UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                          ----------------------------

                                    FORM 10-Q
(Mark One)
    X          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
               SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 1996

                                       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. 1-12962

                               GRAND CASINOS, INC.
             (Exact name of registrant as specified in its charter)

                Minnesota                                        41-1689535
      (State or other jurisdiction                            (I.R.S. Employer
    of incorporation or organization)                       Identification No.)

            130 Cheshire Lane
          Minnetonka, Minnesota                                    55305
(Address of principal executive offices)                         (Zip Code)

                                 (612) 449-9092
              (Registrant's telephone number, including area code)

        13705 First Avenue North                                   55441
         Minneapolis, Minnesota                              (Former Zip Code)
    (Former Name, Former Address and
     Former Fiscal Year, If Changed
           Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                           Yes        X                     No _______

         As of November 12, 1996, there were 41,776,386 shares of Common Stock,
$0.01 par value per share, outstanding. Page 1 of 29


                      GRAND CASINOS, INC. AND SUBSIDIARIES

                                      INDEX

                                                                        Page of
                                                                       Form 10-Q

PART I.  FINANCIAL INFORMATION

         ITEM 1.       FINANCIAL STATEMENTS

                       Consolidated Balance Sheets as of                    3
                       September 29, 1996 and December 31, 1995

                       Consolidated Statements of Earnings                  4
                       for the three months ended September 29, 1996
                       and October 1, 1995

                       Consolidated Statements of Earnings for              5
                       the nine months ended September 29, 1996 and
                       October 1, 1995.

                       Consolidated Statements of Cash Flows                6
                       for the nine months ended September 29, 1996
                       and October 1, 1995

                       Notes to Consolidated Financial Statements           7

         ITEM 2.       MANAGEMENT'S DISCUSSION AND                         14
                       ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS

PART II. OTHER INFORMATION

         ITEM 1.       Legal Proceedings                                   23

         ITEM 3.       Defaults Upon Senior Securities                     26

         ITEM 6.       Exhibits and Reports On Form 8-K                    27







<TABLE>
<CAPTION>
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                           (UNAUDITED)               *
                                                                       SEPTEMBER 29, 1996   DECEMBER 31, 1995
                                                                           ----------          ----------
<S>                                                                        <C>                 <C>       
ASSETS
Current Assets:
    Cash and cash equivalents                                              $  126,290          $  334,772
    Current installments of notes receivable                                   11,454              13,750
    Accounts receivable                                                        19,611              10,864
    Deferred income taxes                                                       7,278               6,747
    Other current assets                                                       15,186              13,736
                                                                           ----------          ----------
Total Current Assets                                                          179,819             379,869
                                                                           ----------          ----------
Property and Equipment, Net                                                   784,444             542,838
                                                                           ----------          ----------
Other Assets:
    Cash and cash equivalents-restricted                                        6,253               6,902
    Securities available for sale                                              33,559              14,200
    Notes receivable, less current installments                                36,333              43,594
    Investments in and notes from unconsolidated affiliates                   147,949             109,413
    Debt issuance and deferred licensing costs-net                             23,754              20,582
    Other long-term assets                                                     18,020              10,710
                                                                           ----------          ----------
Total Other Assets                                                            265,868             205,401
                                                                           ----------          ----------
TOTAL ASSETS                                                               $1,230,131          $1,128,108
                                                                           ==========          ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Accounts payable-trade                                                 $    7,895          $    6,252
    Accounts payable-construction                                              18,188              12,517
    Current installments of long-term debt and capital leases                  11,277              11,562
    Accrued interest                                                           15,880               4,030
    Accrued payroll and related expenses                                       18,843              17,157
    Other accrued expenses                                                     32,922              16,314
                                                                           ----------          ----------
Total Current Liabilities                                                     105,005              67,832
                                                                           ----------          ----------
Long-term Liabilities:
    Long-term debt-less current installments                                  468,121             459,070
    Deferred income taxes                                                      74,489              75,106
                                                                           ----------          ----------
Total Long-Term Liabilities                                                   542,610             534,176
                                                                           ----------          ----------
TOTAL LIABILITIES                                                             647,615             602,008
                                                                           ----------          ----------
COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
    Common stock, $.01 par value; authorized 100,000 shares;
        issued and outstanding 41,768 and 40,988
        at September 29, 1996 and December 31, 1995, respectively                 418                 410
    Additional paid-in-capital                                                412,337             397,298
    Net unrealized gains on securities available for sale                       2,912               2,102
    Retained earnings                                                         166,849             126,290
                                                                           ----------          ----------
Total Shareholders' Equity                                                    582,516             526,100
                                                                           ----------          ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 $1,230,131          $1,128,108
                                                                           ==========          ==========

</TABLE>



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

* DERIVED FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS.



<TABLE>
<CAPTION>
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                    (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

                                                                       (UNAUDITED)
                                                                    THREE MONTHS ENDED
                                                                    ------------------
                                                          SEPTEMBER 29, 1996       OCTOBER 1,1995
                                                          ------------------       --------------
<S>                                                            <C>                    <C>      
REVENUES:
     Casino                                                    $ 109,391              $  71,157
     Hotel                                                         6,516                  3,626
     Food and beverage                                            14,941                  8,940
     Management fee income                                        22,447                 20,991
     Retail and other income                                       3,071                  2,524
                                                               ---------              ---------
Gross Revenues                                                   156,366                107,238
     Less:  Promotional allowances                                (9,641)                (3,828)
                                                               ---------              ---------
NET REVENUES                                                     146,725                103,410
                                                               ---------              ---------

COSTS AND EXPENSES:
     Casino                                                       39,509                 23,231
     Hotel                                                         1,512                  1,026
     Food and beverage                                             8,980                  4,021
     Other operating expenses                                      3,111                  2,545
     Depreciation and amortization                                14,930                  6,491
     Lease expense                                                 4,992                  3,991
     Selling, general and administrative                          40,638                 28,042
                                                               ---------              ---------
         Total Costs and Expenses                                113,672                 69,347
                                                               ---------              ---------

EARNINGS FROM OPERATIONS                                          33,053                 34,063
                                                               ---------              ---------

OTHER INCOME (EXPENSE):
     Interest income                                               4,063                  3,919
     Interest expense                                            (11,167)                (7,078)
     Gain on sale of investments/Other (expense)                    (245)                 3,232
     Equity in loss of unconsolidated affiliates                 (10,910)                  (136)
                                                               ---------              ---------
         Total other income (expense), net                       (18,259)                   (63)
                                                               ---------              ---------

Earnings before income taxes and minority interest                14,794                 34,000
Provision for income taxes                                        11,291                 13,414
                                                               ---------              ---------

Earnings before minority interest                                  3,503                 20,586
Minority interest                                                      0                    897
                                                               ---------              ---------
NET EARNINGS                                                   $   3,503              $  21,483
                                                               =========              =========

EARNINGS PER COMMON SHARE                                      $    0.08              $    0.61
                                                               =========              =========

WEIGHTED AVERAGE COMMON SHARES AND COMMON
  STOCK EQUIVALENTS OUTSTANDING                                   42,827                 35,175
                                                               =========              =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



<TABLE>
<CAPTION>
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                    (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

                                                                           (UNAUDITED)
                                                                        NINE MONTHS ENDED
                                                                        -----------------
                                                           SEPTEMBER 29, 1996      OCTOBER 1, 1995
                                                           ------------------      ---------------
<S>                                                            <C>                    <C>      
REVENUES:
     Casino                                                    $ 263,991              $ 201,664
     Hotel                                                        18,555                  6,276
     Food and beverage                                            34,009                 25,230
     Management fee income                                        61,539                 52,004
     Retail and other income                                       8,406                  5,511
                                                               ---------              ---------
Gross Revenues                                                   386,500                290,685
     Less:  Promotional allowances                               (22,961)               (11,016)
                                                               ---------              ---------
NET REVENUES                                                     363,539                279,669
                                                               ---------              ---------

COSTS AND EXPENSES:
     Casino                                                       90,195                 63,881
     Hotel                                                         4,561                  2,079
     Food and beverage                                            18,500                 11,703
     Other operating expenses                                      8,686                  5,500
     Depreciation and amortization                                28,269                 16,872
     Lease expense                                                13,164                 10,888
     Selling, general and administrative                         102,487                 78,175
                                                               ---------              ---------
        Total Costs and Expenses                                 265,862                189,098
                                                               ---------              ---------

EARNINGS FROM OPERATIONS                                          97,677                 90,571
                                                               ---------              ---------

OTHER INCOME (EXPENSE):
     Interest income                                              13,501                 10,664
     Interest expense                                            (21,733)               (19,290)
     Gain on sale of investment/Other (expense)                     (245)                 4,853
     Equity in loss of unconsolidated affiliates                 (14,749)                  (406)
                                                               ---------              ---------
        Total other (expense), net                               (23,226)                (4,179)
                                                               ---------              ---------

Earnings before income taxes and minority interest                74,451                 86,392
Provision for income taxes                                        33,892                 33,920
                                                               ---------              ---------

Earnings before minority interest                              $  40,559              $  52,472
Minority interest                                                      0                  2,353
                                                               ---------              ---------
NET EARNINGS                                                      40,559                 54,825
                                                               =========              =========

EARNINGS PER COMMON SHARE                                      $    0.94              $    1.59
                                                               =========              =========

WEIGHTED AVERAGE COMMON SHARES AND COMMON
  STOCK EQUIVALENTS OUTSTANDING                                   42,985                 34,476
                                                               =========              =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<TABLE>
<CAPTION>
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                                                            (UNAUDITED)
                                                                                         NINE MONTHS ENDED
                                                                                         -----------------
                                                                              SEPTEMBER 29, 1996        OCTOBER 1, 1995
                                                                              ------------------        ---------------
<S>                                                                                <C>                    <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings                                                                  $  40,559              $  54,825
     Adjustments to reconcile net earnings to net cash
       provided by operating activities:
      Depreciation and amortization                                                   26,527                 14,318
      Amortization of original issue discount and debt issuance costs                  1,742                  4,743
      Gain on sale of investment                                                           0                 (4,853)
      Equity in loss of unconsolidated affiliate                                      14,749                    406
      Decrease in minority interest                                                        0                 (2,353)
      Change in deferred income taxes                                                    616                      0
      Write-off of project note receivables                                             (340)                     0
      Changes in operating assets and liabilities:
           Current assets                                                            (15,460)                (2,446)
           Accounts payable                                                            7,314                  3,458
           Accrued expenses and income taxes                                          34,849                 26,085
                                                                                   ---------              ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                            110,556                 94,183
                                                                                   ---------              ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Increase in notes receivable                                                       (453)               (10,409)
     Investment in and notes receivable from unconsolidated affiliates               (53,664)               (20,059)
     Proceeds from repayment of notes receivable                                      10,349                 17,675
     (Increase) decrease in cash and cash equivalents-restricted                         649               (162,839)
     Payments for property and equipment                                            (261,508)              (108,234)
     Purchases of securities available for sale                                      (19,750)                     0
     Proceeds from sale of investment                                                      0                  4,778
     Increase in other long-term assets                                              (13,455)                  (560)
                                                                                   ---------              ---------
NET CASH USED IN INVESTING ACTIVITIES                                               (337,832)              (279,648)
                                                                                   ---------              ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Decrease in accounts payable-construction                                             0                   (329)
     Proceeds from issuance of common stock-net                                       15,047                  1,337
     Debt issuance costs and deferred financing costs                                 (5,018)               (12,838)
     Proceeds from issuance of long-term debt                                         18,429                235,500
     Payments on long-term debt and capital lease obligations                         (9,664)               (12,222)
     Increase in minority interest due to
          exercise of Stratosphere warrants                                                0                  4,663
     Gain on exercise of Stratosphere Corporation warrants                                 0                  6,272
                                                                                   ---------              ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                             18,794                222,383
                                                                                   ---------              ---------

Net increase (decrease) in cash and cash equivalents                                (208,482)                36,918
Cash and cash equivalents - beginning of period                                      334,772                 29,797
                                                                                   ---------              ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD                                          $ 126,290              $  66,715
                                                                                   =========              =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
      Interest - net of capitalized interest                                       $   9,883              $  20,027
      Income taxes                                                                 $  15,719              $  26,354
NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Issuance of common stock for debt issuance costs                              $       0              $   4,000
     Increase in goodwill due to an increase in
          ownership of Stratosphere Corporation                                    $       0              $   4,185
     Increase in minority interest due to an increase in
          ownership of Stratosphere Corporation                                    $       0              $  16,296
     Deferred income taxes on gain on exercise of
          Stratosphere Corporation warrants                                        $       0              $   2,200


</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 



                      GRAND CASINOS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 29, 1996
                                   (UNAUDITED)



NOTE 1            UNAUDITED FINANCIAL STATEMENTS

                  Grand Casinos, Inc. and Subsidiaries, collectively the
                  Company, develop, construct, and manage land-based and
                  dockside casinos and related hotel and entertainment
                  facilities primarily in emerging gaming jurisdictions. The
                  Company owns and operates two dockside casinos on the
                  Mississippi Gulf Coast, one dockside casino in Tunica County,
                  Mississippi, and manages two Indian-owned casinos in Minnesota
                  and two Indian-owned casinos in Louisiana. It is also an owner
                  of approximately 42% of Stratosphere Corporation
                  (Stratosphere), which constructed the Stratosphere project in
                  Las Vegas, Nevada, which opened on April 29, 1996. Related
                  hotel and entertainment facilities at the Grand Casino Biloxi
                  and Grand Casino Tunica projects are currently under
                  construction and will open at various times.

                  The consolidated financial statements include the accounts of
                  Grand Casinos, Inc. and its wholly-owned and majority-owned
                  subsidiaries. The prior year's accompanying consolidated
                  financial statements include the accounts of Stratosphere
                  through December 20, 1995, the date on which the Company owned
                  less than 50% of the voting stock of Stratosphere. Investments
                  in unconsolidated subsidiaries representing between 20% and
                  50% of voting stock are accounted for on the equity method.
                  All material intercompany balances and transactions have been
                  eliminated in the consolidation.

                  The accompanying unaudited consolidated financial statements
                  have been prepared by the Company in accordance with generally
                  accepted accounting principles for interim financial
                  information, in accordance with the rules and regulations of
                  the Securities and Exchange Commission. Pursuant to such rules
                  and regulations, certain financial information and footnote
                  disclosures normally included in the consolidated financial
                  statements have been condensed or omitted. In the opinion of
                  management, all adjustments (consisting of normal recurring
                  adjustments) considered necessary for fair presentation have
                  been included.

                  Operating results for the nine months ended September 29,
                  1996, are not necessarily indicative of the results that may
                  be expected for the fiscal year ending December 29, 1996.

                  The consolidated financial statements should be read in
                  conjunction with the consolidated financial statements and
                  notes thereto included in the Company's annual report on Form
                  10-K for the fiscal year ended December 31, 1995.

NOTE 2            INCOME RECOGNITION

                  The Company recognizes revenues from its owned and operated
                  casinos in accordance with industry practice. Casino revenue
                  is the net win from gaming activities (the difference between
                  gaming wins and losses). Casino revenues are net of accruals
                  for anticipated payouts of progressive and certain other slot
                  machine jackpots. Revenues include the retail value of food
                  and beverage and other items which are provided to customers
                  on a complimentary basis. A corresponding amount is deducted
                  as promotional allowances. The costs of such complimentaries
                  are included in casino costs and expenses in the accompanying
                  Consolidated Statements of Earnings. Revenue from the
                  management of Indian-owned casino gaming facilities is
                  recognized when earned according to the terms of the
                  management contracts.

NOTE 3            INVENTORIES

                  Inventories, consisting of food and beverage, retail and
                  operating supplies, are stated at the lower of cost or market.
                  Cost is determined using the first in, first out method.

NOTE 4            PREOPENING EXPENSES

                  Preopening expenses incurred prior to opening of Company-owned
                  facilities are capitalized and amortized to expense using the
                  straight-line method over the six months following the opening
                  of the respective facilities. The majority of these costs
                  include payroll, training, and marketing costs incurred prior
                  to commencement of operations. Depreciation and amortization
                  for the nine months ended September 29, 1996 and October 1,
                  1995 includes approximately $5.6 million and $.6 million of
                  preopening amortization expense, respectively. For the three
                  months ended September 29, 1996 and October 1, 1995,
                  approximately $5.2 million and $.4 million, respectively, of
                  preopening amortization was expensed.

NOTE 5            EARNINGS PER COMMON SHARE

                  Earnings per common share was determined by dividing net
                  earnings by the weighted average number of common shares and
                  common stock equivalents outstanding during the nine and three
                  months ended September 29, 1996 and October 1, 1995.

NOTE 6            PROPERTY AND EQUIPMENT

                  Property and equipment are stated at cost, except in the case
                  of capitalized lease assets, which are stated at the lower of
                  the present value of the future minimum lease payments or fair
                  market value at the inception of the lease. Expenditures for
                  additions, renewals and improvements are capitalized. Costs of
                  repairs and maintenance are expensed when incurred.
                  Depreciation of property and equipment is computed using the
                  straight-line method over useful lives of three to forty
                  years. Leasehold acquisition costs are amortized over the
                  shorter of the estimated useful life or the term of the
                  respective leases once the assets are placed in service.

NOTE 7            AMORTIZATION OF ORIGINAL ISSUE DISCOUNT AND DEBT ISSUANCE 
                  COSTS

                  Original issue discounts are amortized using the effective
                  interest method, over the life of the related indebtedness.
                  Debt issuance costs are amortized using the straight-line and
                  effective interest methods, over the life of the related
                  indebtedness.

NOTE 8            INTEREST COSTS

                  Interest is capitalized in connection with the construction of
                  major facilities. The capitalized interest is recorded as part
                  of the asset to which it relates and is amortized over the
                  asset's estimated useful life once the asset is placed in
                  service. For the nine months ended September 29, 1996 and
                  October 1, 1995, approximately $14.1 million and $13.6
                  million, respectively, of interest cost was capitalized. For
                  the three months ended September 29, 1996 and October 1, 1995,
                  approximately $1.0 million and $5.4 million, respectively, of
                  interest cost was capitalized. Capitalized interest for
                  Stratosphere which was included in the consolidated financial
                  statements for the nine and three months ended October 1, 1995
                  was $7.7 million and $3.9 million, respectively.

NOTE 9   NOTES RECEIVABLE

<TABLE>
<CAPTION>
                  Notes receivable consist of the following (in thousands):

                                                                       September 29, 1996            Dec. 31, 1995
                                                                       ------------------            -------------
<S>                                                                               <C>                       <C>    
                  Notes from the Coushatta Tribe with interest at a defined
                  reference rate plus 1% (not to exceed 16%), receivable in 84
                  monthly installments through
                  January 2002                                                     24,386                   26,903

                  Notes from the Tunica-Biloxi Tribe with interest at a defined
                  reference rate plus 1% (not to exceed 16%), receivable in 84
                  monthly installments through June
                  2001                                                             13,070                   14,529

                  Notes from the Mille Lacs Band with interest at a defined
                  reference rate plus 1% (not to exceed 16%), receivable in
                  varying installments through October 1997                         1,886                    3,071

                  Notes from the Mille Lacs Band, with
                  interest at 9.75%, receivable in 60 monthly
                  installments through December 1997                                1,577                    2,435

                  Other                                                             6,868                   10,406
                                                                                  -------                  -------
                                                                                  $47,787                  $57,344
                  Less current installments of notes receivable                    11,454                   13,750
                                                                                  -------                  -------
                  Notes receivable-less current installments                      $36,333                  $43,594
                                                                                  =======                  =======

</TABLE>

NOTE 10           LONG-TERM DEBT

                  On November 30, 1995, the Company completed its public
                  offering of $450.0 million of eight year 10.125% First
                  Mortgage Notes due December 1, 2003, realizing net cash
                  proceeds of approximately $434.5 million after underwriting
                  and other related offering costs. The Company used $132.6
                  million of net proceeds to extinguish $115.0 million aggregate
                  principal amount of 12.5% First Mortgage Notes due on February
                  1, 2000 (including accrued interest of $4.8 million and $12.8
                  million related to a tender offer premium and expenses), and
                  $25.3 million to retire all outstanding principal and interest
                  due under a credit facility with First Interstate Bank of
                  Nevada, N.A. (F.I.B. Note). The balance of net proceeds of
                  approximately $275.7 million is to be used to develop and open
                  Grand Casino Tunica and to construct additional hotel rooms
                  and entertainment and gaming-related amenities at Grand Casino
                  Biloxi and Grand Casino Gulfport.

                  The 10.125% First Mortgage Notes are secured by substantially
                  all the assets of Grand Casino Biloxi and Grand Casino
                  Gulfport, Grand Casino Tunica assets included in Phase 1
                  development, capital stock owned by the Company in
                  Stratosphere, and certain existing notes receivable due the
                  Company from Tribes. The notes require semi-annual payments of
                  interest only on June 1 and December 1 of each year which
                  commenced June 1, 1996, until December 1, 2003, at which time
                  the entire principal plus accrued interest is due and payable.
                  The notes may be redeemed at the Company's option, in whole or
                  in part, anytime after December 1, 1999, at a premium,
                  declining ratably thereafter to par value on December 1, 2002,
                  to maturity.

                  On May 10, 1996, the Company completed a $120 million Senior
                  Secured Term Loan through BankAmerica Leasing and Capital
                  Group. The five-year Senior Secured Term Loan Facility, with
                  varying interest rates ranging from 1.75% to 2.50% over the
                  LIBO Rate, will be used for the continued development of the
                  Company's Grand Casino Tunica project, located in northern
                  Mississippi, just outside of Memphis,Tennessee. Approximately
                  $90 million of the loan will be used for furniture, fixtures
                  and equipment for the 340,000 square foot casino complex. The
                  balance of approximately $30 million will be used to construct
                  a 600-room hotel at Grand Casino Tunica. As of September 29,
                  1996, $18.4 million had been advanced under the Senior Secured
                  Term Loan Facility.

NOTE 11           COMMITMENTS AND CONTINGENCIES

                  STRATOSPHERE CORPORATION

                  On March 9, 1995, the Company converted $33.5 million of
                  outstanding advances to Stratosphere into an aggregate 8.25
                  million shares of common stock. The Company has agreed to
                  provide credit enhancements, subject to certain limitations,
                  to guarantee completion of construction of the project to a
                  limit of $50.0 million and to purchase up to $20.0 million of
                  additional equity in Stratosphere during each of the first
                  three years (up to $60.0 million total) Stratosphere is
                  operating to the extent Stratosphere's consolidated cash flow
                  does not reach $50.0 million in each of such years. As of
                  September 29, 1996 and October 1, 1996, the Company has loaned
                  $49.4 million and $50.0 million, respectively to Stratosphere
                  pursuant to the Completion Guarantee.

                  On October 24, 1996, Stratosphere announced that it continues
                  to seek additional financing and is discussing restructuring
                  both its existing First Mortgage Note indebtedness and capital
                  lease obligation. Based on Stratosphere's current and
                  projected cash position, Stratosphere does not plan to make
                  the First Mortgage Note interest payment of $14.5 million that
                  is due November 15, 1996. Failure to make such payment will
                  result in an event of default that gives the note holders the
                  right to accelerate such indebtedness. This right does not
                  vest until the expiration of the 30 day right to cure this
                  default by Stratosphere. Stratosphere does not currently have
                  the ability to repay the indebtedness. It is likely that
                  Stratosphere's negotiations with its creditors, whether
                  successful or not at arriving at a restructuring, will involve
                  a bankruptcy filing by Stratosphere as a means of formalizing
                  and approving a consensual or nonconsensual restructuring.
                  Stratosphere has suspended construction of Phase II. If
                  Stratosphere cannot restructure its existing indebtedness,
                  there will be serious doubt as to whether or not Stratosphere
                  will be able to continue as a going concern. Depending upon
                  the terms of any restructuring of Stratosphere, the Company's
                  participation in any such restructuring, and the valuation of
                  the Company's position in Stratosphere following any such
                  restructuring, the Company may be required to write off a
                  substantial portion or all of its previous investment in
                  Stratosphere. Any such write-off would have a material adverse
                  effect on the Company's results of operations and financial 
                  position.

                  LOAN GUARANTY AGREEMENTS

                  The Company has guaranteed a loan and security agreement
                  entered into by the Tunica-Biloxi Tribe of Louisiana for $14.1
                  million for the purpose of financing casino equipment. The
                  agreement extends through 1998, and as of September 29, 1996,
                  the amount outstanding was $7.6 million.

                  In addition, the Company has guaranteed loan and security
                  agreements entered into by the Coushatta Tribe of Louisiana
                  for $22.3 million for the purpose of financing casino
                  equipment. The agreements are for three years and have various
                  maturity dates through 1998, and as of September 29, 1996, the
                  amounts outstanding were $16.1 million.

                  The Company has entered into a master hotel development
                  agreement with Casino Resource Corporation for the hotel
                  adjacent to Grand Casino Hinckley. The Company has guaranteed
                  the mortgage related to the hotel in the amount of $2.8
                  million as of September 29, 1996.

                  OTHER

                  The Company is a defendant in various pending litigation. In
                  management's opinion, the ultimate outcome of such litigation
                  will not have a material adverse effect on the results of
                  operations or the financial position of the Company. See Part
                  II -- Item 1. Legal Proceedings of this Form 10-Q.


                      GRAND CASINOS, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (UNAUDITED)


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

                  OVERVIEW

                  The Company develops, constructs and manages land-based and
                  dockside casinos primarily in emerging gaming jurisdictions.
                  The Company's revenues are derived from the Company-owned
                  casinos of Grand Casino Biloxi, Grand Casino Gulfport, and
                  Grand Casino Tunica, and from management fee income from Grand
                  Casino Mille Lacs, Grand Casino Hinckley, Grand Casino
                  Avoyelles, and Grand Casino Coushatta.

                  Pursuant to the Mille Lacs, Hinckley, Avoyelles, and Coushatta
                  management contracts, the Company receives a fee equal to 40%
                  of the net distributable profits generated by Grand Casino
                  Mille Lacs, Grand Casino Hinckley, Grand Casino Avoyelles, and
                  Grand Casino Coushatta.

                  The Company commenced operations in August 1990, and opened
                  its Company-owned casinos, Grand Casino Gulfport, Grand Casino
                  Biloxi and Grand Casino Tunica in May 1993, January 1994 and
                  June 1996, respectively. Therefore, the Company's limited
                  operating history may not be indicative of the Company's
                  future performance. In addition, a comparison of results from
                  year to year may not be meaningful due to the opening of new
                  facilities during such years. The Company's growth strategy
                  contemplates expanding existing operations and establishing
                  additional gaming operations. The successful implementation of
                  this growth strategy is contingent upon the satisfaction of
                  various conditions and the occurrence of certain events,
                  including obtaining governmental approvals and increased
                  competition, many of which are beyond the control of the
                  Company. The following discussion and analysis should be read
                  in conjunction with the consolidated financial statements and
                  notes thereto included in the Company's Annual Report on Form
                  10-K for the year ended December 31, 1995.

                  The casino operations of Grand Casino Tunica opened to the
                  public on June 24, 1996. Accordingly, there are only
                  approximately three months of Grand Casino Tunica's operations
                  included in the results of operations for the nine month
                  period ended September 29, 1996. The Company's long term plan
                  was, and continues to be, to develop Grand Casino Tunica into
                  a destination resort with the development of hotels and other
                  amenities over the next several months.

                  A 188 room hotel opened on September 22, 1996 and 1,200
                  additional rooms are currently under development. Until such
                  time that such hotels and other amenities are fully
                  operational, Grand Casino Tunica will be dependent on the
                  highly competitive day trip market. Although Grand Casino
                  Tunica has only been open for a short period of time, gaming
                  revenue for the period of time since opening is below
                  expectations. The Company believes that the addition of hotels
                  and other amenities will improve Grand Casino Tunica's
                  performance. However, there can be no assurance that results
                  will improve as such additional amenities are added.

                  Revenues from owned and operated casinos are calculated in
                  accordance with generally accepted accounting principles and
                  are presented in a manner consistent with industry practice.
                  Net distributable profits from Grand Casino Mille Lacs, Grand
                  Casino Hinckley, Grand Casino Avoyelles, and Grand Casino
                  Coushatta are computed using a modified cash basis of
                  accounting in accordance with the management contracts. The
                  effect of the use of the modified cash basis of accounting is
                  to accelerate the write-off of capital equipment and leased
                  assets, which thereby impacts the timing of net distributable
                  profits.

                  RESULTS OF OPERATIONS

                  NINE MONTHS ENDED SEPTEMBER 29, 1996 COMPARED TO THE NINE
                  MONTHS ENDED OCTOBER 1, 1995

                  Earnings Per Common Share and Net Earnings

                  Earnings per common share for the nine months ended September
                  29, 1996 were $.94 versus $1.59 for the prior year's
                  comparable period based upon weighted average common shares
                  outstanding of 43.0 million and 34.5 million for the nine
                  month periods ended September 29, 1996 and October 1, 1995,
                  respectively. The increase in the weighted average common
                  shares outstanding was primarily a result of the acquisition
                  of Gaming Corporation of America and Grand Gaming Corp. on
                  November 30, 1995 in which 7.3 million shares of common stock
                  were issued.

                  Net earnings decreased $14.3 million to $40.6 million for the
                  nine months ended September 29, 1996 compared to the prior
                  year. Net earnings were negatively impacted by pre-opening
                  costs from Grand Casino Tunica in the amount of $5.2 million.
                  Earnings were also impacted by Grand's 42% equity share in the
                  Stratosphere loss in the amount of $14.8 million during the
                  period.

                  Net Revenues

                  Net revenues for the Company increased $83.9 million for the
                  nine months ended September 29, 1996 compared to the same
                  period in the prior year. The increase in net revenues is
                  primarily due to increased revenues at Company owned
                  facilities on the Gulf Coast of Mississippi and Tunica County,
                  Mississippi in the amount of $39.7 million and $35.1 million,
                  respectively, and increased management fee income from
                  Indian-owned casinos in the amount of $9.5 million. Grand
                  Casino Tunica opened on June 24, 1996. Accordingly, only three
                  months of Grand Casino Tunica's operations are included in the
                  results for the nine months ended September 29, 1996.

                  Grand Casino Biloxi, Grand Casino Gulfport and Grand Casino
                  Tunica generated $264.0 million in gross casino revenue and
                  $61.0 million in gross hotel, food, beverage, retail, and
                  entertainment revenue during the nine months ended September
                  29, 1996. During the nine months ended October 1, 1995, Grand
                  Casino Biloxi and Grand Casino Gulfport generated $201.7
                  million in gross casino revenue and $37.0 million in gross
                  hotel, food, beverage and retail revenue. The increase in
                  gross revenue is primarily a result of hotels opened at both
                  Grand Casino Biloxi and Grand Casino Gulfport for the entire
                  nine months ended September 29, 1996 and Grand Casino Tunica
                  being open for approximately three months. The Biloxi Hotel
                  and Gulfport Hotel opened in April 1995 and October 1995,
                  respectively.

                  Costs and Expenses

                  Total costs and expenses increased $76.8 million from $189.1
                  million for the nine months ended October 1, 1995 to $265.9
                  million for the nine month period ended September 29, 1996.
                  Casino expenses were $90.2 million for the nine month period
                  ended September 29, 1996 compared to $63.9 million for the
                  comparable period.

                  This casino expense increase is principally related to the
                  increase of $39.7 million in casino revenues at Biloxi and
                  Gulfport and the opening of Grand Casino Tunica. As a result
                  of additional overnight guests at Grand Casino Biloxi and
                  Grand Casino Gulfport, additional casino expenses in the form
                  of complimentary rooms and entertainment have increased casino
                  expenses. Food and beverage expenses increased $6.8 million to
                  $18.5 million for the nine month period ended September 29,
                  1996, of which $3.7 million was a result of the opening of
                  Grand Casino Tunica.

                  Increases in selling, general and administrative expenses in
                  the amount of $24.3 million are primarily attributable to
                  increases in marketing expenses in the amount of $7.2 million
                  for the Biloxi and Gulfport properties as a result of air
                  charter programs and additional promotions, marketing expenses
                  for Grand Casino Tunica in the amount of $4.4 million,
                  increases in indirect expenses associated with the Biloxi and
                  Gulfport Hotels, as well as additional costs relating to the
                  opening of Grand Casino Tunica in the amount of $7.6 million.

                  Other

                  Interest income increased by $2.8 million to $13.5 million for
                  the nine months ended September 29, 1996. This increase is
                  primarily attributable to interest income earned on the
                  proceeds of the Company's $450.0 million First Mortgage Note
                  offering that closed on November 30, 1995. In addition,
                  interest expense increased by $2.4 million to $21.7 million
                  for the nine months ended September 29, 1996 compared to $19.3
                  million for the nine months ended October 1, 1995. The
                  increase is the result of increased interest due to $450
                  million First Mortgage Notes and advances under $120 million
                  Senior Secured Term Loan.

                  THREE MONTHS ENDED SEPTEMBER 29, 1996 COMPARED TO THE THREE
                  MONTHS ENDED OCTOBER 1, 1995

                  Earnings Per Common Share and Net Earnings

                  Earnings per common share for the three months ended September
                  29, 1996 were $.08 versus $.61 for the prior year's comparable
                  period based upon weighted average common shares outstanding
                  of 42.8 million and 35.2 million for the three month periods
                  ended September 29, 1996 and October 1, 1995, respectively.
                  The increase in the weighted average common shares outstanding
                  was primarily a result of the acquisition of Gaming
                  Corporation of America and Grand Gaming Corp. on November 30,
                  1995 in which 7.3 million shares of common stock were issued.

                  Net earnings decreased $18.0 million to $3.5 million for the
                  three months ended September 29, 1996 compared to the prior
                  year. Net earnings per share were negatively impacted by
                  pre-opening costs from Grand Casino Tunica and Grand's 42%
                  share of Stratosphere preopening costs in the amount of $5.2
                  and $5.1 million, respectively. In addition, earnings includes
                  a $4.3 million net loss from operations at Tunica and Grand's
                  42% equity share in the Stratosphere loss in the amount of
                  $8.8 million during the period.

                  Net Revenues

                  Net revenues for the Company increased $43.3 million for the
                  three months ended September 29, 1996 compared to the same
                  period in the prior year. The increase in net revenues is
                  primarily due to increased revenues at Company owned
                  facilities Grand Casino Biloxi, Grand Casino Gulfport and
                  Grand Casino Tunica and increased management fee income from
                  Indian owned casinos. Grand Casino Biloxi and Grand Casino
                  Gulfport generated net revenues of $94.0 million during the
                  three months ended September 29, 1996, an increase of $11.7
                  million compared to the comparable period in the prior year
                  and Grand Casino Tunica generated $30.3 million net revenues
                  for the quarter. Management fee income from Indian owned
                  casinos increased by $1.5 million during the three month
                  period ended September 29, 1996 compared to the comparable
                  period. Grand Casino Biloxi, Grand Casino Gulfport and Grand
                  Casino Tunica generated $109.4 million in gross casino revenue
                  and $24.5 million in gross hotel, food, beverage, retail and
                  entertainment revenue during the three months ended September
                  29, 1996.

                  During the three months ended October 1, 1995, Grand Casino
                  Biloxi and Grand Casino Gulfport generated $71.2 million in
                  gross casino revenue and $14.9 million in gross hotel, food,
                  beverage and retail revenue. The increase in gross revenue is
                  primarily a result of hotels opened at both Grand Casino
                  Biloxi and Grand Casino Gulfport for the entire three months
                  ended September 29, 1996, whereas, only the Biloxi Hotel was
                  open during the three months ended October 1, 1995. In
                  addition, Grand Casino Tunica revenues were included for the
                  entire three months ended September 29, 1996.

                  Costs and Expenses

                  Total costs and expenses increased $44.3 million from $69.3
                  million for the three months ended October 1, 1995 to $113.7
                  million for the three month period ended September 29, 1996.

                  Casino expenses were $39.5 million for the three month period
                  ended September 29, 1996 compared to $23.2 million for the
                  comparable period, principally due to the increase of $38.2
                  million in casino revenues. As a result of additional
                  overnight guests at Biloxi and Gulfport, additional casino
                  expenses in the form of complimentary rooms and entertainment
                  have increased casino expenses. Food and beverage expenses
                  increased $5.0 million to $9.0 million for the three month
                  period ended September 29, 1996, of which Grand Casino Tunica
                  accounted for $3.4 million of the increase. Increases in
                  selling, general and administrative expenses in the amount of
                  $12.6 million are primarily attributable to increases in
                  marketing expenses in the amount of $1.0 million for the
                  Biloxi and Gulfport properties, marketing expenses in the
                  amount of $4.3 million for Grand Casino Tunica, and indirect
                  expenses for Grand Casino Tunica in the amount of $6.8
                  million.

                  Other

                  Interest expense increased by $4.1 million to $11.2 million
                  for the three months ended September 29, 1996 compared to $7.1
                  million for the three months ended October 1, 1995. The
                  increase is the result of increased interest due to $450
                  million First Mortgage Notes and advances under the $120
                  million Senior Secured Term Loan.

                  CAPITAL RESOURCES AND LIQUIDITY

                  As of September 29, 1996, the company had cash and cash
                  equivalents of $126.3 million. For the nine months ended
                  September 29, 1996, capital expenditures were $261.5 million
                  compared to $108.2 million for the comparable period in the
                  prior year. The majority of expenditures, $242.9 million for
                  the nine months ended September 29, 1996, related to
                  construction of Grand Casino Tunica. Based upon current
                  construction plans, the Company expects that development,
                  construction, equipping and furnishing Grand Casino Tunica
                  will require an aggregate of approximately $490 million, of
                  which $342.4 million was expended as of September 29, 1996.

                  The Company secured $120.0 million in Senior Secured Term Loan
                  Facility for the Grand Casino Tunica project. Based on the
                  current construction plans, the continued development of Grand
                  Casino Tunica will require $147.6 million of additional
                  capital, of which $101.6 million is anticipated to be funded
                  through the Senior Secured Term Loan Facility for the Grand
                  Casino Tunica project. These estimates are based upon current
                  construction plans, which are subject to change, and the scope
                  and cost of each of the Company's projects may vary
                  significantly from that which is currently anticipated.

                  The Company, in conjunction with the closing of Stratosphere
                  Corporation's First Mortgage Notes, agreed to provide credit
                  enhancements, subject to certain limitations, to guarantee
                  completion of construction of the Stratosphere project up to a
                  limit of $50.0 million and to purchase up to $20.0 million of
                  additional equity in Stratosphere Corporation during each of
                  the first three years (up to $60.0 million total) after
                  Stratosphere Corporation commences operations to the extent
                  Stratosphere's consolidated cash flow does not reach $50.0
                  million in each of such years.

                  As of October 1, 1996, the Company has loaned $50.0 million to
                  Stratosphere pursuant to the Completion Guarantee. Based on
                  Stratosphere's net loss reported for the third quarter of 1996
                  in the amount of $26.0 million and the factors discussed
                  below, there can be no assurance that Stratosphere will
                  generate sufficient cash flow to service this debt.

                  Pursuant to the terms of the Completion Guarantee,
                  Stratosphere is permitted to defer the payment of interest and
                  principal on such indebtedness. Stratosphere has announced
                  that its cash on hand and projected internally generated funds
                  will not be sufficient to fund Stratosphere's cash
                  requirements for existing operations, including debt service.

                  The Company is not obligated to provide funds to Stratosphere
                  other than as noted above.

                  Stratosphere has announced that its cash on hand and
                  internally generated funds will not be sufficient to fund the
                  cash requirements of its existing operations, current trade
                  and construction payables and debt service. Stratosphere has
                  also announced that it does not plan to make its regularly
                  scheduled interest payment on its First Mortgage Notes due on
                  November 15, 1996, of $14.5 million. Failure of Stratosphere
                  to service debt will result in an event of default under
                  Stratosphere's First Mortgage Note Indenture that gives the
                  Stratosphere note holders the right to accelerate such
                  indebtedness. This right does not vest until the expiration of
                  the 30 day right to cure this default by Stratosphere. It is
                  likely that Stratosphere's negotiations with its creditors,
                  whether successful or not at arriving at a restructuring, will
                  involve a bankruptcy filing by Stratosphere as a means of
                  formalizing and approving a consensual or nonconsensual
                  restructuring. If Stratosphere cannot restructure its existing
                  indebtedness, there will be serious doubt as to whether or not
                  Stratosphere will be able to continue as a going concern.
                  Depending upon the terms of any restructuring of Stratosphere,
                  the Company's participation in any such restructuring, and the
                  valuation of the Company's position in Stratosphere following
                  any such restructuring, the Company may be required to write
                  off a substantial portion or all of its previous investment in
                  Stratosphere. Any such write-off would have a material adverse
                  effect on the Company's results of operations and financial 
                  position.

                  On October 10, 1996, Stratosphere paid $2.3 million to the
                  Company pursuant to the Management and Development Agreement
                  entered into on July 1, 1994. The Company has agreed to either
                  refund the $2.3 million to Stratosphere or advance the amount
                  as a loan by November 5, 1996. As of November 13, 1996, such
                  amount has not been paid to Stratosphere. In addition,
                  Stratosphere has purchased certain equipment from a
                  wholly-owned subsidiary of the Company in the approximate
                  amount of $3.7 million. As of November 13, 1996, approximately
                  $2.5 million of such amount remained unpaid. Stratosphere has
                  advised the Company that is has accrued this cost and intends
                  to pay such amount as part of the final funding of Phase I.


                  Pursuant to the Company's covenants related to the $450.0
                  million First Mortgage Notes, the Company is restricted from
                  paying cash dividends and from transferring funds from certain
                  subsidiaries to the Company. Because of such restrictions and
                  to provide funds for the growth of the Company, no cash
                  dividends are expected to be paid on common shares in the
                  foreseeable future.

                  PRIVATE SECURITIES LITIGATION REFORM ACT

                  The Private Securities Litigation Reform Act of 1995 provides
                  a `safe harbor' for forward-looking statements. Certain
                  information included in this Form 10-Q and other materials
                  filed or to be filed by the Company with the Securities and
                  Exchange Commission (as well as information included in oral
                  statements or other written statements made or to be made by
                  the Company) contains statements that are forward-looking,
                  such as statements relating to plans for future expansion and
                  other busines development activities as well as other capital
                  spending, financing sources and the effects of regulation
                  (including gaming and tax regulation) and competition.

                  Such forward-looking information involves important risks and
                  uncertainties that could significantly affect anticipated
                  results in the future and, accordingly, such results may
                  differ from those expressed in any forward-looking statements
                  made by or on behalf of the Company. These risks and
                  uncertainties include, but are not limited to, those relating
                  to development and construction activities, dependence on
                  existing management, leverage and debt service (including
                  sensitivity to fluctuations in interest rates), domestic or
                  global economic conditions, changes in federal or state tax
                  laws or the administration of such laws and changes in gaming
                  laws or regulations (including the legalization of gaming in
                  certain jurisdictions).

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                     PART II
                                OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS

                  1.  Stratosphere Shareholders Lawsuits  -  Federal Court

                  The Company's Quarterly Report Form on Form 10-Q for the
                  fiscal quarter ended June 30, 1996 described a lawsuit (the
                  `Ceasar Lawsuit') entitled Michael Ceasar, et al v.
                  Stratosphere Corporation, et al which was filed on August 5,
                  1996 in the United States District Court for the District of
                  Nevada. The Ceasar Lawsuit involves claims against
                  Stratosphere Corporation, the Company, Bob Stupak (a former
                  officer and director of Stratosphere), David R. Wirshing (a
                  former officer and director of Stratosphere), Lyle A. Berman
                  (an officer and director of the Company and an officer and
                  director of Stratosphere), Thomas A. Lettero (an officer of
                  Stratosphere), Andrew S. Blumen (an officer and director of
                  Stratosphere), Bob Stupak Enterprises and Thomas G. Bell (a
                  director of Stratosphere).

                  The complaint in the Ceasar Lawsuit purports to seek relief on
                  behalf of a class of plaintiffs who purchased Stratosphere
                  common stock during the period from December 19, 1995 through
                  and including July 22, 1996. That complaint alleges that the
                  defendants made misrepresentations and engaged in other
                  wrongdoing.

                  In August, September and October 1996, complaints in the
                  following lawsuits were filed in the United States District
                  Court for the District of Nevada against the defendants in the
                  Ceasar Lawsuit (and in one instance also against Stanley Taube
                  - an officer and director of the Company and a director of
                  Stratosphere) alleging, in a manner nearly identical to the
                  complaint in the Ceasar Lawsuit, that the defendants made
                  misrepresentations and engaged in other wrongdoing:

<TABLE>
<CAPTION>
                           Name of Lawsuit                                      Date Filed

<S>                                                                             <C> 
                           Regina Peltz, et al v. Stratosphere Corporation      August 13, 1996
                           Grand Casinos, Inc., Bob Stupak, David R.
                           Wirshing, Lyle A. Berman, Thomas A. Lettero
                           Andrew Blumen, Bob Stupak Enterprises and
                           Thomas G. Bell

                           Robert Stengel, et al v. Stratosphere Corporation    August 13, 1996
                           Corporation, Grand Casinos, Inc., Bob Stupak,
                           David R. Wirshing, Lyle A. Berman, Thomas A.
                           Lettero, Andrew S. Blumen, Bob Stupak
                           Enterprises and Thomas G. Bell

                           Robert Johnson, et al v. Stratosphere Corporation,   Sept. 19, 1996
                           Grand Casinos, Inc., David R. Wirshing, Lyle A.
                           Berman, Thomas A. Lettero, Andrew S. Blumen,
                           Bob Stupak Enterprises and Thomas G. Bell

                           David Vallee, et al v. Stratosphere Corporation,     Sept. 25, 1996
                           Grand Casinos, Inc., Bob Stupak, David R.
                           Wirshing, Lyle A. Berman, Thomas A. Lettero,
                           Andrew S. Blumen, Bob Stupak Enterprises and
                           Thomas G. Bell

                           Anthony L. Poli, et al v. Stratosphere Corporation,  Sept. 25, 1996
                           Grand Casinos, Inc., Bob Stupak, David R.
                           Wirshing, Lyle A. Berman, Thomas A. Lettero,
                           Bob Stupak Enterprises, Thomas G. Bell and
                           Stanley M. Taube

                           Darrell Russell and Gail Russell, et al v.           October 7, 1996
                           Stratosphere Corporation, Grand Casinos, Inc.,
                           Bob Stupak, David R. Wirshing, Lyle A. Berman,
                           Thomas A. Lettero, Andrew S. Blumen, Bob
                           Stupak Enterprises and Thomas G. Bell

                           Mitchell Gordon, et al v. Stratosphere               October 7, 1996
                           Corporation, Grand Casinos, Inc., Bob Stupak,
                           David R. Wirshing, Lyle A. Berman, Thomas A.
                           Lettero, Andrew S. Blumen, Bob Stupak
                           Enterprises and Thomas G. Bell
</TABLE>

                  The Company believes that the claims made in the complaint in
                  each of the above lawsuits are without merit and plans to
                  vigorously defend such claims.

                  2.  Stratosphere Shareholders Lawsuit  -  State Action

                  On August 16, 1996, a complaint was filed in the District
                  Court for Clark County, Nevada (Victor M. Opitz, et al v.
                  Robert E. Stupak, et al) against Robert E. Stupak (a former
                  officer and director of Stratosphere), Lyle A. Berman (an
                  officer and director of the Company and an officer and
                  director of Stratosphere), Patrick R. Cruzen (a former officer
                  and director of Stratosphere), Timothy J. Cope (an officer of
                  the Company) and Stanley M. Taube (an officer and director of
                  the Company and a director of Stratosphere). The complaint
                  purports to seek relief on behalf of a class of plaintiffs who
                  purchased Stratosphere common stock during the period from
                  December 19, 1995 through July 22, 1996. The complaint alleges
                  that the defendants made representations and engaged in other
                  wrongdoing.

                  The Company believes that the claims made in the Victor M.
                  Opitz, et al v. Stratosphere Corp., et al complaint are
                  without merit and plans to vigorously defend such claims.

                  3.  Grand Shareholders Lawsuits  -  Federal Court

                  The following complaints have been filed in the United States
                  District Court for the District of Minnesota against the
                  Company, Lyle A. Berman (an officer and director of the
                  Company), Patrick R. Cruzen (a former officer and director of
                  the Company), Timothy J. Cope (an officer of the Company) and
                  Stanley M. Taube (an officer and director of the Company):

<TABLE>
<CAPTION>
                          Name of Lawsuit                                      Date Filed

<S>                                                                             <C>    
                           Joel Blake v. Grand Casinos, Inc., Lyle A.           September 9, 1996
                           Berman, Patrick R. Cruzen, Timothy J.
                           Cope and Stanley M. Taube

                           Robert D. Marcus v. Grand Casinos, Inc.,             October 25, 1996
                           Lyle A. Berman, Patrick R. Cruzen,
                           Timothy J. Cope and Stanley M. Taube.
</TABLE>

                  The complaint in each of the above lawsuits purports to seek
                  relief on behalf of a class of plaintiffs who purchased common
                  stock of the Company during the period from December 19, 1995
                  through July 22, 1996. The complaint in each of the above
                  actions makes nearly identical allegations and alleges that
                  the defendants made misrepresentations and engaged in other
                  wrongdoing.

                  The Company believes that the claims made in each of the above
                  lawsuits are without merit and plans to vigorously defend such
                  claims.

                  See the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1995 and the Company's Quarterly
                  Reports on Form 10-Q for the fiscal quarter ended March 31,
                  1996 and June 30, 1996 for information regarding other pending
                  legal proceedings.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES  -  STRATOSPHERE CORPORATION

                  The Company is the owner of approximately 42% of Stratosphere
                  Corporation (Stratosphere) and has an investment in and
                  advances due from Stratosphere in the amount of $145.6 million
                  as of September 29, 1996. Based upon Stratosphere's third
                  quarter results, Stratosphere determined that it would not
                  meet certain financial covenants which would constitute an
                  event of default under Stratosphere's capital lease that would
                  give the lender the right to accelerate maturity. On October
                  30, 1996, Stratosphere entered into a Standstill Agreement
                  with the lenders that will remain in effect until the earlier
                  of the bankruptcy filing or payment default.

                  Pursuant to the agreement, Stratosphere made its scheduled
                  payment on October 31, 1996, of $3.2 million. In addition, the
                  agreement required the return of $4.2 million (including
                  interest) remaining in the escrow account to the lenders to be
                  applied to the principal balance on a pro rata basis. The
                  amount was applied to the principal balance on October 30,
                  1996, reducing it to a total of $28.3 million. In the event
                  the Standstill Agreement is terminated for reasons mentioned
                  and the lenders accelerate Stratosphere's capital lease
                  indebtedness, Stratosphere would not have the ability to repay
                  such indebtedness. The acceleration of Stratosphere's capital
                  lease indebtedness would also constitute an event of default
                  under Stratosphere's First Mortgage Note Indenture by reason
                  of a cross default provision included in such Indenture.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibit Number 10.01  -  Funding Agreement dated as 
                           of September 27,  1996 by and among Grand Casinos, 
                           Inc. and Stratosphere Corporation

                           Exhibit Number 10.02 - Letter Agreement dated as
                           of September 27, 1996 by and among Grand Casinos,
                           Inc., Stratosphere Corporation and Stratosphere
                           Gaming Corp.

                           Exhibit Number 27  -  Financial Data Schedule

                  (b)      No reports on Form 8-K were filed during the
                           quarterly period ended September 29, 1996.


                                   SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.






Dated:  November 13, 1996        GRAND CASINOS, INC.
                                 -------------------
                                 Registrant



                                 By/ S /THOMAS J. BROSIG
                                 Thomas J. Brosig, President



                                 / S / TIMOTHY J. COPE
                                 Timothy J. Cope, Chief Financial Officer