SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

                                   (Mark One)

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934.
      For the fiscal year ended December 31, 2001.

                                       OR

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934.

      For the transition period from __________ to _________.

                      Commission File Number: _____________

                            TOTAL ENTERTAINMENT INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)



           Indiana                                                35-1504940
-------------------------------                              -------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

1411 Peel Street, Suite 500, Montreal, Quebec, Canada                  H3A 1S5
-----------------------------------------------------                 ----------
       (Address of Principal Executive Offices)                       (Zip Code)

                                 (514) 842-6999
                           ---------------------------
                           (Issuer's telephone number)


      Securities registered pursuant to Section 12(b) of the Exchange Act:



       Title of Each Class                       Name of Each Exchange
                                                  on Which Registered
-----------------------------------    ----------------------------------------

             None                                          None
-----------------------------------    ----------------------------------------


         Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.001 PER SHARE
                     ---------------------------------------
                                (Title of Class)

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

The issuer's net revenues for its most recent fiscal year were $1,929,484

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of FEBRUARY
21, 2002 WAS $2,335,538.

As of February 21, 2002, there were 58,388,443 shares of the issuer's common
stock outstanding.

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

                                     PART I

Statements contained in the annual report that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ materially
from estimated results. Such risks and uncertainties are detailed in filings
with the Securities and Exchange Commission, including without limitation in
Item 1-- DESCRIPTION OF BUSINESS and Item 6-- MANAGEMENT DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION below.

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

Total Entertainment Inc. (the Company) is a holding company, which through its
two wholly-owned subsidiaries, Intercapital Global Fund, Ltd., an Antiguan
corporation (Intercapital Global), and Total Entertainment Canada, Ltd., a
Quebec corporation (TE Canada), owns and operates interactive software-based
games of chance and sports wagering facilities which are offered as an online
service accessible world-wide through the Internet.

Intercapital Global is the owner and operator of several Internet casino Web
sites (collectively, the Online Casinos), including the sites located at
www.theonlinecasino.com, also known as The Online Casino & Sportsbook, and
www.theonlinesportsbook.com, also known as The Online Sportsbook. Several other
Web sites are currently under development. Intercapital Global licenses casino
gaming and sportsbook software and the electronic commerce (e-cash) and
transaction processing software (collectively, Casino Software) utilized by the
Online Casinos from Online Gaming Systems, Ltd. (OGS, a Florida corporation
(f/k/a) Atlantic International Entertainment Ltd.)

Intercapital Global is also currently utilizing gaming and transaction
processing software under an informal license arrangement with another vendor,
Montana S.A., a Panamanian corporation (Montana). Intercapital Global uses this
software in its www.theonlinecasino.com and www.theonlinesportsbook.com Web
sites. In the fourth quarter of 2000 Intercapital Global used this software on a
no-cost trial basis. In 2001 Intercapital Global began making volume-based
monthly royalty payments to Montana pursuant to an informal license arrangement.
Intercapital Global is currently exploring the possibility of entering into a
formal license agreement with Montana, one which would either require
Intercapital Global to pay a fixed fee and/or pay a volume-based royalty.

Intercapital Global earns income through revenues associated with the wagering
activities of its Online Casino users.

TE Canada, based in Montreal, Canada, provides Intercapital Global with
technical support, customer support and general administrative services.

The Company's shares of common stock, par value $.001 per share (the Common
Stock), currently trade on the OTC bulletin board market maintained by Nasdaq,
under the symbol TTLN.ob. Unless otherwise indicated, all descriptions herein of
the business of the Company shall also be deemed to include the business of the
Company's wholly-owned subsidiaries, Intercapital Global and TE Canada.

PRODUCTS AND SERVICES

The Online Casino games use software technology that provides enhanced sound and
graphics, and allows real time interactivity within a user's own Web browser. A
customer has the option of loading and playing casino games through their Web
browser with no downloading, or a customer may download either the entire Web
site or individual games in order to achieve faster play. Once the necessary
software has been downloaded, a customer is required to provide certain personal
and financial information, including a user name and password, in order to open
an account. A person need not open an account in order to browse the Online
Casinos without playing any games. In order to play games and make live wagers,
a person must purchase electronic cash by making one or more credit card
deposits into the person's account.

                                       1
<PAGE>

Once a customer has an account balance, the customer may play various
casino-style games, which currently include Slots, Blackjack, Poker, Roulette,
Red Dog, Keno, Craps, Let Em Ride, and Mini Baccarat or bingo, if the customer
is using one of the Bingo Sites. Many of the casino-style games have several
variations with minimum and maximum betting ranges. The customer may also open a
separate account to place wagers on sporting events, including all major
professional and collegiate sports and other events with respect to which a
betting line (or sportsbook) has been established by the odds makers in Las
Vegas. Customer winnings (in U.S. dollars) are automatically credited to a
customer's account. Withdrawals of a customer's balance are affected by credit
to the customer's credit card up to the amount deposited via credit card, with
the balance sent to the customer by check. A customer is free to withdraw all or
part of his winnings, review his account balance or make additional deposits to
his account at any time.

The Company does not require patrons to maintain a minimum account balance or
place any restrictions on amounts accumulated through winnings. The Company has,
however, established a maximum bet limit for new customers, although it may, at
its discretion, grant custom wagering and account options to its regular
customers based upon their established profiles. At the present time, the
Company does not intend to extend credit services to its patrons. In addition to
the foregoing, management has agreed to adhere to the Code of Conduct of the
Interactive Gaming Council, a gaming industry organization of which the Company
is a member. Among other things, the Code of Conduct requires Interactive Gaming
Council members to post loss limits and to provide referrals and direct access
to help and counseling organizations as a means to identify and curtail
compulsive gambling. Moreover, the Company's managers may suspend a patron's
account activity at any time if they suspect or observe compulsive gambling
behavior. Notwithstanding these procedures, however, there can be no assurance
that the Company will be able to successfully identify or curtail compulsive
gambling by its patrons.

The Company has designed the Online Casinos to be an entertaining, interactive,
real time playing experience that provides maximum privacy and security to the
customer. With respect to customer privacy and security, the Company does not
disclose any personal or wagering information relating to any customer, and
access to the customer's account (e.g., for account review, deposits or
cash-out) is password protected. Customers may access an Online Casino through
the use of personal computers.

RECENT DEVELOPMENTS

Agreement with North Star Advertising, Inc.

During 2000, the Company entered into a transaction whereby 1,000,000 common
shares were issued to Northstar Advertising, Inc. ("Northstar") in exchange for
consulting services for internet-based advertising through July 31, 2001. The
Company recorded the value of the advertising to be received based upon the
quoted market value of the common shares at the date of issuance, which amounted
to $225,000. Northstar fulfilled its obligations pursuant to the agreement in
the first quarter 2001. Accordingly the balance of prepaid advertising of
approximately $200,000 was expensed in the first quarter of 2001.

WWW.SLOTSVEGAS.COM TRANSACTIONS

In June 1999, the Company launched an Online Casino geared toward slots players
located at www.slotsvegas.com (Slotsvegas). Prior to launching, the Company sold
a 50% ownership interest and equal profit and loss participation in the
Slotsvegas site to Summerhill Gaming Limited, a Bahamian corporation (SGL), for
$500,000 (paid either in cash to the Company or to certain vendors for
obligations incurred by the Company).

Pursuant to a Purchase Agreement dated March 1, 2000 between Intercapital Global
and Netforfun.com Inc., a publicly held Canadian company (Netforfun), the
Company sold its remaining 50% interest in the Slotsvegas site and related
assets and customer deposits to Netforfun for $2,000,000 to be payable as
follows:

o    $100,000 in cash upon signing of the purchase agreement;

o    $400,000 in the form of a five year promissory note bearing interest at 9%
     per annum and payable in equal quarterly installments of $24,910.02,
     commencing on July 1, 2000; and

o    $1,500,000 in the form of 15,000,000 shares of Netforfun common stock
     valued at $0.10 per share.

As part of the transaction, Intercapital Global entered into a software support
maintenance agreement (the Software Support Maintenance Agreement) with
Netforfun pursuant to which Netforfun agreed to pay Intercapital Global $15,000
per month for an initial term of one year in exchange for certain maintenance
and support services provided by Intercapital Global in connection with the
Slotsvegas software. Netforfun will operate the Slotsvegas casino through the
Company's Dominican Hosting Facility.

                                       2
<PAGE>

Netforfun has experienced delays in receiving its external financing, and as a
result has undertaken little promotional activity for the Slotsvegas web site.
The Company has deferred invoicing Netforfun for monthly payments owed to it
pursuant to the Software Support Maintenance Agreement and hosting arrangements
since June 2000. The Company earned $45,000 during 2000 for services pursuant to
the Software Support Maintenance Agreement.

In January 2002 Netforfun was taken over by Spectrafax. The Netforfun common
stock was replaced by 1,800,000 shares of Spectrafax common stock valued at
$0.10 per share. The Company received approximately $23,000 from the sale of
270,000 shares of Spectrafax in January and February 2002 which will be applied
against the note receivable from Netforfun.

The Company has not recognized any value of its holdings of Netforfun/Spectrafax
common stock due to the uncertainty of the valuation of the common stock
received. The Company offset a portion of its note receivable from Netforfun
against its amounts due to directors and shareholders pursuant to an assumption
agreement entered into on June 30, 2000. The Company and Netforfun have also
agreed that any winnings from the Slotsvegas website will be applied against the
note receivable. Effective December 31, 2000, SGL agreed to assume the
obligation of Netforfun under the note receivable if the obligation was not
satisfied.



TECHNOLOGY AND INFRASTRUCTURE

The Company is currently using state-of-the-art casino gaming and sportsbook
software under an informal license arrangement with Montana, a leading casino
software development company. In the fourth quarter of 2000 we used this
software on a no-cost trial basis. In 2001 we began making volume-based monthly
royalty payments to Montana pursuant to an informal license arrangement. We are
exploring the possibility of entering into a formal license agreement with
Montana, one which would either require us to pay a fixed fee and/or
volume-based royalty. There is no assurance that our informal software license
from Montana will continue or that we will enter into a formal license
agreement.

The Company also licenses state-of-the-art casino gaming and sportsbook software
from OGS pursuant to four nonexclusive, four-year term License Agreements (the
License Agreements). Under two License Agreements dated April 9, 1999 relating
to the sportsbook and certain casino gaming software, as consideration for the
licenses granted there under, Intercapital Global paid OGS a total of $247,500.
Under the two License Agreements dated June 23, 1999 relating to Bingo Blast and
Lotto Magic (which the Company intends to install on its Bingo Sites in future),
as consideration for the licenses granted there under, Intercapital Global paid
OGS a total of $102,500. In March 2000, the Company returned certain of the
casino gaming and sportsbook software and the related licenses with an aggregate
cost of $172,000 to OGS, of which approximately $95,000 was refunded to the
Company and remaining balance was refunded in 2001. The Company believes the
remaining OGS software and related licenses will be utilized by the Company in
other company-owned Web sites or its casino hosting and licensing business.

Intercapital Global entered into an Agreement dated August 18, 1998 (the
Processing Agreement) with MPACT Immedia Transaction Services Ltd., a Bermuda
company (MPACT), subsequently transferred to Surefire Commerce Ltd. (Surefire),
pursuant to which Surefire performs various credit card approval and processing
services to facilitate Online Casino transactions in return for a weekly fee
equal to 5.75% (subsequently reduced to 5.25% in 2000 and 5.00% in 2001) of all
approved and settled credit card transactions, subject to a minimum fee of
$2,000 per month. The Processing Agreement can be terminated by Intercapital
Global, with or without cause, on 15 days notice to Surefire. Intercapital
Global's obligations to Surefire under the Processing Agreement are personally
guaranteed by Sandy J. Masselli, Jr., the Chief Executive Officer of the
Company.

The Company's network is connected to the Internet via redundant high-speed
fiber, ensuring multiple backup connections to the Internet. This high
performance network infrastructure ensures reliable and responsive game play for
the Company's users/players. The system is composed of high-speed Dell servers
and 3Com networking equipment. Most of the critical system components, such as
the game servers and Web servers, are distributed across multiple machines,
which protect the gaming service from failures due to malfunctioning equipment.
The highly scalable nature of the Company's system design makes provisioning for
additional capacity relatively simple. The network monitoring staff tracks the
system at all times to maintain constant awareness of the system's operating
parameters. New equipment is installed when necessary to compensate for
increased activity or anticipated peak demands for popular events.

The high quality Internet connection at the Company's network facility in San
Jose, Costa Rica is provided by HostaRica.com, a Web-hosting facility, which
contributes to responsive game play. Each gaming transaction is stored on an SQL
database that is replicated for redundancy and backed up daily to prevent data
loss, and the gaming components communicate using 128 bit encryption to protect
sensitive data from potential hackers.

TE Canada, a wholly-owned subsidiary of the Company, was formed on October 15,
1997 in order to provide technical support services and customer services (by
email and telephone) to Intercapital Global's Online Casino business.

                                       3
<PAGE>

DISTRIBUTION AND MARKETING

The Company markets its Online Casinos to an international clientele consisting
of individuals located throughout the world who are at least 18 years of age and
have access to the Internet through a personal computer. According to the
International Data Corporation, the number of Internet users is projected to
grow from 142 million people at the end of 1998 to 502 million people in 2002.
In particular, Internet use is expected to undergo significant growth in the
Pacific Rim region over the next five years. The Company also recognizes that a
substantial amount of business is now conducted over the Internet and that such
business is projected to grow significantly over the next few years.

In order to create an awareness of the Company's existence among individuals in
the target markets, the Company intends to focus its marketing efforts primarily
on traditional media advertising, online promotions, business development,
third-party relationships and social programs. In addition, the Company has
established various links at other Internet Web sites, which will enable users
of the other sites (e.g., Amazon.com) to link up to the Company's Web sites.

In the future, the Company intends to develop online gaming sites and other
e-businesses for third parties. The Company anticipates that this strategy will
be linked to its overall strategy of expansion by aligning itself with strategic
local partners familiar with local laws and customs.

To keep pace with technological changes and market conditions, the Company
intends to update its Web sites on a quarterly basis. Such quarterly updates are
expected to include new games and sporting events and new versions of existing
games, as well as technological enhancements such as shorter downloading time,
improved sound and graphics and broader software compatibility.

BARTER TRANSACTION WITH DISCOUNT CHARGE CARD LTD.

In June 2000, the Company entered into an agreement with Discount Charge Card
Ltd. (DCC) whereby DCC will provide up to $5 million worth of advertising media
to the Company in exchange for an equal amount of I-chips to be used in the
Company's Online Casinos. The agreement will enable the Company to advertise in
various media, including radio stations such as WNEW 102.7 in New York City,
newsprint and magazines such as Ocean Drive, Maxim and Continental Airlines' and
TWA's in-flight magazines. Pursuant to this agreement, 330,751 I-chips were used
through December 31, 2001. The Company has ceased such agreement, and currently
there is a dispute between the parties - See Item 3 Legal Proceedings.

COMPETITION

Given the popularity of the Internet in general and the relatively high profit
margins and low overhead associated with the Internet gambling business in
particular, especially as compared to traditional physical casinos, the Company
faces strong competition in what is expected to be a rapidly growing global
industry. The Company is aware of several other companies that currently offer
casino gambling services on the Internet similar to those of the Company. Some
of the Company's primary competitors include CryptoLogic, Inc., VentureQuest
Group Inc., GLC Limited, GoCall Inc., Cybergames Inc., Youbet.com., Internet
Casinos Ltd., Wager Net Inc., Casinos of the South Pacific, World Wide Web
Casinos and Virtual Vegas. Some of these competitors offer entrepreneurs full
software, accounting, marketing and other forms of support to enable such
persons to operate their own Internet casino Web sites.

The barrier to entry to most Internet markets, including the gambling segment,
is relatively low making it accessible to a wide number of entities and
individuals. In the Internet gaming industry, the required technological and
management expertise can be purchased or licensed from existing vendors. Thus,
in addition to those known competitors of the Company, several new competitors
are likely to emerge in the near future.

The Company's computer technology for the Online Casinos is characterized by
rapid and significant technological change in the computer, software and
telecommunication industries. Many entities are engaged in research and
development with respect to offering gaming services on the Internet. The
Company's competitors may develop technologies and products that are more
effective and efficient than the Company's products, and the Company's products
may be rendered obsolete by such developments. In addition, other companies with
greater technological and financial resources may develop gaming services over
the Internet with better capabilities than the Company's.

PATENTS, TRADEMARKS, LICENSES, ROYALTY AGREEMENTS

As of the date hereof, the Company does not own or otherwise control any
patents, copyrights or trademarks. As the Company's research and development
efforts progress, the Company will attempt to protect its own proprietary
technology by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees and other persons who have access
to its proprietary technology. Despite these anticipated protections, other
persons may independently develop or obtain access to the Company's technology,
which would adversely effect the Company's competitive position.

The Company has royalty-bearing agreements with OGS currently in effect for its
bingo products and certain casino games, although none of the software products
are currently generating any significant revenues.

                                       4
<PAGE>

GOVERNMENT REGULATION

GENERAL REGULATORY ENVIRONMENT

The Company and its subsidiaries are subject to applicable laws in the
jurisdictions in which they operate or offer services. While some jurisdictions
have attempted to restrict or prohibit Internet gaming, other jurisdictions,
such as several Caribbean countries, Australia and certain Native American
territories, have taken the position that Internet gaming is legal and/or have
adopted or are in the process of reviewing legislation to regulate Internet
gaming in such jurisdictions. As companies and consumers involved in Internet
gaming are located around the globe, there is uncertainty regarding exactly
which government has jurisdiction or authority to regulate or legislate with
respect to various aspects of the industry. Furthermore, it may be difficult to
identify or differentiate gaming-related transactions from other Internet
activities and link those transmissions to specific users, in turn making
enforcement of legislation aimed at restricting Internet gaming activities
difficult. The uncertainty surrounding the regulation of Internet gaming could
have a material adverse effect on the Company's business, revenues, operating
results and financial condition.

On March 8, 2001, the government of the United Kingdom (UK) announced that
effective January 1, 2002, the current 6.75% betting duty that is passed onto a
player, and 9% total betting duty, will be eliminated. The UK government
believed that this tax reform was necessary for UK companies to compete with the
offshore market, which already offers bettors duty free gambling, and to help
regulate the UK bookmaking industry. The reform is also intended to bring home
major UK bookmakers who have fled to offshore tax havens such as Gibraltar,
Malta, Antigua and Alderney. A UK government issued Bookmakers Permit will be
required to accept wagers. Currently, a UK based bookmaker may operate an
Internet bookmaking site, but must collect the betting duty. This reform is
expected to make the UK the hub of gaming. It is predicted that their official
entry into online gaming could put pressure on the United States and other
entities toward regulating the industry. The Company plans to apply for a UK
Bookmakers Permit.

PENDING UNITED STATES LEGISLATION AND OTHER EXISTING LAWS

Governments in the United States or other jurisdictions may in the future adopt
legislation that restricts or prohibits Internet gambling. After previous
similar bills failed to pass in 1998, in November 1999, the United States Senate
passed a bill intended to prohibit and criminalize Internet gambling (other than
certain state regulated industries). A similar bill failed to pass the United
States House of Representatives. There can be no assurance as to whether the
Senate bill or any similar bill will become law.

In addition, existing U.S. federal statutes and state laws could be construed to
prohibit or restrict gaming through the use of the Internet, and there is a risk
that governmental authorities may view the Company as having violated such
statutes or laws, notwithstanding the gaming licenses issued to Intercapital
Global by the governments of Honduras, Costa Rica and the Dominican Republic.
Several state Attorney Generals and court decisions have upheld the
applicability of state anti-gambling laws to Internet casino companies.

Accordingly, there is a risk that criminal or civil proceedings could be
initiated in the United States or other jurisdictions against the Company and/or
its employees, and such proceedings could involve substantial litigation
expense, penalties, fines, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against the Company and/or its
employees. Such proceedings could have a material adverse effect on the
Company's business, revenues, operating results and financial condition.

In addition, as electronic commerce further develops, it may generally be the
subject of government regulation. Current laws which pre-date or are
incompatible with Internet electronic commerce may be enforced in a manner that
restricts the electronic commerce market. Any such developments could have a
material adverse effect on the Company's business, revenues, operating results
and financial condition.

The Company intends to minimize the potential legal risks by continuing to
conduct its Internet business from offshore locations that permit online gaming
and by increasing its marketing efforts in Asia and other foreign jurisdictions.
There is no assurance, however, that these efforts will be successful in
mitigating the substantial legal risks and uncertainties associated with the
Company's Internet gaming business.


GAMING LICENSES

Intercapital Global is the holder of the Company's gaming licenses and the owner
and operator of the Online Casino Web sites. Intercapital Global is based in The
Bahamas and, through a special purpose subsidiary, obtained an Internet gaming
license from the government of the Dominican Republic. Intercapital Global also
holds a gaming license from the governments of Honduras and the Dominican
Republic, pursuant to which it conducts its present Internet casino business.
The Company plans to apply for a UK Bookmakers Permit.

                                       5
<PAGE>

RESEARCH AND DEVELOPMENT

The Company intends to continue its research efforts to develop additional Web
sites, new games and sporting events and new versions of existing games, as well
as technological enhancements such as shorter downloading time, improved sound
and graphics and broader software compatibility. In general, the Company plans
to invest in new technologies and casino-style games and events that add to the
entertainment value of its product and appeal to one or more selected markets.
There can be no assurance, however, that the Company will have sufficient funds
to carry out its research and development plans.

EMPLOYEES AND LABOR RELATIONS

The Company and its subsidiaries currently have 25 total employees, of which 15
are full time employees, none of whom are represented by labor unions. The
Company is not a party to any collective bargaining agreements or labor union
contracts, nor has it been subjected to any strikes or employment disruptions in
its history.

ITEM 2.  DESCRIPTION OF PROPERTY

The corporate headquarters and principal executive office of the Company is
located at 1411 Peel Street, Suite 500, Montreal, Quebec, Canada H3A 1S5. This
facility houses TE Canada's technical, marketing, customer support and
administrative operations. TE Canada leases approximately 3,057 square feet of
office space at these premises pursuant to a five-year lease, which commenced
August 1, 1999 and expires on July 31, 2004. The annual rent is approximately
US$6.50 per square foot in years one and two, approximately US$7.10 per square
foot in year three and approximately $US7.50 per square foot in years four and
five, and is paid monthly. In addition to the rent, TE Canada is obligated to
pay its proportionate share of operating costs and taxes relating to the leased
property.

The Company believes that its leased property is in good condition, well
maintained, and is adequate for the Company's current and immediately
foreseeable operating needs. Neither the Company nor its subsidiaries have any
policies regarding investments in real estate, securities, or other forms of
property.

ITEM 3.  LEGAL PROCEEDINGS

KNOBLOCK LITIGATION
-------------------
Robert W. Knoblock, Carole Knoblock and Jille Knoblock, officers, directors
and/or principal shareholders of Kit, predecessor to the Company, have filed a
lawsuit against the Company and certain affiliates. The lawsuit arises out of a
January 1998 reverse merger between Kit and Mint and restrictive legends on
certain Company stock certificates issued to the Knoblocks in connection with
this merger. The Knoblocks claim that they are shareholders and that the
restrictive legends are improper as a matter of law, and that the Company and
other defendants are liable to them, under different theories, for failure to
remove the restrictive legends. Some defendants are defendants for purposes of
some counts, but not others. There is another count raised against defendant S.
Masselli only, for payment under a $175,000 promissory note, but the Company is
not a defendant to that claim. Plaintiffs seek more than $5.5 million in
damages, in addition to prejudgment interest, punitive damages and attorney's
fees. Defendant Equity Transfer Services, Inc. also filed a cross-claim against
the Company for defense costs and indemnification.

The Company denies the claims, and has filed a counterclaim. The Company's
counterclaim is based on a claim that plaintiffs represented that only
12,000,000 shares were outstanding at the time of the merger, when more than
40,000,000 shares were outstanding. The Company seeks $2.7 in damages, in
addition to prejudgment interest, punitive damages and attorney's fees. The
facts of the case are not clearly established because discovery has been
limited. The case stalled when plaintiffs' counsel withdrew and one of the
plaintiffs died. New counsel just appeared last fall. The trial, which was set
for January 2002, was continued, and no new date has been set. The parties have
been ordered to mediation, but a date has not been set. A summary judgment
motion was filed on the promissory note claim against defendant S. Masselli, and
his response is due on May 3, 2002. The hearing will be held on May 30, 2002. It
is premature to predict the outcome of this lawsuit.

DISCOUNT CHARGE CARD LIMITED
----------------------------
Discount Charge Card Limited ("DCC") filed an arbitration proceeding against the
Company and Intercapital Global in state court in Florida alleging breach of
contract. In turn, the Company and Intercapital Global have filed an action, in
state court in Florida, asserting that DCC and other parties violated agreements
with the Company and Intercapital Global, as well as committed fraud. Both
matters are currently pending. DCC is seeking damages of $400,000 in the
arbitration proceeding. The damages under the Company's state court
counter-claim have not yet been ascertained.

In addition to the foregoing, the Company is involved from time to time in
various claims and lawsuits in the ordinary course of business, none of which is
expected, either singly, or in the aggregate, to have a material effect on the
Company.

Although the Company's management believes it has meritorious defenses, there
can be no assurance that the Company will prevail. If the Company does not
prevail, it may have a material adverse impact on the financial condition of the
Company.

                                       6
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's Common Stock is currently traded on the OTC bulletin board market
maintained by Nasdaq under the symbol TTLN.ob. The following table sets forth
the range of the high and low bid quotations for the Company's Common Stock for
the periods indicated (as reported by Nasdaq). The bid quotations set forth
below reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions:



                                                      High         Low
                                                      ----         ---

Fiscal Year Ended December 31, 2000: .........       $ 0.88      $ 0.04
    First Quarter ............................         0.88        0.25
    Second Quarter ...........................         0.50        0.19
    Third Quarter ............................         0.37        0.19
    Fourth Quarter ...........................         0.27        0.04



                                                      High         Low
                                                      ----         ---

Fiscal Year Ended December 31, 2001:
    First Quarter ............................       $ 0.17      $ 0.05
    Second Quarter ...........................         0.32        0.05
    Third Quarter ............................         0.12        0.06
    Fourth Quarter ...........................         0.08        0.04



SECURITY HOLDERS AND DIVIDENDS

As of March 21, 2002, there were approximately 133 holders of record of the
Company's Common Stock. The Company has not declared or paid any cash dividends
on its Common Stock during the past two fiscal years. The Company's board of
directors currently intends to retain all earnings for use in the Company's
business for the foreseeable future. Any future payment of dividends will depend
upon the Company's results of operations, financial condition, cash requirements
and other factors deemed relevant by the Company's board of directors.

ITEM 6.  MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of the financial condition and results of our
operations should be read in conjunction with our financial statements and
related notes appearing elsewhere in this Form 10-KSB. Except for the historical
information contained herein, the discussion in this Form 10-KSB contains
forward-looking statements that involve risks, uncertainties and assumptions
such as statements of our plans, objectives, expectations and intentions. The
cautionary statements made in this Form 10-KSB should be read as being
applicable to all related forward-looking statements wherever they appear in
this document. The actual results, levels of activity, performance, achievements
and prospects could differ materially from those discussed below. Factors that
could cause or contribute to such differences include those discussed elsewhere
in this Form 10-KSB.

                                       7
<PAGE>

OVERVIEW

From 1996 through August 1998, we were considered a development stage company.
On September 12, 1998, we launched the www.theonlinecasino.com Web site and
began generating revenues.

During 2000, we spent considerable effort developing a turnkey casino management
and support business. This activity has ceased currently as we focus on our
websites and technology improvements.

We intend to continue to increase our marketing and administrative activities,
and to increase other operating expense as required to build our business.
During 2001, we focused our activities on the following:

o    Engaging qualified personnel to refine our web sites;

o    Testing and refining various aspects of new software for the Casino and
     Sportsbook operations;

o    Marketing to existing and potential customers

o    Increasing our staff and remunerating the officers of the Company in cash.

We have incurred significant losses and negative cash flows from operations
since inception due to the initial research, technology infrastructure
development and starting of our business. Our revenues have not been sufficient
to cover our expenses to date. In order to significantly increase revenues we
will be required to incur significant advertising and promotional expenses. We
anticipate additional revenues to occur in the fall and winter months, when
wagering on professional and college football and, to a lesser extent
basketball, and internet gaming activities as a whole, are expected to be at
their highest levels. In anticipation of an expansion of our operations, we have
recently employed additional management personnel. We intend to employ
additional personnel in such areas as sales, technical support and finance.
These actual and proposed increases in personnel will significantly increase our
selling, general and administrative expenses.

Our limited operating history and the uncertain nature of the markets we address
or intend to address make prediction of our future results of operations
difficult. Our operations may never generate significant revenues, and we may
never achieve profitable operations. Our quarterly and annual operating results
are likely to fluctuate significantly in the future due to a variety of factors,
including the seasonal effects of the Sportsbook operation, many of which are
outside our control.


RESULTS OF OPERATIONS

REVENUES. Gaming revenues in the years ended December 31, 2001and 2000 were
approximately $2,769,000 and $1,084,000, respectively. This represents an
increase of $1,685,000 or 155%. Net gaming revenues in the years ended December
31, 2001 and 2000 were approximately $1,929,000 and 998,000 respectively. This
represents an increase of $931,000 or 93%. Our revenues are recognized upon
completion of the sporting event or game of chance. In 2001, revenues were
consistent throughout the year with the exception of the third quarter which was
considerably lower. The tragic events of September 11th had a severe impact on
the volume of wagering in the month of September which caused the company to
offer a substantial increase in complimentary and bonus dollars to attract
customers in September subsequent months.

Sporting event revenues have a strong seasonality towards U.S. professional and
college football and basketball seasons in the fall and winter months. Revenues
from the sportsbook operations were approximately $1,516,000 and $530,000 for
the years ended December 31, 2001 and December 31, 2000, respectively.
Substantially all of the sportsbook revenues occurred in the first and fourth
quarters when both gross volume and the hold (net winnings percentage by the
Company) were higher than in subsequent quarters. The hold on baseball games in
the summer months is typically less than the hold for football games. The launch
of the www.onlinesportsbook.com sports oriented Web site in October 2000 had a
significant impact on revenue during the years ended December 31, 2000 and
December 31, 2001.

Revenues from the Online Casino operations were approximately $1,253,000 and
$554,000 for the years ended December 31, 2001 and December 31, 2000,
respectively. The volume of wagering was significantly higher in 2001, due to
additional Casino games offered for play. The volume of wagering is higher in
the winter months due to the seasonal effect of online activity. During the
summer months both the amount wagered and the hold decreased consistent with
lower Internet usage as a whole.

COST OF OPERATIONS. Cost of operations consists primarily of software licensing
and maintenance costs, royalty payments, telecommunications and credit card
processing fees and internet service provider expenses. Cost of operations
amounted to $718,000 and $330,000 for the years ended December 31, 2001and
December 31, 2000, respectively. This represents an increase of $388,000 or
118%. The increase was the result of higher credit card processing fees and
software licensing costs associated with higher volumes of betting activities as
well as the amortization of the deferred licensing fees.

                                       8
<PAGE>

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses consist
principally of costs associated with the development and implementation of the
Web sites, developing a methodology for online gaming and investigating the
development of certain software products. Total expenses in the years ended
December 31, 2001 and 2000 were approximately $60,000 and $110,000,
respectively. This represents a decrease of $50,000 or 45%, and is due to the
greater amount of new products introduced in 2000.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of salary costs and administrative functions, advertising expenses,
travel costs and professional service fees. Total general and administrative
expenses for the years ended December 31, 2001 and December 31, 2000 were
approximately $2,125,000 and $1,480,000, respectively. This represents an
increase of $645,000 or 44%. The increase in costs was due to the efforts to
increase the size of the business, to administer the expanded volume, and
additional salary expenses. Advertising costs amounted to $405,000 and $167,000
for the years ended December 31, 2001and December 31, 2000, respectively. The
increase was primarily related to the Northstar agreement. Professional fees
decreased from $251,000 in 2000 to $60,000 in 2001 due to higher accounting and
legal fees and the use of outside consultants in 2000.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of the depreciation of furniture and in-house computer and
telecommunications equipment. Total depreciation and amortization expense was
approximately $128,000 and $106,000 for the years ended December 31, 2001 and
December 31, 2000, respectively. This represents an increase of $22,000 or 21%.

GAIN ON SALE OF THE WWW.SLOTSVEGAS.COM WEB SITE. The gain on the sale of the
slotsvegas Web site was approximately $1 million of which $965,000 was
recognized in the year ended December 31, 2000.

INCOME TAXES. We have incurred net losses for each period from inception through
1999, and recorded a modest profit in 2000. Since we have not yet filed our 1996
through 2000 tax returns for Mint and affiliates and Total Entertainment Inc.,
losses generated in prior years may not be available. We are expecting to file
such tax returns in the near future, which could yield approximately $2,000,000
of net operating loss carry forwards and deferred expenses as of December 31,
2001 for United States federal income tax purposes, which will expire in the
year 2018. Due to the uncertainty of obtaining such benefits and of future
profitability, a valuation allowance equal to the deferred tax assets has been
recorded. Changes in ownership resulting from transactions among our
stockholders and sales of common stock by us, may limit the future annual
realization of the tax net operating loss carry forwards under Section 382 of
the Internal Revenue Code of 1986.


CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION. Gaming revenues are recognized when the sporting event or
game of chance has been completed. Credit card deposits held by the Company for
individual customers are recorded as customer account deposits until earned by
the Company or returned to the customer. Gaming revenues are presented on a net
basis (i.e., net of customer winnings).

RESEARCH AND DEVELOPMENT EXPENSES. Costs associated with research and
development, principally relating to website development and e-commerce
development are expensed as incurred. Such costs also include expenditures for
developing a methodology for on-line gaming and investigating the development of
certain software gaming products.

LIQUIDITY AND CAPITAL RESOURCES

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. We have a deficiency
in working capital of approximately $1,896,000 and $1,016,000 for the years
ended December 31, 2001 and December 31, 2000, respectively. We have also
incurred a loss from operations in all periods since inception. There are also
legislative risks and uncertainties regarding online casinos, and certain
litigation against the Company; the cost of defending such actions could be
significant. We have financed our operations to date primarily through the
deferral of officer's salaries, advances made by affiliates, and the proceeds of
the sale of our Slotsvegas site.

Net cash provided by (used in) operating activities was approximately $6,000 and
$(512,000) for the years ended December 31, 2001 and December 31, 2000,
respectively. The improvement was made possible by the collection of receivables
and higher customer deposits, offset by the fact that a portion of the officers'
salaries was not deferred in 2001.

During 2001, the directors and shareholders of the Company provided working
capital advances of $43,000. The officers of the company deferred $181,000 and
$340,000 of salaries during the fiscal years ended December 31, 2001 and
December 31, 2000, respectively.

                                       9
<PAGE>

Our material capital commitments consist of obligations under facilities and
operating leases, royalties, and operating agreements. We anticipate that we
will experience an increase in our capital expenditures and lease commitments
consistent with our anticipated growth in operations, infrastructure and
personnel. We anticipate devoting additional resources to building the strength
of our brand name, through increased marketing and sales efforts. If we are
unsuccessful in defending litigation and claims against us, we may incur
significant costs or dilution. We have used our common stock where possible to
obtain required products and services without using cash.

We may seek additional funding through public or private financing or other
arrangements. Adequate funds may not be available when needed or may not be
available on terms acceptable to us. If additional funds are raised by issuing
equity securities, dilution to existing stockholders could result. If funding is
insufficient at any time in the future, we may be unable to develop or enhance
our products and services, take advantage of business opportunities or respond
to competitive pressures, any of which could have a material adverse effect on
our business, financial condition and results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We operate substantially all of our business activities and casino games in
United States dollars. We are exposed to a certain level of foreign currency
exchange risk related to our Canadian-based technical and customer support
activities. However, the assets maintained in Canada and expenditures made in
Canadian dollars have not been significant in 2000 or 2001. The Company has not,
and does not plan on entering into any programs which are intended to hedge its
exposure to the Canadian dollar.

ITEM 7.  FINANCIAL STATEMENTS

Information with respect to this item is contained in the financial statements
appearing on Item 13 of this Report. Such information is incorporated herein by
reference.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and
financial disclosure for the two most recent fiscal years.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

OFFICERS AND DIRECTORS

The Company's officers and directors are as follows:



        Name                       Age        Position(s)

Sandy J. Masselli, Jr.             39         Chairman of the Board, Chief
                                              Executive Officer and Secretary
Mitchell Brown                     36         Director, President and Chief
                                              Operating Officer
T. R. Anthony Malcom               67         Director
Robert D. Bonnell                  56         Director
Richard B. Davis                   55         Director
John Masselli                      31         Director



TERMS OF DIRECTORS

Mr. Sandy Maselli and Mr. Brown have served as directors of the Company since
January 21, 1998. Mr. Bonnell, Mr. Malcom, and Mr. Davis have served as
directors of the Company since September 30, 1998. Mr. John Masselli has served
as director of the Company since July 2, 2001. The directors of the Company
serve as such until the next annual meeting of stockholders and until their
successors are elected and qualified.

                                       10
<PAGE>

BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS

Sandy J. Masselli, Jr. has served as the Chairman of the Board, Chief Executive
Officer, and a Director of the Company since January 1998. From May 1990 to the
present, Mr. Masselli has served as Managing Director of Intercapital Asset
Management Company, Inc., an investment advisory company, where he has been
responsible for the selection and monitoring of investments as well as merchant
banking activities. From May 1981 until May 1990, Mr. Masselli worked as a Vice
President or Senior Vice President at several major securities and brokerage
firms, including Prudential Securities, Inc., Drexel Burnham Lambert, Inc.,
Shearson Lehman Hutton, Inc. and Merrill Lynch Pierce Fenner & Smith, Inc. He
holds a Bachelor of Arts degree in Political Science from Monmouth College and a
Juris Doctor from LaSalle University.

Mitchell Brown has served as the President, Chief Operating Officer and a
Director of the Company since January 1998. He has over 11 years experience in
the sales and marketing industry. From January 1990 to December 1997, Mr. Brown
worked as a sales representative at Feldman Associates where his
responsibilities included the sale of licensed and generic toys, candy, seasonal
and novelty products. Mr. Brown holds a Bachelor of Science degree in Business
Administration from Monmouth University.

T. R. Anthony Malcolm has served as a Director of the Company since September
30, 1998. He is a Barrister and Solicitor by profession since 1958. He is
admitted to the Bar in Quebec, Ontario and British Columbia, Canada. He was a
partner at the Canadian law firm of Foster, Leggat, Colby, Rioux & Malcolm from
1966 to 1969. In 1969, he became special counsel to the law firm of Chauvin &
Venne where he was responsible for arranging corporate acquisitions, mergers and
disposals throughout Canada, the United States and abroad for the North American
Trust Company. In 1971, Mr. Malcolm left Chauvin & Venne and entered the private
practice of law and maintains offices in Quebec and Ontario, Canada where he
continues to practice in such capacity. Mr. Malcolm has been appointed Deputy
Municipal Judge in Montreal West; legal advisor to and administrator for the
Quebec Rental Board; and President of the Provincial Arbitration Commission for
the Town of Mount Royal.

Robert D. Bonnell has served as a Director of the Company since September 30,
1998. He has over 25 years experience in the marketing and public relations
industries. From 1992 to the present, Mr. Bonnell has served as Chairman and
Chief Executive Officer of Skiff Lake Holdings Limited, a private holding
company with positions in real estate, investments and trusts. During this
period, he also served as Chairman of Communicer, an international company
specializing in corporate communications and advice in connection with mergers
and acquisitions. Previously, Mr. Bonnell worked as Managing Director and in
other senior positions for Public & Industrial Relations, Canada's largest
public relations firm. In addition, Mr. Bonnell has in the past served as a
director of several other companies, including Windsor Investments S.A. in
Luxemburg, Tudor Deutche International and Windsor Energy Corporation in Tulsa,
Oklahoma (which position he currently holds). He holds a Bachelor of Arts
(Honors) degree in Political Science and Economics from Ricker College,
University of New Brunswick.

Gala Tse had served as a Director of the Company since September 30, 1998. She
has extensive experience in marketing and distributing products in Asia. From
1995 to 1997, she was the Director of Business Development for Hasbro Toys Asia.
From 1991 to 1995, Ms. Tse worked as an independent distributor or Blue Diamond
Executive based in Hong Kong for NuSkin International, a multilevel marketing
company. From 1990 to 1991, she was a Director of Royal Company Ltd., a Japanese
toy company, responsible for setting up their Hong Kong office for the purpose
of manufacturing toys in China for export throughout South East Asia. Since
1997, Ms. Tse has been raising a family. She holds a Bachelor of Science degree
from McGill University in Montreal. Ms. Tse resigned her position effective July
2, 2001 for personal reasons.

Richard B. Davis has served as a Director of the Company since September 30,
1998. He is a Certified Public Accountant licensed to practice in New York and
New Jersey. From 1976 to the present, Mr. Davis has been engaged in the private
practice of accounting, providing services to many companies and individuals.
Prior to that time, Mr. Davis spent many years working in the tax and other
departments at several major accounting firms, including Peat Marwick, Mitchell
& Co. and Touche Ross & Co. Mr. Davis is a member of the American Institute of
Certified Public Accountants, the New York State Society of Certified Public
Accountants and the New Jersey Society of Certified Public Accountants. He holds
a Bachelor of Business Administration degree from City College of New York.

John J. Masselli has served as a Director and Secretary of the Company since
July 2001. From March 1998 to present, Mr. John J. Masselli has been employed by
the Company as Executive Vice President, Marketing/Development. From March 1993
to March 1998, Mr. John J. Masselli was employed by Merrill Lynch & Co., Inc.,
U.S. Private Client Services; his responsibilities included brokerage operations
and customer service. Mr. John J. Masselli holds a Bachelor of Science degree in
Communications from The University of Miami, Florida. Mr. John J. Masselli is
the brother of Sandy J. Masselli, Jr., Chairman of the Board, Chief Executive
Officer and a director of the Company.

                                       11
<PAGE>

SIGNIFICANT EMPLOYEES

Vance P. Hein has been a Vice President of the Company since April 1, 1999 with
responsibility for network administration. Mr. Hein has extensive experience
with computer network administration and information and security systems
management. From 1997 to 1998, Mr. Hein worked as Network Administrator for
Intersphere Communications Ltd., a gaming software developer located in Plymouth
Meeting, Pennsylvania, where he was responsible for the company's network, Web
server and security system for user accounts. From 1992 to 1997, Mr. Hein was
employed as Information Systems Manager by CVP Communications in West Chester,
Pennsylvania, where he was responsible for all computer operations, desktop
support and software installation. In addition, from 1976 to 1984, Mr. Hein
served in the U.S. Navy where he had responsibilities in the broadcast network
and shipboard communication areas. Mr. Hein has his MCSE Certification and holds
an MFA degree in Film & Television Production/Information Technology from the
University of Southern California, Los Angeles, as well as a B.S. degree in
Secondary Education from Clarion University.

FAMILY RELATIONSHIPS

John J. Masselli, Director is the brother of Sandy Masselli, Jr. Chairman of the
Board. There are no other family relationships among directors, executive
officers or other persons nominated or chosen by the Company to become officers
or executive officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

The Company is not aware of any material legal proceedings that have occurred
within the past five years concerning any director, director nominee, promoter
or control person which involved a criminal conviction, a pending criminal
proceeding, a pending or concluded administrative or civil proceeding limiting
one's participation in the securities or banking industries, or a finding of
securities or commodities law violations.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the SEC). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on the Company's review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 2001, all filing requirements
applicable to the Company's officers, directors and greater than ten percent
beneficial owners were complied with.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth certain summary information concerning the
aggregate compensation paid to the Company's Chief Executive Officer. There were
no other executive officers of the Company who earned in excess of $100,000 for
the year ended December 31, 2001:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                 Long-Term
                                                                                 Compensation
                                          Annual Compensation                    Securities
Name and                                  -------------------    Other Annual    Underlying
Principal Position(s)             Year    Salary ($)    Bonus    Compensation    Options/SARs (#)
------------------------------    ----    ----------    -----    ------------    ----------------
<S>                               <C>     <C>             <C>          <C>             <C>
Sandy J. Masselli, Jr.(1)         2001    100,000(2)      0            0               0
Chairman of the Board             2000    100,000(2)      0            0               0
and Chief Executive Officer
</TABLE>

1.   Sandy Masselli, Jr. became Chief Executive Officer of the Company as of
     January 23, 1998 as part of the Merger.

2.   See Deferred Compensation Arrangements below.

                                       12
<PAGE>

STOCK OPTIONS

No stock options were granted or exercised during 2001 to or by any of the
Company's named executive officers.

LONG-TERM INCENTIVE PLANS

The Company made no awards to the named executive officers under any long-term
incentive plan in 2001.

COMPENSATION OF DIRECTORS

Directors of the Company do not receive any stated salary or other compensation
for their services as directors or members of committees of the Board of
Directors, but by resolution of the board, a fixed fee and expenses of
attendance may be allowed for attendance at each meeting. Directors of the
Company may also serve the Company in other capacities as an officer, agent or
otherwise, and may receive compensation for their services in such other
capacity.

DEFERRED COMPENSATION ARRANGEMENTS

Sandy Masselli, together with certain other senior officers and employees of the
Company, have agreed to defer their annual salaries until such time as
determined by the relevant officer, without interest and not funded. The
deferred salaries shall be paid to such persons in cash or stock of the Company
at such future time as each person may elect by written notice to the Company.
The total amount of deferred officer salaries at December 31, 2001 was
approximately $1,061,000. During the year ended December 31, 2001, $158,950 of
officers salaries were paid in cash and $181,050 was deferred.

EMPLOYMENT AGREEMENTS

The Company is not a party to any employment or consulting agreement with any
named executive officer.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock by (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table set forth in Item 10 --
EXECUTIVE COMPENSATION, and (iv) all directors and executive officers of the
Company as a group. Unless otherwise indicated, the address of such persons is
1411 Peel Street, Suite 500, Montreal, Quebec, Canada H3A 1S5.



                                      Number of Shares
                                      of Common Stock
Name and Address of Beneficial Owner  Beneficially Owned(1)  Percent of Class(2)
------------------------------------  ---------------------  -------------------

Sandy J. Masselli, Jr                      72,500,000(3)             59.5
Mitchell Brown                              3,500,000(4)              5.8
Robert D. Bonnell                           2,350,000(5)              4.0
John Masselli                                 750,000(6)              1.2
T.R. Anthony Malcom                           250,000(7)               .4
Richard B. Davis                              250,000(8)               .4
Robert and Carole Knoblock                  4,140,000                 7.2
    294 South 200 W
    Valparaiso, Indiana 46383
Intercapital Asset Management Limited      57,000,000(9)             49.8
    c/o The Royal Bank of Scotland
    Shirley & Charlotte Street
    Nassau, The Bahamas
All directors and executive officers       79,600,000                71.3
as a group (first 6 persons)

                                       13
<PAGE>

1.   Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Except as indicated by
     footnotes and subject to community property laws, where applicable, the
     persons named above have sole voting and investment power with respect to
     all shares of Common Stock shown as beneficially owned by them.

2.   With respect to option holders, the calculation of percentage ownership
     assumes the exercise of the relevant option or options beneficially owned
     by the holder but not by other option holders.

3.   This amount consists of (i) 10,000,000 shares of Common Stock held,
     directly or indirectly, by Sandy Masselli's family and relatives, with
     respect to which Mr. Masselli is in a position to exercise voting and
     investment power, (ii) 3,000,000 common stock options issued to Mr.
     Masselli, (iii) 2,500,000 common stock options issued to Mr. Masselli's
     brother, Joseph H. Masselli, with respect to which Mr. Masselli is in a
     position to exercise voting and investment power, and (iv) 57,000,000
     common stock options (the Global Options) held by Intercapital Asset
     Management Limited, a Bahamian corporation (ICAM) as transferee from
     Intercapital Global, with respect to which Mr. Masselli is in a position to
     exercise voting and investment power. All of the 62,500,000 common stock
     options referred to in clauses (ii), (iii), and (iv) above are exercisable
     at any time at $0.1875 per share and expire on February 3, 2006. ICAM is
     also listed in the table as an additional beneficial owner of the Global
     Options.

4.   2,500,000 of this amount consists of common stock options issued to Mr.
     Brown. The options are exercisable at any time at $0.1875 per share and
     expire on February 3, 2006.

5.   2,000,000 of this amount consists of common stock options issued to Mr.
     Bonnell. The options are exercisable at any time at $0.15 per share and
     expire on September 30, 2006. Of the remaining 350,000 shares beneficially
     owned by Mr. Bonnell, 170,000 are held directly and 180,000 are held
     through a family holding company of which Mr. Bonnell is the Chairman and
     CEO.

6.   This amount consists of 750,000 common stock options issued to Mr. John
     Masselli. The options are exercisable at any time at $0.1875 per share and
     expire on February 3, 2006.

7.   This amount consists of 250,000 common stock options issued to Mr. Malcom.
     The options are exercisable at any time at $0.15 per share and expire on
     September 30, 2006.

8.   This amount consists of 250,000 common stock options issued to Mr. Davis.
     The options are exercisable at any time at $0.15 per share and expire on
     September 30, 2006.

9.   This amount consists of the 57,000,000 Global Options issued to
     Intercapital Global as an agent for the beneficial owners of Mint and
     Intercapital Global. The Global Options were subsequently transferred by
     Intercapital Global to ICAM. The Global Options are exercisable at any time
     at $0.1875 per share and expire on February 3, 2006. Sandy J. Masselli, Jr.
     is also listed in the table as an additional beneficial owner of the Global
     Options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

FORMATION OF THE COMPANY

The Company was incorporated on April 22, 1993 in the State of Indiana under the
name Kit Farms Inc. (Kit). From 1993 until 1995, Kit engaged in the business of
pet food manufacturing and processing. From 1995 until January 1998, Kit was
inactive. On January 28, 1998, Mint Energy Corporation, a Delaware corporation
(Mint), merged with and into Kit, with Kit being the surviving corporation (the
Merger). Concurrently, Intercapital Global was contributed to Kit by its
shareholders, and became a wholly-owned subsidiary of Kit. Mint and Intercapital
Global had the same beneficial owners (the beneficial owners) at the date of the
Merger. After the Merger, Kit changed its name to the present name of the
Company and in September 1998, the Company commenced its present Internet casino
business.

The Merger was effected pursuant to the terms of a Merger Agreement dated
November 17, 1997 entered into between Mint and Kit, as amended by the First
Amendment thereto dated January 15, 1998, and as further amended by certain oral
agreements in February 1998 (as amended, the Merger Agreement). Pursuant to the
Merger Agreement, the shareholders of Mint and Intercapital

                                       14
<PAGE>

Global received approximately 104.8 million shares of Common Stock (the Merger
Shares) with a negotiated value of $2 million in consideration for entering into
the Merger. Through the Merger, the shareholders and management of Mint acquired
control over the Company as the surviving entity.

Prior to the Merger, Mint owned certain Internet casino hardware and software
through its two wholly-owned subsidiaries, Online Software, Inc., a Delaware
corporation (OSI), and Online Casinos, Inc. a Delaware corporation (OCI), and
Intercapital Global owned a gaming license issued by the government of Honduras.
From 1996 through the date of the Merger, the beneficial owners of these
entities advanced approximately $2 million which are reflected as capital
contributions to such entities to fund expenditures relating to research and
development of the online gaming business and software. As a result of the
Merger, OSI and OCI became wholly-owned subsidiaries of the Company and were
later merged with and into the Company with the Company surviving.

Intercapital Global was organized in October 1993 as an offshore private
investment fund, and, from time to time, conducted certain investment activities
not related to the casino business on behalf of its beneficial owners. The
Merger Shares were issued to the beneficial owners of Mint and Intercapital
Global, in consideration for entering into the Merger; however, to reduce the
Company's public float, among other reasons, the beneficial owners returned 57
million of the Merger Shares to the Company for cancellation. In exchange for
the returned shares, the Company issued to Intercapital Global, as agent for the
beneficial owners, options to acquire 57 million additional shares of Common
Stock at an exercise price of $0.1875 per share expiring on February 3, 2006
(the Global Options). The balance of 47.8 million Merger Shares was subsequently
distributed by Intercapital Global, as agent, to the beneficial owners, which
shares, together with the Global Options, were treated as consideration for the
Merger.

Pursuant to the Merger and concurrent contribution of its shares to Kit,
Intercapital Global became a wholly-owned subsidiary of the Company (and
operator of the Company's Online Casinos) and the Global Options were
transferred to Intercapital Asset Management Limited (ICAM), a Bahamian
corporation controlled by Sandy J. Masselli, Jr., the Chief Executive Officer of
the Company. ICAM holds the Global Options for the beneficial owners.

Prior to the January 1998 Merger between Kit and Mint in which the Company was
the surviving entity, Sandy J. Masselli, Jr., Chief Executive Officer of the
Company, had voting and investment control over all of Intercapital Global's
assets and outstanding shares of capital stock. At the time of the Merger, the
beneficial owners of Mint and Intercapital Global were identical.

PERSONAL GUARANTY OF MPACT AGREEMENT

Intercapital Global entered into an Agreement dated August 18, 1998 (the
Processing Agreement) with MPACT Immedia Transaction Services Ltd., a Bermuda
company (MPACT), subsequently transferred to Surefire Commerce Ltd. (Surefire),
pursuant to which Surefire performs various credit card approval and processing
services to facilitate Online Casino transactions in return for a weekly fee
equal to 5.75% (reduced to 5.25% in 2000 and 5.00% in 2001) of all approved and
settled credit card transactions, subject to a minimum fee of $2,000 per month.
The Processing Agreement is terminable by Intercapital Global, with or without
cause, on 15 days notice to Surefire. Intercapital Global's obligations to
Surefire under the Agreement are personally guaranteed by Sandy J. Masselli,
Jr., the Chief Executive Officer of the Company. In 2000, this agreement was
transferred by MPACT to Surefire.

OTHER

From time to time, certain officers and directors of the Company have directly
paid certain Company expenses, or have provided the Company with working capital
advances. Such transactions have been recorded in the Company's books as due to
directors and stockholders, and do not bear interest. There are no scheduled
terms of repayment of such amounts.

                                       15
<PAGE>

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Financial Statements

         -   Report of Independent Accountants

         -   Consolidated Balance Sheets

         -   Consolidated Statement of Operations

         -   Consolidated Statement of Stockholders' Equity (Deficiency)

         -   Consolidated Statement of Cash Flows

         -   Notes to Consolidated Financial Statements

(b)  Exhibits

     3.1     Certificate of Incorporation and amendments*

     3.2     Bylaws*

     10.1    Merger Agreement dated November 17, 1997 entered into between Mint
             Energy Corporation and Kit Farms Inc., as amended by the First
             Amendment thereto dated January 15, 1998, and Plan of
             Merger/Exchange dated January 23, 1998*

     10.2    License Agreements dated April 9, 1999 and June 23, 1999 between
             Intercapital Global Fund, Ltd. and Online Gaming Systems, Ltd.
             (f/k/a. Atlantic International Entertainment, Ltd.), and related
             Software Support Maintenance Agreements*

     10.3    Amended and Restated Purchase Agreement dated May 5, 1999 between
             Intercapital Global Fund, Ltd. and Summerhill Gaming Limited*

     10.4    Agreement dated August 18, 1998 between Intercapital Global Fund,
             Ltd. and MPACT Immedia Transaction Services Ltd.*

     10.5    Equipment Lease Agreement dated August 18, 1999 between Total
             Entertainment Canada, Ltd. (formerly Intercapital Canada Ltd.) and
             Dell Financial Services Canada Limited*

     10.6    Lease Agreement dated June 22, 1999 between Marine Properties Ltd.,
             as Landlord, and Total Entertainment Canada, Ltd. (formerly
             Intercapital Canada Ltd.), as Tenant*

     10.7    Lease Agreement dated July 30, 1999 between Devonshire House, Ltd.,
             as Landlord, and Intercapital Global Fund, Ltd., as Tenant*

     10.8    Revolving Credit Note dated May 5, 1999 payable to Summerhill
             Gaming Limited*

     10.9    Marketing and License Agreement dated January 14, 2000 between
             Intercapital Global and Online Gaming Systems, Ltd.**

     10.10   Information Services Provider Agreement dated February 1, 2000
             between Intercapital Global and Caribbean Entertainment
             International, S.A.**

     10.11   Purchase Agreement dated March 1, 2000 between Intecapital Global
             and Netforfun.com Inc., and related Software Support Maintenance
             Agreement**

     10.12   Agreement with Summerhill Gaming Limited dated March 24, 2000
             regarding debt to equity conversion**

     10.13   Agreement with Discount Charge card, Ltd. dated June 13,2000
             regarding provision of advertising media and related
             cross-guarantee of parent companies***

     10.14   Agreement with NorthStar Advertising, Inc. regarding provision of
             public relations services***


*   Incorporated by reference from the Company's Form 10-SB Registration
    Statement dated December 14, 1999.

**  Incorporated by reference from the Company's Form 10-KSB Annual Report dated
    December 31, 1999.

*** Incorporated by reference from the Company's Form 10-KSB Annual Report dated
    December 31, 2000.

(c) No reports on Form 8-K were filed during the last quarter of the period
    covered by this Report.

                                       16
<PAGE>

                                    I N D E X



                                                                        Page
                                                                        ----

Report of Independent Certified Public Accountants                       F-2

Financial Statements

  Consolidated Balance Sheets                                            F-3

  Consolidated Statements of Operations                                  F-4

  Consolidated Statement of Stockholders' Equity (Deficiency)            F-5

  Consolidated Statements of Cash Flows                                  F-6

  Notes to Consolidated Financial Statements                          F-7 - F-18



                                       F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholders and Board of Directors
Total Entertainment Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Total
Entertainment Inc. (an Indiana corporation) and Subsidiaries as of December 31,
2000 and 2001, and the related consolidated statements of operations
stockholders' equity (deficiency) and cash flows for the years then ended. These
consolidated 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 of America. Those standards require that we plan and
perform the audit 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 consolidated financial position of Total
Entertainment Inc. and Subsidiaries as of December 31, 2000 and 2001, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the consolidated financial
statements, at December 31, 2001, the Company's current liabilities exceeded its
current assets by $1,896,000, and the Company lost $1,101,000 from operations
for the year ended December 31, 2001. There are also significant legislative
risks and uncertainties regarding on-line casino operations. In addition, the
Company is involved in litigation as described in Note D-4. Although the
Company's management believes it has meritorious defenses, there can be no
assurance that the Company will prevail. If the Company does not prevail, it may
have a material adverse impact on the financial condition of the Company. These
factors, among others, as discussed in Note A-3 to the financial statements,
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note A-3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





/s/ GRANT THORNTON LLP
----------------------
Grant Thornton LLP



Edison, New Jersey
April 12, 2002

                                       F-2
<PAGE>

                    Total Entertainment Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS



                                                     December 31,   December 31,
                                                        2000           2001
                                                     -----------    -----------
ASSETS

Current assets:
 Cash                                                $       369    $    20,416
 Accounts receivable                                     317,455        232,527
 Prepaid expense and other receivables                   275,750             --
                                                     -----------    -----------
     Total current assets                                593,574        252,943

Property and equipment:
 Computer equipment                                      351,048        354,893
 Furniture and fixtures                                   48,845         48,845
                                                     -----------    -----------
                                                         399,893        403,738
 Less accumulated depreciation                           176,248        304,310
                                                     -----------    -----------
                                                         223,645         99,428
Other assets:
  Deferred licensing fees, net                           112,235             --
  Note receivable from NetForFun                         114,698        124,717
  Other assets                                            41,282         41,282
                                                     -----------    -----------
                                                     $ 1,085,434    $   518,370
                                                     ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
 Accounts payable and accrued liabilities            $   224,506    $   348,004
 Customer account deposits                               211,118        373,381
 Current maturities of capital lease obligations          21,560         11,264
 Deferred compensation                                   880,000      1,061,050
 Due to directors and stockholders                       272,197        354,965
                                                     -----------    -----------
     Total current liabilities                         1,609,381      2,148,664

Capital lease obligations, less current maturities         4,999             --

COMMITMENTS AND CONTINGENCIES

Stockholders' equity (deficiency):
 Common stock, $.001 par value; authorized,
   200,000,000 shares; issued and
   outstanding, 58,388,443 shares at
   December 31, 2000 and 2001                             58,388         58,388
 Additional paid-in capital                            2,684,695      2,684,695
 Accumulated deficit                                  (3,272,029)    (4,373,377)
                                                     -----------    -----------

Total stockholders equity (deficiency)                  (528,946)    (1,630,294)
                                                     -----------    -----------

                                                     $ 1,085,434    $   518,370
                                                     ===========    ===========



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

                                       F-3

<PAGE>

                    Total Entertainment Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,



                                                         2000           2001
                                                     -----------    -----------
Revenues:
  Gaming revenues                                    $ 1,084,429    $ 2,768,729
  Less:  Charge backs                                    (48,162)      (207,469)
         Complimentary and bonus                         (38,394)      (631,776)
                                                     -----------    -----------
  Gaming revenues, net                                   997,873      1,929,484
  Hosting fees and commissions                            92,250             --
                                                     -----------    -----------
  Total Revenues                                       1,090,123      1,929,484

Costs and expenses:
 Cost of operations                                      329,522        717,730
 Research and development                                110,446         59,994
 Selling, general and administrative                   1,480,475      2,125,046
 Depreciation and amortization                           106,098        128,062
                                                     -----------    -----------
                                                       2,026,541      3,030,832
                                                     -----------    -----------

Loss from operations                                    (936,418)    (1,101,348)

Other Income:
  Gain on sale of website                                964,682             --

                                                     -----------    -----------
     Income (loss) before provision for
         income taxes                                     28,264     (1,101,348)

Provision for income taxes                                 2,000             --
                                                     -----------    -----------
     NET INCOME (LOSS)                               $    26,264    $(1,101,348)
                                                     ===========    ===========
Basic and diluted income (loss) per common share     $       .00    $      (.02)
                                                     ===========    ===========



The accompanying notes are an integral part of these statements.

                                       F-4

<PAGE>

                    Total Entertainment Inc. and Subsidiaries

           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

                     Years ended December 31, 2001 and 2000


<TABLE>
<CAPTION>

                                                           Common stock
                                                          $.001 par value         Additional                     Total
                                                     -------------------------     paid-in     Accumulated    stockholders'
                                                       Shares         Amount       capital       deficit   equity (deficiency)
                                                     -----------   -----------   -----------   -----------    -----------
<S>                                                   <C>          <C>           <C>           <C>            <C>
Balance, December 31, 1999                            57,388,443   $    57,388   $ 2,460,695   $(3,298,293)   $  (780,210)

Net income for the year ended December 31,2000                                                      26,264         26,264
Capital stock issued to Northstar Advertising Inc.     1,000,000         1,000       224,000                      225,000
                                                     -----------   -----------   -----------   -----------    -----------
Balance December 31, 2000                             58,388,443        58,388     2,684,695    (3,272,029)      (528,946)

Net loss for the year ended December 31,2001                  --            --            --    (1,101,348)    (1,101,348)
                                                     -----------   -----------   -----------   -----------    -----------
Balance December 31, 2001                             58,388,443   $    58,388   $ 2,684,695   $(4,373,377)   $(1,630,294)
                                                     -----------   -----------   -----------   -----------    -----------
</TABLE>

The accompanying notes are an integral part of this financial statement.

                                       F-5

<PAGE>

                    Total Entertainment Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,



                                                          2000          2001
                                                      -----------   -----------

Cash flows from operating activities:

 Net income (loss)                                    $    26,264   $(1,101,348)
 Adjustments to reconcile net income (loss) to net
   cash used in operating activities:
     Amortization of deferred licensing fees              104,522       112,235
     Depreciation and amortization                        106,098       128,062
     Expenditures paid by directors and stockholders       21,000        39,542
     Gain on sale of website                             (964,682)           --
     Deferred compensation                                340,000       181,050
     Increase (decrease) in cash from changes in
      operating assets and liabilities:
        Accounts receivable                              (244,166)       84,928
        Prepaid expense and other                          27,905       275,750
        Accounts payable and accrued liabilities           61,235       123,498
        Customer account deposits                           9,661       162,263
                                                      -----------   -----------
Net cash (used in) provided by operating activities      (512,163)        5,980
                                                      -----------   -----------
Cash flows from investing activities:

 Purchase of property and equipment                       (66,348)       (3,845)
 Proceeds from sale of website                            100,000            --
 Payments received on (increase in) note receivable        45,302       (10,019)
                                                      -----------   -----------
          Net cash provided by (used in)
           investing activities                            78,954       (13,864)
                                                      -----------   -----------
Cash flows from financing activities:

 Principal payments on capital leases                     (35,918)      (15,295)
 Advances from directors and stockholders                 445,631        43,226
                                                      -----------   -----------
Net cash provided by financing activities                 409,713        27,931
                                                      -----------   -----------
          NET (DECREASE) INCREASE IN CASH                 (23,496)       20,047

Cash at beginning of period                                23,865           369
                                                      -----------   -----------
Cash at end of period                                 $       369   $    20,416
                                                      ===========   ===========



See Note G for supplementary cash flow information.

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

                                       F-6

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001

NOTE A - BUSINESS, DESCRIPTION AND HISTORY OF COMPANY

1. CORPORATE STRUCTURE

Total Entertainment Inc., formerly known as Kit Farms Inc. (the Company),
incorporated in the state of Indiana, has three wholly-owned subsidiaries,
Intercapital Global Fund Ltd. (Intercapital Global), an Antiguan company,
Intercapital Canada Ltd. (Intercapital Canada), incorporated in the Province of
Quebec, and Total Entertainment (Delaware) Inc., an inactive Delaware company.

The Company offers software-based games of chance and sports wagering facilities
on a worldwide basis through the Internet located at www.theonlinecasino.com,
www.theonlinesportsbook.com, www.bingoonthenet.com, as well as other sites
(collectively the Online Casinos). There are significant legislative risks and
uncertainties regarding on-line gaming operations (see Note D-1). The Company
launched its www.theonlinecasino.com Web site on September 12, 1998.

Intercapital Global, the operating company, owns a gaming license issued by the
Government of Honduras and the Dominican Republic, and several Internet Web
sites. The Company is currently using state-of-the-art casino gaming and
sportsbook software under an informal license arrangement with Montana S.A.
(Montana), a leading casino software development company. In the fourth quarter
of 2000 the Company used this software on a no-cost trial basis. In 2001 the
Company began making volume-based monthly royalty payments to Montana pursuant
to an informal license arrangement. The Company is exploring the possibility of
entering into a formal license agreement with Montana, one which would either
require the Company to purchase the software or pay a fixed fee and/or
volume-based royalty. There is no assurance that the informal software license
from Montana will continue or that the Company will enter into a formal license
agreement. The Company also licenses software for the gaming and sportsbook
operations from Online Gaming Systems (formerly known as Atlantic Entertainment
International Inc. (OGS), an independent software developer, and other vendors.
Intercapital Global accepts wagers via the Internet through an E-commerce credit
card processing agreement with MPACT Immedia Transaction Services Ltd. (MPACT).
During 2000, this contract was transferred by MPACT to Surefire Commerce Ltd.

Intercapital Canada provides Intercapital Global with technical and customer
support and administrative services.

2. WWW.SLOTSVEGAS.COM TRANSACTIONS

A. SGL TRANSACTION. In June 1999, the Company launched an Online Casino geared
toward slots players located at WWW.SLOTSVEGAS.COM (Slotsvegas). On May 5, 1999,
the Company entered into an agreement with Summerhill Gaming Limited (SGL) to
transfer a 50% ownership interest and profit and loss participation in
Slotsvegas. The agreement did not specify a fixed period and remains in effect
as long as the Web site is in operation. In consideration for this interest, SGL
paid $150,000 in cash to the Company and paid $350,000 of obligations to vendors
on behalf of the Company, which was recorded as deferred income. Such amounts
are non-refundable.

The agreement requires the Company to pay SGL 50% of the net profits derived
from the Slotsvegas site, on a monthly or other interim basis, as agreed to by
the Company and SGL. To the extent that the Slotsvegas site incurs net losses,
SGL will pay the Company 50% of such amounts. Through December 31, 2000, the net
profit derived from the Slotsvegas site was insignificant.

The agreement with SGL in substance represents the sale of future income and was
accounted for as deferred income in accordance with Emerging Issues Task Force
issue No. 88-18. The amount of deferred income to be amortized was calculated
using the ratio of the amounts to be paid to SGL over management's estimate of
the total payments expected to be made to SGL over four years (the management's
expected life of the website). At such time, if ever, that the deferred income
balance is fully amortized, any payments to SGL will be charged to earnings in
the current period. Further, SGL will pay the Company 50% of any net losses of
the Slotsvegas website; accordingly, any future amounts received by the Company
will be recorded as a reduction of the Slotsvegas site's operating expenses.

As part of the agreement, SGL agreed to make short-term loans up to $500,000 to
the Company for liquidity purposes. The loans bear interest at 7% per annum,
require interest payments on a monthly basis, and payment of the entire
principal balance three years from the date of issuance. Through December 31,
1999, SGL loaned the Company approximately $502,958. The loans were made in the
form of direct payments of obligations to vendors on behalf of the Company and
cash advances of $305,000. On December 31, 1999, the Company converted the
cumulative cash advances of $502,958, accrued interest of $12,867 and net
profits from Slotsvegas of $2,258 into 1,671,235 shares of common stock of the
Company using the quoted value of the common stock of $.31 per share.

                                       F-7

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

B. NETFORFUN TRANSACTION. In March 2000, pursuant to a Purchase Agreement dated
March 1, 2000 between Intercapital Global and Netforfun.com, Inc., a publicly
held Canadian company (Netforfun), the Company sold its remaining 50% interest
in the Slotsvegas site and related assets and customer deposits to Netforfun for
$2,000,000, payable as follows:

o    $100,000 in cash upon signing of the purchase agreement;

o    $400,000 in the form of a five-year promissory note bearing interest at 9%
     per annum and payable in equal quarterly installments of $24,910.02,
     commencing on or before July 1, 2000; and

o    $1,500,000 in the form of 15,000,000 shares of Netforfun common stock
     valued by the parties at $0.10 per share.

Given the current financial position of Netforfun, and its stock valuation
profile, no amounts will be recognized by the Company relating to the sale of
the website for common stock held until the uncertainty of realization is
satisfied. The Company and Netforfun agreed in June 2000, that any winnings
allocable to Netforfun were to be first applied against the principal of the
note receivable. Approximately $35,000 in Netforfun's share of the winnings from
the website has been applied against the note receivable. Effective June 30,
2000, the Company assigned $240,000 of the note receivable from Netforfun to
Intercapital Asset Management (see Note E) in partial satisfaction of amounts
owed by the Company to Intercapital Asset Management. Effective October 31,
2000, SGL agreed to assume the obligation of Netforfun under the note receivable
if the obligation is not satisfied. This guarantee was extended to October 31,
2002.

In January 2002 Netforfun was taken over by Spectrafax. The Netforfun common
stock was replaced by 1,800,000 shares of Spectrafax common stock valued at
$0.10 per share. The Company received approximately $23,000 from the sale of
270,000 shares of Spectrafax in January and February 2002 which was applied
against the note receivable from Netforfun.

Intercapital Global has also entered into a Maintenance and Support Services
Agreement with Netforfun pursuant to which Intercapital Global has agreed to
provide certain maintenance and support services to Netforfun for the Slotsvegas
software for an initial term of one year for a fee of $15,000 per month, subject
to adjustment. The Company received and recorded revenue of $45,000 under this
agreement during the year ended December 31, 2000. The Company also agreed to
defer further billing and revenue recognition under this agreement for monthly
payments owed to us pursuant to the Maintenance and Support Services Agreement,
from July 2000 until such time as the traffic of the Slotsvegas Web site becomes
more significant.

C. GAIN ON SALE OF WEB SITE. As a result of the Netforfun transaction and
certain agreements with SGL, which modified (relieving the Company of any
continuing obligations and risks with respect to the Slotsvegas website) the
original SGL agreement, the unamortized deferred income was recognized in the
year ended December 31, 2000. The total gain on the sale of the Web site
amounted to $964,682 during the year ended December 31, 2000 (which is the
aggregate of the $500,000 received directly or indirectly by SGL and $500,000 in
the form of notes receivable and cash from Netforfun, less approximately $35,000
recognized in 1999).

3. BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has incurred a loss from operations
since inception. At December 31, 2001 and 2000, the Company has a working
capital deficiency of approximately $1,896,000 and $1,016,000, respectively, and
a stockholders' deficiency of approximately $1,630,000 and $528,000,
respectively. The Company is also involved in litigation (as described in Note
D-4), which, if the Company is unsuccessful in its defense, could have a
material adverse effect on the Company. There are also significant legislative
risks and uncertainties regarding on-line casino operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.

In view of the matters described in the previous paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which, in turn, are
dependent upon the Company's ability to meet its financing requirements on a
continuous basis and to succeed in its future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts of liabilities that might be
necessary should the Company be unable to continue in existence.

                                       F-8

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

The Company's plans and actions with respect to this situation include the
following:

a. Since 2000, the Company re-focused its business on running its casino and
sportsbooks, with improved software and graphics. The Company has also entered
into a significant advertising campaign and promotional programs to increase
traffic at the website.

o    Entered into a transaction with an advertising consultant to assist in
     developing its advertising strategy;

o    Entered into a barter transaction (See Note D-8), whereby we will obtain up
     to $5 million of advertising media in various media, including radio (such
     as WNEW 102.7 in New York City), newsprint, magazines (such as Ocean Drive,
     Maxim, Continental Airlines and TWA's inflight magazines), etc. in exchange
     for an equal amount of I-chips in our Online Casinos. This transaction
     ceased in 2001, without full utilization of the $5 million.

b. Obtain advances from affiliated companies, officers or other sources, as
necessary, to fund operating expenses.

c. Defer officers' salaries until such time the Board of Directors determines it
is appropriate to commence payment. (See Note E-1.)

d. Currently the Company is running its casino on new and improved software on a
trial basis. The Company is exploring the possibility of entering into a formal
agreement with, Montana, the casino software development company, one which
would either require the Company to purchase such software or pay a volume-based
royalty.

NOTE B - ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:

1. PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.

2. FIXED ASSETS

Computers and furniture and fixtures are stated at cost and are depreciated over
their estimated useful lives of three to five years.

3. FOREIGN CURRENCY TRANSLATION

The assets and liabilities of the Company's foreign operations are translated at
the exchange rates prevailing at year-end and income and expenses are translated
at the average exchange rate for the year. Balance sheet gains and losses
arising from translation are immaterial. Translation gains or losses, for the
periods presented, have been included in the results of operations and are not
material.

4. EARNINGS (LOSS) PER SHARE

Basic earnings per share for the year ended December 31, 2000 is computed by
dividing the income for the period by the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed by
dividing the net income for the period by the weighted average number of common
shares adjusted for the dilutive effect of any potential common shares issuable
during the period. The denominator for the basic earnings per share calculation
for the year ended December 31, 2000 is 58,174,591 shares, and the denominator
for the diluted earnings per share calculation, which includes the dilutive
effect of stock options of 16,531,393 shares for the year ended December 31,
2000 is 74,705,984 shares. The amount of options not considered in the loss per
share calculation because their effect was antidilutive was 52,718,607.

                                       F-9

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

Basic loss per share for the year ended December 31, 2001 is computed by
dividing the loss for the period by the weighted average number of common shares
outstanding during the period. Diluted loss per share is computed by dividing
the loss for the period by the weighted average number of common shares adjusted
for the dilutive effect of any potential common shares issuable during the
period. The denominator for the basic and diluted earnings per share calculation
for the year ended December 2001 is 58,388,433. The amount of options not
considered in the loss per share calculation for the year ended December 31,
2001 because their effect was antidilutive was 69,250,000 shares.

5. INCOME TAXES

Total Entertainment is responsible for filing a United States Federal income tax
return, while Intercapital Canada is responsible for filing a Canadian tax
return. Intercapital Global is not required to file a United States corporate
income tax return because it is a foreign corporation and has no U.S. source
income or U.S. operations. Intercapital Global is not required to file an
Antiguan tax return since it is an International Business Corporation not
subject to taxation. (See Note D-6.)

Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 109 (SFAS No. 109), Accounting for Income Taxes, requires the liability
approach to accounting for deferred income taxes for financial reporting
purposes. Under the provisions of SFAS No. 109, deferred tax assets and
liabilities are determined based on tax rates expected to be in effect when the
taxes are actually paid or refunds received.

6. CONCENTRATION OF CREDIT OR MARKET RISK

Statement of Financial Accounting Standards No. 105 (SFAS No. 105) requires the
disclosure of significant concentration of credit or market risk, regardless of
the degree of such risk. Financial instruments, as defined by SFAS No. 105,
which potentially subject the Company and its subsidiaries to concentrations of
risk, consist principally of cash, the note receivable from Netforfun, and
accounts receivable. Substantially all of the accounts receivable at December
31, 2001 are from Surefire Commerce Ltd. or other credit card processors.

7. USE OF ESTIMATES

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

8. VALUATION OF LONG-LIVED ASSETS

The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS No. 121), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of. The statement requires that the Company
recognize and measure impairment losses of long-lived assets and certain
identifiable intangibles and value long-lived assets to be disposed of. The
carrying values of the long-lived assets are reviewed if the facts and
circumstances suggest that such assets may be permanently impaired. If the
expected future undiscounted cash flows derived from such assets is less than
the carrying value, such value would be reduced to its fair value.

9. RESEARCH AND DEVELOPMENT EXPENSES

Costs associated with research and development, principally relating to website
development and e-commerce development are expensed as incurred. Such costs also
include expenditures for developing a methodology for on-line gaming and
investigating the development of certain software gaming products.

10. ADVERTISING EXPENSES

Costs associated with advertising are expensed as incurred, and amounted to
$405,000 and $167,000 for the years ended December 31, 2001 and 2000,
respectively. See also Note C-1.

                                      F-10

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)


11. SEGMENT AND RELATED INFORMATION

The Company operates as one active segment, internet-based gaming, and follows
the requirements of SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information.

The hosting business has no dedicated assets and liabilities, and the Company
recorded $92,250 (including $45,000 pursuant to the Netforfun Maintenance
agreement) of revenue related to this activity during the year ended December
31, 2000. The Company has deferred the launch of this business until improved
proprietary products and services can be developed or obtained.

12. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.

13. REVENUE RECOGNITION

Gaming revenues are recognized when the sporting event or game of chance has
been completed. Credit card deposits held by the Company for individual
customers are recorded as customer account deposits until earned by the Company
or returned to the customer. Gaming revenues are presented on a net basis (i.e.,
net of customer winnings).

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents are assumed to be at fair value
because of the liquidity of the instruments. Accounts and notes receivable and
accounts payable are assumed to be at fair value because of the short term
nature of the instruments.

15. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2000, the Emerging issues Task Force (EITF) reached a consensus on
Issue No. 99-17, Accounting for Barter Transactions, to be effective for
transactions entered into after January 20, 2000. The consensus states that
advertising barter transactions should be accounted for at fair value and that
the fair value recognized be disclosed in the financial statements, if there is
verifiable objective evidence provided by sufficient cash transactions received
by the seller of the advertising or similar advertising. The Company purchased
advertising from barter transactions (See Note D-8), in 2001 and 2000. The
Company records advertising expense with a corresponding credit to customer
account balances as advertising is incurred.

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets (the
"Statements"). SFAS 141 is effective for all business combinations completed
after June 30, 2001. SFAS 142 is effective for fiscal years beginning after
December 15, 2001; however, certain provisions of this Statement apply to
goodwill and other intangible assets acquired between July 1, 2001 and the
effective date of SFAS 142. Major provisions of these Statements and their
effective dates for the Company are as follows:

o    all business combinations initiated after June 30, 2001 must use the
     purchase method of accounting. The pooling of interest method of accounting
     is prohibited except for transactions initiated before July 1, 2001.

o    intangible assets acquired in a business combination must be recorded
     separately from goodwill if they arise from contractual or other legal
     rights or are separable from the acquired entity and can be sold,
     transferred, licensed, rented or exchanged, either individually or as part
     of a related contract, asset or liability.

o    goodwill, as well as intangible assets with indefinite lives, acquired
     after June 30, 2001, will not be amortized. Effective January 1, 2002, all
     previously recognized goodwill and intangible assets with indefinite lives
     will no longer be subject to amortization.

o    effective January 1, 2002 goodwill and intangible assets with indefinite
     lives will be tested for impairment annually and whenever there is an
     impairment indicator.

o    all acquired goodwill must be assigned to reporting units for purposes of
     impairment testing and segment reporting.

Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.

                                      F-11

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)


In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS No. 144"), "Accounting for the Impairment of Disposal of Long-lived
Assets." This statement is effective for fiscal years beginning after December
15, 2001. This supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed of," while retaining many of the requirements of such statement.

16. RECLASSIFICATIONS

Certain reclassifications to 2000 reported amounts have been made in the
financial statements to conform to 2001 presentation.

17. DEFERRED LICENSING FEES

Up front costs incurred to obtain software licenses are amortized over the term
of the license agreement. As of December 31, 2001 all deferred licensing fees
were written off due to uncertainty as to realization (through relicensing,
refund or other) of the asset.

NOTE C - CAPITAL STOCK AND STOCK OPTIONS

1. COMMON STOCK TRANSACTIONS

During 2000, the Company entered into a transaction whereby 1,000,000 common
shares were issued to Northstar Advertising Inc. in exchange for consulting
services for internet-based advertising through July 31, 2001. The Company
recorded the value of the advertising to be received based upon the quoted
market value of the common shares at the date of issuance, which amounted to
$225,000. Northstar fulfilled its obligation pursuant to the agreement in the
first quarter 2001. Accordingly, the balance of the prepaid advertising of
approximately $200,000 was expensed in the first quarter 2001.

During 2000, the Company issued 370,000 shares of common stock to Online Gaming
System Ltd. pursuant to the OGS Agreement. Upon cancellation of the OGS
Agreement effective December 31, 2000, the shares were returned by Online Gaming
System Ltd to the Company.

During 2000, the Company issued 500,000 shares to an individual in exchange for
investor relations services. This agreement was rescinded, and the shares
returned to the Company, prior to the commencement of any investor relations
activities by the individual.

2. STOCK OPTIONS

The Company did not have a formal stock option plan; however, the Company has
issued stock options under letter agreements to certain individuals. The options
granted had an exercise price at least equal to the fair value of the Company's
stock, and expire after eight years. The options granted vest immediately.

As permitted by SFAS No. 123, the Company has elected to follow Accounting
Principles Board Opinion No. 25 (APB No. 25), Accounting for Stock Issued to
Employees, method of determining compensation cost. Under APB No. 25, because
the exercise price of the Company's employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recognized for options issued to employees or Directors.

The Company had no options granted, exercised and forfeited during the years
ended December 31, 2001 and 2000. The following table summarizes information
about the shares outstanding and exercisable for options, including the option
held by Intercapital Asset Management Limited (See Note E-3), at December 31,
2001.

                                      F-12

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)




                                        Weighted-
                                         average
                                        remaining
      Exercise         Number        contractual life     Number
       prices        outstanding         in years       exercisable
       ------        -----------         --------       -----------
       $.1875         66,500,000           6.1           66,500,000
        .15            2,750,000           6.75           2,750,000
                     -----------                        -----------
                      69,250,000                         69,250,000
                     ===========                        ===========



NOTE D - COMMITMENTS AND CONTINGENCIES

1. LEGISLATIVE RISKS AND UNCERTAINTIES

The Company and its subsidiaries are subject to applicable laws in the
jurisdictions in which they operate or offer services. While some jurisdictions
have attempted to restrict or prohibit Internet gaming, other jurisdictions,
such as several Caribbean countries, Australia and certain native Indian
territories, have taken the position that Internet gaming is legal and/or have
adopted, or are in the process of reviewing, legislation to regulate Internet
gaming in such jurisdictions. As companies and consumers involved in Internet
gaming are located around the globe, there is uncertainty regarding exactly
which government has jurisdiction or authority to regulate or legislate with
respect to various aspects of the industry. Furthermore, it may be difficult to
identify or differentiate gaming-related transactions from other Internet
activities and link those transmissions to specific users, in turn making
enforcement of legislation aimed at restricting Internet gaming activities
difficult. The uncertainty surrounding the regulation of Internet gaming could
have a material adverse effect on the Company's business, revenues, operating
results and financial condition.

PENDING UNITED STATES LEGISLATION AND OTHER EXISTING LAWS

Governments in the United States or other jurisdictions may in the future adopt
legislation that restricts or prohibits Internet gambling. After previous
similar bills failed to pass in 1998, in November, 1999, the United States
Senate passed a bill intended to prohibit and criminalize Internet gambling
(other than certain stated regulated industries). A similar bill failed to pass
the United States House of Representatives. There can be no assurance as to
whether the Senate bill or any similar bill will become law.

In addition, existing U.S. Federal statutes and state laws could be construed to
prohibit or restrict gaming through the use of the Internet, and there is a risk
that government authorities may view the Company as having violated such
statutes or laws, notwithstanding the Company's gaming licenses issued to
Intercapital Global by the governments of Honduras, Costa Rica and the Dominican
Republic. Several State Attorney Generals and court decisions have upheld the
applicability of state antigambling laws to Internet casino companies.

Accordingly there is a risk that criminal or civil proceedings could be
initiated in the United States or other jurisdictions against the Company and/or
its employees, and such proceedings could involve substantial litigation
expenses, penalties, fines, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against the Company and/or its
employees. Such proceedings could have a material adverse effect on the
Company's business, revenues, operating results and financial condition.

In addition, as electronic commerce further develops, it may generally be
subject to government regulation. Current laws which predate or are incompatible
with Internet electronic commerce may be enforced in a manner that restricts the
electronics commerce market. Any such developments could have a material adverse
effect on the Company's business, revenues, operating results and financial
condition.

                                      F-13

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

The Company intends to minimize the potential legal risks by continuing to
conduct its Internet business from offshore locations that permit online gaming
and by increasing its marketing efforts in Asia and other foreign jurisdictions.
There is no assurance, however, that these efforts will be successful in
mitigating the substantial legal risks and uncertainties associated with the
Company's internet gaming business.

2. OPERATING LEASES

The Company signed a lease for office premises in June 1999 for a period of five
years ending July 31, 2004 for a minimum annual rent of $22,000 plus operating
costs. The lease contains escalation clauses for payments of expenses over base
rent. Additionally, the Company is committed under three operating leases for
automobiles expiring on various dates in 2004. The approximate minimum annual
rental commitments under these operating leases currently in effect at December
31, 2001 are as follows:



                  Year ending December 31,
                    2002                        112,000
                    2003                        112,000
                    2004                         66,000
                                               --------
                    Total minimum payments     $291,000
                                               ========



Rent expense for the years ended December 31, 2001 and December 31, 2000 was
approximately $157,000 and $90,000, respectively. The Company also pays for a
portion of Intercapital Asset Management's leased facility in New Jersey under
an informal agreement. Intercapital Asset Management's total commitment under
this lease is $4,500 per month plus common area expenses for 60 months.

3. CAPITAL LEASE OBLIGATIONS

The Company leases certain equipment under various capital leases which will
expire through 2002.

Minimum payments for the capital leases are as follows:




                  2002                                        12,158
                                                             -------
                  Total minimum lease payments                12,158

                  Less amounts representing interest             894
                                                             -------
                  Current                                     11,264
                                                             =======



Equipment recorded under capital leases was $100,427. Accumulated amortization
of capital assets subject to capital leases amounted to approximately $89,163 at
December 31, 2001. Interest on capital leases amounted to approximately $ 7,000
and $4,000 for the years ended December 31, 2000 and 2001, respectively.

                                      F-14

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

4. LITIGATION

KNOBLOCK LITIGATION
-------------------
Robert W. Knoblock, Carole Knoblock and Jille Knoblock, officers, directors
and/or principal shareholders of Kit, predecessor to the Company, have filed a
lawsuit against the Company and certain affiliates. The lawsuit arises out of a
January 1998 reverse merger between Kit and Mint and restrictive legends on
certain Company stock certificates issued to the Knoblocks in connection with
this merger. The Knoblocks claim that they are shareholders and that the
restrictive legends are improper as a matter of law, and that the Company and
other defendants are liable to them, under different theories, for failure to
remove the restrictive legends. Some defendants are defendants for purposes of
some counts, but not others. There is another count raised against defendant S.
Masselli only, for payment under a $175,000 promissory note, but the Company is
not a defendant to that claim. Plaintiffs seek more than $5.5 million in
damages, in addition to prejudgment interest, punitive damages and attorney's
fees. Defendant Equity Transfer Services, Inc. also filed a cross-claim against
the Company for defense costs and indemnification.

The Company denies the claims, and has filed a counterclaim. The Company's
counterclaim is based on a claim that plaintiffs represented that only
12,000,000 shares were outstanding at the time of the merger, when more than
40,000,000 shares were outstanding. The Company seeks $2.7 in damages, in
addition to prejudgment interest, punitive damages and attorney's fees. The
facts of the case are not clearly established because discovery has been
limited. The case stalled when plaintiffs' counsel withdrew and one of the
plaintiffs died. New counsel just appeared last fall. The trial, which was set
for January 2002, was continued, and no new date has been set. The parties have
been ordered to mediation, but a date has not been set. A summary judgment
motion was filed on the promissory note claim against defendant S. Masselli, and
his response is due on May 3, 2002. The hearing will be held on May 30, 2002. It
is premature to predict the outcome of this lawsuit.

DISCOUNT CHARGE CARD LIMITED
----------------------------
Discount Charge Card Limited ("DCC") filed an arbitration proceeding against the
Company and Intercapital Global in state court in Florida alleging breach of
contract. In turn, the Company and Intercapital Global have filed an action, in
state court in Florida, asserting that DCC and other parties violated agreements
with the Company and Intercapital Global, as well as committed fraud. Both
matters are currently pending. DCC is seeking damages of $400,000 in the
arbitration proceeding. The damages under the Company's state court
counter-claim have not yet been ascertained.

In addition to the foregoing, the Company is involved from time to time in
various claims and lawsuits in the ordinary course of business, none of which is
expected, either singly, or in the aggregate, to have a material effect on the
Company.

Although the Company's management believes it has meritorious defenses, there
can be no assurance that the Company will prevail. If the Company does not
prevail, it may have a material adverse impact of the financial condition of the
Company.

5. OGS GAMING SOFTWARE CONTRACTS

On April 9, 1999, the Company signed two agreements with OGS granting it the
right to use casino and sportsbook gaming software for a four-year period ended
April 9, 2003. The terms of the agreement required payment of $247,500 upon
signing (which amount was paid in 1999) and an obligation to pay the licensor a
royalty of 7% of the Company's gaming revenue.

On June 23, 1999, the Company signed two additional agreements with OGS for the
rights to two more games for a four-year period ended June 23, 2003. Under the
terms of this agreement, the Company paid $102,500 upon signing and must pay a
royalty of 5% and 7%, respectively of the Company's gaming revenue.

The Company also signed an agreement with OGS for support and maintenance of the
licensed software for an initial period of one year ending June 30, 2000, at a
cost of $5,000 per month, subject to adjustments. As part of the termination of
the OGS Agreement discussed in Note A-2, the Company will have no royalty
payments and minimal maintenance costs on an ongoing basis.

In March 2000, the Company returned software and the related licenses with an
aggregate cost of $172,000 to OGS, of which approximately $95,000 was refunded
to the Company and the remaining $77,000 was paid in 2001. The Company believes
the remaining OGS software and related licenses will be utilized by the Company
in other company-owned Web sites or licensing business.

                                      F-15

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

6. MONTANA S.A. SOFTWARE

The Company is currently using state-of-the-art casino gaming and sportsbook
software under an informal license arrangement with Montana S.A. (Montana), a
leading casino software development company. In the fourth quarter of 2000 the
Company used this software on a no-cost trial basis. In 2001 the Company began
making volume-based monthly royalty payments to Montana pursuant to an informal
license arrangement. The Company is exploring the possibility of entering into a
formal license agreement with Montana, one which would either require the
Company to purchase the software or pay a fixed fee and/or volume-based royalty.
There is no assurance that the informal software license from Montana will
continue or that the Company will enter into a formal license agreement. There
is a $10,000 per month minimum royalty fee.

7. INCOME AND OTHER TAX RETURNS

Through December 31, 2001, Total Entertainment, its subsidiaries and its
predecessor companies including Kit Farms, have not filed all required income
tax returns or other tax returns or reports required by Federal, State, Local or
other jurisdictions. The Company has been advised to investigate and consult
with appropriate authorities to establish a plan to become compliant as soon as
possible. For substantially all periods, these entities had not generated any
taxable profits; therefore, management believes the amount of taxes due,
including any potential penalties and interest, for past periods is not
considered significant.

8. CREDIT CARD PROCESSING CONTRACT

In August 1998, the Company entered into an agreement with MPACT, subsequently
transferred to Surefire, whereby Surefire performs various credit card approval
and processing services for the online casino operations. Surefire receives a
fee equal to 5.75%, subsequently reduced to 5.25% in 2000 and 5.00% in 2001, of
all approved and settled credit card transactions, subject to a minimum of
$2,000 per month. The agreement is terminable by the Company with 15 days'
notice to Surefire. Surefire holds a security deposit of $25,000 from the
Company, and has a personal guaranty of Mr. Masselli, the Company's Chief
Executive Officer.

9. BARTER TRANSACTION

In June 2000, the Company entered into an agreement with Discount Charge Card
Ltd. (DCC) whereby DCC will provide up to $5 million worth of advertising media
to the Company in exchange for an equal amount of I-chips to be use in the
Company's Online Casinos. Pursuant to this agreement, 330,751 I-chips were used
through December 31, 2001, and a corresponding amount was added to the client
account balances.


NOTE E - RELATED PARTY TRANSACTIONS

1. DEFERRED COMPENSATION

During 1998 through 2000, the officers of the Company did not receive any cash
compensation for their services. Two other employees including the brother of
Mr. Masselli had similar arrangements. Such amounts totaled approximately
$880,000 at December 31, 2000 and are deferred by the Company until such time as
determined by the relevant officer. The deferred salaries shall be paid to such
persons in cash or stock of the Company at such time as each officer may elect
by written notice to the Company by the Board of Directors of the Company to be
paid. The total amount of deferred officer salaries at December 31, 2001 was
approximately $1,061,000. During the year ended December 31, 2001, $158,950 of
officers salaries were paid in cash and $181,050 was deferred.


2. DUE TO DIRECTORS AND STOCKHOLDERS

From time to time, directors and stockholders of the Company have directly paid
certain Company expenses. Such directors and stockholders have also supplied the
Company with cash advances during 2000 and 2001. Such transactions have been
recorded as due to directors and stockholders, and do not bear interest. There
are no scheduled terms of repayment of such amounts. In 2000, the Company
satisfied a portion of these advances by assigning $240,000 of its note
receivable from Netforfun to Intercapital Asset Management (See Note A-2B).

                                      F-16

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

Fees paid to directors for professional services during 2001, was approximately
$25,000.

3. HISTORY OF COMPANY FORMATION

Mr. Sandy Masselli had effective control of Mint Energy and affiliates and
Intercapital Global. Mr. Sandy Masselli has effective control of Intercapital
Asset Management Limited.

Kit Farms was incorporated on April 22, 1993 and was engaged in the pet food
business until 1995, when the remaining assets and liabilities were liquidated.
From that date to January 28, 1998, Kit Farms was an inactive public company
trading on the Nasdaq over-the-counter bulletin board market (bulletin boards).

From 1996 through 1998, Mint Energy and its subsidiaries had spent several years
exploring the possibilities of and developing software for a gaming and wagering
operation accessible through the Internet. These entities had no revenues or
employees during this period. Funds used by Mint Energy and subsidiaries to
conduct these activities and develop the business were received as advances
which are reflected as capital contributions from Sandy J. Masselli, Jr.,
Chairman of the Board (Mr. Masselli) and other shareholders of Mint Energy. At
the time of the merger, the shareholders of Mint and Intercapital Global were
identical (the Beneficial Owners).

On January 28, 1998 and as amended, Kit Farms Inc. (Kit Farms) merged with Mint
Energy including its subsidiaries, and the Beneficial Owners of Intercapital
Global contributed their shares of Intercapital Global to Kit Farms. At the time
of the Kit Farms merger, it had been purported that 7.37 million shares of Kit
Farms were outstanding. Subsequent to the merger, the Company was informed that
there may be additional shares outstanding, which were subsequently cancelled by
the Company. This matter is currently under arbitration (see Note D-4).
Notwithstanding the arbitration issue, the existing stockholders of Kit Farms
were to continue to hold the 7.37 million shares of the common stock of the
merged entity. Intercapital Global, in its role as agent for the Beneficial
Owners, received 104.8 million shares of common stock of Kit Farms, with an
aggregate value of approximately $2 million pursuant to the merger of Mint
Energy into Kit Farms, and the contribution, by the Beneficial Owners, of their
shares of Intercapital Global. The aggregate value was determined through
negotiations among the Boards of Directors of Kit Farms and Mint Energy, in the
absence of reliable quoted market prices on the bulletin boards.

In February 1998, the Beneficial Owners voluntarily returned to treasury 57
million shares. The shares were subsequently cancelled by the Company. On
February 3, 1998, the Company granted an option (the Global Option), to replace
the returned shares, to acquire 57 million shares at $.1875 per share,
exercisable at any time through February 3, 2006, to Intercapital Global in its
role as agent for the Beneficial Owners. Intercapital Global subsequently
transferred the option to Intercapital Asset Management Limited, an investment
management company controlled by Mr. Masselli, which had the same Beneficial
Owners as Mint Energy and Intercapital Global.

Intercapital Global, in its role as agent for the Beneficial Owners,
subsequently distributed 47.8 million shares of common stock it received to its
Beneficial Owners, which, together with the Global Option were consideration for
the merger.

In June 1998, the Company issued an additional 537,000 shares to the former
principal shareholders and directors of Kit Farms to facilitate the merger. The
acquisition resulted in the owners and management of Mint Energy having
effective control of the combined entity.

Kit Farms changed its name to Total Entertainment Inc. on February 19,1998.

Under accounting principles generally accepted in the United States of America,
the acquisition is considered to be a capital transaction in substance, rather
than a business combination. That is, the acquisition is equivalent to the
issuance of stock by Mint Energy for the net monetary assets of Kit Farms,
accompanied by a recapitalization, and is accounted for as a change in capital
structure. Accordingly, the accounting for the acquisition is identical to that
resulting from a reverse acquisition, except that no goodwill is recorded. Under
reverse takeover accounting, the post-reverse-acquisition comparative historical
financial statements of the legal acquirer (Kit Farms) are those of the
accounting acquirer (Mint Energy). Earnings per share (EPS) are calculated to
reflect the Company's change in capital structure for all periods presented.

                                      F-17

<PAGE>

                    TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 2001
                                   (Continued)

Intercapital Global was organized in 1993 by Mr. Maselli, as an offshore private
investment fund, which from time to time conducted certain investment activities
not related to the online gaming business for the benefit of the Beneficial
Owners. At the time, Mr. Maselli had voting and investment control over all of
Intercapital Global's assets and control over all outstanding shares of capital
stock issued by Intercapital Global. Intercapital Global later became a
wholly-owned subsidiary of the Company when its Beneficial Owners contributed
their shares to Kit Farms as part of the merger. At the time of the transfer of
ownership, Intercapital Global held no assets or liabilities other than the
gaming license.

NOTE F - INCOME TAXES

Upon filing income tax returns (see Note D-6), the Company could have net
operating losses of approximately $2 million, which could be used to offset
future United States taxable income. However, net operating losses and other
deferred expenses generated in years for which no income tax returns have been
filed, or are not accepted by the Internal Revenue Service, may not be
available. The Company is consulting with legal council to determine a plan to
become compliant. Deferred tax assets arising from these net operating loss
carryforwards, deferred compensation and certain accruals, if any, are fully
reserved due to the uncertainty of future utilization. The Company did not have
any significant taxable income in the United States or Canada for the years
ended December 31, 2000 and 2001, and income generated in Antiqua is not subject
to income taxes.

Changes in ownership resulting from transactions among our stockholders and
sales of common stock by us, may limit annual realization of the tax net
operating loss carry forwards that could become available under Section 382 of
the Internal Revenue Code.

NOTE G - SUPPLEMENTARY CASH FLOW INFORMATION

1. NON-CASH TRANSACTION. In 2000, $240,000 of advances from directors and
stockholders were repaid through the assignment of a notes receivable (See Note
A-2B and Note E-2). In addition the Company issued Common Stock, with a fair
value of $225,000, for advertising services (see Note C1).

2. INTEREST AND TAXES PAID. During 2000 the Company paid approximately $2,000 of
taxes and $7,000 of interest. During 2001 the Company paid approximately $0 of
taxes and $4,000 of interest.

                                      F-18
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                            TOTAL ENTERTAINMENT INC.





                            By /s/ SANDY J. MASSELLI, JR.
                               --------------------------
                               Sandy J. Masselli, Jr.,
                               Chairman of the Board, Chief Executive
                               Officer and Director



Date: April 12, 2002

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Signature                                Title                        Date
---------                                -----                        ----

/s/ MITCHELL BROWN             President, Chief Operating        April 12,2002
-----------------------        Officer and Director
Mitchell Brown

/s/ T.R. ANTHONY MALCOM        Director                          April 12, 2002
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T.R. Anthony Malcom

/s/ ROBERT D. BONNELL          Director                          April 12, 2002
-----------------------
Robert D. Bonnell

/s/ RICHARD B. DAVIS           Director                          April 12, 2002
-----------------------
Richard B. Davis

/s/ JOHN J. MASSELLI           Director                          April 12, 2002
-----------------------
John J. Masselli