Dec. 02, 2020TSE Cancellation of Designation of Securities Under Supervision (Examination), Designation of Securities on Alert, Alteration of Listing Market (from the 1st Section to Mothers), and Imposition of Listing Agreement Violation Penalty:HyAS&Co.Inc.

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Dec. 02, 2020 TSECancellation of Designation of Securities Under Supervision (Examination), Designation of Securities on Alert, Alteration of Listing Market (from the 1st Section to Mothers), and Imposition of Listing Agreement Violation Penalty:HyAS&Co.Inc.

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TSE has decided to cancel the designation of Security Under Supervision (Examination) for a stock and has designated the stock as a Security on Alert, decided on alteration of listing market (from the 1st Section to Mothers), and imposed a listing agreement violation penalty as follows.
*This decision is based on the results of the examination by Japan Exchange Regulation.

１．Issue Name	HyAS&Co.Inc. stock (Code: 6192, Market Division: 1st Section)
２．Date of Cancellation of Designation of Securities Under Supervision (Examination)	Nov. 27, 2020 (Fri.)
Provision	Securities Listing Regulations, Rule 601, Paragraph 1, Item (12), Sub-item a (due to TSE not deeming that the company has fallen under cases where the company has committed a material breach of matters taken on oath in the written oath)
３．Date of Designation of Security on Alert	Nov. 27, 2020 (Fri.)
Provision	Securities Listing Regulations, Rule 501, Paragraph 1, Item (1) (due to TSE deeming that the case does not fall under any of the delisting criteria and that the improvement of the internal management system, etc. of the listed company is highly necessary)
４．Date of Alteration	Dec. 27, 2020 (Sun.)
Provision	Securities Listing Regulations, Rule 315-8, Paragraph 1, Item (1) (due to falling under cases where a company has committed a breach of matters taken on oath in the written oath pertaining to application for assignment to the First Section, etc. and the stock of the company is designated as security on alert due to said breach)
５．Listing Agreement Violation Penalty　Total	JPY 33.6 million
Provision	Securities Listing Regulations, Rule 509, Paragraph 1, Item (3) (due to falling under a case where TSE deems that the listed company has violated the matters in the written oath and has undermined the confidence of shareholders and investors in the TSE market)
６．Reason	HyAS&Co.Inc. (hereinafter 'the Company') disclosed the establishment of a third party committee, etc. on Aug. 31, 2020, an interim report of the third party committee concerning inappropriate accounting processing conducted since before its initial listing (hereinafter 'inappropriate accounting') on Sep. 29, 2020, and corrections to past earnings reports, etc. as well as the fact of having received audit reports containing a disclaimer of opinion, etc. on Sep. 30, 2020. In light of these disclosures, etc., TSE deemed that the Company was likely to commit a material breach of the matters in the written oath pertaining to initial listing application and listing market alteration application submitted by the Company, and designated its stock as a Security Under Supervision (Examination) on Sep. 30, 2020. After that, the Company disclosed the final report of the third party committee concerning inappropriate accounting and the fact that it had received a quarterly review report containing a qualified conclusion for its first quarter consolidated quarterly financial statements for the fiscal year ending Apr. 2021 on Oct. 26, 2020, and disclosed its new management structure, etc. on Nov. 16, 2020. These disclosures, etc. revealed the following facts: - Despite having submitted written oaths for its initial listing application to TSE Mothers and subsequent application for alteration of listing market to the TSE main market stating that contents of all the documents submitted to TSE were truthful without any omissions, the Company included financial statements containing falsehoods in the application documents, repeatedly provided untruthful responses in writing to inquiries in the course of examination, and failed to report when there were additional matters that should have been reported. - On the other hand, the amounts subject to correction in past earnings reports due to inappropriate accounting are considered limited, as evidenced by, among others, the maximum amount subject to correction is a decrease of JPY 17 million in annual sales, and did not impact on whether the Company satisfied the numerical criteria pertaining to initial listing and alteration of listing market. In addition, while its auditors disclaimed opinions for the corrections to past financial statements, taking into consideration, among others, the contents of the final report of the third party committee and the fact that it received a qualified conclusion in the quarterly review of its first quarter consolidated financial statements for fiscal year ending Apr. 2021, the possibility of a significant increase in the amount subject to correction is considered to be substantially low. - All the directors and statutory auditors of the Company who were involved in or aware of the inappropriate accounting are expected to resign by the end of Dec. 2020, including a former representative director and president of the Company, who was the reason for the auditing firm expressing serious doubts about honesty and issuing a disclaimer of opinion. In overall consideration of the above situation, TSE does not deem that the case amounts to a delisting resulting from the Company having committed a material breach of the matters in the written oaths pertaining to initial listing application and listing market alteration application submitted by the Company to TSE. Thus, TSE has decided to cancel the designation of Securities Under Supervision (Examination) of the Company. On the other hand, it was deemed that the following points mainly contributed the Company's breach of the matters in the written oaths pertaining to initial listing application and listing market alteration application: - Internal control at the Company was rendered ineffective, as evidenced by, among others, most directors including the former representative director and president of the Company being involved in or aware of the inappropriate accounting that was conducted with the aim of passing the listing examination. - Some of the directors, including the former representative director and president of the Company, were significantly lacking in their awareness toward conducting reliable financial reporting as well as honesty to market participants as evidenced by, among others, not only providing untruthful responses in the course of the initial listing examination and the examination for alteration of listing market but also conducting a cover-up after the inappropriate accounting was detected, such as untruthful explanations to Japan Exchange Regulation and disrupting the audit firm's audit procedures. - Board of directors meetings became mere formalities due to, among others, the meetings simply adding endorsement of content that had been substantially decided in separate meetings that involved the former representative director and president of the Company and others, and as such, the board of directors' could not function to sufficiently oversee the execution of duties by the directors. - A full-time statutory auditor did not perform his supervisory function as statutory auditor because, among others, he did not take measures to rectify the situation despite having gained knowledge of a part of the inappropriate accounting. - The employees of the Company lacked awareness of compliance as evidenced by, among others, the finance and accounting department , which should have provided checks and balances of the activities of the sales department, being themselves involved in inappropriate accounting in addition to playing a supportive role to the sales department. Furthermore, there was other behavior, such as the internal approval process becoming a mere formality and paying little attention to contracts, which was widespread and created the conditions that allowed the inappropriate accounting to be conducted. In overall consideration of the above situation, TSE deems this to be a case of committing a breach of the matters in the written oaths pertaining to initial listing application and listing market alteration application due to significant inadequacies in the internal management system of the Company, and therefore, improvements in the Company's internal management system, etc. are deemed highly necessary. Thus, TSE has decided to designate the stock of the Company as a Security on Alert. In addition, as mentioned above, because the Company has committed a breach of the matters in the written oath pertaining to listing market alteration application and the stock of the Company has been designated as a Security on Alert due to said breach, TSE has decided to change the listed market of the stock of the Company from the 1st Section to Mothers. Furthermore, in light of the fact that the Company has committed a breach of the matters in the written oaths by providing financial statements containing falsehoods in the application documents in the course of initial listing examination and examination for alteration of listing market, repeatedly providing untruthful responses in writing to inquiries in the course of examination and failing to report additional matters that should have been reported, TSE deems that this case has undermined the confidence of shareholders and investors in the TSE market. As such, TSE shall impose a listing agreement violation penalty on the Company.

Current Designations of Securities Under Supervision & Securities to Be Delisted
Designation History of Securities Under Supervision & Securities to Be Delisted
Current Designations of Securities on Alert
Designation History of Designation of Securities on Alert
Section transfers due to material false statements in applications
Listing Agreement Violation Penalty

DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc. and/or Japan Exchange Regulation shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with regard to this translation.

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