(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	December 31,			June 30,			March 31,			June 30,
	2017			2017			2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	9,409		$	6,263		$	6,314		$	46,676
Restricted cash								55,569			—
Inventories		220,018			221,906			137,360			114,905
Prepaid expenses		6,681			6,367			8,081			6,353
Other current assets		2,970			1,982			3,970			7,210
Total Current Assets		239,078			236,518			211,294			175,144
Property and equipment, net		122,031			118,397			39,082			68,635
Operating lease right-of-use assets								203,565			258,433
Deferred financing costs		829			986			2,705			—
Other assets		2,306			2,252			3,329			3,178
Total Assets	$	364,244		$	358,153		$	459,975		$	505,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Debtor-in-possession financing								—		$	100
Accounts payable	$	94,760		$	67,326			46,082			5,514
Accrued liabilities		48,653			44,260			72,866			33,942
Income taxes payable		154			11
Operating lease liabilities								53,480			—
Total Current Liabilities		143,567			111,597			172,428			39,556

Borrowings under revolving credit facility		—			30,500
Deferred rent		19,593			13,883
Long-term debt (see Note 8 for amounts due to related parties)								25,392			—
Lease liability — non-current								169,190			—
Asset retirement obligation — non-current		3,100			2,307			971			1,213
Other liabilities — non-current		874			1,027			3,061			1,347
Total Liabilities not subject to compromise								371,042			42,116
Liabilities subject to compromise								—			456,339
Total Liabilities		167,134			159,314			371,042			498,455
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share, authorized 10,000,000 shares; none issued or outstanding		—			—
Common stock, par value $0.01 per share, authorized 100,000,000 shares; 47,702,059 shares issued and 45,918,398 shares outstanding at December 31, 2017 and 46,904,295 shares issued and 45,120,634 shares outstanding at June 30, 2017		469			469
Preferred stock, par value $0.01 per share, authorized 10,000,000 shares; NaN issued or outstanding								—			—
Common stock, par value $0.01 per share, authorized 200,000,000 shares at March 31, 2021 and authorized 100,000,000 shares at June 30, 2020; 87,978,189 shares issued and 86,194,528 shares outstanding at March 31, 2021 and 49,124,313 shares issued and 47,340,652 shares outstanding at June 30, 2020								832			455
Additional paid-in capital		236,437			234,604			303,798			244,021
Retained deficit		(32,984	)		(29,422	)		(208,885	)		(230,729	)
Less: 1,783,661 common shares in treasury, at cost, at December 31, 2017 and 1,783,661 common shares in treasury, at cost, at June 30, 2017		(6,812	)		(6,812	)
Less: 1,783,661 common shares in treasury, at cost, at March 31, 2021 and 1,783,661 common shares in treasury, at cost, at June 30, 2020								(6,812	)		(6,812	)
Total Stockholders’ Equity		197,110			198,839			88,933			6,935
Total Liabilities and Stockholders’ Equity	$	364,244		$	358,153		$	459,975		$	505,390

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

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2021			2020			2021			2020
Net sales	$	153,345		$	165,698		$	513,516		$	714,551
Cost of sales		105,145			113,531			354,192			475,476
Gross profit		48,200			52,167			159,324			239,075
Selling, general and administrative expenses		59,183			82,814			184,600			267,273
Restructuring and abandonment expenses		1,047			—			7,554			—
Operating loss		(12,030	)		(30,647	)		(32,830	)		(28,198	)
Other income/(expense):
Interest expense		(1,409	)		(499	)		(6,676	)		(1,890	)
Reorganization items, net		(23,597	)		—			62,169			—
Other income/(expense), net		89			223			(104	)		456
Other income/(expense) total		(24,917	)		(276	)		55,389			(1,434	)
Income/(loss) before income taxes		(36,947	)		(30,923	)		22,559			(29,632	)
Income tax expense		172			117			715			99
Net income/(loss)	$	(37,119	)	$	(31,040	)	$	21,844		$	(29,731	)
Earnings Per Share
Net income/(loss) per common share:
Basic	$	(0.55	)	$	(0.69	)	$	0.41		$	(0.66	)
Diluted	$	(0.55	)	$	(0.69	)	$	0.41		$	(0.66	)
Weighted average number of common shares:
Basic		67,584			45,314			52,741			45,162
Diluted		67,584			45,314			52,741			45,162
Dividends per common share	$	0		$	0		$	0		$	0

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

	Common Stock				Additional Paid-In		Retained			Treasury			Total Stockholders'
	Shares		Amount		Capital		Deficit			Stock			Equity
Balance at December 31, 2020		46,846	$	450	$	244,769	$	(171,766	)	$	(6,812	)	$	66,641
Net loss		—		—		—		(37,119	)		—			(37,119	)
Share-based compensation		—		—		409		—			—			409
Shares issued in connection with rights offering		38,182		382		58,607		—			—			58,989
Shares issued or canceled in connection with employee stock incentive plans and related tax effect		1,167		—		13		—			—			13
Balance at March 31, 2021		86,195	$	832	$	303,798	$	(208,885	)	$	(6,812	)	$	88,933

	Common Stock						Additional Paid-In		Retained			Treasury			Total Stockholders'
	Shares			Amount			Capital		Deficit			Stock			Equity
Balance at December 31, 2019		48,036		$	462		$	242,899	$	(63,092	)	$	(6,812	)	$	173,457
Net loss		—			—			—		(31,040	)		—			(31,040	)
Share-based compensation		—			—			581		—			—			581
Shares issued or canceled in connection with employee stock incentive plans and related tax effect		(25	)		(1	)		1		—			—			—
Balance at March 31, 2020		48,011		$	461		$	243,481	$	(94,132	)	$	(6,812	)	$	142,998

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

	Common Stock					Additional Paid-In		Retained			Treasury			Total Stockholders'
	Shares		Amount			Capital		Deficit			Stock			Equity
Balance at June 30, 2020		47,341	$	455		$	244,021	$	(230,729	)	$	(6,812	)	$	6,935
Net income		—		—			—		21,844			—			21,844
Share-based compensation		—		—			1,152		—			—			1,152
Shares issued in connection with rights offering		38,182		382			58,607		—			—			58,989
Shares issued or canceled in connection with employee stock incentive plans and related tax effect		672		(5	)		18		—			—			13
Balance at March 31, 2021		86,195	$	832		$	303,798	$	(208,885	)	$	(6,812	)	$	88,933

	Common Stock					Additional Paid-In		Retained			Treasury			Total Stockholders'
	Shares		Amount			Capital		Deficit			Stock			Equity
Balance at June 30, 2019		46,683	$	465		$	241,456	$	(63,800	)	$	(6,812	)	$	171,309
Net loss		—		—			—		(29,731	)		—			(29,731	)
Cumulative effect of change in accounting principle		—		—			—		(601	)		—			(601	)
Share-based compensation		—		—			2,022		—			—			2,022
Shares issued or canceled in connection with employee stock incentive plans and related tax effect		1,328		(4	)		3					—			(1	)
Balance at March 31, 2020		48,011	$	461		$	243,481	$	(94,132	)	$	(6,812	)	$	142,998

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

Three Months Ended
Six Months Ended

December 31,
December 31,

2017

2016

2017

2016

Net sales

$
333,807

$
328,137

$
552,564

$
540,023

Cost of sales

228,122

222,155

368,929

356,702

Gross profit

105,685

105,982

183,635

183,321

Selling, general and administrative expenses

97,409

97,215

187,353

183,794

Operating income/(loss)

8,276

8,767

(3,718
)

(473
)

Other income/(expense):

Interest expense

(542
)

(412
)

(980
)

(684
)

Other income, net

371

387

728

742

Other income/(expense), total

(171
)

(25
)

(252
)

58

Income/(loss) before income taxes

8,105

8,742

(3,970
)

(415
)

Income tax provision/(benefit)

(587
)

312

(408
)

11

Net income/(loss)

$
8,692

$
8,430

$
(3,562
)

$
(426
)

Earnings Per Share

Net income/(loss) per common share:

Basic

$
0.19

$
0.19

$
(0.08
)

$
(0.01
)

Diluted

$
0.19

$
0.19

$
(0.08
)

$
(0.01
)

Weighted average number of common shares:

Basic

44,260

43,928

44,173

43,875

Diluted

44,263

43,943

44,173

43,875

Dividends per common share

$
—

$
—

$
—

$
—

	Nine Months Ended
	March 31,
	2021			2020
Cash flows from operating activities:
Net income/(loss)	$	21,844		$	(29,731	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization		11,933			20,935
Loss on abandonment of assets		5,638			—
Amortization of financing costs and interest expense		5,949			163
(Gain)/loss on disposal of assets		(1,403	)		92
Gain on sale-leaseback		(49,639	)		—
Share-based compensation		1,347			2,082
Rights Offering and Backstop Agreement		18,990			—
Gain on lease terminations		(93,281	)		—
Construction allowances from landlords		401			1,313
Change in operating assets and liabilities:
Inventories		(22,650	)		22,341
Prepaid and other current assets		(2,952	)		1,631
Accounts payable		(42,899	)		(7,339	)
Accrued liabilities		37,295			(9,842	)
Operating lease assets and liabilities		(6,538	)		(1,085	)
Income taxes payable		—			153
Other liabilities — non-current		1,481			(106	)
Net cash provided by/(used in) operating activities		(114,484	)		607
Cash flows from investing activities:
Capital expenditures		(2,342	)		(15,513	)
Proceeds from sale-leaseback		68,566			—
Purchases of intellectual property		—			(27	)
Proceeds from sales of assets		1,896			114
Net cash provided by/(used in) investing activities		68,120			(15,426	)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility		613,370			265,353
Repayments of borrowings under revolving credit facility		(613,470	)		(209,403	)
Proceeds from term loan		25,000			—
Proceeds from issuance of common stock and exercise of employee stock options		40,012			—
Change in cash overdraft		—			(4,996	)
Payments on finance leases		(167	)		(196	)
Payment of financing fees		(3,174	)		—
Net cash provided by financing activities		61,571			50,758
Net increase in cash, cash equivalents and restricted cash		15,207			35,939
Cash, cash equivalents and restricted cash at beginning of period		46,676			11,395
Cash, cash equivalents and restricted cash at end of period	$	61,883		$	47,334

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

Six Months Ended

December 31,

2017

2016

Net cash flows from operating activities:

Net loss

$
(3,562
)

$
(426
)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

12,724

9,976

Amortization of financing fees

157

168

Gain on disposal of assets

(59
)

(4
)
Gain on sale-leaseback

(371
)

(371
)
Share-based compensation

1,946

2,316

Construction allowances from landlords

3,503

—

Change in operating assets and liabilities:

Inventories

1,774

(9,147
)
Prepaid and other assets

(1,391
)

498

Accounts payable

14,433

3,578

Accrued liabilities

7,488

9,985

Deferred rent

2,760

2,089

Income taxes payable

147

4

Other liabilities — non-current

661

(235
)
Net cash provided by operating activities

40,210

18,431

Net cash flows from investing activities:

Capital expenditures

(19,532
)

(19,951
)
Purchase of intellectual property

(13
)

—

Proceeds from sale of assets

59

23

Net cash used in investing activities

(19,486
)

(19,928
)
Net cash flows from financing activities:

Proceeds under revolving credit facility

87,800

95,200

Repayments under revolving credit facility

(118,300
)

(95,200
)
Change in cash overdraft

13,001

—

Purchase of treasury stock

—

(23
)
Proceeds from the exercise of employee stock options

—

2

Payments on capital leases

(79
)

—

Net cash used in financing activities

(17,578
)

(21
)
Net increase/(decrease) in cash and cash equivalents

3,146

(1,518
)
Cash and cash equivalents, beginning of period

6,263

14,150

Cash and cash equivalents, end of period

$
9,409

$
12,632

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

The terms “Tuesday Morning,” the “Company,” “we,” “us” and “our” as used in this Quarterly Report on Form 10-Q refer to Tuesday Morning Corporation and its subsidiaries. Other than as disclosed in this document, please refer to our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for our critical accounting policies.

1. Basis of ~~presentation~~Presentation — The unaudited interim consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These financial statements include all adjustments, consisting only of those of a normal recurring nature, which, in the opinion of management, are necessary to present fairly the results of the interim periods presented and should be read in conjunction with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020. The consolidated balance sheet at June 30, ~~2017~~2020 has been derived from the audited consolidated financial statements at that ~~date, but does~~date. These interim financial statements do not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~ 2020.

The ~~results~~accompanying unaudited interim consolidated financial statements include the accounts of ~~operations~~Tuesday Morning Corporation, a Delaware corporation, and its wholly‑owned subsidiaries. All entities of the Company were included in the filing of and subsequent emergence from a voluntary petition (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the ~~three~~Northern District of Texas, Dallas Division (the “Bankruptcy Court”) and ~~six month periods ended December 31, 2017~~all entities are ~~not necessarily indicative~~included in our consolidated financial statements. Separate condensed combined financial statements of the ~~results~~entities were not required during the reorganization proceedings, nor required post emergence from bankruptcy. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications were made to ~~be expected for~~prior period amounts to conform to the ~~full fiscal year ending June 30, 2018, which we refer to as fiscal 2018.~~

current period presentation. None of the reclassifications affected our net income in any period. We do not present a consolidated statement of comprehensive income as there are no other comprehensive income items in either the current or prior fiscal periods.

The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full fiscal year ending June 30, 2021, which we refer to as fiscal 2021, due in part to the seasonality of our business, the financial impact of the COVID-19 pandemic, and the Chapter 11 cases, discussed further below.

The preparation of unaudited interim consolidated financial statements, in conformity with GAAP, requires us to make assumptions and use estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate ~~to:~~to inventory valuation under the retail method and estimation of reserves and valuation allowances specifically related to insurance, income taxes and litigation. Actual results could differ materially from these estimates. The COVID-19 pandemic has increased the difficulty in making various estimates in our financial statements. Our fiscal year ends on June 30 and we operate our business as a single operating segment.

The COVID-19 pandemic has had, and could continue to have, an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow.

On March 25, 2020, we temporarily closed all of our stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. Stores gradually reopened as allowed by state and local jurisdictions, and all but 2 of our stores had reopened as of the end of June 2020. In the first quarter of fiscal 2021, we completed the permanent closure of 197 stores. The scope and duration of this pandemic and the related disruption to our business and financial impacts cannot be reasonably estimated at this time. While we have taken actions to minimize costs, some of which are permanent including the closure of 197 stores and the closure of our Phoenix distribution center, and mitigate the related risks, there can be no assurance that these measures will continue to provide benefit or that they will be adequate to mitigate future changes in circumstances.

On May 27, 2020 (the “Petition Date”), we filed the Chapter 11 Cases. The Chapter 11 Cases were jointly administered for procedural purposes.

During the pendency of the Chapter 11 Cases, we continued to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On May 28, 2020, at the first-day hearings of the Chapter 11 Cases, the Bankruptcy Court granted relief in conjunction with various motions intended to ensure our ability to continue our ordinary operations after the Petition Date. The Bankruptcy Court’s orders granting such relief, entered on May 28, 2020 and May 29, 2020, authorized us to, among other things, pay certain pre-petition employee and retiree expenses and benefits, use our existing cash management system, maintain and administer customer programs, pay certain critical and foreign vendors and pay certain pre-petition taxes and related fees. In addition, the Bankruptcy Court issued orders approving, among other things, (1) our entry into the Senior Secured Super Priority Debtor-in-Possession Credit Agreement (the “DIP ABL Credit Agreement”) among the Company, JPMorgan Chase Bank, N.A., as administrative agent, for itself and the other lenders, which provided for a super priority secured debtor-in-possession revolving credit facility in an aggregate amount of up to $100.0 million (the “DIP ABL Facility”), and (2) our use of cash collateral in accordance with the terms of the DIP ABL Credit Agreement. See Note 8 to the Consolidated Financial Statements for additional information regarding the DIP ABL Facility.

These orders were significant because they allowed us to operate our businesses in the normal course.

The Bankruptcy Court has issued orders designed to assist us in preserving certain tax attributes during the pendency of the Chapter 11 Cases by establishing, among other things, notification and hearing procedures (the “Procedures”) relating to proposed transfers of its common stock and the taking of worthless stock deductions. The Procedures, among other things, restricted transfers involving, and required notice of the holdings of and proposed transactions by any person or “entity” (as defined the applicable U.S. Treasury Regulations) owning or seeking to acquire ownership of 4.5% or more of the Company’s common stock. The Bankruptcy Court orders provided that any actions in violation of the Procedures (including the notice requirements) would be null and void ab initio, and (a) the person or entity making such a transfer would be required to take remedial actions specified by us to appropriately reflect that such transfer of our common stock is null and void ab initio and (b) the person or entity making such a declaration of worthlessness with respect to our common stock would be required to file an amended tax return revoking such declaration and any related deduction to reflect that such declaration is void ab initio.

On June 9, 2020, the Bankruptcy Court issued an order approving procedures for the closure of up to 230 of our store locations. In early June 2020, we commenced the process to close 132 store locations in a first wave of store closings. By the end of July 2020, all of these stores were permanently closed. In mid-July 2020, we began the process to close an additional 65 stores following negotiations with our landlords, and those store closures were completed in August 2020. In the first quarter of fiscal 2021, we recorded abandonment charges of $4.8 million, related to our Phoenix distribution center closure plan. In the second quarter of fiscal 2021, we recorded abandonment charges of $0.8 million, related to our Phoenix distribution center closure plan. We closed our Phoenix, Arizona distribution center in the second quarter of fiscal 2021.

On July 10, 2020, in accordance with a final order issued by the Bankruptcy Court on July 10, 2020, we entered into a Senior Secured Super Priority Debtor-In-Possession Delayed Draw Term Loan Agreement (the “DIP DDTL Agreement”) with the Franchise Group, Inc. (the “Lender”). Pursuant to the DIP DDTL Agreement, the Lender agreed to lend us up to an aggregate principal amount of $25.0 million in the form of delayed draw term loans (the “DIP Term Facility”). See Note 8 for additional information.

On September 23, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Original Plan”) and a proposed Disclosure Statement in Support of the Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Original Disclosure Statement”) describing the Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases.

On September 23, 2020, contemporaneously with the filing of the Original Plan and Original Disclosure Statement, the Company and its subsidiaries filed an expedited motion for entry of an order (1) approving sale and bidding procedures in connection with a potential sale of assets of the Company and its subsidiaries, (2) authorizing the sale of assets free and clear of all liens, claims, encumbrances and other interests, and (3) granting related relief (the “Bidding Procedures Motion”). The Company believed that the concurrent prosecution of a plan of reorganization and a court-approved process for bidding and potential sale of substantially all of their assets would allow the Company and its subsidiaries to assess the relative benefits of a plan of reorganization and a sale. The Bidding Procedures Motion provided that the Bankruptcy Court would consider approval of a sale of assets on October 29, 2020 if the Company determined to proceed with a sale of assets.

On October 26, 2020, the Company and its subsidiaries filed a motion with the Bankruptcy Court indicating the Company would not be seeking approval of a sale of assets on October 29, 2020. On October 26, 2020, the Company also filed a motion indicating the Company was working to make revisions to the Original Plan and Original Disclosure Statement and seeking to establish a hearing on November 9, 2020 for consideration of a revised plan of reorganization and disclosure statement. The Company reserved the right to continue to pursue a sale of assets if the Company determined that a sale of assets is in the best interests of the bankruptcy estate.

On November 4, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code and a proposed Amended Disclosure Statement. On November 16, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Revised Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Amended Plan”) and a proposed Amended Disclosure Statement (the “Amended Disclosure Statement”) in support of the Amended Plan describing the Amended Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. The Amended Plan and the Amended Disclosure Statement contemplated the proposed financing transactions described in Notes 8 and 13 below, including the transactions contemplated by the Purchase and Sale Agreement (as defined in Note 13), the New ABL Facility (as defined in Note 8), the Term Loan Credit Agreement (as defined in Note 8) and the Rights Offering (as defined below).

On November 18, 2020, the Bankruptcy Court issued an order approving the Amended Disclosure Statement. On December 23, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Amended Plan, with certain modifications described in the Confirmation Order (as modified and confirmed, the “Plan of Reorganization”). On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and the Company completed the transactions contemplated by the Purchase and Sale Agreement, the New ABL Facility and the Term Loan Credit Agreement.

In accordance with the Plan of Reorganization, effective December 31, 2020, the Company’s board of directors was comprised of 9 members, including 5 continuing directors of the Company, 3 new directors appointed by the Backstop Party (as defined below) and 1 director appointed by the equity committee in the Chapter 11 Cases.

Pursuant to the Plan of Reorganization, each outstanding share of the Company’s common stock as of the close of business on January 4, 2021 was exchanged (the “Exchange”) for (1) 1 new share of the Company’s stock and (2) a share purchase right entitling the holder to purchase its pro rata portion of shares available to eligible holders in the Rights Offering. In accordance with the Plan of Reorganization, the Company commenced a $40.0 million rights offering (the “Rights Offering”), under which eligible holders of the Company’s common stock could purchase up to $24.0 million of shares of the Company’s common stock at a purchase price of $1.10 per share, and Osmium Partners, LLC or its affiliates, including a special purpose entity affiliate of Osmium Partners, LLC jointly owned with Tensile Capital Management (the “Backstop Party”), could purchase up to $16 million of shares of the Company’s common stock at a purchase price of $1.10 per share. Pursuant to a backstop commitment agreement, the Backstop Party agreed to purchase all unsubscribed shares in the Rights Offering.

The subscription period for the Rights Offering expired on February 1, 2021, with eligible holders subscribing to purchase approximately $19.8 million of shares, with the Backstop Party purchasing the remaining $20.2 million of shares. On February 9, 2021, the Company closed on the Rights Offering and in the three months ended March 31, 2021, recorded proceeds of $40.0 million and recognized a non-cash charge of approximately $14.5 million as a result of the change in fair value of the Company’s common stock issued to the Backstop Party as measured from the consummation of the Exchange through the close date (“Backstop Premium”). The change in fair value was determined by reference to the Company’s stock price, traded over-the-counter, discounted for the restrictions limited the holders ability to resell securities until they are registered pursuant to the Registration Rights Agreement entered into on February 9, 2021 between the Company and Backstop Party. In addition, on the close date, the Company issued warrants with rights to purchase 10 million shares of common stock with an exercise price of $1.65 and a five year term to the Backstop Party (“Warrants”). The Company classified the Warrants as equity instruments and recognized expense of $2.5 million measured at fair value using the Black-Scholes model for the three months ended March 31, 2021. Finally, on the close date the Backstop Party received a backstop fee in the amount of $2.0 million (payable in shares of common stock valued at $1.10 per share) that was classified as an equity instrument for the three month period ended March 31, 2021. The non-cash charges of approximately $14.5 million for the Backstop Premium, the $2.5 million of expense related to the Warrants, and backstop fee of approximately $2.0 million are recorded in Reorganization items, net in our Consolidated Statements of Operations for the three and nine months ended March 31, 2021. In accordance with the terms of the Plan of Reorganization, all proceeds from the Rights Offering will be used to make payments of the claims of general unsecured creditors in the Chapter 11 Cases.

On May 27, 2020, the Company received a letter from the Listing Qualifications Department staff of The Nasdaq Stock Market (“Nasdaq”) notifying it that, as a result of the Chapter 11 Cases and in accordance with Nasdaq Listing Rules 5101, 5110(b) and IM-5101-1, Nasdaq determined that the Company’s common stock would be delisted from Nasdaq. On June 8, 2020, trading of the Company’s common stock on Nasdaq was suspended. On July 1, 2020, Nasdaq filed a Form 25 with the SEC to delist the Company’s common stock. During the pendency of the Chapter 11 Cases, the Company’s common stock traded over the counter in the OTC Pink Market under the symbol “TUESQ”. Following the Company’s legal emergence from bankruptcy, we applied for listing on the over the counter market, and the Company’s common stock now trades over the counter on the OTCQX market under the symbol “TUEM.”

Our operating loss was $32.8 and $28.2 million for the nine months ended March 31, 2021 and March 31, 2020, respectively. Our operating loss for the fiscal year ended June 30, 2020 was $159.2 million.

The COVID-19 pandemic and the resulting store closures severely reduced our revenues and operating cash flows during the third and fourth quarters of our fiscal year ended June 30, 2020 as well as the first nine months of fiscal 2021. As described further above, on May 27, 2020, we commenced the Chapter 11 Cases in the Bankruptcy Court. Our Plan of Reorganization was confirmed by the Bankruptcy Court on December 23, 2020, and all listed material conditions precedent were deemed resolved by the December 31, 2020 legal effective date of emergence as governed by the Bankruptcy Court. The Rights Offering that closed on February 9, 2021 raised approximately $40 million of cash and was considered a critical component to the execution of our confirmed Plan of Reorganization.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments that would result if the Company was unable to realize its assets and settle its liabilities as a going concern in the ordinary course of business. We believe our plans, implemented during the nine month period ended March 31, 2021 in connection with the Chapter 11 Cases and those continuing to be implemented, will mitigate the known conditions and events that initially raised substantial doubt about the entity’s ability to continue as a going concern. However, due to the uncertainty around the scope and duration of the ongoing COVID-19 pandemic and current challenges related to the global transportation market those plans collectively cannot be deemed probable of mitigating substantial doubt as to our ability to continue as a going concern.

See Note 2 entitled “Bankruptcy Accounting” for additional information regarding the Chapter 11 Cases.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASC 326”), which makes significant changes to the accounting for credit losses on financial assets and disclosures. The standard requires immediate recognition of management’s estimates of current expected credit losses. We adopted ASC 326 in the first quarter of fiscal 2021. The adoption did not have a material impact to our consolidated financial statements.

ASC 852 requires that the consolidated financial statements, for periods subsequent to the filing of the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. During the pendency of the Chapter 11 cases until we qualified for emergence under ASC 852, the consolidated financial statements were prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business and reflect the application of ASC 852. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings were recorded in reorganization items on our consolidated statements of operations. In addition, pre-petition unsecured and under-secured obligations that were subject to the bankruptcy reorganization process were classified as liabilities subject to compromise.

Pursuant to the Plan of Reorganization, a General Unsecured Claim Fund (“Unsecured Creditor Claim Fund”) was established for the benefit of holders of Allowed General Unsecured Claims. Upon the closing of the sale and leaseback of the Corporate Office and the Dallas Distribution Center properties (see Note 6) and the issuance of the Term Loan (as defined in Note 8), net proceeds of $67.5 million, after payment of property taxes, and $18.8 million, respectively, were deposited directly into the Unsecured Creditor Claim Fund that is being administered by an independent unsecured claims disbursing agent. The remaining proceeds from the Term Loan not deposited into the Unsecured Creditor Claim Fund were deposited into our operating account. In addition, $14.2 million of additional cash was deposited into a segregated bank account at Wells Fargo Bank and is restricted for use in paying compensation for services rendered by professionals on or after the Petition date and prior to the Effective Date (“Wells Fargo Restricted Fund”). The closing of the Rights Offering provided approximately $40.0 million of cash that was deposited to the Unsecured Creditor Claim Fund and recorded as restricted cash. As of March 31, 2021, we had $46.3 million and $9.3 million of cash held in the Unsecured Creditor Claim Fund and the Wells Fargo Restricted Fund, respectively, that are recorded as restricted cash on the balance sheet. The accompanying consolidated financial statements as of June 30, 2020 do not purport to reflect or provide for the consequences of the Chapter 11 Cases. In particular, the consolidated financial statements do not purport to show: (i) the realizable value of assets on a liquidation basis or their availability to satisfy liabilities; (ii) the full amount of pre-petition liabilities that may be allowed for claims or contingencies, or the status and priority thereof; (iii) the effect on stockholders’ investment accounts of any changes that may be made to our capitalization; or (iv) the effect on operations of any changes that may be made to our business. For specific discussion on balances of liabilities subject to compromise and reorganization items, see below.

Our Plan of Reorganization was confirmed on December 23, 2020, and all listed material conditions precedent were resolved by the December 31, 2020 legal effective date of emergence as governed by the Bankruptcy Court. However, the closing of our Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of ASC 852 until that transaction closed on February 9, 2021.

We were not required to apply fresh start accounting based on the provisions of ASC 852 as there was no change in control and the entity’s reorganization value immediately before the date of confirmation was more than the total of all its post-petition liabilities and allowed claims.

As a result of the Chapter 11 Cases, the payment of pre-petition indebtedness was subject to compromise. Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims is generally not permitted, the Bankruptcy Court granted the Company authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of our businesses and assets. Among other things, the Bankruptcy Court authorized the Company to pay certain pre-petition claims relating to employee wages and benefits, customers, vendors, and suppliers in the ordinary course of business and certain insurance, tax, and principal and interest payments. With respect to pre-petition claims, we notified all known claimants of the deadline to file a proof of claim with the Bankruptcy Court. Pre-petition liabilities that are subject to compromise were required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts (see above for details on the Unsecured Creditor Claim Fund). On December 31, 2020, the legal effective date in accordance with the Bankruptcy Court, we assumed some leases and other executory contracts, while we rejected others. Liabilities for those leases and contracts that were assumed are no longer categorized in liabilities subject to compromise, as any pre-petition amounts outstanding were cured prior to the end of the second fiscal quarter ending December 31, 2020. Estimated allowable claims for those which were rejected are included in accrued expenses. Where there was uncertainty about whether a secured claim would be paid or impaired pursuant to the Chapter 11 Cases, we classified the entire amount of the claim as an outstanding liability subject to compromise as of June 30, 2020.

In connection with our emergence from bankruptcy, all allowable claims have been reclassified from Liabilities subject to compromise to Accounts payable and Accrued liabilities in our Consolidated Balance Sheets as of March 31, 2021. Liabilities subject to compromise in our condensed consolidated balance sheet include the following as of March 31, 2021 and June 30, 2020 (in thousands):

Restructuring and abandonment charges total $1.0 million and $7.6 million for the three and nine months ended March 31, 2021, respectively, and include the following (in thousands):

The restructuring and abandonment costs shown above primarily relate to the remaining employee retention costs of $0.3 million and $0.7 million of severance costs as of March 31, 2021. For the nine months ended March 31, 2021, the abandonment costs shown were primarily related to the permanent closure of our stores and Phoenix, Arizona distribution center. Decisions regarding store closures and the Phoenix, Arizona distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021. There were 0 charges for restructuring, impairment or abandonment recorded in the statement of operations for the three and nine month periods ended March 31, 2020.

Reorganization items included in our consolidated statement of operations represent amounts directly resulting from the Chapter 11 Cases and total a net expense of $23.6 million and a total net benefit of $62.2 million for the three and nine months ended March 31, 2021, respectively, and include the following (in thousands):

During the three months ended March 31, 2021, reorganization costs primarily related to the execution of our Rights Offering along with related professional fees (see Note 1). During the first nine months of fiscal 2021, in addition to the Rights Offering and related professional fees, reorganization costs primarily related to the leases for store locations related to our permanent closure plan, as well as the lease for our Phoenix distribution center, which were rejected and the related lease liabilities were reduced to the amount of estimated claims allowable by the Bankruptcy Court, resulting in the $66.2 million gain shown above for the nine months ended March 31, 2021. In the second quarter of fiscal 2021, we executed a sale-leaseback agreement on our owned real estate as part of our Plan of Reorganization, the proceeds of which, along with other sources of financing, will be utilized to satisfy allowed claims and are thus categorized as a reorganization item. Please refer to Note 13 for additional details regarding the sale-leaseback transactions. There were 0 charges for reorganization items recorded in the statement of operations for the three and nine months ended March 31, 2020.

Cash paid for reorganization items during the three and nine months ended March 31, 2021 was $3.7 million and $22.6 million, respectively, and related to professional and legal fees. As of March 31, 2021, $15.6 million of professional fees were unpaid and accrued in Accounts Payable and Accrued Liabilities in the accompanying Consolidated Balance Sheet.

3. Revenue recognition — Our revenue is earned from sales of merchandise within our stores and is recorded at the point of sale and conveyance of merchandise to customers. Revenue is measured based on the amount of consideration that we expect to receive, reduced by point of sale discounts and estimates for sales returns, and excludes sales tax. Payment for our sales is due at the time of sale. We maintain a reserve for estimated returns, as well as a corresponding returns asset in “Other Assets” in the Consolidated Balance Sheet, and we use historical customer return behavior to estimate our reserve requirements. NaN impairment of the returns asset was identified or recorded as of March 31, 2021. Gift cards are sold to customers in our stores and we issue gift cards for merchandise returns in our stores. Revenue from sales of gift cards and issuances of merchandise credits is recognized when the gift card is redeemed by the customer, or if the likelihood of the gift card being redeemed by the customer is remote (gift card breakage). The gift card breakage rate is determined based upon historical redemption patterns. An estimate of the rate of gift card breakage is applied over the period of estimated performance and the breakage amounts are included in net sales in the Consolidated Statement of Operations. Breakage income recognized for the three and nine months ended March 31, 2021 was $0.1 million and $0.3 million, respectively. Breakage income recognized for the three and nine months ended March 31, 2020 was $0.1 million and $0.4 respectively. The gift card liability is included in “Accrued liabilities” in the Consolidated Balance Sheet. We will continue to evaluate whether and how store closures may affect customer behavior with respect to sales returns and gift card redemption and related breakage.

4. Share-based incentive plans — ~~Stock Option Awards.~~ ~~We have established the~~On January 4, 2021, Tuesday Morning Corporation ~~2004 Long-Term Equity Incentive Plan,~~interests, prior to reorganization, consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the existing common stock were reinstated and entitled the holder to acquire an equal number of shares of the common stock of reorganized Tuesday Morning, subject to dilution as ~~amended (the “2004 Plan”),~~a result of the issuance of the Rights Offering and the issuance of equity securities on and after January 4, 2021.

Stock Option Awards. We have established the Tuesday Morning Corporation 2008 Long-Term Equity Incentive Plan (the “2008 Plan”) and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”), which allow for the granting of stock options to directors, officers and key employees of the Company, and certain other key individuals who perform services for us and our subsidiaries. Equity awards may no longer be granted under the ~~2004 Plan or the~~ 2008 Plan but equity awards granted under the ~~2004 Plan and the~~ 2008 Plan are still outstanding.

~~On November 16, 2016, our stockholders approved amendments~~ Pursuant to the Plan of Reorganization, upon the Company’s emergence from bankruptcy, all outstanding equity awards remained in full force and effect under their existing terms. In addition, the Plan of Reorganization provided for an amendment to the 2014 Plan to increase the number of shares ~~of the Company’s common stock~~ available for ~~issuance under the 2014 Plan~~future awards by 2,500,000 shares and to make additional amendments to the 2014 Plan, including (i) reducing the percentage of shares exempt from the minimum vesting requirements under the 2014 Plan, (ii) adding a clawback policy, (iii) generally eliminating the discretion of the Board of Directors to accelerate the vesting of outstanding and unvested awards upon a change of control and (iv) providing that certain shares surrendered in payment of the exercise price of awards or withheld for tax withholding would count against the shares available under the 2014 Plan.2.4 million shares.

Stock options were awarded under the 2008 Plan and the 2014 Plan with a strike price at ~~a fair market value equal to~~ the ~~average of the high and low trading prices of our common stock on the date of grant under the 2004 Plan. Stock options were awarded with a strike price at a~~ fair market value equal to the closing price of our common stock on the date of the ~~grant under the 2008 Plan and the 2014 Plan.~~grant.

Options ~~granted under the 2004 Plan typically vest over periods of one to five years and expire ten years from the date of grant, while options~~ granted under the 2008 Plan and the 2014 Plan typically vest over periods of one to four years and expire ten years from the date of grant. Options granted under ~~the 2004 Plan,~~ the 2008 Plan and the 2014 Plan may have certain performance requirements in addition to service terms. If the performance conditions are not satisfied, the options are forfeited. The exercise prices of stock options outstanding on ~~December~~March 31, ~~2017,~~2021 range between ~~$1.24~~$1.64 per share and $20.91 per share. ~~All shares available under the 2004 Plan have been granted. The 2004 Plan and the 2008 Plan terminated as to new awards as of May 17, 2014 and September 16, 2014, respectively.~~ There were ~~3.0~~5.9 million shares available for grant under the 2014 Plan at ~~December~~March 31, ~~2017.~~2021.

Restricted Stock Awards—The ~~2004 Plan, the~~ 2008 Plan and the 2014 Plan authorize the grant of restricted stock awards to directors, officers, key employees and certain other key individuals who perform services for us and our subsidiaries. Equity awards may no longer be granted under the ~~2004 Plan and the~~ 2008 Plan, but restricted stock awards granted under ~~the 2004 Plan and~~ the 2008 Plan are still outstanding. Restricted stock awards are not transferable, but bear certain rights of common stock ownership including voting and dividend rights. The 2014 Plan also authorizes the issuance of restricted stock units which, upon vesting, provide for the issuance of an equivalent number of shares of common stock or a cash payment based on the value of our common stock at vesting. Restricted units are not transferable and do not provide voting or dividend rights. Shares and units are valued at the fair market value of our common stock aton the date of ~~award.~~the grant. Shares and units may be subject to certain performance requirements. If the performance requirements are not met, the restricted shares or units are forfeited. Under ~~the 2004 Plan,~~ the 2008 Plan and the 2014 Plan, as of ~~December~~March 31, ~~2017,~~2021, there were ~~1,607,150~~2,011,061 shares of restricted stock and 1,028,932 restricted stock units outstanding

with award vesting periods, both performance-based and service-based, of one to four years and a weighted average grant date fair value of ~~$4.29~~$1.92 and $1.91 per ~~share.~~share, respectively.

Performance-Based Restricted Stock Awards and Performance-Based Stock Option Awards. As of ~~December~~March 31, ~~2017~~2021, there were ~~1,641,513~~287,348 unvested performance-based restricted stock awards and performance-based restricted stock ~~option awards~~units payable in cash outstanding under the 2014 Plan.

Share-based Compensation Costs. Share-based compensation costs were recognized as follows (in thousands):

3.5. Commitments and contingencies — WeInformation related to the Chapter 11 Cases that were filed on May 27, 2020 is included in Note 1.

In addition, we are involved in legal and governmental proceedings as part of the normal course of our business. Reserves have been established when a loss is considered probable and are based on ~~management's~~management’s best estimates of our potential liability in these matters. These estimates have been developed in consultation with internal and external counsel and are based on a combination of litigation and settlement strategies. Management believes that such litigation and claims will be resolved without material effect on our financial position or results of operations.

6.Leases— We conduct substantially all operations from leased facilities, including our corporate offices in Dallas and the Dallas warehouse, distribution and retail complex, which were leased on December 31, 2020, subsequent to the sale and leaseback of those facilities on that date. Our retail store locations, our corporate office and our distribution center are under operating leases that will expire over the next 1 to 11 years. Many of our leases include options to renew at our discretion. We include the lease renewal option periods in the calculation of our operating lease assets and liabilities when it is reasonably certain that we will renew the lease. We also lease certain equipment under finance leases that generally expire within 60 months.

On December 31, 2020, we sold our corporate office and Dallas distribution center properties and leased back those facilities. The ~~Company~~lease of the corporate office is for a ~~defendant~~term of 10 years, and the lease of the distribution center is for an initial term of two and one-half years, with an option to extend the distribution center lease for one additional year. We believe it is reasonably certain the option to extend will be exercised. We determined the sale price represented the fair value of the underlying assets sold and have no continuing involvement with the properties sold other than a normal leaseback.

The 2 leases, associated with the transaction, were recorded as operating leases. As of March 31, 2021 we will pay approximately $10.0 million in fixed rents and in-substance fixed rents, over the 10 year lease term for the corporate office and we will pay approximately $17.3 million in fixed rents and in-substance fixed rents for the Dallas distribution center property over the three and one-half year lease term, including the one-year option period as noted above. Fixed rents and in-substance fixed rents for each lease were discounted using the incremental borrowing rate we established for the respective term of each lease.

Subsequent to the petition date, we commenced negotiations with our landlords on substantially all of our ongoing leases, resulting in significant modifications and remeasurement recorded in the first and second quarter of fiscal 2021. As a result of the remeasurements and terminations of rejected leases, we reduced our operating lease right-of-use assets by approximately $32 million and our operating lease liabilities by approximately $124 million, recording a gain of approximately $92 million, which is included in Reorganization items, net (see Note 2) in the unaudited interim Consolidated Statement of Operations.

We determine whether an agreement contains a lease at inception based on our right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the right-of-use (“ROU”) assets represent our right to use the underlying assets for the respective lease terms.

The operating lease liability is measured as the present value of the unpaid lease payments and the ROU asset is derived from the calculation of the operating lease liability. As our leases do not generally provide an implicit rate, we use our incremental borrowing rate as the discount rate to calculate the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate that would be required to borrow over a similar term, on a collateralized basis in a ~~purported class action lawsuit,~~ ~~Jerry Castillo v. Tuesday Morning Inc., which was filed on December 28, 2017~~similar economic environment.

Rent escalations occurring during the term of the leases are included in the ~~United States District Court, Middle District~~calculation of ~~Florida.~~the future minimum lease payments and the rent expense related to these leases is recognized on a straight-line basis over the lease term. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses allocated on a percentage of sales in excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expense in the period incurred. The ~~case~~ROU asset is ~~brought under~~adjusted to account for previously recorded lease-related expenses such as deferred rent and other lease liabilities.

Our lease agreements do not contain residual value guarantees or significant restrictions or covenants other than those customary in such arrangements.

Total lease costs shown above exclude $5.6 million recorded in the ~~Fair Labor Standards Act and includes allegations that the Company violated various wage and hour labor laws. Relief is sought on behalf~~nine months ended March 31, 2021, for accelerated recognition of ~~current and former Company employees. The lawsuit seeks to recover damages, penalties and attorneys' fees~~rent expense as a result of abandonment due to our Phoenix distribution center closure.

The table below presents additional information related to the ~~alleged violations. We are investigating the underlying allegations~~Company’s leases as of March 31, 2021 and ~~intend to vigorously defend our position. We cannot reasonably estimate the potential loss or range of loss, if any, for the lawsuit.~~June 30, 2020:

4.Other information related to leases, including supplemental disclosures of cash flow information, is as follows (in thousands):

Maturities of lease liabilities were as follows as of March 31, 2021 (in thousands):

	Operating Leases		Finance Leases		Total
Fiscal year:
2021 (remaining)	$	17,298	$	60	$	17,358
2022		68,507		125		68,632
2023		58,844		—		58,844
2024		46,163		—		46,163
2025		31,831		—		31,831
2026		19,397		—		19,397
Thereafter		28,542		—		28,542
Total lease payments	$	270,582	$	185	$	270,767
Less: Interest		47,912		5		47,917
Total lease liabilities	$	222,670	$	180	$	222,850
Less: Current lease liabilities		53,480		171		53,651
Non-current lease liabilities	$	169,190	$	9	$	169,199

Current and non-current finance lease liabilities are recorded in “Accrued liabilities” and “Other liabilities – non-current,” respectively, on our consolidated balance sheet. As of March 31, 2021, there were 0 operating lease payments for legally binding minimum lease payments for leases signed but not yet commenced.

7. Earnings per common share — The following table sets forth the computation of basic and diluted ~~income/(loss)~~earnings per common share (in thousands, except per share amounts):

	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016			2021			2020			2021			2020
Net income/(loss)	$	8,692		$	8,430		$	(3,562	)	$	(426	)	$	(37,119	)	$	(31,040	)	$	21,844		$	(29,731	)
Less: Income to participating securities		(156	)		(72	)		—			—			—			—			(311	)		—
Net income/(loss) attributable to common shares	$	8,536		$	8,358		$	(3,562	)	$	(426	)	$	(37,119	)	$	(31,040	)	$	21,533		$	(29,731	)
Weighted average number of common shares outstanding basic		44,260			43,928			44,173			43,875
Weighted average number of common shares outstanding — basic														67,584			45,314			52,741			45,162
Effect of dilutive stock equivalents		3			15			—			—			—			—			—			—
Weighted average number of common shares outstanding diluted		44,263			43,943			44,173			43,875
Net income/(loss) per common share basic	$	0.19		$	0.19		$	(0.08	)	$	(0.01	)
Net income/(loss) per common share diluted	$	0.19		$	0.19		$	(0.08	)	$	(0.01	)
Weighted average number of common shares outstanding — diluted														67,584			45,314			52,741			45,162
Net income/(loss) per common share — basic													$	(0.55	)	$	(0.69	)	$	0.41		$	(0.66	)
Net income/(loss) per common share — diluted													$	(0.55	)	$	(0.69	)	$	0.41		$	(0.66	)

For the quarters ended ~~December~~March 31, ~~2017~~2021 and ~~December~~March 31, ~~2016,~~2020, options representing the rights to purchase approximately ~~4.0~~2.3 million weighted average shares and ~~3.8~~2.8 million weighted average shares, respectively, were ~~not included~~excluded in the dilutive ~~income~~earnings per share calculation because the assumed exercise of such options would have been anti-dilutive. For the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~December~~March 31, ~~2016, all~~2020, options ~~and awards~~ representing the rights to purchase approximately 2.6 million weighted average shares and 2.9 million weighted average shares, respectively, were excluded ~~from~~in the ~~diluted loss~~dilutive earnings per share calculation, ~~as we had a net loss for the periods and~~because the assumed exercise of such options ~~and awards~~ would have been anti-dilutive. On February 9, 2021, as part of the Rights Offering, the Company issued warrants to purchase 10 million shares of common stock with an exercise price of $1.65 and a five year term, all which remained outstanding as of March 31, 2021. For the three and nine months ended March 31, 2021, warrants representing the rights to purchase approximately 5.7 million and 1.9 million weighted average shares, respectively were excluded in the dilutive earnings per share calculation because the assumed exercise of such warrants would have been anti-dilutive.

Through December 31, 2020, we were party to a credit agreement ~~providing~~that provided for an asset-based, five-year senior secured revolving credit facility in the original amount of up to $180.0 million which ~~matures~~was scheduled to mature on ~~August 18, 2020~~January 29, 2024 (the ~~“Revolving~~“Pre-Petition ABL Credit ~~Facility”~~Agreement”). The availability of funds under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility is~~Agreement was limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitments under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility.~~Agreement. Our indebtedness under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility is~~Agreement was secured by a lien on substantially all of our assets. ~~The Revolving~~

On May 14, 2020, we entered into a Limited Forbearance Agreement (the “Forbearance Agreement”) with the lenders under the Pre-Petition ABL Credit ~~Facility contains~~Agreement.

Under the terms of the Forbearance Agreement, the lenders under the Pre-Petition ABL Credit Agreement agreed to not exercise remedies under the Pre-Petition ABL Credit Agreement and applicable law through May 26, 2020 (or earlier, if certain ~~restrictive covenants, which affect, among others,~~events occurred) based on the event of default resulting from our

~~ability to incur liens or incur additional indebtedness, change~~ suspension of the ~~nature~~operation of our business ~~sell assets~~in the ordinary course and other events of default that may arise during the forbearance period as a result of failing to meet our obligations under certain agreements.

Pursuant to the Forbearance Agreement, the commitment of the lenders under the Pre-Petition ABL Credit Agreement was permanently reduced from $180.0 million to $130.0 million and new swingline loans were not advanced. During the forbearance period, the lenders were not obligated to fund further loans or ~~merge~~issue or ~~consolidate~~renew letters of credit under the Pre-Petition ABL Credit Agreement. The Forbearance Agreement required loan repayments of $10.0 million under the Pre-Petition ABL Credit Agreement, and the application of unrestricted and unencumbered cash balances in excess of $32.0 million to the repayment of outstanding borrowings under the Pre-Petition ABL Credit Agreement. The Forbearance Agreement also required daily cash sweeps to the Company’s main concentration account, a deposit account control agreement over such account, the imposition of additional reporting obligations, including a business plan, cash flow forecasts and working capital plan, and adherence to such cash flow forecasts, subject to certain permitted variances. The Forbearance Agreement also required the Company to retain a liquidation consultant and financial advisor. The Forbearance Agreement ended on May 26, 2020.

As 0 availability remains under the Pre-Petition ABL Credit Agreement, unused commitment fees and interest charges ceased.

The filing of the Chapter 11 Cases on May 27, 2020, was an event of default under the Pre-Petition ABL Credit Agreement, making all amounts outstanding under the existing Pre-Petition ABL Credit Agreement immediately due and payable. As of December 31, 2020, we had 0 amounts outstanding under the Pre-Petition ABL Credit Agreement, and that agreement was terminated.

On May 29, 2020, we entered into the DIP ABL Credit Agreement, which provided for a super priority secured debtor-in-possession revolving credit facility in an aggregate amount of up to $100.0 million. The Lenders under the DIP ABL Facility were the existing lenders under the Pre-Petition ABL Credit Agreement. On July 10, 2020, we entered into the DIP DDTL Agreement, which provided for delayed draw term loans in an amount not to exceed $25.0 million. On December 31, 2020, the DIP ABL Credit Agreement and the DIP DDTL Agreement were terminated.

On December 31, 2020, the Company and its subsidiaries entered into a Credit Agreement (the “New ABL Credit Agreement”) with ~~any other entity, or make investments or acquisitions unless they meet certain requirements.~~JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. (collectively, the “Lenders”) that provides for a revolving credit facility in an aggregate amount of $110.0 million (the “New ABL Facility”). The ~~Revolving~~New ABL Credit ~~Facility~~Agreement includes conditions to borrowings, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The New ABL Credit Agreement requires ~~that we satisfy~~the Company to maintain a minimum fixed charge coverage ratio ~~at any time that our~~if borrowing availability ~~is less than~~falls below certain minimum levels, after the ~~greater~~first anniversary of ~~10%~~the agreement.

Under the terms of ~~our calculated~~the New ABL Credit Agreement, amounts available for advances would be subject to a borrowing base as described in the New ABL Credit Agreement. Under the New ABL Credit Agreement, borrowings will initially bear interest at a rate equal to the adjusted LIBOR rate plus a spread of 2.75% or ~~$12.5 million. Our Revolving Credit~~the Commercial Bank Floating Bank rate plus a spread of 1.75%.

The New ABL Facility ~~may, in some instances, limit our ability to pay cash dividends~~is secured by a first priority lien on all present and ~~repurchase our common stock. In order for~~after-acquired tangible and intangible assets of the ~~borrower~~Company and its subsidiaries other than certain collateral that secures the Term Loan (as defined below). The commitments of the Lenders under the ~~Revolving Credit~~New ABL Facility our subsidiary, to make a restricted payment to us for the payment of a dividend or a repurchase of shares, we must, among other things, maintain availability of 20% of the lesser of our calculated borrowing base or our lenders’ aggregate commitmentswill terminate and outstanding borrowings under the ~~Revolving Credit~~New ABL Facility will mature on ~~a pro forma basis for a specified period prior to and immediately following the restricted payment.~~ December 31, 2023.

As of ~~December~~March 31, ~~2017, we were in compliance with all of the Revolving Credit Facility covenants.~~

~~At December 31, 2017,~~2021, we had no0 borrowings outstanding under the ~~Revolving Credit~~New ABL Facility, ~~$8.5~~$8.8 million of ~~outstanding~~ letters of credit outstanding, and borrowing availability of ~~$102.9 million. Letters of credit~~$48.4 under the ~~Revolving~~New ABL Facility.

On December 31, 2020, the Company, Alter Domus (US), LLC, as administrative agent, and the lenders named therein (the “Term Lenders”), including Tensile Capital Partners Master Fund LP and affiliates of Osmium Partners, LLC, entered into a Credit ~~Facility are primarily~~Agreement (the “Term Loan Credit Agreement”) provided a term loan of $25.0 million to the Company (the “Term Loan”). On December 31, 2020, 3 new directors were selected for ~~self-insurance purposes. We incur commitment fees of up to 0.25%~~membership on the ~~unused portion~~Board of Directors by the Backstop Party, in accordance with the terms of the ~~Revolving~~Plan of Reorganization. Pursuant to the Term Loan Credit ~~Facility, payable quarterly. Any borrowing under~~Agreement, Tensile Capital Partners Master Fund, LP and affiliates of Osmium Partners, LLC., held $19.0 million and $1.0 million, respectively, of the ~~Revolving~~$25.0 million outstanding Term Loan.

Pursuant to the terms of the Term Loan Credit ~~Facility incurs~~Agreement, the Term Loan has a maturity date of December 31, 2024 and bears interest at ~~LIBOR or~~a rate of 14% per annum, with interest payable in-kind. Under the ~~prime rate, plus an applicable margin, at our election (except with respect to swing loans, which incur interest solely at~~terms of the ~~prime rate plus~~Term Loan Credit Agreement, the ~~applicable margin),~~Term Loan is secured by a second lien on the collateral securing the New ABL Facility and a first lien on certain other assets of the Company as described in the Term Loan Credit Agreement. The Term Loan is subject to optional prepayment after the first anniversary of the date of issuance at prepayment price equal to the greater of (1) the original principal amount of the Term Loan plus accrued interest thereon, and (2) 125% of the original principal amount of the Term Loan. The Term Loan is subject to mandatory prepayment in connection with a ~~floor~~change of ~~one month LIBOR plus an applicable margin~~control of the Company as described in the ~~case~~Term Loan Credit Agreement. The Term Loan Credit Agreement also includes customary covenants and events of ~~loans based~~default. As of March 31, 2021, the outstanding principal balance of the Term Loan was $25.4 million, net of debt issuance costs.

The fair value of the Company’s debt approximated its carrying value at March 31, 2021. At March 31, 2021, we are in compliance with covenants in the New ABL Facility and Term Loan.

Interest expense of $1.4 million for the third quarter of fiscal 2021 is primarily due to accrued interest on the ~~prime rate.~~ Term Loan along with the amortization of financing fees incurred for the New ABL facility. Interest expense was $0.5 million for the third quarter fiscal 2020. Interest expense for the ~~second quarter~~first nine months of ~~the current~~ fiscal ~~year~~2021 from the ~~Revolving~~New ABL credit facility, the DIP ABL Credit ~~Facility~~Agreement and the Term Loan of ~~$0.5~~$6.7 million was comprised of ~~commitment fees of $0.1 million, interest expense of $0.3 million and~~ the amortization of financing fees of ~~$0.1~~$5.2 million, commitment fees of $0.6 million, and accrued PIK interest on the Term Loan of $0.9 million. Interest expense for the ~~second quarter~~first nine months of ~~the prior~~ fiscal ~~year~~2020 from the ~~Revolving~~Pre-Petition ABL Credit ~~Facility~~Agreement of ~~$0.4~~$1.9 million was comprised of interest of $1.5 million, commitment fees ~~of $0.1 million, interest expense~~ of $0.2 million, and the amortization of financing fees of $0.1 million. Interest expense for the six months ended December 31, 2017 of $1.0 million was comprised of commitment fees of $0.2 million, interest expense of $0.6 million and the amortization of financing fees of $0.2 million. Interest expense for the six months ended December 31, 2016 of $0.7 million was comprised of commitment fees of $0.2 million, interest expense of $0.3 million and the amortization of financing fees of $0.2 million.

~~6. Depreciation~~9. Property and equipment, including depreciation — Accumulated depreciation of owned property and equipment ~~and property at December~~as of March 31, ~~2017~~2021 and June 30, ~~2017~~2020 was ~~$147.9~~$148.5 million and ~~$138.3~~$231.1 million, respectively. The decrease in the current year was due to the stores closed permanently during the first quarter of fiscal 2021, the Phoenix distribution center closure and the sale-leaseback of our corporate office and Dallas distribution center properties in the second quarter of fiscal 2021 which resulted in property and equipment disposals, as discussed in Note 13.

As of March 31, 2021, due to the ongoing impact of COVID-19, we performed an interim impairment assessment of our leasehold improvement assets and right-of-use assets, which did not result in a material impairment for the three and nine month periods ending March 31, 2021. While we believe our estimates and judgements about projected future cash flows are reasonable, future impairment charges may be required if the future cash flows, as projected, do not occur, or if events changes requiring us to revise our estimates.

In the quarter ended December 31, 2020, we sold our corporate office and Dallas distribution center properties and land with a total net book value of $18.9 million in a sale-leaseback transaction (see further discussion in Note 13 below). Gains related to the sale or other disposal of such assets are presented in reorganization items on our Consolidated Statement of Operations.

7.10. Income taxes ~~— The~~—The Company ~~or one of~~and its subsidiaries files ~~income tax returns in the~~ U.S. federal, state and local ~~taxing jurisdictions.~~income tax returns. With few exceptions, the Company and its subsidiaries are no longer subject to state and local income tax examinations for years ~~through~~prior to fiscal ~~2012. The Internal Revenue Service has concluded~~2016 and are no longer subject to federal income tax examinations for years prior to fiscal 2013.

On March 27, 2020, in an ~~examination~~effort to mitigate the economic impact of the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act includes certain corporate income tax provisions, which among other things, included a five-year carryback of net operating losses and acceleration of the corporate alternative minimum tax credit. The Company has evaluated the CARES Act and it is not expected to have a material impact on the income tax provision. The CARES Act also contains provisions for ~~years ending on or before June 30, 2010.~~

deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the pandemic. As a result of the CARES Act, we continued to defer qualified payroll taxes through March 31, 2021. Current and non-current qualified deferred payroll taxes are each $2.1 million as of March 31, 2021.

The effective tax rates for the quarters ended ~~December~~March 31, ~~2017~~2021 and ~~December 31, 2016~~2020 were ~~(7.2%~~(0.0%) and ~~3.6%~~(0.4%), respectively. The effective tax rates for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~December 31, 2016~~2020 were ~~10.3%~~3.3% and ~~(2.7%~~(0.3%), respectively. A full valuation allowance is currently recorded against substantially all of the Company’s deferred tax assets. A deviation from the customary relationship between income tax ~~expense/~~expense and (benefit) and pretax ~~income/~~income (loss) results from ~~utilization~~the effects of the valuation allowance.

~~The Company’s results of operations included the estimated impact of the enactment of the Tax Cuts~~11. Cash, cash equivalents and Jobs Act (“TCJA”), which was signed into law on December 22, 2017. Among numerous provisions included in the new law was the reduction of the corporate federal income tax rate from 35% to 21%. The Company currently expects the effect of the tax law change to have a nominal impact on its annual effective tax rate, given its cumulative loss position and the related valuation allowance. In the second fiscal quarter of 2018, the Company applied the provisions of the newly enacted TCJA, resulting in an approximate $0.5 million income tax benefit connected with future refunds of alternative minimum tax credits no longer requiring a valuation allowance. The impact of the new tax law, including the remeasurement of the Company’s deferred taxes at the new corporate tax rate, did not have a material impact on the Company’s deferred taxes as substantially all of the Company’s net deferred tax assets have corresponding valuation allowances. The future impact of TCJA may differ due to, among other things, changes in interpretations, assumptions made, the issuance of additional guidance, and actions we may take as a result of the TCJA.

~~8. Cash and~~restricted cash ~~equivalents~~ — Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. ~~At December~~As of March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, credit card receivables from third party consumer credit card providers were ~~$7.7~~$3.3 million and ~~$4.9~~$3.7 million, respectively. Such receivables are generally collected within one week of the balance sheet date. Restricted cash aggregating $55.6 million consists of $46.3 million, which is being held in the Unsecured Creditor Claim Fund and $9.3 million which is being held in the Wells Fargo Restricted Fund (see Note 2).

9.12. Intellectual property — Our intellectual property primarily consists of indefinite lived trademarks. ~~We evaluate annually whether the trademarks continue to have an indefinite life.~~ Trademarks and other intellectual property are reviewed for impairment annually in the fourth fiscal quarter, and may be reviewed more frequently if indicators of impairment are present. As of ~~December~~March 31, ~~2017,~~2021, the carrying value of the intellectual property, which included indefinite-lived trademarks, was ~~$1.0~~$1.6 million, and no0 impairment was identified or recorded.

10. Cease use liability — Amounts in “Accrued liabilities” and “Other liabilities – non-current” in the Consolidated Balance Sheet at December 31, 2017 include the current and long-term portions, respectively, of accruals for the net present value of future minimum lease payments, net of estimated sublease income, attributable to closed stores with remaining lease obligations. The short-term and long-term cease use liabilities were $0.8 and $0.3 million, respectively, at December 31, 2017. The short-term and long-term cease use liabilities were $1.0 and $0.5 million, respectively, at June 30, 2017. Expenses related to store closings are included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations.

~~11.~~13. Sale-leaseback — ~~During the fourth quarter of fiscal 2016,~~On December 7, 2020, we entered into ~~a sale-leaseback transaction~~an agreement to sell ~~two buildings~~our corporate office and ~~land utilized in our~~ Dallas distribution center ~~operations, which~~properties and leaseback those facilities (the “Purchase and Sales Agreement”). On December 31, 2020, with the authority granted us by the Bankruptcy Court, we ~~do not consider part~~executed those transactions. The lease of ~~our long-term~~the corporate office is for a term of 10 years and the lease of the distribution ~~network,~~center properties is for an initial term of two and ~~leased back these facilities through December 2017. We have since exercised our~~one half years, with an option to extend the ~~related~~distribution center properties lease ~~through March 2018.~~ for one additional year. We believe it is reasonably certain the option to extend will be exercised. We determined the sale price represented the fair value of the underlying assets sold and we have no continuing involvement with the properties sold other than a normal ~~leaseback.~~leaseback.

The consideration received for the sale, as reduced by closing and transaction costs, was ~~$8.8~~$68.5 million, and the net book value of properties sold was ~~$5.2~~$18.9 million, resulting in a ~~$3.6~~$49.6 million ~~gain. The~~ gain, ~~recognized in fiscal year 2016~~which was $2.5 million, which included the portion of the gain in excess of the present value of the minimum lease payments for the leaseback, and was included in other income in our Consolidated Statement of Operations. During fiscal 2017, weimmediately recognized ~~$0.7 million of the gain. During the first six months of fiscal 2018, we recognized the final $0.4 million of the gain with no remaining deferred gain~~ as of December 31, ~~2017.~~ 2020. Cash proceeds were deposited directly into the Unsecured Creditor Claim Fund. See Notes 2 and 11.

The ~~leaseback is an~~2 leases, associated with the transaction, were recorded as operating leases. As of March 31, 2021 we will pay approximately $10.0 million in fixed rents and in-substance fixed rents, over the 10 year lease term for the corporate office and we will pay approximately ~~$0.2~~$17.3 million in ~~rent, excluding executory costs, from January 2018 through March 2018.~~

~~12. Capital Lease — During fiscal 2017, we entered into a 5-year capital lease maturing on January 31, 2022 for equipment~~fixed rents and software. At December 31, 2017, the capital lease asset balance was $0.7 million, the current lease liability was $0.2 million and the long-term lease liability was $0.5 million. The capital lease asset is amortized on a straight-line basis. During the second fiscal quarter of 2018, the capital lease amortization was less than $0.1 million and was $0.1 millionin-substance fixed rents for the ~~six months ended December 31, 2017.~~

~~13. Recent accounting pronouncements — In August 2016,~~Dallas distribution center property over the ~~Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts~~three and Cash Payments (“ASU 2016-15”), which provides guidance on eight specific cash flow issues in regard to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, with early adoption permitted. The amendments in ASU 2016-15 should be adopted on a retrospective basis unless it is impracticable to apply, in which case the amendments should be applied prospectively as of the earliest date practicable. The Company currently expects to adopt this standard in the first quarter of fiscal 2019 and is evaluating the impact that this standard will have on its consolidated financial statements and disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) to reduce the complexity of certain aspects of the accounting for employee share-based payment transactions. ASU 2016-09 involves changes in several aspects of the accounting for share-based payment transactions,one-half year lease term, including the ~~accounting~~one-year option period as noted above. Fixed rents and in-substance fixed rents for each lease were discounted using the incremental borrowing rate we established for the ~~income tax consequences~~respective term of share-based awards. For public companies, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted ASU 2016-09 in the first quarter of fiscal 2018 and elected to continue to estimate forfeitures expected to occur to determine the amount of share based compensation cost to recognize in each period, as permitted by ASU 2016-09. In addition, the adoption of this standard prospectively changes the dilutive earnings per share calculation by removing excess tax benefits and deficiencies from the computation. The adoption of this standard did not materially impact our consolidated financial statements and disclosures.lease.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is intended to improve financial reporting in connection with leasing transactions. ASU 2016-02 will require entities (“lessees”) that lease assets with lease terms of more than twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or finance, while the income statement will reflect lease expense for operating leases and amortization/interest expense for finance leases. Accounting by entities that own the assets leased by lessees (“lessors”) will remain largely unchanged from current GAAP. In addition, ASU 2016-02 requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the financial statements. The Company currently expects to adopt this standard in the first quarter of fiscal 2020. While the Company is currently evaluating the provisions of ASU 2016-02 to assess the impact on the Company’s consolidated financial statements and disclosures, the primary effect of adopting the new standard will be to record assets and obligations for current operating leases.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value, except for companies using the Retail Inventory Method which will continue to use existing impairment models. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of

completion, disposal, and transportation. The new guidance must be applied on a prospective basis and is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. The Company adopted ASU 2015-11 in the first quarter of fiscal 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), an updated standard on revenue recognition, and has since modified the standard with additional ASUs. The new guidance provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using IFRS and GAAP. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration, or payment, to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of ASU 2014-09. Accordingly, this standard is effective for reporting periods beginning after December 15, 2017, including interim periods within that year, with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Company currently expects to adopt this standard in the first quarter of fiscal 2019 and does not expect this standard to have a material impact on its consolidated financial statements and disclosures, as the vast majority of its revenue is expected to continue to be generated from point-of-sale transactions that are expected to be recognized consistent with its current accounting. In connection with its point-of-sale transactions, for which sales are subject to a right of return, the Company currently expects to use one portfolio for its measurement of the estimated refund liability and return asset upon adoption of the new standard. Additionally, the Company’s current accounting for gift card breakage is consistent with the new standard. The Company is continuing to evaluate whether the new standard will affect its current accounting for customer incentives. The Company is continuing to evaluate the impact that this standard will have on its consolidated financial statements and disclosures and expects to use the modified retrospective method when adopting this standard.

The following discussion should be read in conjunction with our unaudited interim consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020.

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We are one of the original off-price retailers and a leading destination for unique home and lifestyle goods. We are an off-price retailer, selling high-quality products at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Our customers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our strong value proposition has established a loyal customer base, who we engage with regularly through social media, email, direct mail, digital media and newspaper circulars.

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The COVID-19 pandemic has had, and could continue to have, an adverse effect on our business operations, store traffic, employee availability, financial condition, results of operations, liquidity and cash flow. As of March 25, 2020, we temporarily closed all of our stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. Stores gradually reopened as allowed by state and local jurisdictions, and all but two of our stores had re-opened by June 30, 2020, and those that we have not permanently closed remain open. The scope and duration of this pandemic and the related disruption to our business and financial impacts cannot be reasonably estimated at this time.

Bankruptcy Filing and ~~a leading destination for unique home~~Going Concern

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On May 27, 2020, we commenced the Chapter 11 Cases by filing in the Bankruptcy Court voluntary petitions under Chapter 11 of the Bankruptcy Code. The Chapter 11 Cases were jointly administered for procedural purposes.

•

On June 9, 2020, the Bankruptcy Court issued an order approving procedures for the closure of up to 230 of our store locations. In early June, we commenced the process to close 132 store locations in a first wave of store closings. By the end of July all of these stores were permanently closed. By August 31, 2020, we closed an additional 65 stores following negotiations with our landlords. We also closed our Phoenix, Arizona distribution center in the second quarter of fiscal 2021.

•

On December 23, 2020, the Bankruptcy Court entered an order confirming our Plan of Reorganization. On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and we legally emerged from bankruptcy, resolving all material conditions precedent listed in the Plan of Reorganization. In connection therewith, we entered into the New ABL Credit Agreement and Term Loan Credit Agreement and the Pre-Petition ABL Credit Agreement, DIP ABL Credit Agreement and DIP DTTL Agreement were terminated. See Note 8 “Debt” to the consolidated financial statements herein.

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Pursuant to the Plan of Reorganization, each outstanding share of the Company’s common stock as of the close of business on January 4, 2021 was exchanged (the “Exchange”) for (1) one new share of the Company’s stock and (2) a share purchase right entitling the holder to purchase its pro rata portion of shares available to eligible holders in the Rights Offering. In accordance with the Plan of Reorganization, the Company commenced a $40.0 million rights offering (the “Rights Offering”), under which eligible holders of the Company’s common stock could purchase up to $24.0 million of shares of the Company’s common stock at a purchase price of $1.10 per share, and Osmium Partners, LLC or its affiliates, including a special purpose entity affiliate of Osmium Partners, LLC jointly owned with Tensile Capital Management (the “Backstop Party”), could purchase up to $16 million of shares of the Company’s common stock at a purchase price of $1.10 per share. Pursuant to a backstop commitment agreement, the Backstop Party agreed to purchase all unsubscribed shares in the Rights Offering.

•

as an equity instrument for the three month period ended March 31, 2021. The non-cash charges of approximately $14.5 million for the Backstop Premium, the $2.5 million of expense related to the Warrants, and backstop fee of approximately $2.0 million are recorded in Reorganization items, net in our Consolidated Statements of Operations for the three and nine months ended March 31, 2021. In accordance with the terms of the Plan of Reorganization, all proceeds from the Rights Offering will be used to make payments of the claims of general unsecured creditors in the Chapter 11 Cases.

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The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments that would result if the Company was unable to realize its assets and settle its liabilities as a going concern in the ordinary course of business. We believe that our plans, already implemented and continuing to be implemented, will mitigate the conditions and events that have raised substantial doubt about the entity’s ability to continue as a going concern. However, due to the uncertainty around the scope and duration of the ongoing COVID-19 pandemic and current challenges related to the global transportation market, those plans collectively cannot be deemed probable of mitigating this substantial doubt as to our ability to continue as a going concern.

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As a result of the filing of the Chapter 11 Cases, trading of the Company’s common stock on Nasdaq was suspended on June 8, 2020. During the pendency of the Chapter 11 Cases, the Company’s common stock traded over the counter in the OTC Pink Market under the symbol “TUESQ”. Subsequent to the Company’s legal emergence from bankruptcy, the Company applied to list its common stock on the over the counter market and common stock now trades on the OTCQX market under the symbol “TUEM”.

Quarter and lifestyle goods. We are a true closeout retailer, selling high-quality products at prices below those found in boutique, specialty and department stores. Our customers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our strong value proposition has established a loyal customer base, who we engage regularly with social media, email, direct mail, digital media and newspaper circulars.Nine-months Ended March 31, 2021

Our business is highly seasonal, with a significant portion of our net sales and most of our operating income generated in the second quarter ~~ending December 31.~~ of each fiscal year.

There can be no assurance that the trends in sales or operating results will continue in the future.

We define EBITDA as net income or net loss before interest, income taxes, depreciation, and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash items and other items that we ~~do not~~ believe are not representative of our core operating performance. These measures are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be considered as, alternatives to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or as substitutes for analysis of our results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by such adjustments. We believe it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluate our operating performance. These non-GAAP financial measures are included to supplement our

financial information presented in accordance with GAAP and because we use these measures to monitor and evaluate the performance of our business as a supplement to GAAP measures and we believe the presentation of these non-GAAP measures enhances investors’ ability to analyze trends in our business and evaluate our performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The non-GAAP measures presented may not be comparable to similarly titled measures used by other companies.

~~Adjusted EBITDA.~~ The following table reconciles net income/(loss), the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA, each of which is a non-GAAP financial measure (in thousands):

Three Months Ended
December 31,

Six Months Ended
December 31,

2017

2016

2017

2016

Net income/(loss) (GAAP)
$
8,692

$
8,430

$
(3,562
)

$
(426
)
Depreciation and amortization

6,516

5,393

12,724

9,976

Interest expense, net

530

403

965

658

Income tax provision/(benefit)

(587
)

312

(408
)

11

EBITDA
$
15,151

$
14,538

$
9,719

$
10,219

Share based compensation expense  (1)

1,171

1,578

1,946

2,316

Cease-use rent expense  (2)

449

166

794

473

Phoenix distribution center related expenses  (3)

—

1,087

—

2,137

Stockholder nominations related expenses  (4)

29

—

408

—

Gain on sale of assets  (5)

(186
)

(185
)

(371
)

(371
)
Adjusted EBITDA (non-GAAP)
$
16,614

$
17,184

$
12,496

$
14,774

(1)  Charges related to share-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period.

(2)  Adjustment includes accelerated rent expense recognized in relation to closing stores prior to lease termination.  While accelerated rent expense may occur in future periods, the amount and timing of such expenses will vary from period to period.

(3)  Adjustment includes only certain expenses related to the Phoenix distribution center preparation, ramp up and post go-live activities, including incremental detention costs and certain consulting costs.

(4)  Adjustment includes only certain incremental expenses which relate to the stockholder nominations as described in our Preliminary and Definitive Proxy Statements filed with the SEC on September 25, 2017 and October 5, 2017, respectively.

(5)  Adjustment includes the gain recognized from the sale-leaseback transaction which occurred in the fourth quarter of fiscal 2016.

	Three Months Ended March 31,						Nine Months Ended March 31,
	2021			2020			2021			2020
Net income/(loss) (GAAP)	$	(37,119	)	$	(31,040	)	$	21,844		$	(29,731	)
Depreciation and amortization		3,627			8,127			11,933			20,935
Interest expense, net		1,404			486			6,671			1,868
Income tax provision/(benefit)		172			117			715			99
EBITDA (non-GAAP)	$	(31,916	)	$	(22,310	)	$	41,163		$	(6,829	)
Share based compensation expense (1)		382			523			1,347			2,082
Restructuring and abandonment expenses (2)		1,047			1,260			7,554			1,260
Reorganization items, net (3)		23,597			—			(62,169	)		—
Adjusted EBITDA (non-GAAP)	$	(6,890	)	$	(20,527	)	$	(12,105	)	$	(3,487	)

(1) Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume, timing and vesting of awards. We adjust for these charges to facilitate comparisons from period to period.

(2) Adjustment includes only certain restructuring expenses, including abandonment charges and compensation costs related to the severance and retention costs, permanent closure plan for stores and our Phoenix distribution center. Such costs vary from period to period and management does not consider these costs in our evaluation of ongoing operations.

(3) Adjustment includes only incremental professional and legal fees incurred after and as a direct result of the filing of the Chapter 11 Cases, along with gains resulting from lease terminations, gain on sale-leaseback, partially offset by estimated claims. Such items vary from period to period and are not considered in management's evaluation of the Company’s ongoing operations.

Net sales for the ~~second~~third quarter of fiscal ~~2018~~2021 were ~~$333.8~~$153.3 million, ~~an increase~~a decrease of ~~$5.7~~$12.4 million ~~from $328.1~~or 7.5%, compared to $165.7 million infor the ~~second~~same period last year, primarily due to the permanent closure of 199 stores since the third quarter of fiscal ~~2017.~~2020. Comparable store sales, ~~increased 1.8% compared~~which is calculated by comparing our current store base to the ~~second~~same comparable stores in prior year, increased 17.9% for the third quarter of fiscal ~~2017.~~2021. New stores are included in the same store sales calculation starting with the sixteenth month following the date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation. Stores that are closed are included in the computation of comparable store sales until the month of closure.

The increase in comparable store sales when comparing the three-month period ended March 31, 2021 to March 31, 2020 was due to an increase in average ticket of 18.8%, the temporary closure of all stores on March 25, 2020 related to COVID-19, and the positive impact of an earlier Easter this fiscal year and the related pre-holiday sales compared to the prior year. The increase in comparable store sales was ~~comprised of a 1.9% increase in customer transactions,~~ partially offset by a ~~0.1%~~ decrease in ~~average ticket. Non-comparable stores increased by~~customer transactions of 0.8%, reductions in promotional events as compared to the prior year period and as a ~~total~~result of ~~$0.2 million and~~the winter storm that occurred in February 2021 that resulted in ~~a five basis point positive impact on net sales.~~the temporary closure of many of our stores. Non-comparable store sales, which include the net effect of sales from new stores and sales from stores that have ~~closed. The non-comparable store sales increase was driven~~closed, decreased by 23a total of $35.5 million primarily due to the permanent closure of 199 stores since the third quarter of fiscal 2020, slightly offset by two store openings, ~~partially offset by 39 store closures,~~ which ~~have~~ occurred since the end of the ~~second~~third quarter of fiscal ~~2017. During~~2020. Additionally, sales continued to be negatively impacted by lower store inventory levels. As of March 31, 2021, store inventory levels on a comparable store basis, were approximately 35.6% below last year. The inventory decline year over year was due to the ~~second quarter~~strength of sales immediately post re-opening and challenges related to restocking stores, the closure of our merchant and supply chain operations during the height of the Spring 2020 COVID-19 outbreak and pandemic-related disruptions to supply chain. We expect inventory levels to increase throughout the spring and expect supply chain costs to remain elevated due to higher freight costs and other supply chain conditions. Store openings and closings are presented in the prior year, we experienced issues related to the ramp up of our Phoenix distribution center facility and transition to a multiple distribution center network. These issues resulted in lower than plan store level inventories during the prior year quarter which negatively affected sales across our entire store base.table below.

We ended the ~~second~~third quarter of fiscal ~~2018~~2021 with ~~724~~490 stores, compared to ~~740~~687 stores at March 31, 2020. No stores were relocated during the ~~end of the second~~third quarter of ~~the prior year. We relocated 14 existing stores during the second quarter of~~either fiscal ~~2018 and four stores in the second quarter of the prior~~2021 or fiscal ~~year. We expanded two stores during the second quarter of fiscal 2018 and had no expansions in the second quarter of the prior fiscal year.~~2020.

Gross profit for the ~~second~~third quarter of fiscal ~~2018~~2021 was ~~$105.7~~$48.2 million, a decrease of ~~0.3%~~7.7% compared to ~~$106.0~~$52.2 million in gross profit for the ~~second~~third quarter of fiscal ~~2017.~~2020. Gross profit as a percentage of net sales was ~~31.7%~~31.4% for the ~~second~~third quarter of fiscal ~~2018,~~2021, compared to ~~32.3%~~31.5% for the ~~second~~third quarter of fiscal ~~2017.~~2020. The decrease in gross margin ~~for the second fiscal quarter as compared to the prior year period~~ was primarily ~~due to~~ a ~~significant unfavorable shift in markdown timing from the first quarter~~result of ~~this fiscal year. Partially offsetting this increase in costs was a continued improvement in initial merchandise mark-up along with lower buying and~~higher supply chain and transportation costs recognized ~~as compared to the same period~~ in the ~~prior year.~~current quarter, partially offset by lower markdowns and lower shrink.

Selling, ~~General~~general & ~~Administrative~~administrative (SG&A) expenses for the ~~second~~third quarter of fiscal ~~2018 increased 0.2%~~2021 decreased $23.6 million to ~~$97.4~~$59.2 million, compared to ~~$97.2~~$82.8 million in the same period last year. The decrease in SG&A was primarily due to lower store expenses on a smaller store base, including a significant decrease in store rents for both closed stores and renegotiated rents for the ongoing store base. Subsequent to the petition date, we commenced negotiations with our landlords on substantially all of our ongoing leases, resulting in significant modifications and reduced lease costs. Labor costs and depreciation were also lower on the smaller store base. Also contributing to the favorable comparison were reduced advertising and lower corporate expenses including reductions in compensation costs. As a percentage of net sales, SG&A ~~was 29.2%~~expenses were 38.6% for the ~~second~~third quarter of fiscal ~~2018~~2021 compared to ~~29.6%~~50.0% in the same period last ~~year. This decrease in SG&A as~~year, a ~~percentage~~change of ~~net sales~~1140 basis points.

Our operating loss was ~~driven primarily by reduced advertising expenses in~~$12.0 million for the ~~second~~third quarter of fiscal ~~2018 as~~2021, compared to an operating loss of $30.6 million during the ~~same~~third quarter of fiscal 2020. The operating loss for the current period was primarily the result of higher supply chain costs, higher compensation related expenses and the $1.0 million of restructuring and abandonment charges.

Interest expense was $1.4 million for the third quarter of fiscal 2021, compared to $0.5 million for in the third quarter of the prior fiscal year. Also contributing to the decrease in SG&A in the current quarter were reductions in certain other corporate expenses, including labor costs, and legal and professional fees, which decreased both in dollars and as a percentage of net salesThe increase in the current year ~~quarter from~~period is primarily due to accrued interest expense on Term Loan along with the ~~prior year quarter. Partially offsetting these decreased costs were higher store rent and depreciation, due in part to our strategy to improve store real estate.~~

~~Our operating income was $8.3 million~~amortization of financing fees incurred for the ~~second~~New ABL facility and the Term Loan.

Income tax expense was $0.2 million in the third quarter of fiscal ~~2018 as~~2021, compared to ~~an operating income of $8.8 million during the second quarter of fiscal 2017.~~

~~Interest expense increased~~ $0.1 ~~million to $0.5~~ million in the ~~second~~third quarter of the prior fiscal 2018 compared to $0.4 million in the second quarter of fiscal 2017, as a result of increased borrowings, as well as higher interest rates, on our Revolving Credit Facility during the second quarter of fiscal 2018. Other income was $0.4 million in the second quarter of both fiscal 2018 and fiscal 2017.

~~Income tax expense for the second quarter of fiscal 2018 was a $0.6 million benefit compared to $0.3 million of expense for the same period last~~ year. ~~The second fiscal quarter tax benefit includes a favorable tax impact of approximately $0.5 million resulting from the release of a valuation allowance on deferred taxes due to recent tax law changes.~~ The effective tax rates for the ~~second~~third quarter of fiscal ~~2018~~2021 and fiscal ~~2017~~2020 were ~~(7.2%~~(0.0%) and ~~3.6%~~(0.4%), respectively. ~~The Company~~A full valuation allowance is currently ~~expects~~recorded against substantially all of our deferred tax assets as of March 31, 2021. A deviation from the ~~effect~~customary relationship between income tax expense and pretax income results from the effects of the ~~recent TCJA tax law change to have a nominal impact on its annual effective tax rate, given its cumulative loss position and the related~~ valuation allowance. ~~The Company~~We currently ~~believes~~believe the ~~expected effects on~~ future year effective tax rates towill continue to be nominal until the cumulative losses and valuation allowance are fully utilized. ~~A full valuation allowance is currently recorded against~~

substantially all of our net deferred tax assets at December 31, 2017. A deviation from the customary relationship between income tax benefit and pretax income results from utilization of the valuation allowance.

Net sales for the first ~~six~~nine months of fiscal ~~2018~~2021 were ~~$552.6~~$513.5 million, ~~an increase~~a decrease of ~~$12.6~~28.1%, compared to $714.6 million ~~from $540.0 million in~~for the same period last ~~year. Comparable store sales increased 2.5% compared~~year, primarily due to the ~~same period~~completion of our permanent store closing plans approved through bankruptcy proceedings, as well as a decrease in ~~fiscal 2017.~~sales from comparable stores of 9.9%. New stores are included in the same store sales calculation starting with the sixteenth month following the date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation. Stores that are closed are included in the computation of comparable store sales until the month of closure. The ~~increase~~decrease in comparable store sales was ~~comprised of~~due to a ~~2.3% increase~~17.6% decrease in customer transactions, ~~and~~partially offset by a ~~0.2%~~9.3% increase in average ~~ticket.~~ ticket and the temporary closure of all stores on March 25, 2020 related to COVID-19. Sales were significantly impacted by lower store inventory levels, which averaged approximately 45% below last year for the nine months as well as decreased store traffic resulting from the continuing negative impact of COVID-19. As of March 31, 2021, store inventory levels on a comparable store basis, were approximately 35.6% below last year. This decline was partially due to the strength of sales immediately post re-opening as well as challenges related to restocking stores rapidly. Store level inventory challenges were due in part to the closure of much of our merchant and supply chain operations during the height of the spring 2020 COVID outbreak as well as pandemic-related disruptions to the supply chain. Non-comparable store sales decreased by a total of ~~$0.2~~$146.3 million ~~resulting in a three basis point negative impact on net sales.~~primarily due to the permanent closure of 199 stores since the third quarter of fiscal 2020. Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed. ~~The non-comparable store sales decrease was driven by 56 store closures, partially offset by 27 store~~We expect inventory levels to increase throughout the spring and expect supply chain costs to remain elevated due to higher freight costs and other supply chain conditions. Store openings ~~which have occurred since~~and closings are presented in the beginning of the prior fiscal year. During the six months ended December 31, 2016, we experienced issues related to the ramp up of our Phoenix distribution facility and transition to a multiple distribution center network. These issues resulted in lower than plan store level inventories during the six month period which negatively affected sales across our entire store base.table below.

We ended the first ~~six~~nine months of fiscal ~~2018~~2021 with ~~724~~490 stores, compared to ~~740~~687 stores at ~~the end of the first six months of the prior year. We~~March 31, 2020. No stores were relocated ~~26 existing stores~~ during the first ~~six~~nine months of fiscal ~~2018 and 23~~2021, while five stores ~~in the first six months of the prior fiscal year. We expanded seven stores~~were relocated during the first ~~six months of fiscal 2018 and eight stores in the first six~~nine months of the prior fiscal year.

Gross profit for the first ~~six~~nine months of fiscal ~~2018~~2021 was ~~$183.6~~$159.3 million, ~~an increase~~a decrease of ~~0.2%~~33.4% compared to ~~$183.3~~$239.1 million in gross profit for the ~~same period~~first nine months of fiscal ~~2017.~~2020. Gross profit as a percentage of net sales was ~~33.2%~~31.0% for the first ~~six~~nine months of fiscal ~~2018,~~2021, compared to ~~33.9%~~33.5% for the ~~same period~~first nine months of fiscal ~~2017.~~2020. The decrease in gross margin was primarily ~~due to the recognition~~a result of ~~previously capitalized~~higher supply chain and ~~freight~~transportation costs ~~including an approximate 50 basis point impact of elevated costs related to the supply chain issues that we incurred in the prior fiscal year. Additionally, markdowns increased slightly~~recognized in the current ~~year period. Partially offsetting these increases in costs was an improvement in initial merchandise mark-up.~~period, partially offset by lower markdowns and lower shrink.

~~SG&A~~Selling, general & administrative (SG&A) expenses for the first ~~six~~nine months of fiscal ~~2018 increased 2.0%~~2021 decreased $82.7 million to ~~$187.4~~$184.6 million, compared to ~~$183.8~~$267.3 million in the same period last year. The decrease in SG&A was primarily due to lower store expenses on a smaller store base, including a significant decrease in store rents for both closed stores and renegotiated rents for the ongoing store base. Subsequent to the petition date, we commenced negotiations with our landlords on substantially all of ~~fiscal 2017.~~our ongoing leases, resulting in significant modifications and reduced lease costs. Labor costs and depreciation were also lower on the smaller store base. Also contributing to the favorable comparison were reduced advertising costs and lower corporate expenses including reductions in compensation costs. As a percentage of net sales, SG&A ~~was 33.9%~~expenses were 35.9% for the first ~~six~~nine months of fiscal ~~2018~~2021 compared to ~~34.0%~~37.4% in the same period last ~~year. This~~year, a change of 150 basis points.

Our operating loss was $32.8 million for the first nine months of fiscal 2021 compared to an operating loss of $28.2 million during the first nine months of fiscal 2020. The operating loss for the current period was primarily the result of the 9.9% decrease in ~~SG&A as a percentage~~comparable store sales for the stores remaining open, higher supply chain costs, and the $7.6 million of ~~net sales~~restructuring and abandonment charges.

Interest expense was ~~driven primarily by reduced advertising expenses in~~$6.7 million for the ~~current~~first nine months of fiscal 2021, compared to $1.9 million for the first nine months of the prior fiscal year. ~~Also contributing to the decrease in SG&A~~The increase in the current year period ~~were reductions in certain other corporate expenses, including labor costs,~~is primarily due to the amortization of financing fees incurred for the New ABL facility, the DIP ABL Credit Agreement and legal and professional fees, which decreased both in dollars and as a percentage of net sales in the current year from the prior year period. Partially offsetting these decreased costs were higher store rent and depreciation, due in part to our strategy to improve store real estate.accrued interest on Term Loan.

~~Interest~~Income tax expense increased $0.3 million to $1.0 million in the first six months of fiscal 2018 compared to $0.7 million in the same period of fiscal 2017, as a result of increased borrowings on our Revolving Credit Facility, as well as higher interest rates, during the first six months of fiscal 2018. Other income was $0.7 million in the first ~~six months of both fiscal 2018 and fiscal 2017.~~

~~Income tax expense for the first six~~nine months of fiscal ~~2018 was a $0.4 million benefit~~2021, compared to ~~$11 thousand~~income tax expense of ~~expense~~$0.1 million for the same period ~~last year. The income tax benefit~~ in the ~~current year includes a favorable tax impact of approximately $0.5 million resulting from the release of a valuation allowance on deferred taxes due to recent tax law changes.~~prior fiscal year. The effective tax rates for the first ~~quarter~~nine months of fiscal ~~2018~~2021 and fiscal ~~2017~~2020 were ~~10.3%~~3.3% and ~~(2.7%~~(0.3%), respectively. ~~The Company~~A full valuation allowance is currently ~~expects~~recorded against substantially all of our deferred tax assets as of March 31, 2021. A deviation from the ~~effect~~customary relationship between income tax expense and pretax income results from the effects of the ~~recent TCJA tax law change to have a nominal impact on its annual effective tax rate, given its cumulative loss position and the related~~ valuation allowance. ~~The Company~~We currently ~~believes~~believe the ~~expected effects on~~ future year effective tax rates towill continue to be nominal until the cumulative losses and valuation allowance are fully utilized. ~~A full valuation allowance is currently recorded against~~

Net cash ~~provided by~~used in operating activities for the ~~six~~nine months ended ~~December~~March 31, ~~2017 and 2016~~2021 was ~~$40.2~~$114.5 million ~~and $18.4 million, respectively. The $40.2 million of~~compared to cash provided by ~~operating activities~~operations of $0.6 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2020. Net cash used in operations was primarily ~~due~~driven by payments for bankruptcy court approved Pre-Petition claims, legal and professional fees and payments to ~~a net loss of $3.6 million, adjusted~~the Company’s vendors for non-cash items, including depreciation and amortization of $12.9 million and share based compensation of $1.9 million. In the first six months of fiscal 2018, we received $3.5 million in construction allowances from landlords related to our real estate improvement strategy. Also impacting net cash provided by operating activities were an increase in accounts payable of $14.4 million due to increased merchandise purchases in the current quarter, an increase in accrued liabilities of $7.5 million, an increase in deferred rent of $2.8 million, and a decrease inventory of $1.7 million, partially offset by increased prepaid and other current assets of $1.4 million.inventory. There were no significant changes to our vendor payments policy during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2021.

Net cash provided by ~~operating~~investing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2021 related primarily to $68.6 million of proceeds from the sale of our corporate office and Dallas distribution center properties, along with $1.9 million of property and equipment at the 197 stores that we permanently closed, and was primarily due to a net loss of $0.4 million, adjusted for non-cash items, including depreciation and amortization of $10.1 million and share based compensation of $2.3 million. Also impacting net cash provided by operating activities were an increase in accrued liabilities of $10.0 million, increased accounts payable of $3.6 million, increased deferred rent of $2.1 million, and decreased prepaid and other assets of $0.5 million, partially offset by ~~an increase~~$2.3 million of capital expenditures in ~~inventory~~the first nine months of ~~$9.1 million due to seasonal buying levels and an increased inventory position in preparation for the spring selling season.~~

fiscal 2021. Net cash used in investing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2017 and 2016~~2020 related primarily to capital expenditures. ~~Capital~~Our capital expenditures are generally associated with store relocations, expansions and new store openings, capital improvements to existing stores, as well as enhancements to our distribution center, ~~facilities,~~ equipment, and systems along with improvements related to our corporate office, technology and equipment. ~~Cash used in investing activities totaled $19.5 million and $19.9 million for the six months ended December 31, 2017 and 2016, respectively, primarily related to our store real estate strategy.~~

~~We currently expect to incur capital expenditures in the range of $25 million to $30 million in fiscal year 2018.~~

Net cash ~~used in~~provided by financing activities of ~~$17.6~~$61.6 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017 relates~~2021 related primarily to ~~$118.3~~the proceeds of $25.0 from the Term Loan and $40.0 million from the Rights Offering partially offset by the payment of financing fees of $3.2 million. Net cash provided by financing activities of $50.8 million for the prior year period related primarily to $56.0 million of ~~repayments~~net proceeds on our ~~Revolving~~Pre-Petition ABL Credit ~~Facility, offset by borrowings of $87.8 million, partially offset~~Agreement, along with a ~~$13.0~~$5.0 million cash overdraft provision. ~~Net~~

Historically, we have financed our operations with funds generated from operating activities, available cash ~~used in financing activities of $21 thousand for the six months ended December 31, 2016 primarily consisted of a purchase of treasury shares.~~

~~We have~~and cash equivalents, and borrowings under a credit agreement providing for an asset-based, ~~five-year~~five year senior secured revolving credit facility in the original amount of up to $180.0 million ~~which matures~~that was scheduled to mature on ~~August 18, 2020~~January 29, 2024 (the ~~“Revolving~~“Pre-Petition ABL Credit ~~Facility”~~Agreement”). The availability of funds under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility is~~Agreement was limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitments under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility.~~Agreement. Our indebtedness under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility is~~Agreement was secured by a lien on substantially all of our assets.

The ~~Revolving Credit Facility contains certain restrictive covenants, which affect, among others,~~COVID-19 pandemic has had, and could continue to have, an adverse effect on our ~~ability to incur liens or incur additional indebtedness, change the nature~~business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. As of March 25, 2020, we temporarily closed all of our business, sell assets or merge or consolidate with any other entity, or make investments or acquisitions unless they meet certain requirements. The Revolving Credit Facility requires that we satisfy a fixed charge coverage ratio at any time that our availability is less thanstores nationwide, severely reducing revenues and resulting in significant operating losses and the ~~greater~~elimination of ~~10%~~substantially all operating cash flow. Stores gradually reopened as allowed by state and local jurisdictions, and all but two of our ~~calculated borrowing base~~stores had re-opened by the end of Fiscal 2020. The scope and duration of this pandemic and the related disruption to our business and financial impacts cannot be reasonably estimated at this time. While we have taken actions to minimize costs, some of which are permanent including the closure of 197 stores and the closure of our Phoenix distribution center, and mitigate the related risks, there can be no assurance that these measures will continue to provide benefit or ~~$12.5 million. Our Revolving Credit Facility may,~~that they will be adequate to mitigate future changes in ~~some instances, limit our ability to pay cash dividends and repurchase our common stock. In order for~~circumstances.

The filing of the ~~borrower~~Chapter 11 Cases was an event of default under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility, our subsidiary, to make a restricted payment to us~~Agreement and no further borrowings were available under the Pre-Petition ABL Credit Agreement. To provide for liquidity during the ~~payment of a dividend or a repurchase of shares,~~Chapter 11 Cases, we ~~must, among other things, maintain availability of 20%~~entered into agreements for debtor-in-possession financing. On May 29, 2020, in accordance with an order of the ~~lesser of our calculated borrowing base or our lenders’~~Bankruptcy Court, Debtors entered into the DIP ABL Credit Agreement, which provided for a super priority secured debtor-in-possession revolving credit facility in an aggregate commitments under the Revolving Credit Facility on a pro forma basis for a specified period prior to and immediately following the restricted payment. As of December 31, 2017, we were in compliance with all of the Revolving Credit Facility covenants.

At December 31, 2017, we had no borrowings outstanding under the Revolving Credit Facility, $8.5 million of outstanding letters of credit and availability of $102.9 million. Letters of credit under the Revolving Credit Facility are primarily for self-insurance purposes. We incur commitment feesamount of up to ~~0.25% on~~$100.0 million. Under the ~~unused portion~~terms of the ~~Revolving~~DIP ABL Credit ~~Facility, payable quarterly. Any~~Agreement, amounts available for advances were subject to a borrowing base generally consistent with the borrowing base under the ~~Revolving~~Pre-Petition ABL Credit ~~Facility incurs interest at LIBOR or~~Agreement, subject to certain agreed upon exceptions. On July 10, 2020, we entered into the ~~prime rate, plus~~DIP DDTL Agreement, which provided for delayed draw term loans in an ~~applicable margin, at~~amount not to exceed $25.0 million. On December 31, 2020, the DIP ABL Credit Agreement and the DIP DDTL Agreement were terminated.

~~(except~~legal emergence from bankruptcy, resolving all material conditions precedent listed in the Plan of Reorganization, on December 31, 2020, we entered into the New ABL Credit Agreement and Term Loan Credit Agreement and completed the sale-leaseback transactions with respect to ~~swing loans, which incur interest solely at~~our corporate office and Dallas distribution center properties. See Notes 8 and 13 to the ~~prime rate plus~~consolidated financial statements herein. In addition, we completed the ~~applicable margin), subject~~$40.0 million Rights Offering on February 9, 2021. In accordance with the terms of the Plan of Reorganization, all proceeds from the Rights Offering will be used to ~~a floor~~make payments of ~~one month LIBOR plus an applicable margin~~the claims of general unsecured creditors in the case of loans based on the prime rate. Interest expense for the second quarter of the current fiscal year from the Revolving Credit Facility of $0.5 million was comprised of commitment fees of $0.1 million, interest expense of $0.3 million and the amortization of financing fees of $0.1 million. Interest expense for the second quarter of the prior fiscal year from the Revolving Credit Facility of $0.4 million was comprised commitment fees of $0.1 million, interest expense of $0.2 million and the amortization of financing fees of $0.1 million. Interest expense for the six months ended December 31, 2017 of $1.0 million was comprised of commitment fees of $0.2 million, interest expense of $0.6 million and the amortization of financing fees of $0.2 million. Interest expense for the six months ended December 31, 2016 of $0.7 million was comprised of commitment fees of $0.2 million, interest expense of $0.3 million and the amortization of financing fees of $0.2 million. Chapter 11 Cases (see Note 1).

~~We have financed~~Going forward, we expect to fund our operations with funds generated from operating activities, available cash and cash equivalents, ~~proceeds from the sale of owned properties~~ and borrowings under ~~our Revolving Credit~~the New ABL Facility. ~~Cash and cash equivalents as~~

As of ~~December~~March 31, 2017 and 2016, were $9.4 million and $12.6 million, respectively. Our cash flows will continue to be utilized for the operation of our business and the use of any excess cash will be determined by the Board of Directors. Given the seasonality of our business, the amount of borrowings under our Revolving Credit Facility may fluctuate materially depending on various factors, including the time of year, our strategic investment needs and the opportunity to acquire merchandise inventory. Our primary uses for cash provided by operating activities relate to funding our ongoing business activities and planned capital expenditures. We may also use available cash to repurchase shares of our common stock. We believe funds generated from our operations, available2021, cash and cash equivalents, excluding restricted cash, were $6.3 million and ~~borrowings~~total liquidity, defined as cash and cash equivalents plus the $48.4 million availability for borrowing under the New ABL Facility, was $54.7 million as of March 31, 2021.

We currently expect to incur capital expenditures, net of construction allowances received from landlords, of approximately $3 million to $4 million in fiscal year 2021, which reflects reduced capital spending as one of the liquidity preservation measures we have taken due to the financial impact of COVID-19.

We believe our ~~Revolving Credit Facility~~plans, implemented during the nine month period ended March 31, 2021 in connection with the Chapter 11 Cases and those continuing to be implemented, will mitigate the known conditions and events that initially raised substantial doubt about the entity’s ability to continue as a going concern. However, due to the uncertainty around the scope and duration of the ongoing COVID-19 pandemic and current challenges related to the global transportation market those plans collectively cannot be ~~sufficient~~deemed probable of mitigating this substantial doubt as to ~~fund~~ our ~~operations for the next year. If our capital resources are not sufficient~~ability to ~~fund our operations, we may seek additional debt or equity financing. However, we can offer no assurances that we will be able to obtain additional debt or equity financing on reasonable terms.~~

We had no off-balance sheet arrangements as of ~~December~~March 31, ~~2017.~~2021.

~~As of December 31, 2017,~~Except as discussed in Notes 1, 6 and 8 to the Consolidated Financial Statements, there have been no material changes outside the ordinary course of business from the disclosures relating to contractual obligations contained under “Contractual Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020. Note 6 herein reflects the updated maturities of lease liabilities as of March 31, 2021, subsequent to renegotiations with our landlords and termination of rejected leases.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited interim consolidated financial statements, which have been prepared pursuant to the rules and regulations of the SEC. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our significant estimates which are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates.

AsOther than as described in Note 1 of ~~December~~our unaudited consolidated financial statements, as of March 31, ~~2017,~~2021, there were no changes to our critical accounting policies from those listed in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020.

Under the retail inventory method, permanent markdowns result in cost reductions in inventory at the time the markdowns are taken. We also utilize promotional markdowns for specific marketing efforts used to drive higher sales volume and customer transactions for a specified period of time. Promotional markdowns do not impact the value of unsold inventory and thus do not impact cost of sales until the merchandise is sold. Markdowns and damages during the ~~second~~third quarter of fiscal ~~2018~~2021 were ~~5.1%~~4.0% of sales compared to ~~4.2%~~6.9% of sales for the same period last year. If our sales forecasts are not achieved, we may be required to record additional markdowns that could exceed historical levels. The effect of a 0.5% markdown in the value of our inventory at ~~December~~March 31, ~~2017~~2021 would result in a decline in gross profit and ~~earnings~~diluted income per share for the ~~second~~third quarter of fiscal ~~2018~~2021 of ~~$1.1~~$0.7 million and ~~$0.02,~~$0.01, respectively.

For a further discussion of the judgments we make in applying our accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020.

Please refer to Note 131 of our unaudited ~~condensed~~ consolidated financial statements for a summary of recent accounting pronouncements.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995, which are based on management’s current expectations, estimates and projections. These statements may be found throughout this Quarterly Report on Form 10-Q, particularly in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend” and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words or words that state other “forward-looking” information carefully because they describe our current expectations, plans, strategies and goals and our ~~current~~ beliefs concerning future business conditions, ~~our~~ future results of operations, ~~our~~ future financial ~~position,~~positions, and our current business ~~outlook or state other “forward-looking” information.~~outlook. Forward looking statements also include statements regarding ~~our~~the Company’s ability to continue as a going concern, the Company’s plans for store closures and lease renegotiations, financial projections and other statements regarding the Company’s strategy, future operations, performance and prospects, sales and growth expectations, our liquidity, capital expenditure plans, our ~~real estate strategy~~inventory management plans and merchandising and marketing strategies.

Readers are referred to Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~2020 and Part II, Item 1A “Risk Factors” of this Current Report on Form 10-Q for examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following:

•~~changes in economic and political conditions which may adversely affect consumer spending;~~

•~~our failure to identify and respond to changes in consumer trends and preferences;~~

•~~our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand;~~

•~~loss of, disruption in operations, or increased costs in the operation of our distribution center facilities;~~

•~~unplanned loss or departure of one or more members of our senior management or other key management;~~

~~•our ability to successfully execute our strategy of opening new stores and relocating and expanding existing stores;~~

•~~increases in fuel prices and changes in transportation industry regulations or conditions;~~

•~~our ability to generate strong cash flows~~ ~~from operations and to continue to access credit markets;~~

•~~increases in the cost or a disruption in the flow of our imported products;~~

•~~our ability~~ ~~to attract, train and retain quality employees in appropriate numbers, including key employees and management;~~

•~~our ability to comply with existing, changing and new~~ ~~government regulations;~~

•~~our ability to manage litigation risks from our customers, employees and other third parties;~~

•~~increased costs or exposure to fraud or theft resulting from payment card industry related risk and regulations.~~

The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. Except as may be required by law, we disclaim obligations to update any forward-looking statements to reflect events or circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward-looking ~~statements.~~statements.

~~There have been no material changes to the Company’s market risks as disclosed in our Annual Report on Form 10-K filed for the fiscal year ended June 30, 2017.~~

~~Based on our management’s evaluation (with~~Our management, with the participation of our principal executive officer and our principal financial ~~officer), our principal executive~~ officer, evaluated the effectiveness of the design and ~~our principal financial officer have concluded that~~operation of our disclosure controls and procedures ~~(as~~as of March 31, 2021. The term “disclosure controls and procedures,” as defined in ~~Rule~~Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act of 1934, as ~~amended) were effective as~~amended (the “Act”), means controls and other procedures of ~~December 31, 2017~~a company that are designed to ~~provide reasonable assurance~~ensure that information required to be disclosed by usa company in the reports that ~~we file~~it files or ~~submit~~submits under the ~~Securities~~ Exchange Act ~~of 1934, as amended,~~ is ~~(1)~~ recorded, processed, summarized and reported, within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and ~~forms~~forms. Disclosure controls and ~~(2)~~procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to ~~our~~the company’s management, including ~~our~~its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

~~A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that~~ Based on the ~~objectives of the control system are met. Because of inherent limitations in all control systems, no~~ evaluation of ~~controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly,~~ our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that their objectives are met and, as set forth above, our chief executive officer and chief financial officer have concluded, based on their evaluation as of ~~the end~~March 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~the period covered by this report, that~~such date, our disclosure controls and procedures were not effective ~~to provide~~at the reasonable assurance ~~that their objectives~~level due to the material weakness in internal control over financial reporting described below.

During our fiscal 2020 year-end closing process, we identified a material weakness in internal control related to ineffective assessment of impairment of long-lived assets. Management’s estimation of fair value did not appropriately utilize market participant assumptions. The material weakness resulted in a material misstatement in our June 30, 2020 financial statements which was identified and corrected prior to filing. There were ~~met.~~no restatements of prior period financial statements and no change in previously released financial results were required as the result of the control deficiency.

~~There~~We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weakness are remediated. We are designing and implementing our remediation plan for the material weakness in internal control over financial reporting described above, which includes steps to improve the operation and monitoring of control activities and procedures associated with our impairment assessment. We will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Other than as described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended ~~December~~March 31, ~~2017~~2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

~~The Company is a defendant in a purported class action lawsuit, Jerry Castillo v. Tuesday Morning Inc~~., which was filed on December 28, 2017 in the United States District Court, Middle District of Florida. The case is brought under the Fair Labor Standards Act and includes allegations that the Company violated various wage and hour labor laws. Relief is sought on behalf of current and former Company employees. The lawsuit seeks to recover damages, penalties and attorneys' fees as a result of the alleged violations. We are investigating the underlying allegations and intend to vigorously defend our position. We cannot reasonably estimate the potential loss or range of loss, if any, for the lawsuit.

We are involved in legal and governmental proceedings as part of the normal course of our business. Reserves have been established when a loss is considered probable and are based on management’s best estimates of our potential liability in these matters. These estimates have been developed in consultation with internal and external counsel and are based on a combination of litigation and settlement strategies. Management believes that such litigation and claims will be resolved without material effect on our financial position or results of operations.

We believe there have been no material changes from our risk factors previously disclosed in Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2020.

~~Information regarding our repurchases of equity securities during the three months ended December 31, 2017 is provided in the following table:~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware		75-2398532
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

Large accelerated filer	☐		Accelerated filer	☒

Non-accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒

			Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Class		Outstanding at ~~January 30, 2018~~April 26, 2021
Common Stock, par value $0.01 per share		~~45,918,398~~86,194,528

PART I.	FINANCIAL INFORMATION	3

ITEM 1.	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017~~2020	3

	Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020	4

	Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity for the ~~Six~~Three and Nine Months Ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020	5

	~~Notes to Condensed~~ Consolidated ~~Financial~~ Statements ~~(Unaudited)~~of Cash Flows for the Nine Months Ended March 31, 2021 and 2020	67

	Notes to Consolidated Financial Statements (Unaudited)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1120

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	1829

ITEM 4.	Controls and Procedures	1829

PART II.	OTHER INFORMATION	1930

ITEM 1.	Legal Proceedings	1930

ITEM 1A.	Risk Factors	30

ITEM ~~1A.~~	~~Risk Factors~~	19

~~ITEM 2.~~		~~Unregistered Sales of Equity Securities and Use of Proceeds~~	19

~~ITEM~~ 6.		Exhibits	20

			31

	As of March 31, 2021			As of June 30, 2020
Accounts payable	$	-	$	83,467
Accrued expenses		-		6,630
Operating lease liabilities		-		71,097
Lease liabilities - non-current		-		294,812
Other liabilities - non-current		-		333
Liabilities subject to compromise	$	-	$	456,339


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ~~EXCHANGE ACT OF 1934~~

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2017			2016			2017			2016
Net sales	$	333,807		$	328,137		$	552,564		$	540,023
Cost of sales		228,122			222,155			368,929			356,702
Gross profit		105,685			105,982			183,635			183,321
Selling, general and administrative expenses		97,409			97,215			187,353			183,794
Operating income/(loss)		8,276			8,767			(3,718	)		(473	)
Other income/(expense):
Interest expense		(542	)		(412	)		(980	)		(684	)
Other income, net		371			387			728			742
Other income/(expense), total		(171	)		(25	)		(252	)		58
Income/(loss) before income taxes		8,105			8,742			(3,970	)		(415	)
Income tax provision/(benefit)		(587	)		312			(408	)		11
Net income/(loss)	$	8,692		$	8,430		$	(3,562	)	$	(426	)
Earnings Per Share
Net income/(loss) per common share:
Basic	$	0.19		$	0.19		$	(0.08	)	$	(0.01	)
Diluted	$	0.19		$	0.19		$	(0.08	)	$	(0.01	)
Weighted average number of common shares:
Basic		44,260			43,928			44,173			43,875
Diluted		44,263			43,943			44,173			43,875
Dividends per common share	$	—		$	—		$	—		$	—

	Three Months Ended		Nine Months Ended
	March 31, 2021		March 31, 2021
Restructuring costs:
Severance and compensation related costs	$	1,047	$	1,916
Total restructuring costs	$	1,047	$	1,916

Abandonment costs:
Accelerated recognition of operating right-of-use assets	$	-	$	5,638
Total abandonment costs	$	-	$	5,638

Total restructuring and abandonment costs	$	1,047	$	7,554

	As of March 31, 2021			As of June 30, 2020
Weighted average remaining lease term (in years)
Operating leases		4.8			5.9
Finance leases		1.0			2.6
Weighted average discount rate
Operating leases		8.4	%		5.8	%
Finance leases		2.5	%		3.9	%

	Nine Months Ended March 31, 2021			Nine Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	47,692		$	67,146
Operating cash flows from finance leases		8			22
Financing cash flows from finance leases		167			196
Right-of-use assets obtained in exchange for operating lease liabilities		(108,423	)		28,040

	Store Openings/Closings									Store Openings/Closings
	Three Months Ended December 31, 2017			Three Months Ended December 31, 2016			Fiscal Year Ended June 30, 2017			Three Months Ended March 31, 2021		Three Months Ended March 31, 2020			Fiscal Year Ended June 30, 2020
Stores open at beginning of period		728			742			751			490		705			714
Stores opened during the period		4			4			21			—		—			1
Stores closed during the period		(8	)		(6	)		(41	)		—		(18	)		(30	)
Stores open at end of period		724			740			731			490		687			685

	Store Openings/Closings									Store Openings/Closings
	Six Months Ended December 31, 2017			Six Months Ended December 31, 2017			Fiscal Year Ended June 30, 2017			Nine Months Ended March 31, 2021			Nine Months Ended March 31, 2020			Fiscal Year Ended June 30, 2020
Stores open at beginning of period		731			751			751			685			714			714
Stores opened during the period		8			6			21			2			1			1
Stores closed during the period		(15	)		(17	)		(41	)		(197	)		(28	)		(30	)
Stores open at end of period		724			740			731			490			687			685

Period	Total Number of Shares Repurchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
October 1 through October 31, 2017		—	$	—		—	$	3,187,746
November 1 through November 30, 2017		—	$	—		—	$	3,187,746
December 1 through December 31, 2017		—	$	—		—	$	3,187,746
Total		—	$	—		—	$	3,187,746

Exhibit Number		Description

~~3.1.1~~10.1†		~~Certificate of Incorporation of Tuesday Morning Corporation (the “Company”)~~Transition Agreement with Steve Becker (incorporated by reference to Exhibit ~~3.1~~10.1 to the Company’s ~~Registration Statement on~~ Form ~~S-4 (File No. 333-46017)~~8-K as filed with the ~~Securities and Exchange~~ Commission ~~(the “Commission”)~~ on ~~February 10, 1998)~~January 19, 2021)

~~3.1.2~~10.2		~~Certificate of Amendment to the Certificate of Incorporation of the Company dated March 25, 1999~~Amended and Restated Agreement with BEL Retail Advisors Consulting Agreement (incorporated by reference to Exhibit ~~3.3~~10.2 to the Company’s ~~Registration Statement on~~ Form ~~S-1/A (File No. 333-74365)~~8-K as filed with the Commission on ~~March 29, 1999)~~January 19, 2021)

~~3.1.3~~10.3		~~Certificate of Amendment to the Certificate of Incorporation of the Company dated May 7, 1999~~Registration Rights Agreement (incorporated by reference to Exhibit ~~3.1.3~~4.1 to the Company’s Form ~~10-Q (File No. 000-19658)~~8-K as filed with the Commission on ~~May 2, 2005)~~February 16, 2021)

~~3.2~~10.4		~~Amended and Restated Bylaws~~Form of ~~the Company dated September 16, 2014~~Warrant (incorporated by reference to Exhibit ~~3.2~~4.2 to the Company’s Form 8-K ~~(File No. 000-19658)~~ as filed with the Commission on ~~September 19, 2014)~~February 16, 2021)

~~10.1~~10.5		Agreement ~~dated as of October 1, 2017, by and~~ among ~~Tuesday Morning Corporation, Jeereddi II, LP, Purple Mountain Capital~~Osmium Partners (Larkspur SPV), Osmium Partners, LLC, LLC and the ~~entities and natural persons set forth in the signature pages thereto~~Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K ~~(File No. 000-19658)~~ as filed with the Commission on ~~October 2, 2017)~~February 16, 2021)

10.6†		Enhanced Severance Agreement with Stacie Shirley (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K as filed with the Commission on February 16, 2021)

10.7†		Enhanced Severance Agreement with Bridgett Zeterberg (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K as filed with the Commission on February 16, 2021)

10.8†		Third Amended and Restated Consulting Agreement with BEL Retail Advisors (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K as filed with the Commission on March 31, 2021)

10.9†		Restricted Stock Unit Award Agreement with Paul Metcalf (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K as filed with the Commission on March 31, 2021)

31.1		Certification by the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification by the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

32.2		Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

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	TUESDAY MORNING CORPORATION
	(Registrant)

DATE: ~~February 1, 2018~~April 29, 2021	By:	/s/ Stacie R. Shirley
		Stacie R. Shirley Executive Vice President and Chief Financial Officer ~~and Treasurer~~ (Principal Financial Officer and Principal Accounting Officer)