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.

<PAGE>

                  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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<PAGE>

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  Conver-
sion 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  reclass-
ification 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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<PAGE>

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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