<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 March 29, 1998

                                       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 May 8, 1998, there were 42,155,485 shares of Common Stock, $0.01 par value
per share, outstanding.


                                  Page 1 of 29

<PAGE>   2

                      GRAND CASINOS, INC. AND SUBSIDIARIES

                                      INDEX


<TABLE>
<CAPTION>

                                                                                                 Page of
                                                                                                Form 10-Q
                                                                                                ---------
<S>           <C>           <C>                                                                    <C>
PART I.        FINANCIAL INFORMATION

               ITEM 1.       FINANCIAL STATEMENTS

                             Consolidated Balance Sheets as of                                       3
                             March 29, 1998 and December 28, 1997

                             Consolidated Statements of Earnings                                     4
                             for the three months ended March 29, 1998
                             and March 30, 1997

                             Consolidated Statements of Cash Flows                                   5
                             for the three months ended March 29, 1998
                             and March 30, 1997

                             Notes to Consolidated Financial Statements                              6

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

PART II.       OTHER INFORMATION

               ITEM 1.       Legal Proceedings                                                      20

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

</TABLE>



                                      - 2 -


<PAGE>   3

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

<TABLE>
<CAPTION>

                                                                       (UNAUDITED)           *
                                                                    MARCH 29, 1998   DECEMBER 28, 1997
------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>
ASSETS
Current Assets:
    Cash and cash equivalents                                        $221,536            $238,635
    Current installments of notes receivable                            5,525               6,856
    Accounts receivable                                                23,245              15,644
    Deferred income taxes                                              12,602              13,399
    Other current assets                                               15,219              15,087
--------------------------------------------------------------------------------------------------
Total Current Assets                                                  278,127             289,621
--------------------------------------------------------------------------------------------------
Property and Equipment-Net                                            974,605             941,022
--------------------------------------------------------------------------------------------------
Other Assets:
    Cash and cash equivalents-restricted                                8,405               4,967
    Securities available for sale                                      16,878              13,110
    Notes receivable-less current installments                         29,003              26,979
    Investments in and notes from unconsolidated affiliates             8,123               8,180
    Debt issuance and deferred licensing costs-net                     25,012              26,000
    Other long-term assets                                             27,672              23,858
--------------------------------------------------------------------------------------------------
Total Other Assets                                                    115,093             103,094
--------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                       $1,367,825          $1,333,737
==================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Accounts payable                                                   $9,249             $12,947
    Current installments of long-term debt                              2,912               3,509
    Current installments of capital lease obligations                  93,873              97,376
    Accrued interest                                                   19,926               5,817
    Accrued payroll and related expenses                               19,823              25,555
    Other accrued expenses                                             34,981              22,398
--------------------------------------------------------------------------------------------------
Total Current Liabilities                                             180,764             167,602
--------------------------------------------------------------------------------------------------
Long-term Liabilities:
    Long-term debt-less current installments                          566,487             566,434
    Deferred income taxes                                              97,749              97,085
--------------------------------------------------------------------------------------------------
Total Long-Term Liabilities                                           664,236             663,519
--------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                     845,000             831,121
--------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
    Capital stock, $.01 par value; authorized 100,000 shares; 
        common stock issued and outstanding 42,054 and 41,966
        at March 29, 1998 and December 28, 1997, respectively             420                 420
    Additional paid-in-capital                                        414,076             413,631
    Net unrealized losses on securities available for sale               (622)             (2,947)
    Retained earnings                                                 108,951              91,512
--------------------------------------------------------------------------------------------------
Total Shareholders' Equity                                            522,825             502,616
--------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $1,367,825          $1,333,737
==================================================================================================

</TABLE>

 *  DERIVED FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEE ACCOMPANYING NOTES TO 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
                                                            -----------------------------------------

                                                             MARCH 29, 1998         MARCH 30, 1997

-----------------------------------------------------------------------------------------------------
<S>                                                                  <C>                   <C>
REVENUES:
     Casino                                                           $126,182             $ 108,680
     Hotel                                                               9,870                 7,063
     Food and beverage                                                  17,871                14,605
     Management fee income                                              23,030                19,054
     Retail and other income                                             2,967                 2,937
-----------------------------------------------------------------------------------------------------
Gross Revenues                                                         179,920               152,339
     Less:  Promotional allowances                                     (13,456)              (10,169)
-----------------------------------------------------------------------------------------------------
NET REVENUES                                                           166,464               142,170
-----------------------------------------------------------------------------------------------------

COSTS AND EXPENSES:
     Casino                                                             41,323                38,480
     Hotel                                                               3,095                 1,819
     Food and beverage                                                   8,870                 7,985
     Other operating expenses                                            2,901                 3,061
     Depreciation and amortization                                      14,063                11,551
     Lease expense                                                       5,395                 4,505
     Selling, general and administrative                                54,697                43,906
-----------------------------------------------------------------------------------------------------
        Total Costs and Expenses                                       130,344               111,307
-----------------------------------------------------------------------------------------------------

EARNINGS FROM OPERATIONS                                                36,120                30,863
-----------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
     Interest income                                                     4,067                 3,713
     Interest expense                                                  (11,697)              (10,646)
     Other                                                                (305)                 (188)
-----------------------------------------------------------------------------------------------------
        Total expense, net                                              (7,935)               (7,121)
-----------------------------------------------------------------------------------------------------

Earnings before income taxes                                            28,185                23,742
Provision for income taxes                                              10,746                 9,161
-----------------------------------------------------------------------------------------------------

Net Earnings                                                          $ 17,439             $  14,581
=====================================================================================================

BASIC EARNINGS PER SHARE                                              $   0.42             $    0.35
=====================================================================================================

DILUTED EARNINGS PER SHARE                                            $   0.40             $    0.34
=====================================================================================================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                              41,984                41,827
=====================================================================================================

WEIGHTED AVERAGE COMMON AND DILUTED
  SHARES OUTSTANDING                                                    43,494                42,434
=====================================================================================================

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                      - 4 -
<PAGE>   5
                      GRAND CASINOS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                       (UNAUDITED)
                                                                                   THREE MONTHS ENDED
                                                                            MARCH 29, 1998     MARCH 30, 1997
----------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Earnings                                                                    $17,439            $14,581
     Adjustments to reconcile net earnings  to net cash
       provided by operating activities:
      Depreciation and amortization                                                   14,063             11,551
      Equity in loss of unconsolidated affiliates                                         48                188
      Deferred income taxes                                                                -              1,250
      Changes in operating assets and liabilities:
           Current assets                                                             (7,824)            (5,651)
           Accounts payable                                                           (3,698)            (5,801)
           Accrued expenses                                                           21,013              3,581
----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                             41,041             19,699
----------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Payments for property and equipment                                             (46,058)           (36,813)
     Increase in notes receivable                                                     (2,024)                 -
     Proceeds from repayment of notes receivable                                       1,331              2,136
     Decrease (increase) in cash and cash equivalents-restricted and other            (3,438)               826
     Decrease (increase) in other long-term assets                                    (4,135)               132
----------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                                (54,324)           (33,719)
----------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common stock-net                                          445                256
     Debt issuance costs and deferred financing costs                                   (161)                57
     Payments on long-term debt and capital lease obligations                         (4,100)            (4,991)
----------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities                                                 (3,816)            (4,678)
----------------------------------------------------------------------------------------------------------------


Net decrease in cash and cash equivalents                                            (17,099)           (18,698)
Cash and cash equivalents - beginning of year                                        238,635            147,254
----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR                                             $221,536           $128,556
================================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
      Interest - net of capitalized interest                                          $1,526               $890
      Income taxes                                                                         -             10,500

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                  - 5 -

<PAGE>   6

                      GRAND CASINOS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 29, 1998
                                   (UNAUDITED)



NOTE 1            UNAUDITED FINANCIAL STATEMENTS

                  Grand Casinos, Inc. and its subsidiaries, collectively the
                  Company, develops, constructs, and manages land-based and
                  dockside casinos and related hotel and entertainment
                  facilities. 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 (the management contract with Grand
                  Casino Mille Lacs in Onamia, Minnesota, expires on April 2,
                  1998) and two Indian-owned casinos in Louisiana. Related
                  hotel, health spa/salon, and convention center facilities at
                  Company-owned Grand Casino Biloxi, located in Biloxi,
                  Mississippi, and hotel and health spa/salon facilities at
                  Grand Casino Tunica, located in Tunica County, Mississippi,
                  are currently under construction. In addition, related hotel
                  facilities at Indian-owned Grand Casino Coushatta, located in
                  Kinder, Louisiana, are currently under construction. 

                  The accompanying unaudited consolidated financial statements
                  include the accounts of Grand Casinos, Inc. and its
                  wholly-owned and majority-owned subsidiaries. Investments in
                  unconsolidated affiliates 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 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.




                                      - 6 -
<PAGE>   7


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


NOTE 1            UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

                  Operating results for the three months ended March 29, 1998,
                  are not necessarily indicative of the results that may be
                  expected for the fiscal year ending January 3, 1999. Operating
                  results for such three months include management fees from the
                  Company's management of Grand Casino Mille Lacs. The contract
                  pursuant to which the Company managed Grand Casinos Mille Lacs
                  expired on April 2, 1998.

                  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 year ended December 28, 1997.

NOTE 2            ACCOUNTING PRONOUNCEMENTS

                  The Company adopted FASB Statement No. 130, "Reporting
                  Comprehensive Income", effective December 29, 1997. Statement
                  No. 130 establishes standards for reporting and display of
                  comprehensive earnings and its components in financial
                  statements; however, the adoption of this Statement had no
                  impact on the Company's net earnings or shareholders' equity.
                  Statement No. 130 requires minimum pension liability
                  adjustments, unrealized gains or losses on the company's
                  available-for-sale securities and foreign currency translation
                  adjustments, which prior to adoption were reported separately
                  in shareholders' equity, to be included in other comprehensive
                  earnings. Total comprehensive earnings (loss) for the three
                  months ended March 29, 1998 and March 30, 1997 were $2.3
                  million and $(1.5) million. Differences between comprehensive
                  earnings for these periods were due to unrealized holding
                  gains and losses on securities available for sale.

                  During April 1998, the Accounting Standards Executive
                  Committee of the American Institute of Certified Public
                  Accountants (AICPA) issued Statement of Position 98-5,
                  "Reporting on the Costs of Start-Up Activities" (SOP 98-5).
                  SOP 98-5 requires companies to expense as incurred all
                  start-up and preopening costs that are not otherwise
                  capitalizable as long-lived assets. SOP 98-5 is effective for
                  financial statements for fiscal years beginning after December
                  15, 1998. The Company expects to adopt the Statement effective
                  January 3, 1999. The effect of the adoption is not expected to
                  be significant. Start-up and preopening amounts capitalized as
                  of March 29, 1998 totaled $.5 million. The Company expects
                  that all such costs will be fully amortized prior to the end
                  of 1998.



                                      - 7 -
<PAGE>   8



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




                  In March, 1998, the American Institute of Certified Public
                  Accountants issued Statement of Position 98-1 ("SOP 98-1"),
                  "Accounting for the Costs of Computer Software Developed or
                  Obtained for Internal Use." The statement is effective for
                  fiscal years beginning after December 15, 1998. The statement
                  defines which costs of computer software developed or obtained
                  for internal use are capital and which costs are expense.
                  The effect of adoption is not expected to materially effect 
                  the Company's financial position or results of operation.

NOTE 3            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 interest costs are amortized
                  over the related assets' estimated useful lives. For the three
                  months ended March 29, 1998 and March 30, 1997, approximately
                  $3.9 million and $2.4 million, respectively, of interest cost
                  was capitalized.









                                      - 8 -


<PAGE>   9


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


NOTE 4   NOTES RECEIVABLE

                  Notes receivable consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                                             Mar. 29, 1998             Dec. 28, 1997
                                                                             -------------             -------------
<S>                                                                             <C>                       <C>
                  Notes from the Coushatta Tribe with interest at a defined
                  reference rate plus 1% (not to exceed 16%), receivable in
                  monthly installments through January 2002                       23,564                    22,722

                  Notes from the Tunica-Biloxi Tribe with interest at a defined
                  reference rate plus 1% (not to exceed 16%), receivable in
                  monthly installments through June 2001                          10,375                    10,409

                  Other, less allowance for doubtful accounts
                  of $3,050 and $3,050, respectively                                 589                       704
                                                                                 -------                   -------
                                                                                 $34,528                   $33,835
                  Less current installments of notes receivable                   (5,525)                   (6,856)
                                                                                 -------                   -------
                  Notes receivable-less current installments                     $29,003                   $26,979
                                                                                 =======                   =======

</TABLE>


NOTE 5            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 as of November 30, 1995,
                  Grand Casino Tunica assets included in Phase 1 development as
                  described in the indenture pursuant to which the first
                  mortgage notes were issued, capital stock of Stratosphere
                  Corporation owned by the Company, and certain notes receivable
                  due the Company from Tribes. The first mortgage notes require
                  semi-annual payments of interest only on June 1 and December 1
                  of each year commencing June 1, 1996, and continuing until
                  December 1, 2003, at which time the entire principal plus
                  accrued interest is due and payable. The first mortgage 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.



                                      - 9 -
<PAGE>   10



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


NOTE 5            LONG-TERM DEBT (CONTINUED)

                  On May 10, 1996, the Company completed a $120 million capital
                  lease facility through BA Leasing & Capital Corporation. The
                  five-year capital lease facility, with varying interest rates
                  ranging from 1.75% to 2.50% over the LIBO Rate, was used to
                  fund 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 used to construct a 600-room hotel at Grand Casino
                  Tunica. As of March 29, 1998, $93.9 million was the balance
                  owing under the capital lease facility. That balance was paid
                  in full on March 31, 1998. (See Note 7)

                  On September 30, 1997, the Company completed a $100.0 million
                  revolving loan facility through BA Leasing & Capital
                  Corporation. The five-year revolving capital lease facility,
                  with interest rates ranging from 1.75% to 2.50% over the LIBO
                  Rate, will be used for the continued development of Grand
                  Casino Tunica and Grand Casino Gulfport, as well as other
                  general corporate purposes. As of March 29, 1998, no advances
                  relating to this financing had been made.

                  On October 14, 1997, the Company completed a $115.0 million,
                  9.0%, seven-year, senior unsecured note offering due 2004. The
                  majority of the proceeds from the offering were used to
                  refinance the $120.0 million capital lease facility (described
                  above) on March 31, 1998. The notes require semi-annual
                  payments of interest only on April 15 and October 15 of each
                  year commencing April 15, 1998 and continuing until October
                  15, 2004, at which time the entire principal plus accrued
                  interest is due and payable. The notes may be redeemed in
                  whole or in part, anytime after October 15, 2001, at a
                  premium, declining ratably thereafter to par value on October
                  15, 2003.

NOTE 6            COMMITMENTS AND CONTINGENCIES

                  STRATOSPHERE CORPORATION

                  The Company owns approximately 38% of the common stock issued
                  by Stratosphere Corporation ("Stratosphere"). Stratosphere and
                  its wholly-owned operating subsidiary developed and operate
                  the Stratosphere



                                     - 10 -
<PAGE>   11



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


                  STRATOSPHERE CORPORATION (CONTINUED)

                  Tower, Hotel and Casino in Las Vegas, Nevada. In January 1997,
                  Stratosphere and its wholly-owned operating subsidiary filed
                  for reorganization under Chapter 11 of the U.S. Bankruptcy
                  Code.

                  In October 1997, the Company announced that it had not been
                  able to reach an agreement with holders of a significant
                  portion of Stratosphere's first mortgage notes for a
                  consensual reorganization of Stratosphere that would involve
                  the Company's participation. The Company also announced that
                  it had no intention of participating in any plan or
                  reorganization for Stratosphere.

                  In March 1995, in connection with Stratosphere's issuance of
                  its first mortgage notes, the Company entered into a Standby
                  Equity Commitment Agreement (the "Standby Equity Commitment")
                  between Stratosphere and the Company. The Company agreed in
                  the Standby Equity Commitment, subject to the terms and
                  conditions stated in the Standby Equity Commitment, to
                  purchase up to $20.0 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 exceed $50.0 million.

                  Based on provisions of the U.S. Bankruptcy Code that the
                  Company contends apply to the Standby Equity Commitment, the
                  Company has asserted that the enforceability of the Standby
                  Equity Commitment is in question. Both the Official Committee
                  of Noteholders in the Stratosphere Bankruptcy case (the
                  "Official Committee") and the current trustee under the
                  indenture pursuant to which Stratosphere issued its first
                  mortgage notes (the "Trustee") claim that the Standby Equity
                  Commitment is enforceable.

                  The enforceability of the Standby Equity Commitment is the
                  subject of litigation to which the Company is a party in (i)
                  the Stratosphere bankruptcy case (as a result of a motion
                  brought by the Official Committee), and (ii) the U.S. District
                  Court for the district of Nevada (as a result of an action
                  brought by the Trustee). On February 19, 1998, the Bankruptcy
                  Court ruled that the Standby Equity Commitment is not
                  enforceable in the Stratosphere bankruptcy proceeding as a
                  matter of law.




                                     - 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 March 29, 1998, the
                  amounts outstanding were $2.0 million and $11.4 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 March 29, 1998, the amounts
                  outstanding were $1.6 million. In addition, on May 1, 1997,
                  the Company guaranteed a loan agreement entered into by the
                  Coushatta Tribe in the amount of $25.0 million, for the
                  purpose of constructing a hotel and acquiring additional
                  casino equipment. The guaranty will remain in effect until the
                  loan is paid. The loan term is approximately five years. As of
                  March 29, 1998, $5.1 million have been advanced under this
                  loan agreement.

                  The Company has entered into a master hotel development
                  agreement with Casino Resource Corporation for the Grand
                  Casino Hinckley Inn adjacent to Grand Casino Hinckley. The
                  Company has guaranteed the mortgage for the hotel which had an
                  unpaid principal balance of $2.4 million as of March 29, 1998.

                  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
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)



NOTE 7            SUBSEQUENT EVENTS

                  On March 31, 1998, the Company used cash proceeds received
                  from the $115.0 million, senior unsecured note offering which
                  closed on October 14, 1997, to pay off the $94.6 million
                  balance of principal and interest, remaining under the $120.0
                  million capital lease facility dated May 10, 1996. Unamortized
                  debt issuance costs of $2.6 million will be classified as
                  extraordinary loss relating to early extinguishment of debt
                  for the quarter ended June 28, 1998.







                                     - 13 -


<PAGE>   14


                      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 and related hotel and entertainment
                  facilities in emerging and established 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
                  management agreement for Grand Casino Mille Lacs expired on
                  April 2, 1998. The Company believes that the management
                  agreement for Grand Casino Hinckley, which expires in June
                  1999, will not be renewed.

                  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 Company expects that Grand
                  Casino Biloxi and Grand Casino Gulfport may be affected by the
                  addition of new competition on the Mississippi Gulf Coast.



                                     - 14 -

<PAGE>   15


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


                  OVERVIEW (CONTINUED)

                  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 28, 1997.

                  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.

                  As of May 1, 1998, the Louisiana legislature is considering
                  various proposals for state constitutional amendments and/or
                  legislation that attempt to impose certain taxes, including
                  excise taxes on certain activities conducted on Indian
                  reservations. It appears that the proposals are contemplated
                  to become effective after the expiration dates of the existing
                  compacts between the State of Louisiana and the Indian tribes
                  that own and operate casinos in the State of Louisiana. The
                  issue of the enforceability of such taxes, however, will
                  involve complex legal issues, the resolution of which cannot
                  be predicted with certainty.

                  If any such proposal results in a legally-enforceable tax on
                  the activities of the Company's subsidiaries that manage Grand
                  Casino Avoyelles and/or Grand Casino Coushatta, and that tax
                  is effective during any time that such subsidiaries manage
                  such casinos, the tax may have an adverse effect on the
                  Company.


                                     - 15 -


<PAGE>   16

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


                  RESULTS OF OPERATIONS

                  THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THE THREE MONTHS
                  ENDED MARCH 30, 1997

                  Earnings Per Common Share and Net Earnings

                  Basic and diluted earnings per common share were $.42 per
                  share and $.40 per share, respectively, for the three months
                  ended March 29, 1998, compared to $.35 per share and $.34 per
                  share, respectively for the prior year's comparable period.
                  Net earnings increased $2.9 million to $17.4 million for the
                  three months ended March 28, 1998 compared to the same period
                  in the prior year.

                  Revenues

                  Grand Casino Biloxi, Grand Casino Gulfport, and Grand Casino
                  Tunica generated $126.2 million in gross casino revenue and
                  $30.7 million in gross hotel, food, beverage, retail, and
                  entertainment revenue during the three months ended March 29,
                  1998. During the three months ended March 30, 1997, Grand
                  Casino Biloxi, Grand Casino Gulfport and Grand Casino Tunica
                  generated $108.7 million in gross casino revenue and $24.6
                  million in gross hotel, food, beverage and retail revenue.

                  The increase in gross revenues is attributable to increased
                  revenue at all properties. Grand Casino Tunica's gross
                  revenues increased $14.5 million to $53.7 million, an increase
                  of 37.1%, for the three months ended March 29, 1998.
                  Contributing to this increase at Grand Casino Tunica, the
                  Veranda Hotel and Convention Center, which were not open
                  during the first quarter of 1997, were open during the entire
                  first quarter of 1998. In addition, other new amenities added
                  in the Tunica market appear to have increased the overall
                  Tunica market capacity. Combined gross revenues for Grand
                  Casino Biloxi and Grand Casino Gulfport increased $9.7 million
                  for the three months ended March 29, 1998, compared to the
                  same period in the prior year. Contributing to this increase
                  was the opening of a 500-room hotel at Grand Casino Biloxi in
                  mid-February 1998. Finally, the Company's management fees from
                  Indian-owned casinos increased $4.0 million or 20.9% for the
                  three months ended March 29, 1998, compared to the same period
                  in the prior year.



                                      -16 -
<PAGE>   17


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

                  Costs and Expenses

                  Total costs and expenses increased $19.0 million, from $111.3
                  million for the three months ended March 30, 1997, to $130.0
                  million for the three months ended March 29, 1998. Casino
                  expenses were $41.3 million for the three month period ended
                  March 29, 1998, compared to $38.5 million for the comparable
                  period in 1997. This increase of $2.8 million relates to a
                  $17.5 million increase in casino revenue for such three-month
                  period, compared to the same period in the prior year. Food
                  and beverage expenses increased $.9 million to $8.9 million
                  for the three month period ended March 29, 1998. The increase
                  relates to a $3.3 million increase in food and beverage
                  revenues.

                  Selling, general, and administrative expenses increased $10.8
                  million from $43.9 million for the three months ended March
                  30, 1997 to $54.7 million for the three months ended March 29,
                  1998. Grand Casino Tunica's selling, general, and
                  administrative expenses increased $3.0 million. In addition,
                  combined selling, general, and administrative expenses for
                  Grand Casino Biloxi and Grand Casino Gulfport increased $1.5
                  million. The increases relate primarily to an increase in
                  marketing and health insurance costs. Corporate expenses for
                  the three months ended March 29, 1998 increased by $6.3
                  million from the same period in 1997. Costs associated with
                  the relocation of the corporate headquarters and additional
                  litigation reserves accounted for $5.7 million of the
                  increase.

                  Other

                  Interest income increased by $1.4 million to $4.1 million for
                  the three months ended March 29, 1998 as a result of
                  additional cash available for investment. Interest expense
                  increased by $1.1 million to $11.7 million for the three
                  months ended March 29, 1998. The increase is the result of the
                  $115.0 million senior unsecured notes being outstanding, and
                  the proceeds of which being unused, during the three month
                  period ended March 29, 1998, offset by an increase in
                  capitalized interest for the same period. Capitalized interest
                  was $3.9 million and $2.4 million for the three months ended
                  March 29, 1998 and March 30, 1997, respectively.





                                     - 17 -
<PAGE>   18


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



                  CAPITAL RESOURCES, CAPITAL SPENDING, AND LIQUIDITY

                  At March 29, 1998, the Company had $221.5 million in cash and
                  cash equivalents, of which $94.6 million was used to pay
                  off an existing capital lease facility and related interest on
                  March 31, 1998.

                  Net cash provided by operating activities totaled $41.0
                  million for the three month period ended March 29, 1998,
                  compared with $19.7 million for the three month period ended
                  March 30, 1997. During the three month periods ended March 29,
                  1998 and March 30, 1997, the Company's capital expenditures
                  totaled $46.1 and $36.8 million, respectively. Capital
                  expenditures related primarily to constructing new 600-room
                  hotels at Grand Casino Tunica and Grand Casino Gulfport and
                  completion of a new 500-room hotel at Grand Casino Biloxi.

                  At March 29, 1998, the Company's long-term debt included
                  10.125% first mortgage notes due in 2003 in the amount of
                  $450.0 million and 9% senior unsecured notes in the amount of
                  $115.0 million due in 2004 (which the Company secured for
                  refinancing an existing capital lease facility). The first
                  mortgage notes are redeemable on December 1, 1999, or
                  thereafter based on a stated premium that declines ratably to
                  par value. The senior unsecured notes are redeemable on
                  October 15, 2001, or thereafter based on a stated premium that
                  declines ratably to par value.

                  As of March 29, 1998, $93.9 million remained outstanding on
                  the capital lease facility and is classified as a current
                  liability on the March 29, 1998 balance sheet. The balance was
                  paid in full on March 31, 1998 using proceeds from the senior
                  unsecured notes. The Company also has available a $100.0
                  million revolving capital lease facility for continued
                  development of Grand Casino Gulfport and Grand Casino Tunica.
                  As of March 29, 1998, no advance relating to this financing
                  had been made.

                  Pursuant to the Company's covenants related to the 10.125%
                  first mortgage notes and the 9% senior unsecured notes 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.



                                     - 18 -
<PAGE>   19


                      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 when such
                  statements are made, such statements are all subject to risks
                  and uncertainties that could cause actual results to vary from
                  the forward-looking statements made. 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
                  1997 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.



                                     - 19 -
<PAGE>   20


                      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 May 1, 1998. More
                  complete and/or updated information may be obtained by
                  reviewing the court files pertaining to such proceedings.

                  COHEN - STATE ACTION

                  In August 1995, Harvey Cohen brought a legal 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 alleges
                  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.

                  The state action was, by agreement of the parties, stayed
                  pending a decision in a similar action brought by Cohen in
                  1994 in U.S. District Court for the District of Nevada. Cohen
                  alleged securities law violations and various state law claims
                  in the federal action. The federal action was dismissed by the
                  U.S. District Court, and that dismissal was affirmed by the
                  U.S. Court of Appeals.

                  The Company has requested that the state action be dismissed
                  based on the decision in the federal action.

                  SLOT MACHINE LITIGATION - NEVADA

                  In April 1994, William H. Poulos brought a legal action in the
                  U.S. 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.



                                     - 20 -
<PAGE>   21

                      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 U.S. District Court for the District of Nevada.

                  In September 1995, Larry Schreier brought an action in the
                  U.S. 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 motions to dismiss or stay the consolidated action until
                  the plaintiffs submitted their claims to gaming authorities
                  and those authorities considered the claims submitted by the
                  plaintiffs.

                  In December 1997, the court denied all of the motions
                  submitted by the defendants, and ordered the plaintiffs to
                  file a new consolidated and amended complaint. That complaint
                  has been filed. The Company has filed its answer to the new
                  complaint.



                                     - 21 -
<PAGE>   22

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

                  STRATOSPHERE SECURITIES LITIGATION - FEDERAL

                  In August 1996, a complaint was filed in the U.S. 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 U.S.
                  District Court for the District of Nevada.

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

                  In February 1997, the plaintiffs filed a consolidated and
                  amended complaint naming various defendants, including the
                  Company and certain current and former officers and directors
                  of the Company. The amended complaint included 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. Those
                  motions were made 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 dismissed the amended complaint. The
                  dismissal order did not allow the plaintiffs to further 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, and to allow the plaintiffs to submit a
                  second amended complaint in an attempt to state a valid cause
                  of action. In July 1997, the court allowed the plaintiffs to
                  submit a second amended complaint.



                                     - 22 -
<PAGE>   23

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



                  STRATOSPHERE SECURITIES LITIGATION - FEDERAL (CONTINUED)

                  In August 1997, the plaintiffs filed a second amended
                  complaint. In September 1997, certain of the defendants,
                  including the Company and the Company's officers and directors
                  named as defendants, submitted a motion to dismiss the second
                  amended complaint. The motion was based on various grounds,
                  including the Company's claim that the second amended
                  complaint failed to state a valid cause of action against the
                  Company and those officers and directors.

                  In April 1998, the court granted the Company's motion to
                  dismiss in part, and denied the motion in part. Thus, the
                  plaintiffs are pursuing the claims in the second amended
                  complaint that survived the Company's motion to dismiss.

                  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
                  dismiss or stay the state court action pending resolution of
                  the federal court action described above. The court has stayed
                  further proceedings pending the resolution of In Re:
                  Stratosphere Securities Litigation.

                  GRAND SECURITIES LITIGATION - FEDERAL

                  In September and October 1996, two actions were filed by
                  Company shareholders in the U.S. District Court for the
                  District of Minnesota against the Company and certain of the
                  Company's current and former directors and officers.

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



                                     - 23 -
<PAGE>   24

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



                  GRAND SECURITIES LITIGATION - FEDERAL (CONTINUED)

                  The actions have been consolidated as In Re: Grand Casinos,
                  Inc. Securities Litigation - Master File No. 4-96-890 -- and
                  the plaintiffs filed a consolidated complaint. The defendants
                  submitted a motion to dismiss the consolidated complaint,
                  based in part on the Company's claim that the consolidated
                  complaint failed to properly state a cause of action.

                  In December 1997, the court granted the Company's motion to
                  dismiss in part, and denied the motion in part. Thus, the
                  plaintiffs are pursuing the claims in the consolidated
                  complaint that survived the Company's motion to dismiss.
                  Discovery has begun.

                  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 current and former 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.

                  Pursuant to Minnesota law, the Company's Board of Directors
                  appointed an independent special litigation committee to
                  evaluate whether the Company should pursue the claims made in
                  the action against the officers and directors. The special
                  litigation committee completed its evaluation in December
                  1997, and filed a report with the court recommending that such
                  claims not be pursued.

                  The Company is providing the defense for the Company's current
                  and former officers and directors who are defendants in the
                  action pursuant to the Company's indemnification obligations
                  to such defendants.

                  The Company has submitted a motion to dismiss the action based
                  on the special litigation committee's report. The plaintiffs
                  have opposed that motion. As of May 1, 1998, the court has not
                  ruled on the motion.




                                     - 24 -
<PAGE>   25

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


                  STRATOSPHERE VACATION CLUB LITIGATION

                  In late April 1997, the Company and Grand Casinos Resorts,
                  Inc. ("Resorts"), a wholly-owned subsidiary of the Company,
                  were made defendants 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 that 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 submitted a motion to dismiss the complaint as it
                  pertains to Company and Resorts. The court denied the motion
                  to dismiss. Discovery has begun.

                  In April 1998, the court preliminarily approved a proposed
                  settlement of the action. The terms and conditions of the
                  settlement are described in a settlement agreement filed with
                  the court. As of May 1, 1998, the proposed settlement remains
                  subject to certain conditions described in the settlement
                  agreement, including final court approval.

                  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 U.S.
                  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 sought 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.



                                     - 25 -
<PAGE>   26

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



                  STRATOSPHERE NOTEHOLDER COMMITTEE BANKRUPTCY COURT ACTION 
                                   (CONTINUED)

                  The Company opposed the Committee's motion. The Company
                  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.

                  The Bankruptcy Court held a preliminary hearing on the
                  Committee's motion in June 1997, and an evidentiary hearing in
                  February 1998 on the issues raised by the Committee's motion
                  and the Company's opposition to that motion.

                  In February 1998, the Bankruptcy Court denied the Committee's
                  motion, and determined that the Standby Equity Commitment
                  cannot be assumed (or enforced) by Stratosphere under
                  applicable bankruptcy law.

                  STANDBY EQUITY COMMITMENT LITIGATION

                  In September 1997, the successor trustee (the "Stratosphere
                  Trustee") under the indenture pursuant to which Stratosphere
                  Corporation issued Stratosphere Corporation's first mortgage
                  notes filed a complaint in the U.S. District Court for the
                  District of Nevada - - IBJ Schroeder Bank & Trust Company,
                  Inc. vs. Grand Casinos, Inc. - File No. CV-S- 97-01252-DWH
                  (RJJ) - - naming the Company as defendant.

                  The complaint alleges that the Company failed to perform under
                  the Standby Equity Commitment entered into between
                  Stratosphere Corporation and the Company in connection with
                  Stratosphere Corporation's issuance of such first mortgage
                  notes in March 1995. The complaint seeks an order compelling
                  specific performance of what the Committee claims are the
                  Company's obligations under the Standby Equity Commitment. The
                  Stratosphere Trustee filed the complaint in its alleged
                  capacity as a third party beneficiary under the Standby Equity
                  Commitment.

                  The Company has submitted a motion requesting that the
                  district court stay further proceedings pending resolution of
                  the standby equity commitment issues pending in the
                  Stratosphere bankruptcy case.




                                     - 26 -
<PAGE>   27

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



                  STRATOSPHERE PREFERENCE CLAIM

                  In April 1998, Stratosphere served on the Company and Grand
                  Media & Electronics Distributing, Inc., a wholly-owned
                  subsidiary of the Company ("Grand Media"), a complaint in the
                  Stratosphere bankruptcy case seeking recovery of certain
                  amounts paid by Stratosphere to (i) the Company as management
                  fees and for costs and expenses under a management agreement
                  between Stratosphere and the Company, and (ii) Grand Media for
                  electronic equipment purchased by Stratosphere from Grand
                  Media.

                  Stratosphere claims in its complaint that such amounts are
                  recoverable by Stratosphere as preferential payments under
                  bankruptcy law.

                  As of May 1, 1998, the Company and Grand Media are preparing
                  their response to Stratosphere's complaint.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      No reports on Form 8-K were filed during the
                           quarterly period ended March 29, 1998.




                                     - 27 -

<PAGE>   28





                                   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:  May  13, 1998                       GRAND CASINOS, INC.
                                            -------------------
                                            Registrant



                                            By/ S /THOMAS J. BROSIG
                                            -----------------------
                                            Thomas J. Brosig
                                            President and
                                            Chief Executive Officer



                                            / S / TIMOTHY J. COPE
                                            ---------------------
                                            Timothy J. Cope
                                            Executive Vice President and
                                            Chief Financial Officer







                                     - 28 -