UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.,  20549

                            FORM 10-Q


(Mark One)
( X )  Quarterly  report  pursuant  to  Section 13 or 15(d) of the
       Securities Exchange Act of 1934 for  the  quarterly  period
       ended SEPTEMBER 30, 1997 or
             ------------------

(   )  Transition report pursuant to  Section 13 or 15(d) of  the
       Securities  Exchange  Act of 1934 for the transition period
       from                     to                   .
            -------------------    ------------------

Commission File No. 1-4385

                  DUNES HOTELS AND CASINOS INC.
-------------------------------------------------------------------
       (Exact name of registrant as specified in its charter)

         NEW YORK                                   11-1687244
-------------------------------------------------------------------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                  Identification No.)

4600 Northgate Boulevard, Suite 130, Sacramento, California  95834
-------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code  (916) 929-2295
                                                  -----------------

-------------------------------------------------------------------
Former name, former address and  former  fiscal  year, if changed
since last report

      Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by  Section 13 or  15(d)  of the
Securities  Exchange  Act of 1934  during the preceding 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
                            -----    -----

               Applicable Only to Corporate Issuers

      Indicate  the  number  of shares outstanding of each of the
issuer's  classes of common stock,  as  of the latest practicable
date.

                                                 Outstanding at
       Class                                     October 31, 1997
----------------------------                     ----------------
Common Stock, $.50 par value                     6,375,096 shares

<PAGE>

          DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997

                              INDEX

                                                             Page
Part I.  Financial Information

           Item 1.  Financial Statements

           Consolidated Condensed Balance Sheets
            September 30, 1997 and December 31, 1996            3

           Consolidated Condensed Statements of Income
            (Loss) for the three months ended September
            30, 1997 and 1996                                   5

           Consolidated Condensed Statements of Income
            (Loss) for the nine months ended September
            30, 1997 and 1996                                   7

           Consolidated Condensed Statements of Cash Flows
            for the nine months ended September 30, 1997
            and 1996                                            9

           Notes to Consolidated Condensed Financial
            Statements, September 30, 1997 and 1996            10

           Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations      20

Part II. Other Information

           Item 1.  Legal Proceedings                          30

           Item 3.  Defaults Upon Senior Securities            30

           Item 5.  Other Events                               30

           Item 6.  Exhibits and Reports on Form 8-K           30

           Signatures                                          31

                                    2
<PAGE>

<TABLE>
<CAPTION>
               DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   CONSOLIDATED CONDENSED BALANCE SHEETS

                 SEPTEMBER 30, 1997 AND DECEMBER 31, 1996


                                 ASSETS
                                                                                 September      December
                                                                                  30, 1997      31, 1996
                                                                                ------------  ------------
                                                                                (Unaudited)
                                                                                  (Dollars in thousands)

<S>                                                                             <C>           <C>
Cash and cash equivalents                                                       $     3,092   $     1,283

Marketable securities                                                                 1,678           527

Receivables
  Trade, less allowance 1997, $60; 1996, $141                                            96           133           
  Related party, less allowance of $1,899 in 1997 and 1996                              112           397
  Real estate sales, less allowance of $64 in 1997                                      452           928
  Other                                                                                  20            47

Inventory of real estate held for sale                                                4,441        10,919

Inventory, other                                                                                       38

Prepaid expenses                                                                        148           116

Property and equipment including capitalized lease equipment
         of $1,804 in 1997 less accumlated depreciation and 
         amortiztion1997, $482;  1996, $424                                           3,341         1,678

Investments                                                                             644         1,049

Deferred costs and other                                                                  5            11
                                                                                ------------  ------------
                                                                                $    14,029   $    17,126
                                                                                ============  ============
</TABLE>
                                      (continued)

                                           3
<PAGE>

<TABLE>
<CAPTION>

                     DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                    CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)

                        SEPTEMBER 30, 1997 AND DECEMBER 31, 1996


                          LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                                 September      December
                                                                                  30, 1997      31, 1996
                                                                               -------------  ------------
                                                                               (Unaudited)
                                                                                 (Dollars in thousands)
<S>                                                                            <C>            <C>
Accounts payable                                                               $        183   $        98

Accrued expenses                                                                        240           246

Deferred income                                                                          99            70

Income taxes                                                                            307           247

Short-term debt                                                                          98            69

Long-term debt including capitalized lease obligations of $991 in 1997                2,244         1,955

Accrued preferred stock dividends                                                     1,155         1,101
                                                                               -------------  ------------
           Total liabilities                                                          4,326         3,786

Minority interest                                                                       234         2,897

Shareholders' equity
  Preferred stock - authorized 10,750,000 shares ($.50 par);
           issued 10,512 shares Series B $7.50 cumulative
           preferred stock, outstanding 9,250 shares in 1997 and 1996,
           aggrerate liquidation value $2,355 including dividends in arrears              5             5

  Common stock - authorized 25,000,000 shares ($.50 par);
           issued 7,799,780 shares, outstanding 6,375,096
           shares in 1997 and 1996                                                    3,900         3,900

  Capital in excess of par                                                           25,881        25,881

  Deficit                                                                           (18,317)      (17,343)
                                                                               -------------  ------------
                                                                                     11,469        12,443
  Treasury stock at cost; Preferred - Series B, 902 shares
           Common 1,424,684 shares in 1997 and 1996                                   2,000         2,000
                                                                               -------------  ------------
           Total shareholders' equity                                                 9,469        10,443
                                                                               -------------  ------------
                                                                               $     14,029   $    17,126
                                                                               =============  ============
</TABLE>

  See accompanying notes to consolidated condensed financial statements

                                        4
<PAGE>

<TABLE>
<CAPTION>
                    DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)

                   THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                      UNAUDITED

                                                       1997         1996
                                                  ------------  -----------
                                                (Dollars in thousands, except
                                                           per share)
<S>                                               <C>           <C>
Operating revenues:
  Sales of real estate                            $     6,627   $      165
  Cost of real estate sold                              6,144          189
                                                  ------------  -----------
                                                          483          (24)
                                                  ------------  -----------
  Rental income - agricultural properties                 120          435
  Cost and expense of rental income                        12           12
                                                  ------------  -----------
                                                          108          423
                                                  ------------  -----------
  Rice drying and storage revenues                        342          271
  Cost of rice drying and storage                         153          142
                                                  ------------  -----------
                                                          189          129
                                                  ------------  -----------
  Miscellaneous income - net                               18            2
                                                  ------------  -----------
                                                          798          530
                                                  ------------  -----------
Operating expenses:
  Selling, administrative and general
    Corporate                                             267          288
    Real estate operations                                 72           61
  Bad debts, net of recoveries                            (24)          45
  Loss on real estate investments                         400
  Depreciation                                             17           25
                                                  ------------  -----------
                                                          732          419
                                                  ------------  -----------
Income before other credits (charges) and
  minority interest                                        66          111
                                                  ------------  -----------
Other credits (charges):
  Interest and dividend income                             83          114
  Interest expense                                        (17)         (55)
  Partnership income                                                    40
  Securities gains (losses), net                           24
  Other                                                    16          (15)
                                                  ------------  -----------
                                                          106           84
                                                  ------------  -----------
</TABLE>

                                   (continued)

                                        5
<PAGE>

<TABLE>
<CAPTION>

              DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

        CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) (CONTINUED)

               THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                UNAUDITED

                                                       1997         1996
                                                  -----------   ----------
                                                (Dollars in thousands, except
                                                               per share)
<S>                                               <C>           <C>
Income before minority interest                          172           195

Minority interest in income of the White Ranch          (234)
                                                  -----------   -----------
Net income (loss)                                 $      (62)   $      195
                                                  ===========   ===========

Income (loss) per common share:                   $    (0.01)   $     0.03
                                                  ===========   ===========

</TABLE>

  See accompanying notes to consolidated condensed financial statements.

                                       6
<PAGE>

<TABLE>
<CAPTION>
                  DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)

                  NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                   UNAUDITED

                                                        1997         1996
                                                   ------------  -----------
                                                 (Dollars in thousands, except
                                                             per share)
<S>                                                <C>           <C>
Operating revenues:
  Sales of real estate                             $     7,074   $      608
  Cost of real estate sold                               6,572          665
                                                   ------------  -----------
                                                           502          (57)
                                                   ------------  -----------
  Rental income - agricultural properties                  425          758
  Cost and expense of rental income                         95          247
                                                   ------------  -----------
                                                           330          511
                                                   ------------  -----------
  Rice drying and storage revenues                         412          341
  Cost of rice drying and storage                          344          370
                                                   ------------  -----------
                                                            68          (29)
                                                   ------------  -----------
  Miscellaneous income - net                                55           47
                                                   ------------  -----------
                                                           955          472
                                                   ------------  -----------
Operating expenses:
  Selling, administrative and general
    Corporate                                              825          853
    Real estate operations                                 165          155
  Bad debts, net of recoveries                             100
  Loss on real estate investments                          400          290
  Depreciation                                              52           74
                                                   ------------  -----------
                                                         1,542        1,372

Loss before other credits (charges), income        ------------  -----------
  taxes and minority interest                             (587)        (900)
                                                   ------------  -----------
Other credits (charges):
  Interest and dividend income                             199          276
  Interest expense                                        (103)        (140)
  Partnership income (loss)                                            (109)
  Securities gains                                          40
  Other                                                    (97)
                                                   ------------  -----------
                                                            39           27
                                                   ------------  -----------
</TABLE>

                                    (continued)

                                         7
<PAGE>

<TABLE>
<CAPTION>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

          CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) (CONTINUED)

                 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                     UNAUDITED

                                                        1997         1996
                                                    -----------  -----------
                                                  (Dollars in thousands, except
                                                                 per share)
<S>                                                 <C>          <C> 
Loss before income taxes and minority interest            (548)        (873)

Income taxes                                               (53)
                                                    ------------  -----------

Loss before minority interest                             (601)        (873)

Minority interest in income of the White Ranch            (319)
                                                    ------------  -----------

Net income (loss)                                   $     (920)   $    (873)
                                                    ============  ===========



Income (loss) per common share:                     $    (0.14)   $   (0.14)
                                                    ============  ===========
</TABLE>

     See accompanying notes to consolidated condensed  financial statements

                                     8
<PAGE>

<TABLE>
<CAPTION>

            DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

            NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                              UNAUDITED


                                                     1997          1996
                                                -------------  ------------
                                                   (Dollars in thousands)

<S>                                             <C>            <C>
Cash flows from operating activities:
  Net cash provided by  operating activities    $      3,498   $       176
                                                -------------  ------------
Cash flows from investing activities:
  Decrease (increase) in investments                  (1,151)          516
  Decrease (increase) in notes receivable                788            79
  Increase in real estate held for sale                                (69)
  Purchase of equipment                               (1,804)
                                                -------------  ------------
                                                      (2,167)          526
                                                -------------  ------------

Cash flows from financing activities:
  Increase in long-term debt                           1,152
  Payments on long-term debt                            (703)         (543)
  Increase in short-term debt                             29            35
                                                -------------  ------------
                                                         478          (508)
                                                -------------  ------------

Increase in cash and cash equivalents                  1,809           194

Cash and cash equivalents, beginning of period         1,283           495
                                                -------------  ------------

Cash and cash equivalents, end of period        $      3,092   $       689
                                                =============  ============
</TABLE>

See accompanying notes to consolidated condensed financial statements

                                    9
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED


1. Summary of significant accounting policies:

      Consolidation:

      The    accompanying    consolidated   condensed   financial
      statements include the accounts  of  the  Company  and  its
      wholly-owned     subsidiaries     Continental    California
      Corporation (Continental), M&R Corporation (MRC), and MRC's
      subsidiary M&R Investment Company,  Inc.  (MRI)  and  MRI's
      subsidiaries   SHF   Acquisition   Corporation   (SHF)  and
      Southlake Acquisition Corporation (Southlake).

      Description of business:

      The  Company  operates  in two principal business segments:
      Real   estate   investments  (development   and   sale   of
      residential lots  and  rental  of  agricultural  land)  and
      agricultural (rice drying and storage).

      The   Company's   real   estate   segment  sells  completed
      residential lots primarily to builders  of custom homes and
      to  the  general public located in and around  the  greater
      Sacramento,  California  area.  The agricultural properties
      are leased to farmers in the  area  where  the agricultural
      properties are located.

      The agricultural segment dries harvested rice  over  a  two
      month  period  (approximately  September 15 to November 15)
      and stores, for a fee, the dried  rice  (or  other  grains)
      until  it  is removed by the owner.  The Company dries  and
      stores rice  principally for one customer, Farmers Rice Co-
      operative (Farmers).   Farmers  accounts  for approximately
      98% of the Company's rice drying and storage  revenues.  If
      the  Company were to lose Farmers as a customer,  it  would
      have a  material adverse effect on the Company's drying and
      storage operation.   (See  Note  5 of Notes to Consolidated
      Condensed Financial Statements)

      Basis of presentation:

      The  financial information included  herein  is  unaudited;
      however,   such   information   reflects   all  adjustments
      (consisting  solely of normal recurring adjustments)  which
      are, in the opinion  of  management,  necessary  for a fair
      statement   of   results  for  the  interim  periods.   The
      Consolidated Condensed  Financial Statements should be read
      in conjunction with the Company's Annual Report on Form 10-
      K for the year ended December 31, 1996.

                                10
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

 1.   Summary of significant accounting policies (continued):

      The  results  of  operations  for  the  nine  months  ended
      September  30,  1997, are  not  necessarily  indicative  of
      the results to be expected for the full year.

      Capitalized interest:

      The Company follows the policy of capitalizing interest as a
      component of the cost of property and equipment constructed
      for its own use.  For the nine months ended  September  30,
      1997,  the  Company  capitalized  approximately  $15,000 of
      interest   in connection with the construction of the  rice
      drying facility  (the Drying Facility).  The capitalization
      rate that was used  was 12% which is the rate applicable to
      the  debt  related  to  the   construction  of  the  Drying
      Facility.

      Earnings per share:

      In February 1997, the Financial  Accounting Standards Board
      issued Statement of Financial Accounting Standards No. 128,
      "Earnings Per Share" (SFAS No. 128) which establishes a new
      accounting standard for the computation  and  reporting  on
      net income (loss) per share.  SFAS NO. 128 is effective for
      financial   statements  issued  for  periods  ending  after
      December 15,  1997,  and early adoption is prohibited.  The
      Company expects that there  will be no material effect upon
      implementing SFAS 128 on its  net  income  (loss) per share
      computations.

      Reclassifications:

      For the nine months ended September 30, 1996,  the  Company
      has  changed  the  format  of  its  Consolidated  Condensed
      Statement of Income (Loss) to conform to the September  30,
      1997 presentation.  The Company believes this change better
      reflects  the  revenues and expenses of the segments within
      which the Company operates.

                                   11
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED


2.    Fair value of financial instruments:

      Estimated fair value of the Company's financial instruments
      (all of which are  held  for  non-trading  purposes) are as
      follows:

<TABLE>
<CAPTION>
                                              Carrying      Fair
                                               Amount       Value
                                             ----------  ----------
                                            (Dollars in thousands)
      <S>                                   <C>           <C>
      Cash and cash equivalents             $    3,092    $  3,092 (a)
      Marketable securities                      1,678       1,678 (a)
      Notes receivable, real estate
        sales, net of allowance of $64             452         452 (b)
      Note receivable, related party,
        net of allowance                           112             (c)
      Solano County Option, net of
        allowance of $400                          644         644 (d)
      Long-term debt                            (2,244)       (992)(e)
</TABLE>

      (a)  The  carrying amount approximates fair value of  cash,
           cash  equivalents   and  marketable  securities.   For
           marketable securities, fair values are estimated based
           on quoted market prices as of September 30, 1997.

      (b)  The fair value of the  notes  receivable  are based on
           their  outstanding  balances  (net  of  allowances  of
           $64,000),  interest rates and the fair value, based on
           comparable  sales  in  the area, of the real  property
           which serves as collateral for the note.  In the event
           any  purchaser  were to default  on  the  real  estate
           notes,  the  Company   could   institute   foreclosure
           proceedings and reacquire the property which serves as
           the collateral for the note.

      (c)  It is not possible to determine the fair value  of the
           Baby  Grand  Corp.  note  (the  BGC  Note) because the
           Company is unable to predict whether Baby  Grand Corp.
           will  be  able  to pay its first lien note on its  due
           date, which is the same date that the BGC Note payable
           to the Company comes  due. See Footnote 6d of Notes to
           Consolidated Condensed  Financial  Statements. The BGC
           Note  is  more  fully  described  in  detail   in  the
           Company's  Form  10-K  for  the  year  ended  December
           31,1996,  see "Item 1.  Business - Other Activities  -
           Certain Loans - Baby Grand Corp."; Form 8-K, "Item

                                  12
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

2.   Fair value of financial instruments (continued):

           5. Other Events,"  dated  February 4, 1997;  Form 8-K,
           "Item 5. Other Events," dated March 26, 1997; and Form
           8- K, "Item 5. Other Events," dated July 8, 1997.

      (d)  The  fair  value  of  the  Solano   County  Option  is
           estimated  based on  the amount  for which  management
           believes that the property under option could be sold.
           The Company  originally paid $1,000,000 to acquire the
           option to purchase  the  Solano  County  property  for
           $3,000,000.   It  is   management's  belief  that  the
           Solano  County  Property  could currently be sold  for
           $2,600,000.  Based on a sales  price of $2,600,000 the
           Company would only recover $600,000  of  its  original
           option payment. Therefore the Company has written down
           its   investment   in  the  Salono  County  option  by
           $400,000.   The owner of the property under option has
           informed  the Company  that  it  is  two  payments  in
           arrears,  which   approximates   $150,000,   including
           interest,  on  the  first  mortgage  lien which had  a
           balance due of approximately $1,356,000 as of December
           31, 1996.  The Company and the owner are continuing to
           attempt  to negotiate a solution. If the  Company  and
           the owner  are  unable  to  arrive at a solution,  the
           Company may make the payments  to  the  mortgage  lien
           holder  in  order  to  protect  its  investment in the
           Solano  County   Option.   The  Company is  unable  to
           predict what the outcome of this  matter will be.  The
           Solano County Option is more fully  described  in  the
           Company's  Form  10-K  for the year ended December 31,
           1996, see "Item 1. Business  -  Real  Estate Segment -
           Solano County Option."

      (e)  The fair value of long-term debt payable to Beal  Bank
           is not subject to reasonable  estimation  because  the
           debt arose principally as a result of  the  settlement
           of a dispute. The settlement is described in detail in
           the Company's Form 10-K for the  year  ended  December
           31, 1996, see "Item 1. Business  -  Resolution of SASA
           Dispute."   The  fair  value  of the capitalized lease
           obligation is based  on current  rates  at  which  the
           Company  could  borrow  funds  with  similar remaining
           maturities.

                                    13
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

3.    Inventory of real estate held for development and sale:

<TABLE>
<CAPTION>
                                                1997       1996
                                              --------   --------
                                            (Dollars in thousands)
      <S>                                     <C>        <C>
      The Fairways (a)                        $ 4,255    $ 4,664
      Residential lots, North Las Vegas (b)        -         469
      White Ranch (c)                              -       5,600
      Sam Hamburg Farm (d)                       146         146
      Other                                       40          40
                                             --------    --------
                                             $ 4,441     $10,919
                                             ========    ========
</TABLE>

      (a)  On  October  7,  1996,  the  Company  entered  into  a
           Purchase  and  Option Agreement  regarding the sale of
           certain  lots  at  The  Fairways.   The  Purchase  and
           Option Agreement is  described in the Company's report
           on Form 10-K for the  year ended  December  31,  1996,
           see "Item 1. Business -  Real  Estate  Segment  -  The
           Fairways."

      (b)  On July 3, 1997, the Company completed the sale of the
           57 residential lots in North  Las  Vegas, Nevada.  Net
           proceeds to the Company were approximately $573,000 of
           which $318,000 was paid to Beal Bank, the purchaser of
           the  Company's  obligation  to  San   Antonio  Savings
           Association  (the SASA Obligation).   In addition, the
           Company received a note and deed of trust in the amount
           of  $72,597  representing reimbursement  of water fees
           previously paid. The note was paid in full on July 21,
           1997.

      (c)  On July  15, 1997, the Company completed the  sale  of
           the  White  Ranch.   Net  proceeds  from the sale were
           approximately   $5,965,000   of   which  approximately
           $2,982,500 was paid to the Company. The balance of the
           proceeds were paid to the other 50% owner of the White
           Ranch.

      (d)  See footnote  6b  of  Notes  to Consolidated Condensed
           Financial Statements regarding the chemical cleanup at
           Sam Hamburg Farm.

                                  14
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

4.    Related party transactions:

      John B. Anderson, the Company's controlling stockholder and
      Chairman  of the Board of Directors  of  the  Company,  and
      entities owned or controlled by him (Anderson Entities) own
      approximately  4,280,000  shares  or 67.2% of the Company's
      outstanding common stock as of October  31, 1997.  Of those
      shares,  3,000,000  or  47.1% of the Company's  outstanding
      common stock are subject  to  the  rights and claims of the
      Federal  Deposit  Insurance Corporation  (the  FDIC).   See
      footnote 6d of Notes  to  Consolidated  Condensed Financial
      Statements.

      In August 1997, the Company entered into a verbal agreement
      to use the West Sacramento drying facility  for the purpose
      of drying  long-grain  rice  during  the  1997 rice  drying
      season.  Rental for the West Sacramento drying facility was
      $20,000 plus 50% of the rice drying and storage profit after
      deduction of the $20,000 rent payment.

      On October 16, 1997, the Company loaned James H. Dale,  the
      president of MRI, $85,000. The loan is for three years with
      interest at 9% payable monthly.  The loan is collateralized
      by a first deed of trust on real property and a conditional
      assignment of Mr. Dale's directors fees.

5.    Property and equipment:

      On May 29,  1997,  SHF  signed a contract (the Contract) in
      the amount of $1,651,800  with  Tolson Construction Company
      (the  Contractor)  for  the  construction   of  the  Drying
      Facility  adjacent  to  the rice storage facility  in  Yolo
      County, California.  The  Contract does not include certain
      costs such as permits, landscaping,  paving, utility lines,
      interest costs, etc.  These additional costs are  estimated
      to  be between  $200,000  and  $250,000.  As of October 31,
      1997,  SHF  had  paid  approximately  $1,491,400   to   the
      Contractor   in   accordance    with   the   contract   and
      approximately $312,000  to other parties for the additional
      costs.   In connection with  the  financing of  the  Drying
      Facility  construction,  SHF  entered  into  the  following
      agreements   with ICON Cash Flow  Partners,  L.P., Series E
      (ICON, LP)  and  ICON   Financial   Corp.  (ICON):  (1)   A
      promissory  note  (the Note)  dated  April 3, 1997, between
      ICON, LP and SHF in the principal amount of $1,150,000, with
      interest thereon at the rate of 12% per annum.  Interest is
      payable on the  first  day of the month following the first
      advance  and  on  the first day  of  the  month thereafter.
      Upon  completion of the Drying Facility advances made under
      the Note  will be rolled into the equipment lease financing
      as of the Base Lease

                                  15
<PAGE>

5.   Property and equipment (continued):

      Commencement  Date (the last day of the month following the
      date the Drying Facility is  declared  complete by both SHF
      and  ICON  LP).  As  of  October  31,  1997, SHF  had drawn
      approximately  $991,000  against the Note.   (2)  A  Master
      Equipment  Lease  (the  Lease) dated April 3, 1997, between
      ICON and  SHF.  Beginning  with the Base Lease Commencement
      Date,  ICON will lease to SHF the  Drying  Facility  for  a
      period of five years.   At the end of the five year period,
      SHF will have  the right to purchase  not  less than all of
      the Drying Facility for $1.00. The monthly rental under the
      Lease  will  be  approximately  2.202% of the funded Drying
      Facility cost (estimated  to  be  approximately $25,000 per
      month).  In addition to being collateralized by the  Drying
      Facility, SHF has provided additional collateral in the form
      of  a  Deed  of  Trust  on  certain  parcels  of  property,
      including  the  parcel  on  which  the storage facility  is
      located.  Both the Note and the Lease are guaranteed by MRI
      and the Company (collectively the  Guarantors).  Before the
      Guarantors  are  liable  for  any deficiency, ICON or ICON,
      LP  must  first proceed against the Drying Facility and the
      additional collateral.  Both the Lease and the Note contain
      certain events of defaults, one of  which  relates  to  any
      material  adverse  change  in  the  business  or  financial
      condition   of   SHF   or   the  Guarantors  (defined  as a
      reduction of Tangible Net Worth of 20% or more) and another
      relates to the loss of Farmers as a customer.  These events
      of defaults only  apply  during the period the Note remains
      unpaid.   The  Drying  Facility  commenced   operations  on
      approximately September 15, 1997.

6.   Contingencies:

     a.   As of September 30, 1997, there  were no material legal
          proceedings pending against the Company.   However, see
          footnote   6d   of   Notes  to  Consolidated  Condensed
          Financial Statements regarding  legal  proceedings, not
          involving the Company, that may have a material adverse
          effect on the Company.

     b.   SHF was advised of possible contamination  on two sites
          at  Sam  Hamburg  Farm,  a storage facility for  diesel
          fuels and an old airstrip  which  had been used for the
          loading  and fueling of aircraft applying  agricultural
          chemicals  to  the surrounding farm lands.  The Company
          has  completed  the  cleanup  relating  to  the  diesel
          storage tank at a cost of approximately $100,000.

                                   16
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

6.   Contingencies (continued)

          The Company has disposed  of  a  large  amount  of  the
          contaminated  earth at an approved site for the storage
          of  toxic  wastes.    However,  5,000  cubic  yards  of
          contaminated earth still remain to be disposed of.  The
          Company,  through  its  chemical   and  toxic  clean-up
          consultant, has been working with the  California State
          Environmental  Protection Agency, in seeking  alternate
          means to the disposal  of  the  contaminated  earth  in
          toxic  dump sites.   The State has participated  in the
          funding  of several  projects by  a number  of chemical
          treatment firms  in efforts to try other detoxification
          methods  on  the soil.  Because of the ongoing testing,
          the  State  has  not imposed  a disposal date upon  the
          Company.   Cost of disposal is estimated  at  $100  per
          cubic yard.  However,  if  on-site  remediation  can be
          achieved, it is  estimated  that  the aggregate cost of
          disposal  will  be  between  $90,000 and $115,000.  The
          Company is unable to predict when the  ongoing  testing
          will  be  complete  or  what the outcome of these tests
          will be.

          As  of  September  30, 1997,  the   Company   has  paid
          approximately   $500,000,    including   the   $100,000
          expended for the cleanup relating to the diesel storage
          tank, and accrued an estimated $174,000 relating to the
          balance of the clean-up of the contaminated earth. That
          estimate could  change as the  remediation  work  takes
          place.

     c.   The  Company  received  a  notice from the  California
          Franchise Tax Board (FTB) wherein the FTB alleges that
          one of the  Company's  subsidiaries  owes   California
          franchise tax, penalties and interest of approximately
          $563,800.   The  tax  arose  out of  a  gain  in  1988
          resulting  from  a  foreclosure  sale  of certain real
          property  owned by the subsidiary.   The  FTB contends
          that the gain is non-business income to the subsidiary
          and therefore should be  allocated 100% to  California
          without  the  benefit  of  any  of  the  losses of the
          Company.  The Company has exhausted all of its appeals
          with  the  FTB  and  therefore  this  matter  has been
          referred to the California State Board of Equalization
          (SBE).  On June 12,  1997, the Company filed its Reply
          Brief with the SBE wherein the Company requested, based
          on reasons stated in  the Reply Brief,  that  the  SBE
          reverse the FTB's proposed assessment and withdraw its
          Notice  of    Proposed   Assessment.  Because  of  the
          likelihood of either  litigation or a  settlement, the
          Company has  provided  in  its  balance sheet $300,000
          relating to this matter. The Company has been informed
          that a hearing date regarding this matter has been set
          for December 4, 1997.

                                   17
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

6.   Contingencies (continued):

     d.   John B. Anderson, Edith Anderson, Cedar Development Co.,
          J.A. Inc. and J.B.A.  Investments,  Inc.  (collectively
          the Anderson Parties) are involved  in  litigation with
          the  Federal  Deposit Insurance Corporation (the FDIC).
          This matter is more fully  described  in the  Company's
          Form 10-K for the year  ended December  31,  1996,  see
          "Item 3. Legal Proceedings -  Federal Deposit Insurance
          Corporation, et al v. John B. Anderson  et  al.";  Form
          8-K, "Item 5. Other Events,"  dated February  4,  1997;
          Form 8-K, "Item 5. Other Events," dated March 26, 1997;
          and  Form  8-K, "Item 5. Other Events," dated  July  8,
          1997.  Mr. Anderson,  through his  ownership of   Cedar
          Development Co. (Cedar), the parent of Baby Grand Corp.
          (BGC)  and  J.B.A.  Investments,  Inc.  (J.B.A.),  owns
          approximately  4,280,756  shares  or   67.2%   of   the
          outstanding  common  stock  of  the Company.  Of  these
          shares (i) 3,000,000 shares or 47.1% of the outstanding
          common  stock of the Company (the Pledged Dunes Shares)
          are pledged as collateral in favor of entities of which
          the FDIC is a successor and/or assign and (ii) 1,280,756
          shares  or  20.1%  of the outstanding common shares are
          pledged to MRI as collateral for the BGC Note. In April
          1997, the Company was informed that  the FDIC had filed
          applications with the Nevada Gaming Control  Board (the
          NGCB) and the  Nevada  Gaming Commission (the NGC) (the
          NGCB and the NGC are collectively referred to herein as
          the   Nevada  Gaming  Authorities)  for  permission  to
          enforce the FDIC's security interest  in, including the
          right to vote, the common stock of Cedar, BGC and other
          entities.   The successful enforcement of  the security
          interests by  the FDIC  in  the  common  stock  of  the
          foregoing companies  would, among other things,  result
          in  a  change in  control  of  such  companies  as well
          as the Company.  The NGCB referred the matter  back  to
          the  NGCB   staff  for   further   review.    On   June
          3, 1997, the FDIC filed a motion  in the United  States
          District Court, District of Nevada (the Nevada District
          Court)  (i) for a declaration  that  the  FDIC has  the
          right to exercise voting rights to  the  Pledged  Dunes
          Shares, and (ii)  to  require  the  Company  and  other
          entities to hold their respective stockholders meetings.
          On July 8,  1997, the Nevada District Court granted the
          FDIC's  motion.  In  August  1997, the Anderson Parties
          filed  in  the  Nevada  District  Court  a  motion  for
          clarification  of  the  Nevada  District  Court's order
          granting the FDIC's motion.  The

                                   18
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED

 
6.   Contingencies (continued):

          request for clarification is based on the fact that the
          Nevada District Court's order is silent as to whether or
          not the FDIC is required to comply with certain sections
          of the NGC Regulations  requiring prior approval of the
          NGCB and NGC before voting rights  can  be exercised by
          the FDIC.  On September 8, 1997,  the  Nevada  District
          Court denied the Anderson Parties' motion.  On July  3,
          1997, the Nevada  District  Court  approved the  FDIC's
          proposed   plan  (the  Plan)  for  disposition  of  the
          collateral which  includes the  Pledged  Dunes  Shares.
          The Plan requires, among other things, that the Special
          Master  gather  material to be provided to  prospective
          bidders, to review bids  and negogiate with prospective
          bidders, to submit qualified bids to the Nevada District
          Court and to obtain a hearing  date  at which  time the
          Nevada   District  Court  may  consider  any  qualified
          overbids, as well as  credit  bids  for  the FDIC.  The
          proposed time schedule of the Plan is approximately 215
          days or January 24,  1998.  The  Company  believes  any
          proceeds from the disposition of the  Company's  common
          shares held by BGC, and pledged to MRI, would be payable
          to  MRI.  Should  the  FDIC successfully  assert voting
          rights over, or dispose of, the Pledged  Dunes  Shares,
          there will be a change in control  of the Company.  The
          Company has  been  advised  that  Cedar  and  BGC  each
          received letters dated November 3, 1997, from  the FDIC
          asserting the FDIC's "rights  with regard to the  Cedar
          and BGC stock, advising each of Cedar and BGC that " no
          corporate action should be taken which is  inconsistent
          in any manner with the rights of the FDIC" and demanding
          that a special meeting of the stockholders of  each  of
          Cedar and BGC be forthwith noticed and held,  "at which
          meeting   the   FDIC,  acting  pursuant  to  the  above
          described authority, intends to  vote the Cedar and BGC
          stock to remove the existing board of directors of Cedar
          and BGC  and  to  elect  a  designee  of  the  FDIC  to
          constitute the entire board of directors thereof."  The
          letter sent to BGC additionally states as follows: "Such
          action will be taken with a view to then authorize  BGC
          to surrender its Nevada Gaming  License and  to  enable
          the appointment of a  supervisor  with  respect  to its
          gaming activities. Each of the letters further provides
          that Cedar and BGC  are to call a  special  meeting  of
          stockholders and that if such meetings are not  held on
          or  before  November  20,  1997, the  FDIC may petition
          the Nevada District Court to enter such further  orders
          as may be required to notice and hold such  meetings or
          to permit the FDIC to  take such  actions by  unanimous
          written consent,  for  such  sanctions  as  the  Nevada
          District  Court  may deem necessary or  appropriate for
          the failure to comply with  the court  orders, and  for
          such  other  relief  as  may  be  deemed necessary  and
          appropriate.  As

                                   19
<PAGE>

           DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                     SEPTEMBER 30, 1997 AND 1996

                               UNAUDITED


6.   Contingencies (continued):

          a result of the above-described potential future actions
          by the FDIC, the ability of BGC  to pay the  $2,000,000
          indebtedness   owed   to  the  Company  may  be further
          substantially  impaired.   The Company cannot presently
          predict what action Cedar or BGC  may take in  reaction
          to  the   above-described  notice  from  the FDIC, what
          additional  actions  the  FDIC  may  take  in  reaction
          thereto, or what other actions other parties, including
          the Nevada Gaming Authorities  and the  holder  of  the
          first deed of trust on BGC's Maxim Hotel and Casino, may
          take with respect to the foregoing. Without limitation,
          the above actions of  the  FDIC,  if  successful,  will
          likely constitute events of  default  under  the  first
          deed of  trust  indebtedness on  BGC's Maxim  Hotel and
          Casino,   which   may  cause  other events  which  will
          substantially impair the ability  of BGC to  repay  the
          indebtedness to the Company.

7. Loss per common share:

   Loss per common share has been computed using  the  number  of
   shares outstanding (6,375,096) at September 30, 1997 and 1996.
   Dividends on the  Company's non-convertible  preferred  stock,
   Series B (Series B Preferred  Stock), have been  deducted from
   income or added  to  the  loss  applicable  to  common shares.
   Dividends on the Company's Series B Preferred Stock  have  not
   been paid since the first  quarter of 1982.  The Company is in
   arrears on such  dividends  in  the  amount  of  approximately
   $1,155,000 as of September 30, 1997.

                                 20
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 ITEM  2.   MANAGEMENT'S  DISCUSSION AND  ANALYSIS  OF  FINANCIAL
 CONDITION AND RESULTS OF OPERATIONS

 Section  21E  of  the  Securities  Exchange Act of 1934 provides
 a  "safe  harbor"  for  forward-looking   statements.    Certain
 information   included   herein  contains  statements  that  are
 forward-looking, such as anticipated  liquidity requirements for
 the coming fiscal year, anticipated sources of liquidity for the
 coming  fiscal  year, the collectibility of certain receivables,
 the impact of anticipated  asset  sales  and  potential  changes
 in  control  of  the Company.  Such  forward-looking information
 involves  important  risks    and   uncertainties   that   could
 significantly  affect  the  Company's  financial  condition  and
 future results of  operations,  and,  accordingly,  such  future
 financial condition and results of operations  may   differ from
 those  expressed  in any forward-looking statements made herein.
 These risks and uncertainties include, but are not  limited  to,
 those risks  relating to  actual  costs  necessary  to  clean-up
 certain  real  property  chemical  contamination,   real  estate
 market   conditions  and   general   economic   conditions,  the
 abilities  of  certain  third  parties  to obtain financing  and
 otherwise  perform  under  real   estate  purchase   agreements,
 potential  changes  in  control  of certain affiliate controlled
 entities, and the outcome of certain litigation and other risks.
 The  Company cautions readers not to  place  undue  reliance  on
 any such forward-looking statements, and,  such statements speak
 only as of the date made.

 OVERVIEW

 On  July  3,  1997,  the  Company completed  the  sale of its 57
 residential  lots  in North Las Vegas, Nevada.  Net proceeds  to
 the Company were approximately  $573,000  of  which $318,000 was
 paid  to  Beal  Bank, the purchaser of the SASA Obligation.   In
 addition, the Company  received  a note and deed of trust in the
 amount  of  $72,597  representing reimbursement  of  water  fees
 previously paid.  The note was paid in full on July 21, 1997.

 On  July  15,  1997,  the  Company  completed  the sale  of  the
 White  Ranch.   Net  proceeds  from  the sale were approximately
 $5,965,000 of which approximately $2,985,500  was  paid  to  the
 Company.  The balance of the proceeds were paid to the other 50%
 owner of the White Ranch.

 On  May  29,  1997,  SHF  signed  a  contract  (the Contract) in
 the amount of $1,651,800  with  Tolson Construction Company (the
 Contractor) for the construction  of a rice drying facility (the
 Drying Facility)  adjacent to the rice  storage facility in Yolo
 County, California.  The Contract does not include certain costs
 such  as

                                21
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 permits,    landscaping,    paving,   utility   lines,  interest
 costs,  etc.  These additional costs are estimated to be between
 $200,000  and  $250,000.   As  of October 31, 1997, SHF had paid
 approximately  $1,491,800  to the  Contractor in accordance with
 the contract and approximately $312,000 to other parties for the
 additional  costs.   In connection with  the  financing  of  the
 Drying Facility construction, SHF has entered into the following
 agreements with  ICON  Cash Flow Partners, L.P., Series E (ICON,
 LP) and ICON Financial Corp. (ICON): (1)  A promissory note (the
 Note) dated April 3, 1997,  between  ICON,  LP  and  SHF  in the
 principal  amount  of  $1,150,000,  with interest thereon at the
 rate of 12% per annum.  Interest is payable  on the first day of
 the month following the first advance and on the  first  day  of
 the  month thereafter.   Upon  completion of the Drying Facility
 advances  made  under the Note will be rolled into the equipment
 lease financing as of the Base Lease Commencement Date (the last
 day of the month  following  the  date  the  Drying  Facility is
 declared complete by both SHF and ICON, LP).  As of October  31,
 1997,  SHF  has  drawn $991,800 against the Note.  (2)  A Master
 Equipment Lease (the  Lease)  dated  April 3, 1997, between ICON
 and SHF.  Beginning with the Base Lease  Commencement Date, ICON
 will  lease  to SHF the Drying Facility for  a  period  of  five
 years.  At the  end  of  the five year period, SHF will have the
 right to purchase not less  than  all of the Drying Facility for
 $1.00.  The monthly rental under the Lease will be approximately
 2.202%  of  the funded Drying Facility  cost  (estimated  to  be
 approximately   $25,000   per  month).   In  addition  to  being
 collateralized  by  the  Drying   Facility,   SHF  has  provided
 additional collateral in the form of  a Deed of Trust on certain
 parcels of property, including the parcel  on  which the storage
 facility is located.  Both the Note and the Lease are guaranteed
 by  MRI  and the Company (collectively the Guarantors).   Before
 the Guarantors  are  liable for any deficiency, ICON or ICON, LP
 must  first  proceed  against   the   Drying  Facility  and  the
 additional  collateral.  Both  the Lease and  the  Note  contain
 certain events of defaults, one of which relates to any material
 adverse change in the business or  financial condition of SHF or
 the Guarantors (defined as a reduction  of Tangible Net Worth of
 20%  or more) and another relates to the loss  of  Farmers  Rice
 Coop as  a  customer. These events of defaults only apply during
 the  period  the   Note  remains  unpaid.  The  Drying  Facility
 commenced operations on approximately September 15, 1997.

 During  the quarter  ended September 30, 1997, the Company wrote
 down its investment in  the  Solano  County  Option  by $400,000
 because management  believes that the option purchase  price  is
 in  excess  of  the  estimated  fair value of the property under
 option.

                               22
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997

  
 John  B. Anderson, Edith Anderson,  Cedar  Development Co., J.A.
 Inc.  and  J.B.A. Investments, Inc. (collectively  the  Anderson
 Parties) are  involved  in  litigation  with the Federal Deposit
 Insurance  Corporation (the FDIC).  This matter  is  more  fully
 described in the Company's Form 10-K for the year ended December
 31, 1996, see  "Item  3.  Legal  Proceedings  -  Federal Deposit
 Insurance Corporation, et al v. John B. Anderson et  al.";  Form
 8-K,  "Item  5. Other Events," dated February 4, 1997; Form 8-K,
 "Item 5. Other  Events,"  dated  March  26,  1997; and Form 8-K,
 "Item  5.  Other  Events,"  dated  July 8, 1997.  Mr.  Anderson,
 through his ownership of Cedar  Development  Co.  (Cedar),   the
 parent  of  Baby Grand Corp. (BGC) and J.B.A. Investments,  Inc.
 (J.B.A.), owns  approximately  4,280,756  shares or 67.2% of the
 outstanding common stock of the Company.  Of  these  shares  (i)
 3,000,000 shares or 47.1% of the outstanding common stock of the
 Company  (the Pledged Dunes Shares) are pledged as collateral in
 favor of entities  of  which  the  FDIC  is  a successor and /or
 assign  and  (ii)  1,280,756 shares or 20.1% of the  outstanding
 common shares are pledged to MRI as collateral for the BGC Note.
 In April 1997, the Company  was informed that the FDIC had filed
 an application with the Nevada  Gaming  Control Board (NGCB) and
 the Nevada  Gaming  Commission  (NGC)  (the NGCB and the NGC are
 collectively referred to herein as the Nevada Gaming Authorities)
 for permission to  enforce  the  FDIC's  security  interest  in,
 including the  right  to  vote, the  common stock  of Cedar, BGC
 and other entities.  The successful enforcement of the  security
 interest by the FDIC  in  the  common  stock  of  the  foregoing
 companies would, among other  things,  result  in  a  change  in
 control of such companies as  well as  the  Company.   The  NGCB
 referred  the  matter back to the NGCB staff for further review.  
 On   June  3,   1997,   the   FDIC   filed   a   motion  in  the
 United  States  District  Court, District of Nevada (the  Nevada
 District Court) (i) for a declaration  that  the  FDIC  has  the
 right to exercise voting rights to the Pledged Dunes Shares, and
 (ii)  to  require the Company and certain other entities to hold
 their respective  stockholders  meetings.   On July 8, 1997, the
 Nevada  District  Court  granted the FDIC's motion.   In  August
 1997, the Anderson Parties  filed in the Nevada District Court a
 motion for clarification of the  Nevada  District  Court's order
 granting  the  FDIC's motion.  The request for clarification  is
 based on the fact  that  the  Nevada  District  Court's order is
 silent as to whether or not the FDIC is required  to comply with
 certain  sections  of  the  NGC   Regulations  requiring   prior
 approval  of  the  NGCB  and the NGC before voting rights can be
 exercised  by  the  FDIC.  On  September  8,  1997,  the  Nevada
 District Court denied  the  Anderson Parties motion.  On July 3,
 1997, the Nevada District Court  approved  the  FDIC's  proposed
 plan (the Plan) for disposition of the collateral which includes
 the  Pledged  Dunes  Shares.   The  Plan  requires,  among other
 things,  that the Special Master gather material to be

                                 23
<PAGE>

                  DUNES HOTELS AND CASINOS INC.

                  QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 provided to prospective bidders, to review bids  and  negotitate
 with prospective bidders, to submit qualified bids to the Nevada
 District Court and to obtain a  hearing  date  at which time the
 Nevada  District Court may consider any qualified  overbids,  as
 well as credit  bids  from the FDIC.  The proposed time schedule
 for the Plan is approximately 215 days or January 24, 1998.  The
 Company  believes  any proceeds  from  the  disposition  of  the
 Company's common shares  held  by BGC, and pledged to MRI, would
 be payable to MRI.   Should the  FDIC successfully assert voting
 rights over, or dispose of, the Pledged Dunes Shares, there will
 be  a change in control of the Company.  The  Company  has  been
 advised  that Cedar and BGC each received letters dated November
 3, 1997, from  the FDIC asserting the FDIC's "rights with regard
 to the Cedar and  BGC stock, advising each of Cedar and BGC that
 "no corporate action  should  be  taken which is inconsistent in
 any manner with the rights of the FDIC"  and  demanding  that  a
 special  meeting of the stockholders of each of Cedar and BGC be
 forthwith  noticed  and held, "at which meeting the FDIC, acting
 pursuant to the above  described  authority, intends to vote the
 Cedar and BGC stock to remove the existing board of directors of
 Cedar and BGC  and to elect a designee of the FDIC to constitute
 the entire board of directors thereof."   The letter sent to BGC
 additionally states as follows: "Such action  will be taken with
 a  view  to  then  authorize  BGC to surrender its Nevada Gaming
 License  and  to enable the appointment  of  a  supervisor  with
 respect to its gaming activities."  Each  of the letters further
 provide that Cedar  and  BGC  are  to  call a special meeting of
 stockholders and that if such meetings are not held on or before
 November  20,  1997, the FDIC may petition the  Nevada  District
 Court to enter such  further orders as may be required to notice
 and hold such meetings  or  to  permit  the  FDIC  to  take such
 actions by unanimous written consent, for such sanctions  as the
 Nevada District Court  may deem necessary or appropriate for the
 failure  to  comply  with  the  court orders, and for such other
 relief as may be deemed necessary  and appropriate.  As a result
 of the above-described potential future actions by the FDIC, the
 ability of BGC to pay the $2,000,000  indebtedness  owed  to the
 Company  may  be  further  substantially  impaired.  The Company
 cannot presently predict what action Cedar  or  BGC  may take in
 reaction  to  the  above-described  notice  from the FDIC,  what
 additional  actions  the FDIC may take in reaction  thereto,  or
 what other actions other  parties,  including  the Nevada Gaming
 Authorities  and  the first deed of  trust holder on BGC's Maxim
 Hotel and Casino, may take with respect to the foregoing. Without
 limitation,  the  above-described   actions   of  the  FDIC,  if
 successful, will likely constitute events of default  under  the
 first deed of trust indebtedness on BGC's Maxim Hotel and Casino,
 which may cause other events which will substantially impair the
 ability of BGC to repay the indebtedness to the Company.

                                 24
<PAGE>

                  DUNES HOTELS AND CASINOS INC.

                  QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 The  Company received a notice from the California Franchise Tax
 Board (FTB) wherein the  FTB  alleges  that one of the Company's
 subsidiaries  owes  California  franchise  tax,   penalties  and
 interest of approximately $563,000.  The tax arose out of a gain
 in  1988  resulting  from  a  foreclosure  sale of certain  real
 property  owned  by the subsidiary.  The FTB contends  that  the
 gain is non-business  income  to  the  subsidiary  and therefore
 should  be allocated 100% to California without benefit  of  any
 losses of  the  Company.   The  Company has exhausted all of its
 appeals with the FTB and therefore this matter has been referred
 to the California State Board of  Equalization  (SBE).   On June
 12, 1997, the Company filed its Reply Brief with the SBE wherein
 the  Company  requested,  based  on  reasons stated in the Reply
 Brief, that the SBE reverse the FTB's  proposed  assessment  and
 withdraw  its  Notice  of  Proposed  Assessment.  Because of the
 likelihood of either litigation or a settlement, the Company has
 provided in its balance sheet $300,000  relating to this matter.
 The Company has been informed that a hearing date regarding this
 matter has been set for December 4, 1997.

 The Company has no present intentions to pay dividends on either
 its common or preferred stock.

 OPERATING RESULTS

 Results  of  operations  for  the  nine  months ended  September
 30, 1997 were impacted by a write down of approximately $157,000
 relating to real  estate  notes  resulting  from  sales  at  The
 Fairways  and  a  $400,000  write  down of the investment in the
 Solano County Option.  The write down  of the Fairway notes  was
 a  result  of  two of the original purchasers  of  lots  at  The
 Fairways asking  to have their loans reduced so that their total
 investment in their lots would be closer to their current market
 value.  Although the  Company  could have foreclosed on the lots
 and  resold  them, it was management's  decision  to  grant  the
 reduction  rather   than   go   through  a  lengthy  and  costly
 foreclosure proceeding.  The write  down  of  the  Solano County
 Option was due to management's belief that the fair value of the
 property  under option is less than the  option  purchase price.
 These write downs were partially offset by the sale of the White
 Ranch and the 57 residential lots in North Las Vegas.

                                  25
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 Three  months  ended  September 30, 1997 vs.  Three Months ended
 September 30, 1996

 Real Estate

 The  increase  in  revenues  from  the  sale  of real estate and
 the increase in cost of real estate sold  for  the  three months
 ended  September  30, 1997 resulted from  the sale of the  White
 Ranch and the 57 residential lots in North Las Vegas.

 Net   rental   income   from  agricultural  properties  for  the
 three months ended September 30, 1997 decreased by approximately
 $315,000 when compared with the three months ended September 30,
 1996.   The  decrease  was  due  to  the sale of portions of Sam
 Hamburg Farm and the sale of the White Ranch.

 Agricultural

 Profit  from  the  rice drying  and  storage  operations for the
 three months ended September 30, 1997 increased  by $60,000 when
 compared  with the three months ended September 30,  1996.   The
 increase was  due  primarily  to the increased efficiency of the
 new Drying Facility and the operation  of  the  West  Sacramento
 facility to dry and store long grain rice.

 General

 When  compared  with  the  three   months  ended  September  30,
 1996,  corporate selling, general  and  administrative  expenses
 decreased   by   approximately  $21,000;  loss  on  real  estate
 investments increased  by  approximately  $400,000;  partnership
 losses  decreased  by  approximately  $40,000;  interest  income
 decreased   by   approximately  $31,000;  and  interest  expense
 decreased by approximately  $38,000.The  decrease  in  corporate
 selling,  general  and administrative expenses was due primarily
 to a decrease in salaries.   The loss on real estate investments
 increased because of the write  down  of  the  investment in the
 Solano County Option. The decrease in partnership losses was due
 to the termination of the Pine Ridge Joint Venture and Steadfast
 Cattle  Company  in  1996. The decrease in interest  income  and
 interest  expense was due  to  principal  collections  on  notes
 receivable and a reduction in the principal balance owing on the
 RTC note.

                                26
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


 Nine  months  ended  September  30, 1997  vs.  Nine months ended
 September 30, 1996

 Real estate

 Profit from the sale of real  estate for the nine  months  ended
 September 30, 1997, increased by  $559,000 when  compared to the
 nine months ended September  30, 1996.  This  was  a  result  of
 higher sales prices of  lots at The  Fairways, the sale  of  the
 White Ranch and the sale of the 57 residential lots in North Las
 Vegas.  The increase in cost of real estate sold was  due to the
 sale of the White Ranch and the 57 lots in North Las Vegas.

 Rental  income  from  agricultural   properties  for   the  nine
 months  ended  September  30,  1997, decreased  by $181,000 when
 compared  with  the  nine  months ended September 30, 1996.  The
 decrease in rental income  from  agricultural properties was due
 primarily to a reduction in water  assessment fees, a  reduction
 in the cost of toxic clean up at  Sam  Hamburg Farm, the sale of
 a portion of Sam Hamburg Farm and the sale of the White Ranch.

 Agricultural

 Profit from the rice  drying and storage operation  for the nine
 months  ended  September  30, 1997,  increased  by approximately
 $97,000  when  compared  with  the  nine  months ended September
 30, 1996.  The increase in profit was primarily  attributable to
 the termination of the 1996 lease of the West  Sacramento drying
 facility and  the  agreement  to  use  the  Cal-Dehy  name,  the
 increased efficiency of the new Drying Facility, and the use  of
 the  West Sacramento facility to dry and store long grain rice.

 General

 When compared with  the nine  months ended  September  30, 1996,
 operating  expenses  increased  by approximately $170,000.  The
 increase  in  operating  expenses  consisted  primarily  of  an
 increase in loss on real estate investments of $110,000, and an
 increase in bad debts of $100,000. The increase in loss on real
 estate investments was a result of the Company writing down its
 investment in the Solano County Option.  The  increase  in  bad
 debt  expense  relates  to  the  reduction  of  certain   notes
 receivable resulting from the  sale  of  lots at  The  Fairways
 which is described above. The decrease in interest and dividend
 income for the nine months ended September 30, 1997, was due to
 a reduction in the principal balance of various notes receivable
 primarily related to sales at The Fairways.   Interest  expense
 decreased as a  result of principal  payments  made  Beal Bank,
 the purchaser of  the SASA Obligation.

 The decrease in partnership  losses was due to  the termination
 of the Pine Ridge Joint Venture and Steadfast Cattle Company in
 1996.

 LIQUIDITY AND CAPITAL RESOURCES

 During the nine months ended  September  30,  1997,  cash,  cash
 equivalents and  marketable securities  increased by  $2,960,000
 from $1,810,000 at December 31, 1996, to $4,770,000 at September
 30, 1997.  The most significant  sources of cash during the nine
 months   ended   September  30,  1997,  were   from   operations
 ($3,498,000);  the  collection   of   loans   made   to   others
 ($788,000) and an increase in long-term debt of $1,152,000.  The
 most significant uses  of cash  during  the  nine  months  ended
 September 30, 1997,  consisted of  payments  on  long-term  debt
 ($703,000); payments on short term debt ($42,000); payments made
 for the construction of the Drying Facility ($1,804,000) and  an
 increase in investments of $1,151,000.

 The Company believes that its primary requirements for liquidity
 in the coming fiscal year will be  to fund ongoing  expenses  at
 The Fairways, which include,  among  other  things,  association
 dues, water and sewer fees, property taxes and the final payment
 due the  Rancho  Murieta  Association  on December  31, 1997 for
 unpaid park fees; to  fund the required  payments  on the  note to
 the RTC;  to fund  the  monthly  lease  payments on  the  Drying
 Facility; to fund  costs that may be  incurred  relating  to the
 toxic clean-up at Sam Hamburg Farm;  to fund  amounts,  if  any,
 that may be due to the California  Franchise Tax  Board; and  to
 fund general and  administrative  expenses.   In  addition,  the
 Company  may  elect  to  pay certain  mortgage payments relating
 to the Solano County Option if the current owner is unable to do
 so.

 The  Company  believes  that  sources of  required  liquidity in
 addition to cash, cash equivalents and marketable  securities at
 September 30, 1997, will be cash generated from the  rice drying
 and  storage  facilities, collections on loans made to   others,
 including  the  BGC  Note,  anticipated   lots   sales  at   The
 Fairways, collections of notes receivable resulting  from  sales
 at The Fairways and Success Payments

                               28
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997

 LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

 related to the venture with Murieta  Investors.  Based on  known
 commitments, the Company  believes  that  the  sources of   cash
 described will be adequate to fund known liquidity requirements.

                                29
<PAGE>

                   DUNES HOTELS AND CASINOS INC.

                   QUARTERLY REPORT ON FORM 10-Q

             FOR THE PERIOD ENDED SEPTEMBER 30, 1997


                   PART II - OTHER INFORMATION

      ITEM 1.  Legal Proceeding

      None, except for the  discussion contained in "Part I, Item
      2,  Management's  Discussion   and  Analysis  of  Financial
      Condition and Results of Operations."

      ITEM 3.  Default Upon Senior Securities

      Dividends in arrears.  See Note  7 of Notes to Consolidated
      Condensed Financial Statements.

      ITEM 5.  Other Events

      Certain events could result in a change  of  control of the
      Company.  See Part 1.-Item 1.  Financial Statements  - Note
      6   (d)   of  Notes  to  Consolidated  Condensed  Financial
      Statements, September 30, 1997 and 1996.

      ITEM 6.  Exhibits and Reports on Form 8-K

      (a) Exhibits

      27.01    Financial Data Schedule

      (b) Reports on Form 8-K

      None

                               30
<PAGE>

                            SIGNATURES


      PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
 OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
 ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.



                                    DUNES HOTELS AND CASINOS INC.
                                              Registrant



Date: November 13, 1997             By:  /s/ James H. Dale
                                         James H. Dale
                                         Duly Authorized  Officer
                                         and Chief Financial Officer

                                31
<PAGE>

                          EXHIBIT INDEX


   Item       Description                         Page No.

   27.01      Financial data schedule               33

                                32