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 30, 1997
--------------

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 12, 1997, there were 41,896,541 shares of Common Stock, $0.01 par
value per share, outstanding.

Page 1 of 24
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
March 30, 1997 and December 29, 1996

Consolidated Statements of Earnings 4
for the three months ended March 30, 1997
and March 31, 1996

Consolidated Statements of Cash Flows 5
for the three months ended March 30, 1997
and March 31, 1996

Notes to Consolidated Financial Statements 6

ITEM 2. MANAGEMENT'S DISCUSSION AND 11
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

PART II. OTHER INFORMATION
-----------------

ITEM 1. Legal Proceedings 16

ITEM 6. Exhibits and Reports On Form 8-K 22

- 2 -

3
GRAND CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

(UNAUDITED)
MARCH 30, 1997 DECEMBER 29, 1996*
- ---------------------------------------------------------------------------------------------
ASSETS

Current Assets:
Cash and cash equivalents $ 128,556 $ 147,254
Current installments of notes receivable 5,777 7,792
Accounts receivable 15,094 13,463
Deferred income taxes 12,994 9,910
Other current assets 18,779 15,335
- -------------------------------------------------------------------------------------------
Total Current Assets 181,200 193,754
- -------------------------------------------------------------------------------------------
Property and Equipment, Net 848,809 821,827
- -------------------------------------------------------------------------------------------
Other Assets:
Cash and cash equivalents-restricted 9,450 10,276
Securities available for sale 21,089 23,603
Notes receivable-less current installments 30,651 30,772
Investments in unconsolidated affiliates 8,713 8,823
Debt issuance and deferred licensing costs-net 21,969 22,851
Other long-term assets 10,497 10,910
- -------------------------------------------------------------------------------------------
Total Other Assets 102,369 107,235
- -------------------------------------------------------------------------------------------
TOTAL ASSETS $1,132,378 $1,122,816
===========================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-trade and construction $ 14,201 $ 20,002
Current installments of long-term debt 3,342 4,101
Current installments of capital lease obligations 15,346 15,358
Accrued interest 17,650 5,486
Accrued payroll and related expenses 21,918 23,418
Other accrued expenses 25,796 31,542
- -------------------------------------------------------------------------------------------
Total Current Liabilities 98,253 99,907
- -------------------------------------------------------------------------------------------
Long-term Liabilities:
Long-term debt-less current installments 454,606 455,002
Capital lease obligations-less current installments 52,915 56,740
Deferred income taxes 73,615 71,494
- -------------------------------------------------------------------------------------------
Total Long-Term Liabilities 581,136 583,236
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES 679,389 683,143
- -------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
Capital stock, $.01 par value; authorized 100,000 shares;
common stock issued and outstanding 41,847 and 41,796
at March 30, 1997 and December 29, 1996, respectively 418 418
Additional paid-in-capital 412,832 412,576
Net unrealized gains (losses) on securities available
for sale (163) 1,358
Retained earnings 39,902 25,321
- -------------------------------------------------------------------------------------------
Total Shareholders' Equity 452,989 439,673
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,132,378 $1,122,816
===========================================================================================

* FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS

-3-
4
GRAND CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

(UNAUDITED)
THREE MONTHS ENDED
-----------------------------------
MARCH 30, 1997 MARCH 31, 1996
- -------------------------------------------------------------------------------------------

REVENUES:
Casino $ 108,680 $ 74,303
Hotel 7,063 5,417
Food and beverage 14,605 9,179
Management fee income 19,054 18,692
Retail and other income 2,937 2,370
- -------------------------------------------------------------------------------------------
Gross Revenues 152,339 109,961
Less: Promotional allowances (10,169) (6,125)
- -------------------------------------------------------------------------------------------
NET REVENUES 142,170 103,836
- -------------------------------------------------------------------------------------------

COSTS AND EXPENSES:
Casino 38,480 24,372
Hotel 1,819 1,797
Food and beverage 7,985 4,164
Other operating expenses 3,061 2,889
Depreciation and amortization 11,551 6,507
Lease expense 4,505 4,032
Selling, general and administrative 43,906 32,710
- -------------------------------------------------------------------------------------------
Total Costs and Expenses 111,307 76,471
- -------------------------------------------------------------------------------------------

EARNINGS FROM OPERATIONS 30,863 27,365
- -------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
Interest income 3,713 5,318
Interest expense (10,646) (5,725)
Equity in earnings (loss) of unconsolidated affiliates (188) 858
- -------------------------------------------------------------------------------------------
Total other income (expense), net (7,121) 451
- -------------------------------------------------------------------------------------------

Earnings before income taxes 23,742 27,816
Provision for income taxes 9,161 10,169
- -------------------------------------------------------------------------------------------

NET EARNINGS $14,581 $17,647
===========================================================================================

EARNINGS PER COMMON SHARE $ 0.34 $ 0.41
===========================================================================================

WEIGHTED AVERAGE COMMON SHARES AND COMMON
STOCK EQUIVALENTS OUTSTANDING 42,435 42,865
===========================================================================================

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

(UNAUDITED)
THREE MONTHS ENDED
--------------------------------
MARCH 30, 1997 MARCH 31, 1996
- -------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 14,581 $ 17,647
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 11,551 6,507
Equity in (earnings) loss of unconsolidated affiliates 188 (858)
Deferred income taxes 1,250 616
Write off project note receivables - 989
Changes in operating assets and liabilities:
Other current assets (5,651) (5,396)
Accounts payable (5,801) 6,514
Accrued expenses 3,581 16,683
- -------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 19,699 42,702
- -------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment of notes receivable 2,136 3,066
Investment in and notes receivable from unconsolidated affiliates - (3,468)
Payments for property and equipment (36,813) (86,936)
(Increase) decrease in cash and equivalent-restricted and other 826 (586)
(Increase) decrease in other long-term assets 132 (318)
- -------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (33,719) (88,242)
- -------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock-net 256 12,663
Debt issuance costs and deferred financing costs 57 (223)
Payments on long-term debt and capital lease obligations (4,991) (3,607)
- -------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (4,678) 8,833
- -------------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents (18,698) (36,707)
Cash and cash equivalents - beginning of period 147,254 334,772
- -------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 128,556 $ 298,065
=======================================================================================================

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

- 5 -
6

GRAND CASINOS, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 30, 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 the Grand Casino Biloxi and Grand Casino Tunica projects
are currently under construction and will open at various times. The
Company 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. The Company and Stratosphere have
filed a Joint Plan of Reorganization in Stratosphere's Chapter 11
proceeding.

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.

- 6 -

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 30, 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 three months ended March 30, 1997 and March
31, 1996 includes approximately $.6 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 three months ended March 30, 1997 and
March 31, 1996, approximately $2.4 million and $6.1 million,
respectively, of interest cost was capitalized.

- 7 -

NOTE 5 NOTES RECEIVABLE

Notes receivable consist of the following (in thousands):

March 30, 1997 Dec. 29, 1996
-------------- -------------

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 22,605 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 12,034 12,558

Other, less allowance for doubtful accounts
of $3,050 and $3,050, respectively 1,789 2,206
---------- ----------
$ 36,428 $ 38,564
Less current installments of notes receivable (5,777) (7,792)
---------- ----------
Notes receivable-less current installments $ 30,651 $ 30,772
========== ==========

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.

- 8 -

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 will be used for furniture, fixtures and
equipment for the 340,000 square foot casino complex. The balance of
approximately $30 million will be used to construct a 600-room hotel at
Grand Casino Tunica. As of March 30, 1997, $74.9 million had been
advanced and $68.3 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 interest 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. The proposed plan of reorganization and
investment agreement state the terms and conditions pursuant to which
the Company agreed to participate in the reorganization of
Stratosphere. See Stratosphere's Form 8-K filed on January 6, 1997 for
further information regarding the proposed plan of reorganization.

The proposed plan of reorganization and the related investment
agreement provide that the Company's obligations to participate in the
proposed reorganization are conditioned on Stratosphere obtaining
average monthly consolidated cash flow (as defined in the investment
agreement) at least $2,267,000 for the months between October 1, 1996
and June 30, 1997. In April 1997, Stratosphere announced that its
average monthly consolidated cash flow for the six-month period ending
March 31, 1997 was $1,726,718.

- 9 -

STRATOSPHERE CORPORATION (CONTINUED)

On April 9, 1997, the Company announced that (i) the Company will
not waive the minimum cash flow requirement in the proposed plan of
reorganization and related investment agreement, and (ii) the
Company is prepared to explore alternatives for a consensual
reorganization of Stratosphere with Stratosphere and the noteholder
committee which is representing holders of Stratosphere's
First Mortgage Notes in the Chapter II proceedings. The Company
also announced that if (i) the conditions to the Company's
participation in the pending proposed plan of reorganization are not
satisfied, and (ii) no agreement is reached among the appropriate
parties regarding an alternative reorganization arrangement
acceptable to the Company, then the Company may decide to propose or
participate in alternative plans of reorganization without such an
agreement, or may decide to terminate the Company's participation in
the reorganization of Stratosphere.

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 Standy 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.

The Company has also agreed to provide 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.

LOAN GUARANTY AGREEMENTS

The Company has guaranteed a loan and security agreement entered
into by the Tunica-Biloxi Tribe of Louisiana for $14.1 million for
the purpose of financing casino equipment. The agreement extends
through 1998, and as of March 30, 1997, the amount outstanding was
$5.8 million. The Company has also guaranteed a loan and security
agreement 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 30, 1997, the amounts outstanding were
$9.7 million.

- 10 -

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

LOAN GUARANTY AGREEMENTS (CONTINUED)

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 March 30, 1997.

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.

NOTE 8 SUBSEQUENT EVENTS

On April 7, 1997, the Company guaranteed a loan agreement entered into
by the Tunica-Biloxi Tribe of Louisiana for $16.5 million for the
purpose of purchasing a hotel and casino equipment. The agreement
extends through March, 2000. 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 are 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.

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.

- 11 -

OVERVIEW (CONTINUED)

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.

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.

- 12 -

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 30, 1997 COMPARED TO THE THREE MONTHS
--------------------------------------------------------------
ENDED MARCH 31, 1996
--------------------

Earnings Per Common Share and Net Earnings
------------------------------------------

Earnings per common share for the three months ended March 30, 1997
were $.34 versus $.41 for the prior year's comparable period based
upon weighted average common shares outstanding of 42.4 million and
42.9 million for the three month periods ended March 30, 1997 and
March 31, 1996, respectively. Net earnings decreased $3.1 million
to $14.6 million for the three months ended March 30, 1997 compared
to the same period in the prior year, primarily due to an increase
in net interest expense.

Net Revenues
------------

Net revenues for the Company increased $38.3 million for the three
months ended March 30, 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 $35.9 million
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, retail, and entertainment revenue
during the three months ended March 30, 1997. During the three
months ended March 31, 1996, Grand Casino Biloxi and Grand Casino
Gulfport generated $74.3 million in gross casino revenue and $17.0
million in gross hotel, food, beverage and retail revenue. The
increase in gross revenue is primarily a result of Grand Casino
Tunica being open for the entire first quarter of 1997.

Costs and Expenses
------------------

Total costs and expenses increased $34.8 million from $76.5 million
for the three months ended March 31, 1996 to $111.3 million for the
three month period ended March 30, 1997. Casino expenses were $38.5
million for the three month period ended March 30, 1997 compared to
$24.4 million for the comparable period in 1996.

- 13 -

Costs and Expenses (Continued)
------------------------------

This casino expense increase is principally related to the opening
of Grand Casino Tunica. Food and beverage expenses increased $3.8
million to $8.0 million for the three month period ended March 30,
1997, of which $2.8 million was a result of the opening of Grand
Casino Tunica.

Increases in selling, general and administrative expenses in the
amount of $11.2 million are related to Grand Casino Tunica's
operations.

Other
-----

Interest income decreased by $1.6 million to $3.7 million for the
three months ended March 30, 1997. This decrease is primarily
attributable to lower cash balances due to construction of Grand
Casino Tunica. In addition, interest expense increased by $4.9
million to $10.6 million for the three months ended March 30, 1997
compared to $5.7 million for the three months ended March 31, 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 $2.4 million and $6.1 million for the three months
ended March 30, 1997 and March 31, 1996, respectively.

CAPITAL RESOURCES AND LIQUIDITY

As of March 30, 1997, the company had cash and cash equivalents of
$128.6 million. For the three months ended March 30, 1997, capital
expenditures were $36.8 million compared to $86.9 million for the
comparable period in the prior year. The majority of expenditures
for the three months ended March 30, 1997, related to additional
construction at Grand Casino Tunica and Grand Casino Biloxi. The
capital expenditures during the three months ended March 31, 1996
in the amount of $86.9 million included $74.5 million related to the
construction of Grand Casino Tunica which opened in June 1996.

Pursuant to the Company's covenants related to the $450.0 million
First Mortgage Notes, the Company is restricted from paying cash
dividends and maintenance of 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.

- 14 -

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.

- 15 -

GRAND CASINOS, INC. AND SUBSIDIARIES
------------------------------------
PART II
-------
OTHER INFORMATION
-----------------

ITEM 1. LEGAL PROCEEDINGS
-----------------

The Company beneficially owns approximately 42% of Stratosphere
Corporation ("Stratosphere"). Stratosphere and Stratosphere Gaming
Corp. ("SGC"), a wholly-owned subsidiary of Stratosphere, filed
voluntary petitions on January 27, 1997 for Chapter 11 reorganization
pursuant to the United States Bankruptcy Code. Stratosphere and SGC
are acting as debtors-in-posession on behalf of their respective
bankruptcy estates and are authorized as such to operate their
business to bankruptcy court supervision.

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

HYLAND LITIGATION

The Company's 1996 Form 10-K included a summary of the action brought
by Thomas Hyland -- Thomas H. Hyland v. Griffin Investigations, et.
al. - Civil Action No. 95-CV2236(JEI) -- in the United States
District Court for the District of New Jersey against various
defendants, including the Company. Hyland alleged that the defendants
shared information regarding players in violation of federal
anti-trust and fair credit reporting laws. Hyland sought to have the
action certified as a class action, and to recover actual damages,
treble damages and attorneys' fees.

The defendants, including the Company, submitted a motion to dismiss
all claims in the action. That motion was granted, and the action was
dismissed.

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.

- 16 -

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

COHEN - FEDERAL ACTION (CONTINUED)

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 as of May 1, 1997 the appeals court has not issued its
decision.

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.

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
a 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. As of May 1, 1997, the
Company has not responded to the amended complaint.

- 17 -

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

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.

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 May 1,
1997, the court has not issued a decision regarding any of such
motions.

- 18 -

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 Ceasar, 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).

- 19 -

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. As of
May 1, 1997 the court has not issued a decision regarding the
motions 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. A. 363019 -- 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 In Re: Stratosphere Securities Litigation.

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
has not issued a decision regarding the motion to dismiss.

- 20 -

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

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. No discovery has occurred.

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 has authorized the appointment of
an independent 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 and a motion to stay
further proceedings in the action pending completion of the
independent committee's evaluation. As of May 1, 1997, the court
has not issued a decision regarding the motion.

- 21 -

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 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. The plaintiffs also allege "unjust enrichment," breach
of contract and other claims under Nevada law. The plaintiffs seek
various remedies including compensatory damages and punitive
damages.

As of May 1, 1997, the Company has not responded to the second
amended complaint.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBIT NUMBER 10.01 - AMENDMENT NO. 1 TO PARTICIPATION
AGREEMENT dated as of March 28, 1997, among BL DEVELOPMENT CORP.,
a Minnesota corporation, as Lessee and Construction Agent; GRAND
CASINOS, INC., a Minnesota corporation, and certain of its
Subsidiaries listed therein, as Guarantors; HANCOCK BANK, not in
its individual capacity, but solely as Lessor, Borrower and
Trustee; the persons listed therein, as Lenders; BANK OF SCOTLAND,
WELLS FARGO BANK, NATIONAL ASSOCIATION (successor by merger to
First Interstate Bank of Nevada), and SOCIETE GENERALE, as
Co-Agents; CREDIT LYONNAIS, LOS ANGELES BRANCH, as Lead Manager;
and BA LEASING CAPITAL CORPORATION, a California corporation, as
Arranger and Agent.

Exhibit Number 10.02 - Limited Warranty dated as of March 28, 1997

Exhibit Number 27 - Financial Data Schedule

(b) No reports on Form 8-K were filed during the quarterly period
ended March 30, 1997.

- 22 -

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 14, 1997 GRAND CASINOS, INC.
----------------------------
Registrant

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

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

- 23 -