<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC 20549

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

                                  FORM 10-QSB

(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000.

[_]   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.)
                                                          (Zip Code)

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

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

     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 [_]

     As of August 11, 2000, there were 57,758,443 shares of the issuer's common
stock outstanding.

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

                           Total Entertainment, Inc.

                                     Index
<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                        <C>
Part I. Financial Information (Unaudited)

Condensed Consolidated Balance Sheets
  December 31, 1999 and June 30, 2000                                          1

Condensed Consolidated Statements of Operations
  Six Months Ended June 30, 2000 and 1999                                      2

Condensed Consolidated Statements of Operations
  Three Months Ended June 30, 2000 and 1999                                    3

Condensed Consolidated Statements of Cash Flows
  Six Months Ended June 30, 2000 and 1999                                      4

Notes to Condensed Consolidated Financial Statements                        5-10

Managements Discussion and Analysis of Financial
  Condition and Results of Operations                                      11-14

Part II. Other Information                                                 15-16

          Signatures                                                          17
</TABLE>
<PAGE>

                  Total Entertainment, Inc. and Subsidiaries

                          Consolidated Balance Sheets



                                                     December 31,
                                                         1999
                                                    (Derived from
                                                       audited        June 30,
                                                      financial         2000
                                                     statements)     (unaudited)
                                                    --------------   -----------
ASSETS

Current assets
   Cash                                               $    23,865   $    20,124
   Accounts receivable                                     73,289        61,906
   Note receivable                                                      114,698
   Prepaid expenses and other current assets                            118,781
                                                      -----------   -----------
        Total current assets                               97,154       315,509

Property and equipment
   Computer equipment                                     302,862       309,241
   Other furniture and fixtures                            30,683        30,683
                                                      -----------   -----------
                                                          333,545       339,924
   Less accumulated depreciation                           70,150       119,604
                                                      -----------   -----------
                                                          263,395       220,320

Deferred licensing fees                                   308,037       134,678
Other assets                                               28,657        25,001
                                                      -----------   -----------

                                                      $   697,243   $   695,508
                                                      ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities
   Accounts payable and accrued liabilities           $   163,271   $   164,103
   Customer account deposits                              201,457       115,151
   Current maturities of capital lease
     obligations                                           24,838        19,143
   Deferred compensation                                  540,000       710,000
   Due to directors and stockholders                       45,566        70,466
                                                      -----------   -----------
         Total current liabilities                        975,132     1,078,863

Capital lease obligations, less current
   maturities                                              37,639        15,752

Deferred income                                           464,682

Stockholders' equity (deficiency)
   Common stock, $.001 par value, authorized
   200,000,000 shares:
    Issued and outstanding:57,388,443shares
     At December 31, 1999 and 57,758,443 at
      June 30, 2000                                        57,388        57,758

    Additional paid-in capital                          2,460,695     2,460,325
   Accumulated deficit                                 (3,298,293)   (2,917,190)
                                                      -----------   -----------
                                                         (780,210)     (399,107)
                                                      -----------   -----------

                                                      $   697,243   $   695,508
                                                      ===========   ===========

                                       1
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                     Consolidated Statements of Operations

                    Six months ended June 30, 2000 and 1999
                                  (unaudited)


                                              June 30,     June 30,
                                                1999         2000
                                            -----------   -----------
Revenues
  Gaming revenues, net                      $   311,901   $   273,295
  Commissions earned                                  -        47,250
  Maintenance and support                                      45,000
                                            -----------   -----------
                                                311,901       365,545

Costs and expenses
   Cost of operations                           175,780       211,782
   Research and development                      16,288        39,858
   Selling, general and administrative          554,480       648,031
   Depreciation and amortization                 17,000        49,454
                                            -----------   -----------
                                                763,548       949,125
                                            -----------   -----------
OTHER INCOME
   Gain on sale of website                            -       964,682
                                            -----------   -----------
                                               (451,647)      381,103
INCOME TAXES                                      3,900
                                            -----------   -----------
NET INCOME (LOSS) FOR THE PERIOD            $  (447,747)  $   381,103
                                            ===========   ===========
Earnings (loss) per common share
  Basic                                     $      (.01)  $       .01
  Diluted                                   $      (.01)  $       .00

Weighted-average shares outstanding used
  in computing earnings (loss) per common
  share
    Basic                                    55,717,208    57,512,454
                                            ===========   ===========
    Diluted                                  55,717,208    90,351,831
                                            ===========   ===========

                                       2
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                     Consolidated Statements of Operations

                   Three Months Ended June 30, 2000 and 1999
                                  (Unaudited)


                                              June 30,     June 30,
                                                1999         2000
                                            -----------   -----------
Revenues
  Gaming revenues, net                      $    45,228   $   110,611
  Maintenance support                                          45,000
                                            -----------   -----------
                                                 45,228       155,611

Costs and expenses
   Cost of operations                            66,004        79,505
   Research and development                      12,288        23,972
   Selling, general and administrative          283,250       386,081
   Depreciation and amortization                 10,149        24,942
                                            -----------   -----------
                                                371,691       514,500
                                            -----------   -----------
OTHER INCOME
   Gain on sale of website                            -       400,000
                                            -----------   -----------
                                               (326,463)       41,111
INCOME TAXES                                      3,900
                                            -----------   -----------
NET INCOME (LOSS) FOR THE PERIOD            $  (322,563)  $    41,111
                                            ===========   ===========
Earnings (loss) per common share
  Basic                                     $      (.01)  $       .00
  Diluted                                   $      (.01)  $       .00

Weighted-average shares outstanding used
  in computing earnings (loss) per common
  share
    Basic                                    55,717,208    57,636,465
                                            ===========   ===========

    Diluted                                  55,717,208    79,943,134
                                            ===========   ===========

                                       3
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows

                    Six Months Ended June 30, 2000 and 1999
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                      June 30,    June 30,
                                                        1999        2000
                                                     ---------   ---------
<S>                                                  <C>         <C>
Cash flows from operating activities
 Net income (loss)                                   $(447,747)  $ 381,103
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities

    Amortization of deferred licensing fees             61,020      70,859
    Depreciation and amortization                       17,000      49,454
    Expenditures paid by directors and stockholders     51,700
    Gain on sale of website                                       (964,682)
    Deferred income                                    150,000
    Deferred compensation                              170,000     170,000
    Increase (decrease) in cash from changes in
       operating assets and liabilities
         Accounts receivable                           (25,610)     11,383
         Prepaid expenses and other current assets      12,837     (12,625)
         Accounts payable and accrued liabilities       21,108         832
         Customer account deposits                      22,262     (86,306)
                                                     ---------   ---------
             Net cash provided by (used in)
               operating activities                     32,570    (379,982)
                                                     ---------   ---------
Cash flows from investing activities
 Deferred licensing fees                                (2,041)
 Purchase of computers and equipment                   (35,176)     (6,379)
 Proceeds from sale of website                                     100,000
 Payments received on note receivable                               45,302
                                                     ---------   ---------
        Net cash (used in)provided by
         investing activities                          (37,217)    138,923
                                                     ---------   ---------
Cash flows from financing activities
 Principal payments on capital leases                              (27,582)
 Advances from directors and
  stockholders                                         (10,511)    264,900
                                                     ---------   ---------
    Net cash provided by financing activities          (10,511)    237,318
                                                     ---------   ---------

    NET INCREASE (DECREASE) IN CASH                    (15,158)     (3,741)

Cash at beginning of period                             30,390      23,865
                                                     ---------   ---------

Cash at end of period                                $  15,232   $  20,124
                                                     =========   =========

Supplementary Cash Flow Information:
    Repayment of advances from directors and
     stockholders through assignment of note
     receivable (see Note D-2)                                   $ 240,000
                                                                 =========
</TABLE>

                                       4
<PAGE>

                           TOTAL ENTERTAINMENT, INC.
             CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE A - Summary of Accounting Policies
         ------------------------------

     The unaudited interim consolidated financial statements of Total
Entertainment, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles and rules and
regulations of the Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles of complete
financial statements.

     In the opinion of the Company's management, the accompanying unaudited
financial  statements contain all adjustments (consisting of normal recurring
entries) necessary to present fairly the financial position as of December 31,
1999 and June 30, 2000 and the results of operations for the three and six month
periods ended June 30, 2000 and 1999 and cash flows for the six months ended
June 30, 2000 and 1999, respectively.

     The accounting policies followed by the Company are set forth in Note A
of the Company's financial statements as contained in the Form 10-KSB for the
year ended December 31, 1999 filed with the Securities and Exchange Commission.
The Form 10-KSB contains additional data and information with respect to
intangible assets, stock option plans, reserved shares, income taxes,
commitments, and other items and is incorporated by reference.

     The results reported for the three and six month periods ended June 30,
2000 are not necessarily indicative of the results of operations which may be
expected for a full year.

                                       5
<PAGE>

NOTE B - RECENT DEVELOPMENTS

Software Licensing Business

    The Company has recently entered into a series of agreements through which
it offers customers, on a turnkey basis, a fully operational online casino to be
owned and operated by the customer through computer and other facilities in the
Dominican Republic (the "Dominican Hosting Facility"). The Company earns income
through license fees and other charges to these customers in connection with the
provision of casino gaming software, computer server hosting services, customer
service and administrative support, and a gaming license from the government of
the Dominican Republic. The Company also receives royalties on net winnings from
online casinos licensed by the Company. The Company commenced this business in
March 2000, and commission income of $47,000 was earned in the first half of
2000.

    The Company has entered into several agreements to support the Dominican
Hosting Facility. Pursuant to a Marketing and License Agreement with Online
Gaming Systems, Ltd. ("OGS") dated January 14, 2000 (the "OGS Agreement"),
Intercapital Global has obtained an exclusive worldwide license to market and
sell certain Casino Software developed by OGS to persons seeking to establish
their own Internet casino Web sites. The Company may also market and sell the
OGS Casino Software to customers for purposes unrelated to the Dominican Hosting
Facility. In consideration for this license, Intercapital Global will pay OGS
67% of the purchase price for each product sold up to the first 15 products, and
60% for each product sold thereafter. Intercapital Global is entitled to retain
100% of all royalties it collects in connection with sales of OGS Casino
Software products. Intercapital Global and OGS have agreed to share in the
maintenance responsibilities with respect to the products sold and Intercapital
Global will pay 25% of all maintenance payments collected from purchasers to
OGS. As additional consideration, the Company has agreed to issue 1,500,000
shares of its Common Stock to OGS in installments over the five year term of the
OGS Agreement. Either party may terminate the agreement upon 30 days written
notice to the other. Although both parties are operating under the terms of the
OGS Agreement, in May, 2000 the Company issued 370,000 shares in the name of OGS
but did not release the certificate. Upon satisfactory resolution of certain
performance issues with the OGS software the Company will release the
certificate and issue the remaining shares to OGS in accordance with the terms
of the OGS Agreement.

    In addition to the OGS Agreement, Intercapital Global has entered into an
Information Provider Services Agreement (the "Dominican Services Agreement")
dated February 1, 2000 with Caribbean Entertainment International, S.A. ("CEI").
Pursuant to the Dominican Services Agreement, CEI has agreed to install and
maintain certain Internet casino game and Web servers necessary to host online
casinos for Intercapital Global's software licensees in the Dominican Republic.
In order to allow Intercapital Global to license casino gaming software to
customers on a turnkey basis, whether supplied by OGS or another software
vendor, CEI has agreed to transfer to Intercapital Global ownership of a special
purpose entity formed to hold an Internet gaming license issued by the
government of the Dominican Republic. This entity will sublicense the right to
operate an Internet casino in the Dominican Republic to Intercapital Global's
software licensees who therefore will not need to obtain a gaming license
directly from the government.

    In consideration for CEI licensing and hosting services, Intercapital
Global has agreed to pay to CEI a one time initial fee of $20,000 and a monthly
fee of $10,000 for three casinos plus an additional $2,000 per month for each
additional casino hosted. The term of the Dominican Services Agreement is five
years.

                                       6
<PAGE>

Slotsvegas

     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).

     The agreement with SGL in substance represents the sale of future income
and was accounted for as deferred revenues in accordance with Emerging Issues
Task Force issue number 88-18. The amount amortized, as a reduction of expense,
will be calculated by computing the ratio of the amounts paid to SGL to
management's estimate of total payments expected to be made to SGL over four
years (which is management's estimate of the expected life of the website)
following the launch of the website, www.slotsvegas.com. At such time, if ever,
that the deferred income balance is fully amortized, any payments to SGL will be
charged in full to current earnings. Further, SGL will pay the Company 50% of
net losses of the slotsvegas site; accordingly, any future amounts received by
the Company will be recorded as a reduction of the slotsvegas site's operating
expenses.

     Pursuant to a Purchase Agreement dated March 1, 2000 between Intercapital
Global and Netforfun.com , 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 received as
follows:


          .  $100,000 in cash, which was received by the Company upon signing of
     the purchase agreement.

          .  $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. In June, 2000, the note was
     restructured into two notes for $160,000 and $240,000, respectively; and

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

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

     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 the common stock held or note receivable until the uncertainty
of realization is satisfied. The Purchase Agreement and the sale of Slotsvegas
to Netforfun was ratified by the Netforfun board of directors on May 7, 2000 and
the transaction is effective as of March 1, 2000. The Company and Netforfun
agreed in June, 2000 that any net winnings allocable to Netforfun were to be
first applied against the principal of the note receivable (See Note D-2). Based
upon the Netforfun share of the winnings of Slotsvegas to date (approximately
$35,000 as of June 30, 2000), and assignment of the $240,000 note as discussed
in Note D, the Company determined that the uncertainty of the realization of the
note receivable was satisfied, and that portion of the gain on the sale of the
website was recognized in the quarter ended June 30, 2000.

     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 recorded as gain on the sale of websites in the
period ended March 31, 2000.

                                       7
<PAGE>

NOTE C - Earnings Per Share of Common Stock
         ----------------------------------

   The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 Earnings per Share (SFAS 128) which
specifies the compilation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock or instruments which are
potentially common stock.

   Basic earnings per common share is determined by dividing the net income by
the weighted average number of shares of common stock outstanding. Diluted
earnings per common share is determined by dividing the net income by the
weighted number of shares outstanding and dilutive common equivalent shares from
stock options and warrants. A reconciliation of the weighted average basic
common shares outstanding to weighted average diluted common shares outstanding
follows:

                                           Six Months Ended
                                     June 30, 2000  June 30, 1999
                                     -------------  --------------

Basic Shares                            57,512,454     55,717,208

Dilution: Stock Options                 32,839,377              -
                                       -----------    -----------
Diluted Shares                          90,351,831     55,717,208
                                       ===========    ===========

Income (loss) available to
 common shareholders                       381,103       (447,747)

Basic earnings (loss) per share        $       .01    $      (.01)
Diluted earnings (loss) per share      $       .00    $      (.01)



                                         Three Months Ended
                                     June 30, 2000  June 30, 1999
                                     -------------  --------------

Basic Shares                            57,636,465     55,717,208

Dilution: Stock Options                 22,306,669              -
                                       -----------    -----------
Diluted Shares                          79,943,134     55,717,208
                                       ===========    ===========

Income (loss) available to
 common shareholders                   $    41,111    $  (322,563)

Basic earnings (loss) per share        $       .00    $      (.01)
Diluted earnings (loss) per share      $       .00    $      (.01)

                                       8
<PAGE>

NOTE D - Related Party Transactions
         --------------------------

1. Deferred Compensation

   During the first half of 2000 and 1999, $170,000 of deferred compensation was
   recorded for the officers of the Company. Deferred compensation totaled
   approximately $710,000 at June 30, 2000. The deferred salaries shall be paid
   to such persons in cash or stock of the Company at such future time as each
   officer may elect by written notice to the Board of Directors of the Company
   to be paid. The Company anticipates deferring a substantial portion of the
   officers' salaries in 2000.

2. Due to Directors and stockholders

   During the first half of 2000, Intercapital Asset Management Inc., an entity
   which is controlled by the Company's President and Chief Executive Officer,
   advanced $240,000 to the Company. The Company satisfied these advances
   effective June 30, 2000 by assigning $240,000 of it's note receivable from
   Netforfun to Intercapital Asset Management (see Note B).

   From time to time, directors and stockholders of the Company have directly
   paid certain Company expenses. 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.

NOTE E - 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

   The United States Government or the governments of other jurisdictions may in
   the future adopt legislation that restricts or prohibits Internet gaming.
   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 recently 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.

                                       9
<PAGE>

   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 and the Dominican
   Republic (Pending). 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.

   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. Litigation

   On October 11, 1999, the Company filed a demand for arbitration (the
   "Statement of Claim") with the American Arbitration Association in Chicago,
   Illinois (the "AAA Action") against Robert W. Knoblock, Carole Knoblock and
   Jille Knoblock (collectively, the "Respondents"), the officers, directors
   and/or principal shareholders of Kit Farms Inc ("Kit"), predecessor to the
   Company. Specifically, the Company and another claimant (the "Claimants")
   allege that in connection with the January 1998 reverse merger between Kit
   and Mint Energy Inc, a former subsidiary of the company, the Respondents
   breached certain representations and warranties they made in connection with
   the outstanding number of shares and/or fraudulently misrepresented the
   outstanding number of shares of Kit. The Claimants are seeking damages of
   $2,700,000 plus interest, costs and attorney fees.

   On November 15, 1999, the Respondents filed an answer and motion to dismiss
   the Statement of Claim and have asserted various defenses in connection
   therewith. In connection with their defense of the AAA Action, on December 8,
   1999, the Respondents filed a separate action against the Claimants in the
   Porter Superior Court in Indiana (the "State Court Action"). In the State
   Court Action, the Respondents are seeking damages in excess of $5.5 million
   arising from the Company's refusal to remove restrictive legends on certain
   Company common stock certificates held by the Respondents. The Company moved
   to compel arbitration of the claims brought in the State Court Action and
   such motion was denied. The Company chose not to appeal the decision and has
   asserted its claims set forth in the AAA Action, as counterclaims in the
   State Court Action. All parties in the State Court Action are currently
   engaged in discovery.
                                       10
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations


   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-QSB and Form 10-KSB for the
year ended December 31, 1999. Except for the historical information contained
herein, the discussion in this Form 10-QSB 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-QSB 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-QSB.

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. In the fiscal year ended December 31, 1999, we
continued these initial activities and also focused on:

      .  Increasing marketing activities;

      .  Launching new online gaming Web sites;

      .  Implementing improved gaming software licensed from OGS (f/k/a/
           Atlantic Entertainment International, Ltd.);

      .  Improving the functionality and appearance of the Web sites; and

      .  Enhancing our financial, infrastructure and administrative
           capabilities.

   We intend to continue to increase our marketing and administrative
activities, and to increase other operating expense as required to build our
business. In the first and second quarters of 2000, we focused our activities on
the
following:
      .  Developing our turnkey solution business model for persons who wish to
      enter the online gaming industry through ownership of their own online
      casino;

      .  Establishing a Marketing and License Agreement with OGS to provide
      software, maintenance and technical support;

      .  Establishing an Information Provider Services Agreement with CEI;

   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.

                                       11
<PAGE>

   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. Net revenues for the second quarter of 2000 were $155,611 compared
to $45,228 for the same 1999 period. Net revenues for six months ended June 30,
2000 were approximately $366,000, compared to $312,000 for the six months ended
June 30, 1999.Our revenues are recognized upon completion of the sporting event
or game of chance. Sporting event revenues have a strong seasonality towards
U.S. professional and college football and basketball seasons in the fall and
winter months. The net revenue from the casino for the three months ended June
30, 2000 were approximately 36% more than the comparable 1999 three months, and
20% less for the six months ended June 30, 2000 compared to the same period
because of the disposition of the www.slotsvegas website and lower traffic on
Theonlinecasino website due to the casino being offline while software upgrades
occurred for a part of the 2000 first quarter. The Company's web sites were
essentially non-operational for approximately two weeks in May 1999, while the
gaming software was replaced with the Atlantic Software Porducts. Net revenues
from the sportsbook operations increased approximately $58,000 for the three
months ended June 30, 2000 and $4,000 for the six months ended June 30, 2000
over the same periods in 1999. Substantially all of the sportsbook revenues
occurred, historically, in the first and fourth quarters of the year 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 volume of wagering was
significantly higher in the first quarter of the year, due principally to the
seasonal effect of online activity, which typically increases in the winter
months.

   In the first quarter of 2000 the Company commenced its software licensing
business and recorded commissions of $47,250. The revenues from maintenance and
support of the website sold to Netforfun and SGL were $45,000 for the second
quarter of 2000, which was the initial quarter that the Company provided this
type of service.

   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 costs. For the three and six
months ended June 30, 2000 such cost amounted to $80,000 and $212,000,
respectively as compared to $66,000 and $176,000, respectively for the same
periods in 1999. The increases are a result of increased travel costs for the
software licensing business and higher software licensing and telecommunications
costs for both our owned and managed casino websites, offset partially by the
disposition of the www.slotsvegas website and lower volume of development work
on new websites.

   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 for the three and six
months ended June 30, 2000 were approximately $24,000 and $40,000, respectively
compared to $12,000 and $16,000, respectively for the same period of 1999.

                                       12
<PAGE>

     General and Administrative Expenses. General and administrative expenses
consist primarily of salary costs and administrative functions as well as
professional service fees. Total general and administrative expenses for the
three months ended June 30, 2000 and 1999 were approximately $386,000 and
$283,000. For the six months ended June 30, 2000 and 1999 general and
administrative expenses were approximately $648,000 and $554,000, respectively.
The increase is attributable to an increase in salaries, travel and meeting
costs, to build our business, and professional fees which was offset by a
reduction in advertising and promotion costs.

     Depreciation and Amortization. Depreciation and amortization expenses
consist primarily of the depreciation of furniture and in-house computers,
servers and telecommunications equipment. Total depreciation and amortization
expense was approximately $25,000 and $50,000 for the three and six months ended
June 30, 2000 and $10,000 and $17,000 for the same periods for 1999. The
increase reflects both higher volumes of equipment owned and a depreciation on
assets purchased in the latter part of 1999.

     Other Income. Gain on sale of website, including recognition of previously
deferred income on slotsvegas.com, amounted to $964,682, for the six months
ended June 30, 2000. In 1999, we received $500,000 for the transfer of a 50%
profit participation in www.slotsvegas.com website to Summerhill Gaming. In
2000, we sold the remaining interest in the website for an estimated $2 million
(consisting of cash, notes receivable and common stock). Since we have no
continuing ownership in the website or risks associated with the website, the
previously recorded deferred revenue of and cash proceeds from the sale to
Netforfun were recorded as other income in the first quarter of 2000. Given the
current financial position of Netforfun, and its stock valuation profile, no
amounts will be recognized by the Company for the common stock until the
uncertainty of realization is satisfied.  The $400,000 recorded in the second
quarter of 2000 represents  the note received at the time of sale.  Effective
June 30, 2000, the note was restructured into two notes for $160,000 and
$240,000. Intercapital Asset Management, Inc. accepted the note payable from
Netforfun as satisfaction of $240,000 they had advanced the Company in the first
six months of 2000. In the second quarter of 2000 the net winnings from the
slotsvegas site were approximately $35,000 which the Company retained and
applied toward the note receivable. In addition Netforfun paid $10,000 on the
note in the second quarter.

     Income Taxes. We have incurred net losses for each period from inception
through December 31, 1999. Mint and affiliates (predecessors to the Company) and
Total Entertainment Inc., losses generated in prior years may not be available
to offset future taxable income. 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, 1999 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. Further, a significant portion of our business is conducted in offshore
entities, which do not impose income taxes. Income in the first six months of
2000 is attributable to non-taxable jurisdictions or is offset by net
operating loss carryforwards. Accordingly, no provision for income taxes is
required.

                                       13
<PAGE>

Liquidity and Capital Resources.

   The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. We have incurred losses from inception through
December 31, 1999, and have a deficiency in working capital of approximately
$763,000 at June 30, 2000, including deferred compensation payable of $710,000.
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 advances made by
SGL (through the sale of a 50% ownership interest in the Slotsvegas site and the
working capital loan agreement) and the sale of the remaining interest in the
Slotsvegas site.

   Net cash provided by (used in) operating activities was approximately
$(380,000)and $33,000 for the six months ended June 30, 2000 and 1999.

   During the first half of 2000, we borrowed funds from affiliates to fund our
operations under short-term advances without fixed repayment terms. These
advances were satisfied by assigment of part of the note receivable from
Netforfun.

   Our material capital commitments consist of obligations under facilities and
operating leases. 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.

   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.

                                       14
<PAGE>

                           PART II-OTHER INFORMATION

Item 1.  Legal Proceedings

         NOT APPLICABLE

Item 2.  Changes in Securities and Use of Proceeds

         Pursuant to the OGS Agreement, in May 2000, the Company issued 370,000
         shares of its common stock to OGS as part of its commitment under the
         agreement to issue 1,500,000 shares of common stock to OGS over a five
         year period as partial consideration for the grant by OGS of an
         exclusive worldwide license to market and sell certain casino gaming
         software developed by OGS. The certificate for these shares is being
         held by the Company pending resolution of certain performance issues
         with the OGS software. OGS is a publicly traded company and a
         sophisticated investor with access to all relevant information
         concerning the Company's business and operations. Accordingly, the
         issuance of common stock to OGS did not involve a public offering and
         was exempt from the registration requirements of the Securities Act
         pursuant to the exemption from registration provided by Section 4(2)
         thereof.

         NOT APPLICABLE

Item 3.  Defaults upon Senior Securities

         NOT APPLICABLE

Item 4.  Submission of Matters to a Vote of Security Holders

         NOT APPLICABLE

Item 5.  Other Information

         NOT APPLICABLE

                                       15
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

        (a) 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**
          27  Financial Data Schedule


* 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
December 31, 1999.

  (c) No reports on Form 8-K were filed during the quarter for which this
report is filed.

                                       16
<PAGE>

                                  SIGNATURES

     In accordance with 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.


Date: August 14, 2000                  By /s/ Sandy J. Masselli, Jr.
                                       -----------------------------
                                       Sandy J. Masselli, Jr.,
                                       Chairman of the Board and Chief Executive
                                       Officer

Date: August 14, 2000                  By /s/ Mitchell H. Brown
                                       -------------------------
                                       Mitchell H. Brown
                                       President and Chief Operating Officer

                                      17