<PAGE>1

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10-QSB

(Mark One)

   X   Quarterly  report  pursuant  to  Section  13 or 15(d)  of the  Securities
       Exchange Act of 1934 for the quarterly period ended June 30, 1999
                                                           -------------
  __   Transition report pursuant to 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 business issuer as specified in its charter)

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

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


                                 (916) 929-2295
                          ---------------------------
                          (Issuer's telephone number)


                                 NOT APPLICABLE
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

       Check  whether the issuer (1) filed all  reports  required 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  or the
       past 90 days. Yes X No

                      APPLICABLE ONLY TO CORPORATE ISSUERS
       State the number of shares outstanding of each of the issuer's classes of
common equity,  as of the latest  practicable  date:  6,375,096 shares of common
stock, $.50 par value as of August 2, 1999.

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

<PAGE>2

                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999




                                      INDEX
                                     -------
                                                                           Page
                                                                          ------
Part 1. Financial Information

         Item 1. Financial Statements

         Consolidated Condensed Balance Sheets                                3
         June 30, 1999 and December 31, 1998

         Consolidated Condensed Statements of Operations                      5
         for the three months ended June 30, 1999
         and 1998

         Consolidated Condensed Statements of Operations                      6
         for the six months ended June 30, 1999
         and 1998

         Consolidated Condensed Statements of Cash Flows                      7
         for the six months ended June 30, 1999
         and 1998

         Notes to Consolidated Condensed Financial                            8
         Statement

         Item  2. Management's Discussion and Analysis of
         Financial Condition and Results of Operations                       11
         ------------------------------------------------
Part II. Other Information

         Item 1. Legal Proceedings                                           16
         -------------------------
         Item 2. Changes in Securities                                       16
         -----------------------------------
         Item 3. Defaults Upon Senior Securities                             16
         ------------------------------------------
         Item 4. Submission of Matters to a Vote of Security Holders         16
         -------------------------------------------------------------
         Item 5. Other Information                                           16
         ---------------------------
         Item 6. Exhibits and Reports on Form 8-K                            16
         -----------------------------------------

         Signatures                                                          17

<PAGE>3


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED CONDENSED BALANCE SHEET

                       JUNE 30, 1999 AND DECEMBER 31, 1998
                             (Dollars in thousands)

                                     ASSETS
<TABLE>
<S>                                                                                  <C>                     <C>

                                                                                               June              December
                                                                                             30, 1999            31, 1998
                                                                                        -----------------   -----------------
                                                                                           (Unaudited)

Cash and cash equivalents                                                               $       3,194       $      3,120

Marketable securities                                                                             813                828

Receivables
    Trade                                                                                          33                  9
    Related party, less allowance of $1,899 in 1999 and 1998                                       37                 37
    Real estate sales                                                                             432                369

Inventory of real estate held for sale                                                          3,787              3,950

Prepaid expenses                                                                                   53                115

Property and equipment, less accumulated depreciation
    and amortization, 1999, $664; 1998, $598                                                    3,162              3,228

Real estate investment                                                                                               544

Other assets                                                                                        3                  3
                                                                                     -----------------      -------------

                                                                                  $            11,514       $      12,203
                                                                                     =================      ==============
</TABLE>
<PAGE>4

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                CONSOLIDATED CONDENSED BALANCE SHEET (CONTINUED)

                       JUNE 30, 1999 AND DECEMBER 31, 1998
                             (Dollars in thousands)

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S>                                                                                    <C>                   <C>

                                                                                              June              December
                                                                                            30, 1999            31, 1998
                                                                                       -----------------   -----------------
                                                                                           (Unaudited)

Accounts payable                                                                  $                56        $        25

Accrued expenses                                                                                  175                 185

Due to former minority interest                                                                   320                 320

Income taxes                                                                                      307                 307

Short-term debt                                                                                                        49

Long-term debt and capital lease obligation                                                     1,695               1,875

Accrued preferred stock dividends in arrears                                                    1,281               1,245
                                                                                     -----------------   -----------------

                                                                                                3,834               4,006
                                                                                     -----------------   -----------------
Shareholders' equity
    Preferred stock - authorized  10,750,000  shares ($.50 par);  issued  10,512
        shares Series B $7.50  cumulative  preferred  stock,  outstanding  9,610
        shares in 1999 and 1998, aggregate
        liquidation value $2,446 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 1999 and 1998                                                                        3,900               3,900

    Capital in excess of par                                                                   25,881              25,881

    Deficit                                                                                   (20,106)            (19,589)
                                                                                     -----------------   -----------------
                                                                                                9,680              10,197
    Treasury stock at cost;  Preferred - Series B, 902 shares
        Common 1,424,684 shares in 1999 and 1998                                               (2,000)             (2,000)
                                                                                     -----------------   -----------------

        Total shareholders' equity                                                              7,680               8,197
                                                                                     -----------------   -----------------

                                                                                  $            11,514 $            12,203
                                                                                     =================   =================
</TABLE>

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

<PAGE>5


                DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                    THREE MONTHS ENDED JUNE 30, 1999 AND 1998
                    (Dollars in thousands, except per share)

                                    UNAUDITED
<TABLE>
<S>                                                                                  <C>                     <C>

                                                                                             1999                   1998
                                                                                       ---------------         ---------------
Revenues
    Sales of real estate                                                              $             105        $           172
    Rental income, agricultural properties                                                           14                     13
    Drying and storage revenues                                                                      46                     26
                                                                                        ---------------         ---------------
                                                                                                    165                    211
                                                                                        ---------------         ---------------
Cost and expenses
    Cost of real estate sold                                                                         85                    171
    Cost and expenses of rental income                                                                1                      1
    Cost of drying and storage revenues                                                              70                     89
    Selling, administrative and general
        Corporate                                                                                   159                    188
        Real estate operations                                                                       64                     52
    Depreciation                                                                                     33                     32
                                                                                        ---------------         ---------------
                                                                                                    412                    533
                                                                                        ---------------         ---------------

Loss before other credits (charges) and income taxes                                               (247)                  (322)

Other credits (charges)
    Interest and dividend income                                                                     63                     61
    Interest expense                                                                                (45)                   (59)
    Loss on marketable securities, net                                                              (11)                    (6)
    Other                                                                                             3                     14
                                                                                        ---------------         ---------------
                                                                                                      7                     10
                                                                                        ---------------         ---------------

Loss before income taxes                                                                           (240)                  (312)

Income taxes                                                                                         (7)
                                                                                        ---------------         ---------------

Net loss                                                                                $          (247)        $         (312)
                                                                                         ===============        ===============

Weighted average number of shares outstanding                                                 6,375,096              6,375,096

Loss per common share                                                                  $          (0.04)        $        (0.05)
                                                                                          ===============        ===============

</TABLE>

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

<PAGE>6
                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                     SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                    (Dollars in thousands, except per share)

                                    UNAUDITED
<TABLE>
<S>                                                                                   <C>                     <C>
                                                                                            1999                     1998
                                                                                      ----------------          --------------
Revenues
    Sales of real estate                                                               $            778         $          256
    Rental income, agricultural properties                                                           26                     30
    Drying and storage revenues                                                                      93                     56
                                                                                       ----------------          --------------
                                                                                                    897                    342
                                                                                       ----------------          --------------
Cost and expenses
    Cost of real estate sold                                                                        716                    257
    Cost and expenses of rental income                                                                2                      2
    Cost of drying and storage revenues                                                             150                    220
    Selling, administrative and general
        Corporate                                                                                   343                    431
        Real estate operations                                                                      108                    101
    Depreciation                                                                                     66                     64
                                                                                       ----------------          --------------
                                                                                                  1,385                  1,075
                                                                                       ----------------          --------------

Loss before other credits (charges) and income taxes                                               (488)                  (733)

Other credits (charges)
    Interest and dividend income                                                                    114                    120
    Interest expense                                                                                (89)                   (89)
    Loss on marketable securities, net                                                              (15)                    (8)
    Other                                                                                             7                   (140)
                                                                                       ----------------          --------------
                                                                                                     17                   (117)
                                                                                       ----------------          --------------

Loss before income taxes                                                                           (471)                  (850)

Income taxes                                                                                        (10)                    (2)
                                                                                       ----------------          --------------

Net loss                                                                              $            (481)        $          (852)
                                                                                      =================         ================
Weighted average number of shares outstanding                                                 6,375,096              6,375,096

Loss per common share                                                                 $           (0.08)         $        (0.13)
                                                                                      =================         =================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.


<PAGE>7
                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                     SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                             (Dollars in thousands)

                                    UNAUDITED

<TABLE>
<S>                                                                                   <C>                   <C>

                                                                                             1999                   1998
                                                                                       ------------------     -----------------
Cash flows from operating activities:
    Net cash provided by (used in) operating activities                                $          (155)        $          (532)
                                                                                       ------------------     -----------------

Cash flows from investing activities:
    Decrease (increase) in investments                                                              559                   (237)
    Decrease (increase) in notes receivable                                                        (101)                   (73)
    Purchase of equipment                                                                                                  (58)
                                                                                       ------------------     -----------------

                                                                                                    458                   (368)
                                                                                       ------------------     -----------------

Cash flows from financing activities
    Decrease in long-term debt                                                                     (180)                  (178)
    Decrease in short-term debt                                                                     (49)                   (60)
                                                                                      ------------------     -----------------

                                                                                                   (229)                  (238)
                                                                                      ------------------     -----------------

Increase (decrease) in cash and cash equivalents                                                     74                 (1,138)

Cash and cash equivalents, beginning of period                                                    3,120                  4,299
                                                                                       ------------------     -----------------

Cash and cash equivalents, end of period                                               $          3,194        $         3,161
                                                                                       =================      =================

</TABLE>

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


<PAGE>8
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999


1.       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 of operations for the interim
         periods.

         The results of operations  for the six months ended June 30, 1999,  are
         not  necessarily  indicative of the results to be expected for the full
         year. A more detailed discussion of the Company's financial position is
         described in the Company's  Form 10-KSB for the year ended December 31,
         1998.

2.       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),  after elimination of all material
         inter-company balances and transactions.

3.       Control of registrant:

         John B. Anderson (Anderson),  the Company's controlling stockholder and
         former Chairman of the Board of Directors of the Company,  and entities
         owned or controlled by him (Anderson Entities) own approximately 67.2 %
         of the  Company's  common stock.  See Note 11(b) in the Company's  Form
         10-KSB  for the year  ended  December  31,  1998  regarding  litigation
         between  Anderson and the Federal Deposit  Insurance  Corporation  (the
         FDIC).  Each entity related or controlled by Anderson will  hereinafter
         be identified as an Anderson Entity.

         In May 1999,  the FDIC  solicited bids for the sale of a portion of its
         loan, together with the underlying security, and a part of the judgment
         against  Anderson.  Included in the package was 3,000,000 shares of the
         Company's common stock (the Shares). The Company submitted a bid to the
         FDIC but the successful bidder was General Financial Services, Inc.

         On June 3, 1999, General Financial Services, Inc., and GFS Acquisition,
         Inc.  (collectively  GFS) filed a Schedule 13D with the  Securities and
         Exchange  Commission  which  stated that GFS  intends to  exercise  its
         rights under the judgment and  security  documents.  Subsequently,  GFS
         attempted to transfer the Shares to itself but Mr.  Anderson  objected,
         claiming that there was no change in ownership of the Shares.


<PAGE>9
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999


3.       Control of registrant (continued):

         On July 6, 1999, the Company filed a Complaint In  Interpleader  in the
         Superior  Court of  California,  County of Yolo (the State  Action) and
         deposited the Shares with the Court. The State Action was filed against
         GFS, Anderson and the FDIC to resolve conflicting claims concerning who
         has the power to transfer  and  otherwise  dispose of the Shares and by
         whom  voting  and  other  rights  connected  with  the  Shares  may  be
         exercised.

         On July 9,  1999,  GFS filed a  complaint  against  the  Company in the
         United States District Court Northern District of New York (the Federal
         Action) seeking,  among other things, a permanent  injunction requiring
         the Company to give  possession of the Shares to GFS. The Federal Court
         issued a temporary  restraining  order which restrains the Company from
         disposing of the Shares or  transferring or disposing any of its assets
         outside of the ordinary course of business.

         The Company is unable to predict the outcome of either the State Action
         or the  Federal  Action and has no  ownership  interest  in the shares.
         However,  the State  Action  and/or the Federal  Action may result in a
         change  of  control  of the  Company.  A more  detailed  discussion  is
         described in the Company's Form 8-K filed on July 21, 1999.

4.       Contingencies:

          (a) As of June 30,  1999,  there were no  material  legal  proceedings
              pending against the Company. Subsequent to June 30, 1999, see Note
              3 above  regarding  legal  proceedings  that may  have a  material
              adverse effect on the Company.

          (b) SHF was advised in 1991 of possible  contamination  at Sam Hamburg
              Farm of approximately 5,000 cubic yards of contaminated earth. 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 in toxic dump
              sites of the chemical and toxic-laden 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 or approximately $500,000. However, if on-site
              remediation can be achieved, it is estimated that the cost 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.  Accordingly,  the estimates could materially
              change as the testing and remediation work continues,  which could
              be as early as 1999.


<PAGE>10

                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



         (c) The  Company  has  received  a  notice  from  the  State  of
             California Franchise Tax Board (FTB) wherein the FTB alleges that
             one of the Company's  subsidiaries owes California  franchise tax
             of  approximately   $316,000,   plus  approximately  $350,000  in
             penalties and interest  resulting  from the  foreclosure  sale of
             certain  real  property  owned  by the  subsidiary.  The  Company
             appealed   this   matter  to  the   California   State  Board  of
             Equalization  (SBE)  which  ruled in favor of the  Company on one
             point and ruled in favor of FTB on another.  Both sides  appealed
             and the SBE has  agreed  to  rehear  the case in July  1999.  The
             hearing  was on July 29, 1999 in  Sacramento,  CA. The outcome of
             the hearing is not known at this time. Provision has been made in
             the financial statements for management's minimum estimate of the
             costs of this matter, including penalties and interest accrued.

5. Loss per common share:

              Loss per common share has been  computed by dividing the net loss,
              plus the accrued  dividends  applicable  to the Series B Preferred
              stock  ($36,000),  for the six months ended June 30, 1999 and 1998
              by the  number of shares  outstanding  (6,375,096)  as of June 30,
              1999 and  1998.  Dividends  on  non-convertible  preferred  stock,
              Series B, are 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  $1,281,000 as of June 30, 1999.  The Company has no
              present  intention  to pay  dividends  on  either  its  common  or
              preferred shares.



<PAGE>11



                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



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

         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,  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 operation 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,  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.

YEAR 2000 ISSUE

The Company has addressed the possible  exposures  related to the impact of Year
2000  issues.  The  internal  computer  systems  for key  financial  information
processing  and  operational  equipment  relating  to  the   computer-controlled
conveyors  at the  grain  drying  facility  have  been  assessed.  It  has  been
determined that accounting software is Year 2000-certified.  Computer systems at
the grain drying facility, which was built in 1997, are also compliant.
The dryer as well as conveyor equipment can also be operated manually.

In the two main segments that the Company operates, real estate and agriculture,
neither segment is dependent on computer applications.  The agricultural segment
relating to the grain drying  facility will have the current  year's grain dried
and stored prior to the Year 2000,  thereby  avoiding any  processing  equipment
problems should one occur.  During the coming year of 2000,  grain shipments out
of the warehouse will be by individual  trailer units  alleviating any potential
shipment stoppages. The Company feels that these operations will not be affected
by Year 2000 issues.


<PAGE>12
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



OVERVIEW

REAL ESTATE

FAIRWAYS

In December 1996 the Company sold 6 lots to Murieta Investors,  LLC (MI) for the
greater of $40,000 per lot or 20% of the gross  sales  price of the  residential
dwelling (Success Payment).  To date MI has constructed 4 dwelling units and has
not started any  construction  on the  remaining 2 lots.  One  dwelling was sold
during the first quarter of 1999 and the Company  received a Success  Payment in
the amount of $43,600.  Another  sale is expected to close  during July 1999 and
the Company will receive approximately $40,000.

Pursuant to a 1998  amendment to the Purchase and Option  Agreement  between the
Company  and MI,  the  Company  granted  to MI an option to  purchase  34 of the
remaining 44 lots at the Fairways. The lots covered by the option are subject to
prior sale by the Company. The options are exercisable starting December 1, 1998
(6 lots) and every six months thereafter (4 lots each).

If two  consecutive  options are not exercised  then the  remaining  options are
terminated. MI did not exercise the December 1, 1998 option and the June 1, 1999
option. During June 1999 the Company notified MI that the remaining options were
terminated.

Due to the termination of the Purchase and Option  Agreement,  the Company plans
to initiate a sales program with independent  builders to complete The Fairways.
The  program  will be similar to the MI program  but  without  options and it is
expected that several builders will participate.

In addition,  beginning in May of 1999, advertising expenditures were increased.
An advertising campaign featuring TV and newspaper advertising was begun with an
initial  expenditure of approximately  $20,000. It is anticipated that this will
generate additional sales.

SOLANO COUNTY OPTION

In December  1998,  the Company  entered  into an  agreement to sell the option.
Escrow  closed in March 1999.  The  Company  received  $500,000  cash and a note
receivable  in the  amount  of  $33,333.  The  note is  payable  in four  annual
installments, with an interest rate of 8%.


<PAGE>13
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



AGRICULTURAL

The Company operates a grain drying and storage facility. The drying facility is
financed by a 5-year  lease,  which  commenced in March 1998.  At the end of the
lease the Company will obtain title to the drying  facility.  The Company stores
grain  principally  for one customer under a contract for grain  storage,  which
expires in May 2002.  If the Company were to lose this  customer it would have a
material adverse effect on the Company's agricultural segment.

The Company is contacting  rice growers to dry and store medium grain paddy rice
for the 1999 fall season.  It is not a business  practice for  independent  rice
growers to enter into  signed  contracts  to dry and store  rice,  however,  the
Company does not have any commitments at this date.

OTHER

The  California  State Board of  Equalization  appeal  hearing to determine  the
amount  of  Franchise  Tax,  if any,  that may be due as a result of the sale of
certain  real  property  in San Diego,  California  was held in July  1999.  The
outcome of that hearing is not known at this time.

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

OPERATING RESULTS

Three months ended June 30, 1999 vs. the three months ended June 30, 1998.

Real Estate

The decrease in revenues from the sale of real estate for the three months ended
June 30, 1999 when  compared to the three  months  ended June 30, 1998  resulted
from two lots being sold in 1998 measured against one lot sold in 1999. Sales at
The Fairways continue to be slow.

Net rental income from  agricultural  properties for the three months ended June
30, 1999 parallel the revenue for the same period in 1998.  The 1999-year is the
second year of a two-year lease for property located at Sam Hamburg Farm.

Agricultural

Revenue  from the grain  drying and storage  facility for the three months ended
June 30,  1999  increased  over the three  months  ended June 30,  1998.  Due to
weather  conditions,  more grain was harvested  and received for storage  during
this period in 1999 than in 1998 as wet spring weather


<PAGE>14
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



delayed the 1998  harvest.  It is expected  that upon  completion of harvest the
1999 revenue will parallel 1998 for the storage of the spring grain crops.

General

When  compared  with the three  months  ended June 30, 1998  operating  expenses
decreased by approximately  $29,000.  This decrease is consisted  primarily of a
reduction in  administrative  and general  expenses  consisting of a decrease in
officers/office  salaries  ($33,000),  a decrease in employee benefits ($6,000),
director  fees decrease  ($4,000),  a decrease in  officers/directors  liability
insurance premiums ($6,000) offset by an increase in legal fees ($20,000).

Selling expenses associated with real estate operations increased by $12,000 for
the three months ended June 30, 1999  compared  with the three months ended June
30, 1998.  Advertising  expenditures  increased  ($15,000) and other expenses of
($9,000) were offset by decreases in association  dues, taxes and utilitys costs
due to fewer lots held for resale in 1999 than in 1998.

Advertising costs increased as result of increased newspaper and TV advertising.
Other expense was  attributable to geotechnical  consulting  services on various
lots within the Fairways development.

Six months ended June 30, 1999 vs. six months ended June 30, 1998

Real Estate

         Revenues from the sale of real estate for the six months ended June 30,
1999 increased $522,000 compared to the six months ended June 30, 1998. The sale
of the Solano Option in March 1999  ($533,333)  and the "Success  Payment," from
Murieta Investors,  LLC ($45,000),  from the sale of one residential dwelling at
The Fairways,  accounts for the  increase.  This was offset by a decrease in lot
sales,  two lots sold during this period in 1999  compared  with three lots sold
during 1998.

Agriculture

         Storage revenue at the grain drying and storage  facility  increased by
$37,000 in the six months ended June 30, 1999 compared with the six months ended
June 30,  1998.  The 1999  increase  is a result  from the bulk of the 1998 crop
shipped out during this period  coupled with a larger  volume of 1999 grain crop
received.  In 1998 the spring  grain crop  harvest  was  delayed  due to weather
conditions.  The total  spring  grain crop  received  in 1999 will equal that of
1998.

<PAGE>15

                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999

General

         Compared  with the six months ended June 30, 1998  corporate  operating
expenses  decreased  by  $88,000  in the six months  ended  June 30,  1999.  The
decrease  is made up of salaries  officer/office  ($73,000),  employee  benefits
($16,000),  director fees ($7,500) and  officers/directors  liability  insurance
($12,000). This decrease was offset by an increase in legal fees ($20,000).

         The cost of real estate  operations  increased  in the six months ended
June 30,  1999  compared  with the six  months  ended  June 30,  1998.  The most
significant  increase was  advertising  ($15,000)  and  geotechnical  consulting
services  ($9,000).  A reduction in the number of lots held for resale decreased
the cost of association dues, utilities, and related expenditures ($17,000).

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 1999, cash, cash equivalents and marketable
securities  increased  by $59,000  from  $3,948,000  at December  31,  1998,  to
$4,007,000 at June 30, 1999.  The increase in cash was due primarily to the sale
of the Solano Option.  The most significant uses of cash during the three months
ended June 30, 1999 consisted of cash used in operating  activities  ($155,000),
payments  on  long-term  and  short-term  debt  ($229,000)  and  a  decrease  in
investments of $559,000.

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 and property taxes;
to fund the  required  payments on the note to Beal Bank;  to fund the  required
payments  due on the grain dryer  financing;  to fund costs that may be incurred
relating to the toxic clean-up at Sam Hamburg Farm; to fund any tax payment that
my be due to the  California  Franchise  Tax  Board;  and to  fund  general  and
administrative  expenses.  In  addition,  the  Company  may be  required to fund
certain costs relating to a possible stockholder meeting.

The Company  believes that sources of required  liquidity will be cash generated
from the grain  drying  and  storage  facilities,  anticipated  lot sales at The
Fairways,  collection of notes  receivable,  and the cash  available at June 30,
1999. Based on known commitments,  the Company believes that the sources of cash
described and the cash available at June 30, 1999 will be adequate to fund known
liquidity requirements.



<PAGE>16
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999



                                    PART II - OTHER INFORMATION
                                    ---------------------------

ITEM 1.  Legal Proceedings
-----------------------------
         None,  except for the  discussion  contained  in footnote 3 in Notes to
Consolidated Condensed Financial Statements.

ITEM 2.  Changes in Securities
------------------------------
         Not applicable

ITEM 3.  Default Upon Senior Securities
---------------------------------------
         Dividends  in arrears.  See Note 5 of Notes to  Consolidated  Condensed
         Financial Statements for the quarter ended June 30, 1999.

ITEM 4.  Submission of Matters to a Vote of Security Holders
--------------------------------------------------------------
         Not applicable

ITEM 5.  Other Information
---------------------------
         None

ITEM 6.  Exhibits and Reports on Form 8-K
------------------------------------------
(a)      Exhibits

         27.01    Financial Data Schedule

(b)      Reports on Form 8-K

                  Form 8-K,  dated July 21, 1999,  wherein the Company  reported
                  that on July 6, 1999, it filed a Complaint In  Interpleader in
                  the Superior  Court of the State of California  for the County
                  of Yolo and that on July 9, 1999, General Financial  Services,
                  GFS Acquisition Company, and J.B.A. Investments, Inc., filed a
                  complaint  against the Company in the United  States  District
                  Court Northern District of New York.


<PAGE>17
                          DUNES HOTELS AND CASINOS INC.

                         QUARTERLY REPORT ON FORM 10-QSB

                       FOR THE PERIOD ENDED JUNE 30, 1999




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


                                                  DUNES HOTELS AND CASINOS INC.
                                                  -----------------------------
                                                            Registrant



Date: August 4, 1999                        By:  /s/ EDWARD PASQUALE
     ----------------                                ---------------------
                                                     Edward Pasquale,
                                                     President



                                           By:  /s/  MARVIN P. JOHNSON
                                                    -------------------
                                                    Marvin P. Johnson,
                                                    Principal Financial and
                                                    Accounting Officer