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  September 30, 1998
        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 for 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 October 30, 1998.

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 SEPTEMBER 30, 1998

                                             INDEX
                                                                         Page
Part 1. Financial Information

               Item 1.  Financial Statements
               -------------------------------

               Consolidated Condensed Balance Sheets
               September 30, 1998 and December 31, 1997                       3

               Consolidated Condensed Statements of Loss
               for the three months ended September 30, 1998
               and 1997                                                       5

               Consolidated Condensed Statements of Loss
               for the nine months ended September 30, 1998
               and 1997                                                       7

               Consolidated Condensed Statements of Cash Flows
               for the nine months ended September 30, 1998
               and 1997                                                       9

               Notes to Consolidated Condensed Financial
               Statement, September 30, 1998 and 1997                        10

               Item 2.  Managements Discussion and Analysis of
               Financial Condition and Results of Operations                 13
               ---------------------------------------------

Part II.  Other Information

               Item 1.  Legal Proceedings                                    17

               Item 2.  Changes in Securities                                17
             
               Item 3.  Defaults Upon Senior Securities                      17
         
               Item 4.  Submission of Matters to a Vote of Security Holders  17
       
               Item 5.  Other Information                                    17
     
               Item 6.  Exhibits and Reports on Form 8-K                     17

               Signatures                                                    18


<PAGE>3


                      DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                          CONSOLIDATED CONDENSED BALANCE SHEETS

                         SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

                                          ASSETS




                                                     September        December
                                                     30, 1998         31, 1997
                                                   -----------        ---------
                                                             (Unaudited)
                                                        (Dollars in thousands)

Cash and cash equivalents                            $ 2,965         $  4,299

Marketable securities                                    825              673

Receivables
 Trade                                                    32                3 
 Related party, less allowance of $1,899 in 1998          37    
 Real estate sales                                       389              469
 Other, including officer, $85,000 in 1998 and 1997       88               92

Inventory of real estate held for sale                 4,114            4,359  
                                                                       
Prepaid expenses                                         142              122
                                                                      
Property and equipment, less accumulated 
 depreciation and amortization, 1998, 
 $565; 1997, $477                                      3,247            3,252 

Investments                                              544              644
                                             
Deferred costs and other                                   3              124
                                                  ----------       ----------
                                                                    
                                               $     12,386       $    14,037
                                              ==============   ==============
                                                                     

<PAGE>4
                                                                   

                                                     



                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED CONDENSED BALANCE SHEETS

                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

                      LIABILITIES AND SHAREHOLDERS' EQUITY


                                                           September    December
                                                            30, 1998    31, 1997
                                                            ---------   --------
                                                               (Unaudited)
                                                          (Dollars in thousands)
 
Accounts payable                                            $    11  $      24

Accrued expenses                                                230        207

Deferred income                                                            178
                                                       
Income taxes                                                    307        307 
                                                                     
Short-term debt                                                  80         60 
                                                                             
Long-term debt and capitalized lease obligations              2,009      2,272

Accrued preferred stock dividends                             1,227      1,173
                                                            ------------------
        Total liabilities
                                                              3,864      4,221 
  
     Minority interest                                          320        320
                                                                  
                                                            
                                                                 
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 1998 and 1997,                                    
        aggregate liquidation value $2,319 including 
         dividends in arrears                                     5         5

     Common stock - authorized 25,000,000 shares ($.50 par);
        issued 7,799,780 shares, outstanding 6,375,906
        shares in 1998 and 1997                               3,900      3,900
                                                                       
     Capital in excess of par                                25,881     25,881

     Deficit                                                (19,584)   (18,290)
                                                          ---------------------
                                                             10,202     11,496

     Treasury stock at cost; Preferred-Series B
     902 shares Common 1,424,684 shares in 1998 and 1997      2,000      2,000
                                                         ----------------------
        Total shareholders' equity                            8,202      9,496
                                                         ----------------------
                  
                                                          $  12,386  $  14,037
                                                          =====================
                                                                          
                                     
The accompanying notes are an integral part of these condensed financial 
statements. 
                                                         
<PAGE>5



                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


                                                            1998          1997
                                                           -----         -----
                                                  (Dollars in thousands, except
                                                   per share)

Operating revenues: 

  Sales of real estate                               $      128      $   6,627
  Cost of real estate sold                                  122          6,144
                                                       -----------------------
                                                              6            483
                                                       -----------------------

  Rental income - agricultural properties                    11            120
  Cost and expense of rental income                           1             12
                                                       -----------------------
                                                             10            108
                                                       -----------------------

  Rice drying and storage revenues                           58            342
  Cost of rice drying and storage                            71            153
                                                       -----------------------
                                                            (13)           189
                                                       -----------------------

  Miscellaneous income - net                                                18
                                                       -----------------------

                                                              3            798
                                                       -----------------------
Operating expenses:
  Selling, administrative and general
    Corporate                                               158            267
    Real estate operations                                   67             72
  Bad debts, net of recoveries                                             (24)
  Loss on real estate investments                           100            400
  Depreciation                                               33             17
                                                        -----------------------
                                                            358            732
                                                        -----------------------

Loss before other credits (charges), income taxes and
  minority interest                                        (355)            66
                                                        -----------------------

Other credits (charges):
  Interest and dividend income                               65             83
  Interest expense                                          (55)           (17)
  Securities gains (losses), net                            (11)            24
  Other                                                     (23)            16
                                                         ----------------------

                                                            (24)           106
                                                         ----------------------

<PAGE>6


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


                                                          1998            1997
                                                        ----------   ----------
                                                   Dollars in thousands, except
                                                   per share)


Income taxes                                                (9)

Loss before minority interest                              (388)           172

Minority interest in income of the White Ranch             -----          (234)
                                                      ------------   -----------


Net income (loss)                                    $     (388)      $    (62)
                                                    =============    ===========


Income (loss) per common share:                      $    (0.06)      $   (0.01)
                                                    =============    ===========


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

                                                   
<PAGE>7



                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


                                                      1998            1997
                                                -------------    --------------
                                               (Dollars in thousands, except
                                                per share)
Operating revenues:                                                        

  Sales of real estate                            $     383       $   7,074
  Cost of real estate sold                              380           6,572
                                                 ------------    --------------
                                                          3             502
                                                 ------------    --------------

  Rental income - agricultural properties                41             425
  Cost and expense of rental income                       3              95
                                                 ------------    --------------
                                                         38             330
                                                 ------------    --------------

  Rice drying and storage revenues                      114             412
  Cost of rice drying and storage                       290             344
                                                  ------------   --------------
                                                       (176)             68
                                                  ------------   --------------

  Miscellaneous income - net                                              55
                                                  ------------   --------------

                                                       (135)             955
                                                  ------------   --------------
Operating expenses:
  Selling, administrative and general
    Corporate                                           613              825
    Real estate operations                              143              165
  Bad debts, net of recoveries                                           100
  Loss on real estate investments                       100              400
  Depreciation                                           96               52
                                                   ------------  --------------
                                                        952            1,542
                                                   ------------  --------------

Loss before other credits (charges), income taxes
 and minority interest                               (1,087)            (587)
                                                   ------------   -------------

Other credits (charges):
  Interest and dividend income                          186              199
  Interest expense                                     (145)            (103)
  Securities gains (losses), net                        (19)              40
  Other                                                (164)             (97)
                                                   ------------  --------------

                                                       (142)              39
                                                   -----------   --------------


<PAGE>8

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


                                                           1998         1997
                                                         -------      ---------
                                                 (Dollars in thousands, except
                                                  per share)

Loss before income taxes and minority interest          (1,229)          (548)

Income taxes                                              (11)            (53)
                                                     -----------   ------------

Loss before minority minority interest                 (1,240)           (601)


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


Net income (loss)                                   $ (1,240)      $     (920)
                                                  ==============  =============

Income (loss) per common share:                    $   (0.20)      $     (0.14)
                                                  ==============  =============




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


<PAGE>9


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                  NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

                                    UNAUDITED


                                                        1998          1997
                                                   ------------   -------------
                                                      (Dollars in thousands)


Cash flows from operating activities:
     Net cash provided by (used in) operating 
     activities                                    $   (832)        $   3,498
                                                  -------------  --------------

Cash flows from investing activities:
     Decrease (increase) in investments                 (52)           (1,151)
     Decrease (increase) in notes receivable            (76)              788
     Purchase of equipment                             (131)           (1,804)
                                                   ------------  --------------

                                                       (259)           (2,167)
                                                   ------------   -------------


Cash flows from financing activities:
     Increase (decrease)  in long-term debt            (263)              449
     Increase in short-term debt                         20                29
                                                   ------------  -------------

                                                       (243)              478
                                                  -------------  -------------


Increase (decrease) in cash and cash equivalents     (1,334)            1,809

Cash and cash equivalents, beginning of period        4,299             1,283
                                                  -------------   -------------

Cash and cash equivalents, end of period          $   2,965        $    3,092
                                                  =============   =============

 <PAGE>10


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


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 statements of results for the interim period.

        The results of operations for the nine months ended  September 30, 1998,
        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-K for the year ended
        December 31, 1997.

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)

3.      Related  party transactions:

        As of October 30,  1998,  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 outstanding shares of common stock of the
        Company which is pledged to the FDIC.

        On November 26, 1997, the Company entered into a Loan Purchase Agreement
        (the Note Sale  Agreement)  with  Anderson,  as Trustee,  of the John J.
        Anderson  Family Trust.  The Note Sale Agreement is more fully described
        in the Company's Form 10-K for the year ended December 31, 1997.

        On March 31, 1998, the United States District Court,  District of Nevada
        ordered that the Note Sale Agreement be rescinded and all parties return
        any of the assets transferred.

        As a result of the foregoing  Order,  the Company has recorded a loss of
        approximately  $162,500  in  the  accompanying   Consolidated  Condensed
        Statement of Income (Loss) for the nine months ended September 30, 1998.



                                            

<PAGE>11


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS




3.         Related party transactions (continued):

        In June 1998,  Baby Grand  Corporation  (BGC),  an entity  controlled by
        Anderson,  filed a petition under Chapter 7 of the Bankruptcy  Code with
        the Bankruptcy Court in Las Vegas,  Nevada.  The trustee is inventorying
        the assets of BGC, and the  ultimate  outcome of the  proceeding  is not
        known at this time.  The Company has reduced the  carrying  value of the
        BGC note to the estimated value of the security pledged. The BGC note is
        described  in  detail  in the  Company's  Form  10-K for the year  ended
        December 31, 1997.  See Item 1.  "Business - Other  Activities - Certain
        Loans - Baby Grand Corp."

        The Company is informed  that the FDIC is  attempting  to foreclose  and
        resell the  remaining  collateral  it holds,  which  includes the common
        stock of the Company  owned by Anderson.  The Company  believes that the
        FDIC is required to receive the permission of the United States District
        Court before it may resell the collateral.  The Company has submitted an
        offer to purchase the  3,000,000  shares of the Company held by the FDIC
        as collateral when and if it forecloses.

4.         Contingencies:

        (a)    As  of  September  30,  1998,   there  were  no  material   legal
               proceedings pending against the Company.  However, see footnote 3
               and item b. below regarding legal proceedings,  not involving the
               Company, that may have a material adverse effect on the Company.

        (b)    Anderson,  Edith Anderson  (Anderson's  wife),  Cedar Development
               Co., J.A. Inc., and J.B.A.  Investments,  Inc.  (collectively the
               Anderson  Parties)  are  involved  in  litigation  (the  Anderson
               Litigation) with the Federal Deposit  Insurance  Corporation (the
               FDIC).  The Anderson  Litigation  is more fully  described in the
               Company's Form 10-K for the year ended December 31, 1997.

        (c)    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  completed the cleanup relating to the diesel
               storage tanks at a cost of approximately $100,000 in 1996.

The  Company  has  disposed of a large  amount of the  contaminated  earth at an
approved site for the storage of toxic wastes. However, approximately 5,000


<PAGE>12


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


               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 in
               toxic dump sites of chemical and toxic-laden  soil. 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 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. As of  September  30,  1998,  the
               Company has paid approximately  $500,000,  including the $100,000
               expended for 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.

        (d)    Company has received a notice from the California  State Board of
               Equalization  (SBE) that one of the Company's  subsidiaries  owes
               California  taxes  of  approximately  $183,000  and  interest  of
               $167,000  resulting  from the  foreclosure  sale of certain  real
               property, owned by the subsidiary, in San Diego, California.  The
               issue is the  Company's  accounting  of the  foreclosure  gain in
               1988. The Company has filed a petition for rehearing with the SBE
               and is currently awaiting its decision.

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
        ($54,000),  for the nine months ended September 30, 1998 and 1997 by the
        number of shares  outstanding  (6,375,096)  as of September 30, 1998 and
        1997.  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  $1,227,000 as of September 30,
        1998.

                                           

<PAGE>13


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  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, 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

        The Company's operating results for the quarter ended September 30, 1998
were adversely affected by the following:

       1.      The slow  upper-end  real  estate  market in  Sacramento  County,
               California.  During the quarter  ended  September  30, 1998,  the
               Company  sold  only 1 lot at the  Fairways.  However,  this was a
               resale of a lot acquired by foreclosure.

     2.        Murieta  Investors,  the Company that  purchased 6 lots at the 
               Fairways, has  4  residential  housing  units  in  various 
               stages  of  completion.  It is anticipated  that  these  units
               will be  completed  and sold  during the fourth quarter of 1998
               and the first  quarter of 1999.  Completion  of these units has
               taken longer than previously estimated due to a shortage of 
               trades people in the construction  industry in the  Sacramento, 
               CA area.  If the units are sold, of which there can be no
               assurance,  the Company would receive the success payments as 
               provided for in the Agreement between Murieta Investors and the 
               Company.  The Agreement  defines the  success  payment as 20% of
               the gross sales price of each residential dwelling sold less
               $50,000 per unit previously paid.

        3.     A  significant  decrease  in drying  revenue  at the rice  drying
               facility.  An  abnormally  wet  spring  during  1998,  delayed or
               canceled  planting the rice crop,  which reduced the availability
               of rice to be dried at the  Company's  facility.  As there was no
               rice for the Company to dry, the Company  agreed to dry and store
               white  taco  corn.  It cannot be  determined  at this  time,  the
               expected  revenue from this operation  since drying corn is a new
               operation for the Company and the Company charges

                                   

<PAGE>14




               different  rates for drying rice and corn. The revenue for drying
               corn will be  determined  when  drying is  completed  by December
               1998.

        4.     A decrease in revenue of overage income at the storage  facility.
               Overage  income,  which is  generated  by the sale of paddy  rice
               remaining  in the  warehouse  after  all  commitments  have  been
               shipped, will be down by approximately $23,000 because of no rice
               being dried and stored in 1998.

        5.     A write down of $100,000 in the  investment  in the Solano County
               Option due to the  reduction  in the  Company's  estimate  of the
               value of the property.

       The Company is waiting  for the  ruling  from the  California  State
       Board of  Equalization  regarding  the amount of Franchise  Tax, if
       any, that may be due as a result of the foreclosure sale of certain real
       property in San Diego, California in 1988.

        The Company has addressed the possible  exposures  related to the impact
        on its computer systems of the Year 2000. Key financial  information and
        operational  systems have been  addressed.  It has been  determined that
        accounting  software and computer  controlled systems at the rice drying
        facility is Year 2000 compliant.

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


OPERATING RESULTS

Three months ended September 30, 1998 vs. the three months ended 
September 30, 1997

Real Estate

        The  decrease  in  revenues  from the sale of real  estate for the three
months  ended  September  30,  1998  when  compared  to the three  months  ended
September  30, 1997 is due  primarily  to the sale of the White Ranch and the 57
residential  lots in North Las Vegas in 1997.  During  the  three  months  ended
September 30, 1998 the Company sold only one lot.

        Net rental  income from  agricultural  properties  for the three  months
ended September 30, 1998 decreased by approximately  $109,000. This decrease was
all due to the  sale of the  White  Ranch in 1997  and no  corresponding  rental
income in 1998.

Agricultural

        Rice drying and storage revenues from the rice drying operations for the
three months ended September 30, 1998 decreased by  approximately  $284,000 when
compared with the three

                                              

<PAGE>15




months ended  September 30, 1997.  This was due to adverse  spring weather which
delayed or canceled planting the rice crop, reducing the availability of rice to
be dried. As there was not sufficient  rice to be dried,  the Company decided to
dry white taco corn which is not as  profitable  as drying  rice.  In  addition,
overage  income from rice storage has been  realized  during this period in 1997
but will be  recognized  in the fourth  quarter  of 1998.  The amount of overage
income for 1998 is expected to be approximately 30% less than in 1997.


General

        When compared with the three months ended September 30, 1997,  operating
expenses  decreased  by  approximately  $374,000  during the three  months ended
September  30,  1998.  This  decrease  consisted  primarily  of  a  decrease  in
administrative  expenses of ($109,000),  a decrease in Real Estate Operations of
($5,000),  offset by an increase in depreciation of ($16,000). The Solano Option
was written down by $100,000 in 1998 and $400,000 in 1997 to its estimated  fair
value of $544,000.

        Interest  expense  for  the  three  months  ended  September  30,  1998,
increased by  approximately  $38,000 when  compared  with the three months ended
September 30, 1997. The increase consisted  primarily of an increase in interest
expense  relating  to the new rice  dryer  financing  offset by a  reduction  in
interest expense related to the Beal Bank loan.

Nine months ended September 30, 1998 vs.the nine months ended 
September 30, 1997.

Real Estate

        The  decrease in revenues  from the sale of real estate and the decrease
in cost of real  estate  sold for the nine  months  ended  September  30,  1998,
compared with the nine months ended  September 30, 1997,  resulted from the sale
of the White Ranch and the 57  residential  lots in North Las Vegas  during this
period in 1997.

        Net rental income from agricultural properties decreased due to the sale
of the White Ranch in 1997.

Agricultural

        The loss from the rice drying and storage operations for the nine months
ended  September  30, 1998  increased by $244,000  when  compared  with the nine
months ended September 30, 1997.  1997 includes  $144,000 of rice overage income
whereas in 1998 the rice  overage  income of  $120,000  will be  reported in the
fourth quarter, therefore the real difference is $56,000. This was due primarily
to the switch from rice to corn drying and storage,  which is not as  profitable
as drying  rice.  This  switch  was caused by adverse  spring  conditions  which
adversly impacted the rice crop.


<PAGE>16





General

        When compared with the nine months ended  September 30, 1997,  operating
expenses  decreased  by  approximately  $590,000.  The  decrease  consisted of a
reduction of corporate costs of $212,000,  a decrease in real estate  operations
of $22,000, and bad debt expense of $100,000. The Solano Option was written down
by $100,000 in 1998 and $400,000 in 1997 to its then estimated  fair value.  The
decrease in corporate  costs resulted from the company  relocating the corporate
office  from Las Vegas,  NV to  Sacramento,  CA,  plus a decrease  in  officer's
salaries. Depreciation expense increased due to the new rice drying facility.

Other charges  increased by  approximately  $181,000 when compared with the nine
months ended  September  30, 1997.  The increase was  primarily  due to bad debt
expense  relating to the unwinding of the Note Sale  Agreement  with the John J.
Anderson Family Trust and net securities losses.

LIQUIDITY AND CAPITAL RESOURCES

        During the nine months ended September 30, 1998,  cash, cash equivalents
and marketable  securities  decreased by $1,182,000  from $4,972,000 at December
31, 1997, to $3,790,000 at September 30, 1998. The most significant uses of cash
during the nine months  ended  September  30,  1998,  consisted  of cash used in
operating  activities  ($832,000)  payments on  long-term  and  short-term  debt
($243,000) and an increase in investments of $52,000.

        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, advertising
and property taxes;  to fund the required  payments on the note to Beal Bank; to
fund the required  payments due on the rice 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 may 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 rice drying and storage facilities,  anticipated lot sales at
The Fairways, collection of notes receivable and Success Payments related to the
venture with Murieta  Investors  and the cash  available at September  30, 1998.
Based on known  commitments,  the  Company  believes  that the  sources  of cash
described and the cash  available at September 30, 1998 will be adequate to fund
known liquidity requirements.



<PAGE>17


                      PART II - OTHER INFORMATION

ITEM 1.  Legal Proceeding

        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

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

               None




<PAGE>18


                                    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: November 5, 1998                         By:   /s/ EDWARD PASQUALE      
------------------------                            --------------------------
                                                    Edward Pasquale, President


                                               By:  /s/ MARVIN P. JOHNSON
                                                    -------------------------
                                                    Marvin P. Johnson
                                                    Chief Accounting Officer