<PAGE>   1
                                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 June 29, 1997

                                      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)


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 August 8, 1997, there were 41,902,141 shares of Common Stock, $0.01 par
value per share, outstanding.



                                 Page 1 of 31

<PAGE>   2

                     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
                   June 29, 1997 and December 29, 1996

                   Consolidated Statements of Earnings                    4
                   for the three months ended June 29, 1997
                   and June 30, 1996

                   Consolidated Statements of Earnings for the            5
                   six months ended June 29, 1997 and
                   June 30, 1996

                   Consolidated Statements of Cash Flows                  6
                   for the six months ended June 29, 1997
                   and June 30, 1996

                   Notes to Consolidated Financial Statements             7

         ITEM 2.   MANAGEMENT'S DISCUSSION AND                           13
                   ANALYSIS OF FINANCIAL CONDITION
                   AND RESULTS OF OPERATIONS

PART II. OTHER INFORMATION

         ITEM 1.   Legal Proceedings                                     21

         ITEM 4.   Submission of Matters to a Vote of                    29
                   Security Holders

         ITEM 6.   Exhibits and Reports On Form 8-K                      29






                                    - 2 -

<PAGE>   3

                     GRAND CASINOS, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            (UNAUDITED)             *
                                                                          JUNE 29, 1997     DECEMBER 29, 1996
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                   <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                                    $132,601              $147,254
  Current installments of notes receivable                                        7,068                 7,792
  Accounts receivable                                                            16,536                13,463
  Deferred income taxes                                                          13,552                 9,910
  Other current assets                                                           15,214                15,335
-------------------------------------------------------------------------------------------------------------
Total Current Assets                                                            184,971               193,754
-------------------------------------------------------------------------------------------------------------
Property and Equipment-Net                                                      902,720               821,827
-------------------------------------------------------------------------------------------------------------
Other Assets:
  Cash and cash equivalents-restricted                                            6,650                10,276
  Securities available for sale                                                  18,186                23,603
  Notes receivable-less current installments                                     27,591                30,772
  Investments in and notes from unconsolidated affiliates                         8,604                 8,823
  Debt issuance and deferred licensing costs-net                                 21,277                22,851
  Other long-term assets                                                         16,988                10,910
-------------------------------------------------------------------------------------------------------------
Total Other Assets                                                               99,296               107,235
-------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                 $1,186,987            $1,122,816
=============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                                                              $14,361               $20,002
  Current installments of long-term debt                                          2,304                 4,101
  Current installments of capital lease obligations                              16,871                15,358
  Accrued interest                                                                7,207                 5,486
  Accrued payroll and related expenses                                           23,209                23,418
  Other accrued expenses                                                         30,173                31,542
-------------------------------------------------------------------------------------------------------------
Total Current Liabilities                                                        94,125                99,907
-------------------------------------------------------------------------------------------------------------
Long-term Liabilities:
  Long-term debt-less current installments                                      454,600               455,002
  Capital lease obligations-less current installments                            92,514                56,740
  Deferred income taxes                                                          74,422                71,494
-------------------------------------------------------------------------------------------------------------
Total Long-term Liabilities                                                     621,536               583,236
-------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                               715,661               683,143
-------------------------------------------------------------------------------------------------------------


COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
  Capital stock, $.01 par value, authorized 100,000 shares;
       common stock issued and outstanding 41,897 and 41,796
       at June 29, 1997 and December 29, 1996, respectively                         419                   418
  Additional paid-in-capital                                                    413,216               412,576
  Net unrealized gains (losses) on securities available for sale                   (527)                1,358
  Retained earnings                                                              58,218                25,321
-------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity                                                      471,327               439,673
-------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $1,186,988            $1,122,816
=============================================================================================================
</TABLE>

   * FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS





                                     -3-

<PAGE>   4

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

<TABLE>
<CAPTION>
                                                        (UNAUDITED)     
                                                     THREE MONTHS ENDED
                                         ---------------------------------------
                                            JUNE 29, 1997       JUNE 30, 1996
                                            -------------       -------------
<S>                                         <C>                 <C>
--------------------------------------------------------------------------------
REVENUES:
   Casino                                         $113,628              $80,297
   Hotel                                             9,514                6,622
   Food and beverage                                16,347                9,889
   Management fee income                            19,814               20,400
   Retail and other income                           3,488                2,965
--------------------------------------------------------------------------------
Gross Revenues                                     162,791              120,173
   Less: Promotional allowances                    (11,954)              (7,196)
--------------------------------------------------------------------------------
NET REVENUES                                       150,837              112,977
--------------------------------------------------------------------------------

COSTS AND EXPENSES:
   Casino                                           39,587               26,407
   Hotel                                             2,291                1,580
   Food and beverage                                 8,534                4,963
   Other operating expenses                          3,390                2,658
   Depreciation and amortization                    12,410                6,832
   Lease expense                                     4,676                4,141
   Selling, general and administrative              40,993               29,138
--------------------------------------------------------------------------------
     Total Costs and Expenses                      111,881               75,719
--------------------------------------------------------------------------------

EARNINGS FROM OPERATIONS                            38,956               37,258
--------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
   Interest income                                   2,981                4,119
   Interest expense                                (11,971)              (4,840)
   Other                                               (25)                   0
   Loss of unconsolidated affiliates                  (100)              (4,697)
--------------------------------------------------------------------------------
     Total other expense, net                       (9,115)              (5,418)
--------------------------------------------------------------------------------

Earnings before income taxes                        29,841               31,840
Provision for income taxes                          11,525               12,432
--------------------------------------------------------------------------------

NET EARNINGS                                       $18,316              $19,408
================================================================================

EARNINGS PER COMMON SHARE                            $0.43                $0.45
================================================================================

WEIGHTED AVERAGE COMMON SHARES AND COMMON
 STOCK EQUIVALENTS OUTSTANDING                      42,865               43,262
================================================================================
</TABLE>


                                     -4-
<PAGE>   5

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

<TABLE>
<CAPTION>
                                                        (UNAUDITED)     
                                                      SIX MONTHS ENDED
                                         ---------------------------------------
                                            JUNE 29, 1997       JUNE 30, 1996
                                            -------------       -------------
<S>                                         <C>                 <C>
--------------------------------------------------------------------------------
REVENUES:
   Casino                                         $222,308             $154,600
   Hotel                                            16,576               12,039
   Food and beverage                                30,952               19,068
   Management fee income                            38,868               39,092
   Retail and other income                           6,425                5,335
--------------------------------------------------------------------------------
Gross Revenues                                     315,129              230,134
   Less: Promotional allowances                    (22,122)             (13,320)
--------------------------------------------------------------------------------
NET REVENUES                                       293,007              216,814
--------------------------------------------------------------------------------

COSTS AND EXPENSES:
   Casino                                           78,067               50,686
   Hotel                                             4,110                3,048
   Food and beverage                                16,519                9,521
   Other operating expenses                          6,451                5,575
   Depreciation and amortization                    23,961               13,339
   Lease expense                                     9,181                8,173
   Selling, general and administrative              84,899               61,848
--------------------------------------------------------------------------------
     Total Costs and Expenses                      223,188              152,190
--------------------------------------------------------------------------------

EARNINGS FROM OPERATIONS                            69,819               64,624
--------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
   Interest income                                   6,694                9,438 
   Interest expense                                (22,617)             (10,566)
   Other                                              (113)                  (0)
   Loss of unconsolidated affiliates                  (200)              (3,839)
--------------------------------------------------------------------------------
     Total expense, net                            (16,236)              (4,967)
--------------------------------------------------------------------------------

Earnings before income taxes                        53,583               59,657
Provision for income taxes                          20,686               22,601
--------------------------------------------------------------------------------

Net Earnings                                       $32,897              $37,056
================================================================================

EARNINGS PER COMMON SHARE                            $0.77                 0.86
================================================================================

WEIGHTED AVERAGE COMMON SHARES AND COMMON
 STOCK EQUIVALENTS OUTSTANDING                      42,618               43,063
================================================================================
</TABLE>


                                     -5-
<PAGE>   6
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                        (UNAUDITED)          
                                                                                      SIX MONTHS ENDED       
                                                                               ------------------------------
                                                                               JUNE 29, 1997    JUNE 30, 1996
-------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Earnings                                                                       $32,897          $37,056
  Adjustments to reconcile net earnings to net cash
   provided by operating activities:
   Depreciation and amortization                                                      23,961           13,339
   Equity in loss of unconsolidated affiliates                                           200            3,839
   Deferred income taxes                                                               1,250              616
   Changes in operating assets and liabilities:
      Other current assets                                                            (3,927)          (9,050)
      Accounts payable                                                                (5,641)          27,547
      Accrued expenses                                                                (1,106)          15,997
-------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                             47,634           89,344
-------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from repayment of notes receivable                                          3,905            7,809
  Investment in and notes receivable from unconsolidated affiliates                     -              (4,364)
  Payments for property and equipment                                               (101,590)        (195,946)
  Purchases of securities available for sale                                            -             (19,750)
  (Increase) decrease in cash and cash equivalents-restricted and other                3,626             (843)
  Increase in other long-term assets                                                  (3,878)         (11,461)
-------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                                (97,937)        (224,555)
-------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock-net                                             641           13,020
  Debt issuance costs and deferred financing costs                                       (79)          (4,774)
  Proceeds from issuance of long-term debt                                            45,088             -
  Payments on long-term debt and capital lease obligations                           (10,000)          (6,634)
-------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                                             35,650            1,612
-------------------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                            (14,653)        (133,599)
Cash and cash equivalents - beginning of period                                      147,254          334,772
-------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD                                           $132,601         $201,173
=============================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
   Interest - net of capitalized interest                                            $27,325          $10,714
   Income taxes                                                                      $17,301           $8,000

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.






                                     -6-

<PAGE>   7


                     GRAND CASINOS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JUNE 29, 1997
                                 (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 and one dockside casino in
         Tunica County, Mississippi, and manages two Indian-owned casinos in
         Minnesota and two Indian-owned casinos in Louisiana. Related hotel and
         entertainment facilities at Company-owned properties Grand Casino
         Biloxi and Grand Casino Tunica projects are currently under
         construction and will open at various times.  In addition, related
         hotel facilities at Indian-owned casinos Grand Casino Hinckley and
         Grand Casino Mille Lacs are currently under construction and will open
         at various times.  The Company also owns approximately 42% of
         Stratosphere Corporation (Stratosphere), which owns and operates
         Stratosphere Tower, Casino & Hotel, an integrated casino/hotel and
         entertainment complex located at the north end of Las Vegas Boulevard
         South in Las Vegas, Nevada. Stratosphere filed for reorganization
         under Chapter 11 of the Bankruptcy Code on January 27, 1997.  See Note
         7 for further discussion regarding Stratosphere's reorganization plan.

         The consolidated financial statements include the accounts of Grand    
         Casinos, Inc. and its wholly-owned and majority-owned subsidiaries.
         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.





                                    - 7 -


<PAGE>   8

                     GRAND CASINOS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 (UNAUDITED)




NOTE 1   UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

         Operating results for the six months ended June 29, 1997, are not      
         necessarily indicative of the results that may be expected for the
         fiscal year ending December 28, 1997.

         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 29, 1996.

NOTE 2   NEW ACCOUNTING PRONOUNCEMENT

         During March 1997, the Financial Accounting Standards Board released   
         Statement of Financial Accounting Standards No. 128, Earnings Per
         Share (SFAS 128), which requires the disclosure of basic earnings per
         share and diluted earnings per share.  The Company expects to adopt
         Statement 128 in fiscal 1997 and anticipates it will not have a
         material impact on the financial position or the results of operations
         of the Company.

NOTE 3   PREOPENING EXPENSES

         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.  These costs include direct payroll and other operating
         costs incurred prior to commencement of operations.  Depreciation and
         amortization for the six months ended June 29, 1997 and June 30, 1996
         includes approximately $1.0 million and $.3 million of preopening
         amortization expense, respectively.

NOTE 4   INTEREST COSTS

         The Company's policy is to capitalize interest incurred on debt during 
         the course of qualifying construction projects at Company-owned
         facilities.  Such costs are amortized over the related assets'
         estimated useful lives.  For the six months ended June 29, 1997 and
         June 30, 1996, approximately $3.7 million and $13.1 million,
         respectively, of interest cost was capitalized.






                                    - 8 -

<PAGE>   9
                                      
                     GRAND CASINOS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 (UNAUDITED)


NOTE 5   NOTES RECEIVABLE

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

                                                                     June 29, 1997         Dec. 29, 1996
                                                                     -------------         -------------
         <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                                                   21,693                 23,800

         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                                                           11,504                 12,558

         Other, less allowance for doubtful accounts
         of $3,050 and $3,050, respectively                              1,462                  2,206
                                                                       -------                -------
                                                                       $34,659                $38,564
         Less current installments of notes receivable                  (7,068)                (7,792)
                                                                       -------                -------
         Notes receivable-less current installments                    $27,591                $30,772
                                                                       =======                =======
</TABLE>

NOTE 6   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. The 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.





                                     - 9 -


<PAGE>   10

                     GRAND CASINOS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 (UNAUDITED)



NOTE 6   LONG-TERM DEBT (CONTINUED)

         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, is being 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 was used
         for furniture, fixtures and equipment for the 340,000 square foot
         casino complex.  The balance of approximately $30 million was be used
         to construct a 600-room hotel at Grand Casino Tunica.  As of June 29,
         1997, $120.0 million had been advanced and $109.4 million was the
         balance owing under the Senior Secured Term Loan Facility.

NOTE 7   COMMITMENTS AND CONTINGENCIES

         STRATOSPHERE CORPORATION

         The Company owns approximately 42% of the equity in Stratosphere
         Corporation.  Stratosphere did not make its scheduled First Mortgage
         Notes interest payment due on November 15, 1996.  On January 6, 1997,
         Stratosphere, the Company and an ad hoc committee representing the
         holders of more than 57% of Stratosphere's First Mortgage Notes reached
         an agreement-in-principle for restructuring the debt and equity of
         Stratosphere.

         On January 27, 1997, Stratosphere filed for reorganization under       
         Chapter 11 of the U.S. Bankruptcy Code.  Pursuant to the
         agreement-in-principle, Stratosphere and the Company filed a joint
         proposed plan of reorganization for Stratosphere and a related
         investment agreement, which stated the terms and conditions pursuant
         to which the Company agreed to participate in the reorganization of
         Stratosphere.

         The proposed plan of reorganization and the related investment 
         agreement provided that the Company's obligations to participate in the
         proposed reorganization were conditioned on Stratosphere obtaining
         average monthly consolidated cash flow (as defined in the investment
         agreement) of at least $2,267,000 for the months between October 1,
         1996 and June 30, 1997.  In June 1997, Stratosphere announced that its
         average monthly consolidated cash flow for the eight-month period
         ended May 25, 1997 was $1,470,996.




                                    - 10 -

<PAGE>   11


                     GRAND CASINOS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 (UNAUDITED)


         STRATOSPHERE CORPORATION (CONTINUED)
        
         As a result of Stratosphere's inability to satisfy the consolidated    
         cash flow condition, the Company terminated the original investment
         agreement.  On June 20, 1997, Stratosphere and the Company entered
         into an amended investment agreement and filed an amended plan of
         reorganization, establishing modified terms and conditions of the
         Company's participation in the reorganization of Stratosphere.  See
         Stratosphere's Form 8-K filed on June 25, 1997 for further information
         regarding the amended plan of reorganization.

         On July 25, 1997, Stratosphere advised the Company that an independent 
         committee of Stratosphere's Board of Directors had reached a
         preliminary determination that a restructuring proposal presented to
         Stratosphere by High River Limited Partnership and American Real
         Estate Partners, L.P. was more favorable than the restructuring
         proposal contained in the amended investment agreement and plan of
         reorganization.  The Company intends to continue to explore with
         Stratosphere and the Official Committee representing the holders of
         Stratosphere's First Mortgage Notes alternatives for a consensual
         reorganization of Stratosphere, including the possibility of further
         amending the Company's previous restructuring proposal.  If an
         alternative consensual arrangement cannot be reached, however, the
         Company may propose or participate in alternative plans of
         reorganization without such an arrangement or may terminate altogether
         the Company's participation in Stratosphere's reorganization process.

         In connection with the issuance of Stratosphere's First Mortgage       
         Notes, the Company delivered a Standby Equity Commitment pursuant to
         which the Company agreed, under the terms and conditions described in
         the Standby Equity Commitment, to purchase up to $20 million of
         additional equity in Stratosphere during each of the first three years
         Stratosphere is operating (as defined in the Standby Equity
         Commitment) to the extent Stratosphere's consolidated cash flow (as
         defined in the Standby Equity Commitment) during each of such years
         does not reach $50 million.  As a result of Stratosphere's bankruptcy
         filing and the application of federal bankruptcy laws, the Company has
         contended that the enforceability of the Standby Equity Commitment is
         in question.  This issue is currently the subject of litigation in
         Stratosphere's Chapter 11 proceedings.  See Part II - Item 1.  Legal
         Proceedings of this Form 10-Q.




                                    - 11 -


<PAGE>   12

                     GRAND CASINOS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                 (UNAUDITED)



         LOAN GUARANTY AGREEMENTS

         The Company has guaranteed two loan and security agreements entered    
         into by the Tunica-Biloxi Tribe of Louisiana for $14.1 million for the
         purpose of financing casino equipment and for $16.5 million for the
         purpose of purchasing a hotel and additional casino equipment. The
         agreements extend through 1998 and 2000, respectively, and as of June
         29, 1997, the amounts outstanding were $4.9 million and $15.3 million,
         respectively.

         The Company has also 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 June 29,
         1997, the amounts outstanding were $7.7 million. In addition, on May
         1, 1997, the Company entered into a guaranty agreement related to a
         loan agreement entered into by the Coushatta Tribe of Louisiana in the
         amount of $25.0 million, for the purpose of constructing a hotel and
         acquiring additional casino equipment.  The agreement and the
         underlying documents may be subject to the Bureau of Indian Affairs
         (BIA) approval.  Upon approval of the agreements by the BIA, the
         guaranty would be outstanding for five years.  As of June 29, 1997, no
         advances relating to this loan had been made.

         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 $2.6 million as of June 29, 1997.

         The Company has provided a limited guaranty pursuant to the 
         Stratosphere Participation Agreement for the purpose of financing
         hotel and casino equipment subject to a maximum limitation amount of
         $8.7 million.

         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.




                                    - 12 -



<PAGE>   13

                     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 based on the net
         distributable profits (as defined in the contracts) 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 29, 1996.






                                    - 13 -

<PAGE>   14

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



         OVERVIEW (CONTINUED)

         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

         SIX MONTHS ENDED JUNE 29, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE
         30, 1996

         Earnings Per Common Share and Net Earnings

         Earnings per common share for the six months ended June 29, 1997 were  
         $.77 versus $.86 for the prior year's comparable period based upon
         weighted average common shares outstanding of 42.6 million and 43.1
         million for the six month periods ended June 29, 1997 and June 30,
         1996, respectively.  Net earnings decreased $4.2 million to $32.9
         million for the six months ended June 29, 1997 compared to the prior
         year as a result of less interest capitalized during the six months
         ended June 29, 1997 compared to the prior year.  During the six months
         ended June 30, 1996 capitalized interest on qualifying construction
         projects was $13.1 million, whereas, for the six months ended June 29,
         1997 capitalized interest on qualifying construction projects was $3.7
         million, a decrease of $9.4 million or approximately $5.8 million
         after taxes.  The decrease in qualifying construction projects can
         largely be attributable to the opening of the casino and related
         projects of Grand Casino Tunica on June 24, 1996.  In addition, the
         results of 1996 included the Company's share of losses from
         Stratosphere in the amount of $3.8 million, whereas 1997 does not
         include any losses from Stratosphere.






                                    - 14 -


<PAGE>   15

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

         Gross Revenues

         Grand Casino Biloxi, Grand Casino Gulfport, and Grand Casino Tunica
         generated $222.3 million in gross casino revenue and $54.0 million in
         gross hotel, food, beverage, retail and entertainment revenue during
         the six months ended June 29, 1997.  During the six months ended June
         30, 1996, Grand Casino Tunica, Grand Casino Biloxi and Grand Casino
         Gulfport generated $154.6 million in gross casino revenue and $36.4
         million in gross food, beverage, and retail revenue.  The increase in
         gross revenues is primarily related to the opening of Grand Casino
         Tunica which contributed $86.6 million of gross revenues for the six
         months ended June 29, 1997.  Combined gross revenues for Grand Casino
         Biloxi and Grand Casino Gulfport increased $3.7 million for the six
         months ended June 29, 1997 compared to the same period in the prior
         year.  Lastly, management fees were approximately the same for the six
         months ended June 29, 1997 compared to the same period in the prior
         year ($.2 million decrease from 1996 was principally related to
         management fee income from Stratosphere in 1996, whereas 1997 does not
         include Stratosphere management fee income).


         Net Revenues

         Net revenues for the Company increased $76.2 million for the six
         months ended June 29, 1997 compared to the same period in the prior
         year.  The increase in net revenues is primarily due to the opening of
         Grand Casino Tunica, which contributed revenues of $78.6 million
         during the six months ended June 29, 1997 compared to $4.8 million
         during the six months ended June 30, 1996.  In addition, combined net
         revenues of Grand Casino Biloxi and Grand Casino Gulfport increased
         $2.7 million for the six months ended June 29, 1997 compared to the
         same period in the prior year.  The Company implemented a new
         Marketing campaign in 1997 for Grand Casino Biloxi and Grand Casino
         Gulfport which has increased the level of play; however, it has only
         slightly impacted win due to lower win percentages in table games and
         slots.  The increase in net revenues for Grand Casino Biloxi and Grand
         Casino Gulfport has principally been due to non-gaming revenues.

         Costs and Expenses

         Total costs and expenses increased $71.0 million from $152.2 million
         for the six months ended June 30, 1996 to $223.2 million for the six
         month period ended June 29, 1997.


                                     - 15 -
<PAGE>   16

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



           Costs and Expenses (Continued)

           Casino expenses were $78.1 million for the six month period June 29,
           1997 compared to $50.7 million for the comparable period last year.
           The increase of $27.4 million was comprised of additional casino
           expenses for Grand Casino Tunica in the amount of $23.9 million as
           Grand Casino Tunica was open all of 1997, whereas, approximately one
           week of operations were included in 1996 results. Included in the
           $23.9 million increase is depreciation and amortization for Grand
           Casino Tunica in the amount of $9.5 million.  The increase for Grand
           Casino Biloxi and Grand Casino Gulfport for the six months ended June
           29, 1997 compared to the same period in the prior year in the amount
           of $3.5 million was principally a result of additional 
           complimentaries and labor to service and attract guests. Food and
           beverage expenses increased $7.0 million to $16.5 million for the six
           month period ended June 29, 1996, $5.5 million of which relates to
           the opening of Grand Casino Tunica.

           Selling, general, and administrative expenses increased in the
           amount of $23.1 million from $61.8 million for the six months ended
           June 30, 1996 to $84.9 million for the six months ended June 29,
           1997.  Grand Casino Tunica's selling, general, and administrative
           expenses increased $27.3 million from the six months ended June 30,
           1996 to the six months ended June 29, 1997.  In addition, combined
           selling, general, and administrative expenses for Grand Casino
           Biloxi and Grand Casino Gulfport increased slightly from 1996 to
           1997 ($.4 million).  Lastly, corporate expense decreased $3.2
           million from the six months ended June 30, 1996 to the six months
           ended June 29, 1997 as a result of the corporate reorganization plan
           implemented in late 1996.

           Other

           Interest income decreased by $2.7 million to $6.7 million for the
           six months ended June 29, 1997 from the comparable period last year.
           This decrease is primarily attributable to lower cash balances due
           to construction at Grand Casino Biloxi and Grand Casino Tunica.  In
           addition, interest expense increased by $12.0 million to $22.6
           million for the six months ended June 29, 1997 compared to $10.6
           million for the six months ended June 30, 1996.  The increase is the
           result of a reduction in capitalized interest relating to the
           construction of Grand Casino Tunica and interest incurred under the
           $120 million Senior Secured Term Loan.  Capitalized interest was
           $3.7 million and $13.1 million for the six months ended June 29,
           1997 and June 30, 1996, respectively.



                                     - 16 -


<PAGE>   17

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



           THREE MONTHS ENDED JUNE 29, 1997 COMPARED TO THE THREE MONTHS ENDED
           JUNE 30, 1996

           Earnings Per Common Share and Net Earnings

           Earnings per common share for the three months ended June 29, 1997
           were $.43 versus $.45 for the prior year's comparable period based
           upon weighted average common shares outstanding of 42.9 million and
           43.3 million for the three month periods ended June 29, 1997 and
           June 30, 1996, respectively.  Net earnings decreased $1.1 million to
           $18.3 million for the three months ended June 29, 1997 compared to
           the same period in the prior year as a result of interest incurred
           on new property financing for Grand Casino Tunica and less interest
           capitalized during the three months ended June 29, 1997 compared to
           the prior year.  During the three months ended June 30, 1996,
           capitalized interest on qualifying construction projects was $6.9
           million, whereas, for the three months ended June 29, 1997
           capitalized interest on qualifying construction projects was $1.3
           million, a decrease of $5.6 million or approximately $3.4 million
           after taxes.  The decrease in qualifying construction projects can 
           be attributed to the opening of the casino and related
           projects of Grand Casino Tunica on June 24, 1996.  In addition, the
           results for the three months ended June 30, 1996 included the
           Company's share of losses from Stratosphere in the amount of $4.7
           million, whereas 1997 does not include any losses from Stratosphere.


           Gross Revenues

           Grand Casino Biloxi, Grand Casino Gulfport, and Grand Casino Tunica
           generated $113.6 million in gross casino revenue and $29.3 million
           in gross hotel, food, beverage, retail, and entertainment revenue
           during the three months ended June 29, 1997.  During the three
           months ended June 30, 1996, Grand Casino Tunica, Grand Casino Biloxi
           and Grand Casino Gulfport generated $80.3 million in gross casino
           revenue and $19.5 million in gross hotel, food, beverage and retail
           revenue.  The increase in gross revenues is primarily related to the
           opening of Grand Casino Tunica which contributed $47.5 million of
           gross revenues for the three months ended June 29, 1997.  Combined
           gross revenues for Grand Casino Biloxi and Grand Casino Gulfport
           increased $.5 million for the three months ended June 29, 1997
           compared to the same period in the prior year.  Lastly, management
           fees were approximately the same for the three months ended June 29,
           1997 compared to the same period in the prior year ($.6 million
           decrease from 1996 was principally related to management fee income
           from Stratosphere in 1996, whereas 1997 does not include
           Stratosphere management fee income).



                                     - 17 -
<PAGE>   18


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


           Net Revenues

           Net revenues for the Company increased $37.9 million for the three
           months ended June 29, 1997 compared to the same period in the prior
           year.  The increase in net revenues is primarily due to the opening
           of Grand Casino Tunica, which contributed net revenues of $42.7
           million during the three months ended June 29, 1997, compared to
           $4.8 million during the three months ended June 30, 1996.  In
           addition, combined net revenues of Grand Casino Biloxi and Grand
           Casino Gulfport increased $.6 million for the three months ended
           June 29, 1997 compared to the same period in the prior year.  The
           Company implemented a new Marketing campaign in 1997 for Grand
           Casino Biloxi and Grand Casino Gulfport, which has increased the
           level of play; however, it has only slightly impacted win due to
           lower win percentages in table games and slots.  The increase in net
           revenues for Grand Casino Biloxi and Grand Casino Gulfport has
           principally been due to non-gaming revenues.


           Costs and Expenses

           Total costs and expenses increased $36.2 million from $75.7 million
           for the three months ended June 30, 1996 to $111.9 million for the
           three month period ended June 29, 1997.  Casino expenses were $39.6
           million for the three month period ended June 29, 1997 compared to
           $26.4 million for the comparable period in 1996.  The increase of
           $13.2 million was comprised of additional casino expenses for Grand
           Casino Tunica in the amount of $11.8 million as Grand Casino Tunica
           was open the entire three months ended June 29, 1997, whereas,
           approximately one week of operations were included in 1996 results.
           The increase for Grand Casino Biloxi and Grand Casino Gulfport for
           the three months ended June 29, 1997 compared to the same period in
           the prior year in the amount of $1.4 million was principally a result
           of additional complimentaries and labor to service and attract
           guests.  Food and beverage expenses increased $3.6 million to $8.5
           million for the three month period ended June 29, 1997, of which $2.8
           million was a result of the opening of Grand Casino Tunica. Selling,
           general, and administrative expenses increased in the amount of $11.9
           million from $29.1 million for the three months ended June 30, 1996
           to $41.0 million for the three months ended June 29, 1997.



                                     - 18 -


<PAGE>   19


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


           Costs and Expenses (Continued)

           Grand Casino Tunica's selling, general, and administrative expenses
           increased $13.6 million from the three months ended June 30, 1996 to
           the three months ended June 29, 1997.  In addition, combined
           selling, general, and administrative expenses for Grand Casino
           Biloxi and Grand Casino Gulfport decreased $1.6 million from the
           three months ended June 30, 1996 to the three months ended June 29,
           1997 primarily due to a reduction of Marketing expenses with the new
           Marketing campaign implemented in late 1996.

           Other

           Interest income decreased by $1.1 million to $3.0 million for the
           three months ended June 29, 1997.  This decrease is primarily
           attributable to lower cash balances due to construction at Grand
           Casino Biloxi and Grand Casino Tunica.  In addition, interest
           expense increased by $7.1 million to $12.0 million for the three
           months ended June 29, 1997 compared to $4.9 million for the three
           months ended June 30, 1996.  The increase is the result of a
           reduction in capitalized interest relating to the construction of
           Grand Casino Tunica and advances under the $120 million Senior
           Secured Term Loan.  Capitalized interest was $1.3 million and $6.9
           million for the three months ended June 29, 1997 and June 30, 1996,
           respectively.

           CAPITAL RESOURCES AND LIQUIDITY

           As of June 29, 1997, the company had cash and cash equivalents of
           $132.6  million.  For the six months ended June 29, 1997, capital
           expenditures were $101.6 million compared to $195.9 million for the
           comparable period in the prior year.  The majority of expenditures
           for the six months ended June 29, 1997, related to additional
           construction at Grand Casino Biloxi and Grand Casino Tunica.  Based
           on the projected cash generated from operations and current cash and
           cash equivalents, the Company believes it will have sufficient
           resources to fund operations and proposed capital expenditures
           during the next twelve months.

           Pursuant to the Company's covenants related to the $450.0 million
           First Mortgage Notes, the Company is restricted from paying cash
           dividends and must maintain certain financial ratios.  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.


                                     - 19 -



<PAGE>   20

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




           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" under the Federal Private
           Securities Litigation Reform Act of 1995.

           Forward-looking statements are those which include statements
           regarding projections, plans and objectives, and future economic
           performance, together with statements regarding any assumptions
           pertaining to such projections, plans and objectives, and future
           economic performance.  While these forward-looking statements
           reflect the best judgment of the Company, based on information
           available on the date of this Form 10-Q, such statements are all
           subject to risks and uncertainties that could cause actual results
           to vary from the forward-looking statements made in this Form 10-Q.
           Those variances could be significant.

           Such forward-looking statements involve risks and uncertainties that
           could significantly affect future results, 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), changes in competitive conditions,
           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).  In addition to any specific risks and uncertainties
           mentioned or discussed in this Form 10-Q, the risks and
           uncertainties discussed in detail in the Company's 1996 Form 10-K,
           provide information which should be considered in evaluating any of
           the Company's forward-looking statements.  In addition, you should
           be aware that the facts and circumstances which exist when any
           forward-looking statements are made and on which those
           forward-looking statements are based, may significantly change in
           the future, thereby rendering obsolete the forward-looking
           statements on which such facts and circumstances were based.




                                     - 20 -



<PAGE>   21

                     GRAND CASINOS, INC. AND SUBSIDIARIES
                                   PART II
                              OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS

         The following descriptions are summaries of the status of each of the
         following legal proceedings as of August 1, 1997.  More complete
         information may be obtained by reviewing the court files pertaining to
         such actions.

         COHEN - FEDERAL ACTION

         In April 1994, Harvey Cohen brought an action in the United States
         District Court for the District of Nevada -- Harvey Cohen, et. al. v.
         Stratosphere Corporation, et. al. - Case No. CV-S-94-00334 DWH (LRL)
         -- against various defendants, including Grand Casinos Resorts, Inc.
         ("Resorts"), a wholly-owned subsidiary of the Company.  Cohen alleges
         federal securities law violations and various state law claims in
         connection with the initial public offering (the "IPO") for
         Stratosphere Corporation ("Stratosphere"). Cohen brought the action as
         a class action, and alleges that the defendants deprived the
         plaintiffs of the opportunity  to purchase Stratosphere common stock
         in the IPO.

         In April 1995, the federal district court dismissed the action.  In
         May 1995, the plaintiffs filed a notice of appeal of the dismissal
         with the United States Court of Appeals for the Ninth Circuit.  The
         appeal -- Case No. CA 95-16098 -- was subsequently briefed and argued,
         and in June 1997, the Appeals Court issued its decision affirming the
         district court's dismissal of the action.

         COHEN - STATE ACTION

         In August 1995, Harvey Cohen brought an action in the District Court
         for Clark County, Nevada -- Harvey J. Cohen, et. al. v. Stratosphere
         Corporation, et. al. - Case No. A349985 -- against various defendants,
         including Grand Casinos Resorts, Inc., a wholly-owned subsidiary of
         the Company.  Cohen brought the action as a class action, and makes
         substantially the same claims as made in the federal action brought by
         Cohen and described above.

         The state action has, by agreement of the parties, been stayed pending
         a decision in the federal court action.






                                    - 21 -



<PAGE>   22

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)



           CALIFORNIA VIDEO POKER LITIGATION

           In April 1996, three plaintiffs brought an action in the Superior
           Court of California, County of San Diego -- Tom Payne, et. al. v.
           Aztar Corporation, et. al. - Case No. 698592 -- against several
           defendants, including the Company.  The plaintiffs allege that the
           defendants participated in fraudulent and misleading conduct
           intended to induce plaintiffs to play video poker machines based on
           false beliefs regarding how such machines operate, and that the
           defendants' alleged conduct violates various provisions of
           California law.  The plaintiffs seek to have the action certified a
           class action, compensatory and punitive damages and other relief.

           The defendants attempted to remove the action to federal court, but
           that attempt was unsuccessful.  The defendants then submitted
           various motions to dismiss the action, including a motion based on
           the claim that the California court does not have jurisdiction over
           the defendants named in the action.

           In March 1997, the court required the plaintiffs to file a
           complaint stating more clearly the basis on which the plaintiffs
           claim the defendants violated California law.  In April 1997, the
           plaintiffs filed an amended complaint.  The amended complaint
           includes allegations that the defendants directed advertisements to
           California residents which include false statements regarding video
           poker machines.  The Company asserts that the California courts do
           not have jurisdiction over the Company, and, therefore, has asked
           the court to dismiss the action with respect to the Company.

           SLOT MACHINE LITIGATION - NEVADA

           In April 1994, William H.  Poulos brought an action in the United
           States District Court for the Middle District of Florida, Orlando
           Division -- William H. Poulos, et. al. vs. Caesars World, Inc. et.
           al. - Case No. 39-478-CIV-ORL-22 -- in which various parties
           (including the Company) alleged to operate casinos or be slot
           machine manufacturers were named as defendants.  The plaintiff
           sought to have the action certified as a class action.

           A subsequently filed action -- William Ahearn, et. al. vs. Caesars
           World, Inc., et. al. - Case No. 94-532-CIV-ORL-22 -- made similar
           allegations and was consolidated with the Poulos action.




                                     - 22 -


<PAGE>   23


                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)




           SLOT MACHINE LITIGATION - NEVADA (CONTINUED)

           Both actions included claims under the federal
           Racketeering-Influenced and Corrupt Organizations Act and under
           state law, and sought compensatory and punitive damages.  The
           plaintiffs claimed that the defendants are involved in a scheme to
           induce people to play electronic video poker and slot machines
           based on false beliefs regarding how such machines operate and the
           extent to which a player is likely to win on any given play.

           In December 1994, the consolidated actions were transferred to the
           United States District Court for the District of Nevada.

           In September 1995, Larry Schreier brought an action in the United
           States District Court for the District of Nevada -- Larry Schreier,
           et. al. vs. Caesars World, Inc., et. al. - Case No.
           CV-S-95-00923-DWH (RJJ).

           The plaintiffs' allegations in the Schreier action were similar to
           those made by the plaintiffs in the Poulos and Ahearn actions,
           except that Schreier claimed to represent a more precisely defined
           class of plaintiffs than Poulos or Ahearn.

           In December 1996, the court ordered the Poulos, Ahearn and Schreier
           actions consolidated under the title William H. Poulos, et. al. vs.
           Caesars World, Inc., et. al. - Case No. CV-S-94-1126 - DAE (RJJ) -
           (Base File), and required the plaintiffs to file a consolidated and
           amended complaint.  In February 1997, the plaintiffs filed a
           consolidated and amended complaint.

           In March 1997, various defendants (including the Company) filed (i)
           motions to dismiss the amended complaint, and (ii) motions to stay
           the consolidated action pending consideration of the plaintiff's
           allegations by various gaming regulatory authorities.  As of August
           1, 1997, the court has not issued a decision regarding any of such
           motions.









                                     - 23 -


<PAGE>   24

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)



           STRATOSPHERE SECURITIES LITIGATION - FEDERAL

           In August 1996, a complaint was filed in the United States District
           Court for the District of Nevada -- Michael Caesar, et. al. v.
           Stratosphere Corporation, et. al. -- against Stratosphere
           Corporation and others, including the Company.  The complaint was
           filed as a class action, and sought relief on behalf of
           Stratosphere shareholders who purchased their stock between
           December 19, 1995 and July 22, 1996.  The complaint included
           allegations of misrepresentations, federal securities law
           violations and various state law claims.

           In August through October 1996, several other nearly identical
           complaints were filed by various plaintiffs in the United States
           District Court for the District of Nevada.  Those complaints
           include the following:


           -    Regina Peltz, et. al. v. Stratosphere Corporation, et. al.      
                                                                                
           -    Robert Stengel, et. al. v. Stratosphere Corporation, et. al.    
                                                                                
           -    Robert Johnson, et. al. v. Stratosphere Corporation, et. al.    
                                                                                
           -    David Vallee, et. al. v. Stratosphere Corporation, et. al.      
                                                                                
           -    Anthony L. Poli, et. al. v. Stratosphere Corporation, et. al.   
                                                                                
           -    Darrell Russell and Gail Russell, et. al. v. Stratosphere       
                Corporation, et. al.                                            
                                                                                
           -    Mitchell Gordon, et. al. v. Stratosphere Corporation, et. al.   
                                                                                
           -    James J. Enright, Jr. v. Stratosphere Corporation, et. al.      


           The defendants in the above actions submitted motions requesting     
           that all of the actions be consolidated.  Those motions were granted
           on January 15, 1997, and the consolidated action is entitled IN Re: 
           Stratosphere Corporation Securities Litigation - Master File No.
           CV-S-96-00708 PMP (RLH).




                                     - 24 -


<PAGE>   25

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)



           STRATOSPHERE SECURITIES LITIGATION - FEDERAL (CONTINUED)

           In February 1997, the plaintiffs filed a consolidated and amended
           complaint naming various defendants, including the Company and
           certain officers and directors of the Company.  The amended
           complaint includes claims under federal securities laws and Nevada
           laws based on acts alleged to have occurred between December 19,
           1995 and July 26, 1996.

           In February 1997, various defendants, including the Company and the
           Company's officers and directors named as defendants, submitted
           motions to dismiss the amended complaint on various grounds,
           including the Company's claim that the amended complaint failed to
           state a valid cause of action against the Company and the Company's
           officers and directors.

           In May 1997, the court issued an order dismissing the action.  The
           original dismissal order did not allow the plaintiffs to amend
           their complaint in an attempt to state a valid cause of action.

           In June 1997, the plaintiffs asked the court to reconsider its
           dismissal order.  In July 1997, the court amended its dismissal
           order to provide that the amended complaint was dismissed, but that
           the plaintiffs could submit a second amended complaint by August
           22, 1997.  As of August 1, 1997, the plaintiffs have not filed a
           second amended complaint.

           STRATOSPHERE SECURITIES LITIGATION - STATE

           In August 1996, a complaint was filed in the District Court for
           Clark County, Nevada -- Victor M. Opitz, et. al. v. Robert E.
           Stupak, et. al. - Case No. A363019 -- against various defendants,
           including the Company.  The complaint seeks relief on behalf of
           Stratosphere Corporation shareholders who purchased stock between
           December 19, 1995 and July 22, 1996.  The complaint alleges
           misrepresentations, state securities law violations and other state
           claims.

           The Company and certain defendants submitted motions to (i)
           dismiss, or (ii) stay the state court proceedings pending
           resolution of the federal court actions described above.  The court
           has stayed further proceedings pending the proceedings in federal
           district court IN Re: Stratosphere Securities Litigation.




                                     - 25 -

<PAGE>   26

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)




           GRAND SECURITIES LITIGATION - FEDERAL

           In September and October 1996, two actions (Joel Blake, et. al. v.
           Grand Casinos, Inc., et. al. and Robert D. Marcus, et. al. v. Grand
           Casinos, Inc., et. al.) were filed in the United States District
           Court for the District of Minnesota against the Company and certain
           of the Company's directors and officers.

           The complaints allege misrepresentations, federal securities law
           violations and other claims in connection with the Stratosphere
           project.

           The actions have been consolidated -- IN Re:  Grand Casinos, Inc.
           Securities Litigation - Master File No. 4-96-890 -- and the
           plaintiffs filed a consolidated complaint.  The defendants have
           submitted a motion to dismiss the consolidated complaint.  The
           court heard arguments regarding the motion in May 1997, but has not
           issued a decision regarding the motion to dismiss.

           MICHAELS COMPANY OF NEVADA

           In December 1996, a complaint was filed in the United States
           District Court for the District of Nevada -- Michaels Company of
           Nevada v. Grand Casinos, Inc., et. al. - Case No. CV-S-96-01006-PMP
           (RLH) -- against the Company and others, including certain
           directors and officers of the Company.  The complaint alleges that
           the Company improperly withdrew from an agreement to finance and
           develop a potential Indian-owned gaming project in California.

           The complaint seeks lost profits which the plaintiff claims it
           would have received had the Company not withdrawn. The Company
           believes that it had legitimate business reasons to withdraw from
           the proposed project.

           The Company and the other defendants have submitted answers denying
           the allegations of the complaint.  The parties to the action are
           engaged in discovery.








                                     - 26 -


<PAGE>   27


                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)




           DERIVATIVE ACTION

           In February 1997, certain shareholders of the Company brought an
           action in  the Hennepin County, Minnesota District Court  -- Lloyd
           Drilling, et. al. v. Lyle Berman, et. al. - Court File No.
           MC97-002807 --  against certain officers and directors of the
           Company.  The plaintiffs allege that those officers and directors
           breached certain fiduciary duties to the shareholders of the
           Company as a result of certain transactions involving the
           Stratosphere project.

           The Company's Board of Directors appointed an independent special
           litigation committee to evaluate whether the Company should pursue
           the claims against the officers and directors.

           The Company's officers and directors named as defendants in the
           action have filed an answer to the complaint.  The special
           litigation committee has asked the court stay discovery in the
           action pending completion of the special litigation committee's
           evaluation.

           STRATOSPHERE VACATION CLUB LITIGATION

           In late April, 1997, the Company and Grand Casinos Resorts, Inc.
           ("Resorts"), a wholly-owned subsidiary of the Company, were served
           with a summons and a second amended complaint in an action in
           District Court in Clark County, Nevada -- Richard Duncan, et. al.
           vs. Bob and Jane Doe Stupak, et. al. - Case No. A370127.  The
           plaintiffs allege that the defendants, including the Company and
           Resorts, engaged in acts which constitute "consumer fraud" under
           Nevada law in connection with vacation packages which the
           defendants claim to have purchased from Bob Stupak.  The plaintiffs
           also allege "unjust enrichment", breach of contract and other
           claims under Nevada law. The plaintiffs seek to pursue their claims
           as a class action, and ask for various remedies including
           compensatory damages and punitive damages.

           The Company has submitted a motion to dismiss the complaint as it
           pertains to Company and Resorts.  The court denied the motion to
           dismiss.  The Company is evaluating whether to submit a request for
           reconsideration of the denial of the dismissal.




                                     - 27 -


<PAGE>   28

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)





           STRATOSPHERE NOTEHOLDER COMMITTEE BANKRUPTCY COURT ACTION

           In June 1997, the Official Committee of Noteholders (the
           "Committee") in the Chapter 11 bankruptcy proceeding for
           Stratosphere Corporation ("Stratosphere") pending in the United
           States Bankruptcy Court for the District of Nevada (the "Bankruptcy
           Court") filed a motion by which the Committee sought Bankruptcy
           Court approval for assumption (on behalf of Stratosphere's
           bankruptcy estate) of the March 1995 Standby Equity Commitment (the
           "Standby Equity Commitment") between Stratosphere and the Company.
           In the motion, the Committee seeks Bankruptcy Court authorization to
           compel the Company to fund up to $60 million in "capital
           contributions" to Stratosphere over three years, based on the
           Committee's claim that such "contributions" are required by the
           Standby Equity Commitment.

           Both the Company and Stratosphere opposed the Committee's motion.
           The Bankruptcy Court held a preliminary hearing on the Committee's
           motion in June 1997, and set future evidentiary hearings on the
           issues raised by the Committee's motion and the Company's opposition
           to that motion.

           The Company anticipates filing a motion for summary judgment with
           respect to some of the legal issues raised by the Committee's motion
           and the Company's opposition to that motion.  The Company has
           asserted, in its opposition to the Committee's motion, that the
           Standby Equity Commitment is not enforceable in the Stratosphere
           bankruptcy proceeding as a matter of law.

           Discovery is ongoing with respect to some of the factual issues
           raised by the Committee's motion and the Company's opposition to
           that motion.  Accordingly, the Bankruptcy Court has not issued a
           definitive ruling regarding the Committee's motion.










                                     - 28 -


<PAGE>   29

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                                    PART II
                               OTHER INFORMATION
                                  (CONTINUED)




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

         (a) The Annual Meeting of Shareholders was held on May 9, 1997.

         (b) Matters voted upon:

             (1)  Directors elected at meeting:

                                    Affirmative   Negative              
                                       Votes        Votes    Abstentions 
                                    -----------   --------   ----------- 
                                                                    
                  Lyle Berman        27,974,712    360,367    13,515,807
                  Thomas J. Brosig   28,003,131    331,928    13,515,807
                  Morris Goldfarb    27,991,569    343,510    13,515,807
                  Ronald Kramer      27,991,215    343,864    13,515,807
                  David L. Rogers    27,989,476    345,604    13,515,807
                  Neil I. Sell       27,881,675    453,404    13,515,807
                  Stanley M. Taube   27,994,275    340,804    13,515,807
                  Joel N. Waller     27,992,873    342,206    13,515,807


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibit Number 27  -  Financial Data Schedule

         (b) No reports on Form 8-K were filed during the quarterly period
             ended June 29, 1997.









                                     - 29 -


<PAGE>   30

                                   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:   August 13, 1997         GRAND CASINOS, INC.
                                 -------------------
                                 Registrant



                                 By: _______________________________
                                 Thomas J. Brosig, President




     
                                 ___________________________________
                                 Timothy J. Cope              
                                 Executive Vice President and 
                                 Chief Financial Officer      









                                    -30-