FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains, and incorporates by reference, certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended thereto under) that are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. When used in this document and in the documents incorporated herein by reference, statements other than statements of current

or historical fact are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to the Company or its management, identify certain of such forward-looking statements. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include the possibility that the demand for our services may decline as a result of changes in general and industry

specific economic conditions, the timing of engagements for our services, the effects of competitive services and pricing, tort reform and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in this Report under the heading “Risk Factors” and elsewhere. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to update or revise any such forward-looking statements.

PART I

Item 1. Business

GENERAL

The inception of Exponent, Inc. goes back to 1967, with the founding of the partnership Failure Analysis Associates, which was incorporated the following year in California and reincorporated in Delaware as Failure Analysis Associates, Inc. in 1988. The Failure Group, Inc. was organized in 1989 as a holding company for Failure Analysis Associates, Inc. and changed its name to Exponent, Inc. in 1998. Exponent, Inc. (together with its subsidiaries, “Exponent” or the “Company”), is a science and engineering consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists, physicians, engineers, business and regulatory consultants brings together more than 90 different technical disciplines to solve complicated issues facing industry and government today. Our professional staff can perform in-depth scientific research and analysis, or very rapid-response evaluations to provide our clients with the critical information they need.

CLIENTS

General

Exponent serves clients in automotive, aviation, chemical, construction, consumer products, energy, government, health, insurance, manufacturing, technology and other sectors of the economy. Many of our engagements are initiated directly with large corporations or by lawyers or insurance companies, whose clients anticipate, or are engaged in, litigation related to their products, equipment, processes or service. Our services in failure prevention and technology evaluation have grown as the

technological complexity of products has increased over the years.

Pricing and Terms of Engagements

We generally provide our services on either a fixed-price basis or on a “time and expenses” basis, charging hourly rates for each staff member involved in a project, based on his or her skills and experience. Our standard rates for professionals range from $80 to $800 per hour. Our engagement agreements typically provide for monthly billing, require payment of our invoices within 30 days of receipt and permit clients to terminate engagements at any time. Clients normally agree to indemnify us and our personnel against liabilities arising out of the use or application of the results of our work or recommendations.

SERVICES

Now in our 41^st year of service, Exponent continues to provide the highest quality engineering and scientific consulting services to clients around the world. Our service offerings are provided on a project-by-project basis. Many projects require support from multiple practices. We currently operate 20 practices and centers, including:

Biomechanics

Exponent’s Biomechanics staff uses engineering and biomedical science to explore the cause, nature and severity of injuries as well as to address the interaction between the body and the physical environment. Staff consultants use medical records, testing, computer modeling and extensive knowledge of human injury tolerance to determine whether an injury or claimed injury is consistent with a specific set of actions, an allegation of product defect or exposure to a specific accident environment.

The medical device sector of the Biomechanics practice obtained the ISO 17025, better known as the A2LA accreditation, in order to better assist companies seeking market clearance or approval from the U.S. Food and Drug Administration (FDA). This accreditation applies to the laboratory procedures our staff routinely use to support clients in the FDA submission process. In August of 2007, we received official notice that Exponent’s laboratory was accredited to ISO 17025. This step is in an effort to align Exponent’s laboratory for Good Laboratory Practices (GLP) compliance in the future.

Buildings & Structures

The basic function of a building is to provide structurally sound and environmentally controlled spaces to house and protect occupants and contents. If this basic function is not achieved, some aspect of the building has likely failed to meet its intended purpose. Exponent’s architects, engineers and scientists have a broad range of expertise with failures in the built environment and provide clients with in-depth investigations of individual components, as well as evaluations of these components’ interdependence with the entire building system.

During the past year, in addition to performing structural assessments of a variety of residential, commercial and industrial buildings, our structural engineers managed the development of a publication of General Guidelines for the Assessment and Repair of Earthquake Damage to Residential Woodframe Buildings for CUREE (Consortium of Universities for Research in Earthquake Engineering). The comprehensive reference was developed to bring sound science and engineering to the important but infrequent undertaking of earthquake damage assessment and repair of typical single- and multi-family woodframe residential buildings. The extensively illustrated 371 page publication provides an overview of earthquake effects on woodframe buildings and detailed descriptions of major building components and common patterns of earthquake damage. It also includes checklists to assist with a systematic damage survey and guidance for retaining and working with technical consultants.

Civil Engineering

Exponent provides broad expertise in geotechnical engineering, geological engineering, geophysics, geomechanics and groundwater hydrology to address a host of geo-failures, including landslides, foundation and retaining wall failures, oil-well distress and floods, as well as earthwork construction claims. Our Water Resources group specializes in the application of proven hydrologic, hydraulic, hydrodynamic and sediment transport research and science to provide scientifically sound and cost-effective solutions to our clients

In 2007, Exponent continued to assist with the analysis of structures affected by natural disasters. As a result of the October 15, 2006 earthquake off the Island of Hawaii, we performed structural and geotechnical evaluations for insurance and corporate clients. We also addressed issues related to the landslides and fires in southern California in 2007. Our hydrologists continue to address key issues in floodplain management such as delineation of flood hazards, and the identification of possible measures to mitigate potential impacts.

Construction Consulting

Exponent’s Construction Consulting practice provides construction management services to clients through all phases of the project life cycle, and, if necessary, through dispute resolution. Exponent’s engineers, cost accountants, architects and scientists provide these services to both the public and private sectors, supporting our client’s project staff through all phases of the design and construction process. Our staff identifies and evaluates construction processes and issues related to scope changes, schedule delays, production disruptions and inefficiencies, as well as the costs associated with these types of issues. They also identify the risks associated with large-scale, complex construction projects and the proactive measures to take to avoid potential obstacles.

Ecological & Biological Sciences

Exponent’s ecological scientists provide proven, cost-effective and scientifically defensible solutions to complex issues. State and federal trustees are pursuing natural resource damage claims more aggressively than in the past. Natural resource damages are a corporate environmental liability beyond cleanup or response actions. Damage claims can be very large, and settlement or litigation costs correspondingly high. Exponent assists clients in optimizing costs associated with claims for damages to natural resources, while still protecting the environment.

In 2007, Exponent scientists assisted clients with examining the implications of blended ethanol- gasoline use and release. Given the rise in the use of ethanol and bio-fuels and their potential to play a major role in the future of the energy industry, evaluating and understanding the environmental, health and engineering implications of switching to these alternative fuel sources will be increasingly important.

Electrical & Semiconductors

Exponent continues to be a highly sought-after resource for understanding current and potential risks involving electrical and electronic components. Exponent’s team of electrical engineers performs a wide array of investigations ranging from electric power systems to semiconductor devices. We operate laboratories for testing both heavy equipment and light electronic equipment. Computers and specialized software are used to analyze electric power systems, circuits, and other equipment configurations.

In 2007, our engineers performed a number of investigations related to the interaction between software and hardware in a controlling mechanical system. The primary technical area to date has been embedded systems, where software is interacting with or controlling mechanical systems that may be responsible for the health and safety of the user. Some of the products that were recently analyzed include embedded automotive controllers, software for medical devices, consumer products, battery systems, recreational computers and process control systems.

Environmental & Earth Sciences

Exponent’s environmental scientists and engineers provide proven, cost-effective, scientifically defensible and realistic assessments and solutions to complex environmental issues. Central to Exponent’s environmental expertise is a deep capability in environmental forensics. We have applied our expertise and experience to a wide variety of situations: refineries, former manufactured gas plants, mines, smelters, foundries, pulp and paper mills, wood treatment facilities, pesticide formulation and mixing operations, oil spills, fuel terminals and many manufacturing facilities with contaminants in air, groundwater, surface water, sediment, and soil.

Health Sciences

Exponent’s Health Sciences group is comprised of 5 centers as described below and specializes in solving

complex health science problems that require an experienced team of multidisciplinary health professionals.

Center for Chemical Registration & Food Safety

Our Center for Chemical Registration and Food Safety includes an experienced staff of both technical and regulatory specialists who are experienced in dealing with foods, and with pesticide and non-pesticide products including conventional chemicals, biochemicals, microbials and products of biotechnology. We provide practical, creative, scientific and regulatory support at every stage of the product cycle, from R&D to retail.

The Registration, Evaluation and Authorisation of Chemicals (REACH) regulation was implemented on June 1, 2007 by the European Union (EU). Under the new system, all chemicals manufactured or imported in the EU at levels greater than one tonne per year need to be registered. Exponent’s scientists in the EU and the United States are assisting clients with REACH by helping them to establish priorities, assessing the affect it has on their business and providing them with regulatory advice. We are also deeply involved in the development of guidance documents through the REACH Implementation Process.

Center for Epidemiology, Biostatistics & Computational Biology

Exponent health scientists apply epidemiologic methods to examine and solve complex health issues in a variety of settings. Through the principles of epidemiology, we analyze the interaction of host, agent and environment to reach conclusions about the causes and occurrence of disease in human populations.

In 2007, Dr. Suresh Moolgavkar joined our team as Center Director and Corporate Vice President. Dr. Moolgavkar has more than 30 years of experience in the fields of epidemiology, biostatistics and quantitative risk assessment. He is internationally known for his work in developing mechanistically- based dose-response models for carcinogenesis, and, in particular, for the two-mutation clonal expansion model, which is also known as the Moolgavkar-Venzon-Knudson (MVK) model. Since 1984 Dr. Moolgavkar has been a Member of the Fred Hutchinson Cancer Research Center and a Professor of Epidemiology and Biostatistics at the University of Washington.

Center for Toxicology & Mechanistic Biology

Exponent’s comprehensive experience in toxicology and related disciplines allows us to provide critical insight in resolving important issues on toxicity and

risk for a wide variety of substances. We evaluate the mechanisms by which a substance effects biological systems, provide perspectives on potential effects at realistic human and environmental exposure levels, and technically-support strategies to mitigate risks.

Exponent is involved in the assessment of the implications of nanomaterials. We recently completed a state-of-the-science review and assessment of potential health and ecological risks and regulatory implications of nanometal oxides used in a product intended for widespread consumer use. Potential exposures and risks were considered for manufacture, use, misuse, wear and disposal.

Center for Exposure Assessment & Dose Reconstruction

Exposure assessment is the science of estimating human exposure to chemical, physical, and biological agents, accounting for the frequency, magnitude, and duration of the exposure events. Exposure estimates can be compared to toxicity benchmarks or guidelines to assess potential risks to human health, and are used for many purposes, including in epidemiology, risk assessment, and regulatory compliance.

In 2007, Exponent’s health professionals were retained to conduct an in-depth scientific study regarding the safety of gaming chips used in a casino environment. Exponent completed a study to determine the likelihood that the handling of the gaming chips would produce any significant health risk to the players or dealers.

Center for Public Health & Industrial Hygiene

This center is composed of scientists, engineers, physicians and industrial hygienists, with specialized training in the anticipation, recognition, evaluation, risk assessment and control of human health hazards. At Exponent, our professional staff conducts workplace, community and food and water exposure measurements, and evaluates risk to human health. We have developed, implemented and are overseeing workforce biomonitoring programs for industrial clients. We also assisted in the development of an emergency response plan for business and employees that also addresses community emergency response issues. In 2007, we also provided consultation to global companies addressing ongoing travel health issues, preparations for SARs-like events and pandemic influenza.

Human Factors

Our Human Factors practice analyzes human cognition and behavior to guide product design decisions to provide better product safety and usability. Working in conjunction with other Exponent practices, our scientists look at ways to improve product design, as well as review safety information and training to help change human behavior and reduce accidents.

As part of our work, Exponent scientists analyze the developmental abilities and limitations of children at different ages, the ways these impact how children engage in activities and use products in different environments, and how caregivers respond to children’s needs and safety concerns. Exponent scientists investigate the accident patterns that are unique to children (e.g., choking, suffocation, drowning and poisoning) and the effectiveness of strategies used to reduce child injury. As part of this work, Exponent scientists have tested children of various ages to examine the ways in which they are able to use a variety of products, including those intended for child use (e.g., high chairs, car seats and toys) and those not intended for child use (e.g., lighters and motor vehicles).

Industrial Structures

Our Industrial Structures practice, based in Düsseldorf, Germany, specializes in design and assessment of industrial concrete structures subject to extreme conditions. Exponent’s Düsseldorf office has provided design reviews and assessments on more than 800 structures around the world, and our staff has participated in the creation of several engineering standards.

Mechanical Engineering & Materials Science

As part of the largest technical practice at Exponent, our mechanical engineers and materials scientists have both an academic and “real-world” understanding of their field, including reliability and hazard evaluation, design assessment and materials life prediction. We routinely work with manufacturers to assess risks to their products during their design and manufacturing phases of product development. In addition, we help manufacturers analyze allegations of defective design by federal regulatory agencies such as the Consumer Product Safety Commission.

At the request of the Inter-American Development Bank, Exponent evaluated the integrity of the pipeline components in the Camisea Transportation System in Peru, which experienced five spill incidents between December 2004 and March of 2006, and a sixth spill incident in April 2007. The

intent of our investigation was to develop a risk profile for the two component pipelines and identify the factors that contributed to the incidents. During our investigation of causal factors in the five incidents and assessment of pipeline integrity, Exponent made recommendations to Transportadora de Gas del Peru S.A. (TgP) in order to improve future pipeline integrity by mitigating and controlling identified risks to the system.

Statistical & Data Sciences

All living humans continually bear a certain degree of risk of injury or death. Exponent’s Statistical & Data Sciences practice specializes in determining whether a particular activity or product poses an unreasonable risk. Risk estimation involves establishing a reference period and then collecting information about the number of injuries (or other adverse events) suffered and the amount of exposure during this period.

Exponent recently developed and proposed the design of an experimental study to determine which concrete mixes will possess minimum permeability at cryogenic temperatures. Factors of interest included water/cement ratio, age at filling and percent of silica. Observations at systematically chosen factor-level combinations, depicted as points along the edges of a cube, can be used to estimate the response surface and the manufacturing settings that will produce optimum results. Planning for implementation of the study is underway.

Technology Development

Drawing on our multidisciplinary engineering, testing and failure analysis and prevention expertise, our Technology Development practice specializes in harnessing commercial technologies to develop effective military equipment and systems.

In 2007, Exponent assisted the Army’s Rapid Equipping Force to develop the Rapid Deployment Integrated Surveillance System (RDISS) to improve situational awareness for soldiers at joint security stations and combat outposts throughout Iraq. The new surveillance system minimizes soldiers’ exposure to harm while providing continual observation in operating areas. The RDISS system was fielded in Iraq after just three weeks of design and manufacturing. An indefinite-delivery-quantity (IDIQ) contract for the RDISS systems was awarded in October. We also continued to supply the U.S. Army with MARCbot – our multifunction, agile remote controlled robot for use in reconnaissance missions.

Thermal Sciences

Exponent has investigated and analyzed thousands of fires and explosions ranging from high loss disasters at manufacturing facilities to small insurance claims. Information gained from these analyses has helped us assist clients in assessing preventative measures related to the design of their products.

In 2007, Exponent continued to expand its presence in the energy industry. Working with the Liquified Natural Gas (LNG) industry, our consultants have developed a modeling approach to quantify the fog generation, dispersion and dissipation caused by the cold air effluent from a large field of ambient air vaporizers (AAVs). Exponent developed this modeling approach to successfully address questions and concerns from regulatory agencies with regards to the potential effects on visibility from the fog cloud due to the AAV operation

Vehicle Analysis

Our Vehicle Analysis practice provides design analysis, vehicle crash testing, component testing and accident reconstruction services to clients developing new automotive products, facing unexpected performance issues, or seeking information on how an accident occurred. At our 147-acre Test and Engineering Center in Phoenix, Arizona, we develop unique test protocols using proprietary tests developed by our consulting staff.

We recently completed a patent infringement evaluation of an automotive security system. The primary issue involved was the manner in which the internal parts of the security sensor moved. Exponent used high-speed film to document and analyze the motions of the two different sensors.

Visual Communications

The Visual Communications practice combines art and science to help clients create compelling, fact-based visual displays that communicate complex subject matter, conveying important information to audiences unfamiliar with the matters at hand. Specific components include animation, graphics, multimedia and photography.

COMPETITION

The marketplace for our services is fragmented and we face different sources of competition in providing various services. In addition, the services that we provide to some of our clients can be performed in-house by those clients. However, because of liability

and independence concerns, clients that have the capability to perform such services themselves often retain Exponent or other independent consultants.

In each of the foregoing practices, we believe that the principal competitive factors are: technical capability and breadth of services, ability to deliver services on a timely basis, professional reputation and knowledge of the litigation process. Although we believe that we generally compete favorably in each of these areas, some of our competitors may be able to provide services acceptable to our clients at lower prices.

We believe that the barriers to entry in particular areas of engineering expertise are low and that for many of our technical disciplines, competition is increasing. In response to competitive forces in the marketplace, we continue to explore new markets for our various technical disciplines.

EMPLOYEES

As of December 28, 2007, we employed 875 full-time and part-time employees, including 584 engineering and scientific staff, 106 technical support staff and 185 administrative and support staff. Our staff includes 497 employees with advanced degrees, of which 304 employees have achieved the level of Ph.D. or M.D.

ADDITIONAL INFORMATION

The address of our internet website is www.exponent.com. We make available, free of charge through our website, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other periodic SEC reports, along with amendments to all of those reports, as soon as reasonably practicable after we file the reports with the SEC. The content of our internet website is not incorporated into and is not part of this Annual Report on Form 10-K.

Executive officers of Exponent are appointed by the Board of Directors and serve at the discretion of the Board or until the appointment of their successors. There is no family relationship between any of the directors and officers of the Company.

Michael R. Gaulke joined the Company in September 1992, as Executive Vice President and Chief Financial Officer. He was named President in March 1993 and he was appointed as a member of the Board of Directors of the Company in January 1994. He assumed his current role of Chief Executive Officer in June 1996, and was appointed Chairman of the Board of Directors in May 2007. From November 1988 to September 1992, Mr. Gaulke served as Executive Vice President and Chief Financial Officer at Raynet Corporation, a subsidiary of Raychem Corporation. Prior to joining Raynet, Mr. Gaulke was Executive Vice President and Chief Financial Officer of Spectra Physics, Inc., where he was employed from 1979 to 1988. From 1972 to 1979, Mr. Gaulke served as a consultant with McKinsey & Company. Mr. Gaulke is a member of the Board of Directors of Cymer, Inc. and serves on the Board of Trustees of the Palo Alto Medical Foundation. Mr. Gaulke received an M.B.A. (1972) in Marketing and Operations from the Stanford University Graduate School of Business and a B.S.

(1968) in Electrical Engineering from Oregon State University.

Paul R. Johnston, Ph.D., joined the Company in 1981, was promoted to Principal Engineer in 1987, and to Vice President in 1996. In 1997, he assumed responsibility for the firm’s network of offices. In July 2003, he was appointed Chief Operating Officer and added responsibility for the Health and Environmental Groups. In 2006, he assumed line responsibility for all of the firm’s consulting groups. Dr. Johnston was named President in May 2007. He received his Ph.D. (1981) in Civil Engineering and M.S. (1977) in Structural Engineering from Stanford University. He received his B.A.I. (1976) in Civil Engineering with First Class Honors from Trinity College, University of Dublin, Ireland where he was elected a Foundation Scholar in 1975. Dr. Johnston is a Registered Professional Civil Engineer in the State of California and a Chartered Engineer in Ireland.

Elizabeth L. Anderson, Ph.D., joined the Company in June 2006 as a Group Vice President. Prior to joining Exponent, Dr. Anderson was President and CEO of Sciences International, a health and environmental consulting firm. Dr. Anderson received her Ph.D. (1970) in Organic Chemistry from The American University, M.S. (1964) in Organic

Chemistry from the University of Virginia and B.S. (1962) in Chemistry from the College of William and Mary. Dr. Anderson is a Fellow of the Academy of Toxicological Sciences, founder and past-President of the Society for Risk Analysis and Editor-in-Chief of the journal, Risk Analysis: An International Journal.

Paul D. Boehm, Ph.D., joined the Company in April 2004 as a Group Vice President. Prior to joining the Company, Dr. Boehm was Vice President and Market Manager, Oil and Gas Sector, at Battelle Memorial Institute from 2001 to 2004. From 1999 to 2001, Dr. Boehm was Vice President and Managing Director, Environmental Health and Safety Consulting at Arthur D. Little, Inc. Dr. Boehm received his Ph.D. (1977) and M.S. (1973) in Oceanography from the University of Rhode Island and B.S. (1970) in Chemical Engineering from the University of Rochester. Dr. Boehm has published more than 100 articles in peer-reviewed journals and authored numerous reports on environmental forensics and impact assessments. Dr. Boehm has been chosen to serve on several National Research Council panels.

Robert D. Caligiuri, Ph.D., joined the Company in 1987. He was promoted to Principal Engineer in 1990 and Group Vice President in 1999. Dr. Caligiuri received his Ph.D. (1977) and M.S. (1974) in Materials Science and Engineering from Stanford University and B.S. (1973) in Mechanical Engineering from the University of California, Davis. Prior to joining the Company he was a Program Manager and Materials Scientist for SRI International. He is a Registered Professional Metallurgical Engineer in the State of California, a Licensed Professional Engineer in the State of Utah and is a Fellow of the American Society for Materials.

Subbaiah V. Malladi, Ph.D., joined the Company in 1982 as a Senior Engineer, becoming a Senior Vice President in January 1988 and a Corporate Vice President in September 1993. In October 1998, Dr. Malladi was appointed Chief Technical Officer of the Company. Dr. Malladi also served as a Director of the Company from March 1991 through September 1993. He was re-appointed as a Director in April 1996 and served on the Board until May 2005. He received a Ph.D. (1980) in Mechanical Engineering from the California Institute of Technology, M.Tech (1972) in Mechanical Engineering from the Indian Institute of Technology, B.E. (1970) in Mechanical Engineering from SRI Venkateswara University, India and B.S. (1966) in Physics, Chemistry and Mathematics from Osmania University, India. Dr.

Malladi is a Registered Professional Mechanical Engineer in the State of California.

John E. Moalli, Sc.D., joined the Company in 1992. He was promoted to Principal Engineer in 1997 and Group Vice President in 2002. Dr. Moalli received his Sc.D. (1992) in Polymers from the Massachusetts Institute of Technology and B.S. (1987) in Civil Engineering from Northeastern University. He is a member of the Society for the Plastics Industry, Society for Plastics Engineers and a member of the Editorial Advisory Board of Medical Plastics and Biomaterials.

John D. Osteraas, Ph.D., worked for the Company from 1982 to 1985 as a Senior Engineer. He rejoined the Company in 1990 as a Managing Engineer. He was promoted to Principal Engineer in 1992 and Group Vice President in 2006. Dr. Osteraas received his Ph.D. (1990) in Civil Engineering and M.S. (1977) in Civil Engineering: Structural Engineering from Stanford University and B.S. (1976) in Civil and Environmental Engineering from the University of Wisconsin. Dr. Osteraas is a Registered Professional Engineer in nine states and is a Fellow of the American Society of Civil Engineers.

Richard L. Schlenker, Jr. joined the Company in 1990. Mr. Schlenker is the Chief Financial Officer and Corporate Secretary of the Company. He was appointed Chief Financial Officer in July 1999 and was appointed Secretary of the Company in November 1997. Mr. Schlenker was the Director of Human Resources from 1998 until his appointment as CFO. He was the Manager of Corporate Development from 1996 until 1998. From 1993 to 1996, Mr. Schlenker was a Business Manager, where he managed the business activities for multiple consulting practices within the Company. Prior to 1993, he held several different positions in finance and accounting within the Company. Mr. Schlenker holds a B.S. in Finance from the University of Southern California.

Item 1A. Risk Factors

Exponent operates in a rapidly changing environment that involves a number of uncertainties, some of which are beyond our control. These uncertainties include, but are not limited to, those mentioned elsewhere in this report and the following:

Absence of Backlog

Revenues are primarily derived from services provided in response to client requests or events that occur without notice, and engagements, generally billed as services are performed, are terminable or subject to postponement or delay at any time by clients. As a result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable indicator of revenues for any future periods. Revenues and operating margins for any particular quarter are generally affected by staffing mix, resource requirements and timing and size of engagements.

Attraction and Retention of Key Employees

Exponent’s business involves the delivery of professional services and is labor-intensive. Our success depends in large part upon our ability to attract, retain and motivate highly qualified technical and managerial personnel. Qualified personnel are in great demand and are likely to remain a limited resource for the foreseeable future. We cannot provide any assurance that we can continue to attract sufficient numbers of highly qualified technical and managerial personnel and to retain existing employees. The loss of key managerial employees or any significant number of employees could have a material adverse impact on our business, including our ability to secure and complete engagements.

Competition

The markets for our services are highly competitive. In addition, there are relatively low barriers to entry into our markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets. Competitive pressure could reduce the market acceptance of our services and result in price reductions that could have a material adverse effect on our business, financial condition or results of operations.

Customer Concentration

We currently derive and believe that we will continue to derive a significant portion of our revenues from clients, organizations and insurers related to the transportation industry and the government sector. For the fiscal year ended December 28, 2007 transportation industry related engagements accounted for approximately 14% of our revenues and government sector related engagements

accounted for approximately 14% of our revenues. The loss of any large client, organization or insurer related to the transportation industry or the government sector could have a material adverse effect on our business, financial condition or results of operations.

Economic Uncertainty

The markets that we serve are cyclical and subject to general economic conditions, particularly in light of the labor-intensive nature of our business and our relatively high compensation expenses. If the economy in which we operate, which is predominately in the U.S., were to experience a prolonged slowdown, demand for our services could be reduced considerably.

Professional Reputation

The professional reputation of Exponent and its consultants is critical to our ability to successfully compete for new client engagements and attract or retain professionals. Any factors that damage our professional reputation could have a material adverse effect on our business.

Regulation

Public concern over health, safety and preservation of the environment has resulted in the enactment of a broad range of environmental and/or other laws and regulations by local, state and federal lawmakers and agencies. These laws and the implementing regulations affect nearly every industry, as well as the agencies of federal, state and local governments charged with their enforcement. To the extent changes in such laws, regulations and enforcement or other factors significantly reduce the exposures of manufacturers, owners, service providers and others to liability, the demand for our services may be significantly reduced.

Tort Reform

Several of our practices have a significant concentration in litigation support consulting services. To the extent tort reform reduces the exposure of manufacturers, owners, service providers and others to liability, the demand for our litigation support consulting services may be significantly reduced.

Variability of Quarterly Financial Results

Variations in our revenues and operating results occur from time to time, as a result of a number of factors, such as the significance of client engagements commenced and completed during a

quarter, the timing of engagements, the number of working days in a quarter, employee hiring and utilization rates, and integration of companies acquired. Because a high percentage of our expenses, particularly personnel and facilities related expenses, are relatively fixed in advance of any particular quarter, a variation in the timing of the initiation or the completion of our client assignments can cause significant variations in operating results from quarter to quarter.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our Silicon Valley office facilities consist of a 153,738 square foot building, with office and laboratory space located on a 6.3-acre tract of land we own in Menlo Park, California and an adjacent 27,000 square feet of leased warehouse storage space.

Our Test and Engineering Center (“TEC”) occupies 147 acres in Phoenix, Arizona. We lease this land from the state of Arizona under a 30-year lease agreement that expires in January 2028 and have options to renew for two fifteen-year periods. We constructed an indoor test facility as well as an engineering and test preparation building at the TEC.

In addition, we lease office, warehouse and laboratory space in 21 other locations in 13 states and the District of Columbia, as well as in Germany, China, Switzerland and the United Kingdom. Leases for these offices, warehouse and laboratory facilities have terms generally ranging between one and ten years. Aggregate lease expense in fiscal 2007 for all leased properties was $4,996,000.

Item 3. Legal Proceedings

Exponent is not engaged in any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2007.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Exponent’s common stock is traded on the NASDAQ Global Select Market, which up until July 1, 2006 was the NASDAQ National Market, under the symbol “EXPO”. The following table sets forth for the fiscal periods indicated the high and low closing sales prices for our common stock.

As of February 22, 2008, there were 371 holders of record of our common stock. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we believe that there are considerably more beneficial holders of our common stock than record holders.

We have never paid cash dividends on our common stock. See Item 7 of Part II “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Exponent, Inc. is a science and engineering consulting firm that provides solutions to complex problems. Our multidisciplinary team of scientists, physicians, engineers, business and regulatory consultants brings together more than 90 different technical disciplines to solve complicated issues facing industry and government today. Our services include analysis of products, people, property, processes and finances related to litigation, product recall, regulatory compliance, research, development and design.

CRITICAL ACCOUNTING ESTIMATES

In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheet. We base our

assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition and estimating the allowance for doubtful accounts have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. We discuss below the assumptions, judgements and estimates associated with these policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results. For further information on our critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Revenue recognition. We derive our revenues primarily from professional fees earned on consulting

engagements, product sales in our technology development practice, fees earned for the use of our equipment and facilities, as well as reimbursements for outside direct expenses associated with the services that are billed to our clients.

Substantially all of our engagements are performed under time and material or fixed-price billing arrangements. On time and material and fixed-price projects, revenue is generally recognized as the services are performed. For substantially all of our fixed-price engagements we recognize revenue based on the relationship of incurred labor hours at standard rates to our estimate of the total labor hours at standard rates we expect to incur over the term of the contract. Our estimate of total labor hours we expect to incur over the term of the contract is based on the nature of the project and our past experience on similar projects. We believe this methodology achieves a reliable measure of the revenue from the consulting services we provide to our customers under fixed-price contracts.

Significant management judgments and estimates must be made and used in connection with the revenues recognized in any accounting period. These judgments and estimates include an assessment of collectibility and, for fixed-price engagements, an estimate as to the total effort required to complete the project. If we made different judgments or utilized different estimates, the amount and timing of our revenue for any period could be materially different.

All contracts are subject to review by management, which requires a positive assessment of the collectibility of contract amounts. If, during the course of the contract, we determine that collection of revenue is not reasonably assured, we do not recognize the revenue until its collection becomes reasonably assured, which in those situations would generally be upon receipt of cash. We assess collectibility based on a number of factors, including past transaction history with the client, as well as the credit-worthiness of the client. Losses on fixed-price contracts are recognized during the period in which the loss first becomes evident. Contract losses are determined to be the amount by which the estimated total costs of the contract exceeds the total fixed price of the contract.

Estimating the allowance for doubtful accounts. We must make estimates of our ability to collect accounts receivable and our unbilled work-in-process. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific allowance to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers we recognize allowances for doubtful accounts based upon historical bad debts, customer concentration, customer credit-worthiness, current economic conditions and changes in customer payment terms. As of December 28, 2007, our accounts receivable balance was $59.8 million, net of an allowance for doubtful accounts of $2.2 million.

OVERVIEW OF THE YEAR ENDED DECEMBER 28, 2007

During fiscal 2007, we had a 21.8% increase in revenues as compared to fiscal 2006. This growth was driven by a broad set of practices including technology development, health sciences, mechanical engineering & materials science, vehicle analysis, electrical & semiconductors and eco-sciences. Our technology development practice had a strong year as we continued to support the U.S. Army’s efforts in Afghanistan and Iraq. In our health sciences group we expanded our business, providing solutions to complex health problems that require an experienced team of multi-disciplined health professionals. Our mechanical engineering & materials science practice continued to expand our portfolio of projects in the energy sector and product design consulting work for consumer electronics companies. In our vehicle analysis practice, we continued to grow our business, providing design analysis, vehicle crash testing, component testing and accident reconstruction services.

Our revenue growth was driven primarily by an increase in billable hours, higher billing rates and an increase in product sales in our technology development practice. Total billable hours increased 9.0% to 825,000 during fiscal 2007 as compared to 757,000 during fiscal 2006. The increase in billable hours was supported by an increase in utilization and technical full-time equivalent employees. Utilization increased to 68% for fiscal 2007 as compared to 64% for fiscal 2006. This increase in utilization was due to an increase in demand for our services across a broad set of practices. Technical full-time equivalent employees increased by 2.3% to 581 during fiscal 2007 as compared to 568 during fiscal 2006. This increase in technical full time equivalent employees was due to our continued recruiting and retention efforts. Product sales in our technology development practice increased 272% to $11.9 million for fiscal 2007 as compared to $3.2 million for fiscal 2006. This increase in product sales was primarily due to an increase in sales of robots and surveillance systems to the U.S. Army.

Due to the increase in utilization, the increase in product sales and the management of our operating expenses we were able to leverage this revenue growth to improve operating income by 48.3% and net income by 43.3%.

FISCAL YEARS ENDED DECEMBER 28, 2007, AND DECEMBER 29, 2006

Revenues

Our revenues consist of professional fees earned on consulting engagements, product sales in our technology development practice, fees for use of our equipment and facilities, as well as reimbursements for outside direct expenses associated with the services performed that are billed to our clients. We operate on a 52-53 week fiscal year with each year ending on the Friday closest to December 31^st. The fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 included 52 weeks of activity.

The increase in revenues for our engineering and other scientific segment during fiscal 2007 was the result of an increase in billable hours, higher billing rates and an increase in product sales in our technology development practice. During fiscal 2007, billable hours for this segment increased by 6.0% to 617,000 as compared to 582,000 during fiscal 2006. The increase in billable hours was supported by an increase in utilization and technical full-time equivalent employees. Utilization for this segment increased to 69% for fiscal 2007 as compared to 67% for fiscal 2006. Technical full-time equivalents for this segment increased by 3.1% to 432 during fiscal 2007 as compared to 419 during fiscal 2006. Product sales in our technology development practice increased 272% to $11.9 million for fiscal 2007 as compared to $3.2 million for fiscal 2006.

The increase in revenues for our environmental and health segment during fiscal 2007 was the result of an increase in billable hours and higher billing rates. During fiscal 2007 billable hours for this segment increased by 18.9% to 208,000 as compared to

175,000 during fiscal 2006. This increase in billable hours was supported by an increase in utilization. Utilization for this segment increased to 67% for fiscal 2007 as compared to 57% for fiscal 2006. Technical full-time equivalents for this segment were 149 for fiscal 2007 and 2006.

Revenues are primarily derived from services provided in response to client requests or events that occur without notice and engagements are generally terminable or subject to postponement or delay at any time by our clients. As a result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable indicator of revenues for any future periods.

Compensation and Related Expenses

The increase in compensation and related expenses during fiscal 2007 was due to an increase in payroll expense, bonus expense and stock-based compensation. Payroll expense increased by $6.8 million due to an increase in technical full-time equivalent employees and the impact of our annual salary increase. Bonus expense increased by $6.2 million due to a corresponding increase in profitability. Stock-based compensation increased by $401,000 due to additional restricted stock unit grants during 2007. We expect compensation and related expenses to increase due to the anticipated hiring of additional staff and the impact of future annual salary increases.

Other Operating Expenses

Other operating expenses primarily include facilities-related costs, technical materials, computer-related expenses and depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating expenses was primarily due to an increase of $961,000 in occupancy expense, an increase of $273,000 in

computer-related expenses and a $236,000 increase in depreciation and amortization. The increase in occupancy expense, computer-related expenses, and depreciation and amortization were due to expansion in certain offices to support our increase in technical-full time equivalent employees. We anticipate other operating expenses to increase due to the support associated with the anticipated hiring of additional staff and the anticipated expansion of our offices.

Reimbursable Expenses

The increase in reimbursable expenses during fiscal 2007 was primarily due to a $6.0 million increase in project related costs associated with product sales in our technology development practice.

General and Administrative Expenses

The increase in general and administrative expenses during fiscal 2007 was primarily due to an increase in travel and meals of $560,000 and an increase in bad debt of $300,000. The increase in travel and meals was primarily due to the costs associated with a manager’s meeting held during 2007 and an increase in technical full-time equivalent employees. The increase in bad debt expense was due to an increase in write-offs and an increase in our allowance for doubtful accounts.

Other Income and Expense

Other income and expense, net, consists primarily of investment income earned on available cash, cash equivalents and short-term investments, rental income from leasing excess space in our Silicon

Valley facility, and changes in the value of assets associated with our deferred compensation plan. The increase in other income and expense during fiscal 2007 was primarily due to an increase in rental income of $421,000 due to the addition of a new tenant in our Silicon Valley facility during fiscal 2007. The increase in rental income was partially offset by a smaller increase in the fair value of deferred compensation plan assets. The fair value of deferred compensation plan assets increased by $356,000 during fiscal 2007 as compared to an increase of $581,000 during fiscal 2006.

Income Taxes

The increase in income tax expense was due to a corresponding increase in pre-tax income.

FISCAL YEARS ENDED DECEMBER 29, 2006, AND DECEMBER 30, 2005

The increase in revenues for our engineering and other scientific segment during fiscal 2006 was the result of higher billing rates and an increase in billable hours. During fiscal 2006, billable hours for this segment increased by 8.8% to 582,000 as compared to 535,000 during fiscal 2005. Technical full-time equivalents for this segment increased by 10.3% to 419 during fiscal 2006 as compared to 380 during fiscal 2005. Utilization for this segment decreased to 67% for fiscal 2006 as compared to 68% for fiscal 2005.

The increase in revenues for our environmental and health segment during fiscal 2006 was the result of higher billing rates, partially offset by a decrease in billable hours. During fiscal 2006 billable hours for

this segment decreased by 1.7% to 175,000 as compared to 178,000 during fiscal 2005. This decrease in billable hours was primarily due to a decrease in the volume and size of new and recurring engagements in our ecosciences practice. This practice operates in one of our more competitive markets. Technical full-time equivalents for this segment increased by 7.2% to 149 during fiscal 2006 as compared to 139 during fiscal 2005. Utilization for this segment decreased to 57% for fiscal 2006 as compared to 61% for fiscal 2005.

Compensation and Related Expenses

The increase in compensation and related expenses during fiscal 2006 was due to an increase in payroll expense, stock-based compensation, and fringe benefits. Payroll expense increased by $8.0 million due to a corresponding increase in technical full-time equivalent employees and the impact of our annual salary increase. Stock-based compensation expense related to matching restricted stock units and stock options increased by $1.6 million due primarily to the adoption of SFAS 123(R) during 2006. Fringe benefits increased by $1.3 million due to the increase in technical full-time equivalent employees.

Other Operating Expenses

The increase in other operating expenses was primarily due to an increase of $650,000 in occupancy expense, an increase of $285,000 in computer-related expenses, and a $223,000 increase in depreciation and amortization. The increase in occupancy expense, computer-related expenses, and depreciation and amortization were due to expansion in certain offices to support our increase in technical-full time equivalent employees.

Reimbursable Expenses

The decrease in reimbursable expenses during fiscal 2006 was primarily due to a decrease in purchases of technical materials related to projects in our technology development practice.

General and Administrative Expenses

The increase in general and administrative expenses during fiscal 2006 was primarily due to an increase in travel and meals of $388,000 and an increase in other professional services of $295,000. The increase in travel and meals was primarily due to our increase in technical full-time equivalent employees and an increase in business development activities. The increase in other professional services was primarily due to $216,000 in sub-contractor fees related to a potential project with the U. S. government that was not executed by the end of fiscal 2004. This project was executed during the first quarter of fiscal 2005 and the sub-contractor fees previously expensed were recovered. The recovery of these expenses during fiscal 2005 contributed to the period-to-period increase in outside consulting services.

Other Income and Expense

The increase in other income and expense during fiscal 2006 was primarily due to an increase in interest income of $723,000, an increase in the fair value of deferred compensation plan assets of $581,000 during fiscal 2006 as compared to $330,000 during fiscal 2005 and an increase in rental income of $94,000. The increase in interest income was due to higher balances of cash, cash equivalents and short-

term investments and an increase in short term interest rates. Rental income increased due to the addition of a new tenant in our Silicon Valley facility.

Income Taxes

The increase in our effective tax rate during fiscal 2006 was primarily due to $150,000 in additional income tax expense related to a change in estimated federal and state income taxes for 2005. During fiscal 2005 we recorded a credit of $272,000 to income tax expense related to a change in estimated federal and state income taxes for 2004.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), “Fair Value Measurements,” which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. However, on December 14, 2007, the FASB issued proposed FASB Staff Position (“FSP”) FAS 157-b which would delay the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This proposed FSP partially defers the effective date of Statement 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. Effective for fiscal 2008, we expect to adopt SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in proposed FSP FAS 157-b. We are currently evaluating FAS 157, but do not expect the partial adoption of SFAS 157 to have a material impact on our consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected must be reported in earnings at each subsequent reporting date. The fair value option can be applied instrument by instrument, however the election is irrevocable. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating SFAS 159, but do not expect the adoption of SFAS 159 to have a material impact on our consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations” and SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51”. SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective for fiscal years beginning after November 15, 2008. We intend to adopt SFAS 141R and SFAS 160 in fiscal 2009.

LIQUIDITY AND CAPITAL RESOURCES

We financed our business in fiscal 2007 principally through available cash and cash flows from operating activities. We invest our excess cash in cash equivalents and short-term investments. At the end of fiscal 2007, we had $63.7 million in cash, cash equivalents and short-term investments compared to $58.1 million at the end of the prior year.

The increase in cash provided by operating activities during fiscal 2007 as compared to fiscal 2006 was due to an increase in net income, a larger increase in accrued payroll and employee benefits, a larger increase in accounts payable and accrued liabilities, and an increase in stock-based compensation partially offset by a larger increase in accounts receivable. The larger increase in accrued payroll and employee benefits was primarily due to an increase in accrued bonuses driven by a corresponding increase in profitability. The larger increase in accounts payable and accrued liabilities was due to the timing of payments to our vendors. The increase in stock-based compensation was due to additional restricted stock unit grants during fiscal 2007 and an increase in the accrued bonus that we expect to settle with fully vested restricted stock units. The larger increase in accounts receivable was due to an increase in revenues. Days sales outstanding decreased to 88 days at the end of fiscal 2007 as compared to 94 days at the end of fiscal 2006.

The increase in cash provided by operating activities during fiscal 2006 as compared to fiscal 2005 was due to a smaller increase in accounts receivable and an increase in stock-based compensation partially offset by an increase in deferred income taxes. The smaller increase in accounts receivable was driven by lower days sales outstanding, which decreased to 94 days at the end of fiscal 2006 as compared to 101 days at the end of fiscal 2005. Stock-based compensation was $4.4 million during fiscal 2006 as compared to $2.1 million during fiscal 2005. The increase in stock-based compensation was primarily due to the adoption of SFAS 123(R) during fiscal 2006. During fiscal 2006 deferred income taxes were $3.2 million as compared to $1.5 million during fiscal 2005. The increase in deferred income taxes was due to the corresponding increase in stock-based compensation expense and an increase in amounts deferred under our non-qualified deferred compensation plan.

During fiscal 2007, 2006 and 2005, net cash used in investing activities primarily related to the purchase and sale or maturity of short-term investments.

The decrease in net cash used in financing activities during fiscal 2007, as compared to fiscal 2006, was due to a decrease in repurchases of our common stock under our stock repurchase programs partially offset by an increase in proceeds from the issuance of common stock. Proceeds from the issuance of common stock are primarily related to the exercise of employee stock options and the purchase of common stock under our employee stock purchase plan. The

increase in net cash used in financing activities during fiscal 2006 was primarily due to an increase in repurchases of our common stock under our stock repurchase programs.

We expect to continue our investing activities, including purchases of short-term investments and capital expenditures. Furthermore, cash reserves may be used to repurchase common stock under our stock repurchase programs or strategically acquire professional services firms that are complementary to our business.

The following schedule summarizes our principal contractual commitments as of December 28, 2007 (in thousands):

The above table does not reflect unrecognized tax benefits of $265,000, the timing of which is uncertain. Refer to Note 7 of the Notes to Consolidated Financial Statements for additional discussion on unrecognized tax benefits.

We maintain a nonqualified deferred compensation plan for the benefit of a select group of highly compensated employees. Vested amounts due under the plan of $4.7 million were recorded as a long-term liability on our consolidated balance sheet at December 28, 2007. Company assets that are earmarked to pay benefits under the plan are held in a rabbi trust and are subject to the claims of our creditors. As of December 28, 2007 invested amounts under the plan of $4.9 million were recorded as a long-term asset on our consolidated balance sheet.

We have a revolving reducing mortgage note with a total available borrowing amount of $15.4 million and an outstanding balance of $0 as of February 22, 2008. Any amounts borrowed under the revolving reducing mortgage note are due and payable on January 31, 2009. We believe that our funds generated from operations will provide adequate cash to fund our anticipated cash needs through at least the next twelve-month period.

In addition, we believe that the our funds generated from operations will provide adequate cash to fund our anticipated long-term cash needs beyond the next twelve-month period; however, we intend to grow our business by pursuing potential acquisitions, which could increase the need for additional sources of funds over the long-term.

As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not engage in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Exponent is exposed to interest rate risk associated with our balances of cash, cash equivalents and short-term investments. We manage our interest rate risk by maintaining an investment portfolio primarily consisting of debt instruments with high credit quality and relatively short average effective maturities (auction rate maturity set at date of next auction) in accordance with the Company’s investment policy. The maximum effective maturity of any issue in our portfolio of cash equivalents and short-term investments is 3 years and the maximum average effective maturity of the portfolio cannot exceed 12 months.

Our exposure to market rate risk for changes in interest rates relates primarily to our short-term investments. We do not use derivative financial instruments in our short-term investment portfolio. The average effective maturity of our investment portfolio of short-term investments and cash equivalents at December 28, 2007 was 0.76 years.

Notwithstanding our efforts to manage interest rate risk, there can be no assurances that we will be adequately protected against the risks associated with interest rate fluctuations.

We are exposed to liquidity and credit risk associated with our municipal auction rate securities. In the event of a failed auction we would not have access to these funds until a future auction is successful. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate we may be required to adjust the carrying value of these investments through an impairment charge. Included within our investment portfolio at February 22, 2008 is one AAA rated municipal auction rate security valued at $1.0 million. Based on our ability to access our cash and other short-term investments, our expected operating cash flows, and our other sources of cash we do not expect any lack of liquidity related to this investment to negatively impact our ability to operate our business as usual.

We are exposed to some foreign currency exchange rate risk associated with our foreign operations. Given the limited nature of these operations, we believe that any exposure would be minimal.

Item 8. Financial Statements and Supplementary Data

See Item 15 of this Form 10-K for required financial statements and supplementary data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13(a)-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13(a)-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 28, 2007.

There have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially effect, the Company’s internal control over financial reporting

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item with respect to our directors, code of ethics and compliance with section 16(a) of the Exchange Act is incorporated by reference to the sections of the Company’s definitive Proxy Statement for its 2008 Annual Meeting of Stockholders (the “Proxy Statement”) entitled “Proposal No. 1: Election of Directors,” “Code of Business Conduct and Corporate Governance” and “Compliance with Section 16(a) of the Exchange Act.” See Item 1 for information regarding the executive officers of the Company.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Executive Officer Compensation”.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to the sections of the Proxy Statement entitled “Stock Ownership” and “Equity Compensation Plan Information”.

Item 13. Certain Relationships and Related Transactions

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Related Party Transactions” and “Proposal No. 1 – Election of Directors”.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated by reference to the section of the Proxy Statement entitled “Principal Accounting Fees and Services”.