<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 SEPTEMBER 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 November 10, 2000, there were 59,258,443 shares of the issuer's
common stock outstanding.

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

                                       1
<PAGE>

                           Total Entertainment, Inc.

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

Condensed Consolidated Balance Sheets
  December 31, 1999 and September 30, 2000 (Unaudited)                   3

Condensed Consolidated Statements of Operations
  Nine Months Ended September 30, 2000 and 1999 (Unaudited)              4

Condensed Consolidated Statements of Operations
  Three Months Ended September 30, 2000 and 1999 (Unaudited)             5

Condensed Consolidated Statements of Cash Flows
  Nine Months Ended September 30, 2000 and 1999 (Unaudited)              6

Notes to Condensed Consolidated Financial Statements (Unaudited)      7-12

Management's Discussion and Analysis of Financial
  Condition and Results of Operations                                13-16

Part II. Other Information                                           17-18

          Signatures                                                    19
</TABLE>

                                       2
<PAGE>

                  Total Entertainment, Inc. and Subsidiaries

                     Condensed Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                               December 31,
                                                                   1999
                                                              (Derived from
                                                                 audited     September 30,
                                                                financial         2000
                                                               statements)     (unaudited)
                                                              --------------   -----------
<S>                                                           <C>             <C>
ASSETS
Current assets
   Cash                                                         $    23,865   $    22,795
   Accounts receivable                                               73,289        97,076
   Note receivable                                                       --       114,698
   Prepaid expenses and other                                            --       275,854
                                                                -----------   -----------
        Total current assets                                         97,154       510,423

Property and equipment
   Computer equipment                                               302,862       344,557
   Other furniture and fixtures                                      30,683        40,597
                                                                -----------   -----------
                                                                    333,545       385,154
   Less accumulated depreciation                                     70,150       147,477
                                                                -----------   -----------
                                                                    263,395       237,677

Deferred licensing fees                                             308,037       123,457
Other assets                                                         28,657        25,001
                                                                -----------   -----------

                                                                $   697,243   $   896,558
                                                                ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities
   Accounts payable and accrued liabilities                     $   163,271   $   184,343
   Customer account deposits                                        201,457       178,487
   Current maturities of capital lease
     obligations                                                     24,838        27,305
   Deferred compensation                                            540,000       795,000
   Due to directors and stockholders                                 45,566       274,054
                                                                -----------   -----------
         Total current liabilities                                  975,132     1,459,189

Capital lease obligations, less current
   maturities                                                        37,639         3,116

Deferred income                                                     464,682            --

Stockholders' equity (deficiency)
   Common stock, $.001 par value, authorized
     200,000,000 shares: Issued and outstanding:
     57,388,443 shares at December 31, 1999 and
     58,758,443 at September 30, 2000                                57,388        58,758

   Additional paid-in capital                                     2,460,695     2,684,325
   Accumulated deficit                                           (3,298,293)   (3,308,830)
                                                                -----------   -----------
                                                                   (780,210)     (565,747)
                                                                -----------   -----------

                                                                $   697,243   $   896,558
                                                                ===========   ===========
</TABLE>

                                       3
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                Condensed Consolidated Statements of Operations

                              Nine months ended
                                  (unaudited)


                                           September 30,  September 30,
                                                1999         2000
                                            -----------   -----------
Revenues
  Gaming revenues, net                      $   371,097   $   473,505
  Commissions earned                                  -        47,250
  Maintenance and support                             -        45,000
                                            -----------   -----------
                                                371,097       565,755

Costs and expenses
   Cost of operations                           268,501       296,360
   Research and development                      64,872        74,026
   Selling, general and administrative          725,419     1,093,261
   Depreciation and amortization                 35,000        77,327
                                            -----------   -----------
                                              1,093,792     1,540,974
                                            -----------   -----------
OTHER INCOME
   Gain on sale of website                            -       964,682
                                            -----------   -----------
                                               (722,695)      (10,537)
INCOME TAXES                                      3,900             -
                                            -----------   -----------
NET LOSS FOR THE PERIOD                     $  (718,795)  $   (10,537)
                                            ===========   ===========
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    57,861,472
                                            ===========   ===========
    Diluted                                  55,717,208    57,861,472
                                            ===========   ===========

                                       4
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                Condensed Consolidated Statements of Operations

                              Three Months Ended
                                  (Unaudited)


                                           September 30, September 30,
                                                1999         2000
                                            -----------   -----------
Revenues
  Gaming revenues, net                      $    59,196   $   200,210
                                            -----------   -----------

Costs and expenses
   Cost of operations                            92,721        84,579
   Research and development                      48,584        34,168
   Selling, general and administrative          170,939       445,230
   Depreciation and amortization                 18,000        27,873
                                            -----------   -----------
                                                330,244       591,850
                                            -----------   -----------
NET LOSS FOR THE PERIOD                     $  (271,048)  $  (391,640)
                                            ===========   ===========
Earnings (loss) per common share
  Basic                                     $      (.00)  $      (.01)
  Diluted                                   $      (.00)  $      (.01)

Weighted-average shares outstanding used
  in computing earnings (loss) per common
  share
    Basic                                    55,717,208    58,551,921
                                            ===========   ===========

    Diluted                                  55,717,208    58,551,921
                                            ===========   ===========

                                       5
<PAGE>

                   Total Entertainment Inc. and Subsidiaries

                Condensed Consolidated Statements of Cash Flows

                               Nine Months Ended
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                  September 30, September 30,
                                                        1999        2000
                                                     ---------   ---------
<S>                                                  <C>         <C>
Cash flows from operating activities
 Net loss                                            $(718,795)  $ (10,537)
 Adjustments to reconcile net income (loss) to net
  cash used in operating activities

    Amortization of deferred licensing fees             72,583      93,301
    Depreciation and amortization                       35,000      77,327
    Expenditures paid by directors and stockholders     51,700      21,000
    Gain on sale of website                                  -    (964,682)
    Deferred income                                    150,000           -
    Deferred compensation                              255,000     255,000
    Increase (decrease) in cash from changes in
       operating assets and liabilities
         Accounts receivable                           (36,108)    (23,787)
         Prepaid expenses and other                     23,465     (44,081)
         Accounts payable and accrued liabilities       29,723      21,072
         Customer account deposits                     125,017     (22,970)
                                                     ---------   ---------
             Net cash used in operating activities     (12,415)   (510,195)
                                                     ---------   ---------
Cash flows from investing activities
 Purchase of computers and equipment                   (87,464)    (41,695)
 Purchase of furniture and equipment                         -      (9,914)
 Proceeds from sale of website                               -     100,000
 Payments received on note receivable                        -      45,302
                                                     ---------   ---------
        Net cash (used in) provided by
         investing activities                          (87,464)     93,693
                                                     ---------   ---------
Cash flows from financing activities
 Principal payments on capital leases                        -     (32,056)
 Advances from directors and
  stockholders                                         (10,511)    447,488
Proceeds from loan from Summerhill Gaming               80,000           -
                                                     ---------   ---------
    Net cash provided by financing activities           69,489     415,432
                                                     ---------   ---------

    NET DECREASE IN CASH                               (30,390)     (1,070)

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

Cash at end of period                                $       -   $  22,795
                                                     =========   =========

Supplementary Cash Flow Information:
    Repayment of advances from directors and
     stockholders through assignment of note
     receivable (see Note D-2)                                   $ 240,000
                                                                 =========
    Common stock issued for services
     (see Note B)                                                $ 225,000
                                                                 =========

</TABLE>

                                       6
<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 accounting principles generally accepted in the United States of
America 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 September 30,
2000 and the results of operations for the three and nine month periods ended
September 30, 2000 and 1999 and cash flows for the nine months ended September
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
contingencies, and other items and is incorporated by reference.

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

                                       7
<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 through September 30,
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 paid 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.

                                       8
<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 consideration valued by the
parties at $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 a recapitalization
     of Netforfun's equity.

     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 September 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.

Agreement with North Star Advertising, Inc.

     In July 2000 the Company entered into a consulting agreement with Northstar
Advertising, Inc. In accordance with the agreement the Company issued 1,000,000
shares of its common stock to NorthStar for promotional consulting services to
be provided by Northstar through July 31, 2001. In connection with this
transaction the Company recorded $225,000 of prepaid consulting fees, which
approximates the fair value of its common stock issued based on quoted market
prices and recorded a corresponding credit to equity for $225,000. The prepaid
consulting fees will be expensed over the term of the agreement which is one
year.

                                       9
<PAGE>

NOTE C - Earnings (loss) Per Share of Common Stock
         ----------------------------------------

   The Company computes earnings (loss) 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 (loss) 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
(loss) by the weighted number of shares outstanding and dilutive common
equivalent shares from stock options and warrants. All options and warrants were
antidilutive due to the net loss for all periods, and are not included in the
computation of basic and diluted earnings per share.

                                       10
<PAGE>

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

1. Deferred Compensation

   During the first nine months of 2000 and 1999, the Company accrued $255,000
   of deferred compensation for the officers of the Company. Deferred
   compensation totaled approximately $795,000 at September 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.

2. Due to Directors and stockholders

   During the first nine months of 2000, Intercapital Asset Management Inc., an
   entity which is controlled by the Company's President and Chief Executive
   Officer, advanced $347,000 to the Company. The Company satisfied a portion of
   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.

                                       11
<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 $5,500,000
   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. In the State Court Action, the Respondents have also
   brought a claim against the Company's transfer agent, Equity Transfer
   Services, Inc. In turn, Equity Transfer has cross-claimed against the company
   for defense costs and indemnification. All parties in the State Court Action
   are currently engaged in discovery.

Note F -- Subsequent Event
          ----------------

   In October, 2000 the Company issued 500,000 shares of its common stock in
   exchange for investor relations services to be provided by a third party
   through October 31, 2001.

                                       12
<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 nine months ended September 30, 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.

                                       13
<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 third quarter of 2000 were approximately
$200,000 compared to $59,000 for the same 1999 period. Net revenues for nine
months ended September 30, 2000 were approximately $566,000, compared to
$371,000 for the nine months ended September 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 September 30, 2000 were approximately
52% more than the comparable 1999 three months due to a higher winning
percentage. The net revenue for the casino was 5% less for the nine months ended
September 30, 2000 compared to the same period for 1999 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 and third 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 products. Net revenues
from the sportsbook operations increased approximately $48,000 and $52,000 for
the three and nine months ended September 30, 2000 respectively over the same
periods in 1999. Substantially all of the sportsbook revenues occur,
historically, in the first and fourth quarters of the year when both gross
volume and the hold (net winnings by the Company) were higher than in the second
and third 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 usually 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, credit card processing fees
promotional gaming credits and internet service provider costs. For the three
and nine months ended September 30, 2000 such cost amounted to approximately
$85,000 and $296,000 respectively as compared to $93,000 and $269,000,
respectively for the same periods in 1999. The increases are a result of the
increased volume of business,incentives granted in the software changeovers, and
higher software licensing costs for both our owned and managed casino websites,
offset partially by the reduction of costs associated with the disposition of
the www.slotsvegas website.

   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 nine
months ended September 30, 2000 were approximately $34,000 and $74,000,
respectively, compared to $49,000 and $65,000, respectively for the same period
of 1999.

                                       14
<PAGE>

     General and Administrative Expenses. General and administrative expenses
consist primarily of salary costs, telecommunications, travel and other
administrative costs including professional service fees. Total general and
administrative expenses for the three months ended September 30, 2000 and 1999
were approximately $445,000 and $171,000. For the nine months ended September
30, 2000 and 1999 general and administrative expenses were approximately
$1,093,000 and $725,000 respectively. The increase is attributable to additional
salaries, travel and meeting costs, to build our business, and website
development and professional fees.

     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 $28,000 and $77,000 for the three and nine months
ended September 30, 2000 and $18,000 and $35,000 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 nine months
ended September 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) of consideration . 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 of the note receivable ($400,000) and the common
stock of NetForFun Inc. are satisfied. Effective June 30, 2000, the note
receivable 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 of principal on the note in
the second quarter.

     Income Taxes. We have incurred net losses for each period from inception
through December 31, 1999. However, Mint Energy 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
which will expire in the year 2018 for United States federal income tax
purposes. 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.
Accordingly, no provision for income taxes is required.

                                       15
<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
September 30, 2000, and have a deficiency in working capital of approximately
$949,000 as of September 30, 2000, including deferred compensation payable to
offices of the Company of $795,000. 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 used in operating activities was approximately
$511,000 and $12,000 for the nine months ended September 30, 2000 and 1999.

   During the first nine months of 2000, we borrowed funds from affiliates to
fund our operations under short-term advances without fixed repayment terms.
These advances were reduced by the 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 and website development.

   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.

                                       16
<PAGE>

                           PART II-OTHER INFORMATION

Item 1.  Legal Proceedings

              Please refer to Note E, item 2, of the Condensed Notes to
         Consolidated Financial Statements herein and in the Company's reports
         on Form 10-QSB for prior quarters of this year for a description of the
         material legal proceedings in which the Company is involved.

Item 2.  Changes in Securities and Use of Proceeds

              Pursuant to a Consulting Agreement dated July 29, 2000 between
         the Company and NorthStar Advertising, Inc. ("NorthStar"), in July 2000
         the Company issued 1,000,000 shares of common stock to NorthStar as
         partial consideration for certain public relations services in the
         areas of investor and broker-dealer relations to be provided by
         NorthStar commencing November 15, 2000. The certificate for these
         shares is being held by the Company pending performance by NorthStar of
         certain initial services. The Company considers NorthStar to be a
         sophisticated investor with access to all relevant information
         concerning the Company's business and operations. Based on the
         foregoing and certain representations made by NorthStar, the issuance
         of common stock to NorthStar 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.

              Pursuant to an agreement with Lewis Taylor to provide certain
         investor relations services to the Company, in October 2000 the Company
         issued 500,000 shares of common stock to Mr. Taylor in consideration
         for these services to be provided commencing Novemeber 1, 2000. The
         certificate for these shares is being held by the Company pending
         performance by Mr. Taylor of certain initial services. The Company
         considers Mr. Taylor to be a sophisticated investor with access to all
         relevant information concerning the Company's business and operations.
         Based on the foregoing and certain representations made by Mr. Taylor,
         the issuance of common stock to Mr. Taylor 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.

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

                                       17
<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 Intercapital 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.

          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.

                                       18
<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: November 14, 2000                By /s/ Sandy J. Masselli, Jr.
                                       -----------------------------
                                       Sandy J. Masselli, Jr.,
                                       Chairman of the Board and Chief Executive
                                       Officer

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

                                       19