Annual Report 2018

To our shareholders
Contents
To our shareholders
About Cybernics
Business outline
Motion principle of HAL
Cybernic Treatment
Potential market of Medical HAL
New model Cleaning Robot CL02
Business highlight
Endeavor towards sustainable business
Analyst interview
Management structure
Corporate governance
MD&A
Risk factors
Financial statements
Corporate & Investor information

Forward-Looking Statements
Many of the statements included in this annual report contain forward-looking statements
and information such as forecasts, plans and targets identified by the use of terminology
such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will”or similar phrases.
CYBERDYNE, INC. (the “Company”) bases these statements on beliefs as well asassumptions made using information currently available to the Company. As thesestatements reflect the Company’s current views concerning future events, these statements
involve risks, uncertainties and assumptions. The actual future performance of theCompany, its consolidated subsidiaries and its affiliates accounted for by the equity method(the “Group”) could differ materially from these forward-looking statements.
In addition, information relating to companies other than the Company and the Group thatis included in this annual report has been derived from public sources. As a result, theCompany has not verified this information from the standpoints of accuracy andappropriateness. Moreover, the Company in no manner guarantees this information.
Accordingly, please refrain from making investment decisions that are overly reliant on theforward-looking statements contained in this annual report. The Company cautions
prospective investors not to place undue reliance on these forward-looking statements when
making investment decisions. All written and oral forward-looking statements attributable
to the Company or persons acting on the Company’s behalf are qualified in their entirety bythese cautionary statements.

In the fiscal year ended March 31, 2018,
we succeeded in achieving a very importantmilestone of obtaining marketing clearancefor HAL for Medical Use Lower Limb (“Medical
HAL”) from the U.S. Food & Drug Administration(“FDA”), as a medical device with treatment
effects. FDA’s summary report states that
intended use of Medical HAL is to improveambulation upon completion of HAL gait
training intervention.
We are pleased to learn that the report reflects our concept ofCybernic Treatment with Medical HAL (“Cybernic Treatment” or
the “Treatment”) for improvement and regeneration of gaitfunctions. Immediately after we received the marketing
clearance, we started selecting executive class leader for the U.S.
market to accelerate the business and we are almost ready to
spread our technology across the states. Besides the offering ofCybernic Treatment in the U.S., we also started that in Poland
and Saudi Arabia in the fiscal year under review, so we saw asteady progress towards offering the treatment around the world.
Furthermore for HAL Lumbar Type, we provided further
upgrades to the initial models used to support the workers
by adding new functions, such as communication, waterproof
and dust proof functions. In addition to existing HAL Lumbar
Type for Care Support for a caregiver, we also succeeded incommercializing HAL Lumbar Type for Well-being, to support acare receiver by inducing improvement in the wearer’s ability tostand up and down, so he/she can grow more independent fromthe need of care.
In addition, we introduced a new model of our Cleaning
Robot, “CL02” as the world’s top class cleaning robot., CL02
incorporating reinforced sensing components and AI systems. We
have started distributing CL02, in cooperation with several large
companies. We developed a palm-size medical device, “Vital
Sensor” capable of measuring hardening of arteries and cardiac
functions at home and hospitals. We also submitted a medical
device application for Vital Sensor to Pharmaceuticals andMedical Devices Agency in Japan (“PMDA”). The device will join
our line-up of medical devices. Once this process is complete, wewill be cleared to commence selling of this device.

To our shareholders
We also started selling Cyin for Living Support for a patientwith much deteriorated bodily functions due to severe disorders
has difficulty to speak and/or move with existing communication
devices. Utilizing the patient’s bio-electrical signal, Cyin enables
him/her to manipulate various environment controlling devices
and communication tools. Preparations for distributing thisdevice are proceeding. As listed above, we have been advancing
preparations to create the new “Cybernic Industry” throughthese products incorporating AI and IoH/IoT (Internet of Humans/
Internet of Things) functions. We have worked at full speed since
our listing on the stock market and we can now see the entire
picture of our business better.
In order to create Cybernic Industry, not only we have tocontinue our research and development of the Company’s
products but also we need a bigger framework of business. In
order to formulate this framework, we entered into businessalliances with insurance companies and companies with unique
technologies. To reinforce this framework further, we started“CEJ Fund” in July, 2018 as a scheme to support and nurture
venture companies. CEJ stands for Cybernic Excellence Japan.
Ever since its foundation in 2004, CYBERDYNE,INC. haschallenged to explore the new market with its innovativetechnology. Because this is an endeavor to create a new market
that no other has explored before, at times we are forced to facedifficult situations and advance through trial and error. Despite
these circumstances, the reason why we were able to proceedsteadily and overcome many difficulties is due to support fromall of our investors. The challenge to form the new industry andshape the future society is about to enter into the next stage.
We will continue to develop our business as quickly as we can inorder to meet the expectations from all of our stakeholders that
support us.
CYBERDYNE, INC.
President and CEO

Yoshiyuki Sankai

Annual Report 2018
List of main events in fiscal year ended March 31, 20182017.05.08

Daido life insurance launches world‘s first product to guarantee
treatment with Medical HAL for intractable diseases

2017.06.22

Treatment with Medical HAL covered by private insurance company
starts in Poland

2017.08.07

CYBERDYNE Omni Networks, INC. (joint venture with Covia)
established for communication/device business on IoH/IoT

2017.08.09

Medical HAL obtained medical device approval in Saudi Arabia

2017.10.02

HAL Lumbar Type for Well-being launched as a device that
supports both caregivers and care receivers

2017.12.01

New model of HAL Lumbar Type for Labor Support launched as
upgraded device with waterproof and dust proof function2017.12.17

Medical HAL obtained marketing clearance from U.S. FDA as a
medical device

2017.12.18

CEJ Fund announced as a new industrial infrastructure to assist
and nurture venture companies

2018.01.09

Cyin for Living Support announced as a device that supports
patients who have difficulty in speaking or moving2018.03.02

CYBERDYNE & Brooks, Inc. established to commence operationof first Cybernic Treatment Center in the U.S.

2018.03.09

Domestic gathering of users of HAL Lumbar Type for Care Support
2018 hosted to present excellence use case of HAL Lumbar Type2018.03.26

New model of Cleaning Robot launched as upgraded robot with
cutting-edge autonomous navigation and cleaning capability(U.S. Time)About Cybernics
Cybernics is a new academic field that fused/combined crossdisciplinary fields. The core disciplines of Cybernics are fieldacademic field related to human, robots and information
systems; however, it also embraces various fields such asneuroscience, AI, Robotics, system engineering, information
technology, physiology, psychology, behavioral science,philosophy, ethics, law, business administration and etc.
Various social issues that people and the society face today
are so complex that cross-disciplinary approach is necessary
to tackle them. Yoshiyuki Sankai, a professor at the Universityof Tsukuba in Japan, who is now also President and CEO ofCYBERDYNE, INC. (the “Company”) championed Cybernics as
a new academic field that could approach these issues frommultiple perspectives.

Most renowned research result of Cybernics is the world's firstcyborg-type robot “Robot Suit HAL”, which is now commercialized
as a product of the Company.
The company name is derived from the utilization of innovative“cybernic” technologies and the suffix “dyne” which derives fromthe Greek dunamis meaning force/power. “CYBERDYNE” therefore
means “power generated by Cybernics” and expresses thecompany spirit that all employees hold to dearly.

Business outline

Annual Report 2018

The corporate philosophy of CYBERDYNE and its subsidiaries (the“Group”) is “technology exists for humans and society.” Basedon this philosophy, the Group engages in the entire processfrom research, development and social implementation oftechnology towards solving various problems in the society. The
Group will continue to work on upgrading its technology in linewith endeavors to further coordinate with start-ups and othercompanies with unique technologies as well as companies inother business fields such as insurance companies.
Furthermore, the greatest feature of all products developedby the Group, including HAL, is that they are all IoH/IoT devices.
They can obtain information related to humans such as physicalinformation, vital information, and information related to thesurrounding environments.

The Group works to formulate a scheme to connect those
information gathered from the physical space to the cyber
space. This way, large amount of data could be accumulated andanalyzed, so new discoveries can be fed back to humans and thesociety. The Group will continue to work on this new businessmodel based on IoH/IoT to lead the endeavor to realize Society
5.0/5.1, the future society centered around human where all
people could live prosperously.

Society 5.0/5.1
Feedback analysis results to humans and society
to realize hyper-smart society

People+Cyber/Physical space
Accumulating physical, vital and environment information on Cloud and Data Centers
to analyze the data with AI

Motion principle of HAL

Annual Report 2018
HAL for Medical Use
HAL for Medical Use Lower Limb Type (“Medical HAL”) is the world's firstrobotic treatment device designed to improve the brain, nerves and muscularsystem of the patient. It is approved as a medical device in Japan, U.S. andEurope.

HAL, or Hybrid Assistive Limb, is known to be the world’s firstcyborg-type robot, designed to improve, assist, expand andregenerate the wearer’s physical function.
The most significant feature of HAL is its control system called“Cybernic Voluntary Control.” This control system makes HAL toprovide motor assistance, based on the signal generated when
the wearer tries to move his/her body.

HAL for Well-being
By using HAL for Well-being, people whose physical function has been reduced by aging or disuse can expect it to promote improvement of physicalfunction and level of independence in activities of daily living.

HAL’s potential applications now extend beyond the medical
fields, for which it was initially designed. HAL is also being usedin welfare and labor support. In addition to the products currently
provided, a wide range of new applications for it are also
currently being researched.

HAL for Care/Labor Support
HAL for Care/Labor Support is designed for care facilities/workplaces withheavy-labor operations in mind to lessen the load in the lumbar region forpeople who lift heavy weight every day, thereby lowering the risks of backtrouble.

Motion principle of HAL

Walk

01

02

03

04

05

When a person tries to move theirbody, the brain sends a commandthrough the nerves to the muscle.

Each muscle group can contract
and provide power when it receives
the appropriate command signal
from the brain through the nerves.

HAL controls the power units ateach joint independently based on
the BES that reflects the wearer's
intent as well as other motion
information.

Through steps 01-04, an interactive
biofeedback loop between brain,
spinal cord, muscles and HAL isestablished.

MORE INFOThe speed of the signals that areconveyed from the brain to each muscle
is approximately between 150km/h
and 400km/h, which is far beyond the
speed of a Shinkansen bullet train. The
technology to recognize and understandthose high-speed signals at a glance is
indispensable for HAL.

MORE INFO
In order to produce complex bodily
motions for walking, the brain controls
a number of muscles based on various
types of information from the wholebody. The device that was developed as
an application of this principle was HAL.

The signals that are sent from thebrain through the nerves to themuscles leak onto the skin surface
as very faint signals known as
BES. HAL reads this BES throughsensors placed on the surface ofthe skin. Combined with other typesof information like the center ofbalance or angles of the joints, HAL
recognizes the kind of motion thewearer is trying to do.
MORE INFO
BES that leaks onto the skin surface
is very faint. Its voltage ranges from1/1000th to 1/100,000th of the voltage
exerted by dry batteries. Since HAL isable to detect such weak signals, it does
not overlook the wearer's extremely
subtle indicators that fail to cause flexion
in the leg.

MORE INFO
Because HAL is able to instantly process
the detected BES and quickly control its
power units, the timing of the device’s
delivery of power feels natural, as if HAL
is part of the wearer’s body. This timing
enables the functional fusion/unificationof humans and HAL.

Motor

By integrating the function of thewearer’s brain-nerve systems
and HAL, physical function of thewearer is improved, assisted,
expanded and regenerated.

Cybernic Treatment
Cybernic Treatment is described as “Functional Regenerative
Medicine” realized by devices like Medical HAL. It is an innovative
treatment technology that promotes the functional improvement/
regeneration of the brain, nerves and muscular system.
Even if the patient is unable to generate enough muscle
strength to move due to dysfunction, in accordance with theaforementioned motion principle, Medical HAL is able to assist
the patient to repeatedly realize actual movement that is in sync
with the motion intent of the brain without placing excessive
burdens on the brain, nerves and muscular system.
A clinician can intervene in this process by tuning the many
adjustable parameters related to the patient’s motor andneurological information, which has been built into the device, ina way that appropriately circulates the patient’s motor andneurological information through the neural loop between thebrain-nerve systems and the musculoskeletal system. This
treatment program with Medical HAL has been certified forcertain diseases by the regulatory authorities in the EU, Japan,
the U.S. and other countries.

Annual Report 2018

List of notable related journals
Spinal cord injury- “Functional Outcome of Neurologic ―Controlled HAL― Exoskeletal Neurorehabilitation in Chronic Spinal Cord Injury: A Pilot With One Year Treatment andVariable Treatment Frequency” Global Spine Journal (2017)- “Against the odds: what to expect in rehabilitation of chronic spinal cord injury witha neurologically controlled Hybrid Assistive Limb exoskeleton. A subgroup analysis of
55 patients according to age and lesion level” Neurosurgical Focus (2017)- “The Effectiveness and Safety of Exoskeletons as Assistive and Rehabilitation Devices
in the Treatment of Neurologic Gait Disorders in Patients with Spinal Cord Injury: A
Systematic Review” Global Spine Journal (2016)- “Voluntary driven exoskeleton as a new tool for rehabilitation in chronic spinal cord
injury ― A pilot study” The Spine Journal (2014)- “Locomotion training using voluntary driven exoskeleton (HAL) in acute incomplete
SCI” Neurology (2014)

Stroke-“Combined therapy using botulinum toxin A and single-joint hybrid assistive limb for
upper-limb disability due to spastic hemiplegia”, Journal of the Neurological Sciences(2017)-“Gait training with Hybrid Assistive Limb enhances the gait functions in subacutestroke patients: A pilot study”, NeuroRehabilitation (2017)-“Gait training of subacute stroke patients using a hybrid assistive limb: a pilot study”
NeuroRehabilitation (2017)-“Tailor-made rehabilitation approach using multiple types of hybrid assistive limb
robots for acute stroke patients: A pilot study”, Assistive Technology (2016)-“Gait training early after stroke with a new exoskeleton ― the hybrid assistive limb a
study of safety and feasibility” Journal of Neuro Engineering and Rehabilitation (2014)-“Pilot study of locomotion improvement using hybrid assistive limb in chronic stroke
patients” BMC Neurology (2013)

Other researches

Image of treatment with Medical HAL
Cyberdyne Care Robotics, Bochum, Germany-“Feasibility of rehabilitation using the single-joint hybrid assistive limb to facilitate
early recovery following total knee arthroplasty: A pilot study”,
Assistive Technology (2017)-“Feasibility of rehabilitation training with a newly developed wearable robot forpatients with limited mobility” Archives of Physical Medicine and Rehabilitation(2013)

Potential market of Medical HAL
Medical HAL is designed to be used for treatment of a wide rangeof patients with difficulties to move due to malfunctions of thebrain, nerves and muscular system. The Group sets priorities ofclinical researches on intractable neuromuscular diseases, forwhich a treatment method other than HAL does not exist andspinal cord injury in the chronic phase, for which improvement ofphysical function is deemed to be very difficult.
Now the Group is proceeding with a clinical trial on treatment
with HAL for stroke patients of which population is vast. Also,
clinical researches towards Parkinson’s disease, multiple
sclerosis and so forth are in progress to expand target diseases
of HAL. The table below represents the number of patient of
aforementioned diseases in the Group’s key regions of the U.S.,
EU and Japan.

Annual Report 2018
No. of patients with notable disease to which Cybernic Treatment is applicablein top three regions of medical device expenditure

Spinal Cord Injury

Stroke9.9

0.6

million people

million people

Multiple Sclerosis

Parkinson's Disease

0.8

1.9

million people

million people

8.5 Million

Target diseases
Parkinson's disease
Multiple sclerosis

1,000
400
273

3.2 Million

6,800

712
417
227

Spinal cord injury
Stroke1.6 Million
141

8

1,820

EU*

125**

1,239

U.S.

Japan

Source New Energy and Industrial Technology Development Organization (2013), Ministry of Health, Labour andWelfare of Japan (2011), Translational Research Informatics Center (2014), American Heart Association(2010), National Spinal Cord Injury Statistical Center (2013), The Patient Education Institute, Inc. (2010).
Parkinson's Disease Foundation (2010)* Europe includes Germany, France, the United Kingdom, Italy and Sweden.
** Average of the estimated range from 100 thousand to 150 thousand.

New model Cleaning Robot CL02
The Group announced the launch of a new model of the
Cleaning Robot (CL02) in March 2018. CL02s have already beenused at some facilities owned by companies with which the Groupis partnered. Currently, the Group is providing on-site support tostaff members of the partner companies so that they can improvethe efficiency of operating CL02. The Group is also making
preparation for full-scale launch of this product sometime in thelatter half of the fiscal year ending March 31, 2019.

Annual Report 2018
The Company’s Cleaning Robots, installed with cutting edge
technology, enable interactive co-work of the robot and cleaning
staff on a cleaning site where lack of manpower along with agingof the staff is becoming a primary concern. The device also
contributes to safe and efficient cleaning and improves thecleaning quality on the site.
Main features of CL02

1. Easy to set route

2. Fast and autonomous- Follows cleaning route pre-determinedby its operators via tablets or by manuallypushing the robot to memorize its route- Covers maximum of 3000m2 * with fully
charged battery- Automatically generates its cleaning paths
within the set areas.
- Stores the cleaning pattern with QR codes.
Operator can than make the robot read the
QR code to start cleaning the pre-set route* May vary depending on the assigned cleaning areas orsetting of speed- Fast autonomous navigation and extensive
cleaning efficiency- Rotating brush to punch the dust that iscaught deep in the carpet
Rotating brush

3. Secures the safety- Detects obstacles in its pathway using 3D
camera4. Improves quality- Visualizes the cleaned area, which will
enable the operator to plan efficient andeffective cleaning- Recognizes its position in spacious area
- Adapts to complex structures such as
curved walls
For safety reasons, the robot is programmed to clean
areas that is at least 20 cm away from the walls
If the robot detects obstacles
in its pathways, it will stop
temporarily. Once the
obstacle is removed, it willcontinue to clean. Otherwise,
it will alert the operator.

Visualized dust map

Cleanedareas

Area with higher
density of dust

Business highlight

Annual Report 2018

Status of operation

Changes in operating number of HAL

Revenue increase by 4.1% year on year. In the previous fiscal year,
program hosted by the Japanese Ministry of Health, Labour andWelfare (“MHLW”) led to selling of HAL Lumbar Type for Care
Support, generating revenue of ¥332 million. In the fiscal year
under review, the Group generated revenue exceeding that of theprevious fiscal year mainly from its rented devices.

HAL for Medical Use Lower Limb Type
During the fiscal year under review, the Group has commenced its business promotion in Poland,
Saudi Arabia and the U.S. The Group will continue promoting its clinical trials and researches
to expand the device's target diseases while working towards obtaining insurance coverage andpromoting business overseas.

300
257

250

Revenue(Unit’ Millions of Yen)

188

200
140

150

2,100

100

1,800

1,660

1,500

332

1,728

Special factor(MHLW subsidy program)

1,200

Revenue excluding
special factor

900
600

78

50
0

1,265

111

As of the endof Mar. 2014

As of the endof Mar. 2015

As of the endof Mar. 2016

As of the endof Mar. 2017

As of the endof Mar. 2018

HAL Lumbar TypeA new model of HAL for Care Support is currently under development. In addition, it is becoming
easier for facilities to introduce HAL through such developments as the MHLW added the category

631

1,328

456

of the “Wearable-Transferring Aid device,“ a category that includes HAL Lumbar Type for Care
Support, into a list of eligible products to its subsidy program to secure human resources in care300

facilities. Rental and sales of HAL for Well-being began in October 2017 as new products to support not only caregivers but also care receivers. A new model of HAL for Labor Support (LB03)

0

End ofMar. 2014(J-GAAP)End ofMar. 2015(J-GAAP)End ofMar. 2016(J-GAAP)End ofMar. 2017(IFRS)End ofMar. 2018(IFRS)

with dust proof and waterproof function was released in December 2017.

1400

1000

HAL Lumbar Type for Labor Support

800

HAL Lumbar Type for Care Support

600

988

372

274

498
216

400
200
0

1,219

HAL Lumbar Type for Well-being

1200

0
As of the endof Mar. 2014

89

44
45

As of the endof Mar. 2015

714

796

282
As of the endof Mar. 2016

As of the endof Mar. 2017

As of the endof Mar. 201851

Endeavor towards sustainable business
In September 2015, Sustainable Development Goals (“SDGs“) were adopted in
the UN Sustainable Development Summit. SDGs are a collection of 17 global
goals and 169 targets that constitute an action plan for humans, the planet andprosperity. The global goals of SDGs are common goals for all people on earth,including industry and civil society, not only for the government. As a memberof the society, the Group will make a contribution to achieve the SDGs, which isrelevant to its business activities.

Annual Report 2018
Contribution to solving social problems through the Group's products

Based on its corporate philosophy, the Group performs research and development and social
implementation of its innovative products to solve issues that people and societies are currently
facing. For example, Medical HAL is used for treatment of patients with difficulties to move due
to diseases and injuries. Medical HAL is expected to induce improvement and regeneration of thephysical functions of a patient, to the extent that the patient no longer requires the device to move.
Furthermore, the Group also works on Cyin for Living Support, a communication device designed
for a patient with difficulties in verbal communication or physical movement due to severely
progressed diseases. These products could promote independence of a disabled person andreduce the burden of a caregiver. As such, the Group makes a contribution to reduce inequalities
between the disabled and the non-disabled through the aforementioned products. The Group also
makes contribution to solve other issues such as problematic work environment and workplacewith shortage of manpower.
Products of the Group are worn by their users or operated beside the users. As such, the Group
regards safety of the products as the highest importance. To guarantee the safety of the products,
the Group ensures they are made to conform to standards of International Standards Organization(“ISO”) and various other standards.

Endeavor to promote coordination with partners

Endeavor of the entire Group towards achievement of the SDGs

Based on the philosophy “Technology for humans and society,” the Group sets forth “research anddevelopment of technologies and business activities that can be used for peaceful purposes” asa corporate principle. The focus of the Group is currently on solving social issues related to aging
population and declining birthrate. In order to address these issues, the Group develops innovative Cybernic Technology mainly in the three fields of medicine, care support and living support(including work environment). Furthermore, based on the above philosophy, the Group will notconsider using its technologies for military purposes because if they are used for the developmentof weaponry or support to military action, that would damage people and society rather thanserving them. As an additional measure, upon entering a new business field or offering theGroup’s products, the Company’s Peace and Ethic Committee will discuss whether there is apossibility that its technologies would be used for military purposes.
The Group’s business activities and activities related to generating the Cybernics industry
currently contribute to some of the SDGs that are colored on the chart above, such as “Good
Health and Well-Being,” “Industry, Innovation and Infrastructure,” “Peace Justice and Strong
Institutions.” The Group recognizes other goals as issues that people and society needs to solve
and it will contribute to solving these issues in the future.

The Group works to promote industrial and social transformation from the current “consumptionbased economy” to next-generation “social problem solving economy” through creation ofCybernic industry. To that end, the Group led the establishment of the “CEJ Fund (CEJ stands
for Cybernic Excellency Japan)” as a framework to shape new industry. The fund provides bothbusiness and financial support to startup companies that contributes to the development ofpeople and society. This endeavor contributes to one of the SDGs, “Industry, Innovation andInfrastructure.” It also promotes collaboration among industry, academia and government in Japanand overseas.
Through this endeavor, the Group works to build a foundation to promote the entire processof the research and development to social implementation. In this way, the Group will quickly
implement innovative technologies to contribute to solving social problems related to the aging
population, declining birthrate and disabilities, as well as to providing advanced standards ofprevention and treatment for diseases and injuries.

Endeavors to create a pleasant workplace environment

The most important management resource for sustainable business development is humanresources. In order to nurture and reinforce the human resources, the Group conducts various
endeavors. The Group prepares various work arrangements such as irregular working hoursystem, flextime system and discretionary work system to suit the nature of the work and thedifferent needs of the employees. Furthermore, it also prepares parental leave and family careleave, and there are records of employees using these benefits regardless of genders. With regard
to nurturing of human resources, the Group creates training plans annually to improve individual
skills and knowledge. The Group holds a number of internal seminars and also provides support
for employees to participate in external seminars related to their jobs.
Also, a clinical psychologist of the Group and an industrial physician work together to conduct
interviews with employees on a regular basis to maintain good physical and mental state of theemployees.

Analyst interview: CYBERDYNE's challenge to shape the future
We invited Hidemaru Yamaguchi, an eminent analyst in a field of medicine andhealth care, for an interview with Yoshiyuki Sankai, President and CEO of theCompany, to discuss the Company's challenges to shape the future.
This interview took place on July 10, 2018.
Yamaguchi First, could we have a review of the events in the last 12 months. I
presume, the biggest event was the marketing clearance of Medical HAL fromthe U.S. Food and Drug Administration (“FDA”). Please walk us through what
obstacles were faced, the business going forward now that approval has beencleared, and the situation right now.
Sankai I heard that obtaining clearance from the U.S. FDA for medical devices
with regard to effect of treatment is one of the most difficult certification
processes in the world. It was really difficult to come this far. We repeatedly
explained the therapeutic effects and the technical feature of HAL and the FDA
team gradually understood more about our device. FDA gave us the marketing
clearance in December 2017. When we looked closely, FDA acknowledgedthat Medical HAL was a) designed to improve the wearer’s own ability towalk rather than assisting them only when they are wearing a device, b) the
device with technical feature that is unique and, c) the device with a clinicalevidence that is both statistically and clinically significant, which was almost
everything that we hoped for. Medical HAL became the only device cleared forthe classification combination of Neurological Devices and Physical Medicine
Devices. FDA even rewrote the definition of the Physical Medicine Devices so
Medical HAL can be included.
At times, dealing with the FDA wasdifficult and it didn’t always roll in ourfavor, but they always dealt with us
sincerely. At the very end the FDA blessedus saying “It was a huge accomplishment!
Congratulations,” so it was nice to reach aresult where both sides can celebrate. Thenin March 2018, we formed partnership with
Brooks Rehabilitation Group in Florida toopen our first “Cybernic Treatment Center”
in the U.S. Brooks is a very large andinfluential hospital group that not only has
a considerable number of patients but also
has its own facility to research cutting-edge
technologies.

Annual Report 2018

It also has strong connection with local university hospitals and research
institutes. So we were fortunate to start running our business with a good
partner like Brooks.
While the PR activities in Japan are restricted by “Medical Advertisement
Guidelines,” the regulation in the U.S. is said to be generous comparedto Japan. So we will be able to do more PR in the U.S. to spread Cybernic
Treatment to the entire country.
Yamaguchi So your first partner in the U.S., Brooks Rehabilitation, is located in
the East Coast. Are there any plans on the West Coast?
Sankai On the West Coast, we are actually running clinical researches witha medical institute called Swedish Neuroscience Institute that is located in
Seattle. This institute and the medical institute in Germany have been helping
our clinical researches outside of Japan thus far. Using our cooperation with
Brooks, we are working to build our West Coast operations from a clinicalresearch-only model to one that includes business operations. Through thesepartner hospitals, we can get connected to other hospitals and insurancecompanies that they work closely with. Through these efforts, we are building
the bases for Cybernic Treatment.

Interviewer: Hidemaru Yamaguchi
Managing Director, Pharmaceutical & Health care,
Citi Research, Citigroup Global Markets Japan Inc.
Hidemaru Yamaguchi joined Saloman Smith Barney (currently Citigroup Global Markets Japan Inc.)in April 1998, after working at Nomura ResearchInstitute and Nomura Securities as an analyst sinceApril 1988. He graduated from Tokyo University witha major in agriculture and received his MBA from
UCLA in June 1997, where his major was financeand entrepreneurial studies. He is also a charteredmember of the Security Analysts Association ofJapan (CMA).

Analyst interview
Yamaguchi The next big milestone after
FDA clearance would be expansion of
HAL’s targeted disorders to stroke. How
is the ongoing clinical trial towards
stroke progressing? Also, will we see
Medical HAL being used towards stroke
outside of Japan soon?
Sankai The clinical trial for stroke that
we are doing in Japan is done in a format called investigator-initiated clinical trial. Under this format, the device
manufacturer side is not allowed to know
the progress. However, the pilot study
conducted in the past was able to generate a very good medical effect and thisstudy became the basis to determine theconditions of this clinical trial.
In this pilot study, 16-stroke patients who reached a plateau were studied.
Plateau is a state where amount of improvement becomes flat and significant
improvement can no longer be expected through the traditional rehabilitation.
These 16 patients were split into an “intervention group” that received HAL
treatment and a “control group” that continued the traditional rehabilitation.
When we compared the results between the two groups, we found that the
improvement in the intervention group was approximately five times greaterthan the improvement in the control group. Currently the stroke clinical trial
is using Medical HAL Single-Leg model, but we are currently preparing forstroke clinical trial using HAL for Well-being (Single Joint Type) and Medical
HAL Double-Leg model.
In the U.S., we will run clinical trials towards spinal cord injury based on theclearance from the FDA. But with the help of our U.S. partners, we will prepare stroke clinical trials in the U.S. as well.
Yamaguchi In Japan, the treatment with Medical HAL that is covered by public
insurance started in September 2016 and 68 units have now been deployed in
the rental business. How do you feel about the speed of spreading so far andhow will it spread in the future.
Sankai According to the request from the regulators, we started with thetreatment of eight types of progressive neuromuscular diseases. Towards
these intractable diseases there was no method of treatment, including
methods like drugs, which could even delay the progress of the disease.

Annual Report 2018
But using Medical HAL, the progress ofthe disease can be delayed. In addition,
if it is used at the suitable frequency, it
could maintain and improve the physicalfunction of the wearer. There are two
reasons why the increase of units
seems to look slow. The first reason is
because neuromuscular diseases arerare diseases and there are not too many
patients. The second reason is postmarketing surveillance. Medical HAL
is the first of its kind used in Japan fortreatment, we were asked to do this.
This post-marketing surveillance
requires us to test Medical HAL on
number of patients that is greater thanthe clinical trials.
At times, we are also requested to do test items that were not requiredin clinical trials. It took us sometime to determine the protocol and pick
hospitals that could process these tests. As a result, 68 units of Medical HAL
so far are used in 46 medical institutions in Japan as of the end of March 2018.
We identified facilities that were good at operating HAL, so we will ask those
hospitals to become the “base hospitals” to help spread our treatment with
Medical HAL faster.
Yamaguchi Medical HAL is now available in Japan, Germany, the U.S., Poland
and Saudi Arabia. How do you plan to spread it to other regions?
Sankai As I mentioned before, we obtained the marketing clearance from the
U.S. FDA last December. This allowed us to take our development of Medical
HAL to the next level. We will continue to spread it across Japan, the U.S. andin Europe, but we will also start spreading to Asia. A lot of Asian countries also
require approval before we are allowed to export Medical HAL, but most of
this process seems to adopt systems that are similar to the U.S. or EU, so theapplication is expected to be straight forward. We hope to maintain the highvalue of HAL as an innovative remedial device in Asia as well by making careful
efforts to put in place a good team and deploy our business.

Analyst interview

Annual Report 2018
Yamaguchi Medical device
application for the Vital Sensor
was submitted. How long would
it take until it is approved?
Sankai The Vital Sensor
that we applied for is using a
different measuring methodfrom conventional similar
devices. However, the indicesfor arteriosclerosis can also bemeasured by existing devices.

So the application will be submitted for the category called “improved medical
device.” So in comparison to new medical devices, the approval is likely
to be granted faster. Through the Vital Sensor, we will get access to more
information on human-beings. But if we are to gather these human data, wewill be obliged to handle it appropriately. So we will process these personal
data into a format where individuals cannot be identified. We will then utilize
these highly valuable IoH/IoT (Internet of Humans/Internet of Things) data to
make further contribution to the society.
Yamaguchi Over the past 12 months, we were introduced to a number of
new products. Please let us know some of the products that the Company
introduced and what products we could expect, as far as it’s all right with you.
Sankai We have been offering HAL Lumbar Type for Care Support that was
initially designed to support the caregivers, as the name shows. Furthermore,
we began offering HAL Lumbar Type for Well-being that can promote theimprovement of function in the body trunk and etc., for care receivers
through simple training. We also succeeded in developing the 2S size modelof HAL Lower Limb Type and we are currently making arrangements with
the Japanese regulatory organization (Pharmaceuticals and Medical Devices
Agency) to obtain medical device approval. The existing HAL Lower Limb Typecan be used only by a wearer who is taller than 145 cm, but the 2S Size will
expand this lower limit to 100 cm. So these exciting products joined the lineup.
Furthermore, we started renting out the new model of Cleaning Robot. With
the cutting-edge sensing technology, this robot became one of the world’s
fastest cleaning robots. I believe the technology could be applied to otherusages. For example, if I take off the cleaning unit of the robot, it can easily bechanged to Transportation Robot.

The technology could be usedalso towards many problems
in nursing-care sites, such as
mobility, transfer from a wheel
chair to other equipment,
toileting assistance, watchingover the safety and diet. To
give you an idea, if we use thistechnology for mobility, the robot
is capable of moving in-houseusing its cutting-edge sensors. If
it goes outside, it can switch its
guidance system to GPS.
So we hope to announce these robots one by one, which are capable of moving
in and out of the buildings freely.
Yamaguchi Some people say that CYBERDYNE is in possession of extensive
technologies, but on the other hand it is struggling to develop them into
profitable businesses. What would you say to them?
Sankai If we drive selling HAL, we can generate a higher one-off typeof revenue. We, however, believe it is more important to disseminate thetechnology of HAL so that the vision of the Company and the society we aim tocreate can be realized. We believe we can achieve sustainable growth of theCompany by following through this endeavor.
We are working closely with medical institutions and insurers to, step bystep, develop the market of Medical HAL. We accumulate clinical data, obtaina medical device approval and also an insurance coverage in each country.
Eventually, a unified treatment protocol will be spread to medical societies andhospitals around the world.
When it reaches this stage, treatment using HAL will become “de facto”
and the doctors will think of HAL before any other methods. Even if in the
future there are devices released from others that hope to become a HAL
alternative, the doctors will not think of substituting HAL. At the moment, we
see no alternative to treatment using our Medical HAL, so even if it takes sometime, we will develop the market steadily to turn HAL into a new platform oftreatment.
Some of our shareholders who support our endeavors request the Company
to become profitable or request for dividends at the earliest opportunity andthis was especially evident in the previous General Meeting of Shareholders.
We too believe that profit is necessary for sustainable business and that weneed to work harder and better to get profit.

Analyst interview
At the same time, it is also important for us to realize our vision. We cannot
allow ourselves to chase after short-term profit to the point where we lose
our causes. So we would like to move forward having a balance between our
vision and profitability. The fact that we mostly follow a rental business modelfor HAL is another reason why our short-term revenue seems slow, but webelieve this is the way to reserve a stable profit over the medium to long term.
Yamaguchi CYBERDYNE develops various products that could gather various
data. It plans to create Big Data Business utilizing the cumulated big data
mentioned above. In line with this, the Company established a joint-venture
called “CYBERDYNE Omni Networks, INC.” When and what will be done withthis company?
Sankai Ever since the Company’s foundation, it has been our vision to utilize
various devices manufactured using our Cybernic Technology to improve thefunction of a person, detect early signs of diseases, support both caregivers
and care receivers and support workers etc.
In our efforts to create a comprehensive scheme that realizes these objectives
through combining technologies that can detect the health condition of
the wearer and with those that support the wearer’s work, we have beenworking to lead the world in this field of endeavor under the keyword of IoH/
IoT (Internet of Humans/Internet of Things), which refers to combining theinformation on humans with information on things.
In the process of transmitting information from all devices to one place, wewere in need of a communication function. CYBERDYNE Omni Networks isthe company that develops communication functions for medical, welfare andliving support fields and it also works to prepare an environment capable ofcollecting information.
Our devices are installed with a communication function that does notinterfere with other networks, even in hospitals where isolated network
systems are installed. So this allows us to establish our own network systemeven in those places. Preparation is in progress and we will be able to finish
preparation and run an actual operation next year.
Yamaguchi You have announced the concept of CEJ Fund. How do you plan toproceed with this?
Sankai CEJ Fund was designed as a scheme to promote the generation of
an industry by investing and supporting start-ups and personnel who could
contribute to development of the Cybernic Industry.

Annual Report 2018
For example, if we look at the field of robot, it was merely a field composed ofmechanical engineering, electrical engineering and computer science. Now
the robot industry is recognized to be an independent field, but at the sametime it was integrated into the society as one small part. When you look at thefield of robot on its own, it is no longer considered to be the field that has to be
explored. It enters the new phase, the field that we have called Cybernics since
the early stage of it where fields of human, machine and information are fusedand combined. Now we are about to enter into creation of a new industry,called Cybernic Industry. Robot industry and the IT industry grew rapidly withthe help of funds and CEJ Fund will speed up the process to grow Cybernic
Industry. We led the endeavor for a long time as a front runner, but the world isstarting to catch this concept. For example, Japan made a keyword Society 5.0,
but this was inspired by our challenges and this keyword is spread across theworld.
Yamaguchi The Group bought the land in Tonomachi, Kawasaki. What would be
the role of the facility that you are planning to build there and how is the plangoing?
Sankai The role of the facility that we plan to build is Cybernic International
Innovation Base. We plan to gather the start-ups in the field of Cybernics andpersonnel related to it in this facility. However due to Tokyo Olympics that isplanned for 2020, the construction cost rose rapidly, so we are reviewing ourplans. We are now considering if we could change something to reduce thecost and still maintain the same function. Or whether we could transfer someof the function to other location.
Yamaguchi We appreciate your time to cover many topics. Thank you verymuch.

Management structure

Annual Report 2018

Members of Board of Directors
Yoshiyuki Sankai
Born June 24, 1958 (Male)

President and CEO

Ph.D. in Engineering

Kinichi Nakata
Born May 12, 1962 (Male)

Outside Director
Independent Officer

Ph.M.D. in Medicine

Description of the positions, personal history, assignments and other important position held outside the Company

Description of the positions, personal history, assignments and other important position held outside the Company

2003/7

Professor of Functional Engineering, University of Tsukuba

1989/7

2004/4

Professor of Information & Systems, University of Tsukuba(present)

2004/6

Director at incorporation of CYBERDYNE

2006/2President and CEO of CYBERDYNE (present)

Professor of Information & Systems, University of Tsukuba

2006/2

Executive Research Director of the Center for Cybernic
Research, University of Tsukuba (present)

Executive Research Director of the Center for Cybernic
Research, University of Tsukuba

2006/2

Program manager of the Impulsing Paradigm Changes throughDisruptive Technology Program (ImPACT) hosted by the Cabinet
Office of Japan (present)(Important position held outside CYBERDYNE)

Program manager of the Impulsing Paradigm Changes throughDisruptive Technology Program (ImPACT) hosted by the Cabinet
Office of Japan
Years in service as Director

Special interest in CYBERDYNE

14 yearsnone

Fumiyuki Ichihashi

Ph.D. in Engineering

Director

Born May 1, 1978 (Male)

Number of company shares owned
Common3,042,000 SharesClass B
77,696,000 Shares

Description of the positions, personal history, assignments and other important position held outside the Company
2004/6

Director at incorporation of CYBERDYNE (present)

2007/10 Head of Research and Development Unit at CYBERDYNE

2005/5

Representative Director of CYBERDYNE

2006/2

Representative Director of Medical Interface Incorporated

2013/12 Team leader of the Information Strategy Team in the
Improvement Office of CYBERDYNE (present)

Years in service as Director

Special interest in CYBERDYNE

14 yearsnone

Shinji Uga

Director

Born February 15, 1970 (Male)

Worked for Nihon University School of Medicine

2008/3Councillor at Japanese Association for Coronary Artery Surgery(present)

2008/6

Outside Director of CYBERDYNE (present)

1996/10 Councillor at Japanese Society for Artificial Organs
2003/3

Technical Committee on Industrial Promotion of Medical
Electromagnetic Drive Systems
2003/10 Lecturer at Nihon University School of Medicine (present)(Important position held outside CYBERDYNE)
Lecturer at Nihon University School of Medicine

Years in service as Director

Special interest in CYBERDYNE

10 yearsnone

Kazumasa Yoshida
Born August 20, 1958 (Male)

Number of company shares owned-

Outside Director
Independent Officer

Description of the positions, personal history, assignments and other important position held outside the Company
Outside Director of FreeBit Co., Ltd. (present)

1984/10 Joined Intel Corporation

2016/7

2003/6

President and CEO of Intel Kabushiki Kaisha

2017/12 Outside Director of Mynavi Corporation (present)(Important position held outside CYBERDYNE)

2012/6

Outside Director of Onkyo Corporation (present)

2013/6

Outside Director of CYBERDYNE (present)

2014/6

Outside Director of TDK Corporation (present)

2015/6

Outside Director of Mamezou Holdings Co., Ltd. (present)

Outside Director of Onkyo Corporation
Outside Director of TDK Corporation
Outside Director of Mamezou Holdings Co., Ltd.
Outside Director of FreeBit Co., Ltd.
Outside Director of Mynavi Corporation

Number of company shares owned
Common20,000 Shares

Years in service as Director

Special interest in CYBERDYNE

5 yearsnone

Certified Public Accountant

Hikari Imai

MBA

Born July 23, 1949 (Male)

Outside Director
Independent Officer

Number of company shares owned
Common60,000 Shares

MBA

Description of the positions, personal history, assignments and other important position held outside the Company

Description of the positions, personal history, assignments and other important position held outside the Company

1994/4

Joined Tomen Corporation (Now known as Toyoda Tsusho)

2008/9Joined CYBERDYNE

1974/10 Joined Yamaguchi Securities Co., Ltd.

2015/6

Outside Director of CYBERDYNE (present)

2001/10 Joined Chuo Aoyama Audit Corporation (Now known as
PricewaterhouseCoopers)

2009/2

Director (present) and head of Financial Affairs and Accounting
Unit of CYBERDYNE

1983/1Joined Morgan Stanley Co., Ltd.

2016/6

Outside Director of PACIFIC METAL CO., LTD. (present)

1993/4

Joined Merrill Lynch Securities Company

2016/12 Director and Chairman of 3DOM Inc. (present)

2005/10 Assigned to PricewaterhouseCoopers Shanghai office

2013/12 Head of Corporate Unit of CYBERDYNE (present)

2007/6

Joined Ridgeway Capital Partners Ltd.

Years in service as Director

Special interest in CYBERDYNE

9 yearsnone

Hiroaki Kawamoto
Born August 25, 1974 (Male)

Number of company shares owned
Common60,000 Shares

Ph.D. in Engineering

Director

Description of the positions, personal history, assignments and other important position held outside the Company
Associate Professor of Information & Systems, University ofTsukuba (present)

2004/6

Director at incorporation of CYBERDYNE

2015/4

2005/8

Researcher at Japan Association for the Advancement ofMedical Equipment(Important position held outside CYBERDYNE)

2006/2

Director of CYBERDYNE (present)

Associate Professor of Information & Systems, University of Tsukuba

Years in service as Director

Special interest in CYBERDYNE

14 yearsnone

Number of company shares owned
Common14,000 Shares

1999/1 Vice Chairman of Merrill Lynch Japan Securities Company,
Limited2007/11 Director, Vice President of RECOF Corporation
2008/4President and CEO of RECOF Corporation

2012/4

Outside Director of Olympus Corporation(Important position held outside CYBERDYNE)
Outside Director of PACIFIC METAL CO., LTD. (present)
Director and Chairman of 3DOM Inc. (present)

Years in service as Director

Special interest in CYBERDYNE

3 yearsnone

Number of company shares owned-

Management structure

Corporate GovernanceMembers of Audit and Supervisory Board
Yutaka Fujitani
Born April 1, 1953 (Male)

Outside Audit andSupervisory Board Member (Full-time)
Independent Officer

Description of the positions, personal history, assignments and other important position held outside the Company
1975/4

Joined The Mitsubishi Bank, Ltd.
(Now known as The Bank of Tokyo Mitsubishi UFJ, Ltd.)

2005/1Joined KPMG AZSA LLC.

2011/6

Outside Audit and Supervisory Board Member of CYBERDYNE (present)

Years in service as Director

Special interest in CYBERDYNE

7 yearsnone

Cees Vellekoop
Born May 4, 1956(Male)

Number of company shares owned-

Outside Audit andSupervisory Board Member

Description of the positions, personal history, assignments and other important position held outside the Company
1981/5
1992/5

Registered as attorney-at-law at Court of Rotterdam District ofAmsterdam District
Admitted in Japan as attorney for foreign law

2003/5

Joined Allen & Overy Gaikokuho Kyodo Jigyo Horitsu Jimusho

2005/10 Admitted in England and Wales as attorney-at-law
2007/6

Special interest in CYBERDYNE

11 yearsnone

Born August 18, 1971 (Male)

Outside Audit andSupervisory Board Member

Number of company shares owned
Common20,000 Shares

Certified Public Accountant

Description of the positions, personal history, assignments and other important position held outside the Company
1994/4

Joined Chuo Audit Corporation

2015/6

2007/2

Representative Director of Kabushiki Kaisha BizNext (Now
known as Kaede Accounting Advisory Inc.) (present)

Outside Audit and Supervisory Board Member of SG Holdings
Co., Ltd. (present)

2016/6

Outside Director of Kanematsu Sustech Corporation (Audit Comittee)

2009/9Representative Director of Tokyo-IAS Inc. (Present)(Important position held outside CYBERDYNE)

2011/6

Senior Partner of Akasaka Sogo Accounting Firm Co., Ltd.
(Now known as Kaede Tax Corporation) (present)

2011/6

Outside Audit and Supervisory Board Member of CYBERDYNE(Present)

The Company takes measures to improve corporate
governance by enhancing transparency and ensuring
compliance throughout operations in order toincrease corporate value over the long term.
The Company believes that it is vital to build
constructive relationships with all of its stakeholders
as part of corporate governance. Corporate
governance is important from the standpoint of, notonly making sure that the decisions the Company
makes and actions it takes do not violate laws andmarket regulations, but also ensuring that it has
not ignored the demands of the society and that it
is indeed contributing to the society. The company
also believes that high levels of transparency are
essential for the proper functioning of corporate
governance.
To this end, the Company takes a proactive stanceon disclosing information to shareholders, investors,
employees and customers, which go beyond thelegally required level.

Audit and Supervisory Board Member of CYBERDYNE (present)

Years in service as Director

Kenichiro Okamura

1. The Company’s basic approach to corporate
governance

Representative Director of Kaede Accounting Advisory Inc.
Outside Audit and Supervisory Board Member of SG Holdinigs Co., Ltd
Outside Director of Kanematsu Sustech Corporation (Audit Comittee)

Years in service as Director

Special interest in CYBERDYNE

7 yearsnone

Number of company shares owned-

2. Corporate organizationCYBERDYNE, INC. is a company with a Board of
Directors that holds a meeting (the “Board Meeting“)at least once a month to rapidly make decisions
and supervise whether the Members of the Boardof Directors (the “Board Members“) appropriately
execute their duties. The Board of Directors iscomprised of seven Members of the Board of
Directors, three of whom are Outside Member of theBoard of Directors, forming a structure that enables
the Board of Directors to efficiently reach decisions
and make business judgments.
The Company is a company with an Audit andSupervisory Board. The Audit and Supervisory Board
consists of three Outside Audit and Supervisory
Board Members who proactively voice their opinions
at the Board Meeting to enhance supervision.

Annual Report 2018
and perform audits from an objective standpoint withregard to business execution and important decisionmaking by the Members of the Board of Directors.
The Board Members’ compensation is of theBoard of Directors is debated by the Compensation
Committee which consists of at least threemembers of the Board of Directors or the Audit andSupervisory Board appointed by the Representative
Director. The Compensation Committee thensubmits its opinions about the Board Members to theBoard of Directors.
With the objective of preventing problematicconflicts of interest in the Company’s relationshipwith the University of Tsukuba and Japan Scienceand Technology Agency (JST), the Company ensures
there is at least the same or a higher numberof independent Outside Board Members with noaffiliations with the University of Tsukuba andJST than the number of Internal Board Members
excluding the Members with potential conflicts ofinterest with the university and JST.
As a result, Outside Member of the Board of
Directors have the ability to veto ordinary resolutions
as necessary during Board Meetings when there areproblematic conflicts of interest with the Universityof Tsukuba and JST. The Company thereby, has aneffective system to prevent problematic conflicts ofinterest.
For the purpose of protecting non-controllinginterests, the Company has put in place a systemfor obtaining resolutions at the Board of Directors
based on preapprovals from a committee comprising
the Outside Board Members and Outside Audit andSupervisory Board Members when decisions must
be made concerning transactions between the
Company and Yoshiyuki Sankai, who is a controllingshareholder of the Company, and the Sankai HealthFoundation and the Sankai Science and Technology
Promotion Foundation (collectively referred to as
the “Foundations”), both of which are represented
and managed by Yoshiyuki Sankai, as well astransactions between the Company and the trustees,
directors or controllers of the Foundations.

Corporate Governance
The Company has also established the Peace andEthics Committee to prevent the use of its advanced
technologies from harming people or creating
military weapons. All Outside Board Members andOutside Audit and Supervisory Board Members, inaddition to the President and CEO, are Members of
the Peace and Ethics Committee. Before entering abusiness field outside the areas of medicine, living
support, and labor support, which are defined in the
Company Code of Conduct, the Peace and Ethics
Committee investigates, deliberates and reaches
a decision on whether the Company’s advanced
technologies could eventually be used to harm
people or to create military weapons. The committee
then submits its findings to the Board of Directors.
3. System to ensure the appropriateness ofbusiness operations and implementation statusof the system
i. System to ensure the appropriateness ofbusinesses
The Company resolved a system to ensure theappropriateness of business operations of Membersof the Board of Directors in compliance with laws,
regulations and Articles of Incorporation and thestructure to ensure the appropriateness of otherbusiness as below at the Board of Directors’ Meeting.
(a) Systems to ensure that Members of the Boardof Directors and employees of the Company and thesubsidiaries (collectively the “Group”) perform theirduties in accordance with laws, regulations and the
Articles of Incorporation• The Company shall establish compliance-related
internal regulation embodying the Company Codeof Conduct, for the Group’s Member of the Boardof Directors and employees to ensure adherence tolaws, regulations, the Articles of Incorporation andother internal regulations.
A designated Member of the Board of Directorof the Company shall have cross-organizational
control over the Group’s compliance initiatives. The
designated Member of the Board of Directors (the“Risk and Compliance Director”) shall disseminate
the spirit of compliance to Members of the Board of
Directors and employees of the Group to identify andsolve problems.
• The Company shall establish the AffiliatedCompany Management Policy and in conformity with
that, appoint Members of the Board of Directors ofsubsidiaries and, if necessary, Members of Audit
and Supervisory Board Member of subsidiaries. The
Company shall approval subsidiaries’ importantmatters and take up part of their administrative
works. Consequently the Company shall ensure theappropriateness of the affected companies’ businesspursuant to the Affiliated Company Management
Policy.
• The Company shall establish the Internal Audit
Office who will work directly under the Company
CEO. The Internal Audit Office shall conduct internal
audits of the Group in accordance with the Internal
Audit Policy and Affiliated Company Management
Policy to check the compliance status with laws, theArticles of Incorporation, and other internal

Annual Report 2018
regulations and monitor the overall risk
management status. The Internal Audit Officeshall report the results of the internal audits to theCompany CEO, the Audit and Supervisory Board, andthe Board of Directors.
• The Company shall establish and operate theHotline System Policy as a mean for employees todirectly provide information about legally suspicious
behaviors. The method of providing information
by means of oral communication, e-mail, chatand opinion box shall be the subject of the Hotline
System Policy.

(e) System to ensure reporting on the performanceof duties by subsidiaries’ Members of the Board of
Directors to the Company• The Company shall establish the AffiliatedCompany Management Policy. Pursuant to the Policy
and the subsidiaries shall report the status of theirduties to the Company’s supervisory units where
necessary.

(b) System to store and manage information related
to the execution of duties by the Company’s Memberof the Board of Directors• The Company shall establish the Document
Management Policy which states the method ofstoring and managing information related to the
execution of duties. Pursuant to the law and thispolicy, the information related to the execution ofduties shall be recorded and stored in paper orelectronic format.
• Members of the Board of Directors and Membersof the Audit and Supervisory Board shall be able tobrowse the information at all times.

• When the Audit and Supervisory Board requests
assignment of staff to assist with its duties, theBoard of Directors may designate appropriate
employees who shall serve as assistants or as
assistants with a concurrent post upon consultingwith Audit and Supervisory Board.
• During the assistance period, the supervisory
authority over the designated employees shallbe delegated to the Audit and Supervisory Board,and the employees shall not be subject to thechain of command of the Board of Directors. Any
performance evaluation and personnel changes
concerning the assistant shall require the consent of
the Audit and Supervisory Board.

(c) Policies, procedures and other systems of theCompany and the Group to manage the risk of losses• In order to strengthen the risk management
structure of the Group, the Risk and ComplianceDirector shall put a relevant operating unit in chargeof each risk category and each operating unit incharge shall define risk scopes, risk profiles, self
evaluation policies and guidelines. The Director in
charge of finance shall monitor risks across theorganization and address company wide risks.
• When a new risk arises, the Company CEO shallquickly appoint a Member of the Board of Directors
or a head of operating unit in charge of handlingsuch risks.
(d) System of the Group to ensure the efficient
execution of duties by Members of the Board of
Directors of the Company and the Group• As a system to ensure the efficient execution ofduties by Members of the Board of Directors, theBoard of Directors shall meet once a month andshall conduct extraordinary meetings whenevernecessary.
• Regarding the execution status of matters resolvedby the Board of Directors, each in-charged Memberof the Board of Director or in-charged head ofoperating unit shall report on a regular basis and the
Audit and Supervisory Board shall perform audits.
• The Company shall establish Medium-termbusiness policy and, if necessary, update them tocope with the changes in the business environment.
The status of business performance in that regard
shall be reported to the Board of Directors’ whenevernecessary.
• The Company shall also establish the AffiliatedCompany Management Policy in order to manage
subsidiaries under the supervision of a related unitsof the Company. Consequently, Members of theBoard of Directors of the subsidiaries can execute
their duties efficiently.

(f) Matters regarding employees who assist the
Audit and Supervisory Board with the fulfilment of
its duties(g) System for Members of the Board of Directors
and employees of the Company to report to the
Audit and Supervisory Board, and a system forMembers of the Board of Directors and employeesof subsidiaries, or the Company’s personnel who
received reports from Directors and employees ofsubsidiaries, to report to the Audit and Supervisory
Board of the Company.
• Members of the Board of Directors and employeesof the Company as well as Members of the Boardof Directors and employees of subsidiaries shallreport any significant matters that i) are against
the law or the Articles of Incorporation and ii) areconsidered dishonest acts iii) may have a significant
impact on the Company, to the Audit and Supervisory
Board immediately. In addition, if a Member of the
Audit and Supervisory Board asks for a report from
Members of the Board of Directors or employees of
the Group pursuant to the law, Auditing Standards orRegulations of Audit and Supervisory Board Meeting
established by the Audit and Supervisory Board,
the relevant Members of the Board of Directors or
employees in concern shall report promptly.
In order to improve comprehensiveness of thereport regarding any significant matters i), ii) andiii) above, Members of the Board of Directors andemployees of the Company as well as Membersof the Board of Directors and employees of thesubsidiaries shall endeavor to conduct hearing andgather information from the reports stated in thisclause and matters stated in Internal Audits, hotlines
and Accounting Audits.
• Pursuant to the Hotline System Policy, if mattersthat may violate the law or corporate compliance in
the Group are reported, the Risk and ComplianceDirector shall report the contents reported and theresearch results to the full-time Members of the
Audit and Supervisory Board.

• The Internal Audit Office of the Company shallreport the status of the internal audits of the Groupto Audit and Supervisory Board Members of theCompany. Furthermore, the Risk and ComplianceDirector shall report the status of the Group to Audit
and Supervisory Board Members of the Company
when necessary.
(h) System to ensure that a person who made areport to an Audit and Supervisory Board Member
will not be put in a disadvantageous position
The Company shall not conduct any treatment thatputs a person in a disadvantageous position becauseof his/her report made to an Audit and Supervisory
Board Member.
(i) Matters regarding the Company policy ofprocessing auditing fees
When a Member of the Audit and Supervisory
Board requests an advanced payment or quick
reimbursement of expenses necessary for their duty,
the Company shall pay them promptly unless theexpenses are recognized unnecessary for their duty.
(j) Other systems to ensure the effective executionof audits by Members of the Audit and Supervisory
Board of the Company• Members of the Board of Directors and employeesof the Company and the subsidiaries shall comply
with requests for hearing, visitation and othermethods of examination by Member of the Audit
and Supervisory Board in order to secure theeffectiveness of the audits.
• The Company shall provide enough opportunities
for Members of the Audit and Supervisory Board
to exchange opinion with Member of the Boardof Directors, Accounting Auditors and any otherpersonnel required to appropriately execute the duty
as an auditors.
• Upon request of Members of the Audit andSupervisory Board, the Company shall also provide
enough opportunities for them to coordinate withsubsidiaries’ Member of the Audit and Supervisory
Board and to gather information from employees ofthe subsidiaries.
ii. Implementation status of the systems toensure appropriateness of business
operations
The Group established and implemented theaforementioned systems. Notable actions conductedwithin this fiscal year, which are thought to beimportant with regard to internal control are statedbelow.
(a) Corporate Compliance System
All members of the Group endeavor to be compliant
with the laws and regulations in execution of theirduties in accordance with internal policies, suchas the Company Code of Conduct based on the
aforementioned compliance systems. Furthermore,in order to detect or avoid violation of compliance atthe earliest opportunity, the Hotline System Policy
and its method of utilization shall be notified torelated personnel in a thorough fashion.

Corporate Governance(b) Risk Management System
For the Group, the Risk and Compliance Directorof the Company determines the operating unit incharge of each risk category, monitors the risk status
and responds accordingly. Furthermore, the status of
this risk management is subject to internal audits
and audits conducted by the Audit and Supervisory
Board Member.
(c) Effeciency of the duty by Members of the Boardof Directros
For the Group, the Board of Directors shall meetonce a month with provisional Board of Directors
Meetings conducted whenever necessary, in order tocheck the reports of business execution (including
reports from subsidiaries), progress of business forthe fiscal year (including subsidiaries), and so on.
4. Status of internal audits and audits by Audit andSupervisory Board Members
The Company has an Internal Audit Office thatconsists of one internal auditor and performs
necessary operational audits based on the Internal
Audit Policy. Internal Audit Office contributes to theenhancement of the Company’s internal control
systems.
As the head of Internal Audit Office concurrently
belongs in the Corporate sector as a leader ofGeneral Affairs and HR team, an internal audit on
General Affairs and HR team shall be conducted by a
substitute auditor selected by the president and CEO.
Audits by the Audit and Supervisory Board involves
operational audits, such as audits of the businessexecution by Directors, based on Auditing Standards
and Regulation of Audit and Supervisory Board
Meeting. Outside Audit and Supervisory Board
Members include an experienced business person(SVP of a large bank), a CPA and an attorneyelected for their expert knowledge of accounting,legal affairs and risk management. Therefore,
the Company puts in place a system with effective
management oversight functions.
Internal Audit Office coordinates with fulltime Audit and Supervisory Board Member uponestablishment of an annual internal audit plan.
Results of internal audits are reported to the
President and CEO and Audit & Supervisory
Board Members. Furthermore, if issues related tointernal control are found in the midst of internal
audits, Internal Audit Office provides proposals for
improvement to the unit in charge of the internal
control process. Internal Audit Office coordinateswith Audit & Supervisory Board Members as wellas accounting auditors by exchanging opinions orinformation, so that audit can be executed effectively.
5. Status of accounting audits
For the fiscal year ended on March 31, 2018, theCompany entered into an audit engagement contract
with Deloitte Touche Tohmatsu LLC, and received
accounting audits performed by this accounting
auditor. Its Auditing team consists of two partners

Annual Report 2018
and twenty three support members which comprises
five CPAs and eighteen other professionals, toperform audits.

7. Implementation status of risk management
structure

This activity is a significant support to thesupervision of each Board Member’s businessexecution by the Board of Directors.

The Group continues to enhance its risk
management system implementing and/or
updating its Code of Conduct, the Risk Management
Policy, etc., in alignment with changes in the risk
environment. Since sound management practices
and a stable earnings foundation through risk control
are key priorities for the Company, it has an advisory
contract with a law firm “ TMI Associates” to receive
advice and guidance about all legal matters whenneeded.

6. Relationships with Outside Members of the Boardof Directors and Outside Audit and Supervisory
Board Members
The Company has three Outside Members of theBoard of Directors and three Outside Audit andSupervisory Board Members.
The Company has not set any standards or specificpolicies regarding the independence of its Outside
Members of the Board of Directors and Outside Audit
and Supervisory Board Members.
Instead, the Company appoints Outside Membersof the Board of Directors and Outside Audit andSupervisory Board Members based on their extensive
experience as management, as well as their deep
insight about research, finance, accounting andlegal affairs, for the purpose of building an effective
corporate governance system from an external
standpoint.
The Company expects its Outside Members of theBoard of Directors and Outside Audit and Supervisory
Board Members to supervise the business executionof its Members of the Board of Directors.
Outside Director Kazumasa Yoshida provides his
opinions and proposals regarding management ingeneral in the Board Meetings from the standpointof the experienced executive in a global company.
While Kazumasa Yoshida holds 60,000 shares of theCompany as of June 25th, 2018 when the securities
report was submitted, it was deemed to have nosignificance. Furthermore, between the Company
and Kazumasa Yoshida,there is no human, capital,business affiliation or any other conflicts of interests.
In addition, while Kazumasa Yoshida currently serves
as the outside Directors of Onkyo Corporation,
TDK Corporation, Mamezou Holdings, Co. Ltd.,FreeBit Co., Ltd., MyNavi Corporation and previously
served as President and CEO of Intel Kabushiki
Kaisha and vice president of Intel Corporation, theCompany does not have any human, capital, businessaffiliations or other conflicts of interest with theseven aforementioned companies.
The Company does not have any human, capital,business affiliations or other conflicts of interest withother Outside Members of the Board of Directors andOutside Audit & Supervisory Board Members.
Outside Audit and Supervisory Board Members
supervise the business execution of Inside Membersof the Board of Directors and other management.
Audit and Supervisory Board Members conduct
an audit of the business execution of Members of
the Board of Directors and an audit of accounting
documents and the methods and results of audits
performed by the accounting auditor. As it is stated in“4. Status of internal audits and audits by Audit andSupervisory Board Members,” Audit and Supervisory
Board Members coordinates their audits in terms ofscopes, risk profiles, schedules, communication andso on. Audit and Supervisory Board Members report
the process and results of their audits at the Meetingof the Board of Directors on a regular basis.

8. Compensation for Members of the Board of Directors and Members of the Audit and Supervisory
Board
i. Total compensation for Members of the Board of Directors and Members of the Audit andSupervisory Board Members by officer type, breakdown by compensation type and number of them
Officer type

Breakdown of compensation (Millions of yen)

Total
compensation(Millions of yen)

Base salary

33

33

4

13

13

6

Directors (Excluding outside directors)

Stockoptions

Bonus

Retirement
benefits

Number ofapplicable officers(people)Audit and Supervisory Board
Members (Excluding outside Audit andSupervisory Board Members)
Outside directors and Audit andSupervisory Board Members

ii. Total consolidated compensation by each
Members of the Board of Directors and Memberof the Audit and Supervisory Board
Since there are no Members of the Board of
Directors or no Members of the Audit andSupervisory Board who have received a total
consolidated remuneration of more than ¥100 million
no items are reported.
iii. The policy to determine amount andcalculation method of compensation for
Members of the Board of Directors andMembers of the Audit and Supervisory Board
The Company established a Compensation
Committee to discuss compensation for theMembers of the Board of Directors and Audit andSupervisory Board Members. The Compensation
Committee will determine the amount ofcompensation within the limits approved by theOrdinary General Meeting of Shareholders.
The upper limit of compensation for a Member ofthe Members of the Board of Directors, resolved atthe 2nd Ordinary General Meeting of Shareholders
on May 31, 2006, is ¥100 million per year.
The upper limit of compensation for a Member ofthe Audit and Supervisory Board, resolved at the 3rd
Ordinary General Meeting of Shareholders on June
28, 2007, is ¥50 million per year.
9. Share buyback decision mechanism
In accordance with Article 165-2 of the Companies
Act, the Company’s Articles of Incorporation statethat share buybacks may be implemented byresolution of the Board of Directors with the objectiveof flexibly returning profits to shareholders.
10. Interim dividends
The Company’s Articles of Incorporation allow aninterim dividend to be paid to shareholders, classshareholders and registered beneficiaries listed
in the shareholders’ register as of the close of
September 30 every year, by resolution of theBoard of Directors, for the purpose of flexibly
returning profits to shareholders.
11. Outline of limitation of liability contracts
In accordance with Article 427-1 of the Companies
Act, the Company’s Articles of Incorporation permit
the Company to enter into contracts that limit theliability of Members of Board of Directors (excludingInternal Directors) and Members of the Audit andSupervisory Board for damages as defined by Article
423-1 of the Companies Act. The amount of the limit
in liability for damages in these contracts is thesame amount defined by law.
12. Outline of exemption from liability
In accordance with Article 426-1 of the Companies
Act, the Company’s Articles of Incorporation statethat the Board of Directors can pass a resolution
to exempt the Company’s Members of the Board of
Directors (including former Members of the Board of
Directors) and Members of the Audit and Supervisory
Board from liability to the fullest extent allowableby law for damages defined by Article 423-1 of theCompanies Act in the pursuit of their duties, inorder to ensure that they are able to fully apply theirabilities in the fulfilment of their expected roles.

Corporate Governance
13. Number of Members of the Board of Directors
The Articles of Incorporation state that the Company
shall have no more than eight Members of the Boardof Directors.
14. Election requirements for Members of theBoard of Directors
The Company’s Articles of Incorporation state that
resolutions for the election of Members of the Boardof Directors may only be passed with a majority
vote of the shareholders in attendance, which must
represent at least one third of the voting rights of allshareholders able to exercise their voting rights. The
Articles of Incorporation state that cumulative voting
is not allowed for resolutions to elect Members of
the Board of Directors.
15. Matters subject to resolution by the General
Meeting of Shareholders, which can be decided
by resolution of the Board of Directors
The Company’s Articles of Incorporation state thatthe Board of Directors may pass a resolution todetermine dividends on surplus, as prescribed by
Article 454-5 of the Companies Act to shareholders,class shareholders and registered pledgee ofshares, who are registered or recorded on the lastshareholder registry as of the close of September 30
each year.
16. Requirements for special resolutions onimportant matters at General Meeting of
Shareholders and General Meeting of Class
Shareholders
The Company’s Articles of Incorporation state that
resolutions on important matters at the General
Meeting of Shareholders, as defined by Article 309-2of the Companies Act, require two-thirds of thevotes of shareholders in attendance, which must
represent at least one-third of the voting rights of allshareholders able to exercise their voting rights.
The Articles of Incorporation also state that
resolutions on important matters at the General
Meeting of Class Shareholders, as defined by Article
324-2 of the Companies Act, require two-thirds ofthe votes of shareholders in attendance, which must
represent at least one-third of the voting rights of allshareholders able to exercise their voting rights.
These regulations are intended to facilitate
the smooth operation of the General Meeting of
Shareholders and the General Meeting of Class
Shareholders by relaxing the requirements for aquorum on special resolutions put to a voteat the General Meeting of Shareholders and theGeneral Meeting of Class Shareholders.

MD&A
This dual class structure reflects the concentrationof voting rights with Yoshiyuki Sankai and theFoundations (see 2. Corporate Organization,
Paragraph 6), to ensure that the Company’s
advanced technologies are used for peacefulpurposes only, and to prevent the misuse of thesetechnologies in order to harm humans or to create
military weapons.
The Group’s vision for the future is to create a
Cybernic Industry—a new industrial field that will
support people by solving issues directly caused byaging and declining birth rate. To realize this vision,
the Company must coordinate business managementwith research and development in Cybernic
Technologies.
Yoshiyuki Sankai created the Company’s Cybernic
Technologies, and continues to be a central figure in
Cybernic research. He is also a business leader who
seeks to make this innovative technology widely
available for the benefit of society. For the Groupto increase corporate value (i.e., share profits withshareholders), Yoshiyuki Sankai must be a stable
leadership figure in the management of the Company
in the future. This scheme has been adopted toensure he remains so.
At this juncture,Yoshiyuki Sankai plans totransfer a portion of the Class B Shares he owns
to the Foundations without compensation inorder to ensure the continuity of this scheme. The
Foundations intend to hold these Class B Shares inperpetuity. As holders of Class B Shares, theFoundations have created the following guidelines
concerning the exercise of voting rights with theobjective of ensuring that the Group’s advanced
technologies are used for peaceful purposes only andpreventing damage to the corporate value of theCompany. As the owner of Class B Shares issued
by the Company, the Foundations shall vote against
resolutions that contain language defined in a and b
below, through the exercise of its voting rights at theGeneral Meeting of Shareholders and the General
Meeting of Class Shareholders. Any changes to theFoundations’ guidelines for the exercise of theirvoting rights shall require approval by resolution of
their boards of trustees, and these changes shall bemade public by a method chosen by the Foundations.
a. Resolutions concerning the election and dismissalof a Member of the Board of Directors, where theMember of the Board of Directors to be elected or
dismissed would likely manage the Group in a waythat is detrimental to its corporate value or hinder
the peaceful use of its advanced technologies.
b. Other resolutions that, if passed, would likely
damage the corporate value of the Group or hinder
the peaceful use of its advanced technologies.

17. Class B Shares
The Company’s Articles of Incorporation state that
10 Class B Shares constitute one share unit and 100
Common Shares constitute one share unit. As voting
rights are granted for each share unit, a shareholderof Class B Shares has 10 times as many voting rights
compared to a shareholder of Common Shares withan equal number of shares.

18. Status of shares held by the Company
The number of issuing entities of shares that theCompany invested for purposes other than pureinvestments and its total value on the balance sheet
9 issuing entities, ¥2,314 million

1. Explanation of operating results
The Group continues to research, develop andsocially implement Cybernic Technology* (Seebelow.) that combines and fuses people, robots
and information in the medical, nursing-care andliving support (at home and in work environments)
fields. By achieving physical, informational and vitalinteraction with Cybernic Technology, the Group aims
at solving various problems that the hyper-aging
society faces.
Cybernics connects humans, robots and information
functionally and establishes physical, informativeand biological interaction. Utilizing Cybernics, theGroup pursues to establish a new vision of Society
5.1, where “human” is centered and combined withcyberspace (virtual world) and physical space (realworld) of Society 5.0. The Group will continue to drive
the movement to realize Society 5.0/5.1 as a futuresociety where human and technology coexist.
During the consolidated fiscal year ended March 31,
2018, the Group carried out the following activities.

Annual Report 2018

Note 1: Other devices in the category are intended toenable individuals to perform ambulatory functions
while it is worn.
Note 2: Long term use of over 12 weeks (60treatment sessions) has not been clinically tested
and therefore the term “temporarily” is used.
- The therapeutic effects: The results of HAL
gait training intervention suggest a statisticallysignificant improvement in the gait related outcome
measures collected without wearing HAL, andclinical significance was acknowledged.
Following this announcement of the FDA marketing
clearances, the Company set up a joint venture,CYBERDYNE & BROOKES, Inc., with Brooks
Rehabilitation, which is known as one of the busiest
rehabilitation hospital groups in the U.S. The Group
created Cybernic Treatment Center in Jacksonville,
Florida in March 2018, to provide the treatment
service with Medical HAL. The Group regards this as
its first step to disseminate the treatment services
with Medical HAL in the U.S., which is the largest
medical device market in the world.

In the field of medicine, the Group continued
business promotion of HAL for Medical Use Lower
Limb Type (“Medical HAL”) Double-Leg model, which
is designed as a device to improve ambulation. In
Japan, Medical HAL is used mainly for treatment of
intractable neuromuscular disease, which is now
covered by public health insurance. The device ispromoted to hospitals that would become the “base”
hospitals for the treatment with the device in Japan.
In line with this promotion, an investigatorinitiatedclinical trial on the use of Medical HAL Single- Legmodel on stroke patients, which commenced in
September 2016, is in process.

In another region, the Group obtained medical
device approval for manufacturing and marketingof Medical HAL from The Saudi Food and Drug
Authority in August 2017. Treatment with Medical
HAL commenced in Abdul Latif Jameel Hospital,
which is the hospital owned by the Company’sbusiness partner Abdul Latif Jameel Group.

In Europe, the Group already acquired medical
device certification for Medical HAL for a wider
range of diseases such as stroke, spinal cord injury
and intractable neuromuscular diseases etc. The
Group has been providing the medical treatment
service with the device covered by public workers
compensation insurance in Germany. The Group is
taking procedures to obtain public health insurance
coverage in the country. Furthermore, a private
insurer started providing insurance coverage for thetreatment with Medical HAL in Poland in July 2017.

With regards to the light-weighted and compact HAL
for Well-being (Single Joint Type), 234 units were in
operation as of the end of March 2018 and most ed
project in October 2017. Once this clinical trial iscomplete, the Group will go through necessary steps
to obtain a medical device approval for thisdevice. For Vital Sensor, which is a palm-size device
for monitoring indices of arteriosclerosis andelectrocardiogram, the Group completed making
arrangements with the Pharmaceuticals and Medical
Devices Agency about the necessary procedures toobtain a medical device approval and entered into thefinal phase of preparing necessary documents.

In the United States, the Group obtained marketing
clearance from U.S. FDA in December 2017. Uponthis clearance, the following points were reflected.
- The Indication for Use: Medical HAL is a gait
training device intended to temporarily improveambulation upon completion of
the HAL gait training intervention.

As of the end of March 2018, 257 units of Medical
HAL were in operation in Japan and foreign countries
including those used for clinical research. Out of theaforementioned number, 68 units were rented out inJapan.

MD&A
In the field of care support, HAL for Well-being
Lower Limb Type was introduced as the successor
model of HAL for Living Support (Lower Limb Type)in April 2018. These devices are designed for chronic
stage patient with disability in their lower limb or theusers with weakened lower limb function. HAL for
Well-being induces the improvement in the lower
limb function. As of the end of March 2018, 398 unitsof HAL for Well-being Lower Limb Type and HAL for
Living Support (Lower Limb Type) were in operation.
The Group also started to market its new product,
HAL Lumbar Type for Well-being in October 2017.
This product is capable of inducing the maintenanceand improvement of the weakened bodily functions ofa care receiver in the core and lower body. Quality of
his/her life will improve with this product, as it would
enable him/her to stand and sit without the help of
caregivers. It will also greatly reduce the physicalburden of the caregivers. 51 units of HAL Lumbar
Type Well-being for were in operation as of the endof March 2018.
Furthermore, in January 2018, the Groupannounced to commence selling of Cyin for Living
Support (“Cyin”). Cyin applied the technology of
HAL to allow patients with difficulties in verbal
communication or physical movement due to diseaseetc., to transmit their intention and operate othercommunication and environmental control devices,such as a nurse call button. The Group delivered Cyin
to 11 patients’ associations/support associations ofpatients (as a donation from Daido Life Insurance
Company) who helped the clinical research of Cyin
and HAL Systems. The Group is currently making
preparation towards the general market. The Groupwill develop Cyin even more, so that it could be usedby more patients with difficulties in verbal
communication or physical movement due todiseases, etc. The Group also anticipates to develop
a sensing device that can analyze vital informationsuch as bio-electrical signals using the technologyof Cyin.
Regarding HAL Lumbar Type for Care Support that
reduces the load on the lower back of caregivers
and would result in improvement of the work
environment at care facilities that suffer from highturnover rates, 796 units were in operation as of theend of March 2018. As the Ministry of Health, Laborand Welfare of Japan added the category of the“Wearable-Transferring Aid devices”, a category that
includes HAL Lumbar Type for Care Support, into alist of eligible products to its subsidy program tosecure human resources in care facilities, theCompany anticipates an increase in the operating
number of HAL Lumbar Type for Care Support.

Annual Report 2018
In the field of living support, the Group focuses its
development on labor support. HAL Lumbar Typefor Labor Support is utilized to reduce the load on
the lower back of workers and improve the work
environment in order to maintain the labor force indistribution warehouses, construction sites andfactories of various types, which suffer from serious
shortage of labor force as a result of an aging
population and declining birthrate. The new model(LB03) that was announced in November 2017 is
expected to significantly multiply the usage scenes of
HAL Lumbar Type for Labor Support. This new modelwith waterproof and dust proof functions will allow
the product to be used in various situations such as
rainy or dusty outdoor construction sites and humid
indoor sites. Since the end of December 2017, theoperating units of HAL Lumbar Type for Labor
Support increased 88 units to 372 units as of the endof March 2018, following the events such as adoptionof 30 units by Daiwa House Industry Co., Ltd.
Furthermore, the Group completed thedevelopment of the improved new model of the
Cleaning Robot (CL02) in March 2018.
The Cleaning Robot can flexibly clean buildings withwide cleaning areas or complex shapes utilizing
cutting-edge technology. As such, the Group
anticipates implementation of Cleaning Robots tovarious large-scale facilities such as commercial
buildings, office buildings and airports. In March
2018, the Group delivered the new Cleaning Robot
to Diversity Tokyo Plaza that is operated by Mitsui
Fudosan Co., Ltd. The Group also announced to work
together with Sumitomo Corporation on automationand streamlining of office buildings. The Group andSumitomo Corporation will implement the Cleaning
Robots to office buildings that is operated by the
Sumitomo Corporation Group. 27 units of Cleaning
Robots and Transportation Robots in operation wererecorded as of the end of March 2018.
In order to disseminate Cybernic Technology further,
the Company established a business alliance witha private insurer and promoted a private insurance
coverage of the treatment with the device in addition
to the public health insurance. In addition to thepromotion of “HAL Plus rider” Daido Life Insurance
Company donated Cyin to 11 patients’ associations/
support associations of patients. AIG Holding JapanKK is covering the fee for the training programwith HAL for 50 students in Kanagawa Prefecture,
who suffer from spinal cord injury as part of theircontribution to their society. Furthermore, theCompany has entered into comprehensive businessalliance with Sompo Japan Nipponkoa Insurance in
October in order to fuse innovative Cybernic
Technology with risk financing facilities of the insurer
to structure healthy and rich social system, startingwith the field of long-term care.

The Group continues to revolutionize both industries
and the society through Cybernics in order to solve
problems related to the super aging society. In linewith that, the Group announced to establish “CEJFund” with Mizuho Bank, Ltd. and Global Brain
Corporation in December 2017. CEJ Capital, Inc.
(CEJ stands for Cybernic Excellency Japan) wasestablished in December 2017 and preparation iscurrently in process to start the operation of CEJ
Fund.
As the result of the aforementioned, in the fiscal
year ended March 31, 2018, the Company recorded
revenue of ¥1,728 million (4.1% increase year onyear), mainly due to an increase in the operating
numbers of the Medical HAL and HAL for Care
Support (Lumbar Type), increasing gross profit to¥1,204 million (12.3% increase year on year).
Research and development expenses wererecorded at ¥834 million (7.5% decrease year onyear), main due to development of new products
at the Company’s own expense and consigned
research projects of “Realization of Zero Intensive
Care Society through Innovative Cybernic System”,
which are part of the projects under the Impulsing
Paradigm Change through Disruptive Technologies
Program (“ImPACT”) hosted by the Japan Scienceand Technology Agency (“JST”) and other selling,
general and administrative expenses only increasedto ¥1,390 million (2.1% increase year on year).
Other income was recorded at ¥364 million (27.0%
decrease year on year), mainly due to income fromconsigned research project, while other expenses
were recorded at 4 million (41.9% decrease year onyear) leading to improvement of ¥39 million to¥659 million (5.4% decrease year on year) in
operating loss.
Furthermore, because of finance income wasrecorded at ¥13 million (77.3% decrease year onyear), finance costs were recorded at ¥6 million(33.2% decrease year on year), share of loss ofinvestment accounted for using the equity method
was recorded at ¥21 million and income tax expense
was recorded at ¥6 million, loss improved ¥19 million
to ¥678 million (2.7% decrease year on year).

Risk Factors
Risks associated with business operations
Set out below are some of the major risks associatedwith the business operations of the Group as well asother potential risks that the Group may face. Listed
items include risks that may not apply directly, buthave been included in order to disclose information
fairly and accurately as they are thought to beimportant for investors upon making soundinvesting decisions. While the Group recognizes thepossibilities of the listed risks occurring and will takenecessary measures either to avoid their occurrenceor to react appropriately to reduce damages,
investors should carefully consider both the statedrisks and other risks unstated, prior to making an
investment.
Furthermore, please keep in mind that the items
set out below do not cover all of the potential risks.
The stated risks are based on assumptions andbeliefs derived from information currently available
to the Group and they may be altered due to changeof circumstances in the future.
1. The Group business in a novel business category
The Group’s main product is HAL, the world’s first
Cyborg type robot,developed by Yoshiyuki Sankai,
President and CEO. The Group is currently
developing business of Medical HAL in Germany
and Japan. Also in Japan, the Group is developing
business of HAL for Well-being Lower Limb Type,HAL Single Joint Type, HAL Lumbar Type for Care/
Labor Support, and others. The Group’s technologies
are thought to be applicable to various fields,
including medicine, living support, labor support,
entertainment and so on. However, since the Groupis working in a novel business category, uncertainty
is very high, and there is no guarantee that themarket will grow steadily. Moreover, if penetration of
the Group’s products does not progress as planned,
or if the Group is unable to achieve profitability, its
business performance, financial condition, andfuture business development may be affected.
2. Competition
The Group is planning to go into the fields of
medicine, care support and living support mainly
centered on HAL.
Currently, wearable robots with autonomous
control systems are being developed by companies
in Japan and elsewhere in the world but the
Cybernic voluntary control technology that utilizes
BES originating from the brain is the Group’s
original technology. Due to this differentiation oftechnologies, the Group can maintain its competitiveedge. Intellectual properties related to HAL such as
the basic principles of Cybernic voluntary control
are jointly held by the Group and the University ofTsukuba.

Annual Report 2018
The Group has exclusive rights to use all of thepatent rights that give it a competitive advantage
in the wearable robot market. However, various
enterprises in Japan and overseas are proceedingwith research and commercialization of wearable
robots. If the competitive environment surrounding
the Group were to change, for example with the newentry of a large number of companies, including
major technology companies, into the commercial
robotics field, there is a possibility that some of theGroup’s potential competitors have or may havesubstantially greater capital, human and otherresources, more efficient cost structures, higher
brand recognition and more diversified product lines
than the Group.
With regard to advanced products such as
HAL, while the research and development andcommercialization processes, which include
verification tests, safety standards certification,
medical device approval and insurance coverage,
are extensive, both in terms of the length in timeand costs involved, they are not always certain of
success. In a business environment such as theabove, if another company succeeds in developing
newer technologies or more effective products
than the Group’s products, the Group will not beable to maintain the competitiveness of its products
and the Group’s business performance, financial
condition, and future business development may beaffected.
Applicatioin number/
Registration number(Date of application)

Name of invention/Inventor
Type of invention

2004-068790/4200492(2004/03/11)

Wearable action assist device
Inventor: Yosiyuki Sankai

2004-040168/4178185(2004/02/17)

Wearable action assist device, and controlling
methods of drive source in wearable action
assitst device, and its program
Inventor: Yosiyuki Sankai

2004-045354/4178186(2004/02/20)

Wearable action assist device, and method andprogram for controlling wearable action-assist
deviceInventor: Yosiyuki Sankai

2005-018295/4178187(2005/01/26)

Wearable action assist device and control
programInventor: Yosiyuki Sankai

3. Risk associated with internal organizational
structure
The Company was established on June 24, 2004
and has the following issues which are specific to a
venture business.
i) The Group heavily relies on Yoshiyuki Sankai,
the founder and President and CEO, in terms ofmanagement and development of new technology.
If he becomes unable to perform his duties in
the Group for some reason, the Group’s businessperformance and future business development
might be affected.
ii) The Group has secured a sufficient number of
excellent research and development staff. If vital
staff members were to resign, the Group’s
speed of product development might be affected.

iii) As business expands, the Group intends toincrease staff in sales, production and controlling
units, and to further reinforce the internal control
system. However, if the Company is not successful
at keeping competent personnel and reinforcing
internal controls, the Group’s business performanceand future business development might be affected.
4. Risks associated with dependence on limited
range of products
The main product of the Group is HAL, whose net
sales comprised the majority of the Group’s net sales
as of the end of March 2017. It is estimated that HAL
will continue to be the main source of the Group’s
profit going forward. If there is a delay in getting
approval for HAL as a new medical device by theUnited States Food and Drug Administration, or adelay in creating laws and regulations, healthcare
policy, or insurance systems such as healthinsurance in targeted countries, the Group’s businessand profitability may be affected.
In addition to these factors, if any other factors
were to preclude the market expansion potentialof HAL, such as lawsuits or other legal action
arising from the use of HAL, the emergence of newtechnologies or technological innovation that replace
HAL, the introduction of more competitive productsin the same genre, changes in relevant laws andregulations, and changes in the relationship with
the University of Tsukuba regarding the grant of
exclusive rights to the use of intellectual property
related to HAL, the Group’s business performance,
financial condition, and future business development
might be affected.
5. Approval of medical devices
In order to sell HAL and other Group products
as medical devices, the products need to obtainapproval from authorities in each country andregion after undergoing certain tests andexaminations based on local laws and regulations.
The Group has obtained approval for HAL as a
medical device in the EU, U.S., Saudi Arabia andJapan. However, there is no guarantee that the Groupwill succeed in
obtaining approval for HAL and other Group products
as medical devices in other country or region. Even if
approval can be obtained, the timing of the approval
may differ by countries and regions. Furthermore
if laws and regulations in respective countries andregions were to be revised after approval is obtained,
the approval might be canceled or not renewed. Insuch cases, the Group’s business performance,
financial condition and future business development
might be affected.

6. Insurance coverage
The spread and penetration of Cybernic Treatmentusing HAL and other Group products is reliant toa certain extent on such treatment being coveredby public and private health insurances in many
countries and regions, with insurance payments
for such treatment being available from public
insurance institutions and private health insurancecompanies, and so forth. The Group recognizes thisas a major issue. However, insurance systems mayvary between countries and regions, and aspects
such as the scope of coverage and payment levels
are determined separately by the respective public
insurance institutions and private insurancecompanies in each country and region. The statusof these determinations may affect the Group’sbusiness performance, financial condition, andfuture business development.
7. Alliances and acquisitions
The Group recognizes that acquiring patents andother intellectual properties from third parties,
acquiring businesses, and forming joint venturesand strategic alliances domestically or overseas aremajor steps to be taken for accelerating its businessdevelopment and it will continue to examine such
steps proactively going forward. However, when
undertaking an acquisition or entering into analliance and so forth, it is difficult to predict theeffect of the acquisition or alliance completely
beforehand. Moreover, there is no guarantee thatthe acquisition or alliance and so forth will proceedsmoothly. When acquiring intellectual property or abusiness, or entering into a joint venture or strategic
business alliance, there is no guarantee that an
anticipated effect will be obtained within an initiallyprojected time frame, and the Group may be unable
to utilize the effects from an acquisition or allianceand so forth appropriately. In such a situation, theGroup’s business performance, financial condition,and future business development might be affected.
8. Risks associated with business implementationin the EUi) Medical HAL acquired CE Marking as a medical
device, a world first for a robotic medical device.
It was accredited by the world-class independent
accreditation organization TÜV Rheinland AG in
June 2013 as a Class IIa device, under the Medical
Devices Directives (“MDD”) for certifying compliancewith EU laws and regulations, which are required
for exporting medical devices to EU markets.
This accreditation is vital for conducting businessactivities for HAL in the EU.
However, if it were confirmed that HAL did
not meet the requirements of the MDD or ISO
13485 (international standards for quality control
management systems for medical equipment), theCE Marking may be canceled and so forth. If suchan event were to hinder the Group’s businessdevelopment in the EU market, the Group’s businessperformance and future business development
might be affected.

Risk Factorsii) The Group started its business in Germany
in August 2013. Since the Deutsche Gesetzliche
Unfallversicherung (German Statutory Accident
Insurance) admitted the application of labor
insurance, the entire fee for the treatment with
HAL for member patients of public labor insurance
institution, “the Berufsgenossenschaft Rohstoffe
und Chemische Industrie (Professional Associationof Raw Materials and Chemical Industry; “BG RCI”).”
Currently, the Group provides therapeutic services
mainly to those patients covered by public labor
insurance with BG RCI as its business partner.
The Group plans to develop its business inGermany further, mainly through hospitals affiliatedwith BG RCI, and then develop its businessthroughout the entirety of the EU. Nevertheless, if forexample the Group were obliged to change its plan todevelop business at BG RCI affiliated hospitals due
to a change in BG RCI’s policy, the Group’s businessdevelopment in Germany and future businessdevelopment in the EU might be affected. In such acase, the Group’s business performance and futurebusiness development might be affected.
9. Risks associated with overseas businesses ingeneralThe Group intends to expand its business abroad.
However, the Group recognizes the following risks
associated with overseas operations. These risks
might affect the Group’s business performance,
financial condition, and future business development.
• Geopolitical risks associated with political andeconomic situations including terrorism, and soforth• Risk of changes in legal and tax systems• Risk of differences in commercial and tradecustoms• Risk of general strikes or other disruptions inworking conditions• Risk of difficulties in managing local personnel andbusiness operations due to cultural differences andother factors• Risk of difficulties in repatriation of funds to Japan• Risk associated with fluctuations in foreignexchange rates
10. Loss of clients due to product malfunctions
The Group continuously strives to improve the qualityof its products based on ISO 13485 (international
standards for quality control management systems
for medical equipment). There is no guarantee,
however, that its products will be free of deficiency
or that product liability claims or recalls will notoccur in the future. If damages were to occur due
to a product defect, product liability claims would
be covered entirely or in part by product liability
insurance; however, a decline in the Group’s and the
products’ social credibility might affect its businessperformance, financial condition, and futurebusiness development.

Annual Report 2018
11. Intellectual property

12. Legal risks

14. Peace and Ethics Committeei) The Group’s HAL systems employ unique
technology that utilizes a wearer’s BES. The patentrights for technologies used in HAL are jointly heldby the University of Tsukuba and the Company,
except for patents independently owned by theCompany. The Company concluded a contract
concerning an exclusive license for use of thesepatented technologies. This contract is a significant
prerequisite for the Group to conduct businessactivities and will be valid until the expiry date of
the licensed intellectual property rights. However, if
it becomes difficult to continue the contract for any
reason, such as a breach of the contract, a petition
for bankruptcy, a merger, an acquisition of significant
assets, or an assignment of the Company’s key
business line, the Group’s business performance,
financial condition, and future business development
might be affected.
ii) To date, the Group has neither received any claims
from, nor been involved in a lawsuit with any third
party concerning intellectual property such as patentrights related to the Group’s business.
Moreover, the Group considers it unlikely that its
business operations would be materially hindered
due to a problem arising in relation to infringement
on intellectual property such as other parties’ patentrights during its business operations. The Grouptakes measures to avoid problems concerning
intellectual property infringement by conducting
continuous technical investigations.
However, for research and development-orientatedenterprises such as the Group, it is very difficult toentirely avoid the occurrence of problems concerning
intellectual property infringement. In the future, if
the Group is involved in litigation with third
parties, the Group’s policy is to consider concrete
countermeasures individually depending on thedetails of each case in consultation with lawyers andpatent attorneys. It will, however, be time consuming
and costly to reach a settlement, regardless of thevalidity of the counterparty’s claim. Furthermore,
although the Group manages its technologies withthe utmost care, if a third party infringes upon theGroup’s technologies, settlement of the issue will
be time consuming and costly. In such cases, theGroup’s business strategies, business performance,
financial condition, and future business development
might be affected.

The Group’s business is subject to restrictions due tothe application of the respective laws and regulationsof each country and region, including the items listed
below. For example, in various business activities inwhich the Group is involved domestically orinternationally, the Group is subject to laws andregulations concerning intellectual property rights
and product liabilities related to technologies,
products, services and so on, as well as regulations
related to pharmaceutical affairs, commercial
transactions, and import and export restrictions; tax
obligations, including tariffs; laws and regulations
concerning anti-bribery and corruption, antitrust,labor, consumers, personal information, theenvironment, foreign exchange; and various otherlaws and regulations. Moreover, the Group may
encounter unexpected issues relating to these laws
and regulations or business customs. In particular,
since some of the Group’s products are medical
devices designated under the Pharmaceuticals andMedical Devices Act of Japan, the Group had to
obtain the manufacture and distribution approval
from the MHLW. Similarly, in other countries
and regions, local regulatory authorities’ approvals
may be required, along with supervision fromsupervisory authorities.
Approval inspections are conducted to validate theeffectiveness and safety of the products. It is possiblethat an application could be denied or an approval
could be delayed as a result of the inspection. Even if
sales of the merchandise are started after approval,
it is possible that approval could be canceled due tothe occurrence of problems in product effectivenessand safety. In addition to the above, if the Group
were to violate any laws or regulations applicable
to its business, it could be subjected to civil,
administrative, or criminal sanctions, which might
affect the Group’s social credibility. In such a case,the Group’s business performance or financial
condition may be materially affected.

The Group has also established the Peace andEthics Committee to prevent the use of its advanced
technologies to harm people or to create military
weapons. All outside directors and outside Audit
and Supervisory Board Members, in addition to the
President and CEO, are members of the Peace andEthics Committee. Committee resolutions require amajority vote of two-thirds or more of thoseattending. Before entering fields outside the areas of
medicine, living support and disaster recovery,
which are defined in the Company Code of Conduct,
the Peace and Ethics Committee investigates,deliberates and reaches a decision on whether
the Group’s advanced technologies could be used
to harm people or to create military weapons as aconsequence of entering this business field. The
committee then submits its findings to the Board of
Directors.
The result of the Committee’s examinationand verification might not necessarily contributeto improving the Group’s short-term businessperformance.

13. Risks associated with personal information
The Group obtains the personal information of
HAL users. The number of staff within the Group
who are able to access this personal information islimited, and the Group has concluded nondisclosureagreements with all executives and employees.
Moreover, the Group has taken adequate measures
for the protection of personal information, including
the establishment of Regulations for Protectionof Personal Information and the appointment ofa Person in Charge of Protection Management of
Personal Information, and no problem, such asleakage of personal information, has occurred
to date. However, if a problem, such as leakageof customer information, were to occur, claims
for damages and a decline in the Group’s social
credibility might affect its business, financial status,and business performance.

Risk Factors

Annual Report 2018

Risks associated with the President’s engagement
as a University professor

Matters associated with advanced device
businesses in general

1. Risks associated with the President’s
engagement as a professor at the University ofTsukuba

1. Risks associated with development businesses
in general

Yoshiyuki Sankai, President and CEO of the Company,
holds concurrent positions as a professor of the
University of Tsukuba and as the program manager
for the Impulsing Paradigm Change throughDisruptive Technologies (“ImPACT”) program of the
Cabinet Office of Japan. Details ofi) measures to avoid conflicts of interest between
the Group, the University of Tsukuba, and the Japan
Science and Technology Agency (“JST”), which is
implementing the ImPACT program, arising fromconcurrent positions as the President and CEOof the Company, aprofessor at the University ofTsukuba, and the program manager of ImPACT andii) impediments to performance of duties as the
President and CEO are as follows:i. Measures to avoid conflicts of interest
All decisions related to conflicts of interest, includingtransactions and conclusions of joint research
agreements with the University of Tsukuba or JST
are made by the Board of Directors. A structure toprevent conflicts of interest has been established,
under which the decisions concerning the Universityof Tsukuba are made by the five directors (of whomthree are outside directors) excluding Yoshiyuki
Sankai and another member affiliated with the
University of Tsukuba, and the decisions concerning
the JST are made by the six directors (of whom three
are outside directors) excluding Yoshiyuki Sankai.
In addition, a structure is in place under whichmatters pertaining to conflicts of interest are being
monitored monthly through an audit by the Audit
and Supervisory Board and reported to the CEO, theInternal Audit Office and a responsible member ofthe Board of Directors.
ii. Impediments to performance of duties as
President and CEO
Although duties related to Cybernic research by
the Group, the University of Tsukuba and ImPACT
Program are integral and inseparable, the influenceof duties of a faculty member of the University ofTsukuba in Japan (lectures, attendance at intramural
meetings as a university professor, etc.) and
Program Manager of ImPACT on duties specific to
the President and CEO of the Company (attendanceat the Board of Directors meetings, approval ofrequests, responses to investors, etc.) are limited
and do not disturb performance of duties as
President and CEO at all.However, should Yoshiyuki
Sankai prioritize his duties as a university professor
or program manager of ImPACT over his position asa President and CEO of the Company, the Group’s
financial condition and business performance might
be affected.

In the field of cutting-edge technology development,
companies around the world vie with each other for
quality and speed of technological innovation. Also,
they must invest large amounts of funds over thelong term in the processes from basic research,development and manufacturing of advanced robots
to their sales, since they must proceed in accordancewith the various regulations in each country. Against
this backdrop, research and development entail
many uncertainties and such risks are inherent
in the products the Group is now developing andwill develop in the future. Under its business plan,
the Group is also developing its business towards
achieving insurance coverage in each country by
expanding business domains (various diseases,
long-term care, etc.). However, there is no guaranteethat the Group will expand its business domains asplanned, and exists a risk that the applied insurance
systems will be reviewed or changed in the futurewith respect to the scope of coverage and payment
amounts. If such risks were to materialize, theGroup’s business, financial condition, and businessperformance might be affected.
2. Risks associated with creation of newly
developed products
The Group explores and creates newly developed
products through joint research with research
institutions, centering on the University of Tsukuba,
and one of its important business strategies is therelease of multiple newly developed products inaddition to HAL for Medical/Well-being Lower Limb
Type, HAL Single Joint Type as well as
HAL Lumbar Type for Care/Labor Support, whichhave already been commercialized.
However, there is no guarantee that such new
products will be successfully explored and created.
Accordingly, if exploration and creation activitiesof new products were to be hindered for somereason, the Group’s financial condition and businessperformance might be affected.
3. Risks associated with progress delays inherent toresearch and development
The Group is efficiently advancing research anddevelopment as a research and development
oriented company group by establishing cooperative
relationships with external partners, centeredon joint research with the University of Tsukuba.
However, since there is no guarantee that researchand development activities will advance as planned,
in some cases, the initially planned results ofresearch and development may not be obtained,
the start or completion of various experiments
may be delayed, and acquisition of approval for
manufacturing and marketing medical devices may
be delayed or limited.

To avoid such situations as much as possible, theGroup manages and evaluates the progress of eachproduct under development in a timely manner andtakes such measures as prioritizing products underdevelopment and changing the levels of management
resources invested
in products or deciding to suspend development
temporarily. Thus, the Group reduces the risk of a
sharp increase in research and development
expenses. However, if research and development
does not proceed as planned, the Group’s, business,financial condition, and businessperformance might be affected.
Risks related to the dual class share structure
1. Outline of the Scheme
Under the Group’s philosophy that “Technology
exists for humans and society” the Group employs
the advanced technologies centered around HAL
for peaceful purposes. The peaceful application ofCybernic Technologies to improve, support, enhance,and regenerate users’ bodily functions matches theneeds of the hyper aging society, and leads to therise of the Group’s long-term corporate value.
However, this technology could be put to use in nonpeaceful purposes such as in lethal weaponryin the military industry. In order to raise funds fromthe market while ensuring that the Company’s
innovative technologies are used solely forpeaceful purposes, Class B Shares are issued
separately from the listed Common Shares. (Thescheme involving the Company’s Class B Sharesis hereafter referred as “Scheme”)
The Group’s vision for the future is to create ahuman-assistive industry—a new industrial field thatwill support people by solving issues directly faced byaging and declining birthrate. To realize this vision,
the Group must coordinate business managementwith R&D of Cybernic Technologies. Yoshiyuki Sankai
created the Group’s Cybernic Technologies, andcontinues to be a central figure in Cybernic research.
He is also a business leader who seeks to make thisinnovative technology widely available for the benefitof the society. For the Group to increase corporate
value (i.e., common interest of shareholders),
Yoshiyuki Sankai must be a stable leadership figurein the management of the Company in the future.
This Scheme has been adopted to ensure he remains
so. To explain in detail, while Class B Shares areranked the same as Common Shares and paid thesame amount as Common Shares with regard to
dividends and distribution of residual assets, Class B
Shares differ from Common Shares in traded units.
Common Shares are traded in units of 100 shares,
and Class B Shares are traded in units of 10
shares. This grants a holder of Class B Shares 10
times as many voting rights as a holder of Common
Shares when they have equal numbers of shares.

Current holders of Class B Shares are Yoshiyuki
Sankai, the founder and President and CEO of theCompany, and the foundations (hereinafter referred
to collectively as “the Foundations”) of which
Yoshiyuki Sankai serves as Representative Director.
As of March 31, 2017, Yoshiyuki Sankai holds
3,042,000 Common Shares and 77,696,000 ClassB Shares. Together, this represented approximately
86% of the total number of voting rights for theCompany.
Set out below is certain information concerning thisScheme, Common Shares and Class B Shares.
i. Outline of the shares
Common SharesClass B Shares

Dividends of surplus anddistribution of residual assets

Receive the same amount of dividendsof surplus per share in the same rank

The number of sharesconstituting one unit

100 Shares(1 voting rights
per 100 shares)

10 Shares(1 voting rights
per 10 shares)

Article of incorporation topreclude a resolution of theCommon Shareholders' Class
Shareholders’ Meeting

Yes

None

Shares with put option

None

Yes
(1 Class B Sharefor 1 Common
Share)

Shares subject to call

None

Yes
(1 Class B Sharefor 1 Common
Share)

Share split or consolidation

Executed into the same numbers ofshares simultaneously

Listing

ListedUnlistedii. Difference between the share units of the twoshare types
While shareholders of both Common Shares
and Class B Shares receive the same amount ofdividends and distribution of residual assets at thesame priority level, they differ in the number ofshares that constitute one share unit. One hundred(100) Common Shares constitute one shareunit whereas ten (10) Class B Shares constitute one
share unit. As such, a shareholder of Class B Shares
has 10 times as many voting rights as a shareholderof Common Shares when they have the equal
number of shares.
As of the consolidated financial year ended March
31, 2018, the number of shares of each class issued
is 137,347,609 Common Shares and 77,700,000 ClassB Shares. Yoshiyuki Sankai, the President and CEOof the Company, holds 3,042,000 Common Sharesand 77,696,000 Class B Shares, which represents
approximately 38% of all issued and outstanding
shares of the Company. Also, Yoshiyuki Sankai holds
86% of the total number of voting rights related to
the Company, making him capable of determining
matters for resolution in the General Meeting of
Shareholders such as the selection of directors or
reorganization by acting on his own.

Annual Report 2018iii. Scheme to prevent changes of shareholders ofClass B SharesClass B Shares are issued for the purpose of
preventing the Group’s technology from being used toharm people or to create military weapons. In orderto prevent Class B Shares from being transferred topeople or entities other than the shareholders ofClass B Shares as of the submission date of theCompany’s Annual Securities Report released onJune 26, 2017 or other internal personnel of theCompany, the Articles of Incorporation of theCompany states thata) The approval of the Board of Directors isnecessary upon the transfer of the Class B Shares toany person other than the shareholders of theClass B Shares. Andb) When a shareholder of the Class B Shares has
died and 90 days have passed without succession, or
within 90 days, a transfer to any other shareholdersof the Class B Shares has not occurred, and theCompany is requested* to approve the acquisitionof the Class B Shares by any person other than theshareholders of Class B Shares, all of the Class B
Shares held by the departed shareholder shall be
exchanged for one Common Share per Class B Shareupon acquisition.
* A request for approval as set down in Article 136
and 137 of the Companies Act.
iii. Scheme to prevent changes of shareholders ofClass B SharesClass B Shares are issued for the purpose of
preventing the Group’s technology from being used toharm people or to create military weapons. In orderto prevent Class B Shares from being transferred topeople or entities other than the shareholders ofClass B Shares as of the submission date of theCompany’s Annual Securities Report released onJune 26, 2017 or other internal personnel of theCompany, the Articles of Incorporation of theCompany states thata) The approval of the Board of Directors isnecessary upon the transfer of the Class B Shares toany person other than the shareholders of theClass B Shares. Andb) When a shareholder of the Class B Shares has
died and 90 days have passed without succession, or
within 90 days, a transfer to any other shareholdersof the Class B Shares has not occurred, and theCompany is requested* to approve the acquisitionof the Class B Shares by any person other than theshareholders of Class B Shares, all of the Class B
Shares held by the departed shareholder shall be
exchanged for one Common Share per Class B Shareupon acquisition.
* A request for approval as set down in Article 136
and 137 of the Companies Act.

The shareholders of Class B Shares as of thesubmission date of the Company’s Annual Securities
Report, June 26, 2017 are Yoshiyuki Sankai and theFoundations, and the number of Class B Shares heldis 77,696,000 shares and 4,000 shares respectively.
In order to preserve the continuity of this Scheme,
Yoshiyuki Sankai plans on transferring part of theClass B Shares he holds as of this submission dateto the Foundations at no cost. Furthermore, there are
no plans for the Foundations to release the Class B
Shares in their possession.
As a shareholder of Class B Shares, theFoundations established guidelines on the executionof their voting rights, to prevent the Group’s
technologies from being used to harm people orto create military weapons, damaging the Group’s
corporate value.
The Foundations will exercise its voting rights
related to the Class B Shares they hold against
resolutions in the General Meeting of Shareholders
and General Meeting of Class Shareholders in thecases stated below. Furthermore, a resolutionof the board meeting of the Foundations will be
required to alter these guidelines, and the change
will be announced by a method determined by theFoundations:a) if in resolutions for the dismissal or appointment
of directors will lead to the misuse of the Group’s
innovative technology or damage the Group’s
corporate valueb) for all other resolutions, if the passing of theresolution leads to the prevention of peacefulutilization of the Group’s innovative technologies
or damage to the Group’s corporate value
iv. Breakthrough provision
In order to dissolve this Scheme upon a situation
where a shareholder with only a small portion of
the issued shares controls the Company, if theshares held by one acquirer is over three quartersof the total number of issued shares (excluding thetreasury stock) as a result of a takeover bid, all ClassB Shares will be converted to Common Shares inaccordance with the Breakthrough provision (seenote) stated in the Articles of Incorporation.
(note) The Breakthrough provision refers to theprovision that allows the dissolution of
the Scheme upon the appearance of an acquirer withmore than a certain ratioof holding shares.

v. Sunset provision
As stated in iii) above, Yoshiyuki Sankai plans totransfer portions of Class B Shares he holds to theFoundations at no cost in order to preserve thecontinuity of this Scheme. This Scheme is planned tobe continued after the resignation from the post of
director by Yoshiyuki Sankai, who is the developer of
the Group’s innovative technologies, or his death.
However, since there is the possibility that thedecision made by the Foundations after Yoshiyuki
Sankai’s resignation from the post of director(excluding cases where he holds multiple posts
or is reappointed to the post immediately after
resignation) does not match the will of the Company
shareholders (including holders of the Common
Shares), an intention verification procedure ofshareholders will be conducted by the conclusionof the last General Meeting of the Shareholders
held in the fiscal year ending within one year ofthe date of Yoshiyuki Sankai’s resignation or within
3 months after the end of the last fiscal year that
ends within 5 years’ time since the most recent
intention verification procedure of shareholders.
More specifically, the Sunset provision (see note)in the Articles of Incorporation states that if theshareholders of Common Shares and Class B Shares
who hold one third of the total voting right (calculatedusing 100 Class B Shares for each share unit)
participate in the intention verification procedure andtwo thirds (2/3) of those who participated agree, allClass B Shares will be converted to Common Sharesof the Company.
(note) The Sunset provision refers to the provisionthat enables the dissolution of the
Scheme under circumstances where the purpose of
introducing class shares
has ended or where the Scheme is clearly against
the will of the majority of shareholders, according
to the relevant intention verification procedure
explained above.
vi. Elimination of the Meeting of Class Shareholders
comprised of shareholders of Common Shares
The Company’s Articles of Incorporation states that,the execution of actions stated in each item of Article
322-1 of the Companies Act, unless stated otherwise
by law or by the Articles of Incorporation, does not
require the resolution of the Meeting of Class
Shareholders comprised of shareholders of Common
Shares.

However, to ensure that the elimination of the
Meeting of Class Shareholders does not negatively
impact the shareholders of Common Shares, out of
the actions stated in each item of Article 322-1 of theCompanies Act,(a) reverse share splits, share splits, free allocationof shares, free allocation of stock acquisition rights,
allocation of shares as well as stock acquisitionrights to shareholders, share transfers (excluding
cases where the share transfer is conducted
together with other companies) and changes to thecalculation of share units shall be executed at thesame timing and same ratio as stated by the Articles
of Incorporation, and(b) in the case that a merger agreement where theCompany will be absorbed, or a share exchange
agreement or share transfer plan (limited to cases
where the share transfer is conducted together
with other companies) where the Company will
become a wholly owned subsidiary, is approved bya Meeting of Shareholders (if an approval by the
Meeting of Shareholders is not required, resolution
by the Board of Directors) of all relevant companies,
all Class B Shares shall be converted to Common
Shares as stated by the Articles of Incorporation.
2. Risks of this Scheme
Class B Shares have been issued for the purpose of
preventing the Group’s technology from being used toharm people or to create military weapons. However,this Scheme also presents potential risks statedbelow. If such risks were to materialize, rights andinterests of the shareholders of the Company’s
Common Shares may be affected.
(a) Risk associated with the strong influence of theshareholders of Class B Shares from their voting
rights. As of the fiscal year ended on March 31, 2018,
Yoshiyuki Sankai holds 3,042,000 Common Sharesand 77,696,000 Class B Shares which accounts
for 38% of the total number of issued shares. Thisequates to 86% of the total number of voting rights of
the Company, giving him strong influence overbusiness matters. This will limit the influence ofthe shareholders of Common Shares on corporate
matters. As a result, if the voting rights by theshareholders of Class B Shares are exercised toensure the peaceful use of the Group’s innovativetechnology, the Company may take actions that theshareholders of Common Shares do not generally
view as beneficial.

Risk Factors(b) Risk associated with the prevention of acquiring
shares of the Company The Company’s Articles
of Incorporation provide that 10 Class B Sharesconstitute one share unit and 100 Common Sharesconstitute one share unit. As voting rights are
granted for each share unit, a shareholder of ClassB Shares has 10 times as many voting rights asa shareholder of Common Shares with an equal
number of shares. While the Breakthrough provisionand the Sunset provision are stated in the Articles
of Incorporation, the conditions in which all of theClass B Shares are converted to Common Sharesare limited to circumstances where the acquirer
as a result of a take over bid holds three quarters(3/4) of the total numbers of issued Common Shares
and Class B Shares, and where two thirds (2/3)
of all shareholders who took part in the intention
verification procedures agree to the conversion of theClass B Shares to Common Shares, respectively.
(b) Risk associated with the prevention of acquiring
shares of the Company The Company’s Articles
of Incorporation provide that 10 Class B Sharesconstitute one share unit and 100 Common Sharesconstitute one share unit. As voting rights are
granted for each share unit, a shareholder of ClassB Shares has 10 times as many voting rights asa shareholder of Common Shares with an equal
number of shares. While the Breakthrough provisionand the Sunset provision are stated in the Articles
of Incorporation, the conditions in which all of theClass B Shares are converted to Common Sharesare limited to circumstances where the acquirer
as a result of a take over bid holds three quarters(3/4) of the total numbers of issued Common Shares
and Class B Shares, and where two thirds (2/3)
of all shareholders who took part in the intention
verification procedures agree to the conversion of theClass B Shares to Common Shares, respectively.
Therefore, there is the possibility that this Scheme
may prevent acquisitions that may benefit theshareholders of Common Shares.
(c) Risk associated with the elimination of the
Meeting of Class Shareholders comprised ofshareholders of Common Shares The execution ofactions stated in each item of Article 322-1 of theCompanies Act, unless stated otherwise by law orby the Articles of Incorporation, does not require
the resolution of the Meeting of Class Shareholders
comprised of shareholders of Common Shares,
so the decisions made by the Company may notreflect the will of the shareholders of Common
Shares.
(d) Risk associated with the conversion of the Class B
Shares Because Class B Shares include the right torequest acquisitions under acquisition terms, thereis the possibility that a future conversion of ClassB Shares to Common Shares will increase the total
number of authorized Common Shares issued on themarket, and the market price of the Common Shares
may be affected.

Annual Report 2018
Other risks

4. Loss brought forward for tax purposes

1. Dividend policy

Since the Group has been making upfront
investments in development as a corporate researchand development group, it has a significant amountof retained losses carried forward for Japanese
corporate tax purposes. Should there be any changes
to the Japanese tax systems in the futuresuch that restrictions are tightened on deduction oflosses brought forward, the Group might lose theopportunity to recover part of the capital that it has
invested in research and development or suffer othereffects that might affect its business, financial
condition, and business performance.

The Company has not been able to pay dividends toshareholders since its establishment, and as of the
publication of this report, is still not in a position
where it is allowed to pay dividends in accordancewith the Companies Act. At this time, the Company’s
policy is to prioritize achieving profitability quickly
by improving its financial strength throughretaining earnings and reinvesting in researchand development activities. On the other hand, theCompany considers returns to shareholders to
be an important management issue and will consider
possible payment of dividends in the future taking
into account its financial condition and businessresults. However, if the Company’s earnings plan
does not proceed as envisaged, and it continues to beunable to achieve steady earnings, it may not be able
to return profits to shareholders in the formof dividends.
2. Risks associated with financing and fund procurement
The Group records large amounts of upfront researchand development expenses in association with theprogress of its research and development activities,
resulting in continued recording of operating
losses. The Group’s funding needs are expected
to increase as its business proceeds, including
operating capital, research and development
investment, and capital expenditures. The Groupplans to continue strengthening its financialbase making use of funds such as governmental
subsidies. However, depending on how successful
the Group is at securing profits and raising capital,
its financial condition and business performancemight be affected.
3. Recording negative retained earnings brought
forward
The Group has been focusing on research anddevelopment activities, and has therefore recorded alarge amount of upfront research and development
expenses, as well as negative retained earnings
brought forward. The Group aims to achieve
profitability quickly and to establish a strong financialbase by posting stable profits. However, there is arisk that the Group’s business might not proceed
as planned, and that the Group may be unable toeliminate the recording of negative retained
earnings brought forward, which might affectits business, financial condition, and businessperformance.

5. Fluctuations in foreign exchange rates
Since the financial results of overseas Group
companies are translated from local currency into
Japanese yen when reflected in the Group’s
consolidated financial statements duringconsolidated account settlement, the Group is
exposed to risk from the effects of fluctuations
in foreign exchange rates. Therefore, if foreignexchange rates were to fluctuate sharply in the
future, the Group’s financial condition andbusiness performance might be affected.

Financial Statements
Consolidated financial statements and notes to consolidated financial statements(Consolidated Balance Sheet)

CYBERDYNE, INC. and Consolidated Subsidiaries March 31, 2018

Annual Report 2018

Financial Statements

Annual Report 2018

Consolidated statement of profit or loss and consolidated statement of comprehensive income(Consolidated statement of profit or loss)

CYBERDYNE, INC. and Consolidated Subsidiaries March 31, 2018

(Consolidated statement of comprehensive income)CYBERDYNE, INC. and Consolidated Subsidiaries March 31, 2018

Financial Statements
Consolidated statement of changes in equity
CYBERDYNE, INC. and Consolidated Subsidiaries March 31, 2018

Annual Report 2018

Financial Statements

Annual Report 2018

Consolidated statement of cash flow

Notes to consolidated financial statements

CYBERDYNE, INC. and Consolidated Subsidiaries March 31, 2018

Notes to consolidated financial statements following the conversion to IFRS
standards are disclosed on CYBERDYNE website.
Please refer to “English translation of the financial reporting parts of theAnnual Securities Report for the Fiscal Year Ended March 31, 2018“, which canbe accessed from the Investor Relation Page.

Corporate & Investor Information

Annual Report 2018

Matters regarding the Company shares

Main offices of operations and factories

Major shareholders

As of end of March 31, 2018
Number of shares held
(shares)

Shareholding
ratio (%)

Voting rights
ratio (%)

3,042,000 (common)
77,696,000 (Class B)

37.54

85.31

Daiwa House Industry Co., Ltd.

30,000,000

13.95

3.28

STATE STREET LONDON CARE OF STATE STREET BANK AND TRUST, BOSTON SSBTC A/C UK LONDONBRANCH CLIENTS* UNITED KINGDOM

4,337,300

2.02

0.47

Japan Trustee Services Bank. Ltd. (Trust Account)

4,317,700

2.01

0.47

Name of shareholder

Yoshiyuki Sankai

GCAS BANA LONDON US CLIENT

3,726,000

1.73

0.41

The Master Trust Bank of Japan, Ltd. (Trust Account)

2,586,900

1.20

0.28

Japan Trustee Services Bank. Ltd. (Trust Account 9)2,036,100

0.95

0.22

BBH FOR GLOBAL X ROBOTICS AND ARTIFICIAL INTELLIGENCE ETF

1,461,867

0.68

0.16

CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

1,390,122

0.65

0.15

Rakuten Securities, Inc.

1,210,000

0.56

0.13

8,310,680

61.29

90.90

Total

(Classification of shareholders by shareholder types)
Common Share

As of end of March 31, 2018

Status of shares (100 shares per 1 share unit)
Classification

Government andlocal government

Financial
institution

Foreign investors

Individual
investors etc.

Status of sharesless then one
share unit (share)

Financial instrument
service operators

Other
corporations

Non-individuals

Individuals

100

77,72578,806

Total

Number of shareholder(person)

22

65

482

412

Number of shareholder(unit)

147,849

48,379318,146

296,134

767

561,890

1,373,165

Shareholding ratio%

10.77

3.52

23.17

21.56

0.06

40.92

100

31,109Note 1. Yoshiyuki Sankai is in posession of both Common Share and Class B Share
Note 2. Out of 138 shares in the treasury stock, 100 was included in “Individual investors etc.“ and 38 was included in “status of shares less then one share unit“

Class B Share

As of end of March 31, 2018
Status of shares (100 shares per 1 share unit)

Classification

Government andlocal government

Financial
institution

Financial instrument
service operators

Foreign investors

Other
corporations

Non-individuals

Individuals

Individual
investors etc.

Total

Status of sharesless then one
share unit (share)

Number of shareholder(person)2

1

3

Number of shareholder(unit)

400

7,769,600

7,770,000

Shareholding ratio%

0.01

99.99

100

Name

Division

Location
Location
Tsukuba, Ibaraki, Japan

Head Quarters
The Company
Subsidiaries (Outside Japan)

Subsidiaries (Within Japan)

Next-generation multipurpose robotized production
facility (Fukushima office)

Koriyama, Fukushima, Japan

Cyberdyne Care Robotics GmbH

Bochum, Nordhein-Westfalen, Germany

CYBERDYNE USA Inc.

Jacksonville, Florida, USA
Seattle, Washington, USA

CYBERDYNE & Brooks, Inc.

Jacksonville, Florida, USA

Suzuka RoboCare Center Co., Ltd.

Suzuka, Mie, Japan

Shonan RoboCare Center Co., Ltd.

Fujisawa, Kanagawa, Japan

Oita RoboCare Center Co., Ltd.

Beppu, Oita, Japan

Status of employees(i) Status of employees in the Group (as of March 31, 2018)
Number of employees

Change from previous fiscal year

75 members(63 members)

Increase of 4 members(Decrease of 31 members)(Notes)(1) The number of employees includes full-time employees and members on temporary transfer assignments. It does not include the number of Members of theBoard of Diriectors who also hold positions as Company employees or dispatch workers sent from a temp agencies.
(2) The number of contract employees are stated in the brackets (). This number includes part-time workers but excludes those who work in the Group as second
jobs.
(3) Since the Group is involved in a single segment of business related to robots, information of employyes for each segment is omitted.

(ii) Status of employees in the Company (as of March 31, 2018)
Number of employees

Change from previous fiscal year

Number of employees

Change from previous fiscal year

62 members(44 members)

Increase of 1 members(Decrease of 17 members)

40.4 years old

5.1 years(Notes)(1) The number of employees includes full-time employees and members on temporary transfer assignments. It does not include the number of Members of theBoard of Diriectors who also hold positions as Company employees or dispatch workers sent from a temp agencies.
(2) The number of contract employees are stated in the brackets (). This number includes part-time workers but excludes those who work in the Group as second
jobs.