<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
                                    FORM 10-K
                         ------------------------------

[X]      ANNUAL  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE  ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 2, 2000
                                                         ---------------
                                       OR

[ ]      TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
         SECURITIES  EXCHANGE  ACT OF 1934 FOR THE TRANSITION PERIOD
         FROM                 TO
             -----------------  ------------------

                           Commission File No. 0-27366

                              RAINFOREST CAFE, INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)

            MINNESOTA                                            41-1779527
            ---------                                            ----------
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

         720 SOUTH FIFTH STREET
           HOPKINS, MINNESOTA                                      55343
           ------------------                                      -----
(Address of principal executive offices)                         (Zip Code)

                                 (612) 945-5400
                                 --------------
              (Registrant's telephone number, including area code)

<TABLE>
<S>                                                         <C>
Securities registered pursuant to Section 12(b) of the Act:  NONE
                                                             ----

Securities registered pursuant to Section 12(g) of the Act:  COMMON STOCK, NO PAR VALUE
                                                             --------------------------
</TABLE>

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
                                       ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

As of February 28, 2000, 23,272,232 shares of the Registrant's Common Stock were
outstanding. The aggregate market value of the Common Stock held by
non-affiliates of the Registrant on such date, based upon the last sale price of
the Common Stock as reported on the Nasdaq National Market on February 28, 2000,
was $82,757,332. For purposes of this computation, affiliates of the Registrant
are deemed only to be the Registrant's executive officers and directors.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

PART III - Portions of the Registrants definitive proxy statement in connection
with the 2000 annual meeting of shareholders, if required, are incorporated by
reference into items 10 through 13, inclusive.

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<PAGE>   2


PART I

ITEM 1.  BUSINESS

    The following discussion contains trend information and other
forward-looking statements that involve a number of risks and uncertainties. The
actual results of Rainforest Cafe, Inc. (the "Company") could differ materially
from the Company's historical results of operations and those discussed in the
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, those identified in "Certain
Factors."

    The Company owns, operates and licenses large, high volume, themed
restaurant/retail facilities (a "Unit") under the name "Rainforest Cafe -- A
Wild Place to Shop and Eat." The Company's Units are designed to provide a
visually and audibly stimulating and entertaining rain forest environment that
appeals to a broad range of customers of all ages. Each Rainforest Cafe consists
of a Restaurant and a Retail Village. The Restaurant provides an attractive
value to customers by offering a full menu of high quality food and beverage
items, generous portions and excellent service in a unique and exciting
environment. The Retail Village features apparel, toys and gifts with the
Rainforest Cafe logo and other items reflecting the rain forest theme.

RECENT DEVELOPMENTS

TERMINATION OF MERGER AGREEMENT WITH LAKES GAMING, INC.

    On December 22, 1999, Rainforest entered into an agreement and plan of
merger with Lakes Gaming, Inc. and RFC Acquisition Co., a wholly-owned
subsidiary of Lakes. Pursuant to the terms and subject to the conditions of the
merger agreement, RFC Acquisition Co. was to be merged with and into
Rainforest, with Rainforest continuing as the surviving corporation and a
wholly-owned subsidiary of Lakes.

     On January 24, 2000, Rainforest and Lakes announced that they would not
proceed with their proposed merger transaction and entered into a mutual
termination agreement. The termination was mutually agreed upon, and no payments
were made by either party. A $2 million termination fee from Rainforest
continues to be payable to Lakes if Rainforest consummates a takeover proposal
within six months.

MERGER AGREEMENT WITH LANDRY'S SEAFOOD RESTAURANTS, INC.

    On February 9, 2000, Landry's Seafood Restaurants, Inc. ("Landry's") and
Rainforest announced that they had entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of February 9, 2000, by and among
Rainforest, the Company and LSR Acquisition Corp., a wholly owned subsidiary of
the Landry's ("Merger Sub"). Pursuant to the Merger Agreement, Rainforest will
be merged with and into Merger Sub, with Merger Sub being the surviving
corporation in the merger. Pursuant to the Merger Agreement, each share of
Rainforest common stock will be converted, at the shareholder's election, into
the right to receive $5.23 in cash or .5816 shares of Landry's common stock for
each share of Rainforest common stock outstanding, subject to mandatory
proration. As a result of the transaction, approximately 65% of the shares of
Rainforest common stock will be converted into Landry's common stock and
approximately 35% of the shares of Rainforest common stock will be converted
into cash. Landry's will issue approximately 9,028,000 shares of its common
stock and pay approximately $43,750,000 in cash for all of the outstanding
shares of common stock of Rainforest. The merger transaction is subject to
various conditions including, among others, approval of holders of Rainforest
common stock and regulatory approvals and consents.

    It is intended that the merger transaction qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended. In connection with the transactions contemplated by the Merger
Agreement, Lyle Berman and Steven Schussler, shareholders of Rainforest holding
approximately 6.6% and 4.1% of Rainforest's outstanding shares of common stock,
respectively, have entered into agreements with Landry's to, among other
things, vote their shares of common stock in favor of the transaction.
Additionally, Lyle Berman (Chairman of the Board/Chief Executive Officer of
Rainforest), Kenneth W. Brimmer (President of Rainforest), Steven Schussler
(Senior Vice President-Development of Rainforest) and Ercument Ucan (Senior Vice
President - Retail of Rainforest) have entered into employee termination,
consulting and non-competition agreements with Landry's.

RAINFOREST AND ITS BOARD OF DIRECTORS ARE DEFENDANTS IN CERTAIN LAWSUITS
CHALLENGING THE MERGER.

    Rainforest and its Board of Directors were named as defendants in two
purported class action lawsuits, filed on December 23, 1999 and January 13,
2000, respectively, in Hennepin County District Court in Minneapolis.  On
February 26, 2000, these plaintiffs amended their original complaints, alleging
a breach of the board's fiduciary duties in connection with their consideration
of the merger agreement between Rainforest and Landry's. Additionally, the
plaintiffs may seek to permanently enjoin the merger, and seek compensatory
damages for the alleged wrongs.  Rainforest denies these allegations in their
entirety and intends to defend itself vigorously.

    Under Minnesota law, Rainforest is required, subject to certain exceptions
and exclusions, to indemnify its current and former officers and directors in
connection with lawsuits of this nature.  Under the merger agreement, Landry's
has also agreed to indemnify these individuals for a period of six years for
these types of claims.  Accordingly, prior to the merger, Rainforest will bear
the cost of defending itself, its current and former directors and officers, and
for any settlement or judgment in these lawsuits and, after the merger,
Landry's will bear the cost of defending Rainforest and its current and former
directors and officers, for any settlement or judgment of such matters.
Although these lawsuits are in their early stages, and Rainforest and, after the
merger, Landry's plan to defend themselves vigorously, there can be no assurance
that the costs of defense and any settlement or judgment will not have a
material adverse effect on Rainforest or Landry's or their combined results of
operations.


    See ITEM 3. - LEGAL PROCEEDINGS.


THE RAINFOREST CAFE CONCEPT AND STRATEGY

    The Company seeks to differentiate itself by providing high quality, freshly
prepared food and proprietary retail merchandise in a themed environment. The
key factors of the Company's market positioning and operating strategy are as
follows:

    Distinctive Concept. The Company's rain forest theme is promoted by a
simulated unique rain forest environment throughout the Unit. Each Rainforest
Cafe features a visually and audibly exciting environment that usually includes
a variety of live tropical birds, exotic saltwater fish in large custom-designed
aquariums, animated robotic animals and sculpted banyan trees that create a
canopy of foliage. The dynamic rain forest atmosphere is further enhanced by
simulated thunder and lightning storms, tropical rain showers, waterfalls, mists
that emanate from extensive rock formations and specially-developed aromatic
scents. This entertaining rain forest environment makes each Rainforest Cafe "A
Wild Place to Shop and Eat."

    Broad-Based Appeal. Management believes that the Company's Rainforest Cafe
concept has broader appeal than other theme-based restaurant concepts because it
attracts customers of all ages. The Company's distinctive concept, combined with
high quality food and retail merchandise, make the Rainforest Cafe appealing to
children, teenagers, adults, and senior citizens.

    High Profile Unit Locations. In order to take maximum advantage of the
Company's broad-based appeal, the Company believes that the placement of its
Units in high profile, heavy-traffic locations is critical to its success. By
being in such locations, the Company believes its Units appeal to both
destination customers as well as passers-by who are drawn to its visually and
audibly exciting environment. The Company believes that its format, as developed
at its existing Units, can be utilized in multiple high traffic locations with
favorable demographics such as shopping malls, entertainment centers and Disney
theme parks.



                                       2



<PAGE>   3


    High Quality Food. The Restaurant provides an attractive value to customers
by offering a moderately-priced, full menu of high quality food and beverage
items served in generous portions in a distinctive environment. The Restaurant
features a wide variety of beverages, appetizers, pastas, sandwiches, salads,
pizzas, burgers and full-platter entrees, presented in a visually appealing
manner. Menu items are prepared on-site using high quality ingredients. Lunch
and dinner entrees range in price from $8.99 to $21.99 and the average guest
check was approximately $13.50 for the fiscal year ended January 2, 2000.
Management believes that its high quality food contributes to a significant
level of repeat business.

    Commitment to Retail and Building Brand Awareness. In order to enter the
Restaurant, all customers must pass through the Unit's Retail Village. The
Retail Village offers over 3,000 SKUs and includes apparel, toys and gifts with
the Rainforest Cafe logo and other items suggesting the rain forest theme. The
Company has also developed eight proprietary Animal Characters, each with a
distinct personality, as an additional method of merchandising its retail
products. The Company utilizes several of its Animal Characters for clothing,
toys and gifts. By offering items featuring the Rainforest Cafe logo and Animal
Characters, the Company believes it is continuing to build "brand equity" in the
Rainforest Cafe name that will allow it to attract more customers and to enhance
its competitive retail position. The Retail Village is also intended to be
educational, with displays of live exotic tropical birds and fish and an
animated talking tree that delivers environmental messages.

    Focus on Customer Satisfaction. The Company is committed to staffing each
Unit with an experienced management team and providing its customers with
prompt, friendly and efficient service. A customer's experience is also enhanced
by the attitude and attention of Unit personnel, including "tour guides"
(greeters), "safari guides" (food servers), "navigators" (bartenders),
"pathfinders" (retail staff) and tropical bird curators. The Company recognizes
that, in order to maintain a high level of repeat customers and to attract new
business through word of mouth, it must provide superior customer service.

    Commitment to Attracting and Retaining Quality Employees. By providing
extensive training and attractive compensation, the Company fosters a strong
corporate culture and encourages a sense of personal commitment from its
employees. The Company believes its compensation structure and positive
corporate culture enable it to attract and retain quality employees. The Company
believes that Unit management is important for the profitability of each
Rainforest Cafe and accordingly, places particular emphasis on recruiting
Unit-level Managing Directors that have significant restaurant and management
experience. The Company anticipates that, prior to opening a Unit, a Managing
Director will have been trained at one or more Rainforest Cafes for four to six
months. All full-time corporate employees and certain members of Unit management
are eligible to participate in the Company's Stock Option Plans and all
full-time employees are eligible to participate in the Company's 1997 Employee
Stock Purchase Plan.


RAINFOREST CAFE FEATURES

    To create a simulated rain forest environment, Rainforest Cafes generally
include:

    Live Exotic Birds -- Most Rainforest Cafes display live exotic birds such as
macaws and cockatoos in the Retail Village. The Company has curators
specifically devoted to caring for the birds and fish and for answering guest
questions. When the exotic birds are not on display they are kept and maintained
in a specially designed "habitat room."


                                       3
<PAGE>   4


    Aquariums -- Rainforest Cafes have large aquarium systems, including
walk-through aquariums that contain many varieties of saltwater fish from
locales such as Africa and South America. Aquariums range in size from 750 to
10,000 gallons and are placed throughout each Unit to maximize visibility to
customers.

    Tropical Rainstorms and Waterfalls -- Simulated lightning and thunderstorms
"sweep" through each Rainforest Cafe every 20 to 30 minutes. Rainforest Cafes
also utilize a mist system emanating from rock formations throughout the Unit
and rain showers around the perimeter of the Restaurant and Mushroom Bar area.
Other Rainforest Cafe features include cascading waterfalls, fountains and a
ventilation system emitting a light floral aroma.

    Trees, Foliage and Animated Animals -- The ceiling level of the Restaurant
and Retail Village of a Rainforest Cafe are intertwined with a "forest" of
sculpted life-like banyan trees that creates a canopy of foliage over diners and
shoppers. Each banyan tree is sculpted for a realistic presentation of its
overgrown root system. The Restaurant and Retail Village contains several rock
formations, abundant foliage and jungle-like scenes. Interspersed throughout the
facility are robotic animals such as life-size crocodiles, elephants, gorillas,
snakes, butterflies and frogs.

    Educational Commitment -- The Company makes each Rainforest Cafe an
environmentally educational experience. The Rainforest Cafe's talking banyan
tree "Tracy" delivers environmental messages to help educate and entertain
children. Each Rainforest Cafe has an on-site curator who educates customers,
including school groups, on the tropical birds and the rain forest. The curator
also makes numerous presentations at schools and community organizations.

UNIT ECONOMICS

    The Company identifies its current and planned domestic Rainforest Cafes as
either "Mall" or "Icon" Units. The Mall Unit format generally ranges in size
from approximately 15,000 to 23,000 square feet and has between 300 and 450
restaurant seats. Mall Units are located primarily in high traffic shopping
malls such as Mall of America in Minneapolis Minnesota, South Coast Plaza in
Orange County, California and Tysons Corner Center I in McLean, Virginia, a
suburb of Washington D.C. The larger Icon Units are generally in excess of
20,000 square feet and have 400 to 600 restaurant seats (although some may be
slightly smaller). Icon Units are generally located in high traffic tourist
areas such as Downtown Disney Marketplace, Disney's Animal Kingdom, the MGM
Grand Hotel and Casino in Las Vegas, Nevada and Downtown Chicago.

    The Company's twenty-one domestic Units that were open the entire fiscal
year ended January 2, 2000, generated average revenues of $11.3 million during
1999. The Company's twenty-three Mall Units open at the end of 1999, were
developed at an average cost of $5.8 million, net of landlord contributions.
Additionally, the Company incurred average pre-opening costs of approximately
$760,000 and purchased an average of $240,000 of inventory in connection with
each opening. Management anticipates that the majority of its future domestic
Units will be in urban entertainment areas and that average development cost,
pre-opening cost and inventory costs will be higher than historical averages as
most these Units will be Icon Units and cost more than typical Mall Units. The
Company currently has four Icon Units which were developed at an average cost of
$12.3 million, net of landlord contributions. The Company incurred an average of
$1.1 million pre-opening expenses and purchased an average of $400,000 inventory
in connection with the opening of these Icon Units. The Company expects
development costs for additional Icon Units to range from $12 million to $19
million, net of landlord contributions. In addition, the Company anticipates
pre-opening costs for each Icon Unit of $1.0 million to $1.5 million and expects
to purchase approximately $400,000 of inventory in connection with each opening.

    Management believes that the Company's demonstrated ability to generate high
sales volumes and customer traffic at its existing Units enables it to obtain
attractive sites and negotiate favorable lease terms, including landlord
contributions.



                                       4
<PAGE>   5


CURRENT UNIT LOCATIONS

    The following table sets forth certain information about the Company's
existing Units and international Units developed by licensees of the Company:

<TABLE>
<CAPTION>
                                                                       APPROXIMATE    RESTAURANT
                      UNIT                          LOCATION         SQUARE FOOTAGE      SEATS       DATE OPENED
         ------------------------------     ------------------------ --------------- -----------   -------------
        <S>                                <C>                      <C>             <C>           <C>
         Domestic
         Mall of America.................   Bloomington, MN               14,900           330     October 1994
         Woodfield Mall..................   Schaumburg, IL                23,000           590     October 1995
         Gurnee Mills....................   Gurnee, IL                    20,000           300     June 1996
         Downtown Disney Marketplace(1)..   Orlando, FL                   30,000           490     July 1996
         Tysons Corner Center I..........   McLean, VA                    19,500           360     October 1996
         Sawgrass Mills..................   Ft. Lauderdale, FL            20,000           340     November 1996
         South Coast Plaza...............   Costa Mesa, CA                17,000           300     June 1997
         The Source......................   Westbury,  Long Island,       22,000           390     September 1997
                                            NY
         Downtown Chicago(1).............   Chicago, IL                   23,000           345     October 1997
         Grapevine Mills.................   Dallas, TX                    20,000           370     October 1997
         Arizona Mills...................   Phoenix, AZ                   20,000           350     November 1997
         Aventura Mall...................   Miami, FL                     21,500           440     December 1997
         MGM Grand Hotel & Casino(1).....   Las Vegas, NV                 20,000           465     December 1997
         Palisades Center................   West Nyack, NY                22,500           415     March 1998
         Disney's Animal Kingdom(1)......   Orlando, FL                   34,000           570     March 1998
         Ontario Mills...................   Ontario, CA                   20,000           360     July 1998
         Cherry Creek Mall ..............   Denver, CO                    23,000           370     August 1998
         Menlo Park Mall.................   Edison, NJ                    18,000           340     September 1998
         Burlington Mall.................   Burlington, MA                17,500           350     October 1998
         Great Lakes Crossing............   Detroit, MI                   20,400           335     November 1998
         Franklin Mills..................   Philadelphia, PA              16,000           330     November 1998
         Oak Park Mall...................   Overland Park, KS             16,000           310     February 1999
         Towson Town Center..............   Baltimore, MD                 17,000           330     March 1999
         MacArthur Center................   Norfolk, VA                   14,700           240     June 1999
         South Center Mall...............   Seattle, WA                   16,800           365     June 1999
         Jersey Gardens..................   Elizabeth, NJ                 16,000           335     October 1999
         Katy Mills......................   Katy, TX                      16,000           340     October 1999
         West Farms......................   Hartford, CT                  14,500           330     February 2000
         International
         London..........................   London, England               18,000           300     June 1997
         Cancun..........................   Cancun, Mexico                16,000           220     August 1997
         Mexico City.....................   Mexico City, Mexico           16,000           225     October 1997
         Eaton Center....................   Vancouver, Canada             18,000           325     June 1998
         Manchester......................   Manchester, England           17,000           350     September 1998
         Festival Walk...................   Hong Kong, China              17,000           350     October 1998
         Mundo E.........................   Mexico City, Mexico           14,000           250     November 1998
         Scarborough Town Center.........   Toronto, Canada               17,500           325     January 1999
         Euro Disney.....................   Paris, France                 20,000           400     May 1999
         Yorkdale........................   Toronto, Canada               17,500           325     June 1999

</TABLE>

----------
(1) Designates Icon Units.



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<PAGE>   6


EXPANSION PLANS AND SITE SELECTION

    The following table sets forth certain information about the Company's
planned Units, all of which are subject to existing leases except where
otherwise indicated:


<TABLE>
<CAPTION>
                                                                        APPROXIMATE   RESTAURANT  DATE PLANNED TO BE
                      UNIT                         LOCATION           SQUARE FOOTAGE     SEATS          OPENED
         ----------------------------       ------------------------ ---------------- ---------- --------------------
        <S>                                 <C>                      <C>              <C>        <C>
         Domestic
         Fisherman's Warf (1) .......       San Francisco, CA             27,000          450    Second Quarter, 2000
         Opry Mills..................       Nashville, TN                 17,000          325    Second Quarter, 2000
         The Disneyland Resort (1) ..       Anaheim, CA                   27,000          500    First Quarter, 2001
         International
         Singapore...................       Singapore                     16,000          300    Second Quarter, 2000
         Tokoyo Disney                      Tokoyo, Japan                 18,000          350    Third Quarter, 2000
         Montreal Forum..............       Montreal, Canada              17,000          300    Third Quarter, 2000
         Niagra Falls................       Niagra Falls, Canada          17,000          325    Third Quarter, 2000
         Shanghai....................       Shanghai, China               15,000          250    Fourth Quarter, 2000
</TABLE>

----------
(1) Designates Icon Units.

    The Company's domestic site selection strategy is to locate its Units in
high profile, heavy traffic locations. A variety of factors are analyzed in the
site selection process, including local market demographics, site visibility,
business seasonality, construction costs and projected Unit economics. By
operating in high profile, heavy traffic locations, the Company believes its
Units appeal to both destination customers as well as passers-by who are drawn
to its visually and audibly exciting environment. The Company believes that its
format, as developed at its existing Units, can be utilized in a number of high
traffic venues with favorable demographics such as entertainment centers and
Disney theme parks.

    While most of the future Rainforest Cafes will be located in shopping malls
or entertainment centers, the Downtown Disney Marketplace Unit located in Walt
Disney World near Orlando, Florida and the Downtown Chicago Unit are stand-alone
facilities. Customers are able to enter the Downtown Disney Marketplace Unit
without having to enter Disney's adjacent theme parks. The Rainforest Cafe at
Disney's Animal Kingdom in Walt Disney World is also a stand-alone facility. The
34,000 square foot, 550 seat Unit is the only full service sit-down restaurant
at Disney's Animal Kingdom. Patrons pass by the Rainforest Cafe upon entering
and leaving the park.

    The Company's Disney leases provide among other things, that the Company
will not own, operate, develop or manage a restaurant: (i) within a 75 mile
radius of Downtown Disney Marketplace, Disney's Animal Kingdom or (ii) in a
theme park located anywhere in the world that is not affiliated with Disney or
its affiliates. The Company also agreed that it would not open a Unit within 50
miles of The Disneyland Resort in Anaheim, California. Disney waived its radius
restriction with respect to the Company's South Coast Plaza and Ontario Mills
Units in California. Additionally, the Company has granted MGM Grand the right
of first refusal, with certain exceptions, with respect to the development of a
Unit in any hotel/casino operation.


INTERNATIONAL LICENSE AND JOINT VENTURE AGREEMENTS

    The Company has entered into eight separate exclusive license arrangements
relating to the development of Rainforest Cafes in the United Kingdom and
Ireland, France, Mexico, Canada and certain countries and cities in Asia and
South America. These agreements have per Unit development fees of at least
$100,000 and royalties ranging from 3% to 10% of Unit sales. All agreements,
with the exception of the agreement relating to the United Kingdom and Ireland,
have area licensing fees which are proportionate to market size and economic
potential. For the fiscal year ended January 2, 2000, approximately 1.2% of the
Company's total revenues were derived from international licensing fees and
royalties. Through the fiscal year ended January 2, 2000, the Company's
expenditures in acquiring ownership interests in certain international
Rainforest Cafes was $5.5 million, not including the investment in the
majority-owned subsidiary Yorkdale Rainforest Restaurant, Inc. that was made
during the third quarter of 1999.

    United Kingdom and Ireland. In August 1996, the Company entered into a
License and Area Development Agreement with Glendola Leisure Ltd. ("Glendola"),
an affiliate of the Foundation Group, a London-based hotel and restaurant
developer and operator, pursuant to which Glendola will develop five Units over
a ten year


                                       6
<PAGE>   7

period in the United Kingdom and Ireland. Pursuant to this agreement, the
Company will have the option to purchase, prior to the opening of the Unit,
between 20% and 50% of the equity interest in any Unit developed by Glendola.
The Company has purchased a 20% ownership interest in the London Unit for
approximately $400,000 and has purchased a 49% ownership in the Manchester Unit
for approximately $550,000.

    Mexico. In October 1996, the Company entered into a License and Area
Development Agreement with a subsidiary of Empresas de Comunicacion y
Entretenimiento ("ECE"), a Mexican-based restaurant owner and operator, pursuant
to which ECE will develop seven Units over a ten-year period in Mexico. Pursuant
to this agreement, ECE has developed three Units through fiscal 1998, one in
Cancun and two in Mexico City.

    Canada. In March 1997, the Company entered a joint venture and exclusive
license agreement with the Elephant and Castle Group ("E & C"), a Vancouver
based owner and operator of Elephant and Castle pubs and restaurants. E & C and
the Company agreed to develop five Rainforest Cafes in Canada over a four-year
period. Under the terms of this agreement, the Company is also entitled to
receive a warrant to purchase 600,000 shares of E & C stock at $8.00 per share
exercisable for a period of five years. In addition, the Company and E & C have
a 50% equity interest in the joint venture Canadian Rainforest Restaurants, Inc.
("CRRI"). The Company will have the option to purchase E & C's interest in CRRI
after seven years based on a predetermined formula of cash flow and investment.
CRRI opened its first Canadian Unit near Vancouver in June 1998 and its second
Canadian Unit in Toronto in January 1999. Two openings are planned for Canada
during 2000. The locations for these Units will be in Montreal and Niagara
Falls. The Company will have an equity interest in the Montreal Unit as this
Unit is being built by CRRI. The Company but will not have an ownership interest
in the Niagara Falls Unit as this Unit will be subfranchised.

    During the third quarter of 1999, the Company purchased a beneficial
ownership of a 75% equity interest in Yorkdale Rainforest Restaurant, Inc.
("YRRI") (a Canadian federal corporation) which owns 100% of the Unit in the
Yorkdale Shopping Centre located in North York, Ontario, Canada. Elephant and
Castle is the beneficial owner of the 25% minority interest in YRRI. The
purchase of 75% ownership investment in YRRI was approximately $2.5 million.
The results of this entity are consolidated with the Company's other
wholly-owned and majority owned subsidiaries.

    Southeast Asia. In August 1997, the Company entered into a Master License
Agreement with Rainforest Cafe Far East, Ltd. ("RFC Far East Ltd.") formerly
Movie Dream Corporation, a subsidiary of Far East Holdings International
Limited, a Singapore-based holding company. The agreement was amended as of
January 1, 1999. Under the terms of the agreement, RFC Far East Ltd. will
develop a minimum of three Units over ten years. Countries covered by this
agreement include Singapore, which is scheduled to open in April 2000, Thailand
and the Philippines. RFC Far East Ltd. has the right to establish
sub-franchisees within the territory, subject to certain terms and conditions,
which include a right of the Company to approve all investors and all other
rights in the license agreement. Pursuant to this agreement, the Company will
have the option to purchase, prior to the opening of any Unit, up to 20% of the
equity interest in all Units developed by RFC Far East Ltd.. This license
agreement also grants RFC Far East Ltd. an option for the development rights to
India, Malaysia, and Indonesia, subject to meeting future performance criteria.

    Hong Kong. In March 1998, the Company entered into a Master Franchise
Agreement with Jungle Investment Limited ("JIL"), a Hong Kong based entity, to
develop a minimum of two units in a territory including Hong Kong, Macau,
Taiwan, and Shanghai. JIL has the right to establish sub-franchises within the
territory, subject to certain terms and conditions, such as the Company's right
to approve all shareholders of the sub-franchisee. Under the terms of this
agreement, JIL will develop a minimum of two restaurants over the next 15
months. Pursuant to the agreement, the Company has a right to purchase, prior to
the opening of each Unit, up to 20% of the equity interest in any unit
developed, as well as 20% of JIL. In March, 1998, the Company purchased 20%
ownership, for approximately $1.8 million, in both JIL and the first Unit which
opened in Hong Kong in October 1998. A Unit in Shanghai, China is scheduled to
open during the fourth quarter of 2000. This Unit was subfranchised by JIL, with
approval from the Company, to Bright Billion Limited, a Hong Kong Company.

     France. In September 1998, the Company entered into a franchise agreement
to open a Unit at Disneyland Paris to be operated by Groupe Flo S.A.. The
agreement requires the Unit to open within one year and

                                       7
<PAGE>   8

includes an option to open an additional Unit in France prior to July, 2002.

     Argentina, Brazil, Chile and Puerto Rico. In December 1998, the Company
entered into an Area Development Agreement with HR Sudamerica S.A. DE C.V
("Sudamerica") to develop five Units in Argentina, Brazil, Chile and Puerto Rico
prior to December 2002. Under the terms of this agreement, the Company and
Sudamerica will each own approximately 50% of the restaurants required to be
developed under the agreement.

     Japan. In January 2000, the Company entered into a franchise agreement
between Oriental Land Co., Ltd., and Mitsubishi Corporation to develop a Unit at
the Ikspiari Complex at the Tokoyo Disney Resort. The Unit is expected to open
during third quarter of 2000. The Company anticipates a 20% ownership interest
in this Unit.

RESTAURANT

    For the fiscal year ended January 2, 2000, approximately 80% of the
Company's total revenues were derived from Restaurant sales. The Company
believes that Rainforest Cafes enjoy a high level of repeat business and
customer diversity because of the Company's commitment to providing high quality
food and customer service in an exciting and entertaining environment. Features
of the Restaurant are as follows:

     Menu. The Company considers its extensive menu selection to be an important
factor in the appeal of its Restaurant, and accordingly continuous attention is
devoted to the development of new menu items. The Restaurant features casual
cuisine that caters to broad customer preferences. The menu presently offers
several types of appetizers such as "Rainforest Pita Quesadillas" and "Chicken
Rain Stix." The menu also offers different types of pastas, sandwiches, salads,
pizzas, burgers and full-platter entrees, such as "Rasta Pasta" (pasta tossed
in a garlic cream sauce with grilled chicken, broccoli and pesto), "Cedar Wood
Salmon" (fresh salmon grilled on cedar wood) and "Rumble in the Jungle Turkey
Pita" (grilled pita bread stuffed with fresh roasted turkey and Caesar salad). A
children's menu and complete dessert selection are also available. Portions are
generous and significant attention is placed on presentation and the quality of
preparation. Lunch and dinner entrees range in price from $8.99 to $21.99. The
Restaurant's full-service bar, the "Mushroom Bar," features a number of
customized alcoholic and non-alcoholic drinks, such as the "Jungle Root" (carrot
juice), the "Margarilla" (a margarita blended with orange sherbet) and the
"Chocolate Covered Banana Blast" (fresh banana, chocolate syrup, vanilla yogurt
blended with rum). Alcoholic beverages are primarily served to complement meals
and accounted for approximately 9% of total restaurant sales for the fiscal year
ended January 2, 2000. The average check per person for such period was
approximately $13.50. Because the Unit's menu is not tied to any particular type
of food or beverage, the Company can introduce and eliminate items based on
local or current consumer trends without altering its rain forest theme.

    Decor. Restaurant decor is divided into distinctive dining environments
developed around the rain forest and other nature themes. Current themes include
the Atlas and waterfall, gorillas, elephants, tropical fish and star gazing.
Table decor complements the rain forest theme through the use of
brilliantly-colored tables and upholstery with patterns of animals, wildlife and
plant life. In an effort to enhance the dining experience, attempts are made to
maximize restaurant seating near aquariums, waterfalls, sculpted rock formations
or one of the Restaurant's several banyan trees. An integral part of the
Restaurant is the "Mushroom Bar," the "stem" of which consists of the bar with a
"cap" extending over the customers. Seating at the bar is provided by customized
stools designed to resemble the legs of wild animals.



                                       8
<PAGE>   9


    Staffing. An important part of the Company's mission is to ensure that
during each visit to a Rainforest Cafe, customers receive excellent service. To
extend the adventure theme, Restaurant customers are greeted at the entrance by
"tour guides", food servers are known as "safari guides" and the bartenders are
known as "navigators." The "tour guides" at the front desk are trained to
communicate, via headsets, with the floor management staff who greet Restaurant
customers and seat them at their tables. The Company believes that a customer's
experience is enhanced by the attitude and attention of its personnel. Customer
service is based on a team approach so that each customer is continually
attended to, and employees go through extensive ongoing training to ensure
consistent service. The Company endeavors to hire experienced chefs and invests
substantial time training kitchen employees to maintain consistent food
preparation.

RETAIL VILLAGE

     For the fiscal year ended January 2, 2000, approximately 19% of the
Company's total revenues were derived from retail sales. In order to enter the
Restaurant, all customers must pass through the Unit's Retail Village. The
Retail Village offers over 3,000 SKUs and includes apparel and gifts with the
Rainforest Cafe logo and other items with a rain forest theme such as toys and
educational games. The Company has also developed eight proprietary Animal
Characters, each with a distinct personality, including Cha! Cha!, an
adventuresome tree frog; Ozzie, a rascally orangutan; Rio, a colorful, tropical
macaw; Tuki Makeeta, an imaginative baby elephant; Nile, a proud crocodile;
Maya, a regal feline; Bamba, a gentle gorilla; and Iggy, a philosophical iguana.
These Animal Characters are designed to appeal to a broad range of customers,
thereby increasing retail sales and repeat business. The Company utilizes
several Animal Characters for clothing and gifts. Custom designed t-shirts and
sweatshirts with colorful animals spelling out the "Rainforest Cafe" logo and
Animal Characters are signature items. By offering items featuring the
Rainforest Cafe logo and Animal Characters, the Company believes it is
continuing to develop "brand equity" in the Rainforest Cafe name that will allow
it to attract more customers and to enhance its competitive retail position.

     The Retail Village also includes a large selection of colorful rocks, plush
and animated toys and puppets, and educational and entertaining games and
puzzles. Gift items and other artifacts suggesting the rain forest theme,
including colorful animal figurines and prints, kitchen magnets, serving plates
and other tableware, handmade wood products and other unique rain forest related
home accessories, are also available. The Company varies its merchandise mix by
season and location and has developed specific retail profiles for mall Units,
discount center Units, and tourist Units.

OPERATIONS, MANAGEMENT AND EMPLOYEES

    The Company's ability to manage complex operations, including high volume
Restaurants and Retail Villages, has been, and will continue to be, central to
its overall success. The Company believes that its management must include
skilled personnel at all levels, including senior corporate management, Unit
Managing Directors and other Unit employees. The Company's senior corporate
management, including the Company's Chairman and Chief Executive Officer, Lyle
Berman, has significant restaurant and retail experience. Charly Robinson, the
Company's Senior Vice President of Operations has over 20 years of restaurant
and hospitality experience. The Company's Managing Vice Presidents, each of whom
have extensive experience in the restaurant industry, supervise the opening of
new Units, monitor quality control and customer service, and are responsible for
the financial performance of the Units within their respective regions. The
Company believes that Unit management is important for the profitability of each
Rainforest Cafe and accordingly, places particular emphasis on recruiting
Managing Directors that have significant restaurant and management experience.
The Company anticipates that, prior to opening a Unit, a Managing Director and
executive chef will have been trained at one or more Rainforest Cafes for
approximately six months and three months, respectively. All salaried Unit
employees attend one week of culturalization training.



                                       9
<PAGE>   10


    The Company strives to maintain quality and consistency in each of its Units
through the careful training and supervision of personnel and the establishment
of, and adherence to, high standards relating to personnel performance, food and
beverage preparation, and maintenance of facilities. All managers must complete
an eight-week training program during which they are instructed in areas such as
food quality and preparation, customer service, and employee relations. New
staff members participate in approximately three weeks of training under the
close supervision of Company management. The Company has also prepared
operations manuals relating to food and beverage quality and service standards.
Management strives to instill enthusiasm and dedication in its employees,
regularly solicits employee suggestions concerning Company operations and
endeavors to be responsive to employees' concerns. In addition, the Company has
extensive and varied programs designed to recognize and reward employees for
superior performance. The Company believes that it has been able to attract high
quality, experienced restaurant and retail management and personnel with its
competitive compensation and bonus programs.

    In general, each Unit has between 250 and 500 employees, although staffing
levels vary according to the size of the Unit. As of February 28, 2000 the
Company had approximately 6800 employees, including 150 employees at its
corporate headquarters. The Company believes that its relationship with its
employees is good.

PURCHASING

    The Company strives to obtain consistent quality items at competitive prices
from reliable sources. In order to maximize operating efficiencies and to
provide the freshest ingredients for its food products while obtaining the
lowest possible prices for the required quality, each Restaurant's management
team includes a purchasing manager or kitchen manager who determines the daily
quantities of food items needed and orders such quantities from major suppliers
at prices often negotiated directly by the Company's corporate office. Most food
and supplies are shipped directly to the Units. The Company purchases perishable
food products locally. The Company does not maintain a central food product
warehouse or commissary. With respect to retail products, the Company maintains
over 3,000 SKUs, which it purchases from many suppliers. The Company maintains a
centralized warehouse for retail product distribution. The Company has not
experienced any significant delays in receiving restaurant or retail supplies
and equipment. The Company is not dependent on any one supplier for any of its
restaurant or retail goods. The Company is committed to private label
manufacturing, which it believes will improve the Company's retail margins due
to the lower cost of private label products.

MANAGEMENT INFORMATION SYSTEMS/ACCOUNTING

    The Company uses integrated management information systems that are designed
to accommodate significant expansion in the number of Units. These systems
include a computerized restaurant point-of-sale system which facilitates the
movement of customer food and beverage orders between the customer areas and
kitchen operations, controls cash, handles credit card authorizations, keeps
track of revenues on a per employee basis and provides management with revenue
and inventory data. The point-of-sale system is accessed by service personnel
who are assigned individual identification keys, guest orders are printed in the
kitchen and bar areas which eliminates the need to read handwritten tickets. The
Company's retail point of sale, merchandising and distribution system allows
management to track retail inventory daily. The point-of-sale system
electronically transfers data nightly to Company headquarters. The Company also
uses a computerized time management system, which determines the time worked by
each employee, allows management to gather data and schedule work hours, and
produces payroll reports. Each Unit also uses computerized systems to control
and gather data with respect to food, beverage, retail and supplies inventories.
Each Unit has an on-site accountant who assists in the accumulation and
processing of accounting data and performs other administrative functions.



                                       10
<PAGE>   11


    The Company's automated Unit-level systems provide data for posting directly
to the Company's general ledger and to other accounting subsystems. The
automated general ledger system provides various management reports comparing
current and prior operating results as well as measuring performance against
predetermined operating budgets. The results are reported to and reviewed with
Company management. Such reporting includes (i) weekly reports of revenues, cost
of revenues and selected controllable Unit expenses, (ii) detailed monthly Unit
performance reports of revenues and expenses and (iii) monthly reports of Unit-
by-Unit and administrative and occupancy expense performance.

MARKETING AND PROMOTION

     The Company has created a marketing plan with an objective of positioning
the Company to reflect the following statement: Rainforest Cafe is an adventure
that stimulates the mind, emotion and senses by delivering high quality
proprietary entertainment, food and retail experiences to both children and
adults. The Company has multiple strategies for marketing newer versus mature
Rainforest Cafe Units in addition to Company-wide awareness strategies.

     With respect to new Units, given that sales are frequently at or near
capacity during such Unit's first year of operations, the Company places less
emphasis on promotion of new Units during their first year of operations.
Advertising of new Units is focused on recruitment of new employees and building
brand awareness through public relations and regional print media. The Company
has found that Rainforest Cafe grand openings are frequently an event that
receives much local publicity. With respect to existing Units that have been
open more than 12 months, the Company's objective and strategies are to increase
same store sales through, among other things, promoting the Unit's reservations,
offering a special weekday kid's menu and implementing a weekday lunch menu.
With both new and existing Units, the Company strives to utilize its crewmembers
to help develop repeat visits and build guest loyalty.

     In addition to strategies utilized for new and mature Units, the Company
intends to utilize the following to help build brand equity and create repeat
visits:

     -   Loyalty clubs for adults and children designed to motivate guest
         visitation for occasions ranging from birthdays and anniversaries to
         exemplary report cards.
     -   Year round promotions and events designed to help build off-peak hour
         business.
     -   Advertising, primarily print and outdoor signage, to promote both the
         Company's brand and Rainforest Cafe special event.
     -   Cross-marketing to certain businesses, organizations and individuals.
     -   Continued public relations through the Company's off-site educational
         programs.

COMPETITION

    The restaurant and specialty retail businesses are highly competitive. In
the restaurant industry, competition is based primarily upon price, service,
food quality and location. There are numerous well-established competitors,
including national, regional and local restaurant chains, possessing
substantially greater financial, marketing, personnel and other resources than
the Company. The Company also competes on a general basis with a large variety
of national and regional restaurant operations, as well as with locally owned
restaurants, diners, and other establishments that offer moderately priced food.
The Company directly competes with other theme restaurants in the highly
competitive and developing theme restaurant market. Other restaurants and
companies utilize the rain forest or related themes. Additionally, the Company
competes with a number of well-established specialty retailers possessing
substantially greater financial, marketing, personnel and other resources than
the Company. In the retail industry, competition is based primarily upon
merchandise selection, price and customer service. There can be no assurance
that the Company will be able to respond to various competitive factors
affecting the restaurant and retail industries.



                                       11
<PAGE>   12


    The performance of individual Units may also be affected by factors such as
traffic patterns, demographic considerations, and the type, number and location
of competing restaurants. In addition, factors such as inflation, increased
food, labor and employee benefit costs, and the availability of experienced
management and hourly employees may also adversely affect the restaurant and
retail industries in general and the Company's Units in particular. Restaurant
and retail operating costs may be further affected by increases in food
commodity prices, the minimum hourly wage, unemployment tax rates, real estate
taxes and similar matters over which the Company has no control.

REGULATION

    Restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire, and other authorities and are also subject to
state and local licensing and regulation of the sale of alcoholic beverages and
food. Additionally, businesses that maintain or sell animals are subject to
additional levels of state and local health and sanitation regulations. Having
tropical birds as part of the Rainforest Cafe concept requires the Company to
adhere to stringent health codes that prohibit crossover between kitchen workers
and animal handlers, and any exchange of air from the bird areas to the rest of
the Unit. The Company overcame this problem at its existing Units that utilize
live birds by installing specially designed air exhaust hoods for the birds'
perch area. Additionally, a separate waste disposal system is provided for the
birds. Although, to date, the Company has satisfied animal-related licensing
authorities for its existing Units, no assurance can be given that the Company
will be able to maintain such approvals or obtain such approvals at other
locations. Difficulties or failure in obtaining required licenses and approvals
will result in delays in, or cancellation of, the opening of Units. Retail
establishments are also subject to licensing and regulation by safety, fire and
other authorities on the state and local level.

TRADEMARKS AND INTELLECTUAL PROPERTY

     The Company's ability to implement successfully its Rainforest Cafe concept
will depend in part on its ability to further establish "brand equity" through
the use of its trademarks, service marks, trade dress and other proprietary
intellectual property, including its name and logos, the Animal Characters and
unique features of its rain forest theme decor. It is the Company's policy to
seek to protect and to defend vigorously its rights to this intellectual
property.

     The Company's name "RAINFOREST CAFE" and the mark "A WILD PLACE TO SHOP AND
EAT" are federally registered service marks for the Company's Restaurant and
Retail Village. The Company also owns a federal registration for the mark
"RAINFOREST" for the Company's restaurant services. The Company has filed and
has pending several federal trademark applications for "RAINFOREST CAFE" in
various formats and for a variety of goods and services. While the Company
expects that these additional applications will result in registrations
affording the Company additional protections, there is no assurance that all of
these applications will issue as registrations.

     There is also no assurance that any of the Company's rights in any of its
intellectual property will be enforceable, even if registered, against any prior
users of similar intellectual property or competitors of the Company who seek to
utilize similar intellectual property in areas where the Company operates or
intends to conduct operations. The failure to enforce any of the Company's
intellectual property rights could have the effect of reducing the Company's
ability to capitalize on its efforts to establish brand equity. The Company is
aware of trademark applications, registrations and uses that may accord to third
parties certain rights in the words "rain forest" or in certain elements of some
of the proprietary Animal Character names and illustrations with respect to
utilization of these marks on certain clothing and retail products. The
existence of any such third party rights could result in claims of infringement
against the Company with respect to its uses of "Rainforest Cafe" or its Animal
Characters. The Company is currently involved in litigation with a party that
alleges that the Company's restaurants infringe its trade dress rights. Although
the Company believes these allegations are without merit and does not expect
this lawsuit to have a materially adverse result on the Company or its business,
in the event this matter is not successfully resolved, or in the event the
Company encounters other claims of infringement, it is possible that the
Company's operations could be materially limited or that the Company may have to
pay damages.

                                       12
<PAGE>   13

CERTAIN FACTORS

     In addition to the factors discussed elsewhere in Form 10-K such as
competition, regulation and trademarks, and intellectual property, the following
are important factors that could cause actual results or events to differ
materially from those contained in any forward-looking statements made by or on
behalf of the Company.

SAME STORE SALES DECLINE

     The Company's history indicates that a Unit's revenues frequently decrease
during such Unit's subsequent years of operations. Sales for the fifteen Units
opened eighteen months or more as of January 2, 2000 declined 10.9% in Fiscal
2000. Although the Company has undertaken a number of strategies to offset
declining same store sales (such as revising the Restaurant's menu and
discounting certain retail items) no assurance can be given that comparable same
store sales will not continue to decline. In addition to negatively impacting
the Company's revenues, declining same store sales has had a negative impact on
the Company's stock price and resulted in stock price volatility. Furthermore,
because a new Unit typically experiences higher revenues in the initial six to
twelve months of operations, the opening of new Units may disproportionately
impact revenue analysis.

GROWTH FACTORS/EXPANSION STRATEGY

     Principally as a result of sales challenges in several of the Company's
Mall Units, the Company has placed a moratorium on any future mall developments
and on an overall basis, has adopted a "slow growth" strategy. In addition,
failure to improve sales performance in certain existing Units may result in
steps to close certain under performing units. The Company's primary strategy is
to develop new Rainforest Cafes in urban entertainment centers, including the
Unit currently under development at the Downtown Disney entertainment venue near
Disneyland in Anaheim, California. Because of the relatively large size of each
Rainforest Cafe and the Company's site selection criteria, the availability of
desirable locations may be limited and the Company may be hindered in finding
suitable locations for the development of new Units. Additionally, the Company's
ability to open additional Units will depend upon a number of other factors
including the ability of the Company to negotiate leases on acceptable terms,
timely approval of local regulatory authorities, acceptance of the Rainforest
Cafe concept in new markets, and the general state of the economy. Finally, the
capital resources required to develop each new Unit are significant.

     The Company's ability to open and successfully operate additional Units
will also depend upon the hiring and training of skilled Unit management
personnel and the general ability to successfully manage growth, including
monitoring Units and controlling costs, food quality and customer service.
Accordingly, there can be no assurance that the Company will be able to open new
Units, at the planned rate of expansion, or on a timely basis, or that, if
opened, those Units can be operated profitably.

LIMITED BASE OF OPERATIONS

     The combination of the relatively small number of Unit locations and the
significant investment associated with each new Unit may cause the operating
results of the Company to fluctuate significantly and adversely affect the
profitability of the Company. Poor operating results at any one Unit or a delay
in the planned opening or non-opening of a Unit could materially affect the
profitability of the entire Company. Furthermore, the Company is expected to
derive a significant portion of its revenues from its Units located in Walt
Disney World. Because of the substantial financial requirements associated with
opening new Units, the investment risk related to any one Rainforest Cafe is
much larger than that associated with most other companies' restaurant or retail
revenues.



                                       13
<PAGE>   14


     Some of the Company's Units, have been or will be developed at newly
constructed shopping malls that have no operating history. As the Company
continues to develop Units in newly constructed shopping malls, the Company
could experience delays in openings similar to that experienced in the
Burlington Mall Unit or the Palisades Center Unit, the anticipated opening of
which had been delayed for approximately one year due to factors beyond the
Company's control. The poor performance of these malls could also negatively
impact these Units and the financial performance of the Company. Similarly,
Disney's Animal Kingdom has limited operating history and the performance of
this Unit is dependant on visitor attendance to the theme park.

STOCK PRICE VOLATILITY

     Since the Company's initial public offering in April 1995, the market price
of the Company's Common Stock fluctuated substantially and could fluctuate
substantially in the future due to a variety of factors, including quarterly
operating results of the Company or other restaurant and retail companies,
market perception of the Company's ability to achieve successfully its planned
rapid growth, the trading volume in the Company's Common Stock, changes in
general conditions in the economy, the financial markets or the restaurant or
retail industries, or other developments affecting the Company or its
competitors. In addition, the stock market is subject to extreme price and
volume fluctuations. This volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of these companies.

DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING

     The success of the Company's operations depends to a significant extent on
a number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income, the overall success of
the malls, entertainment centers and Disney theme parks in which Units are
located and the continued popularity of theme restaurants generally and the
Company's rain forest concept in particular. Theme restaurants are susceptible
to shifts in consumer preferences and may experience a decline of revenue growth
or of actual revenues as consumers tire of the related theme.

 RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

     The Company has license agreements pursuant to which its licensees will
develop Units in the United Kingdom and Ireland, Mexico, Canada, Southeast Asia,
South America, France and Hong Kong and intends to enter into other license
agreements in the future. The Company's concept is relatively untested outside
of the United States, and no assurance can be given that any international
location will be successful. The Company's success is also dependent to a
substantial extent on its reputation, and its reputation may be affected by the
performance of certain licensee-owned Units over which the Company will have
limited control. In addition, the Company has invested equity capital in its
Units in the U.K., Canada and Hong Kong and is likely to continue to invest
equity capital in certain other of its international Units. Such investments are
likely to range from approximately $400,000 to $2.5 million per Unit. Any
international operations of the Company will also be subject to certain external
business risks such as exchange rate fluctuations, political instability and a
significant weakening of a local economy in which a foreign Unit is located. In
addition, it may be more difficult to register and protect the Company's
intellectual property rights in certain foreign countries.



                                       14
<PAGE>   15


LEASES

     The Company has entered into long-term leases relating to each of its
existing domestic Units and has entered into leases or letters of intent with
respect to certain of its planned domestic Units. These leases are or will be
non-cancelable by the Company (except in limited circumstances) and have or will
have annual base rents ranging from $200,000 to $1.0 million (except for Leases
related to certain Icon Units). Additional facilities developed by the Company
are likely to be subject to similar long-term leases which are non-cancelable by
the Company. If an existing or future Unit does not perform at a profitable
level, and the decision is made to close the Unit which may be deemed a default
under such Unit's lease, the Company may nonetheless be committed to perform its
obligations under the applicable lease which would include, among other things,
payment of the respective base rent for the balance of the respective lease
term. The leases related to the Downtown Disney Marketplace, Disney's Animal
Kingdom and the Disneyland Resort Units are cancelable by the landlord at any
time upon sixty days notice and payment of the Company's unamortized value of
leasehold improvements and an amount equal to the net operating income generated
by such Unit for the previous lease year. With regard to certain of the
Company's leases, in the event the Company fails to achieve specified gross
sales by a certain date, such leases may be terminated by the landlord. If such
a termination were to occur at these locations, the Company would lose a Unit
without necessarily receiving an adequate return on its investment.

DEPENDENCE ON KEY PERSONNEL

     The Company's future success will depend largely on the efforts and
abilities of the Company's senior corporate management. Lyle Berman, the
Company's Chairman and Chief Executive Officer, serves on five boards of public
companies. Mr. Berman devotes approximately 15% of his time to the Company.


ITEM 2.  PROPERTIES

     The Company presently intends to lease the facilities for each of its
Units. It has entered into long-term ten year leases with respect to its
existing and planned Units except for an eleven year lease for the South Coast
Plaza Unit and a fifteen year lease for its Downtown Chicago location. The
Company's leases with Disney are cancelable by the landlord at any time upon 60
days notice and payment by Disney of the Company's unamortized value of
leasehold improvements at the Downtown Disney Marketplace Unit, Disney's Animal
Kingdom Unit and the planned Unit at the Disneyland Resort, respectively, and an
amount equal to the net operating income generated by such Unit for the previous
lease year. With regard to the Tysons Corner Center I and Cherry Creek Mall
leases, in the event the Company fails to achieve specified gross sales by a
certain date, the lease may be terminated by the landlords. The Company's leases
typically have annual base rent, certain common area maintenance expense and
percentage rents that range from 5 to 18 percent depending upon location and
volume of sales.

     The Company's executive offices are located in Hopkins, Minnesota, under a
lease, which terminates in October 2003.

                                       15
<PAGE>   16
ITEM 3.  LEGAL PROCEEDINGS

     The Company is a defendant from time to time in routine lawsuits incidental
to its business, which individually and in the aggregate, are not expected to
have any material adverse effect on the Company. In addition, the company is
party to the following:

EMANUEL MASSING V. LYLE BERMAN ET AL. LITIGATION

The Company and certain present and former executive officers of the Company are
named as defendants in a purported class action complaint, Emanuel Massing vs.
Lyle Berman, et al., alleging violations by the Company and such executive
officers of certain Federal securities laws. The complaint was filed on May 3,
1999 in the United State District Court for the District of Minnesota. This
action is a follow-up action to the previous shareholder action, In Re:
Rainforest Cafe, Inc. Securities Litigation, which was dismissed without
prejudice on December 21, 1998. The new complaint alleges that the defendants
violated the Federal securities laws by making misrepresentations and omissions
regarding the Company's performance and future prospects during the class period
while individually selling the Company's Common Stock. The complaint purports to
seek relief on behalf of a class consisting of all persons who purchased the
Company's Common Stock during the period between October 20, 1997 and January 6,
1998. On January 12, 2000, the United States Magistrate Judge issued a Report
and Recommendation in which he recommended to the presiding judge that the
action be dismissed with prejudice and that plaintiffs be ordered to pay
sanctions of $3,000 to the defendants.  By order filed on February 29, 2000, the
presiding judge accepted the Report and Recommendation in its entirety and
ordered that the action be dismissed with prejudice.

BILLIE MACK V. LYLE BERMAN, ET AL.; ROBERT FINK V. RAINFOREST CAFE, INC. ET AL.

The Company and certain directors are named as defendants in two purported class
action lawsuits, Billie Mack v. Lyle Berman, et al., and Robert Fink v.
Rainforest Cafe, Inc., et al., filed on December 23, 1999 and January 13, 2000,
respectively. Both actions were filed in Hennepin County District Court of
Minnesota, alleging that defendants breached their fiduciary duty and engaged in
unfair dealing to the detriment of the holders of Rainforest Cafe common stock
in connection with a proposed merger of the Company with Lakes Gaming, Inc. The
Company has requested dismissal of the actions in light of the announcement that
the proposed merger with Lakes Gaming has been terminated, thereby making
plaintiffs' allegations moot.

See Part 1, Item 1, - Business: "Recent Developments."

                                       16
<PAGE>   17


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

         No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended January 2, 2000.


                      EXECUTIVE OFFICERS OF THE REGISTRANT

     The following sets forth certain information with respect to each person
who is a director or executive officer of the Company:

     Lyle Berman, age 58 has been Chairman of the Board and Chief Executive
Officer of the Company since its inception in February 1994. Mr. Berman has been
Chairman of the Board of Lakes Gaming since June 1998. Mr. Berman was Chief
Executive Officer of Grand Casinos, Inc. from October 1990 to March, 1998 and
had been Chairman of the Board of Grand Casinos, Inc. and its predecessor since
October 1990. Mr. Berman is also a director of G-III Apparel Group, New Horizons
Kids Quest, Inc., Park Place Entertainment Corporation and Wilsons-The Leather
Experts, Inc. ("Wilsons"). Mr. Berman was Chief Executive Officer and Chairman
of Stratosphere Corporation from July 1996 through July 1997. Stratosphere
Corporation filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in January 1997.

     Kenneth Brimmer, age 44 has been President of the Company since April 1997,
a Director of the Company since August 1998, Treasurer since September 1995 and
involved with the Company in various capacities since its inception. Mr. Brimmer
was employed by Grand Casinos, Inc. and its predecessor from October 1990 to
January 1998 as Special Assistant to the Chairman and Chief Executive Officer,
Lyle Berman. Mr. Brimmer is also a director of New Horizons Kids Quest, Inc.,
Hypertension Diagnostics, Inc. and Oxboro Medical International, Inc.

    Steven Schussler, age 44 has been Senior Vice President-Development of the
Company since its inception and a director of the Company since January 1995.
From 1983 to February 1992, Mr. Schussler was an officer of Juke Box Saturday
Night of Minneapolis, Inc. ("JBSN"), a 1950's and 1960's theme restaurant and
nightclub.

    Ercu Ucan, age 44 has been Senior Vice President-Retail of the Company since
its inception and a director of the Company since January 1995. From September
1992 until December 1993, Mr. Ucan served as President of the Orjin Textile
Group in Istanbul, Turkey, a garment factory employing approximately 150
persons. From January 1989 until August 1992, Mr. Ucan served as Director of
Trend Merchandising and Director of Product Development for Wilsons.


    Charles Robinson, age 44 has been Senior Vice President - Operations of the
Company since August 1998. Mr. Robinson joined Rainforest Cafe in January 1996
as the Director of Operations for the Downtown Disney Marketplace unit. In
August 1997, he was named Regional Director of Operations for the eastern
division, followed by a promotion to Vice President of International Operations
in December 1997. Mr. Robinson has held executive positions in both the
restaurant and hotel industries. He holds a Bachelor of Science degree in
Restaurant, Hotel and Institutional Management from Purdue University.

     Robert Hahn, age 44 has been Vice President and Chief Financial Officer
since January 2000. Mr. Hahn joined Rainforest Cafe in March 1999 as controller.
From 1995 to 1999 Mr. Hahn was a manager with the accounting firm KPMG. Mr. Hahn
has held various executive positions in the retail industry and he is a
certified public accountant.

                                       17
<PAGE>   18

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock trades on the National Market tier of the NASDAQ
Stock Market under the symbol RAIN. On February 28, 2000 there were
approximately 1,300 shareholders of record. The following table sets forth for
the quarters indicted the high and low sale prices of the Company's common
stock, as reported by The Nasdaq Stock Market.

<TABLE>
<CAPTION>
---------------------------------------- -------------------------------------- --------------------------------------
1999                                     High                                   Low
---------------------------------------- -------------------------------------- --------------------------------------
<S>                                      <C>                                    <C>
First Quarter                            $6.25                                  $4.75
Second Quarter                            5.75                                   4.50
Third Quarter                             7.44                                   4.88
Fourth Quarter                            5.31                                   3.13
---------------------------------------- -------------------------------------- --------------------------------------

---------------------------------------- -------------------------------------- --------------------------------------
1998                                     High                                   Low
---------------------------------------- -------------------------------------- --------------------------------------
First Quarter                            $22.75                                 $10.75
Second Quarter                            16.75                                  13.25
Third Quarter                             14.00                                   6.06
Fourth Quarter                             7.41                                   5.44
---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>

Since its intital public offering of common stock in April 1995, the Company has
not paid dividends on its common stock, and has no plans to do so in the
foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Share Data)           1999         1998         1997         1996         1995
---------------------------------------------------------------------------------------------------------------------

<S>                                     <C>          <C>          <C>          <C>          <C>
FISCAL YEAR
Revenues                                $262,690     $213,892     $108,074     $ 48,706     $ 13,451
Unit Operating Income (Loss)              23,060       29,204       19,969        8,889        2,166
Pretax Income (Loss)                       8,691       22,203(2)    19,210        9,240        1,169(1)
Net Income (Loss)                          5,694       14,654(2)    12,293        5,924        1,169(1)
Net Income (Loss) Per Share                  .23          .57(2)       .46          .27          .10
Weighted Average Shares Outstanding       24,637       25,730       26,835       21,587       10,969
AT YEAR END
Working Capital                         $ 53,241     $ 65,651     $ 77,732     $118,320     $ 15,490
Total Assets                             261,716      255,527      246,100      222,701       31,209
Shareholders' Equity                     202,392      207,926      222,982      203,954       26,355
Book Value Per Share                    $   8.70     $   8.43     $   8.46     $   7.91     $   1.85

---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Before extraordinary item
(2) Before cumulative change in accounting principle

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW

The Company, founded in February 1994, owns, operates, and licenses themed
restaurant/retail facilities (each a "Unit") under the name "Rainforest Cafe (R)
- A Wild Place to Shop and Eat(R)." As of February 28, 2000 the Company owned
and operated 28 Units in the United States and licensed ten Units outside of the
United States. Rainforest Cafe Units range in size from the Company's initial
Unit opened on October 3, 1994 in the Mall of America in Bloomington, Minnesota,
which is approximately 15,000 square feet, to the 34,000 square foot Unit
located at Disney's Animal Kingdom at Walt Disney World(R) in Orlando, Florida.

                                       18
<PAGE>   19


The Company's revenue consists primarily of sales from its restaurant and retail
operations that are combined within each of the Company's Units. Comparable Unit
sales include the sales of units open for the full period of each period being
compared. New Units enter the comparable sales base at the beginning of the
nineteenth month of operation. As of February 28, 2000, the Company has opened
one additional domestic Unit during the first quarter of 2000. No additional
Units are planned for the remainder of the first quarter of 2000. Because the
Company anticipates continued expansion, period to period comparisons may not be
meaningful.

In addition to operations in the United States, the Company has pursued
international growth opportunities through licensing arrangements. The Company
has entered into eight exclusive license agreements to develop up to 28 Units,
of which ten are currently open, over the next ten years in the United Kingdom
and Ireland, Mexico, Canada, France, and certain cities and countries in Asia
and South America. The Company intends to enter into additional license
agreements in the future.

These agreements have per Unit development fees of at least $100,000 and
royalties ranging from 3% to 10% of Unit sales. All agreements, with the
exception of the agreement relating to the United Kingdom and Ireland, have area
licensing fees that are proportionate to market size and economic potential.
Certain agreements, such as the agreement relating to the United Kingdom and
Ireland, allow the Company to become an equity participant of 20%-50% of each
Unit developed. The agreement for Canadian development is a 50/50 joint venture
with the Elephant and Castle Group located in Vancouver, Canada. In addition,
during the third quarter of 1999, the Company purchased a beneficial ownership
of a 75% equity interest in Yorkdale Rainforest Restaurant, Inc. (a Canadian
federal corporation) which owns 100% of the Unit in the Yorkdale Shopping Centre
located in North York, Ontario, Canada. Elephant and Castle is the beneficial
owner of the 25% minority interest in Yorkdale Rainforest Restaurant, Inc.. The
results of this entity are consolidated with the Company's other wholly-owned
and majority owned subsidiaries. The Agreement with Jungle Investments Limited
(JIL) to develop Hong Kong , Macau, Taiwan and Shanghai allowed the Company to
purchase 20% equity in JIL as well as 20% equity in the Unit opened in Hong
Kong.

Components of operating expenses include operating payroll and fringe benefits
costs, occupancy costs, maintenance costs related to the bird habitat and
aquariums, and advertising and promotion costs. Historically when a new Unit
opens, it incurs higher than normal levels of labor and food costs as Unit
personnel complete training. Management believes, however, that as new staff
gain experience, hourly labor schedules over the ensuing 30-60 day period will
gradually adjust because of operating efficiencies and will then be similar to
those of established Units. Each of the Company's current leases includes both
fixed rent and percentage rent provisions.

General, administrative and development expenses include all corporate and
administrative functions that serve to support existing operations and provide
an infrastructure to support future growth. In addition, certain expenses
related to the recruiting and training of Unit management personnel are also
included. Corporate management, supervisory and staff salaries, employee
benefits, travel, information systems, finance, marketing, rent and office
expenses are primary items of cost in this category.

The Company uses a 52- or 53- week fiscal year ending on the Sunday nearest
December 31.

                                       19
<PAGE>   20


RESULTS OF OPERATIONS

The operating results of the Company expressed as a percentage of total revenues
(except where noted) were as follows:

<TABLE>
<CAPTION>


                                                         January 2,       January 3,       December 28,
                                                           2000             1999              1997


<S>                                                        <C>              <C>               <C>
Revenues:
   Restaurant sales                                         79.7  %          77.0  %           77.4  %
   Retail sales                                             19.1             22.0              22.0
   Licensing fees and royalties                              1.2              1.0               0.6
                                                      ============      ===========      ============
      Total revenues                                       100.0            100.0             100.0
                                                      ============      ===========      ============


Costs and Expenses:
   Food and beverage costs (1)                              23.6             23.6              23.7
   Cost of retail goods sold (2)                            48.4             46.1              45.6
   Restaurant operating expenses (1)                        55.6             52.0              49.0
   Retail operating expenses (2)                            39.3             33.5              32.4
   Depreciation and amortization (3)                         7.2              6.2               5.3
   Preopening expenses (3)                                   1.6              4.6               2.9
   Asset impairment charge (3)                               2.6                -                 -
                                                      ------------      -----------      ------------
      Total costs and expenses                              91.2             87.2              82.0

      Income from Unit Operations and Licensing              8.8             13.7              18.5
                                                      ------------      -----------      ------------


Other (Income) Expense:
   General, administrative and development                   5.9              5.7               6.9
   Interest Income                                         (1.1)            (2.8)             (8.3)
   Write-off of development and debt offering costs           .3              0.0               2.1
   Other                                                      .3              0.3               0.1
                                                      ------------      -----------      ------------

      Total other (income) expense                           5.5              3.3               0.7
                                                      ------------      -----------      ------------


Income before Income Taxes and Cumulative
   Effect of Change in Accounting Principle                  3.3             10.4              17.8

Provision for income taxes                                   1.1              3.5               6.4
                                                      ------------      -----------      ------------

Income before Cumulative Effect of Change in
   Accounting Principle (4)                                  2.2              6.8              11.4
                                                      ============      ===========      ============
</TABLE>


(1) Percentage of restaurant sales
(2) Percentage of retail sales
(3) Percentage of unit sales
(4) Effective December 29, 1997, the company adopted Statement of Position (SOP)
    98-5, "Reporting on the Costs of Start-Up Activities". The effect of this
    change was a charge to operations representing 1.8% of total revenues.


                                       20
<PAGE>   21


FIFTY-TWO WEEKS ENDED JANUARY 2, 2000 COMPARED TO THE FIFTY-THREE WEEKS ENDED
JANUARY 3, 1999

    Results of operations for the fiscal year ended January 2, 2000 reflect the
operations of twenty three Mall Units and four free-standing Units. Twenty one
domestic Units and seven international Units were open the entire 1999 year. Six
domestic Units and three international units were opened during the year.

    Total revenues increased 23% to $262.7 million in 1999 from $213.9 million
in 1998. Revenue growth resulted primarily from the addition of six domestic
Units during 1999 which contributed revenues of $27.4 million and from a full
year of operations of the seven Units which opened in 1998 and contributed an
increase in revenues of $38.0 million in 1999. International Unit growth
contributed $1.1 million additional revenues in 1999. These increases in
revenues were partially offset by a decrease in sales of $21.0 million for Units
which were opened prior to 1998. The Company's experience to date is that a
Unit's sales frequently decrease on a comparable basis after the first year of
operations. The comparable store sales base decreased 10.9% for 1999 as compared
to 1998. Management believes that any such decreases result primarily from the
fact that the Company's new Units typically open at or near full capacity.

    Restaurant sales increased 27% to $209.3 million compared to $164.7 million
in 1998. The comparable store restaurant sales base decreased 9.5% in 1999
compared to 1998. Retail sales increased 7% to $50.1 million from $47.0 million
in 1998. The comparable store retail sales base decreased 15.8% in 1999 as
compared to 1998. The retail sales decrease was primarily due to a large
decrease in Beanie Baby sales. Sales of Beanie Babies in 1999 decreased by $2.3
million compared to 1998 despite an increase in the number of Units. Comparable
retail sales not including Beanie Babies decreased 7% in 1999 compared to 1998.
The decrease in Beanie Baby sales was primarily due to the manufacturer
announcing the discontinuance of the product. Sales of Beanie Babies were ahead
of 1998 for the first quarter of 1999 before the announcement of the
discontinuance of this product.

    Food and beverage costs increased 28% to $49.5 million in 1999 compared to
$38.8 million in 1998. The increase in food and beverage costs was consistent
with the increase in restaurant sales. Food and beverage costs remained
relatively stable as a percent of sales. Cost of retail goods sold increased 12%
to $24.3 million from $21.7 million in 1998. The increase in cost of retail
goods sold was primarily due to the increase in retail sales from additional
Units. Cost of retail goods sold as a percentage of retail sales increased by
2.3% of sales in 1999 compared to 1998 primarily due to more frequent in-store
promotions and greater discounts offered in 1999.

    Restaurant and retail operating expenses increased 34% to $136.0 million for
1999 from $101.4 million for 1998, primarily due to Unit expansion. Restaurant
operating expenses increased as a percentage of restaurant sales from 52.0% in
1998 to 55.6% in 1999. Retail operating expenses increased as a percentage of
retail sales from 33.5% in 1998 to 39.3% in 1999. The increase in restaurant and
retail operating expenses as a percentage of applicable restaurant and retail
sales is primarily due to the combination of increased expenditures for repairs
and maintenance and sales and marketing, while the same store sales base
decreased. Expenditures for sales and promotions increased at most Units and the
investment in corporate sales personnel at most Units contributed to higher
costs.

    Depreciation and amortization increased 44% to $18.9 million in 1999 from
$13.1 million for the comparable period in 1998. Preopening expenses decreased
56% from $9.7 million in 1998 to $4.3 million in 1999. The increase in
depreciation and amortization was primarily due to Unit expansion and capital
additions and improvements to existing Units. Depreciation and amortization as a
percentage of restaurant and retail sales increased to 7.2% for the 1999 fiscal
year from 6.2% for 1998 due to increased costs of new Unit development, capital
improvements in existing Units and decreased comparable store sales in certain
Units. Preopening expenses decreased as a percentage of restaurant and retail
sales from 4.6% in 1998 to 1.6% in 1999. The decrease as a percentage of sales
is primarily due to a decrease in average Unit preopening costs in 1999 and the
addition of only six new Units in 1999, compared to 8 new Units in 1998. In
addition as more Units are opened the sales base increases in comparison to new
openings.

                                       21
<PAGE>   22


    The Company took a non-cash asset impairment charge of $6.7 million during
the fourth quarter of 1999. This impairment charge represented the write-down to
fair value of the long-lived assets of the Aventura Mall Unit in Miami, Florida.
This Unit's comparable store sales decreased 25% in 1999. As a result, an
impairment was recognized as the future undiscounted cash flows for this Unit
was estimated to be insufficient to recover the related carrying value of the
long-lived assets relating to this Unit. The assets were written down to their
estimated fair value, based on the Company's estimates of future discounted cash
flows.

    General, administrative and development expenses increased 26% to $15.5
million in 1999 from $12.3 million in 1998. The increase in general,
administrative and development expenses was primarily due to the addition of
corporate employees, an increase in regional Unit management and the development
of marketing and advertising programs. General, administrative and development
expenses as a percentage of revenues increased to 5.9% of revenues of 1999 from
5.7% of revenues for 1998.

    Interest income of $2.9 million for 1999 was generated primarily by
investing the proceeds from the Company's two follow-on public offerings
completed in January and September, 1996. Interest income decreased by 52% from
$5.9 million in 1998 to $2.9 million for fiscal year 1999.

     On December 22, 1999, the Company announced that it had an agreement to
merge with Lakes Gaming, Inc.. On January 24, 2000 the two parties mutually
agreed to terminate the merger agreement and the costs associated with the
proposed merger of $.9 million, or .3% of revenue, were charged to operations
during the fourth quarter of 1999. On February 9, 2000, the Company announced
the execution of a definitive merger agreement to be acquired by Landry's
Seafood Restaurants, Inc. (NYSE: LNY), for approximately $125 million to be paid
by Landry's in a combination of common stock (65%) and cash (35%) (based on an
assumed value of $9.00 per share of Landry's common stock), however, the
transaction value to the Company's shareholders will increase or decrease
depending upon fluctuations in Landry's common stock.

     The provision for income taxes in the 1999 and 1998 fiscal years are both
based upon the Company's estimated effective tax rate, including tax-exempt
interest income. The effective tax rate for 1999 was increased to 34.5% from 34%
in 1998, reflecting the reduction in tax exempt interest in comparison to
operating income for 1999 compared to 1998. The Company increased its estimated
tax rate to 35% during the second quarter of 1999 from 34% for 1998 and the
first quarter of 1999.

     Income before cumulative effect of change in accounting principle was $5.7
million, or $.23 per diluted share, for the 52-week 1999 fiscal year compared
with $14.7 million, or $.57 per diluted share, for the 53-week 1998 fiscal year.
Effective December 29, 1998, the company adopted Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5 requires
companies to expense as incurred all start-up and preopening costs that are not
otherwise capitalizable as long-lived assets. The effect of this accounting
change was a charge to operations of $3.9 million; net of $2.2 million of
related tax benefit for the unamortized balance of preopening costs and other
start-up expenses for the fiscal year 1998. The decrease in net income for
fiscal 1999 was primarily due to decreasing same store sales and the asset
impairment charge taken during fourth quarter of 1999.


FIFTY-THREE WEEKS ENDED JANUARY 3, 1999 COMPARED TO THE FIFTY-TWO WEEKS ENDED
DECEMBER 28, 1997

    Results of operations for the fiscal year ended January 3, 1999 reflect the
operations of seventeen Mall Units and four free-standing Units. Thirteen
domestic Units and three international Units were open in the entire 1998 year.
Eight domestic Units and four international units were opened during the year.

                                       22
<PAGE>   23

    Total revenues increased 98% to $213.9 million in 1998 from $108.1 million
in 1997. Revenue growth resulted primarily from the addition of eight domestic
Units during 1998 which contributed revenues of $45.8 million and from a full
year of operations of the seven Units which opened in 1997 and contributed an
increase in revenues of $65.9 million in 1998. International Unit growth
contributed $1.5 million additional revenues in 1998. These increases in
revenues were offset by a decrease in sales of $7.4 million for Units which were
opened prior to 1997. The Company's experience to date is that a Unit's sales
frequently decrease on a comparable basis after the first year of operations.
The comparable store sales base decreased 9% for the fiscal year 1998 as
compared to 1997. Management believes that any such decreases result primarily
from the fact that the Company's new Units typically open at or near full
capacity.

    Food and beverage costs increased 96% to $38.8 million in 1998 compared to
$19.8 million in 1997. The increase in food and beverage costs was consistent
with the increase in restaurant sales. Food and beverage costs remained
relatively stable as a percent of sales. Cost of retail goods sold increased 99%
to $21.7 million from $10.9 million in 1997. The increase in cost of retail
goods sold was primarily due to the increase in retail sales from additional
Units. Cost of retail goods sold as a percentage of retail sales increased by
0.5% of sales in 1998 compared to 1997 primarily due to more frequent in-store
promotions and greater discounts offered in 1998.

    Restaurant and retail operating expenses increased 108% to $101.4 million
for 1998 from $48.7 million for 1997, primarily due to Unit expansion.
Restaurant operating expenses increases as a percentage of restaurant sales from
49.0% in 1997 to 52.0% in 1998. Retail operating expenses increased as a
percentage of retail sales from 32.4% in 1997 to 33.5% in 1998. The increase in
restaurant and retail operating expenses as a percentage of applicable
restaurant and retail sales is primarily due to increased expenditures on
repairs and maintenance, sales and marketing, and increased costs of restaurant
labor. The restaurant labor increase is partially due to the payment of higher
union wage rates at the Company's Unit at MGM Grand Hotel and Casino located in
Las Vegas, Nevada. Expenditures on sales and promotions increased at most Units
and the initial investment in corporate sales personnel in Las Vegas, South
Florida, Orlando and Chicago contributed to higher costs. A high level of
operating expenses at the Aventura Mall Unit combined with low sales volume also
contributed to the percentage increase in restaurant and retail operating
expenses.

    Depreciation and amortization increased 132% to $13.1 million in 1998 from
$5.6 million for the comparable period in 1997. Preopening expenses increased
215% from $3.1 million in 1997 to $9.7 million in 1998. The increase in
depreciation and amortization was primarily due to Unit expansion and capital
additions and improvements to existing Units. Depreciation and amortization as a
percentage of restaurant and retail sales increased to 6.2% for the 1998 fiscal
year from 5.3% for 1997 due to increased costs of new Unit development, capital
improvements in existing Units and decreased comparable store sales in certain
Units. Preopening expenses increased as a percentage of restaurant and retail
sales from 2.9% in 1997 to 4.6% in 1998. The increase as a percentage of sales
is primarily due to an increase in average Unit preopening costs and the
addition of eight new Units in 1998, whose preopening costs were expensed during
the year, and not capitalized as in the past due to a change in accounting
principle as discussed below.

    General, administrative and development expenses increased 66% to $12.3
million in 1998 from $7.4 million in 1997. The increase in general,
administrative and development expenses was primarily due to the addition of
corporate employees, an increase in regional Unit management and the development
of marketing and advertising programs. General, administrative and development
expenses as a percentage of revenues decreased to 5.7% of revenues of 1998 from
6.9% of revenues for 1997.

    Interest income of $5.9 million for 1998 was generated primarily by
investing the proceeds from the Company's two follow-on public offerings
completed in January and September, 1996, and capital gains on investments
realized during 1998. Interest income of $9.0 million for 1997 was generated
primarily by investing the proceeds of the Company's two 1996 follow-on public
offerings.

    The provision for income taxes in the 1998 and 1997 fiscal years are both
based upon the Company's estimated effective tax rate, including tax-exempt
interest income. The effective tax rate for 1998 was reduced to 34% from 36% in
1997, reflecting the addition of more Units in lower tax states such as Nevada
and Florida.

                                       23
<PAGE>   24


     Income before cumulative effect of change in accounting principle was $14.7
million, or $.57 per diluted share, for the 53-week 1998 fiscal year compared
with $12.3 million, or $.46 per diluted share, for the 52-week 1997 fiscal year.
Effective December 29, 1997, the company adopted Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5 requires
companies to expense as incurred all start-up and preopening costs that are not
otherwise capitalizable as long-lived assets. The effect of this accounting
change was a charge to operations of $3.9 million; net of $2.2 million of
related tax benefit for the unamortized balance of preopening costs and other
start-up expenses as of December 28. 1997. Net income was $10.7 million or $.42
per diluted share for the 1998 fiscal year compared with $12.3 million or $.46
per diluted share for fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal capital needs arise from the development and
opening of new Units. In January 1996, the Company issued an aggregate of
6,210,000 shares of Common Stock pursuant to a secondary public offering at
$12.67 per share. The net proceeds to the Company, after payment of underwriting
fees and offering expenses, were approximately $73.6 million. In May 1996, the
Company received approximately $1.0 million in net proceeds from the exercise of
warrants at $3.20 per share issued to Underwriters of the Company's IPO. In
September 1996, the Company issued an aggregate of 5,175,000 shares of common
stock pursuant to an additional public offering at $21.00 per share. The net
proceeds to the Company, after payment of underwriting fees and offering
expenses, were approximately $96.0 million. On January 2, 2000, the Company had
working capital of approximately $53.2 million and marketable securities of
$24.0 million, consisting principally of investment grade, fixed income
securities.

The following table represents a summary of the Company's key liquidity
measurements for the 52-week year ended January 2, 2000, the 53-week year ended
January 3, 1999 and the 52-week year ended December 27, 1997:

(Dollar amounts in millions)
<TABLE>
<CAPTION>
                                                                               Period Ended
                                                                               ------------
                                                              January 2,        January 3,       December 27,
                                                                 2000              1999             1997
                                                              ----------        -----------      -----------

<S>                                                           <C>             <C>           <C>
Cash and marketable securities on hand, end of period          $  35.4        $  46.3        $  93.6
Net working capital, end of period                             $  53.2        $  65.6        $  77.7
Current ratio, end of period                                   4.7 to 1       5.4 to 1       6.6 to 1
Long-term debt, end of period                                  $   -          $  -           $   -
Cash provided by operations                                    $  27.5        $  27.9        $  11.5
Capital expenditure                                            $  36.4        $  71.5        $  39.5

</TABLE>


    The Company generated $27.5 million in cash flow from operating activities
for 1999, compared to $27.9 million for 1998. Additionally, for 1999 the Company
generated $0.2 million from the exercise of stock options, compared with $.6
million for the comparable period in 1998. In 1999, the Company generated
approximately $1.0 million cash from the sale of put options on approximately
2.1 million shares of the Company's common stock at exercise prices ranging from
$5.00 - $6.75 per share. In 1998, the Company generated approximately $2.5
million in cash from the sale of put options on approximately 2.2 million shares
of the Company's Common Stock at exercise prices ranging from $5.00 to $15.00
per share.) The sale of the put options was executed as part of a stock
repurchase program announced in January 1997 and amended January, 1998 and
January, 1999 pursuant to which up to a total of 6.5 million shares of the
Company's Common Stock may be repurchased over a one year period. During 1999,
1.5 million shares of Common Stock were repurchased through put option
assignments and open market repurchases for $9.8 million. The Company believes
that it will continue to generate cash from operating activities and earn
interest income, both of which will be utilized for future development and
working capital purposes.

                                       24
<PAGE>   25


    The average investment to open the Company's seventeen Mall Units was $5.8
million per Unit, net of landlord contributions, which averaged $1.7 million.
Additionally, the Company averaged approximately $760,000 in preopening expenses
and purchased an average of $240,000 of inventory in connection with the
openings. Total expenditures to develop the Company's four Icon Units averaged
$12.3 million per Unit, net of landlord contributions, which averaged $0.9
million. Preopening expenses incurred for these Units were approximately $1.1
million and the initial inventory purchased was approximately $400,000.

    The Company expects future domestic Mall Units to cost between $5.5 million
and $6.5 million to develop, net of anticipated landlord contributions. In
addition, the Company expects that it will incur approximately $700,000 in per
Unit preopening costs and purchase approximately $225,000 of inventory in
connection with the opening of these Units. The Company also expects to open
selected, larger Icon Units, such as its planned Unit in San Francisco,
California, and Disneyland Resorts in Anahiem, California which may cost
significantly more. In connection with the construction of existing Units, the
Company has received landlord contributions, which reduced the cost of opening
these Units. There can be no assurance, however, that landlord contributions
will be available in the future.

    The Company contemplates that the development and opening of each of its
Units through 2000 will be financed with existing cash on hand and cash flow
from operations. The Company may require additional equity or debt financing for
expansion beyond 2000.

    It is not anticipated that the Company's business will require substantial
working capital to meet its operating requirements. Virtually all of the
Company's revenues are collected in cash or pursuant to credit card processing.
Food and beverage inventories and merchandise inventories are expected to
increase in relation to trade accounts payable.

NEW ACCOUNTING STANDARDS

    In June, 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." For further
information on SFAS No. 133, see note 1 of Notes to Consolidated Financial
Statements.


QUARTERLY FLUCTUATIONS, SEASONALITY AND INFLATION

    As a result of the substantial revenues associated with each new Unit, the
timing of new Unit openings may result in significant fluctuations in quarterly
results. The Mall Units may also have higher third or fourth quarter revenues
compared to the first two quarters as a result of seasonal traffic increases at
mall locations and seasonally stronger retail sales. Units at entertainment
centers or Disney theme parks may show fluctuations in accordance with any
overall seasonality at these locations.

    The primary inflationary factors affecting the Company's operations include
food and beverage and labor costs. Management does not anticipate any
significant labor cost increases as a result of the minimum wage increases
enacted in 1998. Units in higher cost labor markets such as California, New York
and Nevada may experience lower operating margins than units located in lower
cost labor markets. In addition, the Company's leases require the Company to pay
costs that are subject to inflationary increases, such as taxes, maintenance,
repairs and utilities. The Company believes low inflation rates have contributed
to relatively stable costs.  There is no assurance, however, that low inflation
rates will continue.

                                       25
<PAGE>   26


FORWARD LOOKING DISCLOSURE

    The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
annual report 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)
contain statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities as well as
other capital spending, financial sources and the effects of competition. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company. These risks and uncertainties include, but
are not limited to, those relating to development and construction activities,
including delays in opening new Units, acceptance of the Rainforest Cafe
concept, the quality of the Company's restaurant and retail operations,
dependence on discretionary consumer spending, the Company's failure to defend
its intellectual property rights, dependence on existing management, general
economic conditions, changes in federal or state laws or regulations.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

    The Company is exposed to market risk related to its investments in
marketable securities. As of January 2, 2000, the Company held $24.0 million in
marketable securities. A hypothetical 10% decline in the market value of these
securities would result in a $2.4 million unrealized loss and a corresponding
decline in fair value of a like amount. This hypothetical decline would not
effect cash flow from operations and would not have an impact on net income
until the securities were sold.


ITEM 8.  FINANCIAL STATEMENTS


Index to Financial Statements
<TABLE>
<CAPTION>

FINANCIAL STATEMENTS:

<S><C>
Report of Independent Certified Public
Accountants...................................................................................27
Consolidated Balance Sheets at January 2, 2000 and January 3, 1999............................28
Consolidated Statements of Operations for the three years ended January 2,2000............... 29
Consolidated Statements of Shareholders' Equity for the three years ended January 2, 2000.....30
Consolidated Statements of Cash Flows for the three years ended January 2, 2000.............. 31
Notes to Consolidated Financial Statements....................................................32
</TABLE>

                                       26
<PAGE>   27


                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Rainforest Cafe, Inc.:

We have audited the accompanying consolidated balance sheets of Rainforest Cafe,
Inc. (a Minnesota corporation) as of January 2, 2000 and January 3, 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the three years in the period ended January 2, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rainforest Cafe,
Inc. as of January 2, 2000 and January 3, 1999 and the results of its operations
and its cash flows for the three years in the period ended January 2, 2000 in
conformity with generally accepted accounting principles.

As explained in Note 1 to the Financial Statements, effective December 29, 1997,
the Company changed its method of accounting for preopening costs.


                                       ARTHUR ANDERSEN LLP



Minneapolis, Minnesota,
   February 4, 2000



                                       27
<PAGE>   28





                              RAINFOREST CAFE, INC.

                           Consolidated Balance Sheets

                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                          January 2,          January 3,
                                                                                             2000                1999
                                                                                       ---------------     ---------------
                                       ASSETS
<S>                                                                                         <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                                 $ 11,480       $  16,863
   Marketable securities available-for-sale                                                    23,957          29,482
   Accounts receivable and other                                                                8,027          15,679
   Inventories                                                                                  9,043          11,191
   Deferred income taxes                                                                       10,198           3,766
   Note receivable from related party                                                           1,721               -
   Prepaid expenses                                                                             2,986           3,563
                                                                                             --------         -------
               Total current assets                                                            67,412          80,544



PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net                                           186,042         168,982

OTHER ASSETS                                                                                    8,262           6,001
                                                                                             --------         -------
                                                                                             $261,716        $255,527
                                                                                             ========        ========
                        LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                                          $  4,397        $  6,897
   Accrued liabilities-
      Payroll and payroll taxes                                                                 2,492           2,831
      Other                                                                                     7,282           5,165
                                                                                             --------        --------
               Total current liabilities                                                       14,171          14,893

DEFERRED OCCUPANCY COSTS                                                                       27,434          23,498

DEFERRED INCOME TAXES                                                                           9,385           4,074
                                                                                             --------        --------
               Total liabilities                                                               50,990          42,465
                                                                                             ========        ========

MINORITY INTEREST                                                                               1,168               -

PUT OPTIONS                                                                                     7,166           5,136

COMMITMENTS AND CONTINGENCIES (Notes 2 and 10)

SHAREHOLDERS' EQUITY:
   Common stock, no par value, 50,000 shares authorized; 23,246 and 24,651 issued
      and outstanding                                                                         171,321         181,628
   Retained earnings                                                                           33,137          27,443
   Cumulative other comprehensive loss                                                         (2,066)         (1,145)
                                                                                             --------        --------
               Total shareholders' equity                                                     202,392         207,926
                                                                                             --------        --------
                                                                                             $261,716        $255,527
                                                                                             ========        ========
</TABLE>




The accompanying notes are an integral part of these consolidated balance sheets

                                       28
<PAGE>   29



                              RAINFOREST CAFE, INC.

                      Consolidated Statements of Operations

                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
                                                                                  January 2,       January 3,       December 28,
                                                                                    2000             1999              1997
                                                                                 ------------     ------------    ---------------
<S>                                                                                 <C>              <C>                <C>
REVENUES:
   Restaurant sales                                                                  $209,326         $164,742           $ 83,650
   Retail sales                                                                        50,094           47,019             23,791
   Licensing fees and royalties                                                         3,270            2,131                633
                                                                                     --------         --------           --------
               Total revenues                                                         262,690          213,892            108,074
                                                                                     --------         --------           --------
COSTS AND EXPENSES:
   Food and beverage costs                                                             49,502           38,811             19,823
   Cost of retail goods sold                                                           24,254           21,657             10,856
   Restaurant operating expenses                                                      116,267           85,688             40,997
   Retail operating expenses                                                           19,709           15,736              7,700
   Depreciation and amortization                                                       18,910           13,082              5,641
   Preopening costs                                                                     4,250            9,714              3,088
   Asset impairment charge                                                              6,738                -                  -
                                                                                     --------         --------           --------
               Total costs and expenses                                               239,630          184,688             88,105
                                                                                     --------         --------           --------
INCOME FROM UNIT OPERATIONS & LICENSING                                                23,060           29,204             19,969
                                                                                     --------         --------           --------
OTHER (INCOME) EXPENSES:
   General, administrative and development expenses                                    15,521           12,295              7,409
   Interest income                                                                     (2,856)          (5,915)            (9,016)
   Write-off of development and transaction costs                                         877                -              2,230
   Other                                                                                  827              621                136
                                                                                     --------         --------           --------

               Total other (income) expenses                                           14,369            7,001                759
                                                                                     --------         --------           --------

INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
   ACCOUNTING PRINCIPLE                                                                 8,691           22,203             19,210


PROVISION FOR INCOME TAXES                                                              2,997            7,549              6,917
                                                                                     --------         --------           --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
                                                                                        5,694           14,654             12,293


CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE RELATED TO START-UP
   COSTS, net of income taxes of $2,202                                                     -           (3,916)                 -
                                                                                    ---------         --------           --------
               Net income                                                               5,694           10,738           $ 12,293
                                                                                    =========         ========           ========
BASIC EARNINGS PER COMMON SHARE:
   Basic earnings per common share before change in accounting principle            $    0.24         $   0.58           $   0.47


   Cumulative effect of change in accounting principle                                      -            (0.16)                 -
                                                                                    ---------         --------           --------

               Basic earnings per common share                                      $    0.24         $   0.42           $   0.47
                                                                                    =========         ========           ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                              24,204           25,387             25,988
                                                                                    =========         ========           ========

DILUTED EARNINGS PER COMMON SHARE:
                                                                                     $   0.23          $  0.57           $   0.46

   Cumulative effect of change in accounting principle                                      -            (0.15)                 -
                                                                                     --------         --------           --------
               Diluted earnings per common share                                     $   0.23         $   0.42           $   0.46
                                                                                     ========         ========           ========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                                            24,637           25,730             26,835
                                                                                     ========         ========           ========
</TABLE>



The accompanying notes are an integral part of these consolidated financial
statements.



                                       29
<PAGE>   30


                                   RAINFOREST CAFE, INC.

                      Consolidated Statements of Shareholders' Equity

                             (In Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                         Common Stock                                  Accumulated
                                                   -----------------------------                          Other
                                                                                      Retained        Comprehensive
                                                     Shares           Amount          Earnings             Income          Total
                                                   -------------  --------------  ---------------  ------------------  -------------
<S>                                                    <C>            <C>              <C>                <C>           <C>
BALANCE, December 29, 1996                              25,780         $199,542         $ 4,412           $     -       $203,954
   Stock options exercised, net of tax effect
                                                           553            4,969               -                 -          4,969
   Employee stock purchases                                 33              402               -                 -            402
   Sale of written put options                               -            1,558               -                 -          1,558
   Common stock repurchased                                (15)            (194)              -                 -           (194)
   Net income                                                -                -          12,293                 -         12,293
                                                        ------         --------         -------           -------       --------

BALANCE, December 28, 1997                              26,351          206,277          16,705                 -        222,982
   Stock options exercised, net of
        tax effect
                                                            89              555               -                 -            555
   Employee stock purchases                                 72              644               -                 -            644
   Sale of put options                                       -            2,544               -                 -          2,544
   Change in put option obligation                           -           (5,136)              -                 -         (5,136)
   Common stock repurchased                             (1,861)         (23,256)              -                 -        (23,256)
   Comprehensive income -
       Net income                                            -                -          10,738                 -         10,738
       Net unrealized losses on marketable
       securities, net of tax                                -                -               -            (1,048)        (1,048)
       Foreign currency translation adjustment,
       net of tax                                            -                -               -               (97)           (97)
                                                                                                                        --------
      Total comprehensive income                             -                -               -                 -          9,593
                                                        ------         ---------        -------           -------       --------
BALANCE, January 3, 1999                                24,651          181,628          27,443            (1,145)       207,926
   Stock options exercised, net of
        tax effect                                          53              176               -                 -            176

   Employee stock purchases                                 59              293               -                 -            293
   Sale of put options                                       -            1,011               -                 -          1,011
   Change in put option obligation                           -           (2,030)              -                 -         (2,030)
   Common stock repurchased                             (1,517)          (9,757)              -                 -         (9,757)
   Comprehensive income -
      Net income                                             -                -           5,694                 -          5,694
      Net unrealized losses on marketable
      securities, net of tax                                 -                -               -            (1,050)        (1,050)
      Foreign currency translation adjustment,
      net of tax                                             -                -               -               129            129
                                                                                                                        --------
 Total comprehensive income                                  -                -               -                 -          4,773
                                                        ------         ---------        -------           -------       --------
BALANCE, January 2, 2000                                23,246         $171,321         $33,137           $(2,066)      $202,392
                                                        ======         =========        =======           =======       ========
</TABLE>



The accompanying notes are an integral part of these consolidated financial
statements.



                                       30
<PAGE>   31


                              RAINFOREST CAFE, INC.

                      Consolidated Statements of Cash Flows

                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                      January 2,       January 3,     December 28,
                                                                                        2000              1999            1997
                                                                                   --------------   --------------  ---------------
<S>                                                                                     <C>              <C>          <C>
OPERATING ACTIVITIES:
   Net income                                                                           $ 5,694          $ 10,738      $12,293
   Adjustments to reconcile net income to cash flows provided by operating
    activities-
         Depreciation of property, equipment and leasehold improvements                  20,430            15,190        6,862
         Amortization of deferred occupancy costs                                        (2,664)           15,284        3,934
         Change in accounting principle                                                       -             3,916            -
         Write-off of development and transaction costs                                     877                 -        2,230
         Asset impairment charge                                                          6,738                 -            -
         Deferred income tax benefit                                                     (1,121)              385        1,944
         Change in assets and liabilities-
            Accounts receivable and other                                                (3,719)          (14,571)      (8,097)
            Inventories                                                                   2,148            (4,486)      (3,840)
            Prepaid expenses                                                               (206)             (125)           -
            Preopening costs                                                                  -               630       (5,332)
            Accounts payable                                                             (2,500)             (238)         898
            Accrued liabilities                                                           1,778             1,135        5,029
                                                                                        -------          --------      -------
               Net cash provided by operating activities                                 27,455            27,858       15,921
                                                                                        -------          --------      -------
INVESTING ACTIVITIES:
    Proceeds from sale and maturity of available-for-sale securities                     34,669            97,142       52,799
    Purchases of available-for-sale securities                                          (30,065)          (70,761)     (31,502)
    Disbursement on related party note receivable                                        (1,700)                -            -
    Investment in Canadian Affiliate                                                     (2,320)                -            -
    Purchases of furniture, equipment and leasehold improvements, net                   (36,383)          (71,477)     (73,322)
    Purchases of other assets                                                              (151)           (4,217)      (1,475)
                                                                                        -------          --------      -------
               Net cash used in investing activities                                    (35,950)          (49,313)     (53,500)
                                                                                        -------          --------      -------
FINANCING ACTIVITIES:
   Proceeds from the sale of common stock and put options, net                            1,480             3,743        4,223
   Repurchase of common stock                                                            (9,757)          (23,256)        (194)
   Tenant allowances collected                                                           11,350             4,362        3,277
                                                                                        -------          --------      -------
               Net cash provided (used) by financing activities                           3,073           (15,151)       7,306
                                                                                        -------          --------      -------
Effect of exchange rate changes on cash and cash equivalents                                 39              (152)           -

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         (5,383)          (36,758)     (30,273)

CASH AND CASH EQUIVALENTS, beginning of year                                             16,863            53,621       83,894
                                                                                        -------          --------      -------
CASH AND CASH EQUIVALENTS, end of year                                                   11,480            16,863      $53,621
                                                                                        =======          ========      =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
      Cash paid during the year for-
         Income taxes                                                                     2,441             6,974        8,310

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       31
<PAGE>   32



                              RAINFOREST CAFE, INC.

                   Notes to Consolidated Financial Statements

             January 2, 2000, January 3, 1999 and December 28, 1997


1.   NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

Rainforest Cafe, Inc. (the Company) owns, operates, and licenses themed
restaurant/retail facilities (each a Unit). As of January 2, 2000, the Company
owned and operated 27 Rainforest Cafe Units in the United States and licensed
ten Units internationally. The first international licensed Unit opened in
London, England in June, 1997. Nine additional units are located in Cancun,
Mexico, Mexico City, Mexico (2 units), Manchester, England, Vancouver, Canada,
Toronto, Canada (2 units), Hong Kong, Peoples' Republic of China and Paris,
France. The Company intends to open three additional units in the United States
during 2000.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
Rainforest Cafe, Inc and its wholly-owned and majority-owned foreign
subsidiaries. Investments in 20 percent to 50 percent-owned affiliates are
accounted for using the equity method. Intercompany transactions have been
eliminated in consolidation.

FISCAL YEAR

The Company has adopted a 52-53-week year ending on the Sunday nearest December
31 of each year. All references herein to "1999" represent the 52-week year
ended January 2, 2000. All references to "1998" and "1997" represent the 53-week
year ended January 3, 1999 and the 52-week year ended December 28, 1997,
respectively.

CASH AND CASH EQUIVALENTS

The Company includes as cash equivalents all highly liquid investments with
original maturities of three months or less when purchased, which are recorded
at the lower of cost or market.

MARKETABLE SECURITIES

Marketable Securities consist of mutual funds, fixed corporate and municipal
income securities, convertible fixed income securities, government securities,
preferred stock and common stock. Marketable securities are stated at fair value
based generally on quoted market price of each security at the balance sheet
date. All marketable securities are defined as trading securities or
available-for-sale securities under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities."

The Company determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. As of January 2, 2000 and January 3, 1999, all securities
were designated as available for sale. Available for sale securities are stated
at fair value, with the unrealized gains and losses, net of tax, reported as a
separate component of shareholders' equity, if significant.

                                       32


<PAGE>   33


INVENTORIES

Inventories consist primarily of retail goods for resale and food and beverages
used in restaurant operations and are recorded at the lower of cost or market
value as determined by the retail inventory method on the first-in, first-out
basis for retail goods and average cost for food and beverages. Inventories
consisted of the following as of (in thousands):

<TABLE>
<CAPTION>
                                                    January 2,       January 3,
                                                      2000             1999
                                                 ------------      ------------
<S>                                              <C>              <C>
        Retail goods                                   $7,926        $10,399
        Food and beverage                               1,117            792
                                                  ------------     ------------
                                                       $9,043        $11,191
                                                  ============     ============
</TABLE>


PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are recorded at cost.
Improvements are capitalized, while repair and maintenance costs are charged to
operations when incurred. Furniture, fixtures and equipment are depreciated
using the straight-line method over their estimated useful lives of 3 to 15
years. Leasehold improvements are amortized using the straight-line method over
the shorter of their estimated useful lives or the initial lease term. In the
event that facts and circumstances indicate that the carrying amount of property
may not be recoverable, an evaluation of recoverability is performed by
comparing the estimated future undiscounted cash flows associated with the asset
to the asset's carrying amount to determine if a write-down to market value is
required.

Property and equipment consisted of the following as of (in thousands):

<TABLE>
<CAPTION>
                                                    January 2,       January 3,
                                                      2000             1999
                                                  ------------     -------------
<S>                                                   <C>            <C>
        Furniture, fixtures and equipment              $76,446        $ 61,226
        Leasehold improvements                         146,605         123,009
        Construction in progress                        11,005          10,088
                                                  ------------     -----------
                                                       234,056         194,323
        Accumulated depreciation and amortization      (48,014)        (25,341)
                                                  ------------     -----------
                                                      $186,042        $168,982
                                                  ============     ===========
</TABLE>


                                       33

<PAGE>   34


LICENSING FEES

The Company has entered into eight exclusive license agreements to develop an
aggregate of at least 21 Units over a ten year period in the United Kingdom and
Ireland, Mexico, Canada, and certain countries in Asia and Europe. As of January
2, 2000, ten units were open. In many of the existing international license
agreements, the Company is entitled to receive up-front area licensing fees and
is entitled to receive a per Unit development fee as well as royalties ranging
from 3% to 10% of gross revenues. Area licensing fees received are deferred and
recognized on a pro rata basis as the licensed units subject to the area
development agreements begin operations. Development fees are recognized when a
licensed Unit begins operations, at which time the Company has performed its
obligations related to such fees. Area licensing fees are nonrefundable.
Licensing royalties are recognized as earned. Certain license agreements allow
the Company to become an equity participant of up to 50% of each Unit developed.


INCOME TAXES

The Company and its subsidiaries file a consolidated federal income tax return
and separate state returns. Deferred income taxes are provided for differences
between the financial reporting basis and tax basis of the Company's assets and
liabilities at currently enacted tax rates.

EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed by dividing net income by the sum of the weighted
average number of common shares outstanding plus all additional common shares
that would have been outstanding if potentially dilutive common shares related
to stock options had been issued. Also included as common stock equivalents for
diluted earnings are outstanding put options that are "in the money" and require
the Company to repurchase its own common stock. The dilutive effect of these put
options is computed using the reverse treasury stock method. The following table
reconciles the number of shares utilized in the earnings per share calculations.

<TABLE>
<CAPTION>
                                                                              1999            1998         1997
                                                                     -------------- --------------- ------------
<S>                                                                       <C>            <C>           <C>
       Net income                                                          $ 5,694        $ 10,738      $12,293
       Earnings per share - basic                                          $   .24         $   .42      $   .47
       Earnings per share - diluted                                        $   .23         $   .42      $   .46
       Weighted average common shares outstanding - basic                   24,204          25,387       25,988
       Effect of dilutive securities - stock options                           354             303          847
       Effect of dilutive securities - put options                              79              30
                                                                                                              -
       Weighted average common shares outstanding - diluted                 24,637          25,730       26,835
</TABLE>

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from those estimates.


                                       34

<PAGE>   35

COMPREHENSIVE INCOME

On December 29, 1997, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
consists of net income, foreign currency translation gains (losses) and
unrealized investment gains (losses). The adoption of SFAS No. 130 requires only
additional disclosures in the financial statements; it does not effect the
Company's financial position or results of operations.

PREOPENING COSTS

Effective December 29, 1997, the Company adopted Statement of Position (SOP) No.
98-5, "Reporting on the Costs of Start-Up Activities." SOP No. 98-5 requires
companies to expense as incurred all start-up and preopening costs that are not
otherwise capitalizable as long-lived assets. The effect of this accounting
change was a charge to operations of $3.9 million, net of $2.2 million of
related tax benefit for the unamortized balance of preopening costs and other
start-up expenses as of December 28, 1997. Also, $2.4 million of preopening
costs capitalized during 1998 have been expensed as preopening costs in the
accompanying statements of operations.

RECLASSIFICATIONS

Certain reclassifications have been made in the financial statements for prior
years to conform to the current presentation. Such reclassifications had no
effect on net income.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company is
not required to adopt SFAS No. 133 until January 1, 2001, since SFAS No. 137.
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," amended the effective date of SFAS
No. 133 to apply for all fiscal quarters of all fiscal years beginning after
June 15, 2000. As the Company does not currently engage or plan to engage in
derivative or hedging activities, there will be no impact to the Company's
results of operations, financial position or cash flows upon adoption of this
standard.


2. WRITE-OFF OF DEVELOPMENT AND TRANSACTION COSTS:

TERMINATION OF PLANNED UNITS

Subsequent to December 29, 1996 the Company determined that due to local
building restrictions, future negotiations with Trump Taj Mahal would not result
in a mutually agreeable space by both parties for the planned unit. The Company
also determined that, due to Stratosphere's announcement that it was seeking a
bankruptcy reorganization, the required space for such unit would not be
delivered according to the required timeline. As such, on March 3, 1997, the
Company announced that it would write off development costs related to
previously planned units at Trump Taj Mahal (Atlantic City, New Jersey) and
Stratosphere (Las Vegas, Nevada). The nonrecurring, pre-tax charge to earnings
of approximately $1.9 million ($0.05 per share after taxes) was recorded during
the first quarter of fiscal 1997.


                                       35

<PAGE>   36

CONVERTIBLE DEBT OFFERING

On December 3, 1997 the Company filed a registration statement with the
Securities and Exchange Commission for a proposed public offering of
$100,000,000 aggregate principal amount of Convertible Subordinated Notes due
2003. On January 8, 1998 the Company withdrew the registration statement and
wrote off all costs associated with the proposed debt offering ($295,000) during
the fourth quarter of 1997.

TERMINATION OF MERGER AGREEMENT

On December 22, 1999, the Company announced that it had an agreement to merge
with Lakes Gaming, Inc. Under the terms of the agreement, Rainforest Cafe
shareholders were to receive .55 shares of Lakes common stock for each
Rainforest share they owned. On January 24, 2000, the two parties mutually
agreed to terminate the merger agreement. Costs associated with the proposed
merger of $877,000 were charged to operations during the fourth quarter of 1999.
The termination agreement called for a $2,000,000 termination fee payable to
Lakes. While the merger agreement was terminated by mutual agreement, the fee
continues to be payable if the Company consummates another merger within six
months of the termination date.


3.   MARKETABLE SECURITIES:

A summary of securities classified as available for sale as of January 2, 2000
and January 3, 1999 is set forth below (in thousands):

<TABLE>
<CAPTION>
                                                            Unrealized          Unrealized             Fair
                                               Cost           Gains              Losses                Value
                                          -------------  --------------  ------------------  ----------------
<S>                                         <C>            <C>                    <C>             <C>
                    JANUARY 2, 2000
            U.S. Government                     $ 4,071          $  -              $  116            $ 3,955
            Municipal debt                        3,583             -                  40              3,543
            Mutual funds                          7,323            27                 370              6,980
            Equity                                4,157             -               1,161              2,996
            Other debt                            7,987            81               1,585              6,483
                                                -------         -----              ------            -------
            Securities available-for-sale
                                                $27,121          $108              $3,272            $23,957
                                                =======          ====              ======            =======

<CAPTION>

                                                             Unrealized         Unrealized             Fair
                                               Cost            Gains             Losses                Value
                                          -------------  ---------------  -----------------  ----------------
<S>                                             <C>              <C>               <C>               <C>
                   JANUARY 3, 1999
            U.S. Government                     $ 2,021          $  2              $    -            $ 2,023
            Municipal debt                       17,200           119                   -             17,319
            Mutual funds                             15             -                   -                 15
            Equity                                8,766           105               1,835              7,036
            Other debt                            3,069            60                  40              3,089
                                                -------          ----              ------            -------
            Securities available-for-sale
                                                $31,071          $286              $1,875            $29,482
                                                =======          ====              ======            =======
</TABLE>

                                       36

<PAGE>   37

Gross gains of $526,000, $3,190,000 and $953,000 were realized during 1999, 1998
and 1997, respectively. Gross losses of $518,000, $2,461,000 and $71,000 were
realized during 1999, 1998 and 1997, respectively.

Scheduled maturities of debt securities classified as available for sale as of
January 2, 2000 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       Cost                  Fair Value
                                                                 --------------           --------------
<S>                                                                    <C>                      <C>
            Less than one year                                          $ 1,100                  $ 1,003
            Due in 1-3 years                                              8,440                    7,760
            Due after 3 years                                             6,101                    5,218
                                                                        -------                  -------
            Total                                                       $15,641                  $13,981
                                                                        =======                  =======
</TABLE>

4.   LONG-TERM DEBT:

The Company has an unsecured $6 million line of credit with a bank under a
commercial revolving note, expiring June 2000, bearing interest at the bank's
prime rate of interest, 8 1/2% at January 2, 2000. During fiscal 1999, 1998 and
1997 there were no cash borrowings on the line. As of January 2, 2000, $1.0
million in letters of credit were outstanding under this credit facility.

5.   RELATED PARTY TRANSACTIONS

At January 2, 2000, the Company holds a note receivable with a balance of
$1,721,363 from an officer/director of the Company. The note arose from an
advance made to such officer/director during the fourth quarter of 1999. The
note bears an interest rate based on the broker loan rate of a national
investment firm. The note is due on demand and at January 2, 2000 the interest
rate on this note was 7.75%. The note is collaterized by 930,000 shares of the
Company's common stock beneficially owned by such officer/director.

6.   SHAREHOLDERS' EQUITY:

STOCK SPLITS

On November 18, 1997, the Company's board of directors approved a three-for-two
stock split in the form of a 50% stock dividend on its no par value common
stock. The split was payable to shareholders of record as of December 26, 1997
and was effective January 15, 1998. All references to earnings per share, number
of shares and share amounts have been retroactively restated throughout the
accompanying financial statements to reflect these stock splits.

STOCK REPURCHASE PLAN

In January 1997 and as amended in January 1998, the Company's board of directors
authorized, subject to certain business and market conditions, the purchase of
up to 3.0 million shares of the Company's common stock. In January 1999, the
Company's Board of Directors amended its stock repurchase program to provide
that up to 2.0 million additional shares may be repurchased over a one-year
period. Through January 2, 2000, the number of shares purchased under this plan
was 3,378,000.


                                       37
<PAGE>   38


PUT OPTIONS

The Company utilizes put options as a part of its stock repurchase program. At
January 2, 2000, put options to acquire approximately 1,300,000 shares of the
Company's common stock were outstanding at exercise prices between $5.00 and
$6.75 per share. The put options are callable on specific dates during 2000, and
give a third party the right to sell shares of the Company's common stock at
contractually specified prices to the Company. During 1999 and 1998, the Company
settled put option obligations of 1,517,000 and 1,861,000 shares for cash of
$9,757,000 and $23,256,000, respectively. The proceeds from the issuance of the
put options were accounted for as additional paid-in-capital. The put option
obligation on the balance sheet is the amount the Company would be obligated to
pay if all the outstanding put options that were in-the-money at January 2, 2000
were exercised at the strike price without a cash settlement. As of January 2,
2000, and January 3, 1999, the cash settlement amount for all put options sold
and outstanding would be approximately $7.2 and $7.1 million, respectively.


7.   ASSET IMPAIRMENT CHARGE

Pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," the Company recorded a non-cash
asset impairment charge of $6,738,000 during the fourth quarter of 1999. The
charge relates to the write-down of the long-lived assets at its Aventura Mall
Unit in Miami, Florida. An impairment was recognized as the future undiscounted
cash flow from this Unit and was estimated to be insufficient to recover the
related carrying value of the long-lived assets related to this Unit. As a
result, the carrying values of these assets were written-down to their estimated
fair value, based on the Company's estimates of future discounted cash flows.


8.   INCOME TAXES:

The provision for income taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                                      1999         1998
                                                                    --------     --------
<S>                                                                  <C>          <C>
              Current:

                 Federal                                             $3,796       $6,499

                 State                                                  322          665

              Deferred                                               (1,121)         385
                                                                     ------       ------


                             Provision for income taxes              $2,997       $7,549
                                                                     ======       ======

</TABLE>

                                       38
<PAGE>   39

The differences between the effective tax rate and income taxes computed using
the federal statutory rate were as follows:

<TABLE>
<CAPTION>

                                                                                      1999        1998
                                                                                     -----       -----
<S>                                                                                   <C>         <C>
              Federal statutory rate                                                  35.0%       35.0%
              State income taxes, net of federal tax benefit                           3.0         3.0
              Tax exempt income                                                       (3.0)       (3.0)
              General business credits                                                (4.7)          -
              Other, net                                                               4.2        (1.0)
                                                                                     -----       -----

                                                                                      34.5        34.0%
                                                                                     =====       =====
</TABLE>

The Company has recorded the following net deferred income taxes as of (in
thousands):

<TABLE>
<CAPTION>

                                                                        January 2,       January 3,
                                                                          2000              1999
                                                                        ----------      ----------
<S>                                                                        <C>              <C>
            Current deferred income tax benefits                           $11,198          $4,485
            Current deferred income taxes                                   (1,000)           (719)
                                                                        ----------      ----------
               Net current deferred income tax benefits                     10,198           3,766
                                                                        ----------      ----------
            Noncurrent deferred income tax benefits                          6,064           8,622
            Noncurrent deferred income taxes                               (15,449)        (12,696)
                                                                        ----------      ----------
               Net noncurrent deferred income taxes                         (9,385)         (4,074)
                                                                        ----------      ----------
               Net deferred income taxes                                       813           $(308)
                                                                        ==========      ==========
</TABLE>

The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows (in thousands):


                                       39

<PAGE>   40


<TABLE>
<CAPTION>

                                                                        January 2,       January 3,
                                                                          2000              1999
                                                                        ----------       ---------
<S>                                                                       <C>             <C>
            Accelerated depreciation                                      $(15,436)       $(12,696)
            Landlord inducements                                             8,545           8,622
            Worker compensation accrual                                        804             576
            Preopening costs                                                   242             422
            Miscellaneous reserves                                             477             621
            Tax credit carryforwards                                         3,027           1,522
            Asset impairment charge                                          2,473               -
            Other accruals                                                     681             625
                                                                        ----------       ---------
                           Net deferred income taxes                        $  813          $ (308)
                                                                        ==========       =========
</TABLE>



9.       STOCK OPTIONS:

STOCK OPTION AND COMPENSATION PLAN

The Company has a Stock Option and Compensation Plan as Amended (the Plan),
pursuant to which options and other awards to acquire an aggregate of 3,750,000
shares of the Company's common stock may be granted to full-time employees of
the Company. Stock options, stock appreciation rights, restricted stock, other
stock and cash awards may be granted under the Plan. The Plan is administered by
the Company's compensation committee which has the discretion to determine the
number and purchase price of shares subject to stock options, which exercise
prices may not be below 100% of the fair market value of the common stock on the
date granted, the term of each option, and the time or times during its term
when the option becomes exercisable. The Company has granted options on
2,326,000 shares through January 2, 2000, with vesting periods ranging from
three to five years and maximum option terms of ten years.

The Company has a Directors' Stock Option Plan, whereby stock options granted to
the Company's outside directors to acquire an aggregate of 300,000 shares of the
Company's common stock. The Company has issued options on 32,000 shares as of
January 2, 2000.

The Company also has a Non-executive Stock Option Plan, whereby stock options
are granted to non-officer employees to acquire an aggregate of 2,500,000 shares
of the Company's common stock. The Company has granted options on 2,057,000
shares through January 2, 2000.






                                       40
<PAGE>   41

A summary of the status of the Company's various stock option plans for the
three-year period ended January 2, 2000 is presented in the table and narrative
below:

<TABLE>
<CAPTION>


                                  January 2, 2000                January 3, 1999              December 28, 1997
                               ------------------------     --------------------------    ---------------------------


                                              Weighted                      Weighted                       Weighted
                                               Average                       Average                       Average
                                              Exercise                      Exercise                       Exercise
                               Shares          Price         Shares          Price           Shares         Price
                              -----------   -----------    -----------    ------------    -----------    ------------
<S>                           <C>            <C>            <C>            <C>            <C>            <C>
Outstanding, beginning
   of year
                                4,566,758   $     7.57        3,242,725    $      13.71       2,261,242   $        6.13
Granted                           961,000         5.45        5,646,733           10.44       1,844,251           19.06
Exercised                          52,600         2.54           88,751            5.15         553,614            3.95
Forfeited                         623,462         8.43        4,233,949           16.49         309,153            6.13
                              -----------   ----------     ------------    ------------    ------------   -------------
Outstanding,
   end of year
                                4,851,696   $     7.02        4,566,758     $      7.57       3,242,726   $       13.71
                             ============   ==========        =========     ===========    ============   =============
Exercisable,
   end of year
                                1,926,674   $     6.32        1,459,299     $      5.43         691,088   $        3.74
                             ============   ==========        =========     ===========    ============   =============
Weighted average fair
   value of
   options granted
                              $     3.19                          $4.42                    $      14.00
                             ============                     =========                    ============

</TABLE>


The Company accounts for these plans under Accounting Principles Board (APB)
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net income and diluted
EPS would have been decreased to the following pro forma amounts:

<TABLE>
<CAPTION>


                                                                        1999         1998         1997
                                                                     --------      -------      -------
              <S>                                                    <C>           <C>          <C>
              Net income:
                 As Reported                                          $  5,631      $10,738       $12,293
                 Pro Forma                                                 580        5,636         8,880

              Diluted earnings per share:
                 As reported                                          $   0.23      $  0.42       $  0.46
                 Pro forma                                                0.02         0.22          0.33
</TABLE>


At January 2, 2000, 795,187 of the 4,851,696 options outstanding have exercise
prices between $0.01 and $5.00, with a weighted average exercise price of $1.02
and a weighted average remaining contractual life of 6.0 years. The remaining
4,056,509 options have exercise prices between $5.01 and $16.00, with a weighted
average exercise price of $8.55 and a weighted average remaining contractual
life of 8.1 years.


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1999, 1998, and 1997: risk-free interest rates of
6.4% 4.8% and 5.8%, no expected dividend yields; expected lives of 6, 6 and 7
years; and expected volatility of 50%, 50%, and 60% respectively.





                                       41

<PAGE>   42

EMPLOYEE STOCK PURCHASE PLAN

The Company also has an Employee Stock Purchase Plan which allows employees to
contribute up to 15% of their earnings, subject to certain limitations, for the
purchase of the Company's common stock. Shares are purchased quarterly under
this Plan at a price equal to 85% of the lesser of the market price on either
the first or last day of the quarter. During 1999, 1998 and 1997, 59,000, 72,000
and 32,000 shares, respectively, were issued under the 1996 Plan, and at January
2, 2000, 170,000 shares were available for future issuance. The average price
per share was $4.96, $8.96 and $17.57 in 1999, 1998 and 1997, respectively.

10.  COMMITMENTS AND CONTINGENCIES:

OPERATING LEASES

The Company has entered into various operating leases for its existing and
future units which typically have an initial lease term of ten to fifteen years
with an option for renewal. All of these leases contain provisions for
contingent rentals based on a percentage of gross revenues, as defined, and
contain renewal options and provisions for payments of real estate taxes,
insurance and common area costs. In addition, certain of these leases provide
for tenant inducements and rent abatements. Total rent expense, including common
area costs, real estate taxes and percentage rent, was $ 35,436,000, $26,983,000
and $10,942,000, for the years 1999, 1998 and 1997, respectively.

Future minimum rental payments (including four units which are not yet open and
excluding percentage rents) are as follows as of January 2, 2000 (in thousands):

<TABLE>

            <S>                                                                                <C>
            2000                                                                                   18,211
            2001                                                                                   19,897
            2002                                                                                   20,078
            2003                                                                                   20,120
            2004                                                                                   20,016
            Thereafter                                                                             76,760
                                                                                                 --------
            Total                                                                                $175,082
                                                                                                 ========
</TABLE>


BUILDING COMMITMENTS

At January 2, 2000, the Company was constructing four Units in which a lease has
been executed. Construction costs to complete these four Units is estimated to
be approximately $37,000,000. All of these Units are expected to be completed by
January 3, 2001.

LOAN GUARANTY

The Company has guaranteed the borrowings of one of its foreign affiliates in
which the Company has a 49% interest. The amount of the guaranty is limited to
approximately $1,200,000. Borrowings by the affiliate under this agreement were
approximately $1,700,000 at January 2, 2000.





                                       42

<PAGE>   43


LITIGATION

The Company is involved in various legal actions rising in the ordinary course
of business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial position or the results of its operations.


RETIREMENT SAVINGS PLAN

The Company offers a 401(k) savings and investment plan (the Plan) to employees
who meet certain eligibility requirements such as 1 year of service, 1,000 hours
worked during the year and age of 21. The Company makes matching contributions
to the Plan up to a maximum percentage of each participating employee's annual
investment. Matching and discretionary contributions to the Plan are authorized
by the Company's compensations committee. The expense for the Plan was $235,000,
$179,000 and $144,000 in 1999, 1998 and 1997, respectively.

11.  QUARTERLY DATA (UNAUDITED):

The following is a summary of quarterly consolidated results of operations for
1999 and 1998 (unaudited, in thousands, except per share data):

<TABLE>
<CAPTION>

                                                    April 4,       July 4,         October 3,       January 2,
                                                      1999          1999             1999             2000
                                                  ------------   -----------     ------------      -----------
<S>                                                 <C>            <C>             <C>              <C>
                     1999
Revenues                                            $ 59,761       $ 67,535        $ 72,205         $ 63,189
Income from unit operations and licensing              7,048          9,354           9,678           (3,020) (a)
Net income                                             2,712          3,884           3,580           (4,482) (a)
Diluted earnings per common share,
                                                        0.11           0.16            0.15            (0.19)


<CAPTION>
                                                    April 5,       July 5,         October 4,       January 3,
                                                      1998          1998             1998             1999
                                                  ------------   -----------     ------------      -----------
<S>                                                  <C>            <C>             <C>              <C>
                     1998
Revenues                                             $44,626        $53,864         $56,011          $59,391
Income from unit operations and licensing              5,904          8,770           7,757            6,773
Net income before cumulative effect of change
   in accounting principle                             3,523          4,656           3,757            2,718
Diluted earnings per common share, before
   cumulative effect of change in accounting
   principle                                            0.14           0.18            0.15             0.11

(a) includes impairment charge of $6,738
</TABLE>


                                       43

<PAGE>   44


12. SALE OF COMPANY

On February 9, 2000, Rainforest Cafe, Inc. and Landry's Seafood Restaurants,
Inc. announced the signing of a definitive merger agreement. The agreement calls
for each share of Rainforest common stock to be converted into $5.23 in cash, or
 .5816 shares of Landry's common stock, subject to mandatory proration. Cash
payments shall not exceed 35% of the total purchase price of which, based upon
an assumed value of $9.00 per share of Landry's common stock, would approximate
$125,000,000. The merger will be accounted for under the purchase method,
whereby the purchase price will be allocated to the underlying assets and
liabilities of Rainforest Cafe, based upon their estimated fair value. The
transaction is subject to customary conditions including, among others, approval
of Rainforest's shareholders and regulatory approvals and consents. Provided the
transaction closes by July 24, 2000, the $2,000,000 termination fee included in
the Lakes Gaming, Inc. Merger Agreement will be due to Lakes upon closing.



                                       44
<PAGE>   45


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information beginning immediately following the caption "Election of
Directors" to, but not including, the caption "Executive Compensation" in the
Company's Proxy Statement, in connection with the Company's 2000 annual meeting
of shareholders, if required, (the "2000" Proxy Statement") forwarded to
stockholders prior to the Company's 2000 Annual Meeting of Shareholders, if
required, is incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

     The information in the 2000 Proxy Statement, if required, beginning
immediately following the caption "Executive Compensation" to, but not
including, the caption "Compensation Committee Interlocks and Insider
Participation," is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information in the 2000 Proxy Statement, if required, beginning
immediately following the caption "Voting Securities and Principal Holders
Thereof" to, but not including, the caption "Election of Directors," is
incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information in the 2000 Proxy Statement, if required, under the caption
"Certain Transactions" is incorporated herein by reference.



                                       45


<PAGE>   46


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K




         ---------------------------

(a)(1)   FINANCIAL STATEMENTS

         Report of Independent Accountants
         Consolidated Balance Sheets at January 2, 2000 and January 3, 1999
         Consolidated Statements of Operations for the three years ended January
         2, 2000
         Consolidated Statements of Shareholders' Equity for the three years
         ended January 2, 2000
         Consolidated Statements of Cash Flows for the three years ended
         January 2, 2000

         Notes to Consolidated Financial Statements



(3)      Exhibits

2.1      Agreement and Plan of Merger dated as of February 9, 2000, by and among
         Rainforest Cafe, Inc., a Minnesota corporation, Landry's Seafood
         Restaurants, Inc., a Delaware corporation, and LSR Acquisition Corp., a
         Delaware corporation and wholly owned subsidiary of Landry's.
         (Incorporated herein by reference to Exhibit 2.1 to the Company's
         Current Report on Form 8-K dated February 9, 2000)

3.1      Articles of Incorporation, as amended (Incorporated herein by reference
         to Exhibit 3.1 of the Company's Registration Statement on Form SB-2,
         File No. 33-89256C (the "SB-2"))
3.2      By-laws (Incorporated herein by reference as Exhibit 3.2 of the SB-2)
10.1     Lease Agreement by and between Mall of America, Inc. and the Company
         dated March 31, 1994. (Incorporated herein by reference as Exhibit 10.1
         of the SB-2)
10.2     Lease Agreement by and between the Company and Walt Disney World dated
         September 6, 1995. (Incorporated herein by reference to Exhibit 10.3 of
         the Company's Registration Statement on Form S-1, File No. 33-99836
         (the "S-1"))
10.3     Company's 1995 Stock Option and Compensation Plan. (Incorporated herein
         by reference as Exhibit 10.3 of the SB-2)
10.4     Indemnification Agreement dated April 6, 1995 by and between the
         Company and Steven Schussler. (Incorporated herein by reference as
         Exhibit 10.16 of the SB-2)
10.5     Form of Director Stock Option Agreement dated April 7, 1995.
         (Incorporated herein by reference as Exhibit 10.1 of the SB-2)
10.6     Lease Agreement by and between the Company and Trump Taj Mahal
         Associates dated December 6, 1995. (Incorporated herein by reference to
         Exhibit 10.10 of the S-1)
10.7     Company's 1996 Employee Stock Purchase Plan. (Incorporated herein by
         reference to Exhibit 10.12 of the Company's Form 10-K for the fiscal
         year ended December 29, 1996)
10.8     Company's 1997 Director Stock Option Plan (Incorporated herein by
         reference to Exhibit 10.11 to the Company's Form 10-K for the fiscal
         year ended December 28, 1997)
10.9     Company's 1998 Non-Executive Stock Option Plan. (Incorporated herein by
         reference to exhibit 10.9 of the Company's Form 10-K for the fiscal
         year ended January 3, 1999)
10.10    Termination agreement dated January 24, 2000 by and between the Company
         and Lakes Gaming, Inc.(Incorporated herein by reference to exhibit 10
         to the Company's Current Report on Form 8-K dated January 24, 2000)
21.      Subsidiaries of Company.
23.1     Consent of Independent Public Accountants

                                       46
<PAGE>   47



(b)      Reports on Form 8-K.

         On December 23, 1999, during the last quarter of the period covered by
         this Form 10-K, the Company filed one report on Form 8-K. The Form
         related to the Merger Agreement between Lakes Gaming, Inc. and the
         Company. The report included, as exhibits, (i) the Agreement and Plan
         of Merger outlining the terms of the proposed merger and (ii) the press
         release issued by Lakes Gaming, Inc. and Rainforest Cafe, Inc.
         announcing the Merger Agreement.

         On January 25, 2000, the Company filed a report on Form 8-K.  The Form
         related to the termination of the Merger Agreement between Lakes
         Gaming, Inc and the Company.  The report included as exhibits (1) the
         Termination Agreement and (ii) the press release issued by Lakes
         Gaming, Inc and Rainforest Cafe, Inc announcing the termination
         agreement.

         On February 18, 2000 the Company filed a report on Form 8-K.  The Form
         related to the Merger Agreement between Landry's Seafood Restaurants,
         Inc. and the Company dated February 9, 2000. The reported included, as
         exhibits, (i) Agreement and Plan of Merger outlining the terms of
         the proposed merger and (ii) the press release issued by the Company
         announcing the Merger Agreement.

27.      Financial Data Schedule.

----------




                                       47


<PAGE>   48






                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                               RAINFOREST CAFE, INC.
                                                 Registrant

Date:   February 28, 2000             By: /s/ Lyle Berman
                                        ----------------------------------------
                                               Name: Lyle Berman
                                               Title: Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
indicated on February 28, 2000.

<TABLE>
<CAPTION>

NAME                                                         TITLE
----                                                         -----
<S>                                                          <C>
                                                             Chairman of  the Board and Chief Executive Officer
/s/ Lyle Berman                                              (principal executive officer)
------------------------------------------------------------
Lyle Berman

/s/ Kenneth W. Brimmer                                       President, Secretary, Treasurer and Director
------------------------------------------------------------
Kenneth W. Brimmer

/s/ Steven W. Schussler                                      Senior Vice President and Director
------------------------------------------------------------
Steven W. Schussler

/s/ Ercu Ucan                                                Senior Vice President and Director
------------------------------------------------------------
Ercu Ucan

/s/ David L. Rogers                                          Director
------------------------------------------------------------
David L. Rogers

/s/ Joel N. Waller                                           Director
------------------------------------------------------------
Joel N. Waller
                                                             Chief Financial Officer (principal financial officer
/s/ Robert V. Hahn                                           and principal accounting officer)
------------------------------------------------------------
Robert V. Hahn
</TABLE>

                                       48