INTEREST OR DIVIDENDS. No payment
or  adjustment  shall be made by or on behalf of the  Company  on account of any
interest  accrued on this  Convertible  Note  surrendered  for  conversion or on
account of any cash  dividends  on the shares of Common  Stock  issued upon such
conversion  which were  declared  for  payment to the Holder of shares of Common
Stock of record as of a date  prior to the  Conversion  Date.  All  payments  of
accrued  interest on this  Convertible  Note shall be made in cash or additional
stock at the Conversion Price, at the Holder's option.

              Section 3.05.  FRACTIONAL SHARES. The Company,  at its option, may
issue


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fractional  shares of Common Stock upon any conversion of this  Convertible Note
or, in lieu of any fraction of a share of Common Stock to which any Holder would
otherwise be entitled  upon  conversion of this  Convertible  Note (or specified
portions thereof), the Company may pay a cash adjustment for such fraction in an
amount equal to same fraction of the Conversion Price per share.

              Section 3.06. ADJUSTMENT OF CONVERSION PRICE. The Conversion Price
shall be adjusted as set forth in this section.

                     (a)    In  the  event  that  the  Company  shall  make  any
distribution  of its assets upon or with respect to its shares of Common  Stock,
as a liquidating or partial  liquidating  dividend,  or other than as a dividend
payable out of earnings or any surplus legally available for dividends under the
laws  of the  state  of  incorporation  of  the  Company,  the  Holder  of  this
Convertible  Note,  upon the  exercise of his right to convert  after the record
date for such  distribution  or, in the absence of a record date, after the date
of such  distribution,  receive,  in addition to the shares  subscribed for, the
amount of such  assets  (or,  at the option of the  Company,  a sum equal to the
value  thereof  at the  time of  distribution  as  determined  by the  Board  of
Directors  in its sole  discretion)  which  would have been  distributed  to the
Holder if he had exercised his right to convert  immediately prior to the record
date for such  distribution  or, in the  absence of a record  date,  immediately
prior to the date of such distribution.

                     (b)    In case at any time the Company shall  subdivide its
outstanding  shares of Common Stock into a greater number of shares, the Current
Conversion  Price  in  effect  immediately  prior to such  subdivision  shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company  shall be  combined  into a smaller  number of shares,  the
Current  Conversion Price in effect  immediately prior to such combination shall
be proportionately increased.

                     (c)    If any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation,  or the sale, transfer or lease of all or substantially all
of its assets to another  corporation,  shall be effected in such a way that the
holder of shares of Common Stock shall be entitled to receive shares, securities
or assets with respect to or in exchange for shares of Common Stock,  then, as a
condition of such  reorganization,  reclassification,  consolidation,  merger or
sale, the Company or such successor or purchasing  corporation,  as the case may
be, shall  execute an  amendment to this  Convertible  Note  providing  that the
Holder of this  Convertible  Note shall have the right  thereafter and until the
expiration of the period of convertibility to convert this Convertible Note into
the kind and  amount  of  shares,  securities  or  assets  receivable  upon such
reorganization,  reclassification,  consolidation, merger or sale by a holder of
the number of shares of Common Stock into which this Convertible Note might have
been  converted  immediately  prior  to such  reorganization,  reclassification,
consolidation,  merger or sale,  subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
3.

                     (d)    Upon  such   adjustment  of  the  Conversion   Price
pursuant to the


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<PAGE>


provisions of this Section 3.06, the number of shares  issuable upon  conversion
of this  Convertible  Note  shall be  adjusted  to the  nearest  full  amount by
multiplying a number equal to the Conversion Price in effect  immediately  prior
to such  adjustment  by the  number  of shares of  Common  Stock  issuable  upon
exercise of this  Convertible  Note  immediately  prior to such  adjustment  and
dividing the product so obtained by the adjusted Conversion Price.

              Section 3.07. COVENANT TO RESERVE SHARES FOR CONVERSION.

                     The Company covenants that it will at all times reserve and
keep  available out of its  authorized  shares of Common  Stock,  such number of
shares of Common Stock as shall then be deliverable  upon the conversion of this
Convertible Note. All shares of Common Stock which shall be deliverable shall be
duly and validly issued and fully paid and nonassessable.

              Section 3.08. NOTICE OF CHANGE OF CONVERSION  PRICE.  Whenever the
Conversion  Price is adjusted,  as herein  provided,  the Company shall promptly
send to the Holder a certificate  of a firm of  independent  public  accountants
(who may be the accountants  regularly  employed by the Company) selected by the
Board of Directors  setting forth the Conversion Price after such adjustment and
setting forth a brief  statement of the facts  requiring such  adjustment.  Such
certificate shall be conclusive evidence of the correctness of such adjustment.

       Section 4. MISCELLANEOUS.

              Section  4.01.  OPTIONAL  PREPAYMENTS.  The Company shall have the
privilege, at any time and from time to time prior to Maturity, upon at least 90
days prior written  notice to the Holder,  of prepaying this  Convertible  Note,
either  in  whole  or in  part,  by  payment  of the  principal  amount  of this
Convertible Note, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment,  without premium or penalty; provided,  however,
that nothing in this Section 4.01 shall prohibit the Holder from converting this
Convertible  Note in accordance  with Section 3 hereof after the date of receipt
of notice of prepayment  and prior to the date of receipt in cash of all amounts
to be prepaid.

              Section  4.02.  GOVERNING  LAW.  This  Convertible  Note  shall be
construed in  accordance  with the laws of the State of New York  applicable  to
contracts entered into and to be performed wholly within said State.

              Section  4.03.   SUCCESSORS   AND  ASSIGNS.   All  the  covenants,
stipulations,  promises and agreements in this  Convertible Note contained by or
on behalf of the  Company  shall bind its  successors  and  assigns,  whether so
expressed or not.

              Section 4.04.  COURSE OF DEALING;  NO WAIVER. No course of dealing
between the Company and the Holder shall operate as a waiver of any right of the
Holder and no delay on the part of the Holder in exercising any right  hereunder
shall so operate.

              Section 4.05. WAIVER OF COMPLIANCE. Any term, covenant,  agreement
or  condition  hereof may be  amended,  or  compliance  therewith  may be waived
(either generally or

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in a particular  instance and either  retroactively  or  prospectively),  if the
Company shall have obtained the agreement or consent in writing of the Holder.

              Section  4.06.  OTHER  PROVISIONS.   The  Company  waives  demand,
presentment,  protest, notice of dishonor and any other form of notice, that may
be required to hold the Company liable on this Note.

       IN WITNESS  WHEREOF,  the undersigned has caused this Convertible Note to
be  signed  in  its  corporate  name  by  one of  its  officers  thereunto  duly
authorized, and to be dated as of the date first written above.

                                           MILITARY RESALE GROUP, INC.



                                           By: /s/ EDWARD T. WHELAN
                                               ---------------------------------
                                                   Edward T. Whelan
                                                   Chief Executive Officer

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