Annual Report 2017

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Contents

Cybernics

Profile2

Corporate Philosophy

3

Business Fields

4

Robot Suit HAL“Cybernics” (adjective: Cybernic) is a new academic
field that is centered around cybernetics, mechatronics
and informatics fused/combined with various otherfields including brain/neuroscience, robotics, biology,
behavioral science, psychology, law, ethics, and businessadministration. Cybernics is championed by Yoshiyuki
Sankai, a professor at the University of Tsukuba in Japan.
Cybernic Technology means the practical application ofCybernics to technology.

®

6

Business Model

8

Potential Markets

10

Business Highlights

12

Analyst Interview

14

Corporate Social Responsibility

22Management Structure

24

Corporate Governance

27

MD&A

33

Risk Factors

35

Robot Suit HAL®

Financial Statements

42

Corporate & Investor Information

64

Robot Suit HAL® is the world’s first cyborg-type robot.
HAL was designed to improve, support, expand andregenerate the physical capabilities of its human users.
The name HAL is short for Hybrid Assistive Limb. The
word “hybrid” refers both to the fact that HAL is a typeof hybrid formed from a human being and a robot, andalso to the fact that HAL provides a mixture of voluntary
control and autonomous control. The word “assistive”
refers to the fact that HAL helps human beings, and theword “limb” refers to any or all of our arms and legs. The
foregoing explains the derivation of the name HAL in the
product Robot Suit HAL®, and furthermore, the name
HAL is also used for any related Cybernic Devices that
employ the same principle as Robot Suit HAL®.

FORWARD-LOOKING STATEMENTS
Many of the statements included in this annual report contain forwardlooking 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 thesestatements on beliefs as well as assumptions made using information
currently available to the Company. As these statements reflect theCompany’s current views concerning future events, these statements
involve risks, uncertainties and assumptions. The actual future
performance of the Company, 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 that is included in this annual report has been
derived from public sources. As a result, the Company has not verified
this information from the standpoints of accuracy and appropriateness.
Moreover, the Company in no manner guarantees this information.
Accordingly, please refrain from making investment decisions thatare overly reliant on the forward-looking statements contained in thisannual 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 by these cautionary statements.

CYBERDYNE, INC.
The Company name is derived from the utilization of
innovative “Cybernic” technologies and the word “Dyne,”
which means power in Greek. The Company was named“CYBERDYNE” to express the meaning of “Powergenerated by Cybernics.”

Cybernic Treatment
Cybernic Treatment is described as “Functional
Regenerative Medicine” realized by devices like Medical
HAL that are developed using Cybernic Technology,
and it is an innovative treatment technology that
promotes the functional improvement/regeneration of
the brain-nerve-physical systems*. HAL establishesinteractive biofeedback according to intension-based
motion information from the brain-nervous system
and activating sensory systems like muscle spindle
fibers to form a neural loop between the brain-nerve
system and the musculoskeletal system. Even if thepatient is unable to generate enough muscle strength
to move due to motor dysfunction, the treatment isable to repeatedly realize actual movement that is insync with the motion intent of the brain while avoiding
excessive burden on the brain-nerve-muscle systems,
thus making functional improvement/regeneration
possible. A physician can intervene by tuning the many
adjustable parameters related to the patient’s motor andneurological information built into the device, in a waythat appropriately circulates the patient’s neurologicalinformation through the neural loop between the brainnerve system and the musculoskeletal system.
Treatment with Medical HAL has been approved by theregulatory authorities in Japan and has been listed asa new treatment procedure that is distinct from othertraditional rehabilitation procedures, with a different
reimbursement price.
*Cybernic Treatment is not limited to Medical HAL and can beadministered by other Medical Cybernic Systems that take on various
forms using Cybernic Technology.

Society 5.0
a concept of super-smart society of the future, promotedby the Japanese government. It is the fifth society after“hunter-gatherer society (Society 1.0),” “agriculturalsociety (Society 2.0),” “industrial society (Society 3.0) and“information society (Society 4.0).” It is a new image of asociety brought by science and technological innovation,
where technologies such as artificial intelligence (AI) andInternet of Things (IoT) will be fully implemented into thesociety. It was stated in the 5th Science and Technology
Basic Plan that Japan is going to start their endeavorahead of other countries to realize this society. As Japan
was the host of the G7 Meeting that was held in May
2016, Japanese government projected this concept to
the world as the ideal future society where humans andtechnology coexist.

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ProfileCYBERDYNE, INC. President and CEO

Yoshiyuki Sankai, Ph.D. in Engineering
Important positions held
Professor at the Graduate School of Systems and Information Engineering, University of Tsukuba, Japan
Director at the Center for Cybernics Research, University of Tsukuba, JapanThe President and CEO of CYBERDYNE, INC.
Program Manager of the Impulsing Paradigm Change through Disruptive Technologies (ImPACT) Program

C YBERDYNE

A n n u a l R e p o r t 2 0 17

CYBERDYNE’s philosophy and business vision“Technology exists for humans and society.”
When I established CYBERDYNE, my intention was to thoroughly incorporate this principle andcreate an enterprise that implements people-friendly technology for the benefit of society.
Many companies are currently based on a business model that consists of generating profitsby manufacturing and selling as many products as possible and getting people to continuously

Education

consume. Because their technology is employed with the premise of consumption, it can result

Completed the Ph.D. course of Engineering at University of Tsukuba (March, 1987)
Degree: Ph.D. in Engineeringin a negative impact on resources and the environment, as well as people’s health and happiness.

Summary

people and their society through the application of technical innovations that do not focus on mere

Yoshiyuki Sankai is well known as a pioneer of a new academic field, “Cybernics: the fusion andcombination of humans, machines and information systems,” and as a developer of an innovative
cyborg type robots utilizing Cybernics Technologies. He is the leading figure in the practical application,
production and social implementation of innovative robotic medical devices such as Medical HAL andvarious medical technologies. He is also focused on R&D related to innovative Cybernic Systems, next
generation network medicine as well as medical and welfare systems towards realization of “ZeroBurdening-care Society” and “Society 5.0.”
After serving as a Research Fellowship for Young Scientists in Japan Society for the Promotion of
Science, Research Associate at Institute of Engineering Mechanics and Systems of Tsukuba University,
Assistant Professor, Associate Professor, Visiting Professor at Baylor College of Medicine in Houston
and Professor of Institute of Engineering Mechanics and Systems of University of Tsukuba. He also
served as a core researcher of Cybernics in the Cabinet Offices’ FIRST program, and served multiple
roles in Robotic Society of Japan such as director, committee member, director and head of committee
of its international journal “Advanced Robotics.” He now serves as a professor at the Graduate Schoolof Systems and Information Engineering at the University of Tsukuba, CEO of CYBERDYNE, INC,
program manager of ImPACT, Director of Japan Society of Embolus Detection and Treatment, Council
Member of the Global Future Council on Human Enhancement of the World Economic Forum and as
Fellow of the Society of Instrument and Control Engineer (SICE).
Yoshiyuki Sankai establish a new academic field of Cybernics. With Cybernics, Yoshiyuki Sankai aims to shape the future by, structuring a
global education system to nurture personnel capable of shaping the future, and also by creating innovative technology, new industry andnurturing personnel simultaneously in order to overcome various problems caused by aging and decline in birthrate.
Yoshiyuki Sankai founded “CYBERDYNE, INC.” to research, develop, manufacture and sell cutting edge robots and services in the field of
medicine, welfare, personal care, business and labor support, as his endeavor to make further contribution to the society with his researches.

Major awards
2005
2006
2007
2009
2011
2012
2013
2014
2015
2016
2017

World Technology Award by World Technology Network
Gold prize for Good Design Award by Japan Institution of Design Promotion
Japan Innovators Award Excellence Award by Nikkei BP
METI ministers award of Contribution to Industry-Academia-Government Collaboration Award by the Cabinet Office of Japan
Invention of 21st Century Award by Japan Institute of Invention and Innovation
NetExplorateurs of the Year by UNESCO French HQ
Capek Award by INNOROBO
The 2014 Technology Pioneer by World Economic Forum Annual Meeting at DavosGold Prize in the Edison Award by Edison Universe
IPO of the Year in the DealWatch Awards by Thomson Reuters
Innovative Equity Deal of the Year in the DealWatch Awards by Thomson Reuters
Outstanding Contribution to Health Award by DIA Japan
Ministers of Health Labor and Welfare Award in Robot Award by METI and The Japan Machinery Federation
The Prime Ministers Award in Nippon Venture Award by METIMy thinking, on the other hand, aims to create value by providing solutions to the issues faced byconsumption.
The vision I am delineating through my business is the creation of a new industrial model that
promotes an industrial and social transformation from our current consumption-based economy to
one based on innovative solutions to critical social issues. We can accomplish this by continuing tocreate innovative technologies to solve these social problems, generating a new market centeredaround industries that employ the methods that provide these solutions at its core, and cultivating
the next generation of pioneers. A positive cycle driven by these three simultaneous endeavors is
our vision for the future, and CYBERDYNE is the enterprise that will lead the way.
CYBERDYNE primarily pursues public interest within a capital economy, while seeking to createand develop new industries. Basically, there are no existing markets for CYBERDYNE’s businesses.
As we have always said, our role at CYBERDYNE is to grapple with uncertainty and seek innovation,
replacing each of the five no’s in “no market, no user, no industry, no professionals, and no social
rules” with the adjective new.
We ask our stakeholders to join us in focusing on the many critical issues faced by people andsociety today, and transforming industries to create a new society for the future.

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Business Fields

C YBERDYNE

A n n u a l R e p o r t 2 0 17

The Group researches and develops Cybernic Technology as a technology that can support human beings in a fullycomprehensive manner, especially covering fields ranging from medicine and living support (at home and in work
environment) to labor support. The Group is engaged in creating a total system for the optimal combination ofhumans, robotics and information systems through activities stretching from basic research to the promotion ofCybernic Technology as an integral part of our communities.

B usi ne ss f i e l d s
MEDICINE
In this business field, the Group administers robotic medical
devices (medical robots), such as Medical HAL, which provide
Cybernic Treatment services for patients with disorders related
to the brain, nerves, or muscular system. The Group is also
involved in development, manufacturing and rents Vital Sensor,
which is a palm size device that would monitor electricalcardiogram and hardening of arteries. The Group provides

MEDICINE

these devices to specialist users (or the institutions that usethem), and also conducts related businesses.

LABOR SUPPORTLIVING SUPPORTIn this business field, the Group provides HAL for Labor Support

In this business field, the Group provides a variety of robots. HAL for Living(Lumbar Type) that supports the heavy-labor operations in

Support (Lower Limb Type) and HAL for Living Support (Single Joint Type)various industries. The Group also provides Cleaning Robots andare devices that promote the independent movement of elderly people andpeople with disabilities. HAL for Care Support (Lumbar Type) mitigates the riskof back injuries for caregivers by reducing the stress applied on the lower backduring heavy labor operation, such as transferring care aid and bathing aid, forelderly or disabled people.

LIVINGSUPPORTLABOR
SUPPORT

Transport Robots with built-in artificial intelligence (”AI”). The
Group also researches disaster relief robots that would support
the rescue missions in disaster sites.

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Robot Suit HAL ®

C YBERDYNE

The world’s first cyborg-type robot, HAL

A n n u a l R e p o r t 2 0 17

What HAL changes is the brain map
Major causes of lower limb disabilities are disorders of the neuromuscular system. In those cases, the brain cannot

When a wearer intends to move their body, various signals are sent from the brain to the muscles through thenervous system, and these signals leak onto the skin surface as bio-electric signals (“BES”). By using this BES,

use ordinary neural pathways and cannot order the legs to move.
Medical HAL is the only robotic treatment device that can teach the brain how to move the legs.

Medical HAL is able to realize the wearer’s intended movement.
Out of the various HAL systems, Medical HAL is known to be the world’s first robotic treatment device
that could improve the function of patients suffering from brain-nerve-muscle disease. This innovative medical
device has drawn a lot of attention since its introduction.

HAL moves as you intend
When a person moves their body, various signals are sent from the brain to the muscles through nerves. Thosesignals leak onto the skin surface as bio-electric signals (“BES”). Medical HAL reads the wearer’s BES, compensatesmuscle power of the lower limbs accordingly, and assists the wearer with walking, standing up and sitting down using
his or her own legs.

Flow of improving physical functions with HAL

1GENERATE 2 RECEIVE
an intent to move with the brain

the signals at the muscles

3 READ

4 MOVE
as you intend with HAL

the connections between thebrain, nerve, and muscle systems

When a person tries to move their body, theEach muscle group can contract and provide

The signals that are sent from the brain

HAL︎ controls the power units at each

Through steps 01~04, an interactive

brain sends a command signal through thepower when it receives the appropriate

through the nerves to the muscles leak onto

joint independently based on the BES that

biofeedback loop between the central

nerves to the muscles.

command signal from the brain through thethe skin surface as very faint signals knownreflects the wearer’s intent as well as othernervous system and the peripherals

nerves.

as BES. HAL︎ reads this BES through sensors

motion information.

is established. In other words,

MORE INFOThe speed of signals that are conveyed fromthe brain to each muscle is approximately
between 150 km/h and 400 km/h, which
is far beyond the speed of a Shinkansenbullet train. The technology to recognize andunderstand those high-speed signals at a
glance is indispensable for HAL.

However, if the flow of the commandsignal from the brain through the spinal cord

the signals with HAL

placed on the surface of the skin.
Combined with other types of information

Even if the command signals from the

5 IMPROVE

nerve information is sent from thebrain to the muscles are weak or sparse due

brain【brain➝spinal cord➝motor
neuron➝muscle➝HAL】, goesto the muscles is affected due to disease

like the center of balance or angles of theto disease or injury, as long as signals linked

or injury, the muscles may not receive thejoints, HAL︎ recognizes the kind motion theto the wearer’s intent can be detected, thethrough HAL, and returns backcommand signal as well, resulting in an

wearer is trying to do.

power delivered by HAL allows the wearer【HAL➝sensory receptors like muscle

impediment to their physical functions.
MORE INFO
In order to produce complex bodily motions
for walking, the brain controls a numberof muscles based on various types of
information from the wholebody. The device that wasdeveloped as an applicationof this principle was HAL.

MORE INFO
BES that leaks onto the skin surface isvery faint. Its voltage ranges from 1/1000th
to 1/100,000th of the voltage exerted bydry batteries. Since HAL is able to detectsuch weak signals, it does not overlook thewearer’s extremely subtle indicators that failto cause flexion in the leg.

to perform voluntary intentional movements

spindle fibers➝sensory neuron➝spinal

without excessively burdening the muscles

cord➝brain】to the brain to form a loop.

and brain.

Parameters like the amount ofassistance provided by HAL can be

MORE INFO
While extremely short, there exists a delay
between the moment the signal from thebrain arrives at the muscles and the moment
the muscles begins to move the joint.
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/unification ofhumans and HAL.

adjusted to meet the conditions of thewearer, so he/she can move their body as
intended without excessively burdening
their brain, nerve, and muscle systems.
This repeated movement strengthens
and adjusts the connections between theneurons in the brain and spinal cord andthe connections between the neurons
and muscles, promoting improvement
and regeneration of physical functions.

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Business ModelC YBERDYNE

A n n u a l R e p o r t 2 0 17

Treatment with Medical HAL(Utilizing public insurance in Japan and Germany)

When considering entry into any market, the Group
must formulate revenue mechanisms in the relevant
country based on its legal systems and businesspractices.
The principal form of the billing mechanism available

Treatment fee
is covered byinsurance

in most countries occurs when a patient with a disability
goes to a hospital where HAL is provided by theGroup and is made available for medical treatments.
The hospital receives payments for treatment using
HAL from the patient (or if the treatment is covered byinsurance, the hospital receives compensation from aninsurer) and pays part of it to the Group. For instance, inGermany where commercialization of HAL as a medical
device is progressing, the Group receives a treatment

Treatment
service

Service providers(Hospitals, etc.)

Treatmentfee

fee for each treatment session using HAL at no cost to

Payment
pertreatment

Insurance /social welfare
providersthe patient, since these treatments are wholly coveredby public workers’ compensation insurance.
In Japan, public health insurance coverage oftreatment with HAL has also started, and the Group will
structure a revenue scheme similar to Germany.

Lease of
HAL

Treatment
fee

Headquarters

910

Potential Markets

C YBERDYNE

Number of patients with notable diseases to which Cybernic Treatment
is applicable

List of notable related journals

StrokeSpinal Cord Injury

Spinal Cord Injury

9.9

0.6

million people

million people

A n n u a l R e p o r t 2 0 17

1. Functional Outcome of Neurologic—Controlled HAL—Exoskeletal Neurorehabilitationin Chronic Spinal Cord Injury: A Pilot With One Year Treatment and Variable Treatment Frequency (2017)
2. Against the odds: what to expect in rehabilitation of chronic spinal cord with a neurologically controlled Hybrid
Assistive Limb Exoskeleton. A subgroup analysis of 55 patients according to age and lesion level (2017)
3. The Effectiveness and Safety of Exoskeleton as Assistive and Rehabilitation Devices in the Treatment of Neurologic
Gait Disorders in Patients with Spinal Cord Injury: A Systematic Review (2016)
4.“Voluntary driven exoskeleton as a new tool for rehabilitation in chronic spinal cord injury — A pilot study” The Spine

Multiple Sclerosis

Parkinson’s Disease

0.8

1.9

million people

million people■ Parkinson’s Disease

6,800■ Spinal Cord Injury■ Stroke

1.6 mil.
141

1,820

Europe*2

Stroke1. “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)
2. “Pilot study of locomotion improvement using hybrid assistive limb in chronic stroke patients” BMC Neurology (2013)

Other researches■ Multiple Sclerosis

1,000
400
273

712
417
227

5. “Locomotion training using voluntary driven exoskeleton (HAL) in acute incomplete SCI” Neurology (2014)

Target diseases

8.5 mil.
3.2 mil.

Journal (2014)

United States

8 125*3
1,239

Japan

*1 Number of patients in the three top regions on medical device expenditure.
*2 Europe includes Germany, France, the United Kingdom, Italy and Sweden.
*3 Average of the estimated range from 100 thousand to 150 thousand.
Source:  New Energy and Industrial Technology Development Organization (2013), Ministry of Health, Labour and Welfare 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)

1. “Feasibility of rehabilitation training with a newly developed wearable robot for patients with limited mobility”
Archives of Physical Medicine and Rehabilitation (2013)

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Business Highlights

C YBERDYNE

Results of operation
In the fiscal year ended March 31, 2017, net sales recorded an increase of 30% compared to the net sales of theprevious year. This was mainly due to the following reasons— Treatment with Medical HAL covered by public health insurance started on September 2016.
— Improved model of HAL for Care Support (Lumbar Type) was introduced and recorded a significant increase in its
number of operating units.

A n n u a l R e p o r t 2 0 17

In fiscal year ended March 31, 2017,
the following products led the sales of the Group.
For the Medical HAL, in addition to the treatment covered by public workers’ compensation insurance that was
already introduced in Germany, insurance covered treatment with public health insurance commenced in Japan on
September 2, 2016 for neuromuscular diseases. The Group will continue to collaborate with Japanese and overseas
hospitals to conduct various clinical tests towards expansion of Medical HAL’s target diseases. Investigator-initiatedclinical trial for stroke started on September 30, 2016 towards obtaining medical device approval for stroke andfunctional improvement, regeneration with Medical HAL (Single-Leg Model).

Net Sales (millions of yen)

1,650

1,600

HAL FOR MEDICAL USE (LOWER LIMB TYPE)(units)(units)
200

188
140

150

(units)
100
200

1,265
1,200

450

111

(units)

188

78
140

50
150

489

500

384

500
400

350
450

489

355

111
1000

78

As of the endof Mar. 2014

300
400

As of the endof Mar. 2015

As of the endof Mar. 2016

As of the endof Mar. 201750

As of the endof Mar., 2014
350

355

384

As of the endof Mar., 2015

As of the endof Mar., 2016

HAL for Care Support recorded a significant increase in its operating units due to introduction of the improved model(units)(units) waterproof function allowing the device to be used for bathing
withaid. Increase was also due to subsidy project by

800

1,0000988■■ HAL FOR LABOR SUPPORT

300
250

the Ministryof
Healthdevicesin careHAL AsforofLaborAs■■of theAsSUPPORT
of Labour
the end andAs ofWelfare
the end toAssupportof the endinstallation of robotic
As of theend
As offacilities.
the endthe end
HALendFOR CARE
of Mar. 2014

631

of Mar. 2016

600
(units)
1,000
400

400

286

HAL FOR CARE / LABOR SUPPORT (LUMBAR TYPE)■■ HAL FOR LABOR SUPPORT■■ HAL FOR CARE SUPPORT

200
600
0
400

0
As of the endof Mar. 2014200

2014 / 32015 / 3of Mar., 2014

of Mar., 20152016 / 32017 / 3(units)2000

0
As of the endof Mar. 2014

150

(units)216

of Mar., 2016

200

498

988

216

714
274

800

2013 / 3of Mar. 2017

800

456

0

of Mar. 2015

Support also recorded an increase due to practical
274implementation to Haneda Airport Limousine Bus.

89 44
45
As of the endof Mar. 2015

89 44
45
As of the endof Mar. 2015

216

250

200

150
0

As of the endof Mar. 2017

714

44

100

0
As of the endof Mar., 2014

(units)200

As of the endof Mar. 2017

154

(units)

As of the endof Mar., 20160
As of the endof Mar., 201415

As of the endof Mar., 2015

44

50

282
As of the endof Mar. 2016

216

100

50

282
498
As of the endof Mar. 2016

150
(units)

As of the endof Mar., 2015

As of the endof Mar., 2016

14

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Analyst Interview

Analyst Interview“CYBERDYNE’s Challenges
to Shape the Future”| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

This is actually what the Company is good at and strongly promotes as its main business line. The Company has
finally reached this phase and, I believe, it is ready to push this concept strongly.
Shigemura: Let’s discuss the business of the Company. In Japan, the insurance for treatment with Medical HAL
under public health insurance was announced in 2016, followed by the start of Cybernic Treatment for neuromusculardisease patients. When a patient receives Cybernic Treatment, how does it contribute to your revenue? In otherwords, could you tell us the revenue scheme of Medical HAL?
Sankai: With the scheme of the Japanese health insurance system, the Company sets a minimum monthly rental fee
for Medical HAL to secure baseline revenue. Once the number of treatments goes above a break even figure, both

Shigemura: The Company filed their FDA application for Medical HAL in June 2017. Now we can see treatment with
HAL spreading out of Japan and Germany to the rest of the world. The global circumstances surrounding HAL at the
moment look entirely different from last year. Can we discuss the status of the Company as of this date?
Sankai: The Company is currently spreading its Cybernic Treatment with Medical HAL around the world as the firststep towards the grand plan of a Cybernic Revolution. The reason is because Cybernic Technology, such as HAL, isdesigned to connect humans and the physical and information spaces. I also see this as the core technology towards
shaping the super smart society of “Society 5.0." The other day, I was invited to the World Economic Forum in Dalian,
China, which is also known as the “Summer Davos,” to give a keynote speech on “Augmenting Humanity,” as partof the Cybernic Revolution based on Cybernic Technology. The gist of the speech is that the world is now following
the Company’s challenge to shape the future. In the last 12 months after the G7 meeting in Japan, I visited a few
countries that participated in the meeting,and talked with relevant ministers on related

the Company and the hospital operating the system will become profitable and they will share the profit.
Shigemura: In Japan, an investigator-led clinical trial for stroke patients is in progress. Will this expand the target
diseases of Medical HAL?
Sankai: Very likely. Medical HAL is currently approved as a medical device for neuromuscular orphan diseases. Once
Medical HAL obtains approval as a medical device for stroke, the Company will see an increase in patients using
HAL by two or three digits. So the outcome of this trial will have a huge impact on the Company’s business. Japan,
by the attempt of the Company, is leading a clinical trial of Cybernic Treatment with Medical HAL for stroke patients.
Certification for manufacturing and marketing Medical HAL as a medical device for expanded target diseases fromorphan neuromuscular diseases to stroke in Japan will have a positive impact on the certification process of Medical
HAL for stroke patients by the U.S. Food and Drug Administration (“FDA") and similar processes in other countries will
be expedited.

topics. I exchanged views in this regard
with eminent figures who participated in theSummer Davos mentioned above.
There is a term “IoT” that stands forInternet of Things. This concept is centeredaround “Things,” but I think “Humans” must

Inter viewer :be included in this concept. So the new

Kyoichiro Shigemura

buzzword should be “IoH” that stands for

Executive Director
Head of Medicine and Healthcare Team
Nomura Securities Co., Ltd.

Internet of Humans. This keyword popped up
around the community in the past few years
but the idea is to put this together with IoT to
make IoH/IoT. Instead of just adding the twoconcepts together, the idea is to combine
the two concepts at a high level. So every
human and thing will be connected, and thisconnection will evolve the entire world.

Kyoichiro Shigemura joined Nomura Securities Co., Ltd. in1991 and started serving as an analyst from 2000. He now
works as the head of the Medicine and Healthcare Team.
He has extensive knowledge in Japanese medical and longterm care system as well as the analysis of healthcarecompanies. He is passionate about discovering companies
that seek to break the stereotypes within the existing
industry. His major was psychology at Waseda University.
He is a member of the Securities Analysts Association ofJapan. He is a 3rd dan in Aikido.

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Analyst Interview

Analyst Interview| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Shigemura: In April 2018, prices of pharmaceuticals as

Shigemura: What is the status of public health insurance

well as treatment fees will be reviewed. How should weapplication in the EU? Also, recently it was announced

interpret the economic value of treatment with HAL?

that a Polish insurance company called WARTA decided
to provide insurance coverage for Cybernic Treatment in a

Sankai: I think insurance payment for treatment withfacility called Constance Care. Do you think that we’ll see

Medical HAL is adequate and will not be revised

more of these schemes to utilize private insurance fordownward. People involved in this discussion know

Cybernic Treatment in other countries?

large insurance cost reduction effect of the treatment
with HAL in comparison to existing treatments. Part ofSankai: In Germany, insurance coverage for treatment

this would-be reduced insurance amount is added onwith Medical HAL is insured by public workers’

insurance payment for treatment with Medical HAL. So I

compensation insurance and the Company is currently

think the pricing will at least stay around the current levelgoing through procedures to obtain public healthfor the time being. When a patient with an intractable

insurance coverage for the treatment. The Company’s

disease is hospitalized, it is said that the individual partsubsidiary in Germany, Cyberdyne Care Robotics

of annual costs which is not covered by national healthGmbH (“CCR”), receives patients coming from various

insurance can go over ten million yen. If the patient

countries. When I spoke with a patient who came

could use Medical HAL to extend the period withoutfrom the Netherlands, for example, he told me that

hospitalization for three years, he/she could save nearly

he individually arranged with a Dutch insurer to coverthirty million yen worth of medical expenses. So, even if

his medical expense in Germany. It seemed to be thethe treatment with Medical HAL is priced at a fraction ofsame for patients who came from other countries. They

the hospitalization fee, it can still be considered a bargain.

arranged coverage for the treatments with their insurers

I think this pricing of treatment with Medical HAL was

as individual cases before they started their treatments.

a result of thorough consideration and discussion about

Alongside these cases where individual arrangements

medical expenses as a whole.

exist, the Company is coordinating with private insurers

Another matter I want to point out is that,once patients start to recover their bodily functions, their mental state significantly changes. In other words,
physical improvement changes their way of living. It’s hard to calculate the monetary value of this change, which
overwhelmingly exceeds the amount of treatment fees. Moreover, I think the mental effects of Medical HAL on thepatients, as well as their family members, are significant.
Allow me to give you an example of a patient in Germany. This patient lost motor function in her lower limbs after
she fell off her horse. However, as she went through the treatment with HAL, she gradually recovered her physicalfunction. Finally, she became able to ride a horse again. HAL changed her life and last year, she became a student
of a medical school. Let me give you another example. This patient was infected with a virus and she lost motor
function in her lower limbs. Before she used HAL, it took her 23 seconds to walk 10 meters no matter how hard she
tried. Now, after using HAL, she can walk the same distance in 8 seconds. For her, this seems to be a life-changing
experience. She now aspires to become a doctor, and she is studying hard to get into a medical school. HAL does not
only change the lives of the patients but it could also change them from benefit receivers to taxpayers in the future.
HAL treatment gives the patients an opportunity to get into good jobs so that they can pay taxes rather than receiving
the benefits. This positive cycle is now apparent in Germany and I anticipate the same in Japan.

as in the cases of Poland and Japan’s Daido Life
Insurance. In that sense, I think the Company has a very good trend in terms of insurance.
Shigemura: How do you plan to disseminate Cybernic Treatment in the U.S.? How will you disseminate HAL tohospitals and gather patients?
Sankai: The Company is discussing U.S. business with a partner organization to build up a business model that suits
the situation in the U.S. The Company is in close contact with a medical institution located on the West Coast thatis part of a big hospital group and has good clinical research teams. The Company is also in contact with a medical
institution located on the East Coast that is known to be one of the busiest hospitals in the U.S. and I think theinstitution and the Company could build a good relationship. The medical institution is planning to coordinate with an
influential research institute in the U.S. to promote the business. Through the aforementioned coordination, I think theCompany could make a positive start in the U.S.
Shigemura: Allow me to ask about other types of HAL. HAL for Care/Labor Support (Lumbar Type) seems to be
spreading rapidly in the last few months. What is the situation at the moment and what are your plans for further
dissemination?

17

18

Analyst Interview

Analyst Interview

Sankai: The Company plans on applying additional functions to HAL (Lumbar Type) to release upgraded versions and| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Cleaning Robot is currently being verified inthis will be done in a very fast cycle.

Haneda Airport, and the Company actually applied
an upgrade that takes the technology to the next

For example, the Company received a request for a waterproof function of HAL for Care Support (Lumbar Type)level. Its artificial intelligence and sensors enablefrom its customers so that caregivers could use the device for bathing aid. The Company worked on it from scratch

Cleaning Robot to conduct environmental cognition

and managed to release the waterproof version of the device. Likewise, the Company will continue to apply various

at the world’s most advanced standard.

upgrades to the device, so that it can rapidly close in on practical field requirements.

These devices, robots and humans will all

From time to time, even HAL breaks. One day, the Company received contact from its customer. The customer

be connected through IoH/IoT. The Company isclaimed that their robot broke and they would not be able to work without the device. So the Company fixed it very

preparing to introduce these various technologies,

quickly. It was the first time the Company heard such a thing from a customer. This comment was severe, but, at thecentered around IoH/IoT, to the market.

same time, the fact that the Company’s technology became an indispensible part of its customers’ operation mademe happy.

Shigemura: Last year, the Company made anannouncement on combining regenerative medicine

HAL for Labor Support (Lumbar Type) is now disseminated to new fields, for example, work places like orange

with iPS stem cells and Medical HAL with Keio

farms or post offices. Workers in these places are forced to work with their back bent while they do sorting work

University.

and so on. It is exciting to go into fields and industries that the Company did not imagine going into. For some work
places, HAL (Lumbar Type) will do no good, as the movements of the worker do not involve the lower back too much.

Sankai: The Company approaches coordination with regenerative medicine based on the key phrase “newNotwithstanding that, as a result, the Company now has a better understanding of the industries and occupations

combination.”that need its devices.
Shigemura: Could you tell us about the new devices that you are working on?
Sankai: The Company has concluded the preliminary consultation with the Pharmaceuticals and Medical Devices
Agency (“PMDA") for the Vital Sensor, which could detect hardening of arteries and an irregular pulse. The Company is
now preparing documents to apply for medical device approval.
Also for Medical HAL, which has already been approved as a medical device, the Company is now able tomanufacture a very small size of this device. The
Company has renewed motors, substrates andcircuits. Once this very small-sized device comes
out, HAL could be available for patients with heightsfrom 100 cm. The Company also completed apreliminary consultation with the PMDA for the very

What we witness here is a new challenge of combining the revolutionary robotic technology of HAL together
with regenerative medicine, which is another revolutionary technology in a different field. This is what we call“innovation.” HAL on its own is a result of innovation. HAL is formed from an essence of a) sensing technology for
information from human brain-nerve systems, b) robotic technology, c) artificial intelligence technology, d) IoH/IoTtechnology and e) various other technologies. It’s difficult to create anything by mixing up ordinary things that havebeen around for years. However, if we combine extremely good things together, we can create something that has
never existed in the world.
Multiple “new combinations” lead to highly innovative devices. When those devices are combined with equally
innovative technologies from different fields, such as regenerative medicine, a giant wave of innovation occurs. The
Company is also planning to combine these devices with pharmaceuticals. The Company does not intend to stick with
one type of pharmaceuticals or regenerative medicine. So in regenerative medicine, the Company is also coordinating
well with a group that is not involved with iPS stem cells.

small-sized HAL and it is now adjusting the timing

Shigemura: The Company has many projects. Please tell us about the production structure, capacity, staff members,

to introduce this product to the market. This will be

etc. Could you also tell us how you plan to gather human resources and material resources?

the Company’s giant leap forward in this year.

Sankai: Sophistication of production has an important role in the Company. It could contribute to enhancement ofTransport Robot is currently working day

products reliability, reduction of costs and detection of problems. The whole process is literally a matter of researchand night in a pharmaceutical company and theand development. In the early stage such as establishment of production procedure, the Company will have to do

customer seems to be very satisfied with it. Now,

everything within the Company. However, once the Company has established an efficient routine, it can outsource

a new unit of this robot is installed every time theproduction to external collaborators. Production of HAL (Lumbar Type), for example, is outsourced.

customer makes a new factory.

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Analyst Interview

Analyst Interview| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Regarding the Company’s facility in Fukushima prefecture, the development of a next-generation production

In the industrial sector, the concept of Industry 4.0 is popular. The idea behind it is to increase the mass offacility where veteran workers and robots can collaborate is the most important mission. The Company will increase

production and sales by increasing the efficiency of production. This concept seemed feasible when our planet was

the capacity of the facility while converting the entire place “Cybernic” to take it to the next level.

relatively much larger and the effect of human activities on it was minimal. However, the era we live in today is

As such, the Company needs versatile staff members in its R&D team, someone capable of covering individual
technologies to the entire systems. Competent R&D staff with experience at different companies joined theCompany. The Company also employs most of doctoral degree holders as project leaders, who earned their degree

different. The world is much smaller and under these circumstances we should not be wasting anything. We must
work to solve the problems in our society and turn this process into an economic cycle.
If a technology could get rid of the heavy, long and harsh parts of long-term care into “Zero” it will make lifein the academic field of Cybernics. Joining the Company, they could develop their projects in the university into moreeasier for long-term care providers. It would also increase the independence of the long-term care receivers. The

sophisticated ones here. Some succeeded in turning their projects into actual products. They made their dreams

technology of HAL could be used to promote the function improvement and regeneration of patients and care

come true. I think this is a great ecosystem.

receivers. When the technology takes the shape of HAL (Lumbar Type), the device reduces the stress applied on

Shigemura: When I talk with Dr. Sankai, you always say, “all devices are connected through data.” What is yourstrategy towards social implementation of “Society 5.0”?
Sankai: The important strategy is to start from the medical field. When I think about the “world” that is approaching
the Company, I think the boundaries between the medical field and the non-medical fields gradually start to overlap
each other, creating a vast field in between. This grey zone will be the Company’s new market.

the lumbar part of a care giver so as to make heavy work easier and protect users. The device could also be used fora person in the need of care, improving his/her bodily function to stand up and sit down. As you can see from theexamples of the world’s first cyborg-type robot HAL, Vital Sensor and so forth as the practical application of Cybernic
Technology, the technology is so innovative it is being utilized for various purposes in the fields of medicine, longterm care and living support. Implementation of Cybernic Technology will connect humans and technology in thephysical space and the information space. Such connection has never happened in human history. This is when theLets say a person who was hospitalized becomes able to leave, and he/she moves on to follow-up visits. The

social revolution of Society 5.0 is realized on the basis of all the past and the current social development stages, fromperson would visit the hospital from house or from work. The person will spend his/her life according to this triangularthe Hunter-Gatherer Society (Society 1.0) to the Information Society (Society 4.0). Perhaps this very moment is thepattern. At that time, what if the Company’s Vital Sensor is introduced at this person’s house? The same device could

beginning of the next evolution. I think Cybernic Technology is capable of driving our society that far.

also be introduced at work places and hospitals, being connected to each other with the same format of data. What if
these work places happen to be somewhere more delicate like hospitals? If a nurse has to use a device in an ICU, thedevice must be compatible with other medical devices in the ICU. If the Company could design this device according
to this standard from the beginning, there wouldn’t be any problems in the place where it is used.
Therefore, in the world of Society 5.0, humans and technology will be connected in the physical space as well as
the information space, regardless of whether they are in the field of medicine, nursing care or living support including
work places and houses. This society that is centered around technology will support every treatment, at work and indaily lives. In anticipation of such a society, the Company will continue its challenge to shape the future with its nextgen research and development capacity under its business strategies.
Shigemura: To me, Cybernic Technologies have the potential to turn themselves into fundamental infrastructure
capable of supporting people in the hyper-aging society, which is becoming a trend worldwide. Please tell us your takeon the importance of this technology, and your challenges to realize a “Zero Burdening-care Society.”
Sankai: As you mentioned, the number of elderly person is increasing and we have entered into the hyper aging
society. According to the estimation, it will reach its peak from 2055 to 2056 and the number of Japanese citizens
over 65 years old will go over 45% of the entire population including infants. As the number of elderly people
increases, those who need long-term care will increase accordingly. Likewise as the birthrate decreases, people
capable of providing care will decrease too. So we must think how to overcome these situations.

Shigemura: We look forward to a day when we can witness these cutting-edge endeavors coming into reality andfeel them in our daily lives.
Sankai: Thank you very much. The Company will continue its business, in line with its challenge to shape the future.
The Company wants to make its shareholders glad that they hold the shares of CYBERDYNE.

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Corporate Social Responsibility

Corporate Social Responsibilit y| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Contribution to the society

Endeavors to create a pleasant workplace environment

Based on the philosophy of “technology exists for humans and society,” “the Group works on social implementation

The Group adheres to the Labor Standard Act and related laws. The Group also prepares various work arrangements

of innovative Cybernic Technologies to overcome various problems caused by aging and the declining birthrate, whichsuch as flextime, exemption and compressed work schedules to suit different lifestyles. Furthermore, in order tomodern society faces.

create an environment that suits the needs of women, which comprise 30% of the workers, the Group prepared

Through innovative Cybernic Treatment that was made possible by Medical HAL, patients for whom it was difficult
to improve their physical functions can now get back to work. HAL for Living Support would reduce dependence ofdisabled and elderly people on their caregivers in daily life.

employee benefits such as maternity leave and menstrual leave. The Group also prepared parental leave as well as
shortened working hours due to child/long-term care and many workers use these benefits.
The Group has a variety of workers of different ages, sexes and nationalities. The Group established a system to

HAL (Lumbar Type) mitigates the risk of back pain and it has proven effective through multiple verification sites.

ensure that all the workers can work pleasantly and perform at their full potential. A clinical psychologist of the Group

Installation of this device would improve the work environment in long-term care, construction, logistics, agriculture

and an industrial physician work together to conduct interviews with the workers on a regular basis and respond to any

and any other industry where workers are required to perform heavy physical work on a regular basis.

requests for consultation to maintain good physical and mental state. Furthermore, the Group has an Improvement

Together with the autonomous Cleaning Robot and Transport Robot with built-in AI designed to free workers fromheavy labor, the Group aims to create a work environment where workers can work longer and safer.

Office, which receives various requests related to the work environment. Requests received will be considered incoordination with the related units and if they are deemed to be reasonable, requests are adopted.

The Group leads the endeavors to realize “Society 5.0” by forming a system where humans, society and theenvironment can be connected, various data can be extracted and vast amounts of that data can be gathered andanalyzed. Data gathered could lead to a discovery of new information that could be helpful to prevent diseases or
improve work environments. By forming this system, a hyper smart society where everyone can live safely andprosperously at a very high level can be established.
The Group continues to stay involved in the entire process from basic research of innovative technologies to theirsocial implementation. At the same time, the Group will continue its endeavors to create new industries and nurture

Other activities that contribute to the society
In order to contribute to the development of the society, the Group sponsors organizations for social contributions andevents for development of the local community. For example, the Group is one of the sponsors of Paralym Art, which
is an organization that promotes the independence of people with disabilities. In acknowledgement of the Group’s
sponsorship, Paralym Art provided the CYBERDYNE Award in the SOMPO Paralym Art Soccer Art Contest.

human resources, in order to solve various problems in the society and to shape the future.

Endeavors to establish a peaceful society

SOMPO Paralym Art Soccer Art Contest CYBERDYNE Award

In order to prevent Cybernic Technologies being used for military purposes, the Group has a Peace and Ethics
Committee that is mainly composed of the outside board members. The Peace and Ethics Committee discusses andverifies the possibility of whether the technology could be used to damage people or as a weapon.
The Group designs its product pursuant to the international standard of ISO to ensure its safety. For example,
Medical HAL is designed pursuant to the quality management system of ISO 13485 and risk management for medical
devices of ISO 14971. HAL (Lumbar Type) are designed pursuant to ISO 13482. The Group also conducts multiple
endeavors throughout the entire process from manufacturing to disposal, in order to minimize the influence on theenvironment caused by the Group’s activities.
Upon manufacturing, the Group is only involved in the assembly of the final product and it does not use or produce
any materials that are considered to be hazardous. The Group only uses materials that can be recycled as the packing
materials for its devices. As the Group uses a rental business model, it collects devices that must be disposed.
Collected devices are dismantled and parts are sorted by material type. Materials that can be used again are reusedfor the new devices. If the materials must be disposed, the Group will assign specialized companies to dispose thematerials. The disposal process will be tracked and rated by the Group.
The Group recognizes that product design to ensure safety and preserve the environment is an important issue,
and it intends to make further commitments to the issue.

Title: Soccer Ball
Artist: Reo Murai

23

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Management StructureManagement Structure| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Members of Board of Directors

Yoshiyuki Sankai

Director

Born June 24, 1958 (59 years old) (Male)Ph.D. in Engineering

Professor of Functional Engineering, University of Tsukuba
Professor at the Graduate School of Systems & Information Engineering,
University of Tsukuba (present)
2004/6 Director at incorporation of CYBERDYNE
2006/2 Representative and CEO of CYBERDYNE (present)
2011/10 Director of the Center for Cybernic Research, University of Tsukuba(present)

Years in service as Director

13 years

Program manager of the Impulsing Paradigm Changes through Disruptive
Technology Program (ImPACT) hosted by the Cabinet Office of Japan(present)(Important positions held outside CYBERDYNE)
Professor at the Graduate School of Systems & Information Engineering, University ofTsukuba
Director of the Center for Cybernic Research, University of Tsukuba
Program Manager of ImPACT hosted by the Cabinet Office of Japannone

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

Director

Born May 1, 1978 (39 years old) (Male)Ph.D. in Engineering

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
2004/6
2005/5
2006/2

2007/10 Head of Research and Development Unit at CYBERDYNE
2013/12 Team leader of the Information Strategy Team in the Improvement Office of
CYBERDYNE (present)

Director at incorporation of CYBERDYNE (present)
Representative Director of CYBERDYNE
Representative Director of Medical Interface Incorporated

Years in service as Director

13 years

1989/7 Worked for Nippon University School of Medicine
1996/10 Councilor 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)

Years in service as Outside Director

9 years

Special interest in CYBERDYNE

none

Shinji Uga

Number of company shares owned
Common20,000 Shares

Certified Public Accountant
MBA

Director

Born February 15, 1970 (47 years old) (Male)

2008/3 Councilor at Japanese Association for Coronary Artery Surgery (present)
2008/6 Outside Director of CYBERDYNE (present)(Important positions held outside CYBERDYNE)
Lecturer at Nihon University School of Medicine

Special interest in CYBERDYNE

none

Kazumasa Yoshida

Number of company shares owned—

Outside Director
Independent Officer

Born August 20, 1958 (59 years old) (Male)

Fumiyuki Ichihashi

Ph.M.D. in Medicine

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

2014/6

Special interest in CYBERDYNE

Outside Director

Born May 12, 1962 (55 years old) (Male)

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
2003/7
2004/4

Kinichi Nakata

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
1984/10
2003/6
2012/6
2013/2
2013/6
2014/6
2015/6

2016/7 Outside Director of FreeBit Co., Ltd. (present)(Important positions held outside CYBERDYNE)
Outside Director of Onkyo Corporation
Outside Director of Gibson Guitar Corporation
Outside Director of TDK Corporation
Outside Director of Mamezou Holdings Co., Ltd.
Outside Director of FreeBit Co., Ltd.

Joined Intel Corporation
President and CEO of Intel Kabushiki Kaisha
Outside Director of Onkyo Corporation (present)
Outside Director of Gibson Guitar Corporation (present)
Outside Director of CYBERDYNE (present)
Outside Director of TDK Corporation (present)
Outside Director of Mamezou Holdings Co., Ltd. (present)

Years in service as Outside Director

4 years

Special interest in CYBERDYNE

none

Hikari Imai

Number of company shares owned
Common60,000 Shares

Outside Director

Born July 23, 1949 (68 years old) (Male)
Descriptions of the positions, personal history, assignments and other important positions held outside the Company
2008/92009/2Joined CYBERDYNE
Director (present) and head of Financial Affairs and Accounting
Unit of CYBERDYNE
2013/12 Head of the Corporate Unit of CYBERDYNE (present)

1994/4 Joined Tomen Corporation (Now known as Toyoda Tsusho)
2001/10 Joined Chuo Aoyama Audit Corporation (Now known as
PricewaterhouseCoopers)
2005/10 Assigned to PricewaterhouseCoopers Shanghai office
2007/6 Joined Ridgeway Capital Partners Ltd.

Years in service as Director

8 years

Special interest in CYBERDYNE

none

Number of company shares owned
Common60,000 Shares

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
1974/4
1986/1
1993/4
1999/1
2007/11
2008/4
2012/4

Joined Yamaichi Securities Co., Ltd.
Joined Morgan Stanley Securities Co., Ltd.
Joined Merrill Lynch Securities Company
Vice Chairman of Merrill Lynch Japan Securities Company, Limited
Director, Vice President of RECOF Corporation
President and CEO of RECOF Corporation
Outside Director of Olympus Corporation

Years in service as Outside Director

2 years

Hiroaki Kawamoto

Director

Born August 25, 1974 (43 years old) (Male)Ph.D. in Engineering

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
2004/6
2005/8
2006/2

Director at incorporation of CYBERDYNE
Researcher at Japan Association for the Advancement of Medical
Equipment
Director of CYBERDYNE (present)

Years in service as Director

13 years

2015/4

Associate Professor at the Graduate School of Systems & Information
Engineering, University of Tsukuba (present)(Important positions held outside CYBERDYNE)
Associate Professor at the Graduate School of Systems & Information Engineering,
University of Tsukuba

Special interest in CYBERDYNE

none

Number of company shares owned
Common14,000 Shares

2015/6 Outside Director of CYBERDYNE (present)
2016/6 Outside Director of PACIFIC METALS CO., LTD. (present)
2016/12 Chairman of 3DOM Inc. (present)(Important positions held outside CYBERDYNE)
Outside Director of PACIFIC METALS CO., LTD.
Director and Chairman of 3DOM Inc.

Special interest in CYBERDYNE

none

Number of company shares owned—

25

Management Structure

Corporate Governance C o r p o r a t e G o v e r n a n c e | C Y B E R D Y N E A n n u a l R e p o r t 2 0 1 7

Members of Audit and Supervisory Board

1. The Company’s basic approach to corporate
governanceOutside Audit andSupervisory Board Member(Full-time)

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

Years in service as Outside Audit andSupervisory Board Member

2005/1
2011/6

Joined KPMG AZSA LLC.
Outside Audit and Supervisory Board Member of CYBERDYNE (present)

Special interest in CYBERDYNE

none

6 years

Cees Vellekoop

Number of company shares owned—

Outside Audit andSupervisory Board Member

Born May 4, 1956 (61 years old) (Male)

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

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

Years in service as Outside Audit andSupervisory Board Member

2003/5 Joined Allen & Overy Gaikokuho Kyodo Jigyo Horitsu Jimusho
2005/10 Admitted in England and Wales as attorney-at-law
2007/6 Audit and Supervisory Board Member of CYBERDYNE (present)

Special interest in CYBERDYNE

none

10 years

Number of company shares owned—

Mr. Vellekoop relinquished his certificate as attorney-at-law in Britain and in the Netherlands

Outside Audit andSupervisory Board Member

Kenichiro Okamura
Born August 18, 1971 (46 years old) (Male)

Certified Public Accountant

Independent Officer

Descriptions of the positions, personal history, assignments and other important positions held outside the Company
1994/4
2007/2
2009/92011/6
2011/6

Joined Chuo Audit Corporation
Representative Director of Kabushiki Kaisha BizNext(Now known as Kaede Accounting Advisory Inc.) (present)
Representative Director of Tokyo-IAS Inc. (present)
Senior Partner of Akasaka Sogo Accounting Firm Co., Ltd.
(Now known as Kaede Tax Corporation) (present)
Outside Audit and Supervisory Board Member of CYBERDYNE (present)

Years in service as Outside Audit andSupervisory Board Member

6 years

2015/6

Outside Audit and Supervisory Board Member of SG Holdings Co., Ltd.
(present)
2016/6 Outside Director of Kanematsu Sustech Corporation (Audit Committee)(Important positions held outside CYBERDYNE)
Representative Director of Kaede Accounting Advisory Inc.
Outside Audit and Supervisory Board Member of SG Holdings Co., Ltd.
Outside Director of Kanematsu Sustech Corporation (Audit and Supervisory
Committee)

Special interest in CYBERDYNE

none

conflicts of interest with the university.
As a result, outside Directors have the ability to veto ordinary
resolutions as necessary during Board Meetings when there areproblematic conflicts of interest with the University of Tsukuba,
thereby establishing an effective system to prevent problematicconflicts of interest.
For the purpose of protecting the interests of non-controllinginterests, the Company has put in place a system for obtaining
resolutions at the Board of Directors based on preapprovals
from a committee comprising the outside Directors and outside
Audit and Supervisory Board Members when decisions must be
made concerning transactions between the Company andYoshiyuki Sankai, who is a controlling shareholder of theCompany, and the Sankai Health Foundation 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.

2. Corporate organization
The Company has a Board of Directors that meets at least oncea month to rapidly make decisions and supervise the Membersof the Board of Directors (also referred to as “Director(s)”) as
they execute their duties. The Board of Directors is comprisedof seven Directors, three of whom are outside Directors,
forming a structure that enables the Board of Directors toefficiently reach decisions and make business judgments.
The Company also has an Audit and Supervisory Board. The
Audit and Supervisory Board consists of three outside Audit andSupervisory Board Members who proactively voice their opinions
at Board of Directors Meetings to enhance supervision. The
Audit and Supervisory Board Members perform audits from an

General Meeting of Shareholders
Number of company shares owned—

ReportingBusiness
reportingElection,
Dismissal

Board of Directors
ReportingElection,
Dismissal

Reporting

Guidance

Representative Director
Reporting
Reporting

Guidance

Business divisions

Internal audits

Accounting audits
Business oversight

Collaboration

Election,
Dismissal

Audit andSupervisory Board

Collaboration

Collaboration

Accounting audits
Guidance and advice

Independentaccounting auditor

Advising attorney

Election, Dismissal

Joined The Mitsubishi Bank, Ltd. (Now known as The Bank of TokyoMitsubishi UFJ, Ltd.)Internal Audit Office

1975/4

objective standpoint with regard to business execution andimportant decision-making by the Board of Directors.
Directors’ compensation is debated by the Compensation
Committee which consists of at least three Directors or Audit
and Supervisory Board Members appointed by the President
and CEO of the Company. The Compensation Committee thensubmits its opinions about compensation to the Board of
Directors.
With the objective of preventing problematic conflicts ofinterest in the Company’s relationship with the University ofTsukuba, the Company ensures there is at least the same or ahigher number of outside Directors with no affiliations with the
University of Tsukuba than the number of Directors (e.g.,internal Directors), excluding internal Directors with potential

The Company recognizes the importance of efforts to improve
corporate governance by enhancing transparency and ensuring
compliance throughout operations in order to increase 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 thestandpoint of, not only making sure the decisions the Company
makes and actions it takes do not violate laws and market
regulations, but also ensuring that it has not ignored thedemands of the society and that it is indeed contributing to
the society. The company also believes that high levels oftransparency are essential for the proper functioning ofcorporate governance.
To this end, the Company takes a proactive stance on
disclosing information to shareholders, investors, employees
and customers, which goes beyond the legally required level.

Compensation
Committee

Born April 1, 1953 (64 years old) (Male)

ReportingYutaka Fujitani

Peace and Ethics Committee

26

27

28

Corporate Governance

The Company has also established the Peace and Ethics
Committee to prevent the use of its advanced technologies toharm 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 and Ethics
Committee. Before entering a business field outside the areasof medicine, living support, and labor support, which are definedin the Company Code of Conduct, the Peace and Ethics
Committee investigates, deliberates and reaches a decision onwhether the Company’s advanced technologies could be used
to harm people or to create military weapons as a consequenceof entering the business field. The committee then submits its
findings to the Board of Directors.

3. System to ensure the appropriateness ofbusinesses and actual operation of the system
i. System to ensure the appropriateness of businesses
The resolution passed at the Board Meetings with regard to
the system to ensure that the Directors implementation ofbusiness is conducted in compliance with laws, regulations andthe Articles of Incorporation, as well as the structure to ensurethat the business is conducted in an appropriate manner isstated as below.
(a)	System to ensure that the Directors and employees of theCompany and the subsidiaries (the “Group”) perform theirduties in accordance with laws, regulations and the Articles
of Incorporation•	A code of conduct that embodies the Company Code of
Conduct and other compliance-related regulations shall beestablished for Directors and employees to ensure adherence
to laws, regulations, the Articles of Incorporation and internal
regulations.
	  The designated Director of the Company shall have crossorganizational control over compliance initiatives and be
responsible for building, maintaining and updating compliancesystems. The Director shall disseminate the spirit ofcompliance to Directors and employees of the Group to identify
and solve problems through seminars, audits, and risk
management processes.
•	The Company shall also establish the Affiliated Company
Management Policy and in its respect, assign Directors (ifnecessary, an Audit and Supervisory Member) of the notablesubsidiaries. Also by making it necessary for the subsidiaries toobtain approval from the Company with regard to importantmatters and the Company corporate sector to conduct certain
parts of the management work, the Affiliated Company
Management Policy shall ensure the appropriateness of theirwork.
•	The Company shall establish the Internal Audit Office who will
work directly under the Company CEO. The Internal Audit
Office shall conduct internal audits in accordance with theInternal Audit Policy and Affiliated Company Management
Policy to check the compliance status with laws, the Articles
of Incorporation, internal regulations and risk management.

Corporate Governance	  Results of the internal audits shall be reported to theCompany CEO, the Audit and Supervisory Board, and Boardof Directors.
•	The Hotline System Policy shall be established and operated asa means for employees to directly provide information about
legally suspicious behavior. The method of providing information
by means of oral communication, email, chat and an opinion box
shall be the subject of the compliance hotline policy.
(b)	System to store and manage information related to the
execution of duties by the Directors•	The Company shall establish the Document Management Policy
which states the method of storing and managing information
related to the execution of duties. Pursuant to the law and thispolicy, the information related to the execution of duties shall berecorded and stored in paper or electronic format.
•	This information shall always be accessible by the Directors
and Audit and Supervisory Board Members.
(c)	Regulations and other systems of the Group to manage therisk of losses•	In order to strengthen the risk management structure of theGroup, a designated Director shall put a relevant operating unit
in charge for each risk category and each operating unit incharge is to create risk scopes, risk profiles, self evaluation
policies and guidelines. The Director in charge of finance shallmonitor risks across the organization and address companywide risks.
•	When a new risk arises, the Company CEO shall quickly
appoint a Director or head of operating unit in charge ofhandling such risks.
(d)	System of the Group to ensure the efficient execution ofduties by Directors•	As a system to ensure the efficient execution of duties byDirectors, The Board of Directors shall meet once a month andprovisional Board Meetings shall be conducted whenevernecessary.
•	Regarding the execution status of matters resolved by the
Board Meeting, the designated Director or head of operating
unit shall report on a regular basis and the Audit andSupervisory Board shall perform audits.
•	Medium-term business policy that timely reflects the changes
in the business environment shall be established. The
Companies progress towards the relevant policy shall bereported to the Board of Directors whenever necessary.
•	The Company shall also establish the Affiliated Company
Management Policy in order to manage the subsidiaries under
the supervision of a related sector of the Company so that the
Directors of the subsidiaries can execute their duties efficiently.
(e)	System to ensure reporting on the subsidiary Directors’
performance of duties to the Company•	The Company shall establish the Affiliated Company
Management Policy and the subsidiaries must report to theCompany’s sector in charge of managing subsidiaries whenevernecessary with regard to the status of their duties.

(f) Matters regarding employees who assist the Audit andSupervisory Board with the fulfillment of its duties•	When the Audit and Supervisory Board requests assignment ofstaff to assist with its duties, the Board of Directors may
designate the appropriate employees who shall serve as
assistant employees or as employees who also hold a post as an
assistant upon consulting with the Audit and Supervisory Board.
•	During the assistance period, the authority over the designatedemployees shall be delegated to the Audit and Supervisory
Board, and the employees shall not be subject to the chain ofcommand of the Board of Directors. Any performance
evaluation and changes in the relevant personnel providing
assistance shall require the consent of the Audit andSupervisory Board.
(g)	System for Directors and employees of the Company toreport to the Audit and Supervisory Board, and a system for
Directors and employees of the subsidiaries, or theCompany’s personnel who received reports from Directors
and employees of the subsidiaries, to report to the Audit andSupervisory Board of the Company•	The Directors and employees of the Company as well as the
Directors and employees of the subsidiaries shall report any
significant matters which are against the law or the Articles ofIncorporation, matters that are considered dishonest acts, andmatters that may have a significant impact on the company, to
the Audit and Supervisory Board Member immediately. In
addition, if the Audit and Supervisory Board Member asks for areport from the Directors or employees pursuant to the law,
Auditing Standards or Regulations of Audit and Supervisory
Board Meeting established by the Audit and Supervisory Board,
Directors or employees in concern shall report promptly.
	  In order to improve comprehensiveness of the report
regarding any significant matters which are against the law or
the Articles of Incorporation, matters that are considereddishonest acts, and matters that may have a significant impact
on the Company, the Directors and employees of the Company
as well as the Directors and employees of the subsidiaries shallconduct a hearing and gather information from the reports
stated in this item, items stated in internal audits, hotlines andaccounting auditors.
•	Pursuant to the Hotline System Policy, if matters that may
violate the law or corporate compliance in the Group are found,they shall be reported to the Board of Directors by the Director
in charge of compliance. Furthermore, the contents reported
and the results shall be reported to the full-time Audit andSupervisory Board Member.
•	The Internal Audit Office of the Company shall report the statusof the internal audit to the Audit and Supervisory Board
Members. Furthermore, the Director in charge of complianceshall report the status regarding compliance to the Audit andSupervisory Board when necessary.
(h)	System to ensure that the person who made reports to the
Audit and Supervisory Board Member will not be put in a
disadvantageous position
The Company shall not conduct any treatment that puts a person
in a disadvantageous position because of their reports made to
the Audit and Supervisory Board Member.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17(i)	Matters regarding the Company policy of processing
auditing fees
If the Audit and Supervisory Board Member requests a payment
required in accordance with the execution of their duty inadvance or to be reimbursed, with the exception of cases wheresuch a payment is recognized to be completely unnecessary forthe execution of their duty, it shall be paid promptly upon request.
(j)	Other systems to ensure the effective execution of audits by
the Company’s Audit and Supervisory Board•	The Director and employees of the Company and thesubsidiaries shall comply with hearing or visiting audits andother methods of investigation by the Audit and Supervisory
Board Member in order to secure the effectiveness of theaudits.
•	The Company shall provide enough opportunities for the Audit
and Supervisory Board Member to exchange opinion with the
Directors, accounting auditors and any other personnel
required to appropriately execute the duty as an auditor.
•	The Company shall also provide enough opportunities for the
Audit and Supervisory Board Member to coordinate with other
Audit and Supervisory Board Members and to gather
information from employees of the subsidiaries.

ii. The status of operation of the systems to ensure
appropriate execution of duties.
The Group shall work to maintain the aforementioned systems
and its operation. Notable actions conducted within this fiscal
year which are thought to be important in regards to internal
control are stated below.
(a)	Corporate Compliance System
All members of the Group shall work to comply with the law inaccordance with the policies regarding the compliance system,
such as the Company Code of Conduct. Furthermore, in order todetect or avoid violation of compliance at the earliest opportunity,
the Hotline System Policy and its method of utilization shall be
notified to related personnel in a thorough fashion.
(b)	Risk Management System
For the Group, the Director in charge of risk management shalldetermine the operating unit in charge of each risk category,monitor the risk status and respond accordingly. Furthermore,
the status of this risk management is subject to internal audits
and audits conducted by the Audit and Supervisory Board
Member.
(c)	Effectiveness of the execution of duty by the Directors
For the Group, the Board of Directors shall meet once a monthwith provisional Board of Directors Meetings conducted
whenever necessary, in order to check the reports of businessexecution (including reports from subsidiaries), progress ofbusiness for the fiscal year (including subsidiaries), and so on.

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Corporate GovernanceCorporate Governance

4. Status of internal audits and audits by Audit andSupervisory Board Members

6. Relationships with outside Directors and outside
Audit and Supervisory Board Members

The Company has established an internal control system
necessary to perform operational audits of its Internal Audit
Office (a concurrent position of one internal auditor) based on
the Internal Audit Policy.
As the head of Internal Audit Office also belongs in the
Corporate unit as the team leader of General Affairs and HR
team, internal audit on General Affairs and HR team are
conducted by an auditor selected by the president and CEO.
Audits by the Audit and Supervisory Board involves
operational audits, such as audits of the business execution 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 attorney elected for their expert
knowledge of accounting, legal affairs and risk management.
Therefore, the Company has put in place a system witheffective management oversight functions.
Internal Audit Office coordinates with full-time Audit andSupervisory Board Member upon establishment of annualinternal audit plan. Results of internal audit are reported to
President and CEO and each of the Audit & Supervisory Board
Members. Furthermore, if issues related to internal control arefound in the midst of internal audit, Internal Audit Officeprovides proposals for improvement to the unit in charge of theinternal control process. Internal Audit Office coordinates with
Audit & Supervisory Board Members as well as accounting
auditors by exchanging opinions or information, so that audit canbe executed effectively.

The Company elects three outside Directors and three outside
Audit and Supervisory Board Members.
The Company has not set any standards or specific policies
regarding the independence of its outside Directors and outside
Audit and Supervisory Board Members. Instead, the Company
appoints outside Directors and outside Audit and Supervisory
Board Members based on their extensive experience as
managers, as well as their superb knowledge of research,finance, accounting and legal affairs, for the purpose of building
an effective corporate governance system from an external
standpoint.
The Company expects its outside Directors and outside Audit
and Supervisory Board Members to supervise the businessexecution of its Directors.
Outside Director Kazumasa Yoshida provides his opinions andproposals regarding management in general in the Board
Meetings from the standpoint of the experienced executive in a
global company. While Kazumasa Yoshida holds 60,000 sharesof the Company as of June 26th, 2017 when the securities
report was submitted, it was deemed to have no significance.
Furthermore, between the Company and Kazumasa Yoshida,
there is no human, capital, business affiliation or any otherconflicts of interests. In addition, while Kazumasa Yoshida also
currently serves as the outside Directors of Onkyo Corporation,
Gibson Guitar Corporation, TDK Corporation, Mamezou
Holdings, Co., Ltd., FreeBit Co., Ltd., and previously served as
President and CEO of Intel Kabushiki Kaisha and vice presidentof Intel Corporation, the Company does not have any human,capital, business affiliations or other conflicts of interest withthe seven aforementioned companies.
The Company does not have any human, capital, businessaffiliations or other conflicts of interest with other outside
Directors and outside Audit & Supervisory Board Members.

5. Status of accounting audits
For the fiscal year ended on March 31, 2017, the Company
entered into an audit engagement contract with Deloitte Touche
Tohmatsu LLC, and received accounting audits performed bythis accounting auditor. Auditing team of twelve people,
comprising three CPAs and nine other professionals performed
the audits.

7. Implementation status of risk management
structure
The Group continues to enhance its risk management system inthe context of its Code of Conduct, risk management
regulations, Hotline System Policy and other regulations. Sincesound management practices and a stable earnings foundation
through risk control are key priorities for the Company, it has anadvisory contract with a law firm “ TMI Associates” to receive
advice and guidance about all legal matters when needed.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

8. Compensation for Directors and Audit and Supervisory Board Members
i. Total remuneration of Directors and Audit and Supervisory Board Members by classification, total remuneration by type,and number of Directors and Audit and Supervisory Board Members receiving remuneration
Officer type

Breakdown of compensation (Thousands of yen)
Total
compensation
Stock
Retirement
Bonus(Thousands of yen) Base salary
options
benefits

Number ofapplicable officers(people)Directors (Excluding outside directors)

32,60032,600———4

Audit and Supervisory Board Members(Excluding outside Audit and Supervisory
Board Members)

—

—

—

—

—

—

13,20013,200———6

Outside directors and Audit &Supervisory Board Membersii. Total consolidated remuneration by each of the Directors
and Audit and Supervisory Board Members
Since there are no Directors or Audit and Supervisory Board
Members who have received a total consolidated remuneration of
more than ¥100,000 thousand no items are reported.

iii. Amount of remuneration for the Directors and the Audit
and Supervisory Board Members and the policy todetermine the calculation method
The Group established a Compensation Committee to discuss the
remuneration of the Directors and the Audit and Supervisory Board
Members, and this Compensation Committee will determine theamount of remuneration within the limits approved by the Ordinary
General Meeting of Shareholders.
The upper limit of remuneration for the Directors, set by adecision made at the 2nd Ordinary General Meeting of Shareholders
that took place on May 31, 2006, is ¥100,000 thousand per year.
The upper limit of remuneration for the Audit and Supervisory
Board Members, set by a decision made at the 3rd Ordinary General
Meeting of Shareholders that took place on June 28, 2007, is¥50,000 thousand per year.

9. Share buyback decision mechanism
In accordance with Article 165-2 of the Companies Act, theCompany’s Articles of Incorporation state that share buybacks
may be implemented by resolution of the Board of Directors
with the objective of flexibly returning profits to shareholders.

10. Interim dividends
The Company’s Articles of Incorporation allow an interim
dividend to be paid to shareholders, class shareholders andregistered 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 toshareholders.

11. Outline of limitation of liability contracts
In accordance with Article 427-1 of the Companies Act, theCompany’s Articles of Incorporation permit the Company toenter into contracts that limit the liability of Directors (excluding
executive Directors) and Audit and Supervisory Board Members
for damages as defined by Article 423-1 of the Companies Act.
The amount of the limit in liability for damages in thesecontracts is the same amount defined by law.

12. Outline of exemption from liability
In accordance with Article 426-1 of the Companies Act, theCompany’s Articles of Incorporation state that the Board of
Directors can pass a resolution to exempt the Company’s
Directors (including former Directors) and Audit and Supervisory
Board Members from liability to the fullest extent allowable bylaw for damages defined by Article 423-1 of the Companies Act
in the pursuit of their duties, in order to ensure that they areable to fully apply their abilities in the fulfillment of their
expected roles.

13. Number of Directors
The Articles of Incorporation state that the Company shall haveno more than eight Directors.

14. Election requirements for Directors
The Company’s Articles of Incorporation state that resolutions
for the election of Directors may only be passed with a majority
vote of the shareholders in attendance, which must represent atleast one third of the voting rights of all shareholders able toexercise their voting rights. The Articles of Incorporation statethat cumulative voting is not allowed for resolutions to electDirectors.

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Corporate Governance15. Matters subject to resolution by the General
Meeting of Shareholders that can be decided byresolution of the Board of Directors
The Company’s Articles of Incorporation state that the Board of
Directors may pass a resolution to determine dividends on
surplus, as prescribed by Article 454-5 of the Companies Act toshareholders, class shareholders and registered pledgee ofshares on record 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 309-2 of the Companies Act, require
two-thirds of the votes of shareholders in attendance, whichmust 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 onimportant matters at the General Meeting of Class
Shareholders, as defined by Article 324-2 of the Companies Act,require two-thirds of the 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 theGeneral Meeting of Class Shareholders by relaxing therequirements for a quorum on special resolutions put to a voteat the General Meeting of Shareholders and the General
Meeting of Class Shareholders.

17. Class B Shares
The Company’s Articles of Incorporation state that 10 Class B
Shares constitute one share unit and 100 Common Sharesconstitute one share unit. As voting rights are granted for eachshare unit, a shareholder of Class B Shares has 10 times as
many voting rights compared to a shareholder of Common
Shares with an equal number of shares. This dual class structurereflects the concentration of voting rights with Yoshiyuki Sankai
and the Foundations, to ensure that the Company’s advanced
technologies are used for peaceful purposes only, and toprevent the misuse of these technologies in order to harm
humans or to create military weapons.

MD&A

The Group’s vision for the future is to create a humanassistive industry—a new industrial field that will support
people by solving issues directly caused by aging and declining
birth rate. To realize this vision, the Company must coordinate
business management with 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 tomake this innovative technology widely available for the benefit
of society. For the Group to increase corporate value (i.e., shareprofits with shareholders), Yoshiyuki Sankai must be a stable
leadership figure in the management of the Company in the
future. This scheme has been adopted to ensure he remains so.
At this juncture,Yoshiyuki Sankai plans to transfer a portion of
the Class B Shares he owns to the Foundations withoutcompensation in order to ensure the continuity of this scheme.
The Foundations intend to hold these Class B Shares inperpetuity. As holders of Class B Shares, the Foundations havecreated the following guidelines concerning the exercise of
voting rights with the objective of ensuring that the Group’s
advanced technologies are used for peaceful purposes only andpreventing damage to the corporate value of the Company. As
the owner of Class B Shares issued by the Company, theFoundations shall vote against resolutions that contain language
defined in a and b below, through the exercise of its voting
rights at the General Meeting of Shareholders and the General
Meeting of Class Shareholders. Any changes to theFoundations’ guidelines for the exercise of their voting rights
shall require approval by resolution of their boards of trustees,
and these changes shall be made public by a method chosen by
the Foundations.
a.	Resolutions concerning the election and dismissal of
Directors, where the Directors to be elected or dismissed
would likely manage the Group in a way that is detrimental toits corporate value or hinder the peaceful use of its advanced
technologies.
b.	Other resolutions that, if passed, would likely damage thecorporate value of the Group or hinder the peaceful use of its
advanced technologies.

1. Process and outcome of the business(from April 1, 2016 to March 31, 2017)
In the “5th Science and Technology Basic Plan” of Japan, a newconcept of super smart society led by scientific and technologicalinnovation called “Society 5.0” is promoted. Society 5.0 is ahuman centric society where physical space (real world) andcyber space are initiatively merged to solve economic and social
problems so that people can enjoy good quality of life. The planstates that research, development and social implementation ofAI, IoT and human assistive robots are the fields that should befocused on. These robots are designed to assist the elderly anddisabled people for their safe and secured life, promoteindependence of people in need of support and reduce burdenof long-term care. As a hosting country of G7 Science &Technology Minister’s Meeting (“the Meeting”) that was held in
Tsukuba, Japan in May 2016, Japan projected this concept as the
future society where humans and technologies coexist.
As one of the driving forces that aim to realize Society 5.0, theCompany made contribution in the aforementioned Meeting.
CEO Yoshiyuki Sankai presented a keynote speech at theCommemorative Symposium, gave an address at the Meetingand hosted the group of representatives during their visit to theCompany headquarters. The Joint Statement “TsukubaCommuniqu” that was adopted on the final day noted theimportance of innovation based on science to establish a social
structure that allows its senior citizens to age healthily including
provision of high quality care in G7 countries and many emerging
countries, which face the hyper aging society. The statement
noted the possibility of robotics as the means of improving thequality of welfare as well as quality of life for the elderly, and also
(as the mean of) reducing the workload for the caregivers. The
statement expressed their determination of integration of social
science research and support for medicine, ICT and Robotics inorder to reduce the burdens on families and the society.
Also, in February 2017, the Company became the winner of
the Prime Minister’s Award in the third Nippon Venture Awards,
which is an award ceremony hosted by the Ministry of
Economy, Trade and Industry along with other organizations.
The Company won this award as it was highly rated fori) the novelty and innovativeness of its businessii)	its visions to expand into the global market and solve various
problems that the society faces today.
By utilizing innovative Cybernic Technology, the Group aims
to accelerate its research, development, and businessdevelopment, in order to provide solutions to the problems thatthe society faces while firmly establishing an economic cycle atthe same time. The Group will continue to attempt Cybernic
Revolution through social and industrial transformation in thefields of medicine, living support and labor support, as one ofthe driving forces that aim to realize “Society 5.0.”

MD&A| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Medical field
During the fiscal year ended March 31, 2017, in the field of
medicine, the Ministry of Health, Labour and Welfare (“MHLW”)
announced public health insurance coverage of the technical fee
for the treatment of rare neuromuscular disease patients using
HAL for Medical Use (Lower Limb Type, Double-Leg model)[“Medical HAL” or “Medical HAL (Double- Leg)”] on April 25,
2016. On September 2, 2016, the treatment with Medical HAL
started in Japan, as the world’s first treatment with robot
covered by public health insurance. The Company will continue
to accelerate its clinical studies and investigations with Japanesehospitals as well as hospitals in other countries, in order toexpand the range of diseases such as stroke and spinal cord
injury to which the treatment with Medical HAL is applicable. For
stroke, investigator-initiated clinical trial on HAL for Medical Use(Lower Limb Type, Single-Leg model) [“Medical HAL” or “Medical
HAL (Single-Leg)”] commenced on September 30, 2016, whichis the necessary procedure to obtain the manufacturing anddistribution approval of the medical device under Pharmaceuticaland Medical Device Law of Japan, aiming at functional
improvement and regeneration of the patients’ impaired mobility.
Furthermore, the Company also started a joint-research projectwith notable hospitals to accelerate the realization of the cuttingedge research on functional regeneration treatment, which could
make the treatment with HAL applicable to an even wider rangeof patients suffering from paralysis. In addition, to further spreadthis innovative medical technology, the Company announced
collaboration with private insurance companies, Daido Life
Insurance Company in the life insurance sector and AIG Japan
Holdings in the accident insurance sector, which will beproceeded alongside its endeavors to apply for public healthinsurance coverage. As a result of this business collaboration,
Daido Life Insurance Company announced the release of its new
insurance product “HAL Plus rider,” the world’s first insurance
product offered by a private insurance company that covers
treatment of intractable diseases with the Medical HAL on May
8, 2017. In Europe, the Company already acquired medical device
certification for Medical HAL, and has been providing the
medical treatment service with the device covered by public
workers’ compensation insurance in Germany and the Company
is processing applications to obtain public health insurance
coverage in the country. In the United States, the Company
found that the United States Food and Drug Administration’s(“FDA”) understanding of HAL for Medical Use’s innovation to
use Cybernic Technology to provide functional improvement/
regeneration treatment of impaired functions of the brain andnervous system has been deepened as a result of continued
discussions. The Company begun its reapplication process
toward obtaining medical device approval in a format that allows
for Medical HAL to be identified as a new and unique robot
treatment device by submitting Pre-Submission to the FDA in
November 4, 2016.

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34

MD&A

The Company continues to advance its clinical researches forthe light-weighted and compact HAL for Living Support (Single
Joint Type), which is a device designed to be applied on theknee or the elbow. The Company has completed preliminary
consultation with the Pharmaceuticals and Medical Devices
Agency about the necessary procedures to obtain medical
device approval and commenced preparation to file thenecessary documents for the Vital Sensor, which is a palm-size
device for monitoring indices of arteriosclerosis andelectrocardiogram. The Company continues to advance its
clinical trials of the Medical HAL in Japan and other countries toenlarge the range of targeted diseases. In Japan the world’s
first coverage of the treatment with HAL as a medical device by
the public health insurance has been approved and installationof HAL for insured treatment by hospitals has commenced. 188
units of the Medical HAL were in operation as of March 31,
2017, including those used outside of Japan and those used forclinical research. Out of the aforementioned number, 38 units
were rented out in Japan. The Company will continue tocoordinate with numbers of core hospitals in each region, which
would become the “bases” for further expansion. 208 units of
HAL for Living Support (Single Joint Type) were in operation asof the end of March, 2017, which are mainly used for clinicalstudies by hospitals in Japan.

Living support field (including at home and in work
environment) and labor support field
In the field of living support, HAL for Living Support (Lower
Limb Type) has been used in care facilities and hospitals within
Japan to promote independent movement of their users, and asof the end of March, 2017, 422 units were in operation. HAL for
Care Support (Lumbar Type), a device capable of reducing theload on the lower back of caregivers, which would result in
improving the work environment of care facilities that sufferfrom high turnover rates, recorded a increase of 411 units inoperation since the end of September 2016, due to the subsidy
program of the MHLW for assisting care facilities withinstallation of robotic devices and introduction of waterproofed
new model of HAL (Lumbar Type) which allow users to provide
bathing aid for example, and as of end of March, 2017, 714 units
were in operation.
In the field of labor support, as of the end of March, 2017,
there were 274 units of HAL for Labor Support (Lumbar Type), a
device capable of reducing the load on the lower back ofworkers and improving the work environment in order tomaintain the labor force in distribution warehouses, construction
sites and factories of various types that suffer from serious
shortage of labor force as a result of an aging population anddeclining birthrate. Implementation by Haneda Airport
Limousine Bus and major construction companies contributed
to the increase of the rented units. Furthermore, starting from
April 2017, All Nippon Airways group plans to implement 25 units

Risk Factors

to Narita Airport as well as notable domestic airports for various
airport tasks. Operating number of HAL for Labor Support(Lumbar Type) is expected to grow significantly once
improvements such as waterproofing are installed. The Cleaning
Robots and Transportation Robots were introduced to Haneda
airport and a major pharmaceutical factory and there were 21
units in operation as of the end of March, 2017.
Furthermore, on May 15, 2017, the Company announced aninvestment in Works Applications Co., Ltd. based on businessalliance. This alliance will allow the two companies to makeprogress towards the realization of Society 5.0 by developing
the next-generation systems that integrate the Company’s
Cybernic Technologies. To accelerate the realization of Society
5.0, the Company will continue to collaborate with companies
with unique and specialized technologies.

Business performances
As the result of the aforementioned, in the fiscal year ended
March 31, 2017, the Company recorded net sales of ¥1,649,940
thousand (30.4% increase year on year), mainly due to anincrease in the operating numbers of the Medical HAL and HAL
for Care Support (Lumbar Type), increasing the gross profit to¥1,078,953 thousand (24.9% increase year on year). Researchand development expenses were recorded at ¥902,867 thousand(9.9% decrease year on year), mainly due to consigned research
projects of “Realization of Zero Intensive Care Society throughInnovative Cybernic System,” which are part of the projects underthe Impulsing Paradigm Change through Disruptive Technologies
Program (“ImPACT”) hosted by the Japan Science andTechnology Agency (“JST”). On the other hand, other selling,
general and administrative expenses were recorded at¥1,348,201 thousand (16.8% increase year on year), mainly due
to the increase of taxes and dues such as business tax (capitalbase) due to exercise of Stock Acquisition Rights included in the
Company’s convertible bonds. As a result, operating loss
improved ¥120,016 thousand to ¥1,172,115 thousand.
Non-operating income were recorded at ¥1,242,386 thousand(76.0% increase year on year), mainly due to an increase of
subsidy income in relation to construction of Next-Generation
Multipurpose Robotized Production Facility in the Fukushima
Prefecture (“Fukushima Production Facility”), while ordinary
loss (income/loss before income tax, also called “Pretax
income” or “Ordinary profit”) were posted at ¥782,653
thousand due to ¥96,231 thousand in the share issuance costcaused by the exercise of Stock Acquisition Rights included in
the convertible bonds as well as ¥852,923 thousand (589.7%
increase year on year) from an increase of loss on reduction of
non-current assets in relation to construction of Fukushima
Production Facility.
Furthermore, because income taxes were recorded at ¥6,417
thousand, net loss attributable to CYBERDYNE, INC. for the fiscal
year ended March 31, 2017 was recorded at ¥789,332 thousand.

Risk Factors

Risks associated with business operations| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

competitiveness of its products and the Group’s business performance,
financial condition, and future business development may be affected.

Set out below are some of the major risks associated with the business
operations of the Group as well as other potential risks that the Groupmay 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 be important for investors upon making soundinvesting decisions. While the Group recognizes the possibilities of thelisted risks occurring and will take necessary measures either to avoid
their occurrence or to react appropriately to reduce damages, investors
should carefully consider both the stated risks and other risks unstated,prior to making an investment.
Furthermore, please keep in mind that the items set out below do notcover all of the potential risks. The stated risks are based on assumptions
and beliefs derived from information currently available to the Group andthey may be altered due to change of circumstances in the future.

*1 HAL, a Cybernic System capable of fusing/integrating the functions of humans
and robot, is the world’s first technology that improves, supports, and enhances
the wearer’s body functions. Vast numbers of intellectual properties related tothis technology are obtained, in order to promote this technology as a platform
in a global scale. Following patents described below are the basic patents of thistechnology.

1. The Group business in a novel business category
The Group’s main product is HAL, the world’s first Cyborg type robot*1,
developed by Yoshiyuki Sankai, President and CEO. The Group is currently
developing business of Medical HAL in Germany and Japan. Also inJapan, the Group is developing business of HAL for Living Support (Lower
Limb Type), HAL (Single Joint Type), HAL for Care/Labor Support (LumbarType), and others. The Group’s technologies are thought to be applicableto various fields, including medicine, living support, labor support,
entertainment and so on. However, since the Group is working in a novel
business category, uncertainty is very high, and there is no guaranteethat the market will grow steadily. Moreover, if penetration of the Group’s
products does not progress as planned, or if the Group is unable toachieve 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, living support andlabor 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 fromthe brain is the Group’s original technology. Due to this differentiation oftechnologies, the Group can maintain its competitive edge. Intellectual
properties related to HAL such as the basic principles of Cybernic
voluntary control are jointly held by the Group and the University ofTsukuba. The Group has exclusive rights to use all of the patent rights thatgive it a competitive advantage in the wearable robot market. However,various enterprises in Japan and overseas are proceeding with researchand commercialization of wearable robots. If the competitive environment
surrounding the Group were to change, for example with the new entry
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 have substantially greater
capital, human and other resources, 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 researchand development and commercialization processes, which include
verification tests, safety standards certification, medical device approvaland insurance coverage, are extensive, both in terms of the length
in time and costs involved, they are not always certain of success.
In a business environment such as the above, if another company
succeeds in developing newer technologies or more effective products
than the Group’s products, the Group will not be able to maintain the

Application number/
Registration number(Date of application)

Name of invention/Inventor
Type of invention

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

Wearable action assist device
Inventor: Yoshiyuki Sankai

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

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

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

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

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

Wearable action assist device and control
programInventor: Yoshiyuki Sankai

3. Risks 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 andPresident and CEO, in terms of management and development of
new technology. If he becomes unable to perform his duties in theGroup for some reason, the Group’s business performance and futurebusiness development might be affected.
ii)	The Group has secured a sufficient number of excellent research anddevelopment 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 to increase 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’sbusiness performance and future business development might beaffected.

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 isestimated 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 the United States Food and Drug Administration,
or a delay in creating laws and regulations, healthcare policy, or insurance
systems such as health insurance in targeted countries, the Group’sbusiness and profitability may be affected.
In addition to these factors, if any other factors were to preclude
the market expansion potential of HAL, such as lawsuits or other legal
action arising from the use of HAL, the emergence of new technologies
or technological innovation that replace HAL, the introduction of morecompetitive products in the same genre, changes in relevant laws
and regulations, and changes in the relationship with the University ofTsukuba 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.

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Risk Factors

5. Approval of medical devices
In order to sell HAL and other Group products as medical devices, theproducts need to obtain approval from authorities in each country andregion after undergoing certain tests and examinations based on local
laws and regulations.
The Group has obtained approval for HAL as a medical device in the EU
and Japan. However, there is no guarantee that the Group will 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 andregulations in respective countries and regions 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 andfuture business development might be affected.

6. Insurance coverage
The spread and penetration of Cybernic Treatment using HAL and otherGroup products is reliant to a certain extent on such treatment being
covered by public and private health insurances in many countries andregions, with insurance payments for such treatment being available frompublic insurance institutions and private health insurance companies, andso forth. The Group recognizes this as a major issue. However, insurance
systems may vary between countries and regions, and aspects such as
the scope of coverage and payment levels are determined separatelyby the respective public insurance institutions and private insurancecompanies in each country and region. The status of these determinations
may affect the Group’s business performance, financial condition, andfuture business development.

7. Alliances and acquisitions
The Group recognizes that acquiring patents and other intellectual
properties from third parties, acquiring businesses, and forming joint
ventures and strategic alliances domestically or overseas are major
steps to be taken for accelerating its business development and it willcontinue to examine such steps proactively going forward. However,when undertaking an acquisition or entering into an alliance and so forth,
it is difficult to predict the effect of the acquisition or alliance completely
beforehand. Moreover, there is no guarantee that the acquisition oralliance and so forth will proceed smoothly. When acquiring intellectual
property or a business, or entering into a joint venture or strategic
business alliance, there is no guarantee that an anticipated effect will beobtained within an initially projected time frame, and the Group may beunable to utilize the effects from an acquisition or alliance and so forthappropriately. In such a situation, the Group’s business performance,
financial condition, and future business development might be affected.

8. Risks associated with business implementation in the EUi)	Medical HAL acquired CE Marking as a medical device, a world firstfor a robotic medical device. It was accredited by the world-classindependent accreditation organization TÜV Rheinland AG in June 2013as a Class IIa device, under the Medical Devices Directives (“MDD”)
for certifying compliance with EU laws and regulations, which arerequired for exporting medical devices to EU markets. This accreditation
is vital for conducting business activities for HAL in the EU.
	  However, if it were confirmed that HAL did not meet therequirements 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 such an event were
to hinder the Group’s business development in the EU market, theGroup’s business performance 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, theentire fee for the treatment with HAL for member patients of publiclabor insurance institution, “the Berufsgenossenschaft Rohstoffe
und Chemische Industrie (Professional Association of 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 in Germany further, mainly
through hospitals affiliated with BG RCI, and then develop its businessthroughout the entirety of the EU. Nevertheless, if for example theGroup were obliged to change its plan to develop business at BG RCIaffiliated hospitals due to a change in BG RCI’s policy, the Group’sbusiness development in Germany and future business developmentin the EU might be affected. In such a case, the Group’s businessperformance and future business development might be affected.

9. Risks associated with overseas businesses in general
The Group intends to expand its business abroad. However, the Group
recognizes the following risks associated with overseas operations. Theserisks might affect the Group’s business performance, financial condition,and future business development.
• Geopolitical risks associated with political and economic situations
including terrorism, and so forth• Risk of changes in legal and tax systems• Risk of differences in commercial and trade customs• Risk of general strikes or other disruptions in working conditions• Risk of difficulties in managing local personnel and business operations
due to cultural differences and other factors• Risk of difficulties in repatriation of funds to Japan• Risk associated with fluctuations in foreign exchange rates

10. Loss of clients due to product malfunctions
The Group continuously strives to improve the quality of 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 productliability claims or recalls will not occur in the future. If damages were tooccur 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 future business development.

11. Intellectual propertyi)	The Group’s HAL systems employ unique technology that utilizes
a wearer’s BES. The patent rights for technologies used in HAL arejointly held by the University of Tsukuba and the Company, except
for patents independently owned by the Company. The Company
concluded a contract concerning an exclusive license for use of thesepatented technologies. This contract is a significant prerequisite for theGroup to conduct business activities and will be valid until the expiry
date of the licensed intellectual property rights. However, if it becomesdifficult to continue the contract for any reason, such as a breach of
the contract, a petition for bankruptcy, a merger, an acquisition ofsignificant assets, or an assignment of the Company’s key businessline, the Group’s business performance, financial condition, and futurebusiness 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 patent rights 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 Group takes measures
to avoid problems concerning intellectual property infringement byconducting continuous technical investigations.
	  However, for research and development-orientated enterprises suchas the Group, it is very difficult to entirely avoid the occurrence ofproblems 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 and patent attorneys.
It will, however, be time consuming and costly to reach a settlement,
regardless of the validity of the counterparty’s claim. Furthermore,
although the Group manages its technologies with the utmost care, if
a third party infringes upon the Group’s technologies, settlement of theissue will be time consuming and costly. In such cases, the Group’sbusiness strategies, business performance, financial condition, andfuture business development might be affected.

12. Legal risks
The Group’s business is subject to restrictions due to the application of
the respective laws and regulations of each country and region, including
the items listed below. For example, in various business activities inwhich the Group is involved domestically or internationally, the Group is
subject to laws and regulations concerning intellectual property rights
and product liabilities related to technologies, products, services and soon, 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, the environment,
foreign exchange; and various other laws and regulations. Moreover,the Group may encounter unexpected issues relating to these laws andregulations 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 manufactureand distribution approval from the MHLW. Similarly, in other countries
and regions, local regulatory authorities’ approvals may be required, alongwith supervision from supervisory authorities.
Approval inspections are conducted to validate the effectivenessand safety of the products. It is possible that an application could bedenied or an approval could be delayed as a result of the inspection.
Even if sales of the merchandise are started after approval, it is possiblethat approval could be canceled due to the occurrence of problems inproduct effectiveness and 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 businessperformance or financial condition may be materially affected.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

13. Risks associated with personal information
The Group obtains the personal information of HAL users. The number ofstaff within the Group who are able to access this personal information
is limited, and the Group has concluded nondisclosure agreementswith all executives and employees. Moreover, the Group has taken
adequate measures for the protection of personal information, including
the establishment of Regulations for Protection of Personal Informationand the appointment of a Person in Charge of Protection Managementof Personal Information, and no problem, such as leakage 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.

14. Peace and Ethics Committee
The Group has also established the Peace and Ethics Committee toprevent 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 membersof the Peace and Ethics Committee. Committee resolutions require amajority vote of two-thirds or more of those attending. 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 tocreate military weapons as a consequence of entering this business field.
The committee then submits its findings to the Board of Directors.
The result of the Committee’s examination and verification might notnecessarily contribute to improving the Group’s short-term businessperformance.

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Risk Factors

Risk Factors

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 aprofessor at the University of Tsukuba

1. Risks associated with development businesses in general

1. Outline of the Scheme

In the field of cutting-edge technology development, companies aroundthe world vie with each other for quality and speed of technologicalinnovation. Also, they must invest large amounts of funds over thelong term in the processes from basic research, development andmanufacturing of advanced robots to their sales, since they must proceedin accordance with the various regulations in each country. Against thisbackdrop, research and development entail many uncertainties andsuch risks are inherent in the products the Group is now developing
and will develop in the future. Under its business plan, the Group is also
developing its business towards achieving insurance coverage in eachcountry by expanding business domains (various diseases, long-termcare, etc.). However, there is no guarantee that the Group will expand
its business domains as planned, and exists a risk that the applied
insurance systems will be reviewed or changed in the future with respect
to the scope of coverage and payment amounts. If such risks wereto materialize, the Group’s business, financial condition, and businessperformance might be affected.

Under the Group’s philosophy that “Technology exists for humans
and society” the Group employs the advanced technologies centeredaround HAL for peaceful purposes. The peaceful application of Cybernic
Technologies to improve, support, enhance, and regenerate users’ bodilyfunctions matches the needs 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 non-peaceful purposes such as in lethal weaponryin the military industry. In order to raise funds from the 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. (The scheme involving the Company’s Class B Sharesis hereafter referred as “Scheme”)
The Group’s vision for the future is to create a human-assistive
industry—a new industrial field that will support people by solving issues
directly faced by aging and declining birthrate. To realize this vision, theGroup must coordinate business management with R&D of Cybernic
Technologies. Yoshiyuki Sankai created the Group’s Cybernic Technologies,
and continues to be a central figure in Cybernic research. He is also abusiness leader who seeks to make this innovative technology widely
available for the benefit of the society. For the Group to increase
corporate value (i.e., common interest of shareholders), Yoshiyuki Sankai
must be a stable leadership figure in the management of the Company inthe future. This Scheme has been adopted to ensure he remains so.
To explain in detail, while Class B Shares are ranked the same as
Common Shares and paid the same amount as Common Shares withregard to dividends and distribution of residual assets, Class B Sharesdiffer from Common Shares in traded units. Common Shares are tradedin 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 numbersof shares. Current holders of Class B Shares are Yoshiyuki Sankai, thefounder and President and CEO of the Company, 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 the Company.

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 through Disruptive
Technologies (“ImPACT”) program of the Cabinet Office of Japan. Details ofi)	measures to avoid conflicts of interest between the Group, theUniversity of Tsukuba, and the Japan Science and Technology Agency(“JST”), which is implementing the ImPACT program, arising fromconcurrent positions as the President and CEO of the Company, aprofessor at the University of Tsukuba, and the program manager of
ImPACT and ii) 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, including transactions andconclusions of joint research agreements with the University of Tsukuba
or JST are made by the Board of Directors. A structure to prevent
conflicts of interest has been established, under which the decisions
concerning the University of Tsukuba are made by the five directors (ofwhom three are outside directors) excluding Yoshiyuki Sankai and anothermember affiliated with the University of Tsukuba, and the decisions
concerning the JST are made by the six directors (of whom three areoutside directors) excluding Yoshiyuki Sankai. In addition, a structure isin place under which matters pertaining to conflicts of interest are being
monitored monthly through an audit by the Audit and Supervisory Boardand reported to the CEO, the Internal Audit Office and a responsible
member of the Board of Directors.
ii. Impediments to performance of duties as President and CEO
Although duties related to Cybernic research by the Group, the Universityof Tsukuba and ImPACT Program are integral and inseparable, theinfluence of duties of a faculty member of the University of Tsukuba
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 (attendance at the Board of Directors
meetings, approval of requests, 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 as a President
and CEO of the Company, the Group’s financial condition and businessperformance might be affected.

Risks related to the dual class sharestructure| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Set out below is certain information concerning this Scheme, Common
Shares and Class B Shares.
i. Outline of the shares

2.	Risks associated with creation of newly developed
products
The Group explores and creates newly developed products throughjoint research with research institutions, centering on the University ofTsukuba, and one of its important business strategies is the releaseof multiple newly developed products in addition to HAL for Medical/
Living Support (Lower Limb Type), HAL (Single Joint Type) as well as
HAL for Care/Labor Support (Lumbar Type), which have already beencommercialized.
However, there is no guarantee that such new products will be
successfully explored and created. Accordingly, if exploration and creation
activities of new products were to be hindered for some reason, theGroup’s financial condition and business performance might be affected.

3. Risks associated with progress delays inherent toresearch and development
The Group is efficiently advancing research and development as a
research and development oriented company group by establishingcooperative relationships with external partners, centered on joint
research with the University of Tsukuba. However, since there is
no guarantee that research and development activities will advanceas planned, in some cases, the initially planned results of researchand development may not be obtained, the start or completion ofvarious 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, the Group manages
and evaluates the progress of each product under development in atimely manner and takes such measures as prioritizing products underdevelopment and changing the levels of management resources invested
in products or deciding to suspend development temporarily. Thus, theGroup 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.

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 Share for
1 Common Share)

Shares subject to call

None

Yes
(1 Class B Share for
1 Common Share)

Share split or consolidation

Executed into the same numbers ofshares simultaneously

Listing

ListedUnlistedii. Difference between the share units of the two share types
While shareholders of both Common Shares and Class B Shares receive
the same amount of dividends and distribution of residual assets at thesame priority level, they differ in the number of shares that constituteone 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 asa shareholder of Common Shares when they have the equal number ofshares.
As of the consolidated financial year ended March 31, 2017, thenumber of shares of each class issued is 137,347,609 Common Sharesand 77,700,000 Class B Shares. Yoshiyuki Sankai, the President andCEO of the Company, holds 3,042,000 Common Shares and 77,696,000
Class B Shares, which represents approximately 38% of all issued andoutstanding 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.
iii. Scheme to prevent changes of shareholders of Class B SharesClass B Shares are issued for the purpose of preventing the Group’s
technology from being used to harm people or to create military
weapons. In order to prevent Class B Shares from being transferred topeople or entities other than the shareholders of Class B Shares as of thesubmission date of the Company’s Annual Securities Report released onJune 26, 2017 or other internal personnel of the Company, the Articles ofIncorporation of the Company states thata)	The approval of the Board of Directors is necessary upon the transferof the Class B Shares to any 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 shareholders of the Class B Shares has not occurred, and theCompany is requested* to approve the acquisition of the Class B
Shares by any person other than the shareholders 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 Share upon acquisition.
* A request for approval as set down in Article 136 and 137 of the Companies Act.

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Risk Factors

The shareholders of Class B Shares as of the submission date of
the Company’s Annual Securities Report, June 26, 2017 are Yoshiyuki
Sankai and the Foundations, and the number of Class B Shares held is
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 the Class B Shares he holds as of this submission date to
the Foundations at no cost. Furthermore, there are no plans for theFoundations to release the Class B Shares in their possession.
As a shareholder of Class B Shares, the Foundations establishedguidelines on the execution of their voting rights, to prevent the Group’s
technologies from being used to harm people or to create military
weapons, damaging the Group’s corporate value.
The Foundations will exercise its voting rights related to the ClassB Shares they hold against resolutions in the General Meeting of
Shareholders and General Meeting of Class Shareholders in the cases
stated below. Furthermore, a resolution of the board meeting of theFoundations will be required to alter these guidelines, and the change will
be announced by a method determined by the Foundations:a)	if in resolutions for the dismissal or appointment of directors will leadto the misuse of the Group’s innovative technology or damage theGroup’s corporate valueb)	for all other resolutions, if the passing of the resolution leads to theprevention of peaceful utilization 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 the shares held by one acquirer is over three quarters of the total
number of issued shares (excluding the treasury stock) as a result of atakeover bid, all Class B Shares will be converted to Common Sharesin accordance with the Breakthrough provision (see note) stated in the
Articles of Incorporation.
(note) The Breakthrough provision refers to the provision that allows the dissolution of
the Scheme upon the appearance of an acquirer with more than a certain ratioof holding shares.

v. Sunset provision
As stated in iii) above, Yoshiyuki Sankai plans to transfer portions of ClassB Shares he holds to the Foundations at no cost in order to preserve thecontinuity of this Scheme. This Scheme is planned to be continued after
the resignation from the post of director by Yoshiyuki Sankai, who is thedeveloper of the Group’s innovative technologies, or his death.
However, since there is the possibility that the decision made by theFoundations after Yoshiyuki Sankai’s resignation from the post of director(excluding cases where he holds multiple posts or is reappointed tothe post immediately after resignation) does not match the will of theCompany shareholders (including holders of the Common Shares), an
intention verification procedure of shareholders will be conducted by
the conclusion of the last General Meeting of the Shareholders held in
the fiscal year ending within one year of the 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 (seenote) in the Articles of Incorporation states that if the shareholders ofCommon Shares and Class B Shares who hold one third of the total
voting right (calculated using 100 Class B Shares for each share unit)
participate in the intention verification procedure and two thirds (2/3) of
those who participated agree, all Class B Shares will be converted toCommon Shares of the Company.
(note) The Sunset provision refers to the provision that 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

Risk Factorsof shareholders, according to the relevant intention verification procedure
explained above.

vi. E limination of the Meeting of Class Shareholders comprised ofshareholders of Common Shares
The Company’s Articles of Incorporation states that, the execution ofactions stated in each item of Article 322-1 of the Companies Act, unlessstated otherwise by law or by the Articles of Incorporation, does not
require the resolution of the Meeting of Class Shareholders comprised ofshareholders 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 allocation of shares, freeallocation of stock acquisition rights, allocation of shares as well as
stock acquisition rights to shareholders, share transfers (excluding
cases where the share transfer is conducted together with othercompanies) and changes to the calculation of share units shall be
executed at the same timing and same ratio as stated by the Articles
of Incorporation, and(b)	in the case that a merger agreement where the Company will beabsorbed, 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 by a Meeting of Shareholders (if anapproval by the Meeting of Shareholders is not required, resolution by
the Board of Directors) of all relevant companies, all Class B Sharesshall be converted to Common Shares as stated by the Articles ofIncorporation.

2. Risks of this Scheme
Class B Shares have been issued for the purpose of preventing theGroup’s technology from being used to harm people or to create military
weapons. However, this Scheme also presents potential risks statedbelow. If such risks were to materialize, rights and interests of theshareholders of the Company’s Common Shares may be affected.
(a)	Risk associated with the strong influence of the shareholders ofClass B Shares from their voting rights. As of the fiscal year ended on
March 31, 2017, 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. This equates to 86% of the total numberof voting rights of the Company, giving him strong influence overbusiness matters. This will limit the influence of the shareholders ofCommon Shares on corporate matters. As a result, if the voting rights
by the shareholders of Class B Shares are exercised to ensure thepeaceful use of the Group’s innovative technology, the Company may
take actions that the shareholders of Common Shares do not generally
view as beneficial.
(b)	Risk associated with the prevention of acquiring shares of theCompany The Company’s Articles of Incorporation provide that 10
Class B Shares constitute one share unit and 100 Common Sharesconstitute one share unit. As voting rights are granted for each shareunit, a shareholder of Class B Shares has 10 times as many voting
rights as a shareholder of Common Shares with an equal number ofshares. While the Breakthrough provision and the Sunset provision
are stated in the Articles of Incorporation, the conditions in which allof the Class B Shares are converted to Common Shares are limited tocircumstances 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 theconversion of the Class B Shares to Common Shares, respectively.

Therefore, there is the possibility that this Scheme may prevent
acquisitions that may benefit the shareholders of Common Shares.
(c)	Risk associated with the elimination of the Meeting of Class
Shareholders comprised of shareholders of Common Shares The
execution of actions stated in each item of Article 322-1 of theCompanies Act, unless stated otherwise by law or by the Articles
of Incorporation, does not require the resolution of the Meeting ofClass Shareholders comprised of shareholders of Common Shares,
so the decisions made by the Company may not reflect the will of theshareholders of Common Shares.
(d)	Risk associated with the conversion of the Class B Shares Because
Class B Shares include the right to request acquisitions underacquisition terms, there is the possibility that a future conversion ofClass B Shares to Common Shares will increase the total number ofauthorized Common Shares issued on the market, and the market
price of the Common Shares may be affected.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Other risks
1. Dividend policy
The Company has not been able to pay dividends to shareholders 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 accordance with
the Companies Act. At this time, the Company’s policy is to prioritizeachieving profitability quickly by improving its financial strength throughretaining earnings and reinvesting in research and development activities.
On the other hand, the Company 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 andbusiness results. However, if the Company’s earnings plan does notproceed as envisaged, and it continues to be unable to achieve steadyearnings, 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 research and development
expenses in association with the progress of its research anddevelopment 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 anddevelopment investment, and capital expenditures. The Group plans tocontinue strengthening its financial base making use of funds such as
governmental subsidies. However, depending on how successful theGroup is at securing profits and raising capital, its financial condition andbusiness performance might be affected.

3. Recording negative retained earnings brought forward
The Group has been focusing on research and development activities,
and has therefore recorded a large amount of upfront research anddevelopment expenses, as well as negative retained earnings brought
forward. The Group aims to achieve profitability quickly and to establish
a strong financial base by posting stable profits. However, there is a riskthat the Group’s business might not proceed as planned, and that theGroup may be unable to eliminate the recording of negative retained
earnings brought forward, which might affect its business, financial
condition, and business performance.

4. Loss brought forward for tax purposes
Since the Group has been making upfront investments in development asa corporate research and 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 of losses brought
forward, the Group might lose the opportunity to recover part of thecapital that it has invested in research and development or suffer othereffects that might affect its 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 during consolidated accountsettlement, the Group is exposed to risk from the effects of fluctuations
in foreign exchange rates. Therefore, if foreign exchange rates wereto fluctuate sharply in the future, the Group’s financial condition andbusiness performance might be affected.

41

42

Financial Statements

Financial Statements| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Consolidated Balance SheetCYBERDYNE, INC. and Consolidated Subsidiaries
March 31, 2017
Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

2016

Thousands of Yen

2017

ASSETS

Thousands of
U.S. Dollars(Note 1)

2017

2016

¥    20,758¥    48,120

2017

LIABILITIES AND EQUITYCURRENT ASSETS:

CURRENT LIABILITIES:Cash and bank balances (Notes 3 and 14)¥10,375,733¥14,458,798$ 92,483

Payables—trade accounts (Note 14)

Marketable securities (Notes 3, 4 and 14)

23,000,000

25,500,386

205,009

Current portion of convertible bond-type bonds,
with subscription rights to shares (Notes 7 and 14)

Trade accounts (Note 14)

247,451

217,347

2,205

Income taxes payable (Note 14)

151,632

63,804

1,351

Other (Note 14)

125,233

349,259

1,116

Other current liabilities

320,052

283,1512,852

492,444

20,322,560

4,389

Receivables:(1,355)

(758)

(12)

Inventories (Note 5)

Allowance for doubtful receivables

526,545449,626

4,693

Prepaid expenses and other current assets

117,807

76,021

1,050

34,391,415

41,050,680

306,546

Total current assets

Total current liabilities

Asset retirement obligations (Note 8)

73,081

71,613651

Deferred tax liabilities (Note 11)

13,853

11,027123

Total long-term liabilities

Land

3,118,558

3,214,303

27,797

Buildings and structures

1,783,431

1,430,082

15,896EQUITY (Note 9):794,514743,047

7,081

Capital stock

6,003,880

699,992

53,515

Assets for rent
Construction in progress
Other assets
Total property, plant and equipment
Accumulated depreciation
Property, plant and equipment—net

1,140,719

1,050,808

10,167

12,841,104

7,138,234

114,458(1,975,508)(1,806,022)(17,608)

10,865,595

5,332,211

96,849Intangible assets (Note 6)
Investment securities (Notes 4 and 14)

66,02665,658588

914,830

12,129Investments in unconsolidated subsidiaries andassociated companies (Note 4)

13,854

14,512123

Others150,537

156,576

1,341

Total investments and other assets
TOTAL

1,591,256

1,151,578

14,183¥46,848,267¥47,534,470$417,579

65,335

380

147,975

1,155

26,743,881

16,511,767

238,380

26,679,881

16,447,767

237,80912,468536,847

111(7,222,347)(6,433,015)(64,376)

(204)

(204)

(1)

Class B shares—authorized, 77,700,000 shares;
issued, 77,700,000 shares in 2017 and 2016
Capital surplus
Stock acquisition rights
Treasury stock—at cost, 138 shares in 2017 and 2016

1,360,838

42,741
129,676

Common shares—authorized, 618,300,000 shares;
issued, 137,347,609 shares in 2017 and 125,576,000 shares in 2016

DeficitINVESTMENTS AND OTHER ASSETS:

19,927,483

LONG-TERM LIABILITIES:OtherPROPERTY, PLANT AND EQUIPMENT (Notes 6 and 7):$    185

Accumulated other comprehensive income:Unrealized gain on available-for-sale securities

8,966

Foreign currency translation adjustments

3,502

772

31

46,226,147

27,063,934

412,034

Total accumulated other comprehensive income

79

Non-controlling interests
Total equity
TOTAL
See notes to consolidated financial statements.

46,226,147

27,063,934

412,034¥46,848,267¥47,534,470$417,579

43

44

Financial Statements

Financial Statements| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Consolidated Statement of Operations

Consolidated Statement of Comprehensive Income

CYBERDYNE, INC. and Consolidated Subsidiaries
Year Ended March 31, 2017

CYBERDYNE, INC. and Consolidated Subsidiaries
Year Ended March 31, 2017
Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

2016

2017

¥ 1,649,940¥ 1,264,902$ 14,706

570,987

401,121

5,089

Gross profit

1,078,953

863,780

9,617

NET SALESSELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12):
Research and development costs
Other selling, general and administrative expenses

Thousands of Yen

2017

COST OF SALES

902,867

1,001,547

8,047

1,348,201

1,154,365

12,017

Total selling, general and administrative expenses

2,251,068

2,155,912

20,064

Operating loss

(1,172,115)(1,292,132)(10,447)

NET LOSS

Unrealized gain on available-for-sale securities

8,966

Foreign currency translation adjustments

2,730

Total other comprehensive income
COMPREHENSIVE LOSS

Interest income

8,902

32,84679879,669

399,574

7,840

Income from consigned research

2,529

283,805

235,330

Interest expense(7,999)(46,142)

Stock issuance costs(96,231)

Loss on write-down of carrying value of fixed assets for tax purposes(741,755)

(71)
(857)

(72,517)(6,611)

63,07232,960562

Other income—net

389,201

582,052

3,469

LOSS BEFORE INCOME TAXES(782,914)(710,079)(6,978)Current

7,534

13,481

67

Deferred(1,116)(2,307)

(9)

6,417

11,17357(789,332)(721,253)(7,035)Gain on sales of fixed assets
Loss on disposal of fixed assets
Other—net

40
(302)

(2)

INCOME TAXES (Note 11):

Total income taxes
NET LOSS(3,195)

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
NET LOSS ATTRIBUTABLE TO OWNERS OF THE PARENT¥  (718,057)¥  (789,332)

U.S. Dollars(Note 1)

Yen
2017

$ (7,035)

2016

2017

PER SHARE OF COMMON SHARE (Notes 2.t and 16):
Basic net loss
See notes to consolidated financial statements.

¥(3.69)¥(3.53)$(0.03)2017¥(721,253)$(7,035)

1,776

24

79

11,6961,776

104¥(777,636)¥(719,476)$(6,931)¥(777,636)¥(716,723)$(6,931)

TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
Owners of the parent

Subsidy income¥(789,332)

2016

OTHER COMPREHENSIVE INCOME (Note 15):

Non-controlling interests

OTHER INCOME (EXPENSES):

Thousands of
U.S. Dollars(Note 1)

See notes to consolidated financial statements.

(2,753)45

46

Financial Statements

Financial Statements

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash FlowsCYBERDYNE, INC. and Consolidated Subsidiaries
Year Ended March 31, 2017

CYBERDYNE, INC. and Consolidated Subsidiaries
Year Ended March 31, 2017
Thousands of Shares
Number ofClass B Shares
Outstanding

125,576

77,700Stock
Acquisition
RightsCapitalStock

CapitalSurplus¥16,511,767¥16,447,767

Thousands of Yen
Deficit¥ 530,529¥(5,714,957)(718,057)

125,576

77,70016,511,767

16,447,767

6,318
536,847(6,433,015)(789,332)

11,771
137,347

77,700

10,232,113

10,232,113¥26,743,881¥26,679,881(524,378)¥   12,468¥(7,222,347)

Thousands of Yen
Accumulated Other
Comprehensive Income
Treasury
Stock

BALANCE, APRIL 1, 2015
Net loss attributable toowners of the parent
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2016
Net loss attributable toowners of the parent
Issuance of new shares
Net change in the year
BALANCE, MARCH 31, 2017

Unrealized
Gain onAvailable-for-Sale
Securities(204)¥8,966¥8,966

Non-controlling
Interests

Total¥ (442)¥27,774,664

1,214
772

(718,057)
(204)
7,532
27,063,934

2,730¥3,502(789,332)
20,464,227(512,682)¥46,226,147¥ 2,634(2,634)

Total
Equity¥27,777,298(718,057)
(204)
4,898
27,063,934(789,332)
20,464,227(512,682)¥46,226,147

Thousands of U.S. Dollars (Note 1)
Accumulated Other
Comprehensive Income

CapitalStock

BALANCE, MARCH 31, 2016
Net loss attributable toowners of the parent
Issuance of new shares
Net change in the year
BALANCE, MARCH 31, 2017

CapitalSurplus

Stock
Acquisition
RightsDeficit$147,176 $146,606 $ 4,785 $(57,340)

Unrealized
Gain onForeign
AvailableCurrency
for-SaleTranslation
Treasury
Securities Adjustments
Stock

$(1)

91,203(4,674)$238,380 $237,809 $   111 $(64,376)

See notes to consolidated financial statements.

$(1)

Total

$ 6 $241,233(7,035)91,20320172016¥   (782,914)¥   (710,079)$  (6,978)Depreciation and amortization

341,191

280,299

3,041

Loss on write-down of carrying value of fixed assets
for tax purposes

$79
$79

(7,035)
182,406
24(4,569)$31 $412,034

Noncontrolling
Interests

Total
Equity$241,233(7,035)
182,406(4,569)$412,034

2017

OPERATING ACTIVITIES:
Loss before income taxes
Adjustments for:741,755

72,517

6,611Interest income(8,902)(32,846)(79)

Interest expense

7,999

46,142

Stock issuance costs

96,231

71
857

Changes in assets and liabilities:
Increase in accounts receivable—trade(30,104)(9,724)(268)

Decrease in accounts receivable—other

224,026

200,633

1,996

Increase (decrease) in allowance for doubtful receivables

Foreign
Currency
Translation
Adjustments¥(204)¥(204)

Thousands of
U.S. Dollars(Note 1)Thousands of Yen

Number ofCommon Shares
Outstanding

BALANCE, APRIL 1, 2015
Net loss attributable toowners of the parent
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2016
Net loss attributable toowners of the parent
Issuance of new shares
Net change in the year
BALANCE, MARCH 31, 2017

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

597

(592)

5

Increase in inventories(76,919)(110,417)(685)

Decrease in accounts payable—trade(243)(27,361)(44,074)

Other—net

95,45432,644850

Subtotal

581,053(275,497)

5,179Interest received

6,982

33,55362

Interest paid

(1,785)(2,632)(15)

Income taxes—paid(10,813)(13,706)(96)

575,438(258,282)

5,129

Purchases of securities(20,000,000)(20,000,213)

Proceeds from redemption of securities

20,000,213

Net cash provided by (used in) operating activities
INVESTING ACTIVITIES:
Decrease in restricted deposits

20,000,000

Payments into time deposits(178,269)
178,270(1,500,000)

Proceeds from withdrawals of time deposits

1,500,000

3,000,000

13,370Purchases of property, plant and equipment(6,596,919)(1,354,938)(58,801)

Purchases of intangible assets(18,003)(25,228)(160)

Purchases of investment securities(433,099)(599,980)(3,860)

Other—net
Net cash used in investing activities

1(2,314)0(5,547,807)(482,675)(49,450)FINANCING ACTIVITIES:Payments for issuance of new shares(88,131)

Other—net(21,676)(21,185)(193)(109,807)(21,185)(978)

Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENT ON
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS(785)(1,060)

(743)

(9)

(5,083,237)(762,887)(45,309)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

18,458,970

19,221,857

164,533

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)¥ 13,375,733¥ 18,458,970$ 119,223

NONCASH INVESTING AND FINANCING ACTIVITIES:Convertible bonds converted into common shares
See notes to consolidated financial statements.

¥ 20,464,227$ 182,406

47

48

Financial Statements

Notes to Consolidated Financial Statements

Financial Statementsb.

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

c.

Consolidation—

The consolidated financial statements as of March 31, 2017, include the accounts of the Company and its five (four in 2016)
significant subsidiaries (together, the “Group”).
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
(Names of Consolidated Subsidiaries)
Suzuka Robo Care Center Co., Ltd.
Shonan Robo Care Center Co., Ltd.
Oita Robo Care Center Co., Ltd.
Cyberdyne Care Robotics GmbHCYBERDYNE USA Inc.

d.

All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit­included in assets resulting from transactions within the Group is also eliminated.
The fiscal year-end date of two consolidated subsidiaries, Cyberdyne Care Robotics GmbH and CYBERDYNE USA Inc., is
December 31. To prepare the consolidated financial statements, the Company used financial statements based on a provisional
statement of accounts as at the fiscal year-end date of the Group. The fiscal year-end date of all other consolidated subsidiaries is
the same as that of the Company.

Cash Equivalents—

Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes
in value.
Cash equivalents include time deposits and marketable securities, all of which mature or become due within three monthsof the date of acquisition.
e.

Inventories—

Inventories are stated at the lower of cost, determined by the following methods, or net selling value:

CYBERDYNE USA Inc. is newly established for the year ended March 31, 2017, and included in the scope of consolidation since
the date of establishment.
Investments in the remaining five (five in 2016) unconsolidated subsidiaries are stated at cost. If the equity method of
accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial
statements would not be material.
(Names of Unconsolidated Subsidiaries)
Niigata Robo Care Center Co., Ltd.
Cyberdyne EU B.V.
CYBERDYNE DENMARK ApS
Cyberdyne Sweden AB
CYBERDYNE (Europe) GmbHBusiness Combinations—

Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a businesscombination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall reportin its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement
period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts
recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of theacquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments
shall be recognized as if the accounting for the business combination had been completed at the acquisition date. The acquirer
recognizes any bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that
all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in thepurchase price allocation. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownershipinterests in its subsidiary. The carrying amount of non-controlling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary, while the parent retains its controlling interest in its subsidiary. Any difference between the fairvalue of the consideration received or paid and the amount by which the non-controlling interest is adjusted is accounted for as
capital surplus as long as the parent retains control over its subsidiary.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—

Under Accounting Standards Board of Japan (”ASBJ”) Practical Issues Task Force (”PITF”) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting policies andprocedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances
should in principle be unified for the preparation of the consolidated financial statements. However, financial statements preparedby foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting
principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification) tentatively
may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process sothat net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b)scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive
income; (c) expensing capitalized development costs of research and development; and (d) cancellation of the fair value model ofaccounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

CYBERDYNE, INC. and Consolidated Subsidiaries
Year Ended March 31, 2017

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the­Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan (”Japanese GAAP”), which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside Japan.
In addition, certain reclassifications have been made in the 2016 consolidated financial statements to conform to the classifications
used in 2017.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which CYBERDYNE, INC. (the“Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely forthe convenience of readers outside Japan and have been made at the rate of ¥112.19 to $1, the approximate rate of exchange at
March 31, 2017. Such translations should not be construed as representations that the Japanese yen amounts could be converted
into U.S. dollars at that or any other rate.
Amounts presented in the accompanying consolidated financial statements are rounded down to the nearest thousand yen andthousand dollar.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

(1) Finished products, work in process:(2) Raw materials, merchandise:(3) Supplies:f.

Specific cost method
Moving-average cost method
Last purchase price method

Marketable and Investment Securities—

Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in the near term, are reported at fair value, and the related
unrealized gains and losses are included in earnings; (2) held-to-maturity debt securities, for which there is a positive intent andability to hold to maturity, are reported at amortized cost; and (3) available-for-sale securities, which are not classified as either of
the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a
separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average cost method. For­other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
g.

Allowance for Doubtful Receivables—

An allowance for doubtful receivables is measured at the amount that may not be recoverable, based on collectability assessment of receivables with reference to historical credit loss record.
h.

Property, Plant and Equipment—

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed by the declining-balance method based on the estimated useful lives of the assets,
except for buildings (excluding structures), building improvements and structures acquired after April 1, 2016, assets for rent, andcertain furniture and fixtures, which are depreciated using the straight-line method.

49

50

Financial Statements

Financial Statements

The range of useful lives is principally as follows:
Buildings and structures:
Assets for rent:
Machinery and equipment:
Vehicles:Furniture and fixtures:j.

r.

Long-Lived Assets—

The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset
or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of
the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

s.

Intangible Assets—

t.

u.

v.

n.

Leases—Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the consolidated balance sheet.
All other leases are accounted for as operating leases.
o.

Revenue Recognition—

The Group’s revenue mainly consists of rental revenue from leasing and sales of products. The Group recognizes rental revenue
each month over the rental period based on the rental agreements. For sales of products, the Company recognizes revenue
upon the completion of acceptance inspection by the customers.
p.

Accounting Changes and Error Corrections—

Under ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections,” and ASBJ Guidance No.
24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections,” accounting treatments are required asfollows: (1) Changes in Accounting Policies—When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively, unless the revised accounting standard includes specific transitional provisions, inwhich case, the entity shall comply with the specific transitional provisions, in which case, the entity shall comply with the specific transitional provisions. (2) Changes in Presentation—When the presentation of financial statements is changed, prior-period
financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates—A change
in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted forprospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior-Period Errors—Whenan error in prior-period financial statements is discovered, those statements are restated.

Stock Options—

Research and development costs are charged to income as incurred.

Per Share Information—

Basic net income or loss per share is computed by dividing net income or loss attributable to common shareholders by theweighted-average number of common shares outstanding for the period.
The Company effected a two-for-one share split on August 1, 2015, by way of a free share distribution, based on the resolution passed by the Board of Directors’ meeting held on May 25, 2015. All prior- and current-years’ shares and per share figures
have been restated to reflect the impact of this share split, and to provide data on a comparable basis.
Net loss per share is computed assuming this share split was conducted at the beginning of the years ended March 31,2017 and 2016.

The cost of employee stock options is measured based on the fair value at the date of grant and recognized as compensation
expense over the vesting period as consideration for receiving goods or services. In the consolidated balance sheet, stock
options are presented as stock acquisition rights as a separate component of equity until exercised.
m. Research and Development Costs—

Foreign Currency Financial Statements—

The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange
rate as of the balance sheet date, except for equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate
component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the averageexchange rate.

Asset Retirement Obligations—

An asset retirement obligation is recorded for a legal obligation imposed either by law or contract that results from the acquisition,
construction, development, and normal operation of a tangible fixed asset, and is associated with the retirement of such tangible
fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset
retirement, and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability
should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of aliability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation
over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent
revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to thecarrying amount of the liability and the capitalized amount of the related asset retirement cost.
l.

Foreign Currency Transactions—

All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese
yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in
the consolidated statement of operations.

Intangible assets are carried at cost, less accumulated amortization, which is computed by the straight-line method over three tofive years for software and eight years for patent rights.
k.

Income Taxes—

The provision for income taxes is computed based on the pretax income included in the consolidated statement of operations.
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured
by applying currently enacted income tax rates to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective April 1, 2016.
There was no impact from this for the year ended March 31, 2017.

3 to 38 years
5 years
7 years
2 to 6 years
2 to 20 years

Under certain conditions, such as when companies receive government subsidies and purchase property, plant and equipmentusing government subsidies, Japanese tax laws permit companies to defer the profit arising from such subsidies by ­reducing thecost of the assets acquired.
i.

q.

| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Accounting Change

Change in Depreciation Method—Pursuant to certain changes of the Corporate Tax Act, the Company adopted ASBJ PITF No. 32,“Practical Solution on a change in depreciation method due to Tax Reform 2016,” and changed the depreciation method for building improvements and structures acquired on or after April 1, 2016, from the declining balance method to the straight-line method.
There was no material impact from adoption of this guidance for the year ended March 31, 2017.

3. RECONCILIATION BETWEEN CASH AND BANK BALANCES AND CASH EQUIVALENTS
A reconciliation between cash and bank balances in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash flows as of March 31, 2017 and 2016, was as follows:

Thousands of Yen

Other Income—

The Group receives subsidies from government agencies. Also, the Company conducts research consigned by government
agencies. Subsidies and consigned research income are recognized by the percentage-of-completion method, as the outcome ofthe projects can be estimated reliably.

Thousands of
U.S. Dollars(Note 1)

2017

2016

Cash and bank balances¥ 10,375,733¥ 14,458,798$   92,483

Marketable securities

23,000,000

25,500,386

205,009(20,000,000)(20,000,213)(178,269)¥ 13,375,733¥ 18,458,970$ 119,223

Time deposits that mature or become due over three months
from the date of acquisition
Bonds and other debt obligations due in three months or later
Cash and cash equivalents

2017(1,500,000)

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Financial Statements

Financial Statements| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

4. MARKETABLE AND INVESTMENT SECURITIES

6. REDUCTION ENTRIESMarketable and investment securities as of March 31, 2017 and 2016, consisted of the following:

By receiving government subsidies for purchases of fixed assets, the Company has reduced the acquisition costs of related fixed
assets for tax purposes.
The amounts deducted from the acquisition costs of fixed assets for tax purposes as of March 31, 2017 and 2016, were as follows:

Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2016

2017

Thousands of Yen

Held-to-maturity—commercial paper
Available-for-sale—negotiable certificates of deposit and publicand corporate bond in 2017 and negotiable certificates of deposit
and joint-managed money trust in 2016
Total
Noncurrent—Securities classified as available-for-sale—investment securities in 2017 and unlisted stocks in 2016

¥23,000,000

24,000,422$205,009¥23,000,000¥25,500,386$205,009¥ 1,360,838¥   914,830¥ 95,744

Buildings

631,457

Machinery and equipment

144,555¥144,555

1,288

Furniture and fixtures

189,458

174,904

1,688

Software

14,174

14,174126

Total

Thousands of
U.S. Dollars(Note 1)

2017

2016

¥10,896¥11,555

$ 97

2,957

2,957

26

¥13,854¥14,512

$123

2017

Inventories as of March 31, 2017 and 2016, consisted of the following:

LONG-TERM DEBT

Long-term debt as of March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2016

2017

Long-term bonds—Euro-yen zero coupon convertible bond-type bonds
with subscription rights to shares, due 2017

¥ 19,927,483

Less current portion(19,927,483)

2017

Long-term bonds, less current portion(1) Type of shares to be converted:
Common shares of the Company(2) Issue price of the stock acquisition rights: Zero
(3) Conversion price:¥1,699 ($15)(4) Aggregate principal of the bond:¥20,000,000 thousand ($178,269 thousand)(5) Exercise period:
From December 26, 2014 to November 28, 2017(6) Substitute payment:	In the exercise of each stock acquisition right, it is assumed that each bond will be
invested, and the value of the bond will be equivalent to the total face value.
The carrying amounts of assets pledged as collateral as of March 31, 2017 and 2016, were as follows:

Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

Work in process

5,628

Outline of Euro-yen zero coupon convertible bond-type bonds, with subscription rights to shares is as follows:

5. INVENTORIES

Merchandise and finished products$  853$ 12,129

Investments in unconsolidated subsidiaries and associated companies:
Investment securities (shares)

2017

Land

7.

Thousands of Yen

2016

2017

¥ 1,499,963

The costs and aggregate fair values of marketable and investment securities as of March 31, 2017, were not disclosed, since thecarrying values of negotiable certificates of deposit and public and corporate bond approximate their fair values because of their shortmaturities. In addition, investment securities do not have quoted market prices and their fair values cannot be reliably determined.
The costs and aggregate fair values of marketable and investment securities as of March 31, 2016, were not disclosed since thecarrying values of commercial paper, negotiable certificates of deposit, and joint-managed money trust approximate their fair values
because of their short maturities. In addition, unlisted stocks do not have quoted market prices and their fair values cannot be­reliably determined.
Investments in unconsolidated subsidiaries and associated companies as of March 31, 2017 and 2016, consisted of the following:

Investment securities (investments in capital)

Thousands of
U.S. Dollars(Note 1)

2017

Current—Securities classified as:

2016

2017

¥ 96,708¥149,939$  862

9,569

13,51985

Raw materials and supplies

420,267

286,167

3,746

Total

¥526,545¥449,626$4,693Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

2016

2017

Buildings¥280,000¥280,000$2,495

Total¥280,000¥280,000$2,495

There are no secured liabilities, though the buildings disclosed above are pledged as collateral.
The Company has overdraft agreements with a maximum limit of ¥900,000 thousand ($8,022 thousand) and ¥900,000 thousandwith banks as of March 31, 2017 and 2016, respectively, in order to efficiently fund ongoing operations.

53

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Financial Statements

Financial Statements| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

The changes in shares are summarized below:

8. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars(Note 1)Thousands of Yen

Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

Shares2017

2016¥71,613¥70,171

$638

1,468

1,442

13

¥73,081¥71,613$651

Common SharesClass B Shares

Total

Balance, April 1, 2015

62,788,000

38,850,000

101,638,000

Balance, April 1, 2015
(as restated to reflect the stock split on August 1, 2015)

125,576,000

77,700,000

203,276,000

125,576,000

77,700,000

203,276,000

Issued shares:

2017

Increase
Decrease

Asset retirement obligations are obligations to restore sites to their original condition in accordance with lease contracts of the head
office building and exhibition facilities, etc. The amounts of the asset retirement obligations are computed at discount rates of 1.98%
to 2.07% by estimating the expected use periods to be 18 to 20 years from the date of acquisition.

Balance, March 31, 2016
Increase

11,771,609

11,771,609

Decrease
Balance, March 31, 2017

9. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies
Act that affect financial and accounting matters are summarized below:a.

77,700,000

215,047,609

Treasury stock:
Balance, April 1, 2015
Increase

Dividends

138

138

138

138

138

138

Decrease

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria, including (1) having a Boardof Directors, (2) having independent auditors, (3) having an Audit and Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors
may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its
articles of incorporation.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or
the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but theamount of net assets after dividends must be maintained at no less than ¥3,000 thousand.
The Company is not allowed to distribute dividends due to its deficit as of March 31, 2017 and 2016.
b.

137,347,609

Balance, March 31, 2016
Increase
Decrease
Balance, March 31, 2017

For the year ended March 31, 2017, reasons for the changes in the number of issued shares of each class of shares are as follows:
March 31, 2017

Common shares—Increase—conversion of Euro-yen zero coupon
convertible bond-type bonds with subscription rights to shares

Shares

11,771,609

Increases/Decreases and Transfer of Common Share, Reserve, and Surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged
upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of thecommon share. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common share, legal reserve, additional paid-in capital, other capital surplus,
and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of theshareholders.

For the year ended March 31, 2016, reasons for the changes in the number of treasury stock are as follows:
March 31, 2016

Common shares—Increase—purchase of shares in fractional lotsc.

Shares138

Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights
and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directlyfrom stock acquisition rights.
The Company recorded stock acquisition rights related to stock options of ¥12,468 thousand ($111 thousand) during the year
ended March 31, 2017.
The Company recorded stock acquisition rights related to Euro-yen zero coupon convertible bond-type bonds and the 2015
stock option, of ¥530,529 thousand and ¥6,318 thousand, respectively, during the year ended March 31, 2016.

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Financial Statements| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Financial Statements

The change in shares to be converted is as follows:

The stock option activity is as follows:
Thousandsof Shares

Common shares:

SharesYear Ended March 31, 20172015 Stock Option

2016 1st Series
Stock Option

2016 2nd Series
Stock Option

4,600

47,700Non-vested

Balance, April 1, 2015

5,277

Balance, April 1, 2015 (as restated to reflect the stock split on August 1, 2015)

10,554

Granted

1,217

CanceledApril 1, 2016—Outstanding
Increase

VestedDecrease
Balance, March 31, 2016

11,771March 31, 2017—Outstanding

11,771

Vested(4,600)47,700

Increase
Decrease

April 1, 2016—Outstanding

Balance, March 31, 2017

7,800

VestedFor the year ended March 31, 2017, the decrease of 11,771 thousand shares was due to the exercise of Euro-yen zero coupon
convertible bond-type bonds, with subscription rights to shares.
For the year ended March 31, 2016, the increase of 1,217 thousand shares was due to adjustments of the conversion price.
Also, the Company effected a two-for-one share split on August 1, 2015, by way of a free share distribution, based on the
resolution passed by the Board of Directors’ meeting held on May 25, 2015.

Canceled
March 31, 2017—Outstanding
Exercise price

10. STOCK OPTIONS

Average stock price at exercise

Expenses related to stock options for the years ended March 31, 2017 and 2016, were as follows:

Fair value price at grant dateThousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

2016

4,600

Exercised
7,800

4,600

¥ 1,806¥  3,060¥2,355($ 16)($   27)($20)¥81,000¥131,630¥  200($721)($1,173)($ 1)

The Assumptions Used to Measure the Fair Value of Stock Options

2017
2016 1st Series Stock Option

Selling, general and administration:
Share-based compensation expenses¥6,054¥6,318$53

The stock options outstanding as of March 31, 2017, are as follows:
2015 Stock Option

2016 1st Series Stock Option

2016 2nd Series Stock Option

Date of resolution

July 28, 2015

May 24, 2016

July 26, 2016

Persons granted

1 external consultant of theCompany

1 external consultant of theCompany

7 directors of the Company
3 Audit and Supervisory Board
members of the Company
102 employees of the Company
17 employees of subsidiaries

Number of options granted

Common share 7,800 shares

Common share 4,600 shares

Common share 47,700 shares

Date of grantAugust 12, 2015

June 8, 2016

August 25, 2016

Exercise period

From July 29, 2017 toJuly 28, 2025

From May 25, 2018 to
May 24, 2026

From July 1, 2017 toAugust 24, 2021

Notes: 1.	Stock acquisition rights for the 2016 2nd series stock options can be exercised only if they meet the conditions set forth in (a) and (b) below as of the
fiscal year ended March 31, 2017, and the fiscal year ended March 31, 2018, from the first day of the month following the filing date of the securities
report of the period in which these conditions are first met.
		 (a) Sales exceed ¥3,000 million.
		 (b) Loss before income tax becomes positive.
		In the determination of sales and ordinary income mentioned above, the sales and loss before income tax presented in the consolidated statement ofoperations (if a consolidated statement of operations has not been prepared, then the amounts presented in the nonconsolidated statement ofoperations) and entered in the Company’s securities report shall be referenced, and if any significant changes to the referenced items occur as a result of
the application of international financial reporting standards, indices that ought to be referenced separately shall be determined by the Board of Directors.
2.	In the event that a stock option holder dies, and one of the heirs of the stock option holder (hereinafter referred to as the “Heir”) inherits all of the stock
options held by the departed, the Heir is able to exercise the stock options. If the Heir dies, the heirs of the Heir cannot inherit the stock options.
3.	If the total number of issued shares will exceed the number of authorized shares due to the exercise of stock options, the stock options cannot be
exercised.
4.	The stock options less than one (1) cannot be exercised.
5.	Other conditions for the exercise of the stock options will be determined by the stock option allotment contract signed between the Company and theallottee based on the resolution of the Board of Directors of the Company.

Estimate method

Black-Scholes option
pricing model2016 2nd Series Stock Option

Monte Carlo simulationpricing model

Volatility of stock price

59.7%

58.8%

Period to maturity

10 years

5 years

Estimated dividend¥— ($—) per share¥— ($—) per share

Risk-free interest rate(0.2)%(0.3)%

57

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Financial Statements

Financial Statements

11. INCOME TAXES

12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate,­resulted in normal effective statutory tax rates of approximately 30.7% and 32.8% for the years ended March 31, 2017 and 2016,
respectively.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and­liabilities at March 31, 2017 and 2016, are as follows:

Selling, general and administrative expenses mainly include the following:

2017

2016

¥     84,156¥     64,761$    750

Write-off of inventories

11,255

7,618

100

Lump-sum depreciable assets

2,974

3,062

26
398

2017

Accrued enterprise tax

44,74018,103

Impairment loss

2,235

2,250

19

Depreciation

99,581

90,627887

Asset retirement obligations

22,12821,819

197

Loss on valuation of shares of unconsolidated subsidiaries
and associated companies

7,231

7,073

64

Tax loss carryforwards

1,737,495

1,595,422

15,487

Accrued enterprise tax

376

Other
Less valuation allowance

2016

2017

Deferred tax assets:
Research and development expenses

Thousands of
U.S. Dollars(Note 1)Thousands of Yen

2017

Research and development costs:

Thousands of
U.S. Dollars(Note 1)Thousands of Yen| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Salaries¥191,952¥187,411$1,710Material costs

337,069

450,892

3,004

Rental expenses

77,182

118,227

687

Other selling, general and administrative expenses:
Salaries

290,194283,2812,586

Tax and dues

216,846

137,865

1,932

13. LEASES
Obligations and future minimum payments under non-cancelable operating leases for the years ended March 31, 2017 and 2016,
were as follows:3

15,15917,998135(2,027,336)(1,828,737)(18,070)

Total

Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

2016

2017

Due within one year

¥400,572¥268,145

Due after one year

174,254

170,216

1,553

Total

¥574,826¥438,361$5,123$3,570

Deferred tax liabilities:
Retirement expenses for asset retirement obligations(9,493)

Unrealized gain on available-for-sale securities(3,942)(10,211)

(84)
(35)

14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Other

(417)

(815)

(3)

a.

Total

(13,853)(11,027)(123)¥   (13,853)¥   (11,027)$   (123)

Net deferred tax liabilities

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statements of operations for the years ended March 31, 2017 and 2016, is as follows:
2017

b.

30.7 %

Expenses not deductible for income tax purposes

(0.1)

(0.1)

Impact of change in tax rate

(1.6)

(13.4)

Inhabitant tax, flat rate

(0.8)

(0.9)

Valuation allowance(25.4)(17.9)

Other—net

(3.6)

(2.1)

Actual effective tax rate(0.8)%(1.6)%Nature and Extent of Risks Arising from Financial Instruments

Receivables, such as trade accounts and other, are exposed to customer credit risk.
Payment terms of payables, such as trade accounts, are less than a month.
Marketable and investment securities, mainly include shares, held-to-maturity bonds, and money trust, are exposed tocredit risk.

2016

Normal effective statutory tax rate

Company Policy for Financial Instruments

The Group finances its daily operations by borrowings from banks or other financial institutions, such as the issuance of bonds,
based on its capital financing plan. Cash surpluses, if any, are invested only in low-risk financial assets. The Company does notintend to carry out derivative transactions.

32.8 %
c.

Risk Management for Financial Instruments

Credit risk management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual
terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of­payment terms and balances of major customers by each business administration department to identify the default risk ofcustomers at an early stage.
With regard to marketable and investment securities, the Group regularly monitors the financial conditions and other parameters of the issuers of these securities.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on their maturity dates. The Groupprepares and updates the cash management plan periodically based on the reports from each department and calculates thenecessary amount on hand. The Company manages liquidity risk by maintaining the amount calculated by the Corporate Unit.

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Financial Statementsd.

Financial Statementse.

Fair Values of Financial Instruments

Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, another rational valuation technique is used instead.

Thousands of Yen
Carrying
AmountFair Value

Thousands of U.S. Dollars (Note 1)
Unrealized
Gain/Loss

Carrying
AmountFair Value$ 92,483$ 92,483

Thousands of Yen
March 31, 2017

(1) Fair values of financial instruments
Financial instruments whose fair values cannot be reliably measured are excluded from the table below.
Unrealized
Gain/Loss| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Cash and bank balances
Marketable securities
Receivables—trade accounts
Receivables—other
Total

Due in 1 Year or Less

Due after 1 Yearthrough 5 Years

Due after 5 Years
through 10 Years

Due after 10 Years¥10,375,733
23,000,000
247,451
125,233¥33,748,418

March 31, 2017

Cash and bank balances
Marketable securities¥10,375,733 ¥10,375,733
23,000,000

23,000,000

205,009

205,009

Receivables—trade accounts

247,451

247,451

2,205

2,205

Receivables—other

125,233

125,233

1,116

1,116

Total

¥33,748,418 ¥33,748,418$300,814$300,814

Payables—trade accounts¥    20,758 ¥    20,758$    185$    185

Income taxes payable
Total

151,632

151,632

1,351

1,351

¥   172,391 ¥   172,391$  1,536$  1,536

Thousands of U.S. Dollars (Note 1)
March 31, 2017

Cash and bank balances
Marketable securities
Receivables—trade accounts
Receivables—other
Total

Due in 1 Year or Less

Due after 1 Yearthrough 5 Years

Due after 5 Years
through 10 Years

Due after 10 Years$ 92,483
205,009
2,205
1,116$300,814

15. COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2017 and 2016, were as follows:

March 31, 2016

Cash and bank balances
Marketable securities
Receivables—trade accounts
Receivables—other

25,500,386

25,500,386

217,347

217,347

349,259

349,259

Total¥40,525,790 ¥40,525,790

Payables—trade accounts¥    48,120 ¥    48,120

Current portion of convertible bondtype bonds, with subscription rights
to shares
Income taxes payable
Total

Thousands of
U.S. Dollars(Note 1)

¥14,458,798 ¥14,458,798
Thousands of Yen
2017

Gains arising during the year

19,927,483

63,80463,8042017¥12,908$  115

Amount before income tax effect

12,908

115

Income tax effect(3,942)(35)¥ 8,966$   79Reclassification adjustments to profit or loss

Total
19,927,483

2016

Unrealized gain on available-for-sale securities:

Foreign currency translation adjustments:
Adjustments arising during the year

¥20,039,408 ¥20,039,408¥ 2,730¥1,776$   24

2,730

1,776

24

Reclassification adjustments to profit or loss
Amount before income tax effectCash and Bank Balances
The carrying values of cash and bank balances approximate their fair values because of their short maturities.

Income tax effectMarketable Securities
The carrying values of marketable securities approximate their fair values because of their short maturities.
Receivables and Payables
The carrying values of receivables and payables approximate their fair values because of their short maturities.
Current Portion of Convertible Bond-Type Bonds, with Subscription Rights to Shares
The carrying values of the current portion of convertible bond-type bonds, with subscription rights to shares, approximate
their fair values because of their short maturities.
(2) Carrying amount of financial instruments whose fair value cannot be reliably measured
Thousands of
U.S. Dollars(Note 1)Thousands of Yen
2017

Investment securities¥1,360,838

2016¥914,830

2017$12,129

Total¥ 2,730¥1,776$   24

Total other comprehensive income¥11,696¥1,776$  10461

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Financial Statements

Financial Statements

16. NET LOSS PER SHARE
The calculation of net loss per share (”EPS”) for the years ended March 31, 2017 and 2016, is as follows:
Thousands of Yen

Thousands of Shares

Net Loss Attributable to
Owners of the Parent

Weighted-Average
SharesYen

U.S. Dollars (Note 1)¥(789,332)

213,822¥(3.69)¥(718,057)

203,275¥(3.53)EPS

Year Ended March 31, 2017

Basic EPS—Net loss available to common shareholders$(0.03)

Year Ended March 31, 2016

Basic EPS—Net loss available to common shareholders

Diluted EPS is not disclosed due to negative EPS, even though dilutive shares exist.
The Company effected a two-for-one share split on August 1, 2015, by way of a free share distribution, based on a resolution
passed by the Board of Directors’ meeting held on May 25, 2015.
EPS is calculated assuming this share split was performed at the beginning of the year ended March 31, 2015.

17. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20, “Guidanceon Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information
about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about which separate financial information is available, and suchinformation is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing­performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating­operating segment performance and deciding how to allocate resources to operating segments.
Since the Group operates under a single segment of business related to robotics, and more than 90% of net sales are from thissegment, segment information is omitted.
(Related Information)a.

Information about Products and Services

Since net sales of a single classification of products and services to outside clients exceed 90% of net sales in the consolidated
statement of operations, segment information by product and service is omitted.
b.

Information about Geographical Areas(1) Net sales
Thousands of Yen
Japan

EMEA

Thousands of U.S. Dollars (Note 1)
Total

Japan

EMEA

Total

March 31, 2017

Net sales¥1,566,199¥83,740¥1,649,940¥1,181,838¥83,063¥1,264,902$13,960$746$14,706

March 31, 2016

Net sales(2) Property, plant and equipment
Since the amount of property, plant and equipment located in Japan exceeds 90% of the amount of property, plant andequipment in the consolidated balance sheet, property, plant and equipment information by geographical area is omitted.
c.

Information about Major Customers

For the year ended March 31, 2017, since there is no external customer whose sales exceed 10% or more of the net sales in the
consolidated statement of operations, information about major customers is omitted.
March 31, 2016

Sales to—Kanagawa Prefecture

Thousands of Yen¥172,227| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

63

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Corporate & Investor Information

Corporate & Investor Information

Matters regarding the Company shares

Main offices of operations and factories
Division

Status of shares (as of March 31, 2017)Class

Total number ofauthorized shares (shares)

Total number of sharesissued (shares)

Common Share

618,300,000

137,347,609

86,822

Class B Share

77,700,000

77,700,000

3

The Company

Number of shareholders(shareholders)

Subsidiaries (Outside Japan)

Subsidiaries (within Japan)

Major shareholders (as of March, 2017)
Name of shareholder

Shareholding
ratio (%)

Number of shares held (shares)

Yoshiyuki Sankai

Common Share 3,042,000Class B Share 77,696,000

37.54

Daiwa House Industry Co., Ltd.

Common Share 37,690,000

17.53

GCAS BANA LONDON US CLIENT

Common Share 3,726,000

1.73

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

Common Share 3,580,500

1.66

BBH FOR MATTHEWS JAPAN FUND

Common Share 2,943,600

1.37Japan Trustee Services Bank. Ltd. (Trust Account)

Common Share 2,669,700

1.24

SBI SECURITIES Co., Ltd.

Common Share 1,733,500

0.81

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

Common Share 1,635,500

0.76Japan Trustee Services Bank. Ltd. (Trust Account 9)

Common Share 1,263,100

0.59

Common Share 841,713

0.39

THE CHASE MANHATTAN BANK. N.A. LONDON SPECIAL ACCOUNT NO.1

[Classification of shareholders by shareholder types]
Common Share
Government
and local
governments

Financial
institution

Foreign inverters

Financial
instrument
service
operators

Other
corporations

Nonindividuals

Individual
investors etc.

Total

—

22

66

531

372

93

84,881

85,965—

Number of shareholder(Unit)—

97,30645,532401,086

233,6961,260

594,275

1,373,155

32,109

Shareholding ratio (%)

—

7.09

3.31

29.2

17.02

0.09

43.28

1.00

—

As of March 31, 2017
Status of shares (100 shares per 1 share unit)

Classification

Government
and local
governments

Financial
institution

Foreign inverters

Financial
instrument
service
operators

Other
corporations

Nonindividuals

Individual
investors etc.

Status ofshares lessthen oneshare unit
(share)Total

Individuals

Koriyama, Fukushima, Japan

Cyberdyne Care Robotics GmbH

Bochum, Nordrhein-Westfalen, Germany

CYBERDYNE USA Inc.

State of Washington, United States of America

Suzuka Robocare Center Co., Ltd.

Suzuka, Mie, Japan

Shonan Robocare Center Co., Ltd.

Fujisawa, Kanagawa, Japan

Oita Robocare Center Co., Ltd.

Beppu, Oita, Japan

Number of employees

Change from previous fiscal year

71 members(94 members)

Increase of 6 members(Increase of 1 member)(ii) Status of employees in the Company (as of March 31, 2017)

Number of shareholder(person)Class B Share

Next-generation multipurpose robotized production facility(Fukushima office)(Notes) (1) The number of employees includes full-time employees and members on temporary transfer assignments. It does not include the numbersof Directors who also hold positions as a Company employees or dispatch workers sent from a temp agencies.
(2) The number in the brackets ( ) represents the number of contract employees (includes part-time workers but excludes those who work in
the Company as their second jobs)(3) S ince the Group is involved in a single segment of business related to robots, information of employees for each segments is omitted.

Status ofshares lessthen oneshare unit
(share)Individuals

Location

Tsukuba, Ibaraki, Japan(i) Status of employees in the Group (as of March 31, 2017)

As of March 31, 2017

Status of shares (100 shares per 1 share unit)

Name

Head Quarters

Status of employees(Note) 138 shares in the treasury stock was excluded upon calculation of the shareholding ratio

Classification| C Y B E R D Y N E A n n u a l R e p o r t 2 0 17

Number of shareholder(person)

—

—

—

2

—

—

1

3

—

Number of shareholder(Unit)

—

—

—

400

—

—

7,769,600

7,770,000—

Shareholding ratio (%)

—

—

—

0.01

—

—

99.99

1.00

—

Number of employees

Change from previous fiscal year

Average age

Average years of continuous service

61 members(61 members)

Increase of 6 members(Increase of 2 members)

39.5 years old

4.5 years(Notes) (1) The number of employees includes full-time employees and members on temporary transfer assignments. It does not include the numbersof Directors who also hold positions as a Company employees or dispatch workers sent from a temp agencies.
(2) The number in the brackets ( ) represents the number of contract employees (includes part-time workers but excludes those who work in
the Company as their second jobs)(iii) Status of trade unions or related association
There are no trade unions or related association comprised by the employees of the Company.
However the Company have been in good relationship with its workers and there are no special matters that must be reported.

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