UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C., 20549
                                   FORM 10-KSB
(Mark One)
X     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
----  Act of 1934 for the fiscal year ended December 31, 2001 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 Identification No.)
incorporation or organization)
46735 County Rd. 32B, P.O. Box 130, Davis, California                 95617
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)
Registrant's   telephone  number,   including  area  code:  (530)753-4890
                                                            -------------

Securities Registered Pursuant to Section 12(b) of the Act:
                                                           Name of each exchange
Title of each class                                          on which registered
       NONE                                                         NONE
-------------------                                        ---------------------
Securities Registered Pursuant to Section 12(g) of the Act:
                                                      Series B, $7.50 Cumulative
                                                      --------------------------
Common Stock, $.50 par value                     Preferred Stock, $.50 par value
----------------------------                     -------------------------------
(Title of class)                                                (Title of class)

     Check 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
                                       ----    ----
     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-B is not  contained in this form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (__)

State issuer's revenues for its most recent fiscal year:  $1,372,000

     The aggregate market value of the voting and non-voting  common equity held
by  non-affiliates  of the Registrant  computed by reference to the bid price at
January  23,  2002 ($1.01 per share) was  approximately  $365,325.  See "Item 5.
Market for Registrant's Common Equity and Related Matters".

The number of shares of common stock outstanding as of March 14, 2002 was
4,365,255.
          Documents Incorporated by Reference Not Applicable

Transitional Small Business Disclosure Format:  Yes   ;  No  X.
                                                   ---      ---

<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

     Dunes Hotels and Casinos Inc. was incorporated in New York in 1956. In this
report  the  term the  "Company"  refers  to  Dunes  Hotels  and  Casinos  Inc.,
individually,  or with 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 South Lake Acquisition Corporation ("SAC").

     The Company, through its subsidiaries, operates in three principal business
segments:  real estate  (development  and sale of residential lots and rental of
agricultural land), grain drying and storage, and distressed assets. See Note 12
of Notes to  Consolidated  Financial  Statements  for  information  relating  to
industry segments and class of services.

     The Company's real estate  segment  previously  sold completed  residential
lots  primarily  to  builders of custom  homes and to the general  public in and
around the greater  Sacramento,  California area. The Company now looks for real
estate development opportunities nationwide. The agricultural property is leased
to tenants in the area where the agricultural property is located.

     The grain drying and storage  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,  normally within the following
year.  The Company  stores rice  principally  for one customer  under a contract
which expires in August 2002. This contract currently accounts for approximately
50% of the  storage  capacity  and 50% of the  storage  revenue.  The Company is
currently  storing yellow corn in the other 50% of its storage capacity under an
agreement with a local grain broker. If the Company were to lose either of these
storage  customers,  fail to obtain drying  contracts for the coming year, or if
the crop  yields  are low,  it  would  have a  material  adverse  effect  on the
Company's agricultural segment.

     Effective with the third quarter of 2001, we have changed the  organization
of our business  segments.  Prior to the third  quarter of 2001, we reported the
rental  revenue from the Sam Hamburg Farm under our Farming  segment.  Beginning
with the third quarter,  we are including the rental income from the Sam Hamburg
Farm under our Real Estate segment. In addition, we are reporting a new business
segment,   Distressed  Assets,  which  reflects  our  intention  to  pursue  the
acquisition and work-out of distressed assets.

RECENT DEVELOPMENTS

     On November 30, 2001,  the Company  acquired  115,053  shares of its common
stock at $1.05 per share pursuant to a tender offer to acquire all of the shares
of its  common  stock not owned by Mr.  Steve  Miller  and his  affiliates.  The
acquired shares represented approximately 2.6% of the then outstanding shares of
common  stock.  The Company paid for the  acquired  shares with a portion of its
short term,  liquid assets.  Additional  shares of common stock were defectively
tendered in the tender offer.  The Company agreed to accept such tendered shares
if the  shareholders  subsequently  correct such  defects.  These shares are not
included in the above numbers or percentages. As of March 14, 2002, 256 of these
shares had been accepted by the Company.

     Since the  Company's  common  stock and Series B preferred  stock were each
held of record by less than 500  persons as of  January 1, 2002 and the  Company
had less than $10 million of assets as of

                                       2
<PAGE>


the end of each of its last three  fiscal  years,  the  Company  terminated  its
registration  of the common  stock and Series B preferred  stock  under  Section
12(g) of the Securities  Exchange Act of 1934 (the "Exchange Act") and suspended
its obligation to file periodic  reports with the SEC with respect to the common
stock and Series B  preferred  stock as of January 1, 2002.  This Form 10-KSB is
the last periodic report that the Company is required to file with the SEC.

     In addition,  as a result of the  termination  of the  registration  of the
common stock and Series B preferred  stock under Section 12 of the Exchange Act,
the Company was no longer  subject to those  provisions of the New York Business
Corporation  Law that  restrict  certain  transactions  between  the Company and
General  Financial  Services,  Inc.,  GFS  Acquisition  Company,  Inc. and Steve
Miller.


REAL ESTATE SEGMENT:

The Fairways

     The Company,  through SHF, developed  approximately 50 acres of residential
land  located  at Rancho  Murieta,  California  as a  residential  planned  unit
development  known as "The  Fairways".  Rancho  Murieta is a  3,500-acre  master
planned  unit  development  located  approximately  25  miles  from  Sacramento,
California.  Rancho Murieta  consists  primarily of  single-family  homes,  town
houses, commercial property and two 18-hole championship golf courses, including
country club facilities.  The Fairways,  located within the boundaries of one of
the golf courses at Rancho Murieta, was subdivided into 110 single-family estate
lots. As of December 31, 2001, all lots have been sold.

     In connection  with its  development  of The Fairways,  SHF was required to
construct certain  improvements that benefited not only The Fairways,  but other
properties  that lay outside of the  boundaries of The Fairways (the  "Benefited
Properties").  The net cost of the improvements to the Benefited  Properties was
$1,140,900.  SHF  expects  to be  reimbursed  for these  costs as the  Benefited
Properties are developed.  SHF's right to reimbursement will expire in September
2015 and the Company is unable to predict what amount,  if any, will be received
as reimbursement. The rights to reimbursement are personal to SHF and do not run
with The Fairway's property unless assigned by SHF.

Sam Hamburg Farm

     MRI owns  approximately  150  acres of  agricultural  property  called  Sam
Hamburg Farm ("Sam Hamburg Farm") in Merced County, California.  MRI's 150 acres
are  operated by SHF. Of the 150 acres,  40 acres  contain an airstrip  and shop
area,  which is the focus of  continuing  attempts  at  chemical  clean-up.  The
remaining  110 acres are leased to one tenant at an annual  aggregate  rental of
approximately  $24,000  which  expired in 2001.  The lease has not been renewed,
however,  the tenant and the  Company  have  agreed that the tenant may farm the
property during the year 2002 under the terms of the original lease.

     The Company was  advised in 1991 of possible  contamination  of 40 acres at
Sam Hamburg Farm of  approximately  5,000 cubic yards of contaminated  soil. The
Company has disposed of 1,000 cubic


                                       3
<PAGE>


yards of contaminated soil to date. The Company,  through its chemical and toxic
clean-up  consultants,  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 ongoing testing,  the State has not imposed a disposal date upon
the Company. Cost of disposal of the remaining soil is estimated at $125 to $200
per cubic  yard or  approximately  $500,000  to  $800,000.  However,  if on-site
remediation  can be achieved,  it is  estimated  the cost should be no more than
$170,000.  The  Company is unable to predict  when the ongoing  testing  will be
completed  or what the  outcome  of these  tests  will  be.  Accordingly,  it is
reasonably possible the estimates will change materially in the near term.

Real Estate Development

     The Company is actively pursuing real estate development opportunities on a
nationwide basis. Although the Company intends to focus primarily on residential
real estate  development  opportunities,  it may also consider  commercial  real
estate  development  opportunities.  Since  December 31,  2001,  the Company has
acquired one property located in New York and is actively negotiating to acquire
a second  property  in  California.  The Company  has  reached an  agreement  in
principle to sell the New York  property at a profit,  although no assurance can
be given that the sale will occur at the anticipated price.

GRAIN DRYING AND STORAGE SEGMENT:

Grain Drying and Storage Facilities

     Since 1990, SHF has owned a grain storage facility (the "Storage Facility")
located in Yolo County,  California.  The Storage Facility generally stores rice
for a fee,  however,  the Storage  Facility is capable of storing other types of
grain. The Storage Facility can store approximately 700,000 cwt. of grain.

     In 1997,  the Company  entered  into a financing  lease  agreement  for its
drying facility which is adjacent to the Storage Facility. The lease is for five
years  commencing  March 1998, the monthly rental is $25,122 and the Company can
buy  the  drying  facility  for  $1 at  the  end  of the  lease.  The  lease  is
collateralized  by the drying  facility,  a deed of trust on certain  parcels of
property, including the parcel on which the Storage Facility is located, and the
guarantees  of MRI and the  Company.  Before the  Guarantors  are liable for any
deficiency,  the leasing  company must first proceed against the drying facility
and the additional collateral.

     Prior to May 2000, the Company stored wheat  principally  for one customer,
Adams  Grain Co.  ("Adams")  under a contract  which  expires  May 2002  ("Adams
Contract").  In May 2000, the Company  negotiated an end to the Adams  Contract.
The terms of ending the storage  agreement,  effective  May 18, 2000 require the
Company to only store rice at the Storage Facility and if the Company stores any
grain  other  than  rice,  Adams  retains  a first  right  of  refusal  to store
commodities  under the Adams  Contract.  These  conditions will remain in effect
until May 31, 2002 (the original expiration date of the Adams Contract).

     On August 5, 2001,  the Company  entered  into an  agreement  with  Pacific
International  Rice Mills, Inc. (PIRMI) to store  approximately  350,000 cwt. of
dry paddy rice for the period commencing  September 1, 2001, to August 31, 2002,
in the west  warehouse.  This  agreement  covers the rice  currently in storage,
which is a carry-over of rice that was dried during the 2000 drying season.  The
gross  revenue is  approximately  $140,000.  Under this  agreement  payment  for
storage was due 50% upon completion

                                       4

<PAGE>


of filling the  warehouse,  with the  remaining 50% due within 30 days after the
warehouse is emptied.  The Company  received the first payment of  approximately
$70,000 during the month of September 2001.

     The Northern  California  rice market is currently  experiencing  an excess
supply of rice.  Many of the  farmers in the area have  taken  their land out of
production and are selling their water rights to down-stream users. In addition,
rice growers in the area are  experiencing  increasing  competition from foreign
sources.  Due to the current market  conditions for rice in Northern  California
and the  seasonal  nature  of grain  drying  and the  filling  of grain  storage
facilities,  the  Company  was  unable to  obtain  any rice  drying  or  storage
contracts  to fill the east  warehouse  during  the fall of 2001.  At this time,
management  is unable to  determine  how long the  market  for rice in  Northern
California will remain depressed.  A prolonged depression in the market for rice
in Northern  California  could have a material  adverse  effect on the Company's
grain drying and storage segment.

     In view of the foregoing,  the Company  actively  sought  contracts for the
storage of grain other than rice (such as yellow  corn)  during  2001.  However,
contracts for the storage of corn are generally less  profitable  than those for
the storage of rice due to the fact that (1) more rice can be stored in the same
amount of space, (2) the storage rates per  hundredweight of grain is higher for
rice than corn and (3) contracts for the storage of rice usually include related
charges for the drying of the rice.

     During  September  2001, the Company entered into an agreement with a local
grain broker, Levine Grain Co., Inc. to store yellow corn in the east warehouse.
Total  yellow  corn placed  into  storage was 259,800  cwt. on behalf of various
growers in the area with the storage revenue totaling  approximately $90,000. As
of  December  31,  2001,  storage  revenue  realized  on  the  yellow  corn  was
approximately  $28,000.  Adams waived its right of first refusal under the Adams
Contract to store corn in the east  warehouse.  The  remaining  revenue  will be
collected  during 2002 as the agreement  provides for the storage  charges to be
paid quarterly. However, all storage charges are to be paid within 30 days after
the warehouse is emptied.

DISTRESSED ASSETS:

     Beginning with the third quarter of 2001, the Company has established a new
business segment:  Distressed Assets. The Company's president,  Steve K. Miller,
has over 13 years  experience  investing  in  similar  types of  assets  through
General  Financial  Services,  Inc.,  a  corporation  he  wholly-owns.   General
Financial Services is the majority shareholder of the Company.

     The Company  currently  intends to acquire  distressed  real estate for the
purpose of  developing  or  rehabilitating  and then  selling or  operating  the
property.  The  Company is  focusing  on  property  that could be  developed  or
converted into single family or multi-family  residences,  but may also consider
developing  commercial  properties.  The  Company  does  not  have  any  current
commitments  to acquire any such property and there can be no assurance that the
Company will be able to acquire such property on terms that are favorable to the
Company.  The Company would seek to fund the purchase of such property through a
combination of debt and the use of the Company's short term liquid assets.

     In addition,  the Company will seek to acquire other distressed assets that
management  believes can be resolved or worked-out at a profit.  The Company has
invested in two distressed  non-performing  promissory  notes owed by debtors in
bankruptcy. The notes are secured by accounts receivables,  second mortgages and
interests in two limited  partnerships.  The notes were  purchased for $480,000,
which is a discount  from their  outstanding  principal,  interest  and  payable
expenses of  approximately  $650,000.  To date, the Company has not realized any
income from this investment.


                                       5

<PAGE>

     There is  substantial  risk with this type of business  and there can be no
assurance  that the Company will recover the principal of its investment or make
a profit after additional incurred expenses.

COMPETITION

Real Estate Segment:

     The real estate investment and development  business is highly competitive.
The Company  competes for real estate  investments  with investors of all types,
including domestic and foreign corporations,  financial institutions, other real
estate investment  companies and individuals,  many of which have  substantially
greater resources than the Company.  In addition,  the Company's  properties are
subject to local  competitors  from the surrounding  areas. The Company does not
consider its real estate business to be seasonal in nature.

     With  respect  to the  Company's  agricultural  real  estate,  the  Company
competes for tenants with other regional or local agricultural properties in the
area of California where the Company's property is located.  Leasing property to
prospective tenants is generally determined on the basis of, among other things,
lease rates and quality of soil. The Company's  leases of agricultural  property
are generally for a period of 2 years.

Grain Drying and Storage Segment:

     With  respect to the  Company's  grain drying and storage  operations,  the
Company  competes  with other  grain  drying and storage  companies  in Northern
California.  The grain drying operation is seasonal and runs from  approximately
September 15 to November 15. The storage  facility,  depending on the demand and
shipment of grain from storage,  operates on a year around basis. The drying and
storage  operations  are  impacted by the number of acres  grown,  the yield per
acre, weather conditions,  trucking expense and government programs. The storage
facility is located on the southern edge of the California  rice growing region.
If there is a significant  change in any of the above  factors,  it could have a
material  adverse effect on the grain drying and storage  revenues.  Because the
Company  currently  is storing rice for one customer and yellow corn for another
customer,  the loss of either  customer could have a material  adverse effect on
the grain drying and storage operation.

SALES AND MARKETING

     The  agricultural  property is marketed to farmers in the surrounding  area
where the  agricultural  property  is  located.  The grain  drying  and  storage
operation is marketed to principally two customers but the Company is attempting
to obtain additional customers.

REGULATION

     The Company  must  comply with  various  federal,  state and local  zoning,
building,  pollution,  environmental,  health, and advertising ordinances, rules
and regulations,  including  regulations relating to specific building materials
to be used, building design, minimum elevations of properties and emissions from
the grain drying and storage facilities.

EMPLOYEES

     At March 14,  2002,  the Company  had 4  employees.  None of the  Company's
employees are covered by collective bargaining agreements.  The Company believes
its employee relations to be satisfactory.


                                       6
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

REAL ESTATE SEGMENT:

The Fairways

     The Fairways is comprised of  approximately 50 acres of land which has been
developed  into 110 single  family estate lots of which all have been sold as of
December  31, 2001.  It is located in Rancho  Murieta,  California,  adjacent to
Highway 16, approximately 25 miles southeast of Sacramento.

Sam Hamburg Farm

     Sam Hamburg Farm  consists of  approximately  150 acres  remaining  from an
original 4,600 acres of agricultural  land. The remaining land is located in the
most southwesterly corner of Merced County,  California  approximately two miles
east of Interstate Highway 5. It is approximately ten miles south of the city of
Los Banos,  California.  The Company  leases 110 acres to one tenant,  who grows
various crops. The remaining 40 acres has possible soil contamination and is not
being  used  for  agricultural  purposes.  See  "Item  1.  Business-Real  Estate
Segment-Sam Hamburg Farm".

GRAIN DRYING AND STORAGE SEGMENT:

Grain Drying and storage Facility

     The drying and storage  facilities are located in Yolo County,  California,
approximately 15 miles west of the city of Sacramento.  The storage facility can
store  approximately   700,000  cwt.  of  rice.  The  drying  facility  can  dry
approximately 17,600 cwt. of rice in a 24 hour period. The drying facility dries
enough rice to fill approximately one-half of the storage facility. See "Item 1.
Business--Agricultural Segment--Grain Drying and storage Facilities."


                                       7
<PAGE>


EXECUTIVE OFFICES:
------------------

     The Company's executive office is located in Davis,  California adjacent to
the grain drying and storage  facility.  The executive offices are approximately
1,000  square  feet and the  Company  believes  that the  executive  offices are
suitable for its needs.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     See "Note 10. - Legal Proceedings" to the Company's  consolidated financial
statements included elsewhere in this report.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
----------------------------------------------------------

     No matter  was  submitted  during the  fourth  quarter  of the fiscal  year
covered by this report to a vote of security  holders,  through the solicitation
of proxies or otherwise.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     Prior to January 1, 2002,  the principal  United States market in which the
Company's common stock was traded was the over-the-counter market. The Company's
symbol for its common  stock is "DUNE".  Since the  Company's  common  stock and
Series B preferred stock were each held of record by less than 500 persons as of
January 1, 2002 and the  Company  had less than $10  million of assets as of the
end of each of its last three years, the Company  terminated its registration of
the  common  stock and  Series B  preferred  stock  under  Section  12(g) of the
Securities  Exchange  Act  of  1934  (the  "Exchange  Act")  and  suspended  its
obligation  to file  periodic  reports  with the SEC with  respect to the common
stock and Series B preferred stock as of January 1, 2002. Since January 1, 2002,
there has been no  established  trading  market for the Company's  common stock.
There  is no  established  public  trading  market  for the  Company's  Series B
preferred stock.  Neither the Company's common stock nor the Company's preferred
stock is listed for trading on an exchange.

     The following  table sets forth for the periods  indicated the range of the
high and low bid quotations for the Company's  common stock as quoted on the OTC
Bulletin Board. The reported bid quotations reflect inter-dealer prices, without
retail markup, markdown or commissions, and may not necessarily represent actual
transactions.

          2001                       HIGH                 LOW
      ------------                   -----               -----
      1st Quarter                    $1.06               $0.72
      2nd Quarter                    $1.01               $0.93
      3rd Quarter                    $1.05               $0.91
      4th Quarter                    $1.03               $0.76

          2000                       HIGH                 LOW
      -------------                  -----               -----
      1st Quarter                    $1.31               $0.75
      2nd Quarter                    $0.75               $0.59
      3rd Quarter                    $0.75               $0.62
      4th Quarter                    $0.88               $0.50

                                       8
<PAGE>


     At March 14, 2002, the Company had  approximately  221 holders of record of
the  Company's  common  stock,  and  approximately  77  holders of record of the
Company's Series B $7.50 cumulative, voting and non-convertible preferred stock.

     Dividends on the Company's common stock have not been paid since the second
quarter of 1979.  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
dividends on the preferred stock in the amount of  approximately  $829,000 as of
December 31,  2001.  The Company has no present  intention  to pay  dividends on
either its common or preferred shares in the near future.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
----------------------------------------------------------

     The  Consolidated  Financial  Statements  and Notes thereto are an integral
part of this report,  including this Item 6, and are incorporated herein by this
reference and should be read in conjunction herewith.

     Certain   information   included  herein   contains   statements  that  are
forward-looking,  such as  anticipated  liquidity  requirements  for the  coming
fiscal year and  anticipated  sources of liquidity  for the coming  fiscal year.
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

Real Estate

     The Fairways consist of the remaining  portion of approximately 50 acres of
developed  residential land in Rancho Murieta,  Sacramento  County,  California.
Rancho Murieta is a 3,500-acre master planned unit development community located
approximately 25 miles from Sacramento.  The development  consists  primarily of
single-family   homes,  town  houses,   commercial   property  and  two  18-hole
championship golf courses and country club facilities.  The 50 acres are located
within the  boundaries of one of the golf courses.  The property was  subdivided
into 110  single-family  estate lots.  As of December 31, 2001,  all of the lots
have been sold.

Grain Drying and Storage

     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 have the option to obtain title to the drying
facility for $1.00.


                                       9
<PAGE>


OPERATING RESULTS

     Net loss for the year ended December 31, 2001,  decreased by  approximately
$504,000 when compared  with the year ended  December 31, 2000.  The major items
contributing to the loss decrease were the following:

     (1) an increase in profit from the sale of real estate,
     (2) a decrease in corporate expense,
     (3) an increase in profit in storage revenue, and
     (4) a decrease in interest expense.

2001 vs. 2000

Real estate

     Real  estate  revenues  and profits  increased  during  2001.  Sales at The
Fairways were completed during 2001 with the remaining lots sold. However, there
was no gain on these sales as the  existing  cost basis  approximated  net sales
proceeds.  During the third quarter of 2001, a "Success  Payment" of $55,000 was
paid to the Company on one lot that had previously been sold.  Selling  expenses
associated with the real estate operation decreased by approximately $143,000 as
the  remaining  lots were sold by the  second  quarter of 2001  eliminating  the
expenses of the commissioned sales person,  the sales trailer,  association dues
and other related sales expenditures.

Grain drying and storage

     Grain drying and storage income in 2001 increased by approximately  $83,000
when  compared  with 2000.  For the year ended  December  31,  2001,  drying and
storage revenue was $305,000  compared to $342,000 for the prior year,  however,
the  cost  of  drying  and  storage  revenue  decreased  by  $120,000  in  2001.
Contributing to the decrease in the cost of drying and storage was  management's
decision to eliminate one  supervisory  employee at the  facility.  In addition,
during the year  2000,  there was a  significant  expenditure  for  preventative
maintenance.  In the  years  prior  to  2000,  there  had  been  practically  no
preventative  maintenance  done, and as a result,  due to the work done in 2000,
preventative maintenance costs were down in 2001.

Distressed Assets

     The Company has  invested in two  non-performing  promissory  notes owed by
debtors in  bankruptcy.  The notes are secured by accounts  receivables,  second
mortgages and shares in two limited  partnerships.  The notes were purchased for
$480,000,  which is a discount from their  outstanding  principal,  interest and
payable  expenses  of  approximately  $650,000.  To date,  the  Company  has not
realized any income from this investment.

General

     Selling,   administrative   and  general   expenses   in  total   decreased
approximately  $233,000.  The major contributors to the decrease were legal fees
($151,000);   accounting  fees  ($60,000);   directors  and  officers  liability
insurance  expense  ($47,000);  directors  consulting fees  ($32,000);  officers
travel expense ($18,000);  directors expenses ($14,000); rent expense ($10,000);
and director fees ($8,000).  These decreases were offset by a $107,000  increase
in fees relating to the tender offer.


                                       10
<PAGE>


     Interest expense  decreased as a result of payments made during the year on
the rice dryer.  Interest income and gain on marketable securities decreased due
to the movement of short term assets from short term  commercial  paper to money
market accounts.

LIQUIDITY AND CAPITAL RESOURCES

     During the year  ended  December  31,  2001,  cash,  cash  equivalents  and
marketable  securities  decreased by $1,547,000  from $4,663,000 at December 31,
2000 to $3,116,000 at December 31, 2001. The most significant sources of cash in
2001 were proceeds from the sale of real estate lots of $819,000 and the sale of
marketable  securities of $100,000.  The most  significant  uses of cash in 2001
consisted  of  purchase  of  treasury  stock  ($888,000),  purchase of assets in
foreclosure ($480,000), and payment on long-term debt ($253,000).

     The Company  completed its initial  tender offer for shares of common stock
on February 15, 2001 and for Series B preferred  stock on March 16,  2001.  As a
result of the tender offers,  the Company paid $489,000 to the former holders of
the common  stock and Series B preferred  stock,  which amount was paid from the
Company's cash and cash  equivalents.  An additional  tender offer for shares of
common stock was completed on November 30, 2002.  As a result,  the Company paid
$121,000 to the former  holders of the common stock,  which amount was paid from
the Company's cash and cash  equivalents.  In addition,  as of January 25, 2002,
the Company had abandoned  since January 1, 2001 to the various states  pursuant
to the state abandoned  property laws, common stock and Series B preferred stock
in the  amount of  $278,000,  which was paid  from the  Company's  cash and cash
equivalents.

     As a result of the initial  tender  offer and the  abandonment  of Series B
preferred stock, the Company's accrued dividends on the Series B stock decreased
by $601,000.

     The Company  believes  that its primary  requirements  for liquidity in the
coming  fiscal year will be to fund the required  payments due on the rice dryer
financing;  to fund equipment purchases and or modifications at the grain drying
facility;  to fund costs that may be incurred  relating to the toxic clean-up at
Sam Hamburg Farm; and to fund general and administrative expenses.

     The Company  anticipates  that sources of required  liquidity  will be cash
generated from the grain drying and storage facilities,  the collection of notes
receivable,  and the cash and cash  equivalents  available at December 31, 2001.
Based on known  commitments,  the  Company  believes  that the  sources  of cash
described and the cash available at December 31, 2001,  will be adequate to fund
known liquidity requirements in 2002.

     In addition,  the Company currently intends to acquire  undeveloped  and/or
distressed real estate for the purpose of developing or rehabilitating  and then
selling or  operating  the  property.  The Company is focusing on property  that
could be developed or converted into single family or  multi-family  residences,
but may also consider  developing  commercial  properties.  The Company does not
have any current  commitments  to acquire any such  property and there can be no
assurance  that the Company will be able to acquire such  property on terms that
are  favorable  to the Company.  The Company  would seek to fund the purchase of
such property  through a combination of debt and the use of the Company's  short
term liquid assets.

                                       11

<PAGE>


ITEM 7. FINANCIAL STATEMENTS
----------------------------

     The Consolidated  Financial Statements of Dunes Hotels and Casinos Inc. are
located at pages F-1 to F-20 attached to the end of this annual report.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

     None

                                    PART III

ITEM  9.  DIRECTORS,   EXECUTIVE  OFFICERS,   PROMOTERS,  AND  CONTROL  PERSONS;
--------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------

     As of February 1, 2002,  all of the directors of the Company other than Mr.
Miller resigned.  The director is elected at each annual meeting of shareholders
to hold  office  until the next annual  meeting  and until a successor  has been
elected and qualified.

     Identified herein are all directors and executive  officers of the Company.
The information set forth as to the sole director and each Executive Officer has
been furnished by such person.

     Steve K. Miller, 52, was elected a director and President of the Company in
April 2000.  Mr. Miller has been employed by General  Financial  Services,  Inc.
since 1988 and as President  since 1995. He earlier  served as president and has
continually  served as Chairman of the Board of  Directors  since its  founding.
General   Financial   Services  is  primarily  engaged  in  the  investment  and
redevelopment of distressed real estate assets.  He also owns several  companies
operated  in  conjunction  with  General   Financial   engaged  in  real  estate
investment, agriculture, hotel ownership and aviation. Prior to founding General
Financial  Services,  Mr.  Miller  owned and  operated  John Deere  agricultural
equipment  dealerships.  Mr. Miller  received his B.A. in Accounting and Finance
from Southwest Oklahoma State University.

     D. Cary Peaden, 46, was elected a Director,  Secretary and Treasurer of the
Company in April  2000.  Mr.  Peaden  has been  employed  by  General  Financial
Services,  Inc. since 1989 and as Vice President for the last five years.  As of
February 1, 2002, Mr. Peaden  resigned as a Director of the Company.  Mr. Peaden
is currently  employed as Vice President of Rich-Mix  Products,  Inc.,  which is
unaffiliated  with General Financial  Services.  Mr. Peaden attended and studied
business administration at Wichita State University.

     There is no family relationship between any directors or executive officers
of the Company.  The sole  director  does not hold a  directorship  in any other
company  with a class of  securities  registered  pursuant  to Section 12 of the
Exchange Act or subject to the  requirements of Section 15(d) of such Act or any
company  registered as an investment company under the Investment Company Act of
1940, as amended.

     Compliance  with  Section  16(a) of the Exchange  Act.  Based solely upon a
review of the Commission's  Forms 3, 4, and 5 received by the Company during the
last fiscal year and written

                                       12

<PAGE>


representations solicited by the Company, no Officer, Director, beneficial owner
of more than 10% of any class of the  Company's  equity  securities or any other
person  subject  to Section  16 of the  Exchange  Act failed to file on a timely
basis as disclosed in the above forms,  reports required by Section 16(a) of the
Exchange Act during the year ended December 31, 2001, except that the Form 4 for
General Financial Services,  Inc., GFS Acquisition  Company,  Inc. and Mr. Steve
Miller filed April 6, 2001, in addition to reporting the 25,000 shares of common
stock  acquired in March 2001 also reported the  acquisition of 74,387 shares of
common stock that had been acquired in February 2001.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The  following  table  sets  forth  the  annual  compensation  paid  to the
Company's  President  for each of the last  three  fiscal  years.  No  executive
officer of the Company  received  compensation  in excess of $100,000  for the 3
years ended December 31, 2001.


                                       13
<PAGE>

                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION
                               -------------------
    (a)               (b)        (c)       (d)           (e)          (i)
                                                   Other annual    All other
Name and prin-                                      compensation  compensation
cipal position        Year     Salary($)  Bonus($)       ($)         ($)  (1)
------------------    ----     ---------  --------  ------------  ------------

Steve K. Miller,     2001 (2)   $100,000     --          --          $15,000
President            2000         71,381     --          --           11,067

Edward Pasquale,
President            2000 (3)       --       --          --          $22,267
                     1999           --       --          --          $62,568

(1)  All other compensation for Mr. Miller consists of the following:

                                   Year Ended December 31,
                                       2001       2000
                                       ----       ----
           Director fees             $15,000    $10,667
           Consulting fees               -          400
                                     -------    -------
                                     $15,000    $11,067
                                     =======    =======

All other compensation for Mr. Pasquale consists of the following:

                                   Year Ended December 31,
                                       2000       1999
                                       ----       ----
           Directors fees            $ 4,333    $15,000
           Audit Committee fees        3,467     12,000
           Consulting fees            14,467     35,568
                                     -------    -------
                                     $22,267    $62,568
                                     =======    =======

(2)  Mr. Miller was elected  president of the Company on April 14, 2000.
(3)  Mr. Pasquale was president of the Company from December 1997 to April 14,
     2000.

Compensation of Directors
-------------------------

     The Company pays each director an annual fee of $15,000 payable monthly. In
addition to their regular  directors  fees,  board  members and audit  committee
members are paid $200 per  half-day  and $400 per full day for special  projects
considered to be outside the scope of their duties as board and audit  committee
members.  In  addition,  they  receive  a travel  fee of $300  for each  meeting
attended.

     During 2001,  Messrs.  Herfurth,  Steckart and Viets (former members of the
board of directors) were members of the Company's Audit Committee.  For services
rendered as Audit Committee members and consultants during the fiscal year 2001,
Mr. Herfurth was paid $21,800.

     The  Company  does not have a plan,  pursuant  to  which  cash or  non-cash
compensation is paid or distributed, or is proposed to be paid or distributed in
the future. The Company does not have any pension or other benefit plans.

                                       14
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The table shown below  contains  certain  information  as of March 14, 2002
with  respect to (1) any person  (including  any "group" as that term is used in
Section  13(d)(3)  of the  Exchange  Act),  who is  known to the  Company  to be
beneficial  owner  (as that term is  defined  in rules  and  regulations  of the
Commission  under the federal  securities laws) of more than 5% of the Company's
common stock (2) each director and each  executive  officer named in the summary
compensation  table and (3) certain  information  with respect to the  Company's
common  stock  beneficially  owned  (as  that  term  is  defined  in  rules  and
regulations of the Commission under the federal security laws) by all directors,
and executive officers of the Company as a group.

Name and Address of             Amount and Nature of        Percent of Common
Beneficial Owner (1)            Beneficial Ownership (1)    Stock Outstanding
--------------------------------------------------------------------------------
GFS Financial Services, Inc.(2)     4,003,309                    92.3%
8441 E. 32nd Street N
Wichita, KS  67226

Steve K. Miller                     4,003,309                    92.3%

D. Cary Peaden                             --                     --

All Directors and Officers
as a Group (2 Persons)              4,003,309                    92.3%
-----------------------
* less than 1%

     (1)  In  furnishing  this  information,  the  Company is  relying  upon the
          contents of statements  filed with the Commission  pursuant to Section
          13(d) and Section 13(g) of the Exchange Act.

     (2)  Consists of  3,000,000  shares  owned  directly  by General  Financial
          Services,  Inc.  and  1,003,309  shares owned  indirectly  through its
          wholly owned  subsidiary GFS Acquisition  Company,  Inc. Mr. Miller is
          the sole  stockholder,  sole  director  and the  president  of General
          Financial  Services,  Inc.  and as a result  may be  deemed  to be the
          beneficial  owner of the  shares  owned  directly  and  indirectly  by
          General Financial Services, Inc.

     The  following  table  sets  forth,  as of March 14,  2002,  the number and
percentage  of  shares  of the  Company's  Series B  preferred  stock  which are
beneficially  owned,  directly or indirectly,  by (1) any person  (including any
"group" as that term is used in Section  13(d)(3) of the Exchange  Act),  who is
known to the  Company to be  beneficial  owner (as that term is defined in rules
and  regulations of the Commission  under the federal  securities  laws) of more
than 5% of the Company's  Preferred  Stock, (2) each director and each executive
officer named in the summary compensation table and (3) certain information with
respect to the Company's  Preferred  Stock  beneficially  owned (as that term is
defined in rules and  regulations of the Commission  under the federal  security
laws) by all directors, and executive officers of the Company as a group.

                                       15
<PAGE>

Name and Address of             Amount and Nature of        Percent of Preferred
Beneficial Owner (1)            Beneficial Ownership          Stock Outstanding
--------------------------------------------------------------------------------
USI Corp. (2)                         2,399                         42.7%
1040 Lawrence Court
Wichita, KS  67206

Steve K. Miller (3)                   2,093                         37.2%

D. Cary Peaden                           --                          --

All Directors and Officers
As a Group (2 Persons)                2,093                         37.2%
----------------------------
     (1)  In  furnishing  this  information,  the  Company is  relying  upon the
          contents of statements  filed with the Commission  pursuant to Section
          13(d) and Section 13(g) of the Exchange Act.

     (2)  USI Corp  claims  that it owns or has  rights to  approximately  3,000
          shares of preferred  stock.  Pursuant to an order by the United States
          District Court for Kansas,  USI Corp. has agreed not to transfer these
          shares. See Notes 10 and 15 to the Consolidated  Financial  Statements
          of the Company  included  elsewhere  in this  report.

     (3)  Consists of 2,093 shares owned by General Financial Services, Inc. Mr.
          Miller is the sole  stockholder,  sole  director and the  president of
          General Financial  Services,  inc. and as a result may be deemed to be
          the  beneficial  owner  of  the  shares  owned  by  General  Financial
          Services, Inc.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     None.


                                       16
<PAGE>


                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

(a)   The following documents are filed as part of this report

Financial Statements                                                       PAGE

      Dunes Hotels and Casinos Inc. and Subsidiaries
      Consolidated Financial Statements:

      Independent Auditors' Report of BKD, LLP                             F-1

      Balance Sheet as December 31, 2001                                   F-2

      Statements of Operations, two years ended December 31, 2001          F-4

      Statements of Changes in Shareholders' Equity, two years
          ended December 31, 2001                                          F-5

      Statements of Cash Flows, two years ended December 31, 2001          F-6

      Notes to Financial Statements, two years ended December 31, 2001     F-8

Exhibits

    3.1   Restated Certificate of Incorporation of Dunes Hotels and Casinos Inc.
          dated June 17,  1982, is  incorporated  herein by  reference to  Dunes
          Hotels and Casinos Inc. Annual Report on  Form 10-K  (file no. 1-4385)
          for the year ended December 31, 1994, Part IV,  Item 14(a)(3), Exhibit
          3.01.

    3.2   Certificate  of Amendment  of Restated Certificate of Incorporation of
          Dunes Hotels and Casinos Inc. dated December 19, 1984, is incorporated
          herein by  reference to Dunes Hotels and Casinos Inc. Annual Report on
          Form 10-K (file no. 1-4385) for the year ended December 31, 1994, Part
          IV, Item 14(a)(3), Exhibit 3.02.

    3.3   Revised  By-laws of Dunes Hotels and Casinos Inc. dated December 1984,
          is incorporated herein by  reference to Dunes Hotels and Casinos  Inc.
          Annual  Report  on  Form  10-K  (file  no. 1-4385) for  the year ended
          December 31, 1994, Part IV, Item 14(a)(3), Exhibit 3.03.

    3.4   Amendment to By-laws adopted June 18, 1997, is incorporated herein  by
          reference  to  Dunes Hotels and Casinos Inc. Annual Report on Form 10-
          KSB (file no. 1-4385) for the year ended  December 31, 2000,  Part IV,
          Item 13(a), Exhibit 3.4.

    4.1   Specimen  Certificate for the Common Stock of Dunes Hotels and Casinos
          Inc.  (incorporated  by  reference  to Dunes  Hotels and Casinos  Inc.
          Annual  Report  on Form  10-K  (file no.  1-4385)  for the year  ended
          December 31, 1994, Part IV, Item 14(a)(3), Exhibit 4.01).

    4.2   Specimen  Certificate  for the  Preferred  Stock of Dunes  Hotels  and
          Casinos  Inc.  (incorporated  by reference to Dunes Hotels and Casinos
          Inc.  Annual Report on Form 10-K (file no.  1-4385) for the year ended
          December 31, 1994, Part IV, Item 14(a)(3), Exhibit 4.02).

   10.1   Reimbursement  Agreement  dated  September  20,  1995,  by and between
          Rancho  Murieta  Community   Services  District  and  SHF  Acquisition
          Corporation  regarding  the  amount of the  reimbursement  due SHF for
          excess work done at The  Fairways at Rancho  Murieta that will benefit
          other properties within the boundaries of Rancho Murieta (incorporated
          by reference to Dunes  Hotels and Casinos Inc.  Annual  Report on Form
          10-K (file no. 1-4385) for the year ended December 31, 1995,  Part IV,
          Item 14(a)(3), Exhibit 10.24).

   10.2   Master  Equipment  Lease dated April 3, 1997,  between ICON  Financial
          Corp. and SHF Acquisition  Corporation  (incorporated  by reference to
          Dunes  hotels and Casinos Inc.


                                       17
<PAGE>


          Quarterly  Report  of  Form 10-Q  for the quarter ended June 30, 1997,
          Part II, Item 6, Exhibit 10.02).

   10.3   Letter  Agreement dated June 5, 2001 and signed August 5, 2001 between
          SHF  Acquisition,  a  wholly-owned  subsidiary  of the Dunes  Hotels &
          Casinos Inc. and Pacific International Rice Mills (incorporated herein
          by reference to Dunes Hotels and Casinos Inc. Quarterly Report on Form
          10-QSB (file no. 1-4385) for the period ended June 30, 2001,  Part II,
          Item 6(a), Exhibit 10.1).

   10.4   Letter  Agreement dated September 5, 2001 between SHF  Acquisition,  a
          wholly-owned  subsidiary of the Dunes Hotels & Casinos Inc. and Levine
          Grain Co., Inc.  (incorporated herein by reference to Dunes Hotels and
          Casinos Inc. Quarterly Report on Form 10-QSB (file no. 1-4385) for the
          period ended September 30, 2001, Part II, Item 6(a), Exhibit 10.1).

   21.01  Subsidiaries of Registrant.

(b)  Reports on Form 8-K

     None

                                       18
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.           DUNES HOTELS AND CASINOS INC.

By   /s/ Steve K. Miller                By  /s/ Marvin P. Johnson
    ---------------------------------      -------------------------------------
    Steve K. Miller                        Marvin P. Johnson
    President                              Principal Financial and Accounting
    (Principal Executive Officer)          Officer

Dated     March 22, 2002
     --------------------

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.

Signature                      Title               Date


/s/ Steve K. Miller            Sole Director       March 22, 2002
-----------------------                            ----------------
Steve K. Miller


                                       19
<PAGE>
                         INDEPENDENT ACCOUNTANTS' REPORT
                         -------------------------------

Board of Directors and Stockholders
Dunes Hotels and Casinos Inc. and Subsidiaries
Davis, California

We have audited the accompanying  consolidated balance sheet of Dunes Hotels and
Casinos  Inc.  and  Subsidiaries  as of  December  31,  2001,  and  the  related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the two years in the period ended  December 31,  2001.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Dunes Hotels and
Casinos Inc. and  Subsidiaries  as of December 31, 2001,  and the results of its
operations  and its cash  flows  for each of the two years in the  period  ended
December 31, 2001, in conformity with accounting  principles  generally accepted
in the United States of America.


/s/ BDK, LLP

Wichita, Kansas

February 14, 2002




                                      F-1
<PAGE>



                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2001
                             (Dollars in thousands)

                                     ASSETS

Cash and cash equivalents                                  $   2,760

Marketable securities                                            356

Receivables
    Trade                                                         42
    Real estate sales - current                                  140

Inventory of real estate held for sale                           186

Prepaid expenses                                                  65
                                                            --------

    Total current assets                                       3,549

Property and equipment, less accumulated depreciation
    and amortization of $984                                   3,016

Real estate sales - noncurrent                                   502

Other assets                                                       4

Assets purchased in foreclosure                                  480

                                                            --------

                                                           $   7,551
                                                           =========




                                   (continued)

                                      F-2
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (CONTINUED)

                                DECEMBER 31, 2001
                             (Dollars in thousands)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current maturities of long term debt and
capital lease obligations                                  $     282

Accounts payable                                                  58

Accrued expenses                                                 477

Deferred storage income                                           23
                                                            --------

    Total current liabilities                                    840

Long-term debt and capital lease obligation                       54

Accrued preferred stock dividends in arrears                     829
                                                            --------

    Total liabilities                                          1,723
                                                            --------

Shareholders'equity
    Preferred stock - authorized 10,750,000 shares
    ($.50 par); issued 6,356 shares Series B $7.50
    cumulative preferred stock, outstanding 5,454
    shares, aggregate liquidation value of $1,511,
    including dividends in arrears                                 3

  Common stock - authorized 25,000,000 shares
    ($.50 par); issued 5,762,843 shares, outstanding
    4,365,759 shares                                           2,882

    Capital in excess of par                                  25,122

    Deficit                                                  (21,032)
                                                            --------
                                                               6,975
    Treasury stock at cost; Preferred - Series
    B, 902 shares Common 1,397,084 shares                     (1,147)
                                                            --------

    Total shareholders' equity                                 5,828
                                                            --------

Total liabilities and shareholders' equity                 $   7,551
                                                           =========
                 See notes to consolidated financial statements

                                      F-3
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                    (Dollars in thousands, except per share)

                                                 2001         2000
                                               ----------   ---------
Revenues
    Sales of real estate                      $    1,004   $   2,474
    Rental income, agricultural properties            59          57
    Drying and storage revenues                      305         342
    Miscellaneous income, net                          4          56
                                               ----------   ---------
                                                   1,372       2,929
                                               ----------   ---------
Cost and expenses
    Cost of real estate sold                         983       2,550
    Cost and expenses of rental income                 4           4
    Cost of drying and storage revenues              285         405
    Selling, administrative and general
        Corporate                                    794       1,027
        Real estate operations                        29         172
    Depreciation                                     133         132
                                               ----------   ---------
                                                   2,228       4,290
                                               ----------   ---------

Loss before other credits (charges) and            (856)     (1,361)
income taxes

Other credits (charges)
    Interest and dividend income                     248         266
    Interest expense                                (54)        (80)
    Gain / (loss) on marketable                       31          44
      securities, net
                                               ----------   ---------
                                                     225         230
                                               ----------   ---------
Loss before income taxes                           (631)     (1,131)
Income taxes                                         (1)         (5)
                                               ----------   ---------

Net loss                                      $    (632)   $  (1,136)
                                               ==========   =========

Weighted average number of shares              4,605,174    5,311,893
outstanding

Basic and diluted loss per                    $   (0.15)   $   (0.21)
common share
                                               ==========   =========

           See notes to consolidated financial statements


                                      F-4
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                Preferred
                                  stock       Common stock                            Preferred           Common
                                issued (1)       Issued         Capital             treasury stock     treasury stock     Total
                             --------------  -----------------    in                ---------------    ---------------    share-
                                      Par              Par      excess                                                    holders'
                              Shares  Value   Shares   Value    of par    Deficit   Shares    Cost     Shares    Cost     equity
                             -------  -----  ---------  ------ --------- --------- -------- -------  ---------  -------- ---------
<S>                           <C>      <C>   <C>        <C>     <C>      <C>        <C>      <C>      <C>       <C>       <C>

Balance, December 31, 1999    10,512   $5    7,799,780  $3,900  $25,881  ($19,752)     902     ($70)  1,424,684  ($1,930)  $8,034

Accrued dividends,
  preferred stock                                                             (72)                                            (72)
Acquisition of
  treasury stock
  through foreclosure                                                                                 1,280,756      (38)     (38)
Net loss                                                                   (1,136)                                         (1,136)
                             -------  -----  ---------  ------ --------- --------- -------- -------  ----------  -------- ---------

Balance, December 31, 2000    10,512    5    7,799,780   3,900   25,881   (20,960)     902      (70)  2,705,440   (1,968)   6,788

Accrued dividends,
  preferred stock                                                             (41)                                            (41)
Acquisition of
  treasury stock                                                              601    4,156     (125)    728,581     (763)    (287)
Cancellation of
  treasury stock              (4,156)  (2)  (2,036,937) (1,018)    (759)            (4,156)     160  (2,036,937)   1,619
Net loss                                                                     (632)                                           (632)
                             -------  ----- ----------  ------ --------- --------- -------- -------  ----------  -------- ---------

Balance, December 31, 2001     6,356   $3    5,762,843  $2,882  $25,122  ($21,032)     902     ($35)  1,397,084  ($1,112)  $5,828
                             =======  ===== ==========  ====== ========= ========= ======== =======  ==========  ======== =========


</TABLE>


(1) Series B, $7.50 dividend,
    voting and non-convertible
    (liquidqation value,
    $125 per share)


                       See notes to consolidated financial statements

                                      F-5

<PAGE>



                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                             (Dollars in thousands)

                                                   2001         2000
                                                   ----         ----
                                                ---------    -----------
Cash flows from operating activities:
    Net loss                                   $   (632)    $   (1,136)
Adjustments to reconcile net loss to net
 cash provided by (used in) operating
 activities:
    Depreciation                                     133            132
    Gain on marketable securities                   (34)           (44)
    (Increase) decrease in operating assets:
        Receivables                                (121)          (198)
        Inventory, real estate held for sale         940          2,334
        Prepaid expenses                             (9)             55
        Other                                                       (1)
    Increase (decrease) in operating liabilities:
        Accounts payable                            (85)             91
        Accrued expenses                             (1)
        Deferred credits and other                 (136)            159
                                                --------       --------
Net cash provided by operating activities             55          1,392
                                                --------       --------


Cash flows from investing activities
    Investment in marketable securities                           (100)
    Proceeds from sale of marketable
      securities                                     100
    Purchase of assets in foreclosure              (480)
    Purchase of property and equipment              (15)          (148)
                                                --------       --------
Net cash provided by (used in) investing
 activities                                        (395)          (248)
                                                --------       --------

                                   (continued)


                                      F-6
<PAGE>


                          DUNES HOTELS AND CASINOS INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                             (Dollars in thousands)

                                                        2001         2000
                                                      ----------    --------
Cash flows from financing activities:
    Purchase of treasury stock                       $    (888)    $      -
    Payments on long-term debt                            (253)       (226)
                                                      ----------    --------
Net cash used in financing activities                   (1,141)       (226)
                                                      ----------    --------

Increase (decrease) in cash and cash equivalents        (1,481)         918

Cash and cash equivalents, beginning of year              4,241       3,323
                                                      ----------    --------
Cash and cash equivalents, end of year               $    2,760    $  4,241
                                                      ==========    ========
Supplemental disclosures of cash flow
 information:
    Cash paid during the year for:
        Income taxes                                 $        1    $      5
                                                      ==========    ========
        Interest                                     $       54    $     80
                                                      ==========    ========

Supplemental schedules of non-cash
  investing and Financing activities:
        Dividends accrued but unpaid                 $       41    $     72
                                                      ==========    ========
        Stock acquired from foreclosure              $        -    $     38
                                                      ==========    ========
        Reduction in preferred dividends payable
          through acquisition of treasury stock      $    (601)    $      -
                                                      ==========    ========


                 See notes to consolidated financial statements

                                      F-7
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

1.   Summary of significant accounting policies:

     Consolidation:

     The accompanying  consolidated 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
South Lake  Acquisition  Corporation  (SAC),  after  elimination of all material
intercompany balances and transactions.

     Description of business:

     The Company  operates in three  principal  business  segments:  real estate
(development  and sale of  residential  lots and rental of  agricultural  land),
grain drying and storage, and distressed assets.

     Effective  with  the  third  quarter  of  2001,  the  Company  changed  the
organization of its business  segments.  Prior to the third quarter of 2001, the
Company  reported the rental revenue from the Sam Hamburg Farm under its Farming
segment.  Beginning  with the third  quarter,  the Company  began  including the
rental  income  from the Sam  Hamburg  Farm under its Real  Estate  segment.  In
addition, the Company began reporting a new business segment, Distressed Assets,
which  reflects  its  intention  to  pursue  the  acquisition  and  work-out  of
distressed real estate related assets.

     The Company's real estate  segment  previously  sold completed  residential
lots  primarily  to  builders of custom  homes and to the general  public in and
around the greater Sacramento,  California, area. The Company now looks for real
estate development opportunities nationwide. The agricultural property is leased
to tenants in the area where the agricultural property is located.  Accordingly,
the Company's  operations in this segment could be affected by material  adverse
changes in economic conditions in the area.

     The grain drying and storage  segment dries harvested rice over a two-month
period  (approximately  September 15 to November 15) and stores,  for a fee, the
dried rice until it is removed,  normally within the following year. The Company
stores rice  principally  for one customer  under a contract,  which  expires in
August  2002.  This  contract  accounts  for  approximately  50% of the  storage
capacity  and 50% of the  storage  revenue.  If the  Company  were to lose  this
storage  customer,  fail to obtain drying contracts for the coming year, or crop
yields  are low,  it would  have a  material  adverse  affect  on the  Company's
agricultural  segment. The Company is currently storing yellow corn in the other
50% of its storage capacity.

     Results from prior periods have been reclassified to conform to the current
business  segments.  For more information on the Company's  reportable  business
segments, See Note 12 below.

     Property and equipment and depreciation and amortization:

     Property and equipment are stated at cost.  Depreciation  and  amortization
are calculated using the straightline  method over the estimated useful lives of
the assets.

                                      F-8
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


     Loss per share:

     Loss per common share has been computed  using the weighted  average number
of shares  outstanding  during the year,  4,605,174  and 5,311,893 for the years
ended  December 31, 2001 and 2000,  respectively.  Dividends  on  nonconvertible
preferred  stock - Series B have been  deducted from income or added to the loss
applicable to common shares. (See Note 3).

     Income Taxes:

     Deferred tax  liabilities  and assets are recognized for the tax effects of
differences  between  the  financial  statement  and tax  basis  of  assets  and
liabilities.  A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.

     Cash equivalents:

     The Company considers all highly liquid cash investments  purchased with an
original  maturity of three months or less to be cash  equivalents.  At December
31, 2001,  cash  equivalents  consisted of money market  accounts and commercial
paper.

     Marketable securities:

     The Company's  investments  in marketable  securities  are accounted for as
trading  securities.  Accordingly,  gains or  losses  related  to the  Company's
investments in marketable securities, which have not been material, are included
in operations. These investments consist of preferred stock of $356,000 in 2001.

     Environmental expenditures:

     Expenditures that relate to current  operations are expensed or capitalized
as appropriate. Expenditures that relate to an existing condition caused by past
operations  and  which  do not  contribute  to  future  revenues  are  expensed.
Liabilities are recorded when remedial efforts are probable and the costs can be
reasonably estimated.

     Inventory of real estate held for development and sale:

     Real estate held for development and sale is stated at the lower of cost or
net realizable value. Costs include primarily acquisition costs and improvements
costs. Costs are allocated to individual properties using the method appropriate
in the  circumstances.  For purposes of the  statement of cash flows,  sales and
purchases  of real  estate  held for  development  and sale  are  classified  as
operating activities, because the real estate is, in substance, inventory.


                                      F-9
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

     Use of estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Reclassifications:

     Certain  reclassifications  have been made to the 2000 financial statements
to conform to the 2001 presentation.  The reclassifications had no effect on the
results of operations.

2.   Fair value of financial instruments:

     The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating its fair value and disclosures for financial instruments:

     Cash, cash equivalents and marketable securities:

     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 December 31, 2001.

     Notes receivable:

     These  notes  are  collateralized  by the real  property  sold.  Management
believes  the fair value of real  estate  notes  receivable  approximates  their
carrying value based on their outstanding  balances,  their respective  interest
rates and comparable sales in the area of the real property.

     In the event these notes were not collected, and the Company were unable to
recover or sell the collateral  property,  the maximum losses sustained would be
equal to the aggregate value of the notes.

     Long-term debt and capital lease obligation:

     The fair value of the capital lease obligation is based on current rates at
which the Company could borrow funds.

     The fair  values of the  Company's  significant  financial  instruments  at
December 31, 2001 approximate their carrying amounts.

3.   Loss per common share:

     Loss per common share has been computed by dividing the income, net (loss),
less the  accrued  dividends  applicable  to the  cumulative  Series B Preferred
Shares,  for each of the two years  ended  December  31,  2001 and 2000,  by the
weighted  average  number of shares  outstanding  (4,605,174) as of December 31,
2001, and (5,311,893) as of December 31, 2000. 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

                                      F-10
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000



dividends in the amount of  approximately  $829,000 as of December 31, 2001. The
Company  has no  present  intention  to pay  dividends  on either  its common or
preferred shares.  The reduction in dividends payable during 2001 was the result
of the acquisition of preferred stock by the Company as treasury stock.

     The following  data shows the amounts used in computing  loss per share and
the  effect on loss and the  weighted  average  number  of  shares  of  dilutive
potential common stock:

                                   (Dollars in thousands, except per share)

                                            Year Ended December 31,
                                            -----------------------
                                               2001         2000
                                               ----         ----

   Loss from operations                      $ (  632)    $ (1,136)
   Less:  preferred dividends                  (   41)      (   72)
                                             ---------    ---------
   Loss to common stockholders used
       in basic and diluted loss per
       common share                          $ (  673)    $ (1,208)
                                             =========    =========

   Weighted average number of common
       shares used in basic and diluted
       loss per common share                 4,605,174    5,311,893
                                             =========    =========

   Basic and diluted loss per common share   $  (0.15)    $  (0.23)
                                             =========    =========

4.    Inventory of real estate held for development and sale:
                                             (Dollars in thousands)

                                               2001
                                               ----
      The Fairways (a)                       $  -
      Sam Hamburg Farm (b)                      146
      Other                                      40
                                              -----
                                             $  186
                                             ======

(a)  The Company, through SHF, developed 50 acres of residential land located at
     Rancho Murieta,  California as a residential planned unit development known
     as "The  Fairways".  Rancho  Murieta is a  3,500-acre  master  planned unit
     development  located  approximately 25 miles from  Sacramento,  California.
     Rancho Murieta  consists  primarily of  single-family  homes,  town houses,
     commercial  property and two 18-hole  championship golf courses,  including
     country club facilities. The Fairways, located within the boundaries of one
     of the golf courses  located at Rancho  Murieta,  was  subdivided  into 110
     single-family  estate lots.  As of December  31,  2001,  all lots have been
     sold.

     In connection  with its  development  of The Fairways,  SHF was required to
     construct certain  improvements  that benefited not only The Fairways,  but
     other  properties  that lay outside of the  boundaries of The Fairways (the
     Benefited  Properties).  The net cost of the  improvements to the Benefited
     Properties was $1,140,900.  SHF expects to be reimbursed for these costs as
     the Benefited  Properties are developed.  SHF's right to reimbursement will
     expire in September


                                      F-11
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

     2015 and the  Company is unable to predict  what  amount,  if any,  will be
     received as reimbursement.  The rights to reimbursement are personal to SHF
     and do not run with The Fairway's property unless assigned by SHF.

(b)  Sam  Hamburg  Farm  consists  of  approximately  150 acres of  agricultural
     property.  Of the 150 acres,  40 acres  contain an airstrip and shop areas,
     which are the focus of continuing  attempts at chemical  clean up. See Note
     9(b) for a detailed  discussion  concerning the removal of the toxic waste.
     The  remaining  110 acres are leased to one  tenant at an annual  aggregate
     rental of  approximately  $24,000 which expired in 2001.  The lease has not
     been renewed,  however,  the prior tenant will farm the property during the
     year 2002 under the same payment terms as the original lease.

5.   Property and equipment and accumulated depreciation and amortization:

                                                     (Dollars in thousands)

                                                       2001
                                                       ----

      Land and land improvements                       $  159
      Building and improvements                         3,746
      Machinery and equipment                              95
                                                      -------
                                                        4,000
      Less accumulated depreciation and amortization  (  984)
                                                      -------
                                                       $3,016
                                                      =======

6. Long-term notes receivable:
                                                     (Dollars in thousands)

   Real estate                                         2001
                                                       ----
      Various real estate notes, collateralized
      by deeds of trust with interest at 10%          $ 642
                                                      =====

7. Long-term debt and capital lease obligations:

      Long-term debt and capital lease obligations at December 31, 2001, consist
of the following:
                                                     (Dollars in thousands)

                                                       2001
                                                       ----
Capital lease obligation (a)                          $ 328
      Other (b)                                           8
                                                       ----
                                                      $ 336
                                                      =====

                                      F-12

<PAGE>


            DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                YEARS ENDED DECEMBER 31, 2001 AND 2000

Maturities of long-term debt are as follows:

                                         (Dollars in thousands)

                                                 Capital
                           Long term debt    Lease Obligation   Total
                           --------------    ----------------   -----

      2002                      $  4                278           282
      2003                         4                 50            54
                               -----                ---        ------
                                $  8               $328          $336
                                ====               ====          ====

(a)  The Company has a financing  lease  agreement  for its drying  facility for
     five years  commencing  March 1998 with a monthly  rental of  $25,121.  The
     Company  can buy the drying  facility  for $1 at the end of the lease.  The
     lease is collateralized by the drying facility,  a deed of trust on certain
     parcels of property,  including the parcel on which the storage facility is
     located,  and the guarantees of MRI and the Company.  Before the guarantors
     are liable for any  deficiency,  the  leasing  company  must first  proceed
     against the drying facility and the additional collateral.

(b)  Other  long-term  debt  consists  of an  unsecured  note  payable in annual
     installments of $5,000, including interest.

8.   Preferred Stock:

     The  Company is  authorized  to issue  10,750,000  share of $0.50 par value
preferred shares.  The Company gave authority to its Board of Directors to issue
such preferred shares in one or more series,  and to fix the number of shares in
each series,  and all designations,  relative rights preferences and limitations
of the shares  issued in each  series.  As of December  31,  2001,  the Board of
Directors has not exercised the authority granted,  and no such preferred shares
have been  issued  except  for the 10,512  shares of Series B, $7.50  cumulative
preferred  stock (the "Series B Preferred  Stock") of which 5,058 and 902 shares
in 2001 and 2000,  respectively,  are held as treasury  stock.  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 as of December 31, 2001,  in
the amount of approximately $829,000. The reduction in dividends payable in 2001
was the result of the  acquisition of shares of Series B Preferred  Stock by the
Company as treasury stock.

9.   Contingencies:

     (a)  At December  31,  2001,  the Company  has a net  operating  loss carry
          forward  (NOL) of  approximately  $44,226,000.  The Board of Directors
          believes  that this NOL is subject to severe limits under the Internal
          Revenue Code and as a result, the Board of Directors believes there is
          substantial  doubt as to whether the NOL has any value to the Company.
          If there has been an  ownership  change for purposes of Section 382 of
          the Internal Revenue Code of 1986 as amended (the Code), then there is
          a  limitation  on the  amount  of  income  that can be  offset  by NOL
          carryovers.  In  general,  an  ownership  change  occurs  when a major
          shareholder of a loss  corporation  increases  their ownership by more
          than 50%,  which is tested over a three year period.  Depending on the
          interpretation  of the IRS,  an  effective  change in control may have
          occurred as early as January 4, 2000,  upon the order  vesting  voting
          control with General Financial Services, Inc.

                                      F-13
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

     (b)  SHF was advised in 1991 of the possible  contamination  of 40 acres at
          Sam Hamburg  Farm of  approximately  5,000  cubic  yards of soil.  The
          Company,  through its chemical and toxic clean-up consultants has been
          working with the California State Environmental  Protection Agency, in
          seeking  alternate  means  to the  disposal  in  toxic  dump  sites of
          chemical and toxics-laden soil.

          Because of ongoing testing,  the State has not imposed a disposal date
          upon the  Company.  The Company  has  disposed of 1,000 cubic yards of
          soil to date.  Cost of disposal of the remaining  soil is estimated at
          $125 to $200 per cubic yard or approximately  $500,000 to $800,000, of
          which $472,000 has been accrued.  However,  if on-site remediation can
          be achieved,  it is estimated the cost will be no more than  $170,000.
          The  Company is unable to predict  when the  ongoing  testing  will be
          complete or what the outcome of these tests will be.  Accordingly,  it
          is  reasonably  possible the estimates  will change  materially in the
          near term as the testing and remediation work continues.

     (c)  See Note 10  below regarding legal proceeding that may have a material
          adverse affect on the Company.

     (d)  The Company had been  notified that the  California  FTB was examining
          its 1995 tax return.  The FTB was questioning the Company's  reporting
          of  approximately  $7,700,000  of income as being exempt from the 9.3%
          California  tax. On September  13, 2000,  the FTB  requested,  and the
          Company granted,  a six month extension of the period in which the FTB
          could make an assessment  related to the 1995 tax return. On March 13,
          2001, the extension  expired without any additional action being taken
          by the FTB.

10. Legal Proceedings.

FDIC Litigation/Change of Control

     John  B.  Anderson  ("Anderson"),  the  former  Chairman  of the  Board  of
Directors  of the  Company,  and  through  ownership  of Cedar  Development  Co.
("Cedar"),  was the  controlling  shareholder  and President of Baby Grand Corp.
("BGC") and J.B.A. Investments,  Inc. ("Anderson Entities"),  which collectively
owned approximately  4,280,756 shares or 67.2% of the Company's common stock. Of
those shares (i) 3,000,000  shares (the "FDIC  Pledged  Shares") were pledged as
collateral to secure certain  obligations owing to the FDIC described below, and
(ii) 1,280,756  shares (the "BGC Pledged  Shares") were pledged as collateral in
favor of a subsidiary of the Company.

     The  Federal  Deposit  Insurance  Corporation  ("FDIC")  brought  an action
captioned,  Federal Deposit Insurance Corporation, et al. v. John B. Anderson et
al.,   United   States   District   Court,   District   of   Nevada,   Case  No.
CV-S-95-00679-PMP  (LRL), on July 14, 1995. Anderson, Edith Anderson (Anderson's
wife), Cedar, J.A. Inc., J.B.A.  Investments,  Inc. ("JBA")  (collectively,  the
"Anderson Parties") are defendants in this litigation. This matter is more fully
described in the Company's  Form 10-K for the year ended  December 31, 1997, see
"Item 3. Legal  Proceedings - Federal Deposit Insurance  Corporation,  et al. v.
John B Anderson, et al." The FDIC reduced its claims to a Consent Judgment dated
September 12, 1995 (the "Judgment").

                                      F-14

<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

     In June 1999,  the FDIC sold a portion of its  Judgment,  together with the
underlying security owned by the Anderson Parties to General Financial Services,
Inc. ("GFS").  Included in the sale were the FDIC Pledged Shares.  GFS attempted
to exercise its rights  under the  Judgment  and transfer  ownership of the FDIC
Pledged  Shares to it, but the Company  intervened  on behalf of  Anderson,  and
seized the FDIC  Pledged  Shares.  The Company in turn filed on July 6, 1999,  a
Complaint in  Interpleader  in Superior  Court of  California  (the  "California
Action").  The  jurisdiction  of the  action  was  removed  and  transferred  on
September  20,  1999 to the United  States  District  Court for the  District of
Nevada as DUNES HOTELS AND CASINOS INC. v. J.B.A. INVESTMENTS,  INC. et al. Case
No.  CV-S-99-1470-PMP  (RJJ) (the "Nevada  Action").  GFS and its subsidiary GFS
Acquisition Company,  Inc. filed a counter-claim  alleging,  among other things,
damages from the previous Company  management for filing the California  Action,
seizing the FDIC Pledged  Shares,  interfering  with the lawful  transfer of the
FDIC Pledged Shares and refusing to grant  shareholder  demands for an immediate
shareholder meeting to elect directors.  A more detailed discussion is described
in the Company's Form 10-KSB for the fiscal year ended December 31, 1999.

     On January 5, 2000,  the U.S.  District  Court in Nevada  ordered  that the
Company hold a  shareholders'  meeting on or before April 14, 2000, and that GFS
was entitled to vote the FDIC Pledged Shares at that meeting.  At that time, GFS
through its subsidiary GFS Acquisition  Company,  Inc.,  owned 883,922 shares of
the Company's common stock acquired in the open market during 1999 and the first
quarter  of 2000,  or  approximately  a total of 17.4%% of the then  outstanding
stock.

     Since 1998, the BGC Pledged Shares have been under the  jurisdiction of the
U.S.  Bankruptcy  Court in Las Vegas,  Nevada,  where BGC filed a petition under
Chapter 7 of the Bankruptcy  Code. On February 22, 2000, the Company's motion in
Bankruptcy  Court for relief from the automatic  stay was granted to allow it to
foreclose on the BGC Pledged Shares.  On March 23, 2000, the Company  foreclosed
on the BGC  Pledged  Shares and placed  them in the  treasury.  Placing  the BGC
Pledged  Shares  into  treasury  had  the  effect  of  increasing  GFS's  voting
percentage to 75.6% of the outstanding stock.

     On  Friday,  April 14,  2000,  an annual  meeting  (the  "Meeting")  of the
Shareholders  of the  Company  was held at 10:00  a.m.  in  Sacramento,  CA. The
purpose  of the  Meeting  was the  election  of the  Board of  Directors  of the
Company.  Upon  completion of the ballot  counting,  it was determined  that the
nominees of GFS and its subsidiary GFS Acquisition, Inc. received a plurality of
the votes and were duly elected.  See the Company's  Current  Report on Form 8-K
dated April 14, 2000 and filed with the  Securities  and Exchange  Commission on
May 3, 2000.

     Immediately  following the annual Meeting,  the Board of Directors met and,
in  accordance  with the  provisions  of the  Company's  bylaws,  elected  three
additional directors to fill the three vacancies on the Board of Directors.  The
new Board of Directors  elected Mr.  Miller  president of the Company.  Mr. Cary
Peaden was elected  secretary-treasurer  of the Company.  Mr. Marvin Johnson was
retained as the chief accounting officer of the Company.

     The Nevada  Action and the GFS  counterclaim  have been  dismissed  without
prejudice.  In January  2001,  GFS  foreclosed  on the FDIC  Pledged  Shares and
acquired direct ownership of the shares. The Dunes has no further involvement in
the litigation involving the Anderson Entities.

                                      F-15

<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

Injunctive Action Regarding Tender Offer

     On April 3, 2000, JBA, GFS and GFS Acquisition  filed an action against USI
Corp., Barney Kreutzer and Thomas Honton (collectively,  the "USI Group") in the
U.S.  District  Court for the District of Kansas  alleging,  among other things,
violations of the Williams Act,  ss.ss.13(d),  14(d) and 14(e) of the Securities
Exchange  Act of 1934,  15  U.S.C.  78a et seq.  ("Williams  Act").  The case is
captioned J.B.A.  Investments,  inc. et al. v. USI Corp., et al., Case No. 00127
WEB (D. Kan. 2000). The plaintiffs  allege that the USI Group conducted a tender
offer for the  Company's  Series B Preferred  Stock in violation of the Williams
Act. Upon  information  believed to be reliable,  USI Group was able to purchase
approximately  3,000  shares of the  Company's  Series B  Preferred  Stock.  The
plaintiffs  further  allege that USI Group  failed to file any of the  necessary
reports required under the Williams Act, failed to make material  disclosures to
the former  holders of the Series B Preferred  Stock and  engaged in  fraudulent
practices in conjunction  with the alleged tender offer.  The plaintiffs  seek a
preliminary and permanent  injunction  prohibiting the USI Group from completing
the tender offer, recission of the Series B Preferred Stock purchases by the USI
Group and damages. On August 3, 2000, the Company was joined as a plaintiff.

     The USI Group and the  plaintiffs  have  consented to an order  halting any
further  purchase of Series B  Preferred  Stock by the USI Group,  allowing  the
Company to instruct  its  transfer  agent to stop the transfer of such shares to
USI Group and precluding the USI Group from transferring or otherwise  disposing
the acquired Series B Preferred Stock.

     On March 9, 2001, the USI Group filed an answer and several  counter-claims
against the plaintiffs,  including the Company.  USI  subsequently  withdrew its
answer and counter-claims and filed an amended answer denying plaintiffs' claims
without the  previously  stated  counter-claims  against the  plaintiffs and the
Company.  The USI Group has denied that it conducted an illegal tender offer for
the Company's Series B Preferred Stock.

     While  management  believes  in the  merits of the action  against  the USI
Group,  there can be no  assurance  as to the outcome of the action and ultimate
ownership of the contested Series B Preferred Stock.

Derivative Shareholder Litigation

     On  October  5,  2001,   GFS  and  GFS   Acquisition   (collectively,   the
"Plaintiffs"),  derivatively on behalf of the Company and individually,  filed a
lawsuit  in the  Superior  Court of the State of  California  for the  County of
Sacramento  (Case No. CIV.  S-01-1878 DFL PAN) against  certain of the Company's
former officers, directors and attorneys (collectively,  the "Defendants").  The
action seeks to remedy alleged  breaches of fiduciary  duty,  waste of corporate
assets,  unjust  enrichment,  lack of candor,  and fraud by the Company's former
senior  executives,  directors  and their  attorneys.  The lawsuit  alleges that
during a substantial portion of the Company's  existence,  the Defendants abused
their control and fiduciary  positions  improperly to obtain for  themselves and
other officers,  managers and employees  millions of dollars in benefits,  while
greatly  damaging the Company and its  shareholders.  At this time, the ultimate
outcome of this litigation is unknown; however, the Company anticipates that the
Defendants  will  vigorously  defend  themselves.  Even  if the  Plaintiffs  are
successful in obtaining a judgment against the Defendants, it is unknown whether
any such judgment would be ultimately

                                      F-16

<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

collectible.  However,  the  Company  is aware  that the  former  directors  and
officers of the Company have the benefit of a $3,000,000  directors and officers
liability  insurance policy that may be available to help pay any such judgment.
Although the Company is a defendant in the  litigation,  it would be entitled to
recover any judgment  awarded with respect to the  derivative  claims alleged by
the Plaintiffs.

11. Taxes:

     The Company and its  subsidiaries  file a  consolidated  federal income tax
return.  Deferred tax assets  (liabilities)  are  comprised of the  following at
December 31, 2001:

                                                  (Dollars in thousands)

                                                    2001
                                                    ----

     Marketable securities valuation allowance          -
      Real estate allowances                            -
      Loss carryforwards                           15,012
      Other                                             2
                                                 --------
        Gross deferred tax assets                  15,014
        Deferred tax asset valuation allowance    (15,014)
                                                 --------
        Net deferred tax assets                 $     -
                                                =========

      A reconciliation of the changes in deferred tax assets valuation allowance
is as follows:

                                                       (Dollars in thousands)

                                                           2001        2000
                                                           ----        ----
      Valuation allowance for unrealized loss
        on marketable securities                          $  (11)    $  (15)
      Current year loss carryforwards                        278        829
      Valuation allowance on real estate                     (53)      (427)

      Expiration of NOL                                   (3,362)      (811)
                                                         --------    -------
      Change in deferred tax asset valuation allowance    (3,148)      (424)
      Deferred tax assets valuation allowance,
        beginning of year                                 18,162     18,586
                                                         --------    -------
      Deferred tax assets valuation allowance,
        end of year                                      $15,014    $18,162
                                                         ========   ========

A reconciliation of the federal statutory tax rate to the effective tax rate for
2001 and 2000, is as follows:
                                   Percentage of pre-tax income

                                    2001      2000
                                    ----      ----
Federal statutory rate             (34%)     (34%)
Non-deductible items:
   Valuation adjustments            34%       34%
                                    ----      ----
                                     0%        0%
                                    ====      ====

                                      F-17

<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


The Company has the following net operating loss carryovers available for income
tax reporting purposes:

         Year of expiration          (Dollars in thousands)
         -------------------

                   2003                   20,156
                   2004                    1,889
                   2005                    1,891
                   2006                    3,542
                   2007                      803
                   2008                    2,408
                   2009                      595
                   2010                    3,298
                   2011                    1,791
                   2012                    2,767
                   2018                    1,241
                   2019                      589
                   2020                    2,438
                   2021                      818

As more  fully  described  in Note  9(a) and 10, a change  in  ownership  of the
Company may have or could have taken place as early as January 4, 2000.  If such
a change in ownership had taken place, it would materially  reduce the amount of
income that could be offset by net operating  losses each year;  and if there is
no continuity of business after an ownership  change,  the net operating  losses
could be eliminated.  Net operating  losses, to the extent not used in any given
taxable year,  may be carried  forward and added to the limitation of subsequent
years.

12.   Segment information:

     As discussed in Note 1, the Company  operates in three  principal  business
segments: real estate investments  (development and sale of residential lots and
rental of agricultural land), grain drying and storage and distressed assets.


                                      F-18
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


      The following is a summary of segment information for 2001 and 2000:

                                                     (Dollars in thousands)
                                                     2001              2000
                                                     ----              ----
      Net revenues from unaffiliated customers:
        Real estate:
             Sale of real estate                $   1,004         $   2,474
             Land rent                                 59                57
        Grain drying and storage revenue              305               342
        Distressed assets                               -                 -
                                               ----------         ---------
                                                $   1,368         $   2,873
                                                =========         =========

      Grain drying and storage depreciation     $     133         $     132
                                                =========         =========

      Income (loss) from operations:
        Real estate                             $      51         $   (139)
        Grain drying and storage                     (113)            (195)
        Distressed assets                               -                -
                                               ----------         ---------
                                                      (62)            (334)
        Corporate operating expense                  (794)          (1,027)
        Other income / (loss)                         225              230
        Income taxes                                   (1)              (5)
                                               ----------         ---------
        Net loss, as reported in the
         accompanying consolidated
         statements of operations                 ($  632)        ($ 1,136)
                                                =========         =========

                                                     2001              2000
                                                     ----              ----
      Identifiable assets
        Real estate                               $   828          $ 1,652
        Grain drying and storage                    3,127            3,231
        Distressed assets                             480                -
        General corporate assets                    3,116            4,663
                                               ----------         ---------
        Total assets, as reported in
          the accompanying consolidated
          balance sheet                           $ 7,551          $ 9,546
                                                =========         =========

      Grain drying and storage fixed
          asset additions                         $    15          $   148
                                                =========         =========

13.  Significant estimates and concentrations:

     Generally  accepted  accounting  principles  require  disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Those matters include the following:

      Major customers:

     The  Company  derives  substantially  all of its  storage  income from five
customers. The storage contracts with these customers expire in 2002.


                                      F-19
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

14.  Related party transactions:

     During 2001, the Company paid General  Financial  Services,  Inc.  (GFS), a
majority  owner of the Company,  $137,000 for legal  services it provided to the
Company. At December 31, 2001 the amount due GFS was $33,000.

15.  Subsequent Events:

     Since the  Company's  common  stock and Series B preferred  stock were each
held of record by less than 500  persons as of  January 1, 2002 and the  Company
had less than $10  million  of  assets  as of the end of each of its last  three
fiscal years,  the Company  terminated its  registration of the common stock and
Series B preferred  stock under Section 12(g) of the Securities  Exchange Act of
1934 (the "Exchange Act") and suspended its obligation to file periodic  reports
with the SEC with respect to the common stock and Series B preferred stock as of
January 1, 2002.

     In addition,  as a result of the  termination  of the  registration  of the
common stock and Series B preferred  stock under Section 12 of the Exchange Act,
the Company was no longer  subject to those  provisions of the New York Business
Corporation  Law that  restrict  certain  transactions  between  the Company and
General  Financial  Services,  Inc.,  GFS  Acquisition  Company,  Inc. and Steve
Miller.

     The parties to the injunctive  action  relating to the tender offer for the
Company's  Series B Preferred  Stock  conducted  by the USI Group have agreed in
principle to a settlement  of the lawsuit that would result in the  dismissal of
the lawsuit with no liability to the Company.


                                      F-20