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, 2000 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:  $2,929,000

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant  computed by reference to the price at March
30,  2001  ($1.03  share) was  approximately  $680,179.  See "Item 5. Market for
Registrant's Common Equity and Related Matters".

The  number  of  shares of common  stock  outstanding  as of March 30,  2001 was
4,666,777.
               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 (South Lake).

      The Company, through its subsidiaries,  operates in two principal business
segments:  real estate  (development  and sale of residential lots and rental of
agricultural  land),  and agriculture  (drying and storing rice). 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  primarily  develops and sells completed
residential lots at The Fairways at Rancho Murieta,  CA primarily to builders of
custom  homes and to the  general  public  located  in and  around  the  greater
Sacramento, California area.

      The  agricultural  segment dries  harvested  rice over a two-month  period
(approximately  September  15 to November  15) and stores,  for a fee, the dried
rice until it is  removed,  normally  within the  following  year as the storage
charges are paid for a twelve month period. In addition, the Company stores rice
for one customer  under a contract  which expires in August 2001.  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 acres planted to rice are reduced due
to market  conditions,  or if the crop  yield is low,  it would  have a material
adverse effect on the Company's agricultural segment.

RECENT DEVELOPMENTS

      On October 31, 2000,  the Company  commenced a tender offer for all of its
Common Stock at a purchase price of $1.00 per share and for all of its Preferred
Stock at a purchase  price of $30.00 per share.  The tender offer for the Common
Stock expired on February 15, 2001 and the tender offer for the Preferred  Stock
expired on March 16, 2001. As a result of the tender offer,  the Dunes  acquired
427,563  shares of Common Stock  (representing  8.4% of the  outstanding  Common
Stock) and 1,075 shares of Preferred Stock  (representing 11.2% of the Preferred
Stock). The tendered shares will be cancelled and as a result,  Steve K. Miller,
indirectly through General Financial Services, Inc. and GFS Acquisition Company,
Inc., will own 85.8% of the Common Stock and 1.4% of the Preferred Stock.

      As of March 30,  2001,  shareholders  who claim to have lost  their  stock
certificates  have submitted  letters of transmittal  for 82 shares of Preferred
Stock and 18,100 shares of Common  Stock.  The Company has agreed to accept such
tendered shares if the shareholders satisfy the transfer agent's requirement for
delivery of a lost stock  affidavit  and the payment of a transfer  service fee.
These shares are not included in the above numbers or percentages.


                                       2
<PAGE>


REAL ESTATE SEGMENT:

The Fairways

      The  Company,  through  SHF,  developed  approximately  50  acres  of real
property as a residential  planned unit  development  known as "The Fairways" in
Rancho Murieta, California.  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 March 23, 2001, 2 lots remain unsold.

      The Company does not expect to realize a gain on the sale of the remaining
lots as the existing cost basis  approximates  net sale proceeds.  To facilitate
sales on certain  lots,  the  Company  planned to build a privacy  wall on those
lots, however, the wall was not approved by the architectural review committee.

      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  and SHF expects to be  reimbursed  for these costs if the  Benefited
Properties are developed.  SHF's right to reimbursement will expire in September
2015. 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 (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. The current lease commenced January 2000 for a period of
two years.

      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  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


                                       3
<PAGE>


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.

AGRICULTURAL SEGMENT:

Rice Storage And Drying Facilities

      Since 1990, SHF has owned a rice storage facility (the "Storage Facility")
located in Yolo County,  California. The Storage Facility generally stores rice,
for a fee and 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 its 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  April  26,  2000,  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, 2000, to August 31, 2001,
in the east warehouse.  The gross revenue is approximately  $140,000. As of July
26, 2000, the filling of the east  warehouse was completed and during  September
2000 the Company received payment for 50% of the storage revenue under the terms
of the agreement.

In addition,  on May 31, 2000, the Company  entered into another  agreement with
PIRMI to dry and store wet paddy rice from the 2000 crop. The agreement provides
for a minimum of 400,000  cwt. of wet paddy rice to be  delivered.  Gross drying
revenue  will be  determined  by the  moisture  content  of the wet  paddy  rice
delivered  and the  storage  revenue  will be  calculated  per dry  cwt.  During
September 2000, the Company began drying operations and as of December 31, 2000,
realized gross drying revenue of approximately $214,000 net of freight rebate.

During 2000, the Company installed equipment and field related structures at the
drying facility at a cost of approximately $120,000. This equipment,  which will
allow the  Company  to clean the wet paddy  rice  prior to drying  and  elevator
modifications, is projected to increase the Company's efficiency and flow rates.

If the  Company  were to lose its drying and storage  customer,  it would have a
material adverse effect on the Company's agricultural segment.


                                       4
<PAGE>


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  residential  real estate,  the Company  competes with
numerous other developers and residential  properties in the greater  Sacramento
area of California, ranging from regional and national firms to local companies,
many of which have  substantially  greater  resources  than the Company.  In the
greater Sacramento area, the Company's residential lots compete on the basis of,
among other things, location,  price and quality of amenities,  such as the golf
course and country club facilities at Rancho Murieta.

      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.

Agricultural Segment:

      With  respect to the  Company's  rice drying and storage  operations,  the
Company  competes  with other rice  drying and  storage  companies  in  Northern
California.  The rice drying  operation is seasonal and runs from  approximately
September 15 to November 15. The storage  facility,  depending on the demand and
shipment of rice 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 rice drying and storage  revenues.  Because the
Company  stores rice for  principally  one  customer,  the loss of that customer
could have a material adverse effect on the rice drying and storage operation.


SALES AND MARKETING

      The Company  employs a sales  consultant  for the sale of its  residential
lots at the Fairways, although sales by independent real estate brokers are also
encouraged.  The  residential  lots  are  marketed  primarily  by means of media
advertising,  customer  referrals and realtor  contacts.  Selling prices are set
based on the local market conditions and competitive  factors.  The agricultural
properties  are  marketed  to  farmers  in  the   surrounding   area  where  the
agricultural  property is located.  The rice  drying and  storage  operation  is
marketed to  principally  one customer but the Company is  attempting  to obtain
additional customers.


                                       5
<PAGE>


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 rice drying and storage facilities.

EMPLOYEES

      At March 23,  2001,  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.

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 2 remain  unsold as of
March 23, 2001. It is located in Rancho Murieta, California, adjacent to Highway
16,  approximately  25 miles southeast of Sacramento.  The land is encumbered by
bonds in the  approximate  amount of  $4,500,  which is the pro rata  share of a
bonded indebtedness  incurred that enabled the Rancho Murieta Community Services
District to acquire the water and sewer  facilities  that serve the community of
Rancho Murieta,  which includes The Fairways.  The bonded  indebtedness  will be
assumed, pro rata, by the individual lot buyers.

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 terms of the leases are usually two crop years on a cash rent
basis. See "Item 1. Business - Real Estate Segment - Sam Hamburg Farm".

AGRICULTURAL SEGMENT:

Rice Storage and Drying Facility

      The storage and drying  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 -- Rice Storage and Drying Facilities."


                                       6
<PAGE>


EXECUTIVE OFFICES:

      The  Company's  executive  office  is  located  in a  building  in  Davis,
California  adjacent  to the rice  drying and storage  facility.  The  executive
offices are  approximately  1,000 square feet and the Company  believes that the
executive office is 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
-----------------------------------------------------------------

      The principal  United States market in which the Company's common stock is
traded is the over-the-counter market. The Company's symbol for its common stock
is "DUNE".  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.

          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

          1999                      HIGH                 LOW
      -----------                   ----                 ---
      1st Quarter                   $0.25                $0.19
      2nd Quarter                   $0.83                $0.21
      3rd Quarter                   $0.89                $0.50
      4th Quarter                   $0.78                $0.68

     At March 30, 2001,  the Company's  transfer  agent reported that there were
approximately  1,466  holders  of  record of the  Company's  common  stock,  and
approximately  511 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.


                                       7
<PAGE>


     The Company is in arrears on dividends on the preferred stock in the amount
of  approximately  $1,389,000  as of December  31,  2000.  This number  includes
accrued dividends on the 1,075 shares of preferred stock acquired by the Company
in its tender  offer.  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,  anticipated  sources of liquidity for the coming fiscal year,  the
impact of  anticipated  asset  sales,  and  potential  changes in control of the
Company.   Such   forward-looking   information  involves  important  risks  and
uncertainties that could significantly  affect the Company's financial condition
and  future  results of  operations,  and  accordingly,  such  future  financial
condition  and  results of  operations  may differ from those  expressed  in any
forward-looking  statements made herein. These risks and uncertainties  include,
but are not  limited to,  those risks  relating  to actual  costs  necessary  to
clean-up  certain  real  property  chemical  contamination,  real estate  market
conditions  and general  economic  conditions,  the  abilities of certain  third
parties to obtain  financing  and otherwise  perform under real estate  purchase
agreements,  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 March 23, 2001, 2 lots are in escrow
pending  closing  which will  complete the sale of all of the lots.  The Company
does not  expect  to  realize  a gain on the sale of the  remaining  lots as the
existing cost basis approximates net sale proceeds.

Agricultural

      The  Company  operates a rice  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.

OPERATING RESULTS

      Net loss for the year ended December 31, 2000,  increased by approximately
$1,045,000 when compared with the year ended December  31,1999.  The major items
contributing to the loss increase were the following:

                                       8
<PAGE>


      (1) A decrease in profit from the sale of real estate.  During 1999,  2.16
          acres of industrial  property in Las Vegas,  NV was sold for $846,800;
          and

      (2) An increase in corporate expense.

These items were partially offset by a decrease in interest expense.

2000 vs. 1999

Real estate
-----------

      Real estate  revenues and profits  decreased  during 2000.  In 1999,  2.16
acres of industrial  property in Las Vegas, NV were sold for $846,800.  Sales at
The Fairways increased during 2000 as there were 30 lot sales, compared to 6 lot
sales in 1999,  however,  there was no gain on these sales as the existing  cost
basis approximates net sales proceeds.

Agricultural
------------

      Rice drying and storage losses in 2000 decreased by approximately $61,000
when  compared  with 1999.  For the year ended  December  31,  2000,  drying and
storage  revenue  was  $342,000  compared to  $168,000  for the prior year.  The
increase is primarily due to rice drying  during the current  year.  The storage
revenue  increase will be reflected  during the next nine months of 2001, as the
storage  revenue  will be realized as earned.  During 1999, there was no storage
revenue.

General
-------

      Selling,   administrative   and  general   expenses  in  total   increased
approximately  $342,000.  The major contributors to the increase were legal fees
($193,000);  officers  salary  ($76,000);  fees  relating  to the  tender  offer
($64,000);  accounting fees  ($42,000);  and officers  travel  ($36,000).  These
increases  were offset by decreases in directors  consulting  fees ($48,000) and
director fees ($21,000).

      Interest  income  increased due to additional  notes  receivable  from lot
sales at The Fairways.  Interest expense  decreased as a result of payments made
during the year on the rice dryer.


LIQUIDITY AND CAPITAL RESOURCES

      During the year ended  December  31,  2000,  cash,  cash  equivalents  and
marketable  securities  increased by $1,062,000  from $3,601,000 at December 31,
1999 to $4,663,000 at December 31, 2000. The most significant  source of cash in
2000 was $1,392,000 provided by operations. The most significant uses of cash in
2000 consisted of payments of $226,000 on long-term  debt,  purchase of property
and equipment of $148,000 and investment in marketable securities of $100,000.

      As discussed in Item 1.--Description of Business--Recent Developments", on
March 16, 2001, the Company  completed its tender offer for shares of the Common
Stock and Preferred  Stock.  As a result of the tender  offer,  the Company paid
$459,813 to the former  holders of the Common Stock and Preferred  Stock,  which
amount was paid from the Company's cash and cash equivalents.

      The Company  believes that its primary  requirements  for liquidity in the
coming fiscal year will be to fund the final  expenses on the remaining two lots
at The Fairways, which include, among other

                                       9
<PAGE>


things,  association  dues, water and sewer fees and property taxes; to fund the
required  payments due on the grain dryer  financing;  to fund costs that may be
incurred relating to the toxic clean-up at Sam Hamburg Farm; and to fund general
and administrative expenses.

      The  Company  believes  that  sources of required  liquidity  will be cash
generated  from the rice drying and storage  facilities  and the  collection  of
notes  receivable  resulting  from  sales  at  The  Fairways.   Based  on  known
commitments,  the Company  believes  that the sources of cash  described and the
cash  available at December 31, 2000,  will be adequate to fund known  liquidity
requirements in 2001. However, if the sources of required liquidity and the cash
available at December 31, 2000 prove to be  insufficient  to cover the Company's
primary  liquidity  requirements,  it will  be  necessary  to  sell  some of the
Company's non-income producing assets.


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

      The  Consolidated  Financial  Statements of Dunes Hotels and Casinos Inc.
are located at pages F-1 to F-21 attached to the end of this annual report.


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

     None

                                       10
<PAGE>


                               PART III

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

        The  By-laws  of the  Company  provide  that  the  number  of  directors
constituting  the entire  board  shall be five.  Directors  are  elected at each
annual meeting of  shareholders to hold office until the next annual meeting and
until a successor has been elected and qualified. On April 14, 2000, the Company
held its annual  meeting of  shareholders.  At the annual  meeting,  GFS and GFS
Acquisition  nominated  four  persons  to fill the board  seats that were up for
election at the annual  meeting.  The  shareholders  of the Company  elected the
nominees proposed by GFS. 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. Two of the directors have subsequently resigned.

        Pursuant to a Securities and Exchange  Commission  consent  decree,  the
Company has  maintained  an Audit  Committee  of the Board of  Directors  (Audit
Committee) since 1978, a majority of which are independent directors.

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

        Steve K.  Miller,  51, 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,   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, 45, 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.  Mr.
Peaden  is  currently  employed  as  assistant  to the  President  of  Rich-Mix
Products,  Inc., which is unaffiliated  with General  Financial  Services.  Mr.
Peaden  attended  and  studied   business   administration   at  Wichita  State
University.

        James R.  Herfurth,  58, was elected a Director of the Company in April
2000.  Mr.  Herfurth  has  practiced  law in  California  since  1977.  He is a
member of the Board of Directors of Valley Solar  Systems,  Inc., a corporation
doing business in energy  conservation,  and is the president and a director of
FCW,  Inc.,  a  corporation  engaged in the  purchase  of consumer  loans.  Mr.
Herfurth   owns   and   operates   commercial,   industrial   and   residential
properties.  He is a graduate  of the  College of the  Sequoias  and  Humphreys
College of Law.

        James G.  Steckart,  51, was elected a Director of the Company in April
2000.  Since January 1999,  Mr.  Steckart has been the President of PXC, LLC, a
Washington State based financial  services  company.  Prior to joining PXC, Mr.
Steckart  served as Chief  Executive  Officer  and  President  of Home  Choice,
Inc.,  Dallas,  Texas,  a publicly  traded  home  furnishings  and  electronics
leasing  company  from May 1998 to  January  1999 and Chief  Operating  Officer
from February 1998 to January 1999.  From


                                       11
<PAGE>


1996 to October  1997, he was the President of Alameda  Management  Company,  a
business  engaged in the  development,  management  and  ownership  of inn-type
motels.  Mr.  Steckart was employed by  Advantage  Companies,  Inc., a publicly
traded  franchisee  of  Rent-A-Center,  first as Vice  President of  Operations
from 1991 to 1993 and then as President from 1993 to 1996.

     Paul H. Viets, 67, was elected a Director of the Company in April 2000. Mr.
Viets is Chairman of the Board of  Directors of Commerce  Bank of  Independence,
Kansas. Prior to that he served as Chairman,  President and Director of Citizens
National Bank which he and his partners sold to Commerce  Bankshares,  Inc., St.
Louis,  Missouri.  Mr.  Viets is also a partner in Vico  Rentals,  L.C.,  a real
estate  development  company  unrelated  to General  Financial.  Mr.  Viets is a
business graduate of the University of Kansas.

     There is no family relationship between any directors or executive officers
of the Company.  No director  holds 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  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, 2000,  except as follows:  (1) the initial Form 3's for Paul Viets,
James  Steckart and James  Herfurth were each filed one day late and the initial
Form 3's for Fadi  Mashnouk,  Thomas  Steele and Cary Peaden were each filed two
days late (each of these forms  reported that the  reporting  person did not own
any shares of common or  preferred  stock in the Company) and (2) the Form 5 for
General  Financial  Services,  Inc.  and Mr.  Steve  Miller  for the year  ended
December 31, 2000,  reporting the  acquisition of 120 shares of preferred  stock
was filed one day late. On April 6, 2001, General Financial Services,  Inc., GFS
Acquisition  Company,  Inc.  and  Mr. Miller  amended their Form 5 to report the
acquisition of 18,000 shares that had not previously been reported on Form 4.


                                       12
<PAGE>



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, 2000.


                      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,         2000(2)   $71,381      --         --       $11,067
President

Edward Pasquale,
President                2000(3)     --         --         --       $22,267
                         1999        --         --         --       $62,568
                         1998        --         --         --       $36,862
------------------
(1)   All other compensation for Mr. Miller consists of the following:

           Directors fees           $10,667
           Consulting fees              400
                                        ---
                                    $11,067
                                     ======

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

                                    Year Ended December 31,
                                    -----------------------
                                    1998        1999         2000
                                    -----       ----         ----

           Directors fees           $15,000     $15,000       $4,333
           Audit Committee fees      12,000      12,000        3,467
           Consulting fees            9,862      35,568       14,467
                                     ------      ------      -------
                                    $36,862     $62,568      $22,267
                                     ======      ======       ======

(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.


                                       13
<PAGE>


      Messrs.  Herfurth,  Steckart,  and Viets are all  member of the  Company's
Audit  Committee.   For  services   rendered  as  Audit  Committee  members  and
consultants during the fiscal year 2000, Messrs.  Herfurth,  Steckart, and Viets
were paid $17,500, $400, and $400 respectively.

      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.


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

      The table shown below  contains  certain  information as of March 30, 2001
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                  85.8%
8441 E. 32nd Street N
Wichita, KS  67226

Steve K. Miller(3)                      4,003,309                  85.8%

James R. Herfurth                              --                    --

James G. Steckart                              --                    --

Paul H. Viets                                  --                    --

D. Cary Peaden                              3,100                     *

All Directors and Officers
as a Group (5 Persons)                  4,006,409                  85.8%

------------------------
* 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


                                       14
<PAGE>


           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 30,  2001,  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.

Name and Address of             Amount and Nature of          Percent of Common
Beneficial Owner (1)            Beneficial Ownership (1)      Stock Outstanding
--------------------------------------------------------------------------------

USI Corp(2)                                 2,399                    28.1%
1040 Lawrence Court
Wichita, KS  67206

Empire & Company                            1,973                    23.1%
c/o Transpacific Corp.
328A Exchange Place Station
Jersey City, NJ 07303

Steve K. Miller(3)                            120                     1.4%

James R. Herfurth                              --                     --

James G. Steckart                              --                     --

Paul H. Viets                                  --                     --

D. Cary Peaden                                 --                     --

All Directors and Officers
as a Group (5 Persons)                        120                     1.4%

------------------------
(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
      Note 10 to the Consolidated  Financial  Statements of the Company included
      elsewhere in this report.

(3)   Consists of 120 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.


                                       15
<PAGE>




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

      None.


                                     PART IV

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


The following documents are filed as part of this report

a.  Financial Statements                                                   PAGE
                                                                           ----

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

      Independent Accountants' Report of Baird, Kurtz & Dobson              F-1

      Independent Auditors' Report of Piercy, Bowler, Taylor and Kern       F-2

      Balance Sheet as December 31, 2000                                    F-3

      Statements of Operations, two years ended December 31, 2000           F-5

      Statements of Changes in Shareholders' Equity, two years ended
      December 31, 2000                                                     F-6

      Statements of Cash Flows, two years ended December 31, 2000           F-7

      Notes to Financial Statements, two years ended
      December 31, 2000                                                     F-9


b.  Exhibits

         3.1   Restated  Certificate  of  Incorporation  of  Dunes  Hotels  and
               Casinos Inc. dated June 17, 1982  (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 3.01).


         3.2   Certificate   of   Amendment   of   Restated    Certificate   of
               Incorporation  of Dunes Hotels and Casinos Inc.  dated  December
               19, 1984  (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 3.02).

         3.3   Revised   By-laws  of  Dunes  Hotels  and  Casinos  Inc.  dated
               February 3, 2000  (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,  1999,  Part IV,  Item  14(a)(3),
               Exhibit 3.03).

         3.4   Amendent to By-laws adopted June 18, 1997.


                                       16
<PAGE>



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

         10.3 Letter  Agreement  dated  May 31,  2000 and  signed  May 31,  2000
              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, 2000, Part II, Item 6(a), Exhibit 10.1)

         10.4 Letter  Agreement  dated April 26, 2000 and signed  April 26, 2000
              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, 2000, Part II, Item 6(a), Exhibit 10.2)

         21.1 Subsidiaries of Registrant.

     (b) Reports on Form 8-K

         None

                                       17
<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  April 2, 2001


    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/  James R. Herfurth                            April 2, 2001
---------------------------------
James R. Herfurth        Director

/s/ Steve K. Miller                               April 2, 2001
---------------------------------
Steve K. Miller          Director

/s/  D. Cary Peaden                               April 2, 2001
---------------------------------
D. Cary Peaden           Director

/s/  James G. Steckart                            April 2, 2001
---------------------------------
James G. Steckart        Director

/s/  Paul H. Viets                                April 2, 2001
---------------------------------
Paul H. Viets            Director



                                       18

<PAGE>


                          INDEPENDENT ACCOUNTANTS' REPORT
                          ----------------------------

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

We have audited the accompanying  consolidated balance sheet of Dunes Hotels and
Casinos  Inc.  and  Subsidiaries  as of  December  31,  2000,  and  the  related
consolidated statements of operations,  changes in shareholders' equity and cash
flows for the year ended December 31, 2000.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides 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, 2000,  and the results of its
operations  and its cash  flows  for the year then  ended,  in  conformity  with
generally accepted accounting principles.



/s/ Baird, Kurtz and Dobson

Wichita, Kansas

February 20, 2001, except for notes 4, 9, 10 and 14 as to which the date is
March 30, 2001.

                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

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

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity  and cash  flows of Dunes  Hotels  and  Casinos  Inc.  and
Subsidiaries  for the year ended December 31, 1999.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the results of operations and cash flows for
the year  ended  December  31,  1999,  of Dunes  Hotels  and  Casinos  Inc.  and
Subsidiaries in conformity with generally accepted accounting principles.



/s/ Piercy, Bowler, Taylor & Kern

Las Vegas, Nevada
January 28, 2000

                                      F-2

<PAGE>

       DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                 CONSOLIDATED BALANCE SHEET

                      DECEMBER 31, 2000
                   (Dollars in thousands)

                           ASSETS




Cash and cash equivalents                        $     4,241

Marketable securities                                    422

Receivables
    Trade                                                 37
    Real estate sales                                    526

Inventory of real estate held for sale                 1,126

Prepaid expenses                                          56

Property and equipmenless accumulated depreciation
    and amortization of $862                           3,134

Other assets                                               4
                                                   ----------

                                                 $     9,546
                                                   ==========

                                  (continued)
                                      F-3

<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (CONTINUED)

                                DECEMBER 31, 2000
                             (Dollars in thousands)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                                              $       143

Accrued expenses                                                      478

Deferred income                                                       159

Long-term debt and capital lease obligation                           589

Accrued preferred stock dividends in arrears                          1,389
                                                                 ----------

                                                                      2,758
                                                                 ----------
Shareholders' equity
    Preferred stock - authorized 10,750,000
      shares ($.50 par); issued 10,512 shares
      Series B $7.50 cumulative preferred
      stock, outstanding 9,610 shares, aggregate
      liquidation value $2,589, including
      dividends in arrears                                                5

    Common stock - authorized 25,000,000 shares ($.50 par);
        issued 7,799,780 shares, outstanding 5,094,340 shares          3,900

    Capital in excess of par                                          25,881

    Deficit                                                          (20,960)
                                                                   ----------
                                                                       8,826
    Treasury stock at cost;  Preferred - Series B, 902 shares
        Common 2,705,440 shares                                       (2,038)
                                                                   ----------

        Total shareholders' equity                                     6,788
                                                                   ----------

                                                                 $     9,546
                                                                  ==========

                 See notes to consolidated financial statements

                                       F-4


<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                    (Dollars in thousands, except per share)

                                                     2000          1999
                                                  ------------  ------------
Revenues
    Sales of real estate                        $       2,474 $       2,108
    Rental income, agricultural properties                 57            51
    Drying and storage revenues                           342           168
    Miscellaneous income, net                              56            67
                                                  ------------  ------------
                                                        2,929         2,394
                                                  ------------  ------------
Cost and expenses
    Cost of real estate sold                            2,550         1,120
    Cost and expenses of rental income                      4             4
    Cost of drying and storage revenues                   405           292
    Selling, administrative and general
        Corporate                                       1,027           685
        Real estate operations                            172           225
    Depreciation                                          132           132
                                                  ------------  ------------
                                                        4,290         2,458
                                                  ------------  ------------

Loss before other credits (charges) and income         (1,361)          (64)
    taxes

Other credits (charges)
    Interest and dividend income                          266           248
    Interest expense                                      (80)         (178)
    Gain / (loss) on marketable securities, net            44           (90)
                                                  ------------  ------------
                                                          230           (20)
                                                  ------------  ------------
Loss before income taxes                               (1,131)          (84)
Income taxes                                                5             7
                                                  ------------  ------------

Net loss                                        $      (1,136)$         (91)
                                                  ============  ============

Weighted average number of shares outstanding       5,311,893     6,375,096

Basic and diluted loss per common share         $       (0.23)$       (0.03)
                                                  ============  ============


                 See notes to consolidated financial statements
                                    F-5


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

                                    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                              YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                      (Dollars in thousands)



                                  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, January 1, 1999          10,512   $5   7,799,780  $3,900  $25,881  ($19,589)  902   ($70)   1,424,684 ($1,930)     $8,197

Accrued dividends, preferred stock                                               (72)                                          (72)
Net loss                                                                         (91)                                          (91)
                                  ------ ------ --------- ------- --------- ---------- ------ ------ --------- --------  ----------
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                                                                                              (38)        (38)
Net loss                                                                      (1,136)                1,280,756              (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
                                  ====== ====== ========= ======= ========= ========== ====== ====== ========= ========  ==========


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

                                          See notes to consolidated financial statements
</TABLE>

                                                               F-6

<PAGE>
                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (Dollars in thousands)



                                                     2000          1999
                                                  ------------  ------------
Cash flows from operating activities:
    Net loss                                    $      (1,136)$         (91)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
    Depreciation                                          132           132
    (Gain) loss on marketable securities                  (44)           90
    (Gain) loss on disposition of assets                                 11
    (Increase) decrease in operating assets:
        Receivables                                      (198)           45
        Inventory, real estate held for sale            2,334           490
        Prepaid expenses                                   55             4
        Other                                              (1)
    Increase (decrease) in operating liabilities:
        Accounts payable                                   91            27
        Accrued expenses and income taxes                               (14)
        Deferred credits and other                        159
        Former minority interest                                       (320)
                                                  ------------  ------------
Net cash provided by operating activities               1,392           374
                                                  ------------  ------------

Cash flows from investing activities
    Investment in marketable securities                  (100)
    Proceeds from sale of marketable securities                         460
    Proceeds from disposition of assets                                 500
    Purchase of property and equipment                   (148)          (22)
                                                  ------------  ------------
Net cash provided by (used in) investing activities      (248)          938
                                                  ------------  ------------

                                (continued)
                                    F-7

<PAGE>

                          DUNES HOTELS AND CASINOS INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (Dollars in thousands)




                                                     2000          1999
                                                  ------------  ------------
Cash flows from financing activities:
    Payments on short-term debt                 $             $         (49)
    Payments on long-term debt                           (226)       (1,060)
                                                  ------------  ------------
Net cash used in financing activities                    (226)       (1,109)
                                                  ------------  ------------

Increase in cash and cash equivalents                     918           203

Cash and cash equivalents, beginning of year            3,323         3,120
                                                  ------------  ------------

Cash and cash equivalents, end of year          $       4,241 $       3,323
                                                  ============  ============

Supplemental disclosures of cash flow information:
    Cash paid during the year for:
        Income taxes                            $           5 $           7
                                                  ============  ============
        Interest                                $          80 $         189
                                                  ============  ============

Supplemental schedules of non-cash investing and
    financing activities:
        Dividends accrued but unpaid            $          72 $          72
                                                  ============  ============
        Stock acquired from foreclosure         $          38 $
                                                  ============  ============







                 See notes to consolidated financial statements
                                    F-8


<PAGE>

                DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999



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  (South  Lake),  after  elimination  of all
material intercompany balances and transactions.

   Description of business:

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

   The Company's real estate segment sells completed  residential lots primarily
to builders of custom homes and to the general  public in and around the greater
Sacramento,  California, area. The agricultural properties are leased to farmers
in the area where the  agricultural  properties  are located.  Accordingly,  the
Company's  operations  in this  segment  could be affected  by material  adverse
changes in economic conditions in the area.

   The  agricultural  segment  dries  harvested  rice  over a  two-month  period
(approximately  September  15 to November  15) and stores,  for a fee, the dried
rice until it is removed, normally within the following year. The Company stores
rice principally for one customer under a contract which expires in August 2001.
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.

   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.

   Loss per share:

   Loss per common share has been computed using the weighted  average number of
shares outstanding during the year:  5,311,893 and 6,375,096 for the years ended
December 31, 2000 and 1999, 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).

                                      F-9
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


   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, 2000 and 1999,  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 $322,000 and a
municipal bond of $100,000.

   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.

   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 1999  financial statements
to conform to the 2000 presentation.  The reclassifications had no effect on the
results of operations.

                                      F-10
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


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, 2000.

   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, 2000 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, 2000,  and 1999,  by the
weighted number of shares  outstanding  (5,311,893) as of December 31, 2000, and
(6,375,096)  as of  December  31,  1999.  Dividends  on the  Company's  Series B
Preferred  have not been paid since the first quarter of 1982. The Company is in
arrears  on such  dividends  in the  amount of  approximately  $1,389,000  as of
December 31,  2000.  The Company has no present  intention  to pay  dividends on
either its common or preferred shares.

   The following  data show 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.

                                      F-11
<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


                       (Dollars in thousands, except per share)
                                             Year Ended December 31,
                                                    2000           1999
                                                    ----           ----
      Loss from operations                       $(1,136)          $(91)
      Less:  preferred dividends                     (72)           (72)
                                                     ----           ----
      Loss to common stockholders used
        in basic and diluted loss per
        common share                             $(1,208)         $(163)
                                                 ========         ======

      Weighted average number of common shares
        used in basic and diluted loss per
        common share                           5,311,893      6,375,096
                                               =========      =========

      Basic and diluted loss per common share     $(0.23)        $(0.03)
                                                  =======        =======

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

      The Fairways (a)                              $    940
      Sam Hamburg Farm (b)                               146
      Other                                               40
                                                    --------
                                                    $  1,126
                                                    ========
(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.  The land is encumbered by bonds in the approximate amount of
      $4,500.  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 March 23, 2001, 2
      lots remain unsold.

      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.

(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 expiring in 2001.

                                      F-12

<PAGE>

                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


5. Property  and  equipment  and  accumulated   depreciation  and  amortization
(Dollars in thousands):

      Land and land improvements                                    $   159
      Building and improvements                                       3,731
      Machinery and equipment                                           106
                                                                    -------
                                                                      3,996
      Less accumulated depreciation and amortization                  ( 862)
                                                                    -------

                                                                     $3,134
                                                                     ======

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

   Real estate
      Various real estate notes, collateralized by deeds of trust
          with interest ranging from 8% to 10%                      $   526
                                                                    =======


7. Long-term debt and capital lease obligations (Dollars in thousands):

      Long-term  debt and  capital  lease  obligations  at  December  31,  2000,
consists of the following:

      Capital lease obligation (a)                                 $    578
      Other (b)                                                          11
                                                                   --------
                                                                   $    589
                                                                   ========

Maturities of long-term debt are as follows:

                                                 (Dollars in thousands)
                                                 ----------------------
                                                         Capital
                                         Long term debt  Lease Obligation  Total
                                         --------------  ----------------  -----

      2001                                          $ 3              $250   $253
      2002                                            4               278    282
      2003                                            4                50     54
                                                    ---              ----   ----
                                                    $11              $578   $589
                                                     ==               ===    ===



(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.

                                      F-13

<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


(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,  2000,  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  of which 902  shares 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, 2000,  in
the amount of approximately $1,389,000.


9.     Contingencies:

(a)  At December 31, 2000,  the Company has a net  operating  loss carry forward
     (NOL) of approximately  $53,298,000.  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 GFS.

(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 a 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.

                                      F-14
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


(c)   The Company estimates the carrying value of the lots at the Fairways real
      estate  development  approximates  their  fair  value.  It  is  reasonably
      possible the amounts  ultimately  realized could differ  materially in the
      near term from amounts recorded in the financial statements.

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

(e)   The Company had been  notified that the  California  FTB is examining its
      1995 tax  return.  The FTB is  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. (JA),
J.B.A.   Investments  Inc,  (JBA)  (collectively,   the  Anderson  Parties)  are
defendants in this  litigation  (the Anderson  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 "Judgement").

In June  1999,  the FDIC  sold a portion  of its  Judgement,  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  Judgement  and  transfer  ownership of the FDIC
Pledged  Shares to it, but the Company  intervened  on behalf of  Anderson,  and
seized  the  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

                                      F-15
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


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.  In addition to its
interest  in the  FDIC  Pledged  Shares,  GFS  has  reported  that  through  its
subsidiary  GFS  Acquisition  Company,  Inc.,  it 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 3, 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 (GFS Shares).

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.  For more
information  regarding the names, ages and business  experience for at least the
past five years of the new directors,  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.

Pursuant to a Consent  and  Undertaking  entered  into with the  Securities  and
Exchange  Commission  on October 13,  1977,  the SEC  asserts  that the board of
directors must have at least three directors satisfactory to the Commission (the
"Independent Directors").  The Company has sought confirmation from the staff of
the Commission that they do not object to Messrs.  Herfurth,  Steckart and Viets
being  designated  the  Independent  Directors  for  purposes of the Consent and
Undertaking. The staff has not responded to date. If the staff were to object to
any of the above individuals being designated an Independent Director,  then the
board of directors  will,  without  further  shareholder  approval elect another
director,  submit that  director to the staff to replace any  director  that was
objected to by the staff.

                                      F-16

<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


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 has
been 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.


Injunctive Action regarding Tender Offer
----------------------------------------

On April 3, 2000, JBA, GFS and GFS  Acquisition  filed an action against the 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  3000 shares of the  Company's  non-convertible  preferred  stock,
Series B ("Series B Preferred").  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  Series  B  Preferred
shareholders 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 purchases by the USI Group and damages.

The USI Group and the plaintiffs  have consented to an order halting any further
purchases  of Series B  Preferred  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.

The USI Group  filed a motion to  dismiss  the  plaintiffs'  action.  Plaintiffs
opposed that motion.  By order dated February 21, 2001, the court denied the USI
Group's motion to dismiss.

On August 3, 2000,  the court  entered an agreed order  joining the Company as a
plaintiff in the action.

On March 9, 2001, the USI Group filed several  counterclaims against plaintiffs,
including the Company.  The claims being made against the Company  include:  (1)
violations of Section 13e-3 and Section 13e-4 of the Securities  Exchange Act of
1934 in conjunction  with the Company's tender offer for all of the Common Stock
and Series B Preferred; (2) breach of contact relating to the USI Group's Series
B  Preferred;   and  (3)  injunctive  relief  relating  to  the  foregoing.  The
counterclaim  also includes  separate  derivative  claims for relief asserted on
behalf of the Company, and claims against plaintiffs other than the Company. The
plaintiffs,  including the Company,  have not yet responded to the counterclaim.
The Company intends to vigorously defend all of the claims made against it.


                                      F-17
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


On March 9,  2001,  the USI  Group  filed  its  answer  to  plaintiffs'  claims.
Discovery is ongoing  with regard to the claims  brought by  plaintiffs  and the
counterclaims brought by the USI Group.

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 or as to the outcome of the claims  against
the Company.

11.   Income 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, 2000
      (Dollars in thousands):

      Marketable securities valuation allowance               $      11
      Real estate allowances                                         53
      Loss carryforwards                                         18,096
      Other                                                           2
                                                                -------
        Gross deferred tax assets                                18,162
        Deferred tax asset valuation allowance                  (18,162)
                                                                -------
        Net deferred tax assets                               $       0
                                                              =========



      A reconciliation of the changes in deferred tax assets valuation allowance
        is as follows (Dollars in thousands):

      Valuation allowance for unrealized loss on marketable
       securities                                                   $     (15)
      Current year loss carryforwards                                     829
      Valuation allowance on real estate                                 (427)
      Expiration of NOL                                                  (811)
                                                                    ---------
      Change in deferred tax asset valuation allowance                   (424)
      Deferred tax assets valuation allowance, beginning of year       18,586
                                                                    ---------
      Deferred tax assets valuation allowance, end of year           $ 18,162
                                                                    =========

A reconciliation of the federal statutory tax rate to the effective tax rate for
2000 and 1999, is as follows:

                                                   Percentage of pre-tax income

                                                     2000              1999
                                                   -------          ---------

Federal statutory rate                              (34%)             (34%)

Non-deductible items:
   Valuation adjustments                             34%               26%

                                      F-18
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


Other                                                   0%                8%
                                                  --------           -------
                                                        0%                0%


The Company has the following net operating loss carryovers available for income
tax reporting purposes:
          Year of expiration       (Dollars in thousands
          ------------------

                2001                       9,890
                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
                                          ------
                                          53,298
                                          ======

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 has 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 two principal business segments:
real estate investments  (development and sale of residential lots and rental of
agricultural land), and agricultural (drying and storing rice).


                                      F-19
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


      Following is a summary of segment information for 2000 and 1999:

                                                               2000      1999
                                                               ----      ----
      Net revenues from unaffiliated customers:
        Real estate:
             Sale of real estate                          $   2,474   $ 2,108
             Land rent                                           57        51
        Rice drying and storage revenue                         342       168
                                                          ---------   -------
                                                          $   2,873   $ 2,327
                                                          =========   =======

      Rice drying and storage depreciation                     $132      $132
                                                               ====      ====

      Income (loss) from operations:
        Real estate                                       $    (139)  $   877
        Rice drying and storage                                (195)     (256)
                                                          ----------  --------
                                                               (334)      621
        Corporate operating expense                          (1,027)     (685)
        Other income / (loss)                                   230       (20)
        Income taxes                                             (5)       (7)
                                                          ----------  --------
      Net loss, as reported in the
      accompanying consolidated statements of operations ($   1,136) ($    91)
                                                            =======       ===


                                                             2000
                                                             ----
      Identifiable assets
        Real estate                                       $   1,652
        Rice drying and storage                               3,231
        General corporate assets                              4,663
                                                          ---------
      Total assets, as reported in the accompanying
       consolidated balance sheet                         $   9,546
                                                          =========

      Rice drying and storage fixed asset additions            $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 customer:

   The  company  derives  substantially  all  of its  storage  income  from  one
customer. The storage contract with this customer expires in 2001.


                                      F-20
<PAGE>


                 DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


14. Subsequent events:

   On October  31,  2000,  the Company  commenced a tender  offer for all of its
Common Stock at a purchase price of $1.00 per share and for all of its Preferred
Stock at a purchase  price of $30.00 per share.  The tender offer for the Common
Stock expired on February 15, 2001 and the tender offer for the Preferred  Stock
expired on March 16, 2001. As a result of the tender offer,  the Dunes  acquired
427,563  shares of Common Stock  (representing  8.4% of the  outstanding  Common
Stock) and 1,075 shares of Preferred Stock  (representing 11.2% of the Preferred
Stock). The tendered shares will be cancelled and as a result,  Steve K. Miller,
indirectly through General Financial Services, Inc. and GFS Acquisition Company,
Inc., will own 85.8% of the Common Stock and 1.4% of the Preferred Stock.

   As of March  30,  2001,  shareholders  who  claim to have  lost  their  stock
certificates  have submitted  letters of transmittal  for 82 shares of Preferred
Stock and 18,100 shares of Common  Stock.  The Company has agreed to accept such
tendered shares if the shareholders satisfy the transfer agent's requirement for
delivery of a lost stock  affidavit  and the payment of a transfer  service fee.
These shares are not included in the above numbers or percentages

                                      F-21