Edgar Filing: MILITARY RESALE GROUP INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 2001
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MILITARY RESALE GROUP, INC.
(Name of Small Business Issuer in Its Charter)

NEW YORK 5141 11-2665282
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)

2180 EXECUTIVE CIRCLE
COLORADO SPRINGS, COLORADO 80906
(719) 391-4564
(Address and Telephone Number of Principal Executive Offices)

2180 EXECUTIVE CIRCLE
COLORADO SPRINGS, COLORADO 80906
(Address of Principal Place of Business or Intended Principal Place of Business)

ETHAN D. HOKIT, PRESIDENT
MILITARY RESALE GROUP, INC.
2180 EXECUTIVE CIRCLE
COLORADO SPRINGS, COLORADO 80906
(719) 391-4564
(Name, address and telephone number of agent for service)
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COPIES TO:
Eric M. Hellige, Esq.
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022-4441
(212) 421-4100

CALCULATION OF REGISTRATION FEE

===================================================================================================================================
Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Aggregate Offering Aggregate Offering Amount of
to be Registered Registered Price Per Share(1) Price(1) Registration Fee(2)
---------------------------- -------------------------- -------------------------- -------------------------- ---------------------

Common Stock, $0.001 par 5,000,000 shares $1.00 $5,000,000 $1,195.00
value
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the
maximum offering price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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MILITARY RESALE GROUP, INC.

5,000,000 SHARES
COMMON STOCK

Military Resale Group, Inc., a New York corporation, is offering up to
5,000,000 shares of its common stock at a price of $1.00 per share. We may offer
the shares for cash from time to time from the date of this prospectus until the
termination of this offering.

Our common stock is traded in the over-the-counter market and prices
are reported on the OTC Bulletin Board under the symbol "MRGI."

See "Risk Factors" beginning on page 3 for risks of an investment in
the securities offered by this prospectus, which you should consider before your
purchase any shares.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

We are offering the shares on a "best efforts, no minimum" basis. In a
"best efforts, no minimum offering," we do not need to reach a specific level of
subscriptions before the proceeds are available to us. There will be no escrow
of funds. There is no underwriter assisting us in the offer and sale of the
shares.

We intend to keep the offering open until May 30, 2002. However, if we
have not sold all of the shares by that date, we may extend the offering period
at our sole discretion for an additional 120 days, and we may offer the
remaining shares on a continuous basis thereafter. We may accept or reject any
subscription in whole or in part. If your subscription is rejected, we will
promptly return your investment to you without interest or other deductions. We
may terminate this offering prior to the expiration date.

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Underwriting Discounts and
Price to Public(2) Commissions(1)

Per Share............................. $1.00 $0.00
Total................................. $5,000,000 $0.00
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(1) We have not engaged a selling agent or underwriter. See "Plan of
Distribution."

(2) Assumes the sale of the maximum offered by this prospectus before deducting
expenses, including professional fees, printing costs, and filing fees
related to the offering payable by us, estimated at $100,000.

The date of this prospectus is __________, 2002

We have not registered the sale of the shares under the securities laws
of any state. Brokers or dealers effecting transactions in the shares should
confirm that the shares have been registered under the securities laws of the
state or states in which sales of the shares occur as of the time of such sales,
or that there is an available exemption from the registration requirements of
the securities laws of such states.

This prospectus is not an offer to sell any securities other than the
shares. This prospectus is not an offer to sell securities in any circumstances
in which such an offer is unlawful.

We have not authorized anyone, including any salesperson or broker, to
give oral or written information about this offering, Military Resale Group,
Inc., or the shares that is different from the information included in this
prospectus. You should not assume that the information in this prospectus, or
any supplement to this prospectus, is accurate at any date other than the date
indicated on the cover page of this prospectus or any supplement to it.

TABLE OF CONTENTS
Page

Prospectus Summary ...................................................... 1
Risk Factors ............................................................ 3
Special Note Regarding Forward-Looking Statements ....................... 11
Use of Proceeds ......................................................... 11
Dilution ................................................................ 12
Capitalization .......................................................... 13
Determination of Offering Price ......................................... 15
Market for Common Equity and Related Shareholder Matters ................ 15
Management's Discussion and Analysis or Plan of Operation ............... 17
Business ................................................................ 20
Management .............................................................. 28
Principal Stockholders .................................................. 31
Certain Relationships and Related Transactions .......................... 33
Description of Securities ............................................... 34
Plan of Distribution .................................................... 35
Legal Matters ........................................................... 35
Experts ................................................................. 35
Where You Can Find Additional Information ............................... 36
Index to Financial Statements ........................................... F-1

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PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN THE SHARES. YOU ARE URGED TO READ THIS PROSPECTUS IN ITS
ENTIRETY.
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We are a regional distributor of grocery and household items
specializing in distribution to the military market. We distribute a wide
variety of items, including fresh and frozen meat and poultry, seafood, frozen
foods, canned and dry goods, beverages, dairy products, paper goods and cleaning
and other supplies. Our operations are currently directed to servicing the
commissaries and exchanges at six military installations located in Colorado,
Wyoming and South Dakota, including the Air Force Academy, located in Colorado
Springs, Colorado. We are approved by the Department of Defense to contract with
military commissaries and exchanges.

Military commissaries are large supermarket-type stores operated by the
United States Defense Commissary Agency ("DeCA") to provide grocery items for
sale to authorized patrons at the lowest practicable prices in facilities
designed and operated under standards similar to those in commercial food
stores. As of September 2000, there were 296 commissaries worldwide, of which
182 were located in the Continental U.S. and 114 were located overseas.
Commissaries are authorized by law to sell goods only to authorized patrons,
which include the approximately 1.4 million active duty U.S. military personnel,
their dependents and certain authorized reservists and retirees. As of September
30, 2000, these authorized patrons totaled approximately 13.7 million
individuals. Annual worldwide commissary sales totaled more than $5 billion in
2000.

We were formed as a New York corporation on August 31, 1983 under the
name Owl Capital Corp. On June 17, 1988, we changed our name to Bactrol
Technologies, Inc. On November 15, 2001, we acquired 98.2% of the issued and
outstanding shares of Military Resale Group, Inc., a Maryland corporation, in a
reverse acquisition (the "Reverse Acquisition") and subsequently changed our
name to Military Resale Group, Inc. In connection with the Reverse Acquisition,
we commenced operations in our current line of business. Prior to the Reverse
Acquisition, we were inactive and had nominal assets and liabilities. Our
principal address is 2180 Executive Circle, Colorado Springs, Colorado 80906. In
this Prospectus, reference to the terms "Military Resale Group," "we," "us" and
"the company" refer collectively to Military Resale Group, Inc. (a New York
corporation) unless otherwise indicated.

ABOUT THIS OFFERING

We are offering up to 5,000,000 shares of common stock at a price of
$1.00 per share. At December 10, 2001, we had 6,630,004 shares of common stock
issued and outstanding. If we were to sell all of the shares offered by us in
this offering, there would be 11,630,004 shares of common stock outstanding
after the offering. There is no underwriter of this offering. We are offering
the shares on a best efforts, no minimum basis. This means that we may sell as
many or as few shares as we determine and we may terminate the offering at any
time before we have sold all 5,000,000 shares. We will not escrow any of the
proceeds we receive from this offering. There is no minimum offering and the
proceeds from any subscription accepted by us will be immediately available to
us. We may reject any subscription in whole or in part. If we reject a
subscription we will return the investor's check or other funds without
deduction and without the payment of any interest.

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Common Stock Offered.......................................... 5,000,000 shares
Common Stock Outstanding Immediately

Prior to the Offering...................................... 6,630,004 shares

Common Stock to be Outstanding Following

the Offering................................................ 11,630,004 shares

Use of Proceeds............................................... The net proceeds of this offering will be used (i) to repay
indebtedness; and (ii) for working capital and general
purposes.

OTC Bulletin Board Ticker Symbol.............................. MRGI

SELECTED FINANCIAL INFORMATION

The selected financial information presented below is derived from and
should be read in conjunction with our financial statements, including notes
thereto, appearing elsewhere in this Prospectus. See "Financial Statements."

MILITARY RESALE GROUP, INC.

SUMMARY OPERATING INFORMATION

FISCAL YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
1999 2000 2000 2001
---- ---- ---- ----

Net sales ....................... $ 3,117,010 $ 4,480,305 $ 3,385,383 $ 3,516,543
Net loss ........................ (145,948) (13,673) (10,186) (184,486)
Net loss per common share ....... $ (0.03) $ (0.002) $ (0.06) $ (0.02)
Weighted average number of common
shares outstanding ............ 5,360,000 5,360,000 5,360,000 5,410,000

SUMMARY BALANCE SHEET INFORMATION

DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, 2000
1999 2000 2000 AS ADJUSTED(1)
---- ---- ---- --------------

Working capital ......................... $ (169,233) $ (161,382) $ (233,114) $ 4,480,886
Total assets............................. 517,509 650,343 731,984 5,364,343
Total liabilities ....................... 563,385 709,892 1,047,519 543,892
Stockholders' equity .................... (45,876) (59,549) (315,535) 4,820,451

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(1) Gives effect to the application of the net proceeds from the sale of
5,000,000 shares in this offering as set forth under "Use of Proceeds."

2
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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING
SHARES IN THIS OFFERING. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY RISKS WE FACE. THESE RISKS ARE THE ONES WE CONSIDER TO BE SIGNIFICANT TO
YOUR DECISION WHETHER TO INVEST IN OUR COMMON STOCK AT THIS TIME. WE MIGHT BE
WRONG. THERE MAY BE RISKS THAT YOU IN PARTICULAR VIEW DIFFERENTLY THAN WE DO,
AND THERE ARE OTHER RISKS AND UNCERTAINTIES THAT ARE NOT PRESENTLY KNOWN TO US
OR THAT WE CURRENTLY DEEM IMMATERIAL, BUT THAT MAY IN FACT IMPAIR OUR BUSINESS
OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION COULD BE SERIOUSLY HARMED, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR
INVESTMENT.

OUR OPERATING HISTORY IS LIMITED, SO IT WILL BE DIFFICULT FOR YOU TO EVALUATE
OUR BUSINESS IN MAKING AN INVESTMENT DECISION.

Although, we were incorporated in 1983, we commenced operations in our
current line of business in November 2001 (at which time we acquired Military
Resale Group, Inc., a Maryland corporation that commenced operations in November
1998) and have a limited operating history. We are still in the early stages of
our development, which makes the evaluation of our business operations and our
prospects difficult. Before buying our common stock, you should consider the
risks and difficulties frequently encountered by early stage companies. These
risks and difficulties, as they apply to us in particular, include:

o potential fluctuations in operating results and uncertain growth
rates;

o limited market acceptance of the products we distribute;

o concentration of our revenues in a single market;

o our dependence on the military market for most of our revenue;

o our need to expand our direct sales forces;

o our need to manage rapidly expanding operations; and

o our need to attract and train qualified personnel.

We have incurred losses since inception and we may be unable to achieve
profitability or generate positive cash flow.

We incurred net losses of $43,372 in 1998, $145,948 in 1999, $13,673 in
2000 and $334,236 for the nine months ended September 30, 2001 and we may be
unable to achieve profitability in the future. If we continue to incur net
losses in future periods, we may be unable to achieve one or more key elements
of our strategy, including the following:

o increase the number of products we distribute;

o increase our sales and marketing activities, including the number of
our sales personnel;

o increase the number of regions in which we distribute products; or

o acquire additional distributorships.

As of September 30, 2001, we had an accumulated deficit of
approximately $543,985. We may not achieve profitability if our revenues
increase more slowly than we expect, or if operating expenses exceed our
expectations or cannot be adjusted to compensate for lower than expected
revenues. If we do

achieve profitability, we may be unable to sustain or increase profitability on
a quarterly or annual basis. Any of the factors discussed above could cause our
stock price to decline.

WE ARE DEPENDENT ON THIRD PARTY PRODUCERS AND MANUFACTURERS FOR THE PRODUCTS WE
DISTRIBUTE.

Although we have good working relationships with our principal
suppliers, we do not have long-term arrangements with these entities. Our
relationships with the suppliers for which we distribute products may be
terminated at any time by any supplier. Therefore, we cannot be assured that we
will be able to maintain or increase the number of producers and manufacturers
for which we distribute and products that we currently distribute and sell. Any
disruption in our relationship with the producers and manufacturers for which we
distribute goods could result in the termination of our representation of such
producers and manufacturers and their products, which could have a material
adverse effect on our business and results of operations.

OUR REVENUES COULD BE NEGATIVELY AFFECTED BY THE LOSS OF A MAJOR SUPPLIER.

We derive a significant portion of our revenues from the distribution
of products that are manufactured by a limited number of suppliers. The loss of
any major supplier could dramatically reduce our revenues. In 2000, Tyson Foods,
Inc. accounted for over 45% of our revenues, Johnson & Johnson and Leiner Health
each accounted for over 20% of our revenues and two other suppliers each
accounted for nearly 10% of our revenues. In the first nine months of 2001, our
three largest suppliers (Tyson Foods Inc., Johnson & Johnson and Leiner Health)
accounted for approximately 80% of our revenues.

VARIOUS CHANGES IN THE DISTRIBUTION AND RETAIL MARKETS IN WHICH WE OPERATE HAVE
LED AND MAY CONTINUE TO LEAD TO REDUCED SALES AND MARGINS AND LOWER
PROFITABILITY FOR OUR CUSTOMERS AND, CONSEQUENTLY, FOR US.

The distribution and retail markets in which we operate are undergoing
accelerated change as distributors and retailers, including military
commissaries, seek to lower costs and provide additional services in an
increasingly competitive environment. An example of this is the growing trend of
large self-distributing chains consolidating to reduce costs and gain
efficiencies. Eating away from home and alternative format food stores, such as
warehouse stores and supercenters, have taken market share from traditional
supermarket operators, including military commissaries, some of which are our
customers. Venders, seeking to ensure that more of their promotional fees and
allowances are used by retailers to increase sales volume, increasingly direct
promotional dollars to large self-distributing chains. We believe that these
changes have led to reduced sales, reduced margins and lower profitability among
many of our customers and, consequently, for us. If the strategies we have
developed in response to these changing market conditions are not successful, it
could harm our financial condition and business prospects.

CONSUMABLE GOODS DISTRIBUTION IS A LOW-MARGIN BUSINESS AND IS SENSITIVE TO
ECONOMIC CONDITIONS.

We derive most of our revenues from the consumable goods distribution
industry. This industry is characterized by a high volume of sales with
relatively low profit margins. A significant portion of our sales are at prices
that are based on product cost plus a percentage markup. Consequently, our
results of operations may be negatively impacted when the price of consumable
goods go down, even though our percentage markup may remain constant. The
consumable goods industry is also sensitive to national and regional economic
conditions, and the demand for our consumable goods has been adversely affected
from time to time by economic downturns. Additional, our distribution business
is sensitive to increases in fuel and other transportation-related costs.

REDUCTIONS IN THE ARMED FORCES MAY ADVERSELY AFFECT OUR BUSINESS AND PROSPECTS.

We distribute and sell products for resale to active and retired
military personnel. Since the end of the Cold War, the United States has
streamlined its Armed Forces by reducing the number of military personnel and
closing military bases. Reductions in funding for force modernization and
military end strength have outpaced reductions in support services and overhead.
Proposals have been made to decrease the cost to taxpayers of operating
commissaries, including:

o increasing the surcharge charged to commissary patrons;

o merging commissaries with exchanges; and

o privatizing the commissary system.

Funding for commissaries has decreased since the early 1990s. In October 1996,
DeCA became a "Performance Based Operation," which has resulted in DeCA's
obtaining special waivers from Federal procurement regulations for the purpose
of striving to operate more efficiently by adopting some characteristics of
private-sector companies. The impact of these trends on our business is
uncertain and could have a material adverse effect on our business or results of
operations.

THERE IS NO MINIMUM NUMBER OF SHARES TO BE SOLD IN THIS OFFERING.

There is no minimum number of shares of common stock that we must sell
in this offering prior to the initial closing, and we expect to accept
subscriptions for shares of common stock as they are received. As a result,
there can be no assurance that we will raise sufficient funds in this offering
to carry out our business plan as currently proposed, or that the net proceeds
from the initial subscriptions for shares will be in an amount sufficient to
enable us to continue operations in any meaningful manner.

WE MAY NEED ADDITIONAL FINANCING TO IMPLEMENT OUR BUSINESS PLAN.

Assuming at least 500,000 shares of common stock offered hereby are
sold in this offering, we believe the net proceeds from this offering, together
with our projected cash flow from operations, will be sufficient to fund our
operations as currently conducted for at least the next 12 months. Such belief,
however, cannot give rise to an assumption that our cost estimates are accurate
or that unforeseen events will not occur that will require us to seek additional
funding to meet our operational needs. As a result, we may require substantial
additional financing in order to implement our business objectives. There can be
no assurances that we will be able to obtain additional funding when needed, or
that such funding, if available, will be obtainable on terms we find acceptable.
In the event our operations do not generate sufficient cash flow, or we cannot
obtain additional funds if and when needed, we may not be able to:

o attract additional suppliers;

o expand into additional regions;

o develop or enhance our product line;

o take advantage of future opportunities; or

o respond to competitive pressures or unanticipated requirements.

For additional information on our anticipated future capital requirements, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

WE ARE DEPENDENT ON THIRD PARTY BROKERS TO STOCK AND DISPLAY THE PRODUCTS WE
DISTRIBUTE.

We rely on a network of brokers to ensure that sufficient inventories
of products are received by commissaries and exchanges and that products are
properly stocked and displayed. Our arrangements with brokers may be terminated
at any time by any broker. Although we have good working relationships with our
brokers, there can be no assurance that we will be successful in maintaining our
existing arrangements with brokers or in acquiring, or entering into
arrangements with, additional brokers. In addition, we do not have exclusive
relationships with the brokers we utilize. Many of these brokers may represent
other products in addition to the products we distribute. There can be no
assurance that the representation by brokers of multiple products does not
result in conflicts of interest.

WE CARRY ONLY A LIMITED AMOUNT OF PRODUCT LIABILITY INSURANCE AND ANY
SIGNIFICANT PRODUCT LIABILITY CLAIM MAY ADVERSELY AFFECT US.

The marketing and sale of products of the type we distribute entails a
risk of product liability claims by consumers and others. Although we have
obtained product liability insurance in the amount of $2,000,000, there is no
assurance that such policy will be sufficient to cover us against all possible
liabilities or that the policy can be maintained in force at a cost we find
acceptable. In the event of a successful product liability claim against us,
lack or insufficiency of insurance coverage could have a material adverse effect
on our business and results of operations.

FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY CAUSE OUR STOCK PRICE TO
DECLINE.

Our quarterly operating results have varied significantly in the past
and will likely fluctuate significantly in the future. Significant annual and
quarterly fluctuations in our results of operations may be caused by, among
other factors:

o the volume of revenues we have generated;

o the timing of our announcements for the distribution of new products,
and any such announcements by our competitors;

o the acceptance of the products we distribute in the military
marketplace; and

o general economic conditions.

There can be no assurance that the level of revenues and profits, if
any, achieved by us in any particular fiscal period will not be significantly
lower than in other, including comparable, fiscal periods. We believe
quarter-to-quarter comparisons of our revenues and operating results are not
necessarily meaningful and should not be relied on as indicators of future
performance. Operating expenses are based on management's expectations of future
revenues and are relatively fixed in the short term. We plan to increase
operating expenses to:

o expand our product line;

o expand our sales and marketing operations;

o increase our services and support capabilities; and

o improve our operational and financial systems.

If our revenues do not increase along with these expenses, our business will be
seriously harmed and net losses in a given quarter would be larger than
expected. It is possible that in some future quarter our operating results may
be below the expectations of public market analysts or investors, which could
cause a reduction in the market price of our common stock.

WE MAY PURSUE ACQUISITIONS THAT BY THEIR NATURE PRESENT RISKS AND THAT MAY NOT
BE SUCCESSFUL.

ACQUISITION STRATEGY. Our growth strategy includes the acquisition of
additional distributors and, possibly, of brokers in the business of selling
consumer goods in the military market. Our ability to accomplish our acquisition
strategy will depend upon a number of factors including, among others, our
ability to:

o identify acceptable acquisition candidates;

o consummate the acquisition of such businesses on terms that we find
acceptable;

o retain, hire and train professional management and sales personnel at
each such acquired business; and

o promptly and profitably integrate the acquired business operations
into our then-existing business.

No assurance can be given that we will be successful with respect to such
factors or that any acquired operations will be profitable or be successfully
integrated into our then-existing business without substantial costs, delays or
other problems. In addition, to the extent that consolidation becomes more
prevalent in the industry, the prices for attractive acquisition candidates may
be bid to higher levels. In any event, there can be no assurance that businesses
acquired in the future will achieve sales and profitability that justify the
investments we make therein.

CAPITAL REQUIREMENTS OF ACQUISITIONS. Acquiring additional broker or
distribution businesses will require additional capital and may have a
significant impact on our financial position. We currently intend to finance
future acquisitions by using our common stock for all or a portion of the
consideration to be paid. In the event our common stock does not maintain
sufficient value, or potential acquisition candidates are unwilling to accept
our common stock as consideration for the sale of their businesses, we may be
required to utilize more of our cash resources, if available, in order to
continue our acquisition program. If we do not have sufficient cash resources,
our growth could be limited unless we are able to obtain capital through the
issuance of additional debt or the issuance of one or more series or classes of
our equity securities, which could have a dilutive effect on our
then-outstanding capital stock. We do not currently have a line of credit or
other lending arrangement with a lending financial institution, and there can be
no assurance that we will be able to obtain such an arrangement on terms we find
acceptable or sufficient for our needs, if at all, should we determine to do so.
Acquisitions could result in the accumulation of substantial goodwill and
intangible assets, which may result in substantial amortization charges that
could our reduce reported earnings.

ENVIRONMENTAL RISKS ASSOCIATED WITH ACQUISITIONS. Although we intend to
perform a detailed investigation of each business that we acquire, there may
nevertheless be liabilities that we fail or are unable to discover, including
liabilities arising from non-compliance with environmental laws by prior owners,
and for which we, as a successor owner, may be responsible. We will seek to
minimize the impact of these liabilities by obtaining indemnities and warranties
from the seller that may be supported by deferring payment of a portion of the
purchase price. However, these indemnities and warranties, if

obtained, may not fully cover the liabilities due to their limited scope, amount
or duration, the financial limitations of the indemnitor or warrantor, or other
reasons.

THE LOSS OF THE SERVICES OR ONE OR MORE OF OUR EXECUTIVE OFFICERS OR KEY
EMPLOYEES COULD HARM OUR BUSINESS.

Our success will be dependent on the efforts of Ethan D. Hokit, our
President. We have no employment agreement with Mr. Hokit. In addition, we have
no key man life insurance on the life of any of our employees, and we have not
entered into any employment agreements or non-competition arrangements with any
of our key personnel. Our key personnel at the present time, however, are our
executive officers and directors, and we believe such persons have certain
fiduciary obligations to our company. The loss of the services of Mr. Hokit, or
our inability to attract and retain other qualified personnel, may adversely
effect our business and prospects.

OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS.

Assuming all shares of common stock offered hereby are sold in this
offering, upon completion of this offering our executive officers and directors
and their affiliates will beneficially own, in the aggregate, approximately
39.04% of our outstanding common stock. As a result, these stockholders will be
able to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, which could delay or present an outside party from
acquiring or merging with us. For a full presentation of the equity ownership of
these stockholders, see "Principal Stockholders."

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE PUBLIC OFFERING PRICE.

There has been only a limited public market for our common stock prior
to this offering. The public offering price for our common stock has been
determined arbitrarily by our management and bears no relationship to our
assets, book value, net worth or other economic or recognized criteria of value.
This public offering price may vary from the market price of our common stock
after the offering. If you purchase shares of common stock, you may not be able
to resell those shares at or above the public offering price. The market price
of our common stock may fluctuate significantly in response to factors, some of
which are beyond our control, including the following:

o actual or anticipated fluctuations in our operating results;

o changes in market valuations of other companies in our industry;

o announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;

o additions or departures of key personnel; and

o sales of common stock in the future.

In addition, the stock market has experienced extreme volatility that
often has been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless of our
performance.

You should read the information under the heading "Market For Common
Equity and Related Shareholder Matters" for a more complete discussion of the
factors which were considered in determining the public offering price of our
common stock.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
SHARES.

The public offering price is expected to be substantially higher than
the book value per share of our outstanding common stock immediately after this
offering. For example, if we sell all 5,000,000 shares offered hereby and you
purchase common stock in this offering, you will incur immediate dilution of
approximately $0.58 in the book value per share of our common stock from the
price you pay for our common stock. If we sell half (2,500,000) of the shares
offered hereby, you will incur immediate dilution of approximately $0.74 in such
book value per share, and if we sell only 500,000 of the shares offered hereby,
you will incur immediate dilution of $0.94 in such book value per share. For
additional information on these calculations, see "Dilution."

WE FACE SIGNIFICANT COMPETITION.

We operate in a highly competitive industry. Many companies are engaged
in the sale and distribution of consumer products to the military market, and we
compete on the basis of price, quality and assortment, schedules and reliability
of deliveries and the range and quality of services provided. Many of our
competitors have financial resources, research and development capabilities,
marketing staffs and facilities substantially greater than ours.

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS

This Prospectus contains certain forward-looking statements regarding
the plans and objectives of management for future operations, including plans
and objectives relating to the development of our business. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. Our plans and objectives are based on a
successful execution of our business strategy and assumptions that we will be
profitable, that the market for the products we distribute will not change
materially or adversely, and that there will be no unanticipated material
adverse change in our operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond our control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate. As a result, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by us or any other person that the objectives and plans of ours
will be achieved.

SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE.

We currently have 5,448,400 shares of our common stock outstanding that
are "restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). In general,
under Rule 144, a person who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period a number of shares of
common stock that does not exceed the greater of 1% of the then outstanding
shares of our common stock or the average weekly trading volume in such shares
during the four calendar weeks prior to such sale. Rule 144 also permits, under
certain circumstances, the sale of shares without any quantity or other

limitation by a person who is not one of our affiliates and who has satisfied a
two-year holding period. Any substantial sale of restricted securities under
Rule 144 could have a significant adverse effect on the market price of our
common stock. In addition, the sale of these shares could impair our ability to
raise capital through the additional sale of stock.

We have reserved from the authorized, but unissued, common stock
1,500,000 shares of our common stock for issuance to key employees, officers,
directors and consultants pursuant to options granted or available for grant
under our existing stock option plan and have reserved 1,000,000 shares of our
common stock for issuance upon exercise of warrants issued to Ronald
Steenbergen, a consultant to the company. The existence of any outstanding
options issued under our stock option plan, and other options or warrants may
prove to be a hindrance to future financings, since the holders of such warrants
and options may be expected to exercise them at a time when we would otherwise
be able to obtain additional equity capital on terms we would find more
favorable.

WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE.

The holders of our common stock are entitled to receive dividends when,
as and if declared by our board of directors out of funds legally available
therefor. To date, we have not paid any cash dividends. Our board of directors
does not intend to declare any cash dividends in the foreseeable future, but
instead intends to retain all earnings, if any, for use in our business
operations.

WE HAVE NOT RETAINED AN UNDERWRITER TO ASSIST US IN THE OFFER AND SALE OF SHARES
OFFERED HEREBY, AND THERE IS A RISK THAT WE WILL BE UNABLE TO SELL THE SHARES WE
ARE OFFERING.

This offering is a self-underwritten offering, and therefore there is
no guarantee that we will sell all or any part of the shares offered in this
offering. We will require additional funding to continue our business, and there
is no assurance that we will be able to locate additional funding.

OUR COMMON STOCK IS SUBJECT TO SPECIAL REGULATIONS GOVERNING THE SALE OF PENNY
STOCKS, WHICH COULD MAKE IT MORE DIFFICULT FOR YOU TO SELL YOUR SHARES IN THE
FUTURE.

Our stock is considered a penny stock. Penny stocks are subject to
special regulations, which may make them more difficult to trade on the open
market.

Our common stock trades on the OTC Bulletin Board under the ticker
symbol "MRGI." Securities in the OTC market are generally more difficult to
trade than those on the Nasdaq National Market, the Nasdaq SmallCap Market or
the major stock exchanges. In addition, accurate price quotations are more
difficult to obtain. Additionally, our common stock is subject to special
regulations governing the sale of a penny stock.

A "penny stock," is defined by regulations of the Securities and
Exchange Commission as an equity security with a market price of less than $5.00
per share. However, an equity security with a market price under $5.00 will not
be considered a penny stock if it fits within any of the following exceptions,
which are not applicable to our securities:

o The equity security is listed on Nasdaq or a national securities
exchange;

o The issuer of the equity security has been in continuous operation for
less than three years, and either has (a) net tangible assets of at
least $5,000,000, or (b) average annual revenue of at least
$6,000,000; or

o The issuer of the equity security has been in continuous operation for
more than three years, and has net tangible assets of at least
$2,000,000.

If you buy or sell a penny stock, these regulations require that you
receive, prior to the transaction, a disclosure explaining the penny stock
market and associated risks. Furthermore, trading in our common stock would be
subject to Rule 15g-9 of the Exchange Act, which relates to non-Nasdaq and
non-exchange listed securities. Under this rule, broker-dealers who recommend
our securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale.

Penny stock regulations will tend to reduce market liquidity of our
common stock, because they limit the broker-dealers' ability to trade, and a
purchaser's ability to sell the stock in the secondary market. The low price of
our common stock will have a negative effect on the amount and percentage of
transaction costs paid by individual shareholders. The low price of our common
stock may also limit our ability to raise additional capital by issuing
additional shares. There are several reasons for these effects. First, the
internal policies of many institutional investors prohibit the purchase of
low-priced stocks. Second, many brokerage houses do not permit low-priced stocks
to be used as collateral for margin accounts or to be purchased on margin.
Third, some brokerage house policies and practices tend to discourage individual
brokers from dealing in low-priced stocks. Finally, broker's commissions on
low-priced stocks usually represent a higher percentage of the stock price than
commissions on higher priced stocks. As a result, our shareholders will pay
transaction costs that are a higher percentage of their total share value than
if our share price were substantially higher.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements involve risks known to us,
significant uncertainties, and other factors which may cause our actual results,
levels of activity, performance, or achievements to be materially different from
any future results, levels of activity, performance, or achievements expressed
or implied by those forward-looking statements.

You can identify forward-looking statements by the use of the words
"may," "will," "should," "could," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "intends," "potential," "proposed," or "continue" or
the negative of those terms. These statements are only predictions. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined above. These factors may cause our actual results
to differ materially from any forward-looking statement.

Although we believe that the exceptions reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately
$4,900,000 from the sale of 5,000,000 shares of our common stock after deducting
expenses of this offering. We expect to use the net proceeds over the next 12
months approximately as follows:

We intend to use approximately $183,000 to repay a portion of our
outstanding indebtedness, of which, at November 30, 2001, approximately $83,000
was owed to Shannon Investments, Inc., a

shareholder of the Company, and approximately $100,000 was owed to Oncor
Partners, Inc., a company of which Edward T. Whelan, our Chief Executive Officer
and one of our directors, is President and a shareholder.

We intend to use the remaining net proceeds (approximately $4,717,000)
for working capital and for general corporate purposes. Pending such uses, the
net proceeds will be invested in short-term, interest-bearing, investment grade
securities.

The foregoing represents our current estimate of the uses of the net
proceeds of this offering and is based on certain assumptions regarding our
business, including the assumption that our sales and marketing plan can be
accomplished at the projected costs. Future events, including the problems,
delays, expenses and complications frequently encountered by companies which
seek to establish new products or introduce products to a new market, as well as
changes in economic, regulatory or competitive conditions, and the success of
our marketing activities, may make shifts in the allocation of funds necessary
or desirable. There can be no assurance that our estimates will prove to be
accurate or that unforeseen expenses will not be incurred.

We believe that the net proceeds of the sale of at least 500,000 shares
in this offering, together with anticipated revenues from sales of our products,
will satisfy our capital requirements for at least the next 12 months.

DILUTION

If you purchase shares in this offering, you will experience immediate
and substantial dilution in your investment. "Dilution" is the reduction in the
value of a purchaser's investment and represents the difference between the
price paid for the shares and the "net tangible book value" per share of the
common stock acquired in the offering. Net tangible book value per share
represents the book value of our tangible assets less the amount of our
liabilities, divided by the number of shares of common stock outstanding.

At December 10, 2001, there were 6,630,004 shares of common stock
issued and outstanding. Without taking into account any changes in our net
tangible book value after that date other than to give effect to the estimated
net cash proceeds of $4,900,000 from the sale of the 5,000,000 shares offered
hereby (after deducting estimated expenses of the offering that total
approximately $100,000), at an offering price of $1.00 per share, the amount of
increase in net tangible book value as of that date attributable to the sale of
shares offered hereby would have been $0.42 per share, representing an immediate
dilution to investors in this offering of $0.58 per share and an immediate
increase of $0.43 per share to present shareholders.

The following table illustrates the per share dilution if we sell all
5,000,000 shares at a price of $1.00 per share, less offering expenses of
$100,000.

Net tangible book value per share at September 30, 2001..................... $(0.01)
Pro Forma net tangible book value per share after the offering.............. 0.42
Pro Forma increase in net tangible book value per share
attributable to investors in this offering................................ 0.43
Pro Forma dilution per share to investors in the offering................... 0.58

The following table illustrates the per share dilution if we sell only
2,500,000 shares at a price of $1.00 per share, less the offering expenses of
$100,000.

Net tangible book value per share at September 30, 2001..................... (0.01)
Pro Forma net tangible book value per share after the offering.............. 0.26
Pro Forma increase in net tangible book value per share
attributable to investors in this offering................................ 0.27
Pro Forma dilution per share to investors in the offering................... 0.74

The following table illustrates the per share dilution if we sell only
500,000 shares at a price of $1.00 per shares, less the offering expenses of
$100,000.

Net tangible book value per share at September 30, 2001..................... (0.01)
Pro Forma net tangible book value per share after the offering.............. 0.06
Pro Forma increase in net tangible book value per share
attributable to investors in this offering................................ 0.07
Pro Forma dilution per share to investors in the offering................... 0.94

The following table summarizes the investments of all existing
shareholders and new investors after giving effect to the sale of all of the
shares offered hereby:

Shares Purchased
--------------------------- Total
Number Percent Amount
---------- -------- ----------

Existing Shareholders.............. 6,630,004 57% $ (59,549)
New Investors(1)................... 5,000,000 43% 5,000,000
--------- --- ---------
Total.............................. 11,630,004 100% $4,940,451
========== === =========

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

(1) Assumes the sale of all 5,000,000 shares offered under this prospectus. The
dilutive effect of the offering would be different if we are unsuccessful
in selling all of the shares. For example, if we were to sell only (A) a
nominal number of shares in this offering, or (B) half of the shares
offered by this prospectus, the investment by the new investors and
existing shareholders would be as follows:

Shares Purchased
------------------------- Total
(A) Number Percent Amount
------ ------- ------

Existing Shareholders.............. 6,630,004 93% $ (59,549)
New Investors(1)................... 500,000 7% 500,000
--------- --- ---------
Total.............................. 7,130,004 100% $440,451
========= === =========

Shares Purchased
-------------------------- Total
(B) Number Percent Amount
------ ------- ------
Existing Shareholders.............. 6,630,004 73% $ (59,549)
New Investors(1)................... 2,500,000 27% 2,500,000
--------- ---- ----------
Total.............................. 9,130,004 100% $2,440,451
========= === =========

CAPITALIZATION

We are authorized to issue 50,000,000 shares of common stock par value
$0.0001 per share and

10,000,000 shares of preferred stock par value $0.0001 per share. At September
30, 2001, there were 6,630,004 shares of common stock issued and outstanding.
Since that date, we issued an aggregate of 179,004 shares of common stock. A
total of 1,500,000 shares of common stock are reserved for issuance upon the
exercise of options granted under our stock option plan to key employees,
officers, directors and consultants.

The following table sets forth (i) our total capitalization as of
September 30, 2001, (ii) capitalization at the date on a pro forma basis to
reflect acquisitions completed after September 30, 2001; and (iii) our total
capitalization at that date on a pro forma as adjusted basis to reflect the sale
of the shares of common stock offered hereby (based on an assumed offering price
of $1.00 per share) and the application of the estimated net proceeds therefrom,
all as if they occurred on September 30, 2001. The information below is
qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing at the end of this
prospectus.

As of September 30, 2001
---------------------------------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- ----------- -----------

Cash and Cash Equivalents $ 12,784 $ 4,736,784 $ 4,736,784
========= =========== ===========
Debt:
Shannon investment..................................... $ 60,000 $ $
Accrued interest....................................... 23,540 23,540 -
Note payable - Navistar................................ 20,835 20,835 -
Note payable - Gerren.................................. - - -
Note payable - Other................................... 100,000 - -
------- ----------- -----------
Total Debt......................................... 204,375 44,375 -
------- ----------
Stockholders Equity:
Common stock of the Predecessor
Common Stock of the Company, par value $.01 per share
50,000,000 shares authorized, 6,580,004 and
11,480,004 issued and outstanding pro forma and pro
forma as adjusted....................................
65,800 111,800 114,800
Additional paid-in capital............................. 162,650 5,012,650 5,012650
Accumulated deficit.................................... (543,985) (543,985) (543,985)
----------- ---------- -----------
Total stockholders equity.......................... (315,535) 4,584,465 4,583,465
----------- --------- ---------
Total capitalization...................................... $ (111,160) $ 4,628,840 $ 4,583,465
=========== ========= =========

DETERMINATION OF OFFERING PRICE

Our management has arbitrarily determined the offering price of the shares
offered hereby. The offering price bears no relationship to our assets, book
value, net worth, or other economic or recognized criteria of value. You should
not regard the offering price to be an indication of future market price of our
securities. In determining the offering price, we considered factors such as the
prospects for our products, our management's previous experience, our historical
and anticipated results of operations and our present financial resources.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS

MARKET FOR COMMON STOCK

Our common stock is traded on the OTC Bulletin Board under the symbol
"MRGI."

Our shares began trading on the OTC Bulletin Board on January 10, 2001.
Prior to that date, there was no public market for our shares.

The following table contains information about the range of high and
low bid prices for our common stock for each full quarterly period since our
shares began publicly trading, based upon reports of transactions on the OTC
Bulletin Board.

High Low
---- ----

2001
First Quarter (commencing January 10)............ $1.88 $0.03
Second Quarter................................... 0.75 0.20
Third Quarter.................................... 2.27 0.45
Fourth Quarter (through December 17)............. 1.30 0.33

The source of these high and low prices was the OTC Bulletin Board.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not represent actual transactions. The high and low
prices listed have been rounded up to the next highest two decimal places.

The market price of our common stock is subject to significant
fluctuations in response to variations in our quarterly operating results, our
public announcements regarding our then-pending acquisition of Military Resale
Group, general trends in the market for the products we distribute, and other
factors, over many of which we have little or no control. In addition, board
market fluctuations, as well as general economic, business and political
conditions, may adversely affect the market for our common stock, regardless of
our actual or projected performance. On December 17, 2001, the closing bid price
of the common stock as reported by the OTC Bulletin Board was $0.42 per share.

HOLDERS

As of December 10, 2001, there were approximately 300 shareholders of
record of our common stock.

DIVIDEND POLICY

We have not paid cash dividends on our common stock and do not intend
to pay any cash dividends in the foreseeable future.

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

OVERVIEW

The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with our financial
statements and notes appearing elsewhere in this Prospectus. This discussion and
analysis contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including,
but not limited to, those set forth below.

During the past two fiscal years and prior to November 15, 2001 in
fiscal year 2001, we did not generate any signification revenue, and accumulated
no significant assets, as we explored various business opportunities. On
November 15, 2001, the date of the Reverse Acquisition, in exchange for a
controlling interest in our publicly-held "shell" corporation, we acquired 98.2%
of the issued and outstanding capital stock of Military Resale Group, Inc., a
Maryland corporation ("MRG-Maryland"). For financial reporting purposes,
MRG-Maryland was considered the acquirer in such transaction. As a result, our
historical financial statements for any period prior to November 15, 2001 are
those of MRG-Maryland.

We are a regional distributor of grocery and household items
specializing in distribution to the military market. We distribute a wide
variety of items, including fresh and frozen meat and poultry, seafood, frozen
foods, canned and dry goods, beverages, dairy products, paper goods and cleaning
and other supplies. Our operations are currently directed to servicing the
commissaries and exchanges at five military installations located in Colorado,
Wyoming and South Dakota, including the Air Force Academy, located in Colorado
Springs, Colorado. We are approved by the Department of Defense to contract with
military commissaries and exchanges.

Military commissaries are large supermarket-type stores operated by the
United States Defense Commissary Agency ("DeCA") to provide grocery items for
sale to authorized patrons at the lowest practicable prices in facilities
designed and operated under standards similar to those in commercial food
stores. As of September 2000, there were 296 commissaries worldwide, of which
approximately 182 were located in the Continental U.S. and approximately 114
were located overseas. Commissaries are authorized by law to sell goods only to
authorized patrons, which include the approximately 1.4 million active duty U.S.
military personnel, their dependents and certain authorized reservists and
retirees. As of September 30, 2000, these authorized patrons totaled
approximately 13.7 million individuals. Annual worldwide commissary sales
totaled more than $5 billion in 2000.

RESULTS OF OPERATIONS

In our two most recent fiscal years, we generated $7,597,315 in revenue
and we incurred operating losses totaling $133,955. During the nine months ended
September 30, 2001, we had sales revenues of $3,539,734 and we incurred
operating losses totaling $328,007. This factor, among others, raises
substantial doubt concerning our ability to continue as a going concern. We
intend to use capital and debt financing as needed to supplement the cash flows
that we expect will be provided by on-going operations. Our primary source of
capital historically has been the current shareholders. Management intends to
augment the current source of capital through the sale of our securities offered
in this offering and private equity sources if available.

During the year ended December 31, 2000, we had sales revenues of
$4,480,305. During the year then ended, we devoted our efforts primarily to
developing our products and services, implementing our

business strategy and raising working capital through equity financing. Our
revenues are primarily dependent upon our ability to cost-effectively and
efficiently develop and market our products and services.

Realization of sales of our products and services is vital to
operations. We may not be able to continue as a going concern without realizing
additional sales or raising additional capital. We cannot guarantee that we will
be able to compete successfully or that the competitive pressures we may face
will not have a material adverse effect on our business, results of operations
and financial condition. Additionally, other companies with superior capital
resources could force us out of business.

While we have been able to generate revenues since inception, we have
been limited in the scope of potential clients that could expand due to the lack
of working capital. We expect that this offering will enhance our ability to
pursue and enter into distribution agreement and contracts to offer additional
products to the military bases we serve.

FUTURE BUSINESS

EXPAND DISTRIBUTION CAPABILITIES. We currently direct our focus to the
distribution of products to commissaries located in the Midwest Region of the
United States, which represents only one of the four DeCA regions. We do not
currently sell to commissaries located overseas or to military exchanges. An
important part of our strategic plan is to expand our distribution capabilities,
both in the domestic and overseas markets, by acquiring or contracting with
distributors, as opportunities permit.

EXPAND PRODUCT OFFERINGS. Industry data indicate that the average
number of items stocked by the typical civilian supermarket is approximately
18,015 as compared to approximately 13,111 for a commissary. We believe the
discrepancy results primarily from the reluctance of certain large manufacturers
and many medium and small manufacturers to undertake the administrative burden
of obtaining DeCA's approval of products to be sold to commissaries. Under
Federal procurement rules, a manufacturer may either represent itself or retain
a third-party representative on an exclusive basis to negotiate, supply, invoice
and otherwise manage its products within the DeCA system. Our management
believes there are many additional manufacturers with products that would meet
the DeCA procurement standards and are desirous of selling to the military but
that are unable or unwilling to commit the personnel and other resources
necessary to comply with the DeCA procurement regulations and procedures
required to enable them to sell their products to military commissaries.

GROWTH THROUGH ACQUISITIONS. We intend to pursue an aggressive
acquisition program to increase the number of our offered products, strengthen
our ability to sell to the military exchange and commissary systems, and broaden
our geographic reach to sell and distribute products in domestic and overseas
regions that we do not currently service. We believe the industry in which we
operate is highly fragmented, consisting primarily of small local brokers and
distributors that limit their operations to a narrow range of offered products
or distribute products only to commissaries or exchanges in selected regions. In
view of the current state of the industry and the trend to centralize the
management of the commissary system and enhance its cost-effectiveness, we
believe significant opportunities are available to a business that can
consolidate the capabilities and resources of a number of existing brokers and
distributors in the military consumer goods market, including the cost savings
that are inherent in a vertically integrated business. We intend to implement an
aggressive acquisition program promptly that is designed to expand our range of
offered products and enable us to distribute products to commissaries and
exchanges in additional geographic markets.

IMPROVE MANAGEMENT INFORMATION SYSTEMS. We are committed to improving
our management information systems to enable management to more efficiently
track sales and product shipments. We believe that, upon completion of this
project, we will have achieved significant progress in creating an improved
infrastructure capable of supporting expanded product offerings.

LIQUIDITY AND CAPITAL RESOURCES

Given our current negative cash flows, it will be difficult for us to
continue as a going concern. While the recent borrowings from related parties
allow us to pursue revenue, and cash, generating contracts and opportunities, it
may be necessary to raise additional funds or reduce cash expenditures. Funds
could be generated through the issuance of additional stock or through the sale
of debenture or other debt offerings. Cash expenditures could be eased through a
reduction in overhead costs, including but not limited to labor and associated
employee benefits.

As mentioned in our audited financial statements included in this
filing our un-audited financial statements have been prepared on the assumption
that we will continue as a going concern. Our product line is limited and it has
been necessary to rely upon financing from the sale of our equity securities to
sustain operations. Additional financing will be required if we are to continue
as a going concern. If additional financing cannot be obtained, we may be
required to scale back or discontinue operations. Even if additional financing
is available there can be no assurance that it will be on terms favorable to us.
In any event, such financing will result in immediate and possibly substantial
dilution to existing shareholders.

BUSINESS
Overview

We are a regional distributor of grocery and household items
specializing in distribution to the military market. We distribute a wide
variety of items, including fresh and frozen meat and poultry, seafood, frozen
foods, canned and dry goods, beverages, dairy products, paper goods and cleaning
and other supplies. Our operations are currently directed to servicing the
commissaries and exchanges at six military installations located in Colorado,
Wyoming and South Dakota, including the Air Force Academy located in Colorado
Springs, Colorado. We are approved by the Department of Defense to contract with
military commissaries and exchanges.

Military commissaries are large supermarket-type stores operated by the
United States Defense Commissary Agency ("DeCA") to provide grocery items for
sale to authorized patrons at the lowest practicable prices in facilities
designed and operated under standards similar to those in commercial food
stores. As of September 2000, there were 296 commissaries worldwide, of which
182 were located in the continental United States and 114 were located overseas.
Commissaries are authorized by law to sell goods only to authorized patrons,
which include the approximately 1.4 million active duty U.S. military personnel,
their dependents and certain authorized reservists and retirees. As of September
30, 2000, these authorized patrons totaled approximately 13.7 million
individuals. Annual worldwide commissary sales totaled more than $5 billion in
2000.

The categories and varieties of merchandise that may be sold in a
commissary is strictly regulated by DeCA, as is the cost at which items may be
purchased for resale. Under DeCA regulations, all items sold though the
commissary system must be sold at cost. The military commissary system is
generally self-funded and receives an annual appropriation from Congress
primarily to pay the salaries of those who work for the commissaries. Store
operations are funded by a 5% surcharge (not a tax) levied on the total amount
of the customers' purchases. The surcharge pays for new commissary construction
and renovation, new equipment and maintenance, paper bags, shopping carts and
other operating costs. In selling products at cost, commissaries are considered
an integral part of the military's pay and compensation package.

The military exchange system consists of nearly two dozen separate
business enterprises, including main exchange stores, convenience stores,
package stores, food operations, gas stations, movie theaters and others,
operated by the various military services for the benefit of military personnel
and other qualified patrons. As of September 30, 2000, there were 548 "main
exchanges" worldwide, and approximately 20,000 other exchange service-operated
facilities. Annual sales from the exchange systems' worldwide business
operations totaled more than $10 billion in 2000. Currently, we do not sell
products to the military exchange system, but plan to begin selling to this area
in the future.

STRATEGIC PLAN

EXPAND DISTRIBUTION CAPABILITIES. We currently direct our focus to the
distribution of products to commissaries located in the Midwest Region of the
United States, which represents only one of the seven DeCA regions. We do not
currently sell to commissaries located overseas or to military exchanges. An
important part of our strategic plan is to expand our distribution capabilities,
both in the domestic and overseas markets, by acquiring or contracting with
distributors, as opportunities permit.

obtaining DeCA's approval of products to be sold to commissaries. Under Federal
procurement rules, a manufacturer may either represent itself or retain a
third-party representative on an exclusive basis to negotiate, supply, invoice
and otherwise manage its products within the DeCA system. Our management
believes there are many additional manufacturers with products that would meet
the DeCA procurement standards and are desirous of selling to the military but
that are unable or unwilling to commit the personnel and other resources
necessary to comply with the DeCA procurement regulations and procedures
required to enable them to sell their products to military commissaries.

PURCHASING AND SUPPLY

Currently, we distribute an aggregate of over 3,325 Stock Keeping Units
(SKUs) from approximately 65 manufacturers. Products distributed include
including fresh and frozen meat and poultry, seafood, frozen foods, canned and
dry goods, beverages, dairy products, paper goods and cleaning and other
supplies.

The majority of our revenues are derived from products that we purchase
outright from manufacturers and resell to commissaries. In this arrangement, the
manufacturer maintains an account with DeCA through the Electronic Data
Interchange ("EDI") system. Generally, the manufacturer also selects the broker
or brokers to merchandise the products and is actively involved in the sale of
its products to commissaries/exchanges and the interaction between the
commissaries/exchanges, brokers and us. Payment for products are remitted by
DeCA to the manufacturer within seven days after the end of each roll-up period
with respect to meats, 10 days with respect to dairy products and 23 days with
respect to most other products. The manufacturer pays us a fee based on a
specified percentage of the purchase price paid by DeCA.

For the year ended December 31, 2001, approximately 40% of our revenues
were derived from the sale of products on a consignment basis. In a consignment
sale, the manufacturer is involved in all facets of the transaction. It appoints
and monitors brokers, maintains the account with DeCA, receives payment from
DeCA, and pays us a fee based on a percentage of the purchase price paid by
DeCA.

For the year ended December 31, 2001, approximately 60% of our revenues
were derived from the purchase and sale of products in which we acted as
principal and dealt directly with DeCA. In such instances, we purchase the
product from manufacturers and resell such products to commissaries at the best
price attainable. We, rather than the manufacturer, maintain an account with
DeCA through the EDI system and receive payments directly from DeCA as if we
were the manufacturer of the products.

MARKETING AND CUSTOMER SERVICE

Our senior management is involved in maintaining relationships with key
customers and securing new accounts. We also maintain good relationships with
brokers, which have been an effective source of new products. We believe that
our ability to consistently provide a high level of service makes us desirable
to brokers who want to ensure on-time delivery of the products they represent.
We rigorously monitor the quality of our service. Our personnel frequently visit
the commissaries that we serve and we are in constant communication with
commissaries in order to ensure on-time order fulfillment.

OPERATIONS AND DISTRIBUTION

Our operations can generally be categorized into two business
processes: (i) product replenishment and (ii) order fulfillment. Product
replenishment involves the management of logistics from the vendor location
through the delivery of products to our distribution center. Order fulfillment
involves all activities from order placement through delivery to the commissary
location. We determine the quantities in which such products will be ordered
from manufacturers. Order quantities for each product are systematically
determined by us. Given our experience in managing our product flow, losses due
to shrinkage, damage and product obsolescence represented less than 1/3 of 1% of
2000 net sales.

We work closely with the commissaries in order to optimize
transportation from vendor locations to the distribution center. By utilizing
the collective demand of the commissaries for in-bound transportation, our own
trucks and our expertise in managing transportation, we can ensure on-time
delivery of products on a cost-effective basis. We believe that we realize
significant cost savings by the consolidation of products from more than one
vendor or for use by more than one commissary. We utilize a number of third
party carriers to provide in-bound transportation services. None of these
carriers is material to our operations.

We currently warehouse approximately 3,325 Stock Keeping Units (SKUs)
for distribution to commissaries. Products are inspected at our distribution
center upon receipt and stored in racks. Our distribution center includes
approximately 28,746 square feet of dry storage space, 2,000 square feet of
frozen storage space, and 2,000 square feet of refrigerated storage space, as
well as offices for operating, sales and customer service personnel and a
management information system.

We place a significant emphasis on providing a high service level in
order fulfillment. We believe that by providing a high level of service and
reliability, we reduce our costs by reducing the number of reorders and
redeliveries. Each commissary places product orders based on recent usage,
estimated sales and existing inventories. We have developed pre-established
routes and pre-arranged delivery times with each customer. Product orders are
placed with us six times a week either through our customer service
representative or through electronic transmission using the EDI system.
Approximately 60% of our orders are received electronically. Orders are
generally placed on a designated day in order to coordinate with our
pre-established delivery schedules. Processing and dispatch of each order is
generally completed within seven hours of receipt and our standards require each
order to be delivered to the customer within one hour of a pre-arranged delivery
time.

Products are picked and labeled at each distribution center. The
products are placed on pallets for loading of outbound trailers. Delivery routes
are scheduled to both fully utilize the trailers' load capacity and minimize the
number of miles driven. We transport approximately 1,950 tons of product
annually. Our trucks travel in excess of 139,000 miles annually.

THE MILITARY MARKET

GENERAL. The United States military market is composed of three main
groups: the active members of the four branches of the United States military --
Army, Navy, Air Force and Marines; military retirees; and members of the
military reserve. Including disabled veterans, overseas civil service personnel
and dependents of all of these groups, and patrons of military commissaries and
exchanges number over 13 million.

Accordingly to DeCA trade publications, active duty personnel generally
are well-educated, well paid and sophisticated. They enjoy a high standard of
living with excellent benefits, and, therefore, constitute an excellent market
for a variety of goods and services. Military retirees consist of military
personnel who retire after 20 years or more of service with full commissary and
exchange privileges. Military retirees generally are younger than civilian
retirees and tend to engage in second careers after retirement. As a result,
they generally are affluent, and like active duty personnel, provide an
excellent market for goods and services offered by commissaries and exchanges.
Within the last several years, reservists were granted full commissary and
exchange benefits while on active duty. Reservists for the most part mirror a
cross-section of the general United States population. Generally, they do not
shop at commissaries and exchanges as often as members of the other military
groups, but tend to buy larger quantities at each trip.

The United States has streamlined its Armed Forces in the post-Cold War
era. Despite these reductions, the United States military resale market
continues to remain strong. In the fiscal year of DeCA ended September 30, 2000,
total annual worldwide commissary and exchange sales was approximately $15
billion, with approximately $11.8 billion of these sales in the United States.
Since 1945, there has been a major military build-down following each of World
War II, the Korean War and the Vietnam war. The military market for consumer
goods continued to prosper through each one. The post-Cold War reduction in
manpower has not been as severe as previous reductions, and largely has been
achieved by early retirement, and the curtailment of inductees. Retirees have
earned and retained the privilege to shop in commissaries and exchanges, and
Congress has elected to extend the shopping privilege to those forced out prior
to retirement.

THE COMMISSARY SYSTEM. Military commissaries are the supermarkets of
the military. The stated mission of the commissary system is to provide grocery
items for sale to authorized patrons at the lowest possible prices in facilities
designed and operated like private-sector supermarkets. The assortment of brands
of merchandise, however, is limited to those that meet the reasonable demands of
commissary patrons, and commissaries currently are prohibited by law from
carrying certain merchandise, including beer and wine and automotive supplies.
Commissaries primarily stock and generally sell leading name brands and do not
offer private label or unknown brands. In the case of many remote military
bases, the commissary is the only source of groceries for military personnel.

Commissaries sell their products at prices equal to cost plus a five
percent surcharge. The only promotional fee that commissaries can accept is a
direct reduction in price. Commissaries are prohibited from accepting other
promotional items offered to private-sector stores, such as slotting allowances,
display allowances or volume rebates. The commissary system receives an annual
appropriation from Congress that pays for the salaries of commissary personnel
and for the purchase of consumer goods for resale.

Store operations otherwise are funded from the five percent surcharge on
purchases. Proceeds from the surcharge also pay for new commissary construction,
renovation, new equipment and maintenance, shopping bags, shopping carts and
various other items. Overseas commissaries also receive Federal funds for
transportation and utility costs. Through payment of the surcharge, the patrons
of the commissaries essentially have created a worldwide military shoppers'
cooperative.

The benefit provided by commissaries is an integral part of the
military's pay and compensation package. Recent re-enlistment surveys show that
commissaries rank second in importance only to the medical/dental benefit.
Commissaries are among the only benefits aimed exclusively at the military
family. As commissaries are prohibited by law from selling any product below
cost, certain items (those used as loss leaders by private-sector stores) may be
priced lower at private sector stores. Nevertheless, the annual savings amounts
to approximately 25%. It has been estimated that the commissary system results
in approximately $2 billion of annual savings for its patrons. As a result,
based upon the annual Congressional appropriation of approximately $1 billion
available to DeCA, the commissary system provides one of the few government
benefits that delivers more than two dollars in direct benefit to the
beneficiary for every dollar spent by the taxpayer.

As of September 2000, there were a total of 296 commissaries worldwide,
of which 182 were located in the continental United States. At such date, the
average gross square footage of these commissaries was approximately 57,500, and
the average monthly sales per square foot of selling space, a commonly used
measure of efficiency of retail operations, was approximately double that of
commercial supermarkets. In the fiscal year of DeCA ended September 30, 2000,
total annual worldwide commissary sales were approximately $5 billion, with
approximately $4.3 billion of these sales in the United States.

The table below shows the dollar volume of commissary sales over the
three-year period ended September 30, 2000, as reported by the American
Logistics Association.

Fiscal Year Worldwide Store Sales(000s)
----------- ---------------------------
2000 $5,038,880
1999 $4,945,204
1998 $4,902,746

DeCA recently completed the implementation of a store modernization
program that has resulted in the opening or reopening of five to ten new stores
a year, each generating between 25% to 30% more business from the same trading
area. We believe DeCA's efforts to modernize facilities and merchandising and
provide easy access, shorter lines and more convenient hours at commissaries
will all contribute to increased sales volume in the commissary system.

THE EXCHANGE SYSTEM. The military exchange system consists of nearly
two dozen separate "businesses," including main exchange stores (department
stores), convenience stores, package stores, food operations, gas stations,
movie theaters, and others. The exchange system is a vast, logistically complex
worldwide operation. Like the commissary system, the stated purpose of the
exchange system is to improve the quality of life of military personnel and
their families.

The exchange system is a "non-appropriated fund" government activity,
and, therefore, does not receive taxpayer subsidies. It is self-sustaining and
operates at a profit generated by patron purchases. After expenses, all exchange
earnings are returned to patrons in the form of new and improved exchanges and
dividends paid to the sponsoring service's morale, welfare and recreation
("MWR") funds.

Appropriations by Congress only fund the cost of transporting goods from the
United States to overseas military exchanges. All other costs and expenses,
including building and operating costs, such as employees' salaries, are paid
from exchange revenues. Unlike the commissary system, which is managed by one
central governmental authority, each military service manages its own exchange
program. These include the Army and Air Force Exchange Service (a joint military
command), the Navy Exchange Service Command, the Marine Corps Retail Operations
Branch, the Coast Guard and the Department of Veterans Affairs.

Military exchanges consistently are ranked by military personnel among
the top benefits provided to the military community. As is the case with
commissaries, exchanges are prohibited from pricing products below cost;
therefore, certain items offered as "loss leaders" in private-sector stores may
be priced below prices offered by exchanges. Notwithstanding this constraint,
exchanges typically provide their customers with savings ranging from 20% to 25%
compared to civilian mass-merchandisers and department stores.

At September 30, 2000, there were 548 "main exchanges" worldwide and
approximately 20,000 exchange service-operated facilities. In the fiscal year of
DeCA ended September 30, 2000, total annual worldwide exchange sales was
approximately $9.75 billion, with approximately $7 billion of these sales in the
United States.

THE DEFENSE COMMISSARY AGENCY. DeCA, which is headquartered in Fort
Lee, Virginia, was formed in October 1991 in an effort to consolidate the
commissary system of each branch of the military into one efficient unit. Its
stated mission is to ensure the commissary system provides United States
military personnel and their families with needed groceries at the lowest
possible price. DeCA's mission is recognized by many as essential to the
military preparedness of the United States by assisting to maintain the morale,
readiness and effectiveness of active duty troops, and by encouraging
reenlistment of highly trained quality personnel.

DeCA is part of the Department of Defense ("DoD") under the Assistant
Secretary of Defense for Personnel and Readiness. It manages the total resources
of all DoD commissaries worldwide, including personnel, facilities, supplies,
equipment and funds. In October 1996, DeCA became a Performance Based Operation
("PBO"). This resulted in DeCA's obtaining special waivers from Federal
procurement regulations, thereby allowing it to operate more efficiently and to
adopt some characteristics of private-sector companies. As a PBO, DeCA will be
striving for progressive market excellence through its "SAVER 2000" initiative
-- providing Service, Access, Value, Efficiency and Response to customers and
taxpayers.

DeCA commands and centrally manages the commissary system through four
commissary regions. Three regions are located in the continental United States
and one in Europe. Daily operational support to the agency's regions, zone
managers, commissaries and associated facilities is provided by an Operations
Support Center located in Fort Lee, Virginia (the "OSC"), which is responsible
for acquisitions, financial management, information technology/electronic
commerce management, inventory management, food safety, marketing and
transportation. All suppliers of goods to the commissary system are required to
interface with the Marketing Business Unit (the "MBU") of the OSC, which
combines several disciplines, such as operations, acquisition management and
information management. The MBU is responsible for DeCA's electronic data
interchange system, the preparation and administration of the resale ordering
agreement used with suppliers, merchandising and marketing, and maintenance of
the catalog master file, the list of products authorized to be carried by
commissaries.

The great majority of the DeCA buying and merchandising decisions for
the seven DeCA regions are handled at DeCA's headquarters in Fort Lee, Virginia.
Each region has its own Region Stock List ("RSL"). Within each RSL is a "Key
Item List," which is a list of items that each store within that region should
carry. Suppliers of brand name products must sell their products to the regional
buyers to have their products included on that region's RSL. Once a product is
listed on an RSL, it is the responsibility of the individual supplier to ensure
that the product gets on the shelf. Many suppliers employ brokers, like us who
function as sales representatives and provide a liaison with DeCA. Brokers also
serve to promote the suppliers' products and ensure that the products are
properly displayed and stocked on the shelf. Suppliers also contract with
distributors who warehouse and ship the suppliers' products to the commissaries.

Any supplier wishing to sell a product in the commissary system must
complete and submit a product application to DeCA. DeCA analyzes each proposed
product on the basis of price, quality, anticipated demand and other factors. If
the proposed product meets DeCA's requirements, it will be assigned a Local
Stock Number, a product identification number ("LSN"), and included on one or
more RSLs. If the product is unique to the tastes of a particular region or
regions, it will be placed on the RSL for those regions only. Depending on the
type of product, it may also be included on the Key Item List of one or more
regions.

COMPETITION

The military resale market is a highly competitive market which is
served by several large distributors, most notably SuperValu, Inc., Nash Finch
Company and Fleming Companies, Inc., but is otherwise highly fragmented with
hundreds of small, privately-held firms operating in the various distribution
layers. We face competition from local, regional and national distributors on
the basis of price, quality and assortment, schedules and reliability of
deliveries and the range and quality of services provided.

Because there are relatively low barriers to entry in the military
resale market, we expect competition from a variety of established and emerging
companies. Many of our competitors have longer operating histories,
substantially greater financial, technical, marketing or other resources, or
greater name recognition than we have. Our competitors may be able to respond
more quickly than we can to new or emerging technologies and changes in customer
requirements. In addition, consolidation in the industry, heightened competition
among our vendors, new entrants and trends toward vertical integration could
create additional competitive pressures that reduce our margins and adversely
affect our business. If we fail to successfully respond to these competitive
pressures or to implement our strategies effectively, it could have a material
adverse effect on our financial condition and prospects.

PROPERTIES

Our corporate headquarters is located at our distribution center in
Colorado Springs, Colorado. The lease for our distribution center and corporate
headquarters includes approximately 32,748 square feet, of which approximately
1,000 square feet is used for our corporate headquarters. The lease expires in
the year 2006.

EMPLOYEES

At December 10, 2001, we employed approximately 15 persons on a
full-time basis, of which two were management personnel, three were office staff
and ten were warehouse and distribution personnel. None of our employees are
members of a trade union. All of our employees are employed at our corporate
offices and distribution center located in Colorado, Springs, Colorado.

LEGAL PROCEEDINGS

None

MANAGEMENT

OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to each
of our officers or directors as of December 10, 2001:

NAME AGE POSITION
---- --- --------

Edward T. Whelan................. 51 Chairman of the Board and Chief Executive Officer
Ethan D. Hokit................... 62 President, Chief Operating Officer and Director
Richard H. Tanenbaum............. 54 Director

EDWARD T. WHELAN was a co-founder and the Chairman and Chief Executive Officer
of Military Resale Group, Inc. and, in November 2001, became the Chairman and
Chief Executive Officer of the company in connection with our merger with
Bactrol Technologies, Inc. From April 1998 until the present Mr. Whelan has also
served as the President and principal stockholder of Xcel Associates, Inc., a
company engaged in providing financial consulting to small and medium-sized
companies and to high net worth individuals. Prior to co-founding Military
Resale Group, Inc., Mr. Whelan spent the last 20 years starting and operating
entrepreneurial businesses. He has founded and operated companies as diverse as
Animated Playhouse; a theme restaurant with animated characters, to Physicians'
Pharmaceutical Services, Inc., a packaged prescription pharmaceutical
manufacturer. From 1968 to 1971, Mr. Whelan attended St. Peters College in
Jersey City, New Jersey where he majored in Economics. Currently, Mr. Whelan
does not receive a salary for his services as an officer of the company.

ETHAN D. HOKIT was a co-founder, a director and the President and Chief
Operating Officer of Military Resale Group, Inc. and, in November 2001, became a
director and the President and Chief Operating Officer of the company in
connection with our merger with Bactrol Technologies, Inc. From 1983 until 1998,
Mr. Hokit was the President of Front Range Distributors, Inc. where he
successfully operated distributorships serving the five military bases in and
around Colorado Springs, Colorado. Mr. Hokit graduated from the University of
Oklahoma with a Bachelor of Science degree in Chemistry in 1960 and a Master's
Degree in Clinical Chemistry in 1962.

RICHARD H. TANENBAUM was the general counsel and a director of Military Resale
Group, Inc. and, in November 2001, became the general counsel and a director of
the company in connection with its merger with Bactrol Technologies, Inc. Mr.
Tanenbaum has practiced law since 1974. Currently, he practices law in Bethesda,
Maryland where he specializes in contract negotiations, the purchase and sale of
businesses, loan and real estate acquisitions, and related tax matters with an
emphasis on commercial acquisitions, sales, leasing and other business
considerations. Mr. Tanenbaum's previous professional legal experience includes
being a Senior Partner of Lerch, Early, and Brewer, Chartered, a Bethesda,
Maryland law firm of thirty-two attorneys, from 1977 until 1984, and an
associate at the law firm of Jones, Day, Reavis & Pogue in their Washington, DC
offices from 1974 until 1977. Prior to becoming an attorney, Mr. Tanenbaum was
an accountant at the public accounting firm of Alexander Grant & Company. In
addition to his work as an attorney, Mr. Tanenbaum's experience includes being a
founder and President of Air Rights Title Associates and Professional Mortgage
Associates, Inc., each a mortgage banking and brokerage company, from 1986 to
1987, when he sold his interests. Mr. Tannenbaum received his legal education at
the Columbia Law School of the Catholic University of America. He received a
Bachelor of Science degree from Bradley University.

EXECUTIVE COMPENSATION

The table below sets forth the compensation earned for services
rendered in all capacities for the fiscal years ended December 31, 1999 and 2000
by our executive officers in their capacities as officers and directors of
Military Resale Group, Inc., a Maryland corporation.

LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME OF PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
----------------------------------- ---- ------- ----- ------------- ------------

Ethan D. Hokit, President and Chief 1999 $24,000 - - -
Operating Officer
2000 $60,000 - - -

Edward T. Whelan, Chairman and Chief 1999 $0 - - -
Executive Officer
2000 $0 - - -

DIRECTORS' COMPENSATION

Our directors are reimbursed for expenses incurred in attending
meetings of the Board of Directors. Directors generally are not paid any
separate fees for serving as directors.

STOCK OPTION PLAN

In November 2001, we adopted the Military Resale Group, Inc. 2001
Employee Stock Option Plan (the "Option Plan") for the purpose of attracting,
retaining and maximizing the performance of executive officers and key employees
and consultants. We have reserved 1,500,000 shares of our common stock for
issuance under the Option Plan. The Option Plan has a term of ten years and
provides for the grant of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory
stock options, stock appreciation rights and restricted stock awards. It is
contemplated that the Option Plan will eventually be administered by a
Compensation Committee of the Board of Directors (the "Compensation Committee"),
which Committee has not yet been created. The exercise price for non-statutory
stock options may be equal to or more or less than 100 percent of the fair
market value of shares of common stock on the date of grant. The exercise price
for incentive stock options may not be less than 100 percent of the fair market
value of shares of our common stock on the date of grant (110 percent of fair
market value in the case of incentive stock options granted to employees who
hold more than ten percent of the voting power of our issued and outstanding
shares of common stock).

Options granted under the Option Plan may not have a term of more than
a ten-year period (five years in the case of incentive stock options granted to
employees who hold more than ten percent of the voting power of our common
stock) and generally vest over a three-year period. Options generally terminate
three months after the optionee's termination of employment by us for any reason
other than death, disability or retirement, and are not transferable by the
optionee other than by will or the laws of descent and distribution.

The Option Plan also provides for grants of stock appreciation rights
("SARs"), which entitle a participant to receive a cash payment, equal to the
difference between the fair market value of a share of our common stock on the
exercise date and the exercise price of SAR. The exercise price of any SAR
granted under the Option Plan will be determined by the Board of Directors in
its discretion at the time of the grant. SARs granted under the Option Plan may
not be exercisable for more than a ten year period. SARs generally terminate one
month after the grantee's termination of employment by us for any reason other
than death, disability or retirement. Although the Board of Directors has the
authority to grant SARs, it does not have any present plans to do so.

Restricted stock awards, which are grants of shares of our common stock
that are subject to a restricted period during which such shares may not be
sold, assigned, transferred, made subject to a gift, or otherwise disposed of,
or mortgaged, pledged or otherwise encumbered, may also be made under the Option
Plan. At this time, the Board of Directors has not granted, and does not have
any plans to grant, restricted shares of common stock.

As of December 10, 2001, options to purchase an aggregate of 1,000,000
shares of our common stock have been granted to our employees, officers,
directors and/or consultants under the Option Plan. Such options are one-year
options to purchase an aggregate of 1,000,000 shares of our common stock at an
exercise price of $0.50.

PRINCIPAL STOCKHOLDERS

The following table sets forth as of December 10, 2001 certain
information regarding the beneficial ownership of our common stock by (a) each
person who is known to us to be the beneficial owner of more than five percent
(5%) of our common stock, (b) each director and executive officer and (c) all
directors and executive officers as a group. Except as otherwise indicated, the
persons or entities listed below have sole voting and investment power with
respect to all shares of common stock beneficially owned by them, except to the
extent such power may be shared with a spouse. The percentage of beneficial
ownership is based upon 6,630,004 shares of our common stock outstanding as of
December 10, 2001.

SHARES OF COMMON STOCK BENEFICIAL OWNERSHIP AFTER
OWNED PRIOR TO OFFERING(1) OFFERING(%)(1)
------------------------------- ----------------------------------
NAME AND ADDRESS AMOUNT % 500,000 2,500,000 5,000,000
----------------------------- -------------- ------------- -------- --------- ---------
SHARES SHARES SHARES
-------- --------- ---------

Edward T. Whelan..................... 3,650,000(2) 55.05% 51.19% 39.98% 31.38%
135 First Street
Keyport, New Jersey 07735

Edward Meyer, Jr..................... 2,710,500(3) 40.88 38.01 29.67 23.30
32 Daniel Drive
Hazlet, New Jersey 07730

Xcel Associates, Inc. ............... 2,210,050 33.33 31.00 24.21 19.00
224 Middle Road
Hazlet, New Jersey 07730

Ronald Steenbergen................... 1,000,000(4) 13.11 12.30 9.87 7.92
4 Cho Yuen Street
Wah Shun Industrial Building
Yau Tong, Kolwoon
Peoples Republic of China

Ethan D. Hokit....................... 440,000(5) 6.64 6.17 4.82 3.78
3305 Blodgett Drive
Colorado Springs, Colorado 80919

Richard H. Tanenbaum................. 450,000 6.79 6.31 4.93 3.87
7315 Wisconsin Avenue
Suite 775N
Bethesda, Maryland 20814

Shannon Investments, Inc. .......... 400,000 6.03 5.61 4.38 3.44
224 Middle Road
Hazlet, New Jersey 07730

Directors and executive officers as
a group (three persons)........... 4,540,000 68.48 63.67 49.73 39.04

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

(1) For purposes of this table, information as to the beneficial ownership of
shares of our common stock is determined in accordance with the rules of
the Securities and Exchange Commission and includes general voting power
and/or investment power with respect to securities. Except as otherwise
indicated, all shares of our common stock are beneficially owned, and sole
investment and voting power is held, by the person named. For purposes of
this table, a person or group of persons is deemed to have "beneficial
ownership" of any shares of our common stock which such person has the
right to acquire within 60 days after the date of this Report. For purposes
of computing the percentage of outstanding shares of our common stock held
by each person or group of persons named above, any shares which such
person or persons has the right to acquire within 60 days after the date of
this Report is deemed to be outstanding but is not deemed to be outstanding
for the purpose of computing the percentage ownership of any other person.
The inclusion herein of such shares listed beneficially owned does not
constitute an admission of beneficial ownership.

(2) Includes 400,000 shares of our common stock owned of record by Shannon
Investments, Inc., of which Mr. Whelan is a principal shareholder, and
2,210,050 shares owned of record by Xcel Associates, Inc., of which Mr.
Whelan is a principal shareholder.

(3) Includes 2,210,050 shares owned of record by Xcel Associates, of which Mr.
Meyer is a principal shareholder.

(4) Represents 1,000,000 shares of our common stock issuable upon the exercise
of currently exercisable stock options.

(5) Includes 400,000 shares of our common stock owned of record by Mary Hokit,
the wife of Mr. Hokit.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In October 1997, we borrowed $60,000 from Shannon Investments, Inc.,
one of our shareholders, and in connection therewith we executed a promissory
note in favor of such lender. As of November 30, 2001, that is controlled by
Edward T. Whelan, our Chairman of the Board and Chief Executive Officer, the
outstanding balance due under the promissory note was approximately $83,000.

Mr. Whelan also is the President and a principal shareholder of Xcel
Associates, Inc., which is one of our principal shareholders. [In addition, on
February 1, 2001, we entered into a Business Consulting Agreement with Mr.
Whelan and Edward Meyer, Jr. for the provision of marketing and managerial
consulting services. The term of the agreement is 11 months. For their services,
Messrs. Whelan and Meyer will receive an aggregate of 290,000 shares of our
common stock.]

Xcel Associates, Inc. maintains office space in our corporate offices
without charge.

On August 14, 2001, we borrowed $100,000 from Oncor Partners, Inc., a
company of which Edward T. Whelan, our Chairman of the Board and Chief Executive
Officer, is President and a shareholder. The loan bears no interest and has a
term of one year. As of September 30, 2001, the outstanding balance due under
the promissory note was approximately $100,000.

In February 2001, we issued 145,000 shares of our common stock to
Edward T. Whelan, our Chairman and Chief Executive Officer, for consulting
services performed for the company.

In February 2001, we issued 50,000 shares of our common stock to Jerry
Gruenbaum, Esq., our corporate counsel at the time of issuance, for legal
services performed for the company. On March 23, 2001, we placed a stop transfer
order on these 50,000 shares.

In August 2001, we issued 20,000 shares of our common stock to Alan
Finfer, a director and our Secretary and Treasurer at the time of issuance, for
consulting services performed for the company.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $.0001 per share, and 10,000,000 shares of preferred stock, par
value $.0001 per share. As of December 10, 2001, 6,630,004 shares of common
stock were issued and outstanding and no shares of preferred stock were issued
and outstanding. In addition, at such date, 1,000,000 shares of common stock
were reserved for issuance upon the exercise of outstanding options and
warrants.

COMMON STOCK

VOTING, DIVIDEND AND OTHER RIGHTS. Each outstanding share of common
stock will entitle the holder to one vote on all matters presented to the
shareholders for a vote. Holders of shares of common stock will have no
preemptive, subscription or conversion rights. All shares of common stock to be
outstanding following this offering will be duly authorized, fully paid and
non-assessable. Our Board of Directors will determine if and when distributions
may be paid out of legally available funds to the holders. We have not declared
any cash dividends during the past fiscal year with respect to the common stock.
Our declaration of any cash dividends in the future will depend on our Board of
Directors' determination as to whether, in light of our earnings, financial
position, cash requirements and other relevant factors existing at the time, it
appears advisable to do so. In addition, we were a party to a credit facility
that prohibits the payment of dividends without the lender's prior consent.

RIGHTS UPON LIQUIDATION. Upon liquidation, subject to the right of any
holders of the preferred stock to receive preferential distributions, each
outstanding share of common stock may participate pro rata in the assets
remaining after payment of, or adequate provision for, all our known debts and
liabilities.

MAJORITY VOTING. The holders of a majority of the outstanding shares of
common stock constitute a quorum at any meeting of the shareholders. A plurality
of the votes cast at a meeting of shareholders elects our directors. The common
stock does not have cumulative voting rights. Therefore, the holders of a
majority of the outstanding shares of common stock can elect all of our
directors. In general, a majority of the votes cast at a meeting of shareholders
must authorize shareholders action other than the election of directors.
However, the Business Corporation Law of the State of New York provides that
certain extraordinary matters, such as a merger or consolidation in which we are
a constituent corporation, a sale or other disposition of all or substantially
all of our assets, and our dissolution, require the vote of the holders of
two-thirds of all outstanding voting shares. Most amendments to our certificate
of incorporation require the vote of the holders of a majority of all
outstanding voting shares.

TRANSFER AGENT AND REGISTRAR

Our Transfer Agent and Registrar for our common stock is Continental
Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004.

PLAN OF DISTRIBUTION

We are offering up to 5,000,000 shares of our common stock on a "best
efforts, no minimum" basis at a price of $1.00 per share. Under a "best efforts,
no minimum" offering, there is no requirement that we sell a specified number of
shares before the proceeds of the offering become available to us. We will not
escrow any of the proceeds received from our sale of shares before the offering
and we are not required to sell a specified number of shares before the offering
is terminated. Therefore, upon acceptance of a subscription, the proceeds from
that subscription will be immediately available for our use and the investor has
no assurance that we will sell all or any part of the remaining shares offered
hereby. The offering will commence on the date shown on the front cover of this
prospectus and will terminated on May 30, 2002, unless, in our discretion, we
terminate the offering before that date. We also reserve the right to extend the
offering beyond May 30, 2002, if we have not sold all of the shares prior to
that date. We will not extend the offering beyond a date that is more than two
years from the effective date of the registration statement of which this
prospectus is a part. The first closing will occur at our discretion.

Our officers, directors, employees and affiliates may purchase shares
in the offering on the same terms and conditions as other purchasers.
Subscription for the shares may only be made by completing a written
subscription agreement and by submitting the completed agreement with a check
payable to "Military Resale Group, Inc." to the company at its principal
executive offices to the attention of the Chief Executive Officer. If the
subscription is accepted, the check will be deposited by us and, upon
notification from our bank that the funds are available, we will cause a stock
certificate for the shares purchased to be issued and delivered to the investor.
If we reject any subscription, the investor's check will be returned without
interest or deduction.

To comply with the securities laws of certain jurisdictions, the shares
of common stock offered by this prospectus may need to be offered or sold only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the shares of common stock may not be offered or sold unless they
have been registered or qualified for sale or an exemption is available and
complied with.

We have not engaged the services of an underwriter or selling agent or
broker in connection with this offering. We will offer the shares directly and
through our officers and directors acting on our behalf. We will not pay any
commission or other consideration or compensation to any officer or director in
connection with the sale of the shares.

LEGAL MATTERS

The legality of the issuance of the shares offered will be passed upon
for us by the law firm of Pryor Cashman Sherman & Flynn LLP, New York, New York.

EXPERTS

The consolidated financial statements as of December 31, 1999 and 2000
and for each of the two years in the period ended December 31, 2000 included in
this Prospectus have been audited by Michael Johnson & Co. LLC, Denver,
Colorado, independent accountants, as stated in its report appearing herein and
elsewhere in this Registration Statement, and have been so included in reliance
upon the report of this firm given upon their authority as experts in auditing
and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 (including exhibits and schedules) under the
Securities Act, with respect to the shares to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to our company and the common
stock offered in this prospectus, reference is made to the registration
statement, including the exhibits filed thereto, and the financial statements
and notes filed as a part thereof. With respect to each such document filed with
the SEC as an exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matter involved.

We file quarterly and annual reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at the
public reference facilities of the SEC in Washington, D.C. You may call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's website at
http//www.sec.gov.

MILITARY RESALE GROUP, INC.

INDEX TO FINANCIAL STATEMENTS

MILITARY RESALE GROUP, INC. CORPORATION CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants...................................................... F-2
Consolidated Balance Sheets............................................................................. F-3
Consolidated Statements of Operations................................................................... F-4
Consolidated Statements of Change in Stockholders' Equity............................................... F-5
Consolidated Statements of Cash Flows................................................................... F-6
Notes to Consolidated Financial Statements.............................................................. F-7

F-1

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Military Resale Group, Inc.
Colorado Springs, Colorado

We have audited the accompanying balance sheets of Military Resale Group, Inc.
as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity and cash flow for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial positions of Military Resale Group, Inc.,
as of December 31, 2000 and 1999, and the results of their operations and their
cash flows for the years ended, in conformity with accounting principles
generally accepted in the United States.

Denver, Colorado
March 20, 2001
Except for Note 10, as to which date is
December 10, 2001

F-2

MILITARY RESALE GROUP, INC.
BALANCE SHEETS

(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
ASSETS 1999 2000 2001
-------------- ------------ ---------------

CURRENT ASSETS:
Cash $ 3,776 -- $ 12,785
Accounts Receivable -trade 299,642 457,574 441,058
Prepaid expenses -- -- 3,388
Inventory 90,734 90,936 173,634
----------- ----------- -----------
Total Current Assets 394,152 548,510 630,865
----------- ----------- -----------
FIXED ASSETS:
Office Equipment 1,176 1,691 6,829
Warehouse Equipment 72,713 83,110 85,285
Vehicles 64,366 64,366 64,366
Leasehold Improvements 2,440 2,440 2,440
Software 12,006 15,609 15,609
----------- ----------- -----------
152,701 167,216 174,529
Less Accumulated Depreciation (32,178) (67,217) (93,497)
----------- ----------- -----------
Net Fixed Assets 120,523 99,999 81,032
----------- ----------- -----------
OTHER ASSETS:
Goodwill 5,000 5,000 5,000
Less Accumulated Amortization (2,166) (3,166) (3,913)
Deposits -- -- 19,000
----------- ----------- -----------
Total Other Assets 2,834 1,834 20,087
----------- ----------- -----------
TOTAL ASSETS $ 517,509 $ 650,343 $ 731,984
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts Payable - trade $ 409,568 $ 544,698 $ 814,344
Bank Overdraft -- 38,223 --
Accrued Interest Payable 15,782 23,540 28,800
Notes Payable - current portion 49,254 86,073 20,835
----------- ----------- -----------
Total Current Liabilities 474,604 692,534 863,979
----------- ----------- -----------

LONG-TERM DEBT:
Notes Payable - long-term portion 88,781 17,358 183,540
----------- ----------- -----------
Total Long-term Debt 88,781 17,358 183,540
----------- ----------- -----------

TOTAL LIABILITIES 563,385 709,892 1,047,519
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, Par Value $.01, 10,000,000 shares
authorized, 5,360,000 shares issued at December 31, 53,600 53,600 65,800
2000 and 1999, and 6,580,004 issued at September 30, 2001
Additional Paid-In Capital 96,600 96,600 162,650
Retained Deficit (196,076) (209,749) (543,985)
----------- ----------- -----------
Total Stockholders' Equity (45,876) (59,549) (315,535)
----------- ----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 517,509 $ 650,343 $ 731,984
=========== =========== ===========

The accompanying notes are an integral part of the financial statements.

F-3

MILITARY RESALE GROUP, INC.
Statement of Operations

(Unaudited)
Nine Month
Year Ended December 31, Period Ended
------------------------------------- September 30,
1999 2000 2001
----------------- ----------------- -----------------

REVENUES:
Sales $ 3,117,010 $ 4,480,305 $ 3,539,734
COST OF GOODS SOLD: (2,872,339) (3,770,094) (3,092,992)
----------------- ----------------- -----------------
NET REVENUES: 244,671 710,211 446,742
----------------- ----------------- -----------------
OPERATING EXPENSES:
Auto & Truck Expense 50,418 78,316 46,039
Amortization/Depreciation 28,412 36,039 27,027
Contributions 610 50 95
Dues & Subscriptions 656 3,160 3,822
Equipment Rental 1,778 6,466 56,940
Insurance Expense 30,812 48,572 48,994
Miscellaneous Expense 761 10,453 7,367
Office Expense 21,090 27,497 44,031
Professional Fees 28,376 50,795 165,633
Rent 31,275 80,805 71,443
Salary & Wages 167,016 332,193 268,907
Supplies 1,126 6,467 4,839
Taxes- Payroll 13,791 29,430 25,919
Travel 953 1,520 3,693
----------------- ----------------- -----------------
Total Operating Expenses 377,074 711,763 774,749
----------------- ----------------- -----------------
Net Loss from Operations (132,403) (1,552) (328,007)
----------------- ----------------- -----------------
OTHER INCOME/EXPENSES
Interest Expense (13,545) (12,121) (6,229)
----------------- ----------------- -----------------
(13,545) (12,121) (6,229)
----------------- ----------------- -----------------
NET LOSS $ (145,948) $ (13,673) $ (334,236)
================= ================= =================
PER SHARE INFORMATION:
Weighted average number
of common shares outstanding 2,982,837 5,360,000 6,580,004
----------------- ----------------- -----------------
NET LOSS PER COMMON SHARE $ (0.05) $ (0.01) $ (0.05)
================= ================= =================

The accompanying notes are an integral part of the financial statements.

F-4

MILITARY RESALE GROUP, INC.
Statement of Change in Stockholders' Equity

COMMON STOCK ADDITIONAL RETAINED TOTAL
------------------------------ PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------------------------------------------- -------------- ------------- ------------- --------------- --------------

BALANCE, OCTOBER 6, 1997 -- $ -- $ -- $ -- $ --
Issuance of Common Stock for cash 800,000 8,000 (7,800) -- 200
Net Loss for period ended -- -- -- (6,756) (6,756)
-------------- ------------- ------------- --------------- --------------
BALANCE, DECEMBER 31, 1997 800,000 8,000 (7,800) (6,756) (6,556)
-------------- ------------- ------------- --------------- --------------

Issuance of Common Stock for Cash 40,000 400 14,600 -- 15,000
Issuance of Common Stock for Services 3,000,000 30,000 (30,000) -- --
Net Loss for year ended -- -- -- (43,372) (43,372)
-------------- ------------- ------------- --------------- --------------
BALANCE, DECEMBER 31, 1998 3,840,000 38,400 (23,200) (50,128) (34,928)
-------------- ------------- ------------- --------------- --------------

Issuance of Common Stock 1,520,000 15,200 119,800 -- 135,000
Net Loss for year ended -- -- -- (145,948) (145,948)
-------------- ------------- ------------- --------------- --------------
BALANCE, DECEMBER 31, 1999 5,360,000 53,600 96,600 (196,076) (45,876)
-------------- ------------- ------------- --------------- --------------

Net Loss for year ended -- -- -- (13,673) (13,673)
-------------- ------------- ------------- --------------- --------------
BALANCE, DECEMBER 31, 2000 5,360,000 $ 53,600 $ 96,600 $(209,749) $(59,549)
-------------- ------------- ------------- --------------- --------------

F-5

MILITARY RESALE GROUP, INC.
Statements of Cash Flows

(Indirect Method)

(UNAUDITED)
YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED
------------------------------- SEPTEMBER 30,
1999 2000 2001
----------- ---------- ----------

Cash Flows from Operating Activities:
Net Loss $(145,948) $ (13,673) $(334,236)
Adjustments to reconcile Net Loss to net cash
used in operating activities:
Depreciation 27,412 35,039 25,280
Amortization 1,000 1,000 747
Stock issued for services -- -- 79,250
Changes in Assets & Liabilities:
Decrease (Increase) in Accounts Receivable (176,664) (157,932) 16,516
(Increase) in prepaid expenses/deposits -- -- (22,388)
(Increase) in Inventory (20,312) (202) (82,698)
Increase in Accounts Payable 239,778 173,353 231,423
Increase in Accrued Expenses 6,032 7,758 5,260
--------- --------- ---------
Net Cash Used in Operating Activities (68,702) 45,343 (80,846)
--------- --------- ---------
Cash Flows From Investing Activities:
Purchase of fixed assets (108,597) (14,515) (7,313)
--------- --------- ---------
Net Cash Used in Investing Activities (108,597) (14,515) (7,313)
--------- --------- ---------
Cash Flows From Financing Activities:
Proceeds from stock issuance 135,000 -- --
Short-term borrowings 40,520 -- 100,944
Note principal payments (14,858) (34,604) --
--------- --------- ---------
Net Cash Provided By Financing Activities 160,662 (34,604) 100,944
--------- --------- ---------
Net Decrease in Cash and Cash Equivalents (16,637) (3,776) 12,785
Cash and Cash Equivalents - Beginning of period 20,413 3,776 --
--------- --------- ---------
Cash and Cash Equivalents - End of period $ 3,776 $ -- $ 12,785
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid $ 7,735 $ 4,365 $ 4,365
========= ========= =========
Income Taxes Paid $ -- $ -- $ --
========= ========= =========

The accompanying notes are an integral part of the financial statements.

F-6

MILITARY RESALE GROUP , INC
Notes to Financial Statements
For the Year Ended December 31, 2000

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

On October 6, 1997, Military Resale Group Inc. (the Company) was
incorporated under the laws of Maryland. The Company is a Maryland
corporation organized for the purpose of distributing/marketing resale
grocery products to military commissaries.

The Company's fiscal year end is December 31.

BASIS OF PRESENTATION

The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, The company considers all cash
and highly liquid investments with initial maturities of three months or
less to be cash equivalents.

ACCOUNTS RECEIVABLE

The Company's trade accounts primarily represent unsecured receivables.
Historically, the Company's bad debt write-offs related to these trade
accounts have been insignificant.

PROPERTY AND EQUIPMENT

The Company Follows the Practice of capitalizing Property and equipment
over $250 at cost. The cost of ordinary maintenance and repairs is charged
to operations while renewals and replacements are capitalized. Depreciation
is computed On the straight-line method over the following estimated useful
lives.

Office Equipment & Software 3 to 5 years
Warehouse Equipment 5 to 7 years
Vehicles 5 years

ESTIMATES

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

F-7

MILITARY RESALE GROUP, INC.
Notes to Financial Statements
For the Year Ended December 31, 2000

NET LOSS PER SHARE

Net loss per share is based on the weighted average number of common shares
and common shares equivalent outstanding during the period.

REVENUE RECOGNITION

Revenue is recognized at the time of sale.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of accounts payable and accrued expenses are considered
to be representative of their respective fair values because of the
short-term nature of these financial instruments.

OTHER COMPREHENSIVE INCOME

The company has no material components of other comprehensive income (loss)
and accordingly, net loss is equal to comprehensive loss in all periods.

FEDERAL INCOME TAXES

The Company accounts for income taxes under SFAS No 109, which requires the
asset and liability approach to accounting for income taxes. Under this
approach, deferred income taxes are determined based upon differences
between the financial statement and tax bases of the Company's assets and
liabilities and operating loss carryforwards using enacted tax rates in
effect for the years in which the differences are expected to reverse.
Deferred tax assets are recognized if it is more likely than not that the
future tax benefit will be realized.

NOTE 2 - NOTES PAYABLE

The following is a summary of notes payable as of December 31, 2000

Note payable to an individual , unsecured loan, 12% interest,
maturity date - April 2000 $ 14,650

Note payable to a finance company, collateralized by auto, monthly installment
payments of $693, maturity date - February 2001 1,372

Note payable to finance company, collateralized by auto, monthly payments of
of $1,053, maturity date - June 2003 27,409

Note payable to investment company, unsecured loan, 10% interest,
Due on demand 60,000
-------
103,431
Less: Current Portion (86,073)
-------
Total Long-Term Debt $17,358
=======

F-8

MILITARY RESALE GROUP, INC
Notes to Financial Statements
For the Year Ended December 31, 2000

Maturities of long-term debt at December 31, 2000, are as follows:

2000 $ 86,073
2001 11,244
2002 6,114
--------
$103,431
========

NOTE 3 INVENTORY

Inventories at December 31, by major classification, were comprised of the
following:

Finished goods $90,936
-------
$90,936
=======

Inventory consists primarily of grocery items and are stated at the lower
of costs or market. Cost is determined under the first-in, first-out method
(FIFO) valuation method. All items of inventory are finished goods resold
to military commissaries and wholesale food chains.

NOTE 4 - OPERATING LEASES

In November 1999, the Company entered into lease agreements for office and
warehouse space in Colorado Springs, Colorado that expires in May 2002.
Rental expense for the year was $80,805.

Minimum future lease payments under current lease agreement at December 31,
2000 are as follows:

2000 $ 66,509
2001 35,529
------
$102,038
========

NOTE 5- CAPITAL STOCK TRANSACTION

On May 24, 1999, the Company's Board of Directors and shareholders approved
the following capital stock transaction: (i) a 40,000 to 1 split of common
stock. All shares and per share amounts n the accompanying financial
statements of the Company and notes thereto have been retroactively
adjusted to give effect to the stock splits.

NOTE 6 -RELATED PARTY TRANSACTION

The officers and directors of this company are also officers and directors
of other companies.

NOTE 7- CONCENTRATION OF RISK

The Company's Revenues From military commissary sales provide approximately
ninety eight percent of their base of operations. Management believes that
concentration of customers with respect to risk is minimal due to the sales
being primary through government contracts.

F-9

MILITARY RESALE GROUP, INC
Notes to Financial Statements
For the Year Ended December 31, 2000

NOTE 8 - SEGMENT INFORMATION

The Company operates primarily in a single operating segment, distributing
and marketing resale grocery products to military commissaries.

NOTE 9-INCOME TAXES

Significant components of the Company's deferred tax liabilities and assets
at December 31, 2000 are as follows:

Deferred Tax Assets
Net Operating Loss Carryforwards $209,749
Less Valuation Allowance (209,749)
---------
Total Deferred Tax Assets $ 0
=========

As of December 31, 2000, the Company had a net operating loss
carryforward for federal income tax purposes approximately equal to the
accumulated deficit recognized for book purposes, which will be
available to reduce future taxable income. The full realization of the
tax benefit associated with the carryforward depends predominantly upon
the Company's ability to generate taxable income during the
carryforward period. Because of the current uncertainty of realizing
such tax assets in the future, a valuation allowance has been recorded
equal to the amount of the net deferred tax assets, which caused the
Company's effective tax rate to differ from the statutory income tax
rate. The net operating loss carryforward, if not utilized, will begin
to expire in the year 2007.

NOTE 10-UNAUDITED INTERIM FINANCIAL INFORMATION

The interim financial information as of September 30, 2001 and for the
nine months ended is unaudited but includes all adjustments,
consisting only of normal recurring adjustments that management
considers necessary for a fair presentation of the Company's financial
position at that date and its results of operations and cash flows for
this period. Operating results for the nine months ended september 30,
2001 are not necessarily indicative of results that may be expected
for any future periods.

F-10

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Sections 721 through 725 of the Business
Corporation Law of the State of New York (the "NYBCL"), which provides for
indemnification of directors and officers of New York corporations under certain
circumstances.

Section 722 of the NYBCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, in connection with actions or proceedings, whether civil or
criminal (other than an action by or in the right of the corporation, a
"derivation action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to amounts paid in settlement and reasonable expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
actions, and the statute does not apply in respect of a threatened action, or a
pending action that is settled or otherwise disposed of, and requires court
approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. Section 721 of the
NYBCL provides that Article 7 of the BCL is not exclusive of other
indemnification that may be granted by a corporation's certificate of
incorporation, disinterested director vote, shareholder vote, agreement or
otherwise.

Article 7 of our Restated Certificate of Incorporation requires us to
indemnify our officers and directors to the fullest extent permitted under the
NYBCL. Furthermore, Article XII of our Amended and Restated By-laws provides
that we may, to the full extent permitted and in the manner required by the laws
of the State of New York, indemnify any officer or director (and the heirs and
legal representatives of any such person) made, or threatened to be made, a
party in an action or proceeding (including, without limitation, one by us or in
our right to procure a judgment in our favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which of our directors or officers served in
any capacity at our request, by reason of the fact that such director or
officer, or such director's or officer's testator or intestate, was a director
or officer of ours or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity.

Section 402(b) of the NYBCL provides that a corporation's certificate
of incorporation may include a provision that eliminates or limits the personal
liability of the corporation's directors to the corporation or its shareholders
for damages for any breach of a director's duty, provided that such provision
does not eliminate or limit (1) the liability of any director if a judgment or
other final adjudication adverse to the director establishes that the director's
acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that the director personally gained a financial
profit or other advantage to which the director was not legally entitled or that
the director's acts violated Section 719 of the NYBCL, or (2) the liability of
any director for any act or omission prior to the adoption of a provision
authorized by Section 402(b) of the NYBCL. Article 7 of our Restated Certificate
of Incorporation provides that none of our directors shall be liable to us or
our shareholders for any breach of duty in such capacity except for liability in
the event a judgment or other final adjudication adverse to a director
establishes that his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that the director
personally gained, in fact, a financial profit or other advantage

II-1

to which he or she was not legally entitled or that such director's acts
violated Section 719, or its successor, of the NYBCL.

Any amendment to or repeal of our Restated Certificate of Incorporation
or by-laws shall not adversely affect any right or protection of any of our
directors or officers for or with respect to any acts or omissions of such
director or officer occurring prior to such amendment or repeal.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons pursuant
to the foregoing, we have been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses expected to be incurred by
us in connection with the issuance and distribution of the Common Stock
registered hereby, all of which expenses, except for the Securities and Exchange
Commission registration fee, are estimates:

DESCRIPTION AMOUNT
------

Securities and Exchange Commission registration fee............ $1, 195
Accounting fees and expenses................................... *
Legal fees and expenses........................................ *
Miscellaneous fees and expenses................................ *
-------------
*
Total...................................................=============

------------------
* To be filed by amendment.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

In November 2001, we issued an aggregate of 5,410,000 shares of our
common stock to the Stockholders of Military Resale Group, Inc., a Maryland
corporation, in connection with the Reverse Acquisition. Such shares were issued
by us in reliance on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended. No underwriter fees or commissions were
paid by us in connection with such issuances.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT
NUMBER DESCRIPTION
-------- -----------
3.1 Restated Certificate of Incorporation of the Company.

3.2 Amended and Restated By-laws of the Company.

II-2

5* Opinion of Pryor Cashman Sherman & Flynn LLP.

10.1 Promissory Note dated December 12, 2001 from the Company to Atlantic
Investment Trust in the principal amount of $25,000.

10.2 Promissory Note dated December 12, 2001 from the Company to Ethan
Hokit, our president and one of our directors, in the
principal amount of $25,000.

10.3 2001 Stock Option Plan of the Company adopted in November 2001.

10.4 Promissory Note dated August 14, 2001 from the Company to Oncor
Partners, Inc. in the principal amount of $100,000.

10.5 Lease Agreement, dated as of August 2001, between MRS Connection and
the Company related to 2180 Executive Circle, Colorado
Springs, Colorado 80906.

10.6 Promissory Note dated as of October 1997 from the Company to Shannon
Investments, Inc.

10.7* Form of Subscription Agreement.

23.1 Consent of Michael Johnson & Co., LLC.

23.2* Consent of Pryor Cashman Sherman & Flynn LLP (included in their
opinion filed as Exhibit 5).

24 Powers of Attorney (included in the Signature Page of the
Resignation Statement).

----------------
* To be filed by amendment.

ITEM 28. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Company, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant undertakes to provide to the underwriters at
the closings specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

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(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds, to believe that it met all
the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in Colorado Springs,
Colorado on December 19, 2001.

MILITARY RESALE GROUP, INC.

By: /s/ Ethan D. Hokit
-----------------------------------------
Ethan D. Hokit
President and Chief Operating Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Edward T. Whelan as true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
and for him/her and in his/her name, place and stead, in any and all capacities
to sign any and all amendments (including pre-effective and post-effective
amendments) to this Registration Statement, as well as any new registration
statement filed to register additional securities pursuant to Rule 462(b) under
the Securities Act, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.

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In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

SIGNATURE TITLE DATE

/s/ Edward T. Whelan Chairman of the Board, Chief Executive December 19, 2001
-------------------------------------- Officer
Edward T. Whelan

/s/ Ethan D. Hokit President, Chief Operating Officer, Director December 19, 2001
--------------------------------------
Ethan D. Hokit

/s/ Richard H. Tanenbaum Director December 19, 2001
--------------------------------------
Richard H. Tanenbaum

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