Tuesday Morning
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10‑K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2018or☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 0‑19658 Tuesday Morning Corporation(Exact name of registrant as specified in its charter) Delaware(State or other jurisdiction ofincorporation or organization)75‑2398532(I.R.S. EmployerIdentification No.)6250 LBJ FreewayDallas, Texas 75240(972) 387‑3562(Address, zip code and telephone number, including area code,of registrant’s principal executive offices)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, $0.01 par value per share The NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒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 thepreceding 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 past90 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 submittedand posted pursuant to Rule 405 Regulation S‑T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment of this Form 10‑K. ☒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 growthcompany. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☒ Emerging growth company ☐Non‑accelerated filer ☐ Smaller reporting company ☐ (Do not check if a smaller reporting 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 anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒The aggregate market value of shares of the registrant’s common stock held by non‑affiliates of the registrant at December 31, 2017 was approximately $101,965,702 basedupon the closing sale price on the Nasdaq Global Select Market reported for such date.As of the close of business on August 17, 2018, there were 45,917,531 outstanding shares of the registrant’s common stock.Documents Incorporated By Reference:Portions of the Registrant’s Definitive Proxy Statement to be filed in connection with the 2018 Annual Meeting of Stockholders are incorporated herein by reference (to theextent indicated) into Part III of this Form 10‑K.  Table of ContentsCautionary Statement Regarding Forward‑Looking Statements3PART I Item 1. Business5Item 1A. Risk Factors8Item 1B. Unresolved Staff Comments17Item 2. Properties17Item 3. Legal Proceedings17Item 4. Mine Safety Disclosures17PART II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities18Item 6. Selected Financial Data20Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations21Item 7A. Quantitative and Qualitative Disclosures About Market Risk30Item 8. Financial Statements and Supplementary Data31Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure31Item 9A. Controls and Procedures31Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting32Item 9B. Other Information33PART III Item 10. Directors, Executive Officers and Corporate Governance33Item 11. Executive Compensation33Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters33Item 13. Certain Relationships and Related Transactions, Director Independence34Item 14. Principal Accountant Fees and Services34PART IV Item 15. Exhibits, Financial Statement Schedules34Item 16. Form 10-K Summary35EXHIBIT INDEX36 SIGNATURES39INDEX TO CONSOLIDATED FINANCIAL STATEMENTSF‑1Report of Independent Registered Public Accounting Firm on Consolidated Financial StatementsF-2Tuesday Morning Corporation Consolidated Balance Sheets (In thousands, except for share data)F‑3Tuesday Morning Corporation Consolidated Statements of Operations (In thousands, except per share data)F‑4Tuesday Morning Corporation Consolidated Statements of Stockholders’ Equity (In thousands)F‑5Tuesday Morning Corporation Consolidated Statements of Cash Flows (In thousands)F‑6Tuesday Morning Corporation Notes to Consolidated Financial StatementsF‑7 2 Cautionary Statement Regarding Forward‑Looking StatementsThis Form 10‑K contains forward‑looking statements within the meaning of the federal securities laws and the Private Securities Litigation ReformAct of 1995, which are based on management’s current expectations, estimates and projections. These statements may be found throughout this Form 10‑K,particularly under the headings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” amongothers. 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 containthese words or words that state other “forward‑looking” information carefully because they describe our current expectations, plans, strategies and goalsand our beliefs concerning future business conditions, future results of operations, future financial positions, and our current business outlook. Forward-looking statements also include statements regarding our sales and growth expectations, our liquidity, capital expenditure plans, our inventorymanagement plans, our real estate strategy and merchandising and marketing strategies.The terms “Tuesday Morning,” “the Company,” “we,” “us,” and “our” as used in this Form 10‑K refer to Tuesday Morning Corporation and itssubsidiaries.The factors listed below in Item 1A. under the heading “Risk Factors” and in other sections of this Form 10‑K provide examples of risks,uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward‑looking statements. Theserisks, uncertainties and events also include, but are not limited to, the following: •our ability to successfully implement our long-term business strategy; •changes in economic and political conditions which may adversely affect consumer spending; •our ability to identify and respond to changes in consumer trends and preferences; •our ability to mitigate reductions of customer traffic in shopping centers where our stores are located; •our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand; •our ability to successfully manage our inventory balances profitably; •our ability to effectively manage our supply chain operations; •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; •increased or new competition; •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; •changes in federal tax policy including tariffs; •the success of our marketing, advertising and promotional efforts; •our ability to attract, train and retain quality employees in appropriate numbers, including key employees and management; •increased variability due to seasonal and quarterly fluctuations; •our ability to maintain and protect our information technology systems and technologies and related improvements to support our growth; 3 •our ability to protect the security of information about our business and our customers, suppliers, business partners and employees; •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; •our ability to manage risks associated with product liability claims and product recalls; •the impact of adverse local conditions, natural disasters and other events; •our ability to manage the negative effects of inventory shrinkage; •our ability to manage exposure to unexpected costs related to our insurance programs; and •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‑K relate only to events as of the date on which the statements are made. Except as may berequired by law, we disclaim obligations to update any forward‑looking statements to reflect events or circumstances after the date on which the statementswere made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward‑looking statements. 4 PART IItem 1. BusinessBusiness OverviewOne of the original off-price retailers, Tuesday Morning is a leading destination for unique home and lifestyle goods. We were established in 1974 andspecialize in name-brand, better/best products for the home. We are known for irresistible finds at an incredible value and search the world for amazing dealsto bring to our customers.We are a closeout retailer, selling high-quality products at prices generally below those found in boutique, specialty and department stores, catalogsand on-line retailers. Our customers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our primary merchandisecategories are upscale home textiles, home furnishings, housewares, gourmet food, toys and seasonal décor. Key vendors are Peacock Alley, Sferra, Lenox,Cuisinart, Home Environment, and Charisma. We buy our inventory opportunistically from a variety of sources including direct from manufacturer, throughcloseout sellers and occasionally other retailers. We have strong supplier relationships and we strive to make it easy for our vendors to do business with us, sothat they will come to us first. Our goods are deeply-discounted, but never seconds or irregulars.Our customer is a savvy shopper with a discerning taste for quality at a value. Our strong value proposition has established a loyal customer base, whowe engage regularly with social media, email, direct mail, digital media and newspaper circulars.With over 715 stores across the country, we are in the neighborhood in convenient, accessible locations. Our store layout is clean and simple, and thelow-frills environment means we can pass even deeper savings on to our dedicated customer base. Our stores operate in both primary and secondary locationsof major suburban markets, near our middle and upper‑income customers. We are generally able to obtain favorable lease terms due to our flexibilityregarding site selection and our straightforward format, allowing us to use a wide variety of space configurations.We operate our business as a single operating segment.Business StrategySeveral years ago, we began a transformation of our Company in order to regain our position as a leader in off‑price retail. We executed on a number ofcritical steps under our business turnaround strategy. These steps included exiting certain categories, refreshing and reorganizing stores, reducing the level ofclearance merchandise, modifying company policies, and eliminating assets that were no longer needed. During this phase, we took specific steps to improveour inventory management process, sourcing of inventory, merchandise offerings and sales productivity.Since fiscal year 2014, when we moved into our rebuilding phase, we have been focusing on supply chain efficiency, working capital managementand inventory turns, repositioning our real estate portfolio, implementing a new marketing strategy, and continuing to improve our merchandise assortment,cost controls and infrastructure.As a key component of this rebuilding phase, we are focused on improving store locations and the in-store experience for our customers. In this regard,we are closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprintsthat are on average three to five thousand square feet larger. In some cases, we are also expanding existing stores to this larger footprint. In addition, we areimproving the finishes in these relocated, new and expanded stores, such as polished concrete floors, simple but attractive fixture packages and new lightingand color palettes, in an effort to match the in-store experience for our customers with the quality of our products.Competition & SeasonalityWe believe the principal factors by which we compete are brand names, price, breadth and quality of our product offerings. Our prices are generallybelow those of department and specialty stores, catalog and on‑line retailers and we offer a broad assortment of high‑end, first quality, brand-namemerchandise. We currently compete against a diverse group of retailers, including department, discount and specialty stores, e‑commerce and catalog retailersand mass merchants, which sell, among other products, home furnishings, housewares and related products. We also compete in particular markets with asubstantial number of retailers that specialize in one or more types of home furnishing and houseware products that we sell. Some of these competitors havesubstantially greater financial resources that may, among other things, increase their ability to purchase inventory at lower costs or to initiate and sustainaggressive price competition.Our business is subject to seasonality, with a higher level of our net sales and operating income generated during the quarter ending December 31,which includes the holiday shopping season. Net sales in the quarters ended December 31, 2017, 2016, and 2015 accounted for approximately 33%, 34% and33% of our annual net sales for fiscal years 2018, 2017 and 2016, respectively.5 Working Capital ItemsBecause of the seasonal nature of our business, our working capital needs are greater in the months leading up to our peak sales period fromThanksgiving to the end of December. The increase in working capital needs during this time is typically financed with cash flow provided by operations andour revolving credit facility. Additional details are provided in the Liquidity and Capital Resources section in Item 7, Management’s Discussion andAnalysis of Financial Condition and Results of Operations.Inventory is the largest asset on our balance sheet. Efficient inventory management is a key component of our business success and profitability. To besuccessful, we must maintain sufficient inventory levels to meet our customers’ demands while keeping the inventory fresh and turning the inventoryappropriately to optimize profitability.PurchasingWe provide an outlet for manufacturers and other sources looking for effective ways to reduce excess inventory resulting from order cancellations byretailers, manufacturing overruns, bankruptcies and excess capacity. Since our inception, we have not experienced significant difficulty in obtaining firstquality, brand-name off‑price merchandise in adequate volumes and at competitive prices. We utilize a mix of both domestic and international suppliers. Wepay our suppliers timely and generally do not request special consideration for markdowns, advertising or returns. During fiscal 2018, our top ten vendorsaccounted for approximately 12% of total purchases, with no single vendor accounting for more than 3% of total purchases.Low Cost OperationsIt is our goal to operate with a low cost structure in comparison to many other retailers. We place great emphasis on expense management throughoutthe Company. Our stores have a “no frills” format and we are flexible in our site selection in order to maintain favorable lease terms.Customer Shopping ExperienceWhile we offer a “no frills” format in our stores, we have made progress in reorganizing and refreshing our stores to enhance our customers’ shoppingexperience. We offer a flexible return policy and we accept all major payment methods including cash, checks, all major credit cards, and digital wallets. Wecontinue to work on initiatives we believe will enhance our customers’ shopping experience.DistributionWe utilize 1.2 million square feet of distribution center facilities in Dallas, Texas and a 0.6 million square foot distribution center in Phoenix, Arizonawhich service all of our stores throughout the United States. The Phoenix distribution center commenced operations during the fourth quarter of fiscal 2016.We shipped approximately 120 million units to our stores during fiscal 2018.PricingOur pricing policy is to sell merchandise generally below retail prices charged by department and specialty stores, catalog and on‑line retailers. Pricesare determined centrally and are initially uniform at all of our stores. Once a price is determined for a particular item, labels displaying two‑tiered pricing areaffixed to the product. A typical price tag displays a “Compare At” or “Compare Estimated Value” price, and “Our Price”. Our buyers determine and verifyretail “Compare At” or “Compare Estimated Value” prices by reviewing prices published in advertisements, catalogs, on‑line and manufacturers’ suggestedretail price lists and by visiting department or specialty stores selling similar merchandise. Our information systems provide daily sales and inventoryinformation, which enables us to evaluate our prices and inventory levels and to adjust prices on unsold merchandise in a timely manner and on a periodicbasis as dictated by sales volumes and incoming purchases, thereby effectively managing our inventory levels and offering competitive pricing.EmployeesAs of June 30, 2018, we employed 1,770 persons on a full‑time basis and 7,292 persons on a part‑time basis. Our employees are not represented by anylabor unions. We have not experienced any work stoppage due to labor disagreements, and we believe that our employee relations are strong.6 Intellectual PropertyThe trade name “Tuesday Morning” is material to our business. We have registered the name “Tuesday Morning” as a service mark with the UnitedStates Patent and Trademark office. We have also registered other trademarks including but not limited to “Tuesday Morning Perks®”. Solely forconvenience, trademarks and trade names referred to in this Form 10‑K may appear without the ® or tm symbols, but such references are not intended toindicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor, to these trademarksand trade names.Corporate InformationTuesday Morning Corporation is a Delaware corporation incorporated in 1991. Our principal executive offices are located at 6250 LBJ Freeway,Dallas, Texas 75240, and our telephone number is (972) 387‑3562.We maintain a website at www.tuesdaymorning.com. Copies of our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reportson Form 8‑K and any amendments to such reports filed with, or furnished to, the Securities and Exchange Commission (the “SEC”) are available free ofcharge on our website under the Investor Relations section as soon as reasonably practicable after we electronically file such reports and amendments with, orfurnish them to, the SEC.The reports we file or furnish to the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1‑800‑SEC‑0330. In addition, the SEC maintains awebsite, www.sec.gov, which contains the reports, proxy and information statements and other information which we file with, or furnish to, the SEC.Stores and Store OperationsStore Locations. As of June 30, 2018, we operated 726 stores in the following 40 states: State # of Stores State # of Stores Alabama 23 Missouri 18 Arizona 21 Nebraska 4 Arkansas 12 Nevada 6 California 62 New Jersey 11 Colorado 21 New Mexico 7 Delaware 3 New York 10 Florida 63 North Carolina 28 Georgia 35 North Dakota 1 Idaho 5 Ohio 21 Illinois 13 Oklahoma 12 Indiana 13 Oregon 12 Iowa 5 Pennsylvania 21 Kansas 8 South Carolina 19 Kentucky 13 South Dakota 1 Louisiana 17 Tennessee 22 Maryland 15 Texas 108 Massachusetts 2 Utah 6 Michigan 9 Virginia 34 Minnesota 9 Washington 14 Mississippi 14 Wisconsin 8 Site Selection. We continually evaluate our current store base for potential enhancement or relocation of our store locations. As a result of thisongoing evaluation, we intend to pursue attractive relocation opportunities in our existing store base, close certain stores by allowing leases to expire forunderperforming stores or where alternative locations in similar trade areas are not available at acceptable lease rates, and, when appropriate, open new stores.For both new stores and relocations, we negotiate for upgraded sites. We believe that this strategy will better position us for long‑term profitable growth. Weexpect to upgrade both the appearance and operation of our new and relocated stores compared to our existing stores and do not anticipate difficulty inlocating additional store locations in areas with our target customer demographics.7 Store Leases. Except for one store adjacent to our existing distribution center in Dallas, Texas, we lease our store locations under operating leases thattypically include renewal options. Some of our leases also provide for contingent rent based upon store sales exceeding stipulated amounts.Our store leases typically include “kick clauses,” which allow us, at our option, to exit the lease with no penalty 24 to 60 months after entering intothe lease if store sales do not reach a stipulated amount stated in the lease. These kick clauses provide us with flexibility in opening new stores and relocatingexisting stores by allowing us to quickly and cost‑effectively vacate a site that does not meet our sales expectations. As a result, we generally do not operatelocations with continued store‑level operating losses.Store Layout. Our site selection process and “no frills” approach to presenting merchandise allow us to use a wide variety of space configurations. Thesize of our stores ranges from approximately 5,600 to 30,000 square feet, averaging on a per store basis approximately 12,100 square feet as of June 30,2018. Historically, we have designed our stores to be functional, with less emphasis placed upon fixtures and leasehold aesthetics. With our current realestate strategy, we continue to be focused on designing a very functional, easy to shop environment that also highlights the quality of the merchandise. Wedisplay all merchandise on counters, shelves, or racks while maintaining minimum inventory in our stockrooms.Store Operations. Our stores are generally open seven days a week, excluding certain holidays. We continue to maintain the frequency of shipmentsof merchandise which results in improved efficiency of receiving and restocking activities at our stores. We attempt to align our part‑time employees’ laborhours with anticipated workload and with current customer sales. We conduct annual physical counts of our store merchandise staggered throughout thesecond half of our fiscal year, primarily when stores are closed.Store Management. Each store has a manager who is responsible for recruiting, training and supervising store personnel and assuring that the store ismanaged in accordance with our established guidelines and procedures. Store managers are full‑time employees. Our store managers are supported by districtand regional level support. Store managers are responsible for centrally-directed store disciplines and routines. The store manager is assisted primarily bypart‑time employees who generally serve as assistant managers and cashiers, and help with merchandise stocking efforts. Members of our management visitselected stores routinely to review inventory levels and merchandise presentation, personnel performance, expense controls, security and adherence to ourpolicies and procedures. In addition, district and regional field managers periodically meet with senior management to review store policies and discusspurchasing, merchandising, advertising and other operational issues.Item 1A. Risk FactorsOur business is subject to significant risks, including the risks and uncertainties described below. These risks and uncertainties and the otherinformation in this Form 10‑K, including our consolidated financial statements and the notes to those statements, should be carefully considered. If any of theevents described below actually occur, our business, financial condition or results of operations could be adversely affected in a material way.Risks Related to Our BusinessWe may not be successful in the implementation of our long‑term business strategy, which could adversely affect our business and our results of operations.Our success depends, to a significant degree, on our ability to successfully implement our long‑term business strategy. Our ability to successfullyimplement our business strategies depends upon a significant number of factors, including but not limited to: •our ability to access an adequate supply of high‑quality merchandise from suppliers at a competitive price; •our ability to deliver profitable sales; •our ability to make adjustments as market conditions change; •customer acceptance of our marketing and merchandise strategies; •our ability to respond to competitive pressures in our industry; •the ability of our management team to properly respond to the dynamics and demands of our market; •our ability to achieve positive cash flow, particularly during our peak inventory build‑ups in advance of the holiday selling season; and •our employees’ ability to adapt to our new strategic initiatives.8 Changes in economic and political conditions may adversely affect consumer spending, which could significantly harm our business, results of operations,cash flows and financial condition.The success of our business depends, to a significant extent, upon the level of consumer spending. A number of factors beyond our control affect thelevel of consumer spending on merchandise that we offer, including, among other things: •general economic and industry conditions; •unemployment; •the housing market; •deterioration in consumer confidence; •crude oil prices that affect gasoline and diesel fuel, as well as, increases in other fuels used to support utilities; •efforts by our customers to reduce personal debt levels; •availability of consumer credit; •interest rates; •fluctuations in the financial markets; •tax rates and policies; •war, terrorism and other hostilities; and •consumer confidence in future economic conditions.The merchandise we sell generally consists of discretionary items. Reduced consumer confidence and spending cut backs may result in reduceddemand for our merchandise, including discretionary items, and may force us to take significant inventory markdowns. Reduced demand also may requireincreased selling and promotional expenses. Adverse economic conditions and any related decrease in consumer demand for our merchandise could have amaterial adverse effect on our business, results of operations, cash flows and financial condition.Any failure to identify and respond to changes in consumer trends and preferences could significantly harm our business.The retail home furnishings and housewares industry is subject to sudden shifts in consumer trends and consumer spending. Our sales and results ofoperations depend in part on our ability to predict or respond to changes in trends and consumer preferences in a timely manner. Although our businessmodel allows us greater flexibility than many traditional retailers to meet consumer preferences and trends, we may not successfully do so. Any sustainedfailure to anticipate, identify and respond to emerging trends in consumer preferences could negatively affect our business and results of operations.We must continuously attract buying opportunities for off‑price merchandise and anticipate consumer demand as off‑price merchandise becomesavailable, and our failure to do so could adversely affect our performance.By their nature, specific off‑price merchandise items are available from manufacturers or vendors generally on a non‑recurring basis. As a result, we donot have long‑term contracts with our vendors for supply, pricing or access to products, but make individual purchase decisions, which may be for largequantities. Due to economic uncertainties, some of our manufacturers and suppliers may cease operations or may otherwise become unable to continuesupplying off‑price merchandise on terms acceptable to us. We cannot assure that manufacturers or vendors will continue to make off‑price merchandiseavailable to us in quantities acceptable to us or that our buyers will continue to identify and take advantage of appropriate buying opportunities. In addition,if we misjudge consumer demand for products, we may significantly overstock unpopular products and be forced to take significant markdowns and missopportunities to sell more popular products. An inability to acquire suitable off‑price merchandise in the future or to accurately anticipate consumer demandfor such merchandise would have an adverse effect on our business, results of operations, cash flows and financial condition.Our results of operations will be negatively affected if we are not successful in managing our inventory profitably.Inventory is the largest asset on our balance sheet and represented approximately 62% of our total assets at both June 30, 2018 and June 30, 2017.Efficient inventory management is a key component of our business success and profitability. To be successful, we must maintain sufficient inventory levelsto meet our customers’ demands without allowing those levels to increase to such an extent that the costs to store and hold the goods unduly impact ourfinancial results. If our buying decisions do not accurately predict9 customer trends or purchasing actions, we may have to take unanticipated markdowns to dispose of the excess inventory, which also can adversely impactour financial results. We continue to focus on ways to reduce these risks, but we cannot assure that we will be successful in our inventory management. If weare not successful in managing our inventory balances, our results of operations may be negatively affected. We have recorded significant inventorywrite‑downs from time to time in the past and there can be no assurances that we will not record additional inventory charges in the future.Our results of operations will be negatively affected if we are unsuccessful in effectively managing our supply chain operations.With few exceptions, all inventory is shipped directly from suppliers either to our distribution center in the Dallas, Texas metropolitan area, or ourPhoenix distribution center, where the inventory is then processed, sorted and shipped to our stores. We depend in large part on the orderly operation of thisreceiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of our distribution centers. We maynot anticipate all of the changing demands which our expanding operations will impose on our receiving and distribution system.The loss of, disruption in operations, or increased costs in the operation of our distribution center facilities would have a material adverse effect on ourbusiness and operations.Events beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements or shipping problems, mayresult in delays in the delivery of merchandise to our stores. We also cannot assure that our insurance will be sufficient, or that insurance proceeds will bepaid to us in a timely manner, in the event a distribution center is shut down for any reason.The unplanned loss or departure of one or more members of our senior management or other key management could have a material adverse effect on ourbusiness.Our future performance will depend in large part upon the efforts and abilities of our senior management and other key employees. The loss of serviceof these persons could have a material adverse effect on our business and future prospects. We do not maintain key person life insurance for our seniormanagement. We cannot provide any assurance that we will not experience future turnover related to our senior management team.Our business is intensely competitive, and a number of different competitive factors could have a material adverse effect on our business, results ofoperations, cash flows and financial condition.The retail home furnishings and housewares industry is intensely competitive. As an off‑price retailer of home furnishings and housewares, wecurrently compete against a diverse group of retailers, including department stores and discount stores, specialty, on‑line, and catalog retailers and massmerchants, which sell, among other products, home furnishing, houseware and related products similar and often identical to those we sell. We also competein particular markets with a substantial number of retailers that specialize in one or more types of home furnishing and houseware products that we sell. Manyof these competitors have substantially greater financial resources that may, among other things, increase their ability to purchase inventory at lower costs orto initiate and sustain aggressive price competition.A number of different competitive factors could have a material adverse effect on our business, results of operations, cash flows and financialcondition, including: •increased operational efficiencies of competitors; •competitive pricing strategies, including deep discount pricing by a broad range of retailers during periods of poor consumer confidence oreconomic uncertainty; •continued and prolonged promotional activity by competitors; •liquidation sales by a number of our competitors who have filed or may file in the future for bankruptcy; •expansion by existing competitors; •entry of new competitors into markets in which we currently operate; and •adoption by existing competitors of innovative store formats or retail sales methods.We cannot assure that we will be able to continue to compete successfully with our existing or new competitors, or that prolonged periods of deepdiscount pricing by our competitors will not materially harm our business. We compete for customers, employees, locations, merchandise, services and otherimportant aspects of our business with many other local, regional, national and10 international retailers. We also face competition from alternative retail distribution channels such as catalogs and, increasingly, e‑commerce websites andmobile device applications. Changes in the merchandising, pricing and promotional activities of those competitors, and in the retail industry, in general, mayadversely affect our performance.If we are unable to successfully execute our strategy of relocating and expanding existing stores and when appropriate, opening new stores, our operatingperformance could be adversely impacted.As part of our business strategy, we intend to pursue relocation opportunities to improve our existing store base as well as open new stores that willoffset the closing of lower performing stores as they come up for renewal. However, we cannot assure that we will be able to achieve our relocation goals orthat we will be able to operate any new or relocated stores profitably. Further, we cannot assure that any new or relocated store will achieve similar operatingresults to those of our existing stores or that new, relocated or expanded stores opened in markets in which we operate will not have a material adverse effecton the net sales and profitability of our existing store base.The success of our store development strategy will be dependent upon numerous factors, many of which are beyond our control, including thefollowing: •the ability of our personnel to adequately analyze and identify suitable markets and individual store sites within those markets; •the competition for suitable store sites; •our ability to negotiate favorable lease terms with landlords; •our ability to obtain governmental and other third‑party consents, permits and licenses needed to operate our stores; •the availability of employees to staff new stores and our ability to hire, train, motivate and retain store personnel; •the availability of adequate management and financial resources to properly manage a large volume of stores; •our ability to adapt our distribution and other operational and management systems to a changing network of stores; •our ability to maintain appropriate inventory levels in our stores; •our ability to attract customers and generate sales sufficient to operate new, relocated or expanded stores profitably; •our ability to renew existing leases; and •our ability to successfully negotiate the termination of leases without significant negative financial impact.While we opened stores in existing markets during fiscal 2018, 2017, and 2016, we also opened stores in new markets during that time period. Thesemarkets may have different competitive conditions, consumer trends and discretionary spending patterns than our existing markets, which may cause our newstores in these markets to be less successful than stores in our existing markets.Increases in fuel prices and changes in transportation industry regulations or conditions may increase our freight costs and thus our cost of sales, whichcould have a material adverse effect on our business and operations.Our freight costs are impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight costs both on inbound freightfrom vendors to our distribution centers and outbound freight from our distribution centers to our stores. In addition, the U.S. government requires drivers ofover‑the‑road trucks to take certain rest periods which reduces the available amount of time they can drive during a 24‑hour period. Changes in truckingindustry conditions, such as truck driver shortages and highway congestion, could increase freight costs. High fuel prices or surcharges, as well as stringentdriver regulations and changes in transportation industry conditions, may increase freight costs and thereby increase our cost of sales.If we are not able to generate strong cash flows from our operations or to continue to access credit markets, we will not be able to support capitalexpansion, operations or debt repayment.Our business is dependent upon our operations generating strong cash flows to support capital expansion requirements and general operatingactivities. In addition, we have a credit agreement providing for a revolving credit facility in the amount of up to $180.0 million. The revolving credit facilitycontains certain restrictive covenants, and if borrowing availability falls below certain thresholds, a financial covenant. If we are unable to comply with therevolving credit facility, we may not be able to obtain an alternate source of funding on satisfactory terms, if at all. Our inability to continue to generatesufficient cash flows to support these11 activities or the lack of availability of financing in adequate amounts and on appropriate terms could adversely affect our financial performance.An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits.Merchandise manufactured and imported from overseas represents the majority of our total product purchases acquired both domestically andinternationally. A disruption in the shipping of imported merchandise or an increase in the cost of those products may significantly decrease our sales andprofits. In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet ourdemands. Products from alternative sources may also be of lesser quality and more expensive than those we currently import.Risks associated with our reliance on imported products include disruptions in the shipping and importation or increases in the costs of importedproducts because of factors such as: •raw material shortages; •work stoppages; •strikes and political unrest; •problems with oceanic shipping, including shipping container shortages; •increased customs inspections of import shipments or other factors causing delays in shipments; •merchandise quality or safety issues; •economic crises; •international disputes, wars, and terrorism; •loss of “most favored nation” trading status by the United States in relation to a particular foreign country; •natural disasters; •import duties and tariffs; •foreign government regulations; •import quotas and other trade sanctions; and •increases in shipping rates.The products we buy abroad are sometimes priced in foreign currencies and, therefore, we are affected by fluctuating exchange rates. We might not beable to successfully protect ourselves in the future against currency rate fluctuations, and our financial performance could suffer as a result.Changes to federal tax policy may adversely impact our operations and financial performance.The U.S. federal government continues to analyze comprehensive tax reform options that could negatively impact companies that directly orindirectly import goods and on July 10, 2018, the Office of the U.S. Trade Representative proposed a 10% tariff on additional classes of products imported tothe U.S. from China. The Company sources a portion of its products from multiple countries, including China. The Company is evaluating strategies tomitigate the impact of the proposed tariff, including reviewing sourcing options as well as collaborative efforts with its vendor partners. Majordevelopments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs onimported products, could have a material adverse effect on our business, results of operations, financial condition, and liquidity. Our success depends upon our marketing, advertising and promotional efforts. If we are unable to implement them successfully, or if our competitors aremore effective than we are, our results of operations may be adversely affected.We use marketing and promotional programs to attract customers to our stores and to encourage purchases by our customers. We use various media forour promotional efforts, including newspaper, database marketing, email, direct marketing, and other digital communications such as online social networks.If we fail to choose the appropriate medium for our efforts, or fail to implement and execute new marketing opportunities, our competitors may be able toattract some of our customers and cause them to decrease purchases from us and increase purchases elsewhere, which would negatively impact our net sales.Changes in the amount and degree12 of promotional intensity or merchandising strategy by our competitors could cause us to have some difficulties in retaining existing customers and attractingnew customers.If we do not attract, train and retain quality employees in appropriate numbers, including key employees and management, our performance could beadversely affected.Our performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other employees in largenumbers, as well as, experienced buying and management personnel. Many of our employees are in entry level or part‑time positions with historically highrates of turnover. Our ability to meet our labor needs while controlling costs is subject to external factors, such as unemployment levels, prevailing wagerates, minimum wage legislation, and changes in rules governing eligibility for overtime and changing demographics. In the event of increasing wage rates, ifwe do not increase our wages competitively, our staffing levels and customer service could suffer because of a declining quality of our workforce, or ourearnings would decrease if we increase our wage rates, whether in response to market demands or new minimum wage legislation. Changes that adverselyimpact our ability to attract and retain quality employees and management personnel could adversely affect our performance.Our results of operations are subject to seasonal and quarterly fluctuations, which could have a material adverse effect on our operating results or themarket price of our common stock.Our business is subject to seasonality with a higher level of net sales and operating income generated during the quarter ended December 31, whichincludes the holiday shopping season. Net sales in the quarters ended December 31, 2017, 2016, and 2015 accounted for approximately 33%, 34% and 33%of our annual net sales for fiscal years 2018, 2017 and 2016, respectively. For more information about our seasonality, please read Item 7 “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Quarterly Results and Seasonality.”Because a significant percentage of our net sales and operating income are generated in the quarter ending December 31, we have limited ability tocompensate for shortfalls in December quarter sales or earnings by changes in our operations or strategies in other quarters. A significant shortfall in resultsfor the quarter ending December 31 of any year could have a material adverse effect on our annual results of operations and on the market price of ourcommon stock. In addition, in anticipation of higher sales during this period, we purchase substantial amounts of seasonal inventory and hire manytemporary employees. An excess of seasonal merchandise inventory could result if our net sales during this principal selling season were to fall below eitherseasonal norms or expectations. If our December quarter sales results are substantially below expectations, our financial performance and operating resultscould be adversely affected by unanticipated markdowns, particularly in seasonal merchandise. Lower than anticipated sales in the principal selling seasonwould also negatively affect our ability to absorb the increased seasonal labor costs.Our quarterly results of operations may also fluctuate significantly based on additional factors, such as: •the timing of new store openings; •the amount of net sales contributed by new and existing stores; •the success of our store expansion and relocation program; •the timing of certain holidays and advertised events; •changes in our merchandise mix and inventory levels; •general economic, industry and weather conditions that affect consumer spending; and •actions of competitors, including promotional activity.These factors could also have a material adverse effect on our annual results of operations and on the market price of our common stock.If we are unable to maintain and protect our information technology systems and technologies, we could suffer disruptions in our business, damage to ourreputation, increased costs and liability, and obstacles to our growth.The operation of our business is heavily dependent upon the implementation, integrity, security, and successful functioning of our computer networksand information systems, including the point‑of‑sale systems in our stores, data centers that process transactions, and various software applications used inour operations. Our systems are subject to damage or interruption from weather events, power outages, telecommunications or computer failures, computerviruses, security breaches, employee errors and similar occurrences. A failure of our systems to operate effectively as a result of damage to, interruption, orfailure of any of these13 systems could result in data loss, a failure to meet our reporting obligations, or material misstatements in our consolidated financial statements, or causelosses due to disruption of our business operations and loss of customer confidence. These adverse situations could also lead to loss of sales or profits orcause us to incur additional repair, replacement and development costs. Our inability to improve our information technology systems and technologies mayfail to support our growth and may limit opportunities.If we fail to protect the security of information about our business and our customers, suppliers, business partners and employees, we could damage ourreputation and our business, incur substantial additional costs and become subject to litigation and government investigations and enforcement actions.In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information andthat of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, on our computer networksand information systems. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our securitymeasures, our information technology and infrastructure and that of our service providers may be vulnerable to attacks by hackers or breached due toemployee error, malfeasance or other disruptions. Cyber threats are rapidly evolving and are becoming increasingly sophisticated. Any such attack or breachcould compromise our security and remain undetected for a period of time, and confidential information could be misappropriated, resulting in a loss ofcustomers’, suppliers’, business partners’ or employees’ personal information, negative publicity, harm to our business and reputation, and potentiallycausing us to incur costs to reimburse third parties for damages and potentially subjecting us to government investigations and enforcement actions. Inaddition, the regulatory environment surrounding data and information security and privacy is increasingly demanding, as new and revised requirements arefrequently imposed across our business. Compliance with more demanding privacy and information security laws and standards may result in significantexpense due to increased investment in technology and the development of new operational processes, and implementing new initiatives could result insystem disruptions. We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of oursystems.We are subject to various government regulations, changes in the existing laws and regulations and new laws and regulations which may adversely affectour operations and financial performance.The development and operation of our stores are subject to various federal, state and local laws and regulations in many areas of our business,including, but not limited to, those that impose restrictions, levy a fee or tax, or require a permit or license, or other regulatory approval, and building andzoning requirements. Difficulties or failures in obtaining required permits, licenses or other regulatory approvals could delay or prevent the opening of a newstore, and the suspension of, or inability to renew, a license or permit could interrupt operations at an existing store. We are also subject to laws governing ourrelationship with employees, including minimum wage requirements, overtime, health insurance mandates, working and safety conditions, and immigrationstatus requirements. Additionally, changes in federal labor laws could result in portions of our workforce being subjected to greater organized laborinfluence. This could result in an increase to our labor costs. A significant portion of our store personnel are paid at rates related to the minimum wageestablished by federal, state and municipal law. Additionally, we are subject to certain laws and regulations that govern our handling of customers’ personalinformation. A failure to protect the integrity and security of our customers’ personal information could expose us to private litigation and governmentinvestigations and enforcement actions, as well as materially damage our reputation with our customers. While we endeavor to comply with all applicablelaws and regulations, governmental and regulatory bodies may change such laws and regulations in the future which may require us to incur substantial costincreases. If we fail to comply with applicable laws and regulations, we may be subject to various sanctions, penalties or fines and may be required to ceaseoperations until we achieve compliance which could have a material adverse effect on our consolidated financial results and operations.We face litigation risks from customers, employees, and other third parties in the ordinary course of business.Our business is subject to the risk of litigation by customers, current and former employees, suppliers, stockholders and others through private actions,class actions, administrative proceedings, regulatory actions, or other litigation. The outcome of litigation, particularly class action lawsuits and regulatoryactions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude ofthe potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. Theremay also be adverse publicity associated with litigation that could decrease customer acceptance of merchandise offerings, regardless of whether theallegations are valid or whether we are ultimately found liable.14 We face risks with respect to product liability claims and product recalls, which could adversely affect our reputation, our business, and our consolidatedresults of operations.We purchase merchandise from third parties and offer this merchandise to customers for sale. In addition, we currently expect to develop andmanufacture certain merchandise for sale, initially on a very limited basis. Merchandise could be subject to recalls and other actions by regulatoryauthorities. Changes in laws and regulations could also impact the type of merchandise we offer to customers. We have experienced, and may in the futureexperience, issues that result in recalls of merchandise. In addition, in the past, individuals have asserted claims, and may in the future assert claims, that theyhave sustained injuries from third‑party merchandise offered by us, and we may be subject to future lawsuits relating to these claims. There is a risk that theseclaims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Any of the issues mentioned above could result in damage to ourreputation, diversion of development and management resources, or reduced sales and increased costs, any of which could harm our business.Our stores may be adversely affected by local conditions, natural disasters, and other events.Certain regions in which our stores are located may be subject to adverse local conditions, natural disasters, and other events. If severe weather, such asheavy snowfall or extreme temperatures, discourages or restricts customers in a particular region from traveling to our stores, our sales could be adverselyaffected. If severe weather conditions occur during the second quarter of our fiscal year, the adverse impact to our sales and profitability could be even greaterthan at other times during the year because we generate a significant portion of our sales and profits during this period. Natural disasters including tornados,hurricanes, floods, and earthquakes may damage our stores, corporate office, and distribution facilities or other operations, which may adversely affect ourfinancial results. Additionally, demographic shifts in the areas where our stores are located could adversely impact our financial results and operations.Our results of operations may be negatively affected by inventory shrinkage.We are subject to the risk of inventory loss and theft. Although our inventory shrinkage rates have not fluctuated significantly in recent years, wecannot assure that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are taking will effectively reducethe problem of inventory shrinkage. Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higherrates of inventory shrinkage or incur increased security costs to combat inventory theft, our results of operations could be affected adversely.Our results of operations may be negatively impacted by exposure to unexpected costs related to our insurance programs.Our insurance coverage is subject to deductibles, self-insured retentions, limits of liability and similar provisions that we believe are prudent based onour overall operations. We may incur certain types of losses that we cannot insure or which we believe are not economically reasonable to insure, such aslosses due to acts of war and terrorism, employee and certain other crime, and some natural disasters. If we incur these losses and they are material, ourbusiness could suffer. Certain material events may result in sizable losses for the insurance industry and adversely impact the availability of adequateinsurance coverage or result in excessive premium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept higherdeductibles or reduce the amount of coverage in response to these market changes. In addition, we self-insure a significant portion of expected losses underour workers’ compensation, general liability, including automobile, and group health insurance programs. Unanticipated changes in any applicable actuarialassumptions and management estimates underlying our recorded liabilities for these self-insured losses, including potential increases in medical andindemnity costs, could result in significantly different expenses than expected under these programs, which could have a material adverse effect on ourfinancial condition and results of operations. Although we continue to maintain property insurance for catastrophic events, we are self-insured for losses up tothe amount of our deductibles. If we experience a greater number of self-insured losses than we anticipate, our financial performance could be adverselyaffected.Our sales depend on a volume of traffic to our stores, and a reduction in traffic to, or the closing of, anchor tenants and other destination retailers in theshopping centers in which our stores are located could significantly reduce our sales and leave us with excess inventory.Most of our stores are located in shopping centers that benefit from varied and complementary tenants, whether specialty or mass retailers, and otherdestination retailers and attractions to generate sufficient levels of consumer traffic near our stores. Any decline in the volume of consumer traffic at shoppingcenters, whether because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity ofshopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excessinventory, which could have a material adverse effect on our financial results or business.15 We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft, subject us to potential liability andpotentially disrupt our business.We accept payments using a variety of methods, including cash, credit and debit cards, gift cards, gift certificates and store credits. Acceptance ofthese payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules andoperating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. In October 2015, the paymentcard industry shifted liability for certain debit and credit card transactions to retailers who are not able to accept EMV chip technology transactions. Anyinability to accept EMV chip technology transactions may subject us to increased risk of liability for fraudulent transactions and may adversely affect ourbusiness and operating results.For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise ouroperating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms ofelectronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt ourbusiness. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated,seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules orrequirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costsincurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain typesof payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment typesor potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected. Risks Related to Our Common StockOur certificate of incorporation, and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us withoutthe consent of our Board of Directors.Provisions in our certificate of incorporation and bylaws will have the effect of delaying or preventing a change of control or changes in ourmanagement. These provisions include the following: •the ability of our Board of Directors to issue shares of our common stock and preferred stock without stockholder approval (subject toapplicable NASDAQ requirements); •a requirement that stockholder meetings may only be called by our President, Chief Executive Officer, the Chairman of the Board or at thewritten request of a majority of the directors then in office and not our stockholders; •a prohibition of cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to electdirector candidates; •the ability of our Board of Directors to make, alter or repeal our bylaws without further stockholder approval; and •the requirement for advance notice for nominations for directors to our Board of Directors and for proposing matters that can be acted upon bystockholders at stockholder meetings.Because we do not presently have any plans to pay dividends on our common stock, stockholders must look solely to appreciation of our common stock torealize a gain on their investment.We have not paid a regular cash dividend since 2008 and do not presently have any plans to pay dividends for the foreseeable future. Accordingly,stockholders must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur.The price of our common stock has fluctuated substantially over the past several years and may continue to fluctuate substantially in the future.From July 1, 2017 to June 30, 2018, the trading prices of our common stock ranged from a low of $1.65 per share to a high of $4.10 per share. Weexpect our stock to continue to be subject to fluctuations as a result of a variety of factors, including factors beyond our control, which have been includedthroughout this Annual Report on Form 10‑K. We may fail to meet the expectations of our stockholders or securities analysts at some time in the future, andour stock price could decline as well.16 Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesStores. We lease all of our stores from unaffiliated third parties, except one Company‑owned store located adjacent to our existing distribution facility inDallas, Texas. A description of the location of our stores is provided in Item 1, “Business—Stores and Store Operations.” At June 30, 2018, the remainingterms of the majority of our store leases range from one month to five years. The average initial term of store leases executed under our new real estate strategyis approximately ten years, typically with options available for renewal. We intend to continue to lease all of our new stores from unaffiliated third parties.Our store leases typically include “kick clauses,” which allow us, at our option, to exit the lease with no penalty 24 to 60 months after entering into the leaseif store sales do not reach a stipulated amount stated in the lease.Distribution Facilities and Corporate Headquarters. We own a 104,675 square foot building which houses our corporate office in Dallas, Texas. Our Dallas distribution center utilizes approximately 1.2million square feet, all of which is owned. During fiscal 2015, we executed a lease for approximately 0.6 million square feet related to our additionaldistribution center in Phoenix, Arizona which started operations in the fourth quarter of fiscal 2016.We lease from unaffiliated third parties two parcels of land of approximately 301,550 square feet, for trailer storage and parking.We are continuing to evaluate our distribution network needs to accommodate our distribution requirements for our existing store base as well as forfuture growth.Item 3. Legal ProceedingsWe are involved in legal and governmental proceedings as part of the normal course of our business. Reserves have been established when a loss isconsidered probable and are based on management’s best estimates of our potential liability in these matters. These estimates have been developed inconsultation with internal and external counsel and are based on a combination of litigation and settlement strategies. Management believes that suchlitigation and claims will be resolved without material effect on our financial position or results of operations.The Company was a defendant in a purported class action lawsuit, Jerry Castillo v. Tuesday Morning Inc., which was filed on December 28, 2017 inthe United States District Court, Middle District of Florida. The case was brought under the Fair Labor Standards Act and included allegations that theCompany violated various wage and hour labor laws. Relief was sought on behalf of current and former Company employees. The lawsuit sought to recoverdamages, penalties and attorneys’ fees as a result of the alleged violations. The matter settled for an amount not material to the Company on July 6, 2018 andthe Court approved the settlement on July 9, 2018.The Company was also a defendant in a purported class action lawsuit, Hector Velarde, on behalf of himself and all other similar situated, Pltf. vs.Tuesday Morning, Inc., which was filed on February 26, 2018 in state court and was pending in the United States District Court, Central District ofCalifornia. The case was brought under the Unruh Civil Rights Act, California Code § 51 ci seq. (“Unruh Act”), the California Disabled persons Act,California Civil Code § 54 et seq. (“CDPA”), and Cal. Civ. Code § 55 et seq. and included allegations that the Company violated various public access laws.The lawsuit sought to recover damages, penalties and attorneys' fees as a result of the alleged violations. The matter settled for an amount not material to theCompany on July 2, 2018 and the Court approved the settlement on July 11, 2018.Item 4. Mine Safety DisclosuresNot applicable. 17 PART IIItem 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is listed on the NASDAQ Global Select Market under the symbol “TUES.” The following table sets forth for the periods indicatedthe high and low sales prices per share as reported on the NASDAQ Select Global Market: High Low Fiscal Year Ended June 30, 2018 First quarter $3.30 $1.65 Second quarter $3.40 $2.38 Third quarter $4.05 $2.45 Fourth quarter $4.10 $2.50 Fiscal Year Ended June 30, 2017 First quarter $8.11 $5.62 Second quarter $6.25 $4.40 Third quarter $5.80 $3.15 Fourth quarter $3.85 $1.60 As of August 17, 2018, there were approximately 209 holders of record of our common stock.Dividend PolicyDuring the fiscal years ended June 30, 2018, 2017 and 2016, we did not declare or pay any cash dividends on our common stock. We do not presentlyhave plans to pay dividends on our common stock. Our revolving credit facility may, in some instances, limit our ability to pay cash dividends andrepurchase our common stock. Additional details are provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources—Revolving Credit Facility.”Repurchases of Common EquityOn August 22, 2011, our Board of Directors adopted a share repurchase program pursuant to which we are authorized to repurchase from time to timeshares of Common Stock, up to a maximum of $5.0 million in aggregate purchase price for all such shares (the “Repurchase Program”). On January 20, 2012,our Board of Directors increased the authorization for stock repurchases under the Repurchase Program from $5.0 million to a maximum of $10.0 million. TheRepurchase Program does not have an expiration date and may be amended, suspended or discontinued at any time. The Board will periodically evaluate theRepurchase Program and there can be no assurances as to the number of shares of Common Stock we will repurchase. During the twelve month period endedJune 30, 2018, no shares were repurchased under the Repurchase Program.Repurchases of equity securities during the three months ended June 30, 2018 are listed in the following table: Period Total Numberof SharesRepurchased AveragePrice Paidper Share Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms ApproximateDollar Valueof SharesThat May YetBe PurchasedUnder thePlans orPrograms(1) April 1 through April 30, 2018 — $— — $3,187,746 May 1 through May 31, 2018 — $— — $3,187,746 June 1 through June 30, 2018 — $— — $3,187,746 Total — $— — $3,187,746 (1)As of June 30, 2018, 1.8 million shares have been repurchased under the Repurchase Program for a total cost (excluding commissions) ofapproximately $6.8 million.18 Stock Price PerformanceThe following graph illustrates a comparison of the cumulative total stockholder return (change in stock price plus reinvested dividends) for the fiscalyears ended June 30, 2018, 2017, 2016, 2015 and 2014, of (1) our common stock, (2) the S&P 500 Index, and (3) the S&P 500 retailing index, apre‑established industry index. The chart assumes that $100 was invested on June 30, 2013, in our common stock and each of the comparison indices, andassumes that all dividends were reinvested.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Tuesday Morning, the S&P 500 Indexand the S&P 500 Retailing Index *$100 invested on 6/30/13 in stock or index, including reinvestment of dividends.Fiscal year ending June 30.Copyright© 2014 S&P, a division of The McGraw‑Hill Companies Inc. All rights reserved.These indices are included for comparative purposes only and are not intended to forecast or be indicative of possible future performance of ourcommon stock.The performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed to be “soliciting material” underRegulation 14A or 14C under the Securities Exchange Act of 1934 or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, and willnot be deemed to be incorporated by reference into any filings under the Securities19 Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate such information by reference into such a filing.Item 6. Selected Financial DataThe following table sets forth the selected consolidated financial and operating data for the fiscal years ended June 30, 2018, 2017, 2016, 2015, and2014.The selected consolidated financial and operating data should be read in conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this Form 10‑K. Fiscal Year Ended June 30, 2018 2017 2016 2015 2014 (in thousands, except per share, per square foot, square foot per store amounts and number ofstores) Statement of Operations Data: Net sales $1,006,332 $966,665 $956,396 $906,365 $864,844 Cost of sales 665,358 645,920 614,594 579,746 562,692 Gross profit 340,974 320,745 341,802 326,619 302,152 Selling, general and administrative expenses 361,924 353,025 339,398 314,263 310,205 Operating income/(loss) (20,950) (32,280) 2,404 12,356 (8,053)Interest expense (2,061) (1,485) (1,068) (1,445) (1,500)Other income/(expense), net 934 1,420 2,640 (495) (582)Income/(loss) before income taxes (22,077) (32,345) 3,976 10,416 (10,135)Income tax provision/(benefit) (139) 197 263 31 41 Net income/(loss) $(21,938) $(32,542) $3,713 $10,385 $(10,176)Earnings/(loss) per share: Basic $(0.50) $(0.74) $0.08 $0.24 $(0.24)Diluted $(0.50) $(0.74) $0.08 $0.24 $(0.24)Weighted average shares outstanding: Basic 44,282 43,943 43,705 43,480 42,943 Diluted 44,282 43,943 43,736 43,770 42,943 Dividends per common share $— $— $— $— $— Operating Data: Number of stores: Beginning of period 731 751 769 810 828 Opened during period 15 21 16 5 9 Closed during period (20) (41) (34) (46) (27)Open at end of period 726 731 751 769 810 Comparable store sales increase (1) 3.9% 2.2% 7.8% 7.2% 6.1%Average sales per store (2) $1,386 $1,311 $1,263 $1,148 $1,058 Inventory turnover (3) 2.8 2.5 2.5 2.6 2.6 Total square footage 8,779 8,507 8,326 8,341 8,593 Net sales per square foot $116 $115 $115 $107 $100 Average square feet per store 12,100 11,500 11,100 11,000 10,700 As of June 30, 2018 2017 2016 2015 2014 (In thousands) Balance Sheet Data: Working capital $120,639 $124,921 $138,947 $152,580 $139,604 Inventories 234,365 221,906 242,315 209,984 207,663 Total assets 376,256 358,153 361,970 334,875 332,344 Total debt, including current portion 38,480 30,500 — — — Total stockholders’ equity 180,254 198,839 227,282 220,289 203,31020 (1)New stores are included in the same store sales calculation starting with the sixteenth month following the date of the store opening. A store thatrelocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of thiscomputation. The number of days our stores are open may fluctuate from period to period.(2)Average sales per store is the sum of the average sales per store for each quarter.(3)Inventory turnover is the ratio of cost of sales to average inventory. Average inventory is calculated by taking the average of the previous year‑endand quarter‑end inventory levels throughout the year. Inventory turnover for fiscal 2014 is unadjusted for the inventory charges recorded during thatfiscal year as part of our business turnaround strategy. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements andrelated notes thereto included elsewhere in this Form 10‑K.Overview •We are one of the original off-price retailers and a leading destination for unique home and lifestyle goods. We are a closeout retailer, sellinghigh-quality products at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Ourcustomers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our strong value proposition has establisheda loyal customer base, who we engage regularly with social media, email, direct mail, digital media and newspaper circulars. •During fiscal 2018, we continued to implement our strategy of improving store locations and the in-store experience for our customers, whichincluded (i) closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, betterlocations with footprints that are on average three to five thousand square feet larger, (ii) expanding some existing stores to a larger footprint,and (iii) improving the finishes in these relocated, new and expanded stores. •We operated 726 stores in 40 states as of June 30, 2018. As part of the implementation of our real estate strategy, our store base decreased by 5stores in fiscal 2018, decreased by 20 stores in fiscal 2017, and decreased by 18 stores in fiscal 2016. We relocated 45 stores in fiscal 2018, 52stores in fiscal 2017, and 46 stores in fiscal 2016. •For fiscal 2018, net sales were $1.0 billion, an increase of 4.1% compared to fiscal 2017 net sales of $966.7 million, primarily due to anincrease in sales from comparable stores (stores open at least five quarters, including stores relocated in the same market and renovated stores)of 3.9%. The increase in comparable store sales was comprised of an increase in customer transactions of 2.9% along with a 1.0% increase inaverage ticket. Sales at the 45 stores relocated during the past 12 months increased approximately 58% on average for fiscal 2018 as comparedto last year and contributed approximately 370 basis points of comparable store sales growth. Net sales during fiscal 2017 were negativelyimpacted by lower than plan store level inventories for a portion of the year due to the supply chain challenges we experienced during the yearalong with 20 fewer stores. •Cost of sales, as a percentage of net sales, for fiscal 2018 was 66.1%, compared to 66.8% for fiscal 2017. •Selling, general and administrative expenses (SG&A) increased $8.9 million to $361.9 million, from $353.0 million for fiscal 2017. •Our operating loss for fiscal 2018 was $21.0 million compared to an operating loss of $32.3 million for fiscal 2017. Our net loss for fiscal2018 was $21.9 million, or diluted net loss per share of $0.50, compared to a net loss for fiscal 2017 of $32.5 million, or diluted net loss pershare of $0.74. •Our fiscal 2017 results were adversely impacted by increased supply chain and freight costs, driven significantly by elevated costs resultingfrom our supply chain issues experienced earlier in the year.21 •As shown under the heading “Non-GAAP Financial Measures” below, EBITDA was $5.6 million for fiscal 2018, compared to negative $9.6million for fiscal 2017. Adjusted EBITDA, was $9.6 million for fiscal 2018 compared to negative $2.8 million for fiscal 2017. •Inventory levels at June 30, 2018 increased $12.5 million to $234.4 million from $221.9 million at June 30, 2017. Inventory turnover for thetrailing five quarters as of June 30, 2018 was 2.8 turns, an increase from the trailing five quarter turnover as of June 30, 2017 of 2.5 turns. •Cash and cash equivalents at June 30, 2018 increased $3.2 million to $9.5 million from $6.3 million at June 30, 2017. We had borrowings of$38.5 million under our revolving credit facility as of June 30, 2018, and borrowings of $30.5 million at June 30, 2017.Results of OperationsThe following table sets forth, for the periods indicated, selected statement of operations data, expressed as a percentage of net sales, as well as thenumber of stores open at the end of each period. There can be no assurance that the trends in sales or operating results will continue in the future. Fiscal Year Ended June 30, 2018 2017 2016 Net sales 100.0% 100.0% 100.0%Cost of sales 66.1 66.8 64.3 Gross margin 33.9% 33.2% 35.7%Selling, general and administrative expenses 36.0 36.5 35.5 Operating income/(loss) (2.1)% (3.3)% 0.2%Interest expense (0.2) (0.2) (0.1)Other income/(expense) 0.1 0.1 0.3 Income tax provision/(benefit) (0.0) 0.0 0.0 Net income/(loss) (2.2)% (3.4)% 0.4%Number of stores open at end of period 726 731 751 Selling, general and administrative expenses are comprised of wages and benefits, rent and occupancy costs, depreciation, advertising, store operatingexpenses and corporate office costs. While selling, general and administrative expense increases and decreases are generally attributable to changes invariable expenses, higher rents, depreciation, and real estate project costs have increased as we continue to implement our store real estate strategy. Variableexpenses include payroll and related benefits, advertising expense and other expenses such as credit card fees.Non-GAAP Financial MeasuresWe define EBITDA as net income or net loss before interest, income taxes, depreciation, and amortization. Adjusted EBITDA reflects furtheradjustments to EBITDA to eliminate the impact of certain items, including certain non-cash items and other items that we believe are not representative ofour core operating performance. These measures are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA should not beconsidered as alternatives to net income or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, andshould not be considered as alternatives to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or assubstitutes for analysis of our results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that our future results will beunaffected by such adjustments. We believe it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluateour operating performance. These non-GAAP financial measures are included to supplement our financial information presented in accordance with GAAPand because we use these measures to monitor and evaluate the performance of our business as a supplement to GAAP measures and we believe thepresentation of these non-GAAP measures enhances investors’ ability to analyze trends in our business and evaluate our performance. EBITDA and AdjustedEBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The non-GAAP measures presentedmay not be comparable to similarly titled measures used by other companies. EBITDA and Adjusted EBITDA. The following table reconciles net loss, the most directly comparable GAAP financial measure, to EBITDA andAdjusted EBITDA, each of which is a non-GAAP financial measure (in thousands): 22 Twelve Months Ended June 30, 2018 2017 Net loss (GAAP) $(21,938) $(32,542)Depreciation and amortization 25,672 21,349 Interest expense, net 2,030 1,443 Income tax provision/(benefit) (139) 197 EBITDA (non-GAAP) 5,625 (9,553)Share-based compensation expense (1) 3,433 4,184 Cease-use rent expense (2) 487 1,135 Phoenix distribution center related expenses (3) — 2,196 Stockholder nominations related expenses (4) 408 — Gain on sale of assets (5) (371) (741)Adjusted EBITDA (non-GAAP) $9,582 $(2,779) (1) Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume, timing andvesting 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. Favorable lease buyout agreementswere negotiated and executed in fiscal 2018, resulting in the reversal of $0.7 million previously recorded accelerated cease-use rent expense. Whileaccelerated 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, includingincremental 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 DefinitiveProxy 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.Fiscal Year Ended June 30, 2018 Compared to Fiscal Year Ended June 30, 2017Net sales increased $39.6 million, or 4.1%, to $1.0 billion in fiscal 2018 from $966.7 million in fiscal 2017, primarily due to a $35.8 million increasein sales from comparable stores of 3.9%. New stores are included in the same store sales calculation starting with the sixteenth month following the date ofthe store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store forpurposes of this computation. The increase in comparable store sales was comprised of an increase in customer transactions of 2.9% along with an increase inaverage ticket of 1.0%. Sales at the 45 stores relocated during the past 12 months increased approximately 58% on average for fiscal 2018 as compared tolast year and contributed approximately 370 basis points of comparable store sales growth. Non-comparable store sales include the net effect of sales fromnew stores and sales from stores that have closed. The non-comparable store sales increase of $3.8 million was driven by 15 store openings, partially offset by20 store closings, which have occurred since the end of fiscal 2017. Net sales during fiscal 2017 were negatively impacted by lower than plan store levelinventories for a portion of the year due to the supply chain challenges we experienced during the year.Gross profit for fiscal 2018 was $341.0 million, an increase of 6.3% compared to $320.7 million for fiscal 2017. As a percentage of net sales, grossmargin increased to 33.9% in fiscal 2018 compared with 33.2% in fiscal 2017. The increase in gross margin was primarily due to improvements in initialmerchandise mark-up and reduced markdowns, along with reduced distribution and freight costs recognized in the current year from the elevated costsincurred in the prior year as a result of the supply chain issues we experienced in fiscal 2017. In fiscal 2018, we realized cost efficiencies in our distributionoperations, partially offset by increased freight costs incurred during the year.SG&A increased 2.5% to $361.9 million in fiscal 2018, compared to $353.0 million in the same period last year. As a percentage of net sales, SG&Adecreased to 36.0% for fiscal 2018 compared to 36.5% for the prior year. This decrease in SG&A as a percentage of net sales was driven primarily byreductions in certain corporate expenses, including labor, severance, and share-based compensation costs, and legal and professional fees, which decreasedboth in dollars and as a percentage of net sales in the current23 year from the prior year, along with reduced promotional spending. Partially offsetting these decreased costs were higher store rent and depreciation, due inpart to our strategy to improve store real estate. Our operating loss was $21.0 million during fiscal 2018 as compared to an operating loss of $32.3 million for fiscal 2017, an improvement of 35%.The improvement was primarily due to higher gross profit and SG&A leverage, as discussed above.Net interest expense increased $0.6 million to $2.1 million in fiscal 2018 compared to $1.5 million in the prior year, as a result of increasedborrowings on our revolving credit facility during fiscal 2018 along with higher interest rates. Other income decreased $0.5 million to $0.9 million in fiscal2018 compared to $1.4 million in fiscal 2017. This change was primarily attributable to a $0.4 million lower gain recognized in fiscal 2018 as compared tofiscal 2017 in connection with a sale-leaseback transaction that occurred in fiscal 2016.Income tax benefit for fiscal 2018 was $139,000 compared to income tax expense of $197,000 in fiscal 2017. The effective tax rates for fiscal 2018and 2017 were 0.6% and (0.6%), respectively. The fiscal 2018 tax benefit includes a favorable tax impact of approximately $0.6 million resulting from therelease of a valuation allowance on deferred taxes due to recent tax law changes as discussed in Note 1 to the Consolidated Financial Statements. Wecurrently expect the effect of the recent tax law change to have a nominal impact on our annual effective tax rate, given our cumulative loss position and therelated valuation allowance on our deferred tax assets. We currently believe the expected effects on future year effective tax rates to continue to be nominaluntil the cumulative losses and valuation allowance are fully utilized. A full valuation allowance is currently recorded against substantially all of our netdeferred tax assets at June 30, 2018. The total valuation allowance at the end of fiscal years 2018, 2017 and 2016 was $23.7 million, $27.2 million and $16.0million, respectively. A deviation from the customary relationship between income tax benefit and pretax income results from utilization of the valuationallowance.Fiscal Year Ended June 30, 2017 Compared to Fiscal Year Ended June 30, 2016Net sales increased $10.3 million, or 1.1%, to $966.7 million in fiscal 2017 from $956.4 million in fiscal 2016, primarily due to a $19.7 millionincrease in sales from comparable stores of 2.2%. New stores are included in the same store sales calculation starting with the sixteenth month following thedate of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same storefor purposes of this computation. Net sales during fiscal 2017 were negatively impacted by lower than plan store level inventories for a portion of the yeardue to the supply chain challenges we experienced during the year, as well as 20 fewer stores. The increase in comparable store sales was comprised of anincrease in customer transactions of 3.4%, offset by a decrease in average ticket of 1.2%. Our comparable store sales increase was partially offset by a decreasein our non-comparable store sales, which decreased a total of $9.5 million, resulting in a 100 basis point negative impact on our increase in net sales. Sales atthe 52 stores relocated during the past 12 months increased approximately 52% on average for fiscal 2017 as compared to last year and contributedapproximately 290 basis points of comparable store sales growth. Non-comparable store sales include the net effect of sales from new stores and sales fromstores that have closed. The non-comparable store sales decrease was driven by 41 store closures, partially offset by 21 store openings, which have occurredsince the end of fiscal 2016.Gross profit for fiscal 2017 was $320.7 million, a decrease of 6.2% compared to $341.8 million for fiscal 2016. As a percentage of net sales, grossmargin decreased to 33.2% in fiscal 2017 compared with 35.7% in fiscal 2016. The decrease in gross margin was primarily due to elevated costs associatedwith our supply chain operations, including distribution center and freight costs recognized in the current period. The impact of elevated supply chain andfreight costs was a 250 basis point decrease to our gross margin rate in fiscal 2017, as compared to the prior year, driven significantly by our supply chainissues experienced earlier in the year. Additionally, markdowns increased in the current year. Partially offsetting these increases in costs was animprovement in initial merchandise mark-up.SG&A increased 4.0% to $353.0 million in fiscal 2017, compared to $339.4 million in the same period last year. As a percentage of net sales, SG&Awas 36.5% for fiscal 2017 compared to 35.5% for the prior year. This increase in SG&A as a percentage of net sales was driven primarily by higher store rent,depreciation, and real estate project expenses, due in part to our strategy to improve store real estate and increased corporate labor and share-basedcompensation expense in the current period as compared to the prior year period due to executive vacancies in the prior year period. Additionally, wecontinued to invest in technology and infrastructure which drove incremental costs related to systems in comparison to the prior year period. Partiallyoffsetting these increased costs were reductions in certain other corporate expenses, including legal and professional fees, which decreased as a percentage ofnet sales from the prior year. In the prior year, we recorded approximately $8.7 million of incremental expenses to support our strategic initiatives. Thesecosts included $3.2 million of accelerated rent expense related to closing stores prior to lease termination, as well as up-front costs for our Phoenixdistribution center and duplication of certain costs at our Dallas distribution center and other investments in the business such as an inventory managementproject, expenses related to advertising research, and investments in store prototype development. 24 Our operating loss was $32.3 million during fiscal 2017 as compared to operating income of $2.4 million for fiscal 2016. The decrease was primarilydue to higher SG&A and lower gross profit, as discussed above.Our fiscal 2017 results were adversely impacted by increased supply chain and freight costs, driven significantly by elevated costs resulting from oursupply chain issues experienced earlier in the year.Net interest expense increased $0.4 million to $1.5 million in fiscal 2017 compared to $1.1 million in the prior year, as a result of increasedborrowings on our revolving credit facility during fiscal 2017. Other income decreased $1.2 million to $1.4 million in fiscal 2017 compared to $2.6 millionin fiscal 2016. This change was primarily attributable to a $1.8 million lower gain recognized in fiscal 2017 as compared to fiscal 2016 in connection with asale-leaseback transaction that occurred in fiscal 2016.Income tax expense for fiscal 2017 was $197,000 compared to $263,000 in fiscal 2016. The effective tax rates for fiscal 2017 and 2016 were (0.6%)and 6.6%, respectively. The change in the effective tax rate was driven in part by our pretax loss in fiscal 2017 compared to pretax income in fiscal 2016. Afull valuation allowance was recorded against our deferred tax assets as of June 30, 2017. The total valuation allowance at the end of fiscal years 2017, 2016and 2015 was $27.2 million, $16.0 million and $16.7 million, respectively. A deviation from the customary relationship between income taxexpense/(benefit) and pretax income/(loss) results from utilization of the valuation allowance.Liquidity and Capital ResourcesCash Flows from Operating ActivitiesIn fiscal 2018, cash provided by operating activities was $27.2 million, compared to $0.4 million in the prior fiscal year. The $27.2 million of cashprovided by operating activities for fiscal 2018 was due to our net loss of $21.9 million adjusted for non-cash items, including depreciation and amortizationof $26.0 million and share based compensation expense of $3.4 million, which were partially offset by a non-cash gain on sale-leaseback of $0.4 millionrecorded in other income and deferred income taxes of $0.6 million. In fiscal 2018, we received $8.6 million in construction allowances from landlordsrelated to our real estate improvement strategy. Also impacting the cash provided by operating activities were increases in accounts payable of $22.6million, deferred rent of $1.3 million, other non-current liabilities of $0.4 million, and decreases in prepaid expenses and other current assets of $0.6 million,partially offset by an increase in inventory of $12.5 million and a decrease in accrued liabilities of $0.4 million. The increase in inventory was drivenprimarily by higher distribution center and in-transit inventory levels, in support of increased sales trends and in preparation for the fall selling season. Therewere no significant changes to our vendor payment policy during fiscal 2018, 2017, or 2016.In fiscal 2017, cash provided by operating activities was $0.4 million, compared to $8.4 million in the prior fiscal year. The $0.4 million of cashprovided by operating activities for fiscal 2017 was due to net loss of $32.5 million adjusted for non-cash items, including depreciation and amortization of$21.7 million and share based compensation expense of $4.2 million, which were partially offset by a non-cash gain on sale-leaseback of $0.7 millionrecorded in other income. In fiscal 2017, we received $2.6 million in construction allowances from landlords related to our real estate improvement strategy.Also impacting the cash provided by operating activities were a decrease in inventory of $20.3 million as well as an increase in deferred rent of $5.0 million,partially offset by decreases in accounts payable of $16.3 million and accrued liabilities of $2.0 million, increases in prepaid expenses and other currentassets of $1.1 million, and a decrease in other non-current liabilities of $0.6 million. The decrease in inventory was driven primarily by lower inventory levelsin our distribution centers, and was offset slightly by increased buying, distribution, and freight costs which are capitalized into inventory.Cash Flows from Investing ActivitiesNet cash used in investing activities was due to capital expenditures of $30.8 million for the fiscal year ended June 30, 2018. Capital expenditureswere primarily associated with store relocations, new store openings, expansions, capital improvements to existing stores and our distribution operations,along with improvements related to our corporate office and equipment. Net cash used in investing activities for the fiscal year ended June 30, 2017 was dueto capital expenditures of $41.7 million. The $10.9 million decrease in investment spend in fiscal 2018 as compared to fiscal 2017 was primarily driven by$6.5 million reduced spending on new, relocated and expanded stores, along with decreased spending on our distribution centers and related informationtechnology. Investment spending in fiscal year 2016 was $38.0 million and was related to capital expenditures of $45.5 million and $1.3 million invested inintellectual property, partially offset by $8.8 million of proceeds received from the sale of two buildings and land that comprised a portion of the Dallasdistribution center facilities in a sale-leaseback transaction that occurred in fiscal year 2016. The $3.8 million decrease in investment spend in fiscal 2017 ascompared to fiscal 2016 was primarily driven by $20.1 million of decreased spending on the Phoenix distribution center and related information technology,partially offset by $14.3 million of increased spending on new, relocated and expanded stores.25 We currently expect to incur capital expenditures in the range of $15 million to $20 million in fiscal year 2019. The reduced level of capital spendfrom prior years reflects fewer relocations and new stores, partially offset by higher investments in information technology.Cash Flows from Financing ActivitiesNet cash provided by financing activities of $6.8 million in fiscal 2018 relates to $8.0 million of borrowings on our revolving credit facility, net ofpayments, partially offset by a $1.0 million reduction in our cash overdraft provision and $0.2 million of capital lease principal payments. Net cash providedby financing activities of $33.3 million in fiscal 2017 relates to $30.5 million of borrowings on our revolving credit facility, net of payments, along with a$2.8 million cash overdraft position. Net cash used in financing activities of $1.0 million in fiscal 2016 primarily consisted of $0.9 million of debt issuancecosts related to our revolving credit facility, discussed below.Revolving Credit FacilityOn August 18, 2015, we entered into a new credit agreement providing for an asset-based, five-year senior secured revolving credit facility in theamount of up to $180.0 million which matures on August 18, 2020 (the “Revolving Credit Facility”), which replaced our prior revolving credit facility. Theavailability of funds under the Revolving Credit Facility is limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitmentsunder the Revolving Credit Facility. Our indebtedness under the Revolving Credit Facility is secured by a lien on substantially all of our assets. TheRevolving Credit Facility contains certain restrictive covenants, which affect, among others, our ability to incur liens or incur additional indebtedness,change the nature of our business, sell assets or merge or consolidate with any other entity, or make investments or acquisitions unless they meet certainrequirements. The Revolving Credit Facility requires that we satisfy a fixed charge coverage ratio at any time that our availability is less than the greater of10% of our calculated borrowing base or $12.5 million. Our Revolving Credit Facility may, in some instances, limit our ability to pay cash dividends andrepurchase our common stock. In order for the borrower under the Revolving Credit Facility, our subsidiary, to make a restricted payment to us for thepayment 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 orour lenders’ aggregate commitments under the Revolving Credit Facility on a pro forma basis for a specified period prior to and immediately following therestricted payment. As of June 30, 2018, we were in compliance with all of the Revolving Credit Facility covenants.At June 30, 2018, we had $38.5 million of borrowings outstanding under the Revolving Credit Facility, $9.5 million of outstanding letters of creditand availability of $60.5 million. Letters of credit under the Revolving Credit Facility are primarily for self-insurance purposes. We incur commitment fees ofup to 0.25% on the unused portion of the Revolving Credit Facility, payable quarterly. Any borrowing under the Revolving Credit Facility incurs interest atLIBOR or the prime rate, plus an applicable margin, at our election (except with respect to swing loans, which incur interest solely at the prime rate plus theapplicable margin), subject to a floor of the one month LIBOR plus an applicable margin in the case of loans based on the prime rate. Interest expense of $2.1million for fiscal 2018 was comprised of interest of $1.3 million, commitment fees of $0.4 million, and amortization of financing fees of $0.4 million.At June 30, 2017, we had $30.5 million of borrowings outstanding under the Revolving Credit Facility, $6.0 million of outstanding letters of creditand availability of $64.2 million.LiquidityWe have financed our operations with funds generated from operating activities, available cash and cash equivalents, proceeds from the sale of ownedproperties and borrowings under our revolving credit facility. Cash and cash equivalents as of June 30, 2018, 2017, and 2016, were $9.5 million, $6.3million, and $14.1 million, respectively. Our cash flows will continue to be utilized for the operation of our business and the use of any excess cash will bedetermined by the Board of Directors. Our borrowings have historically peaked during our second fiscal quarter as we build inventory levels prior to theholiday selling season. Given the seasonality of our business, the amount of borrowings under our Revolving Credit Facility may fluctuate materiallydepending on various factors, including the time of year, our strategic investment needs and the opportunity to acquire merchandise inventory. Our primaryuses for cash provided by operating activities relate to funding our ongoing business activities and planned capital expenditures. We may also use availablecash to repurchase shares of our common stock. We believe funds generated from our operations, available cash and cash equivalents and borrowings underour Revolving Credit Facility will be sufficient to fund our operations for the next year. If our capital resources are not sufficient to fund our operations, wemay seek additional debt or equity financing. However, we can offer no assurances that we will be able to obtain additional debt or equity financing onreasonable terms.26 Critical Accounting Policies and EstimatesManagement’s Discussion and Analysis is based upon our consolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments thataffect the reported amounts of certain assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, weevaluate our significant estimates which are based on historical experience and on various other assumptions that we believe are reasonable under thecircumstances. Actual results may differ from these estimates.We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidatedfinancial statements.Inventory—Our inventories consist of finished goods and are stated at the lower of cost or market using the retail inventory method for storeinventory and the specific identification method for warehouse inventory. We have a perpetual inventory system that tracks on hand inventory and inventorysold at a SKU level. Inventory is relieved and cost of goods sold is recorded based on the current cost of the item sold. Buying, distribution, freight andcertain other costs are capitalized as part of inventory and are charged to cost of sales as the related inventory is sold. The retail inventory method, which isused by a number of our competitors, involves management estimates with regard to items such as markdowns. Such estimates may significantly impact theending inventory valuation at cost as well as the amount of gross margin recognized.Our stores conduct annual physical inventories, staggered during the second half of the fiscal year. During periods in which physical inventoryobservations do not occur, we utilize an estimate for recording inventory shrink based on the historical results of our previous physical inventories. Thisestimate may require a favorable or unfavorable adjustment to actual results to the extent that our subsequent actual physical inventory results yield adifferent result. We have loss prevention and inventory controls programs that we believe minimize shrink. Although inventory shrink rates have notfluctuated significantly in recent years, if the actual rate were to differ from our estimates, then an adjustment to inventory shrink would be required.Inventory is the largest asset on our balance sheet and represented approximately 62%, 62%, and 67% of total assets at June 30, 2018, 2017, and 2016,respectively. Total inventory increased 5.6%, or $12.5 million, from June 30, 2017 to June 30, 2018. Total inventory decreased 8.4%, or $20.4 million, fromJune 30, 2016 to June 30, 2017. On a per store basis, store inventory increased 1.0% from June 30, 2017 to June 30, 2018 and decreased 0.3% from June 30,2016 to June 30, 2017.Markdowns—We utilize markdowns to promote the effective and timely sale of merchandise which allows us to consistently provide newmerchandise to our customers. We also utilize markdowns coupled with promotional events to drive traffic and stimulate sales. Markdowns may be temporaryor permanent. Temporary markdowns are for a designated period of time with markdowns recorded to cost of sales based on quantities sold during the period.Permanent markdowns are charged to cost of sales immediately based on the total quantities on hand at the time of the markdown. Markdowns were 4.8% infiscal 2018 and were 5.1% in fiscal 2017. Markdowns may vary throughout the quarter or year in timing.The effect of a 1.0% markdown in the value of our inventory at June 30, 2018 would result in a decline in gross profit and a reduction in our earningsper share for the fiscal year ended June 30, 2018 of $2.3 million and $0.05, respectively.Insurance and Self‑Insurance Reserves—We use a combination of insurance and self‑insurance plans to provide for the potential liabilitiesassociated with workers’ compensation, general liability, property insurance, director and officers’ liability insurance, vehicle liability and employee healthcare benefits. Our stop loss limits per claim are $500,000 for workers’ compensation, $250,000 for general liability, and $150,000 for medical. Liabilitiesassociated with the risks that are retained by us are estimated, in part, by historical claims experience, severity factors and the use of loss development factors.The insurance liabilities we record are primarily influenced by the frequency and severity of claims and include a reserve for claims incurred but notyet reported. Our estimated reserves may be materially different from our future actual claim costs, and, when required adjustments to our estimated reservesare identified, the liability will be adjusted accordingly in that period. Our self‑insurance reserves for workers’ compensation, general liability and medicalwere $10.1 million, $1.8 million, and $0.9 million, respectively, at June 30, 2018 and $8.6 million, $2.5 million, and $1.1 million, respectively, at June 30,2017.We recognize insurance expenses based on the date of an occurrence of a loss including the actual and estimated ultimate costs of our claims. Claimspaid reduce our reserves and our current period insurance expense is adjusted for the difference in prior period recorded reserves and actual payments. Currentperiod insurance expenses also include the amortization of our premiums paid to our insurance carriers. Expenses for workers’ compensation, general liabilityand medical insurance were $5.3 million, $2.9 million and27 $6.4 million, respectively, for the fiscal year ended June 30, 2018; $4.8 million, $3.4 million and $7.7 million, respectively, for the fiscal year ended June 30,2017; and $3.4 million, $4.0 million and $7.2 million, respectively, for the fiscal year ended June 30, 2016.Share‑based compensation—The Compensation Committee of our Board of Directors and, through express consent of the Compensation Committee,our CEO, are authorized to grant stock options and restricted stock awards from time to time to eligible employees and directors. Those awards may be serviceor performance based. We grant options with exercise prices equal to the market price of our common stock on the date of the option grant as determined inaccordance with the terms of our equity incentive plans. The majority of the options granted prior to June 30, 2008 have a vesting period of one to five yearsand expire ten years from the date of grant. Options granted after June 30, 2008 typically vest over periods of one to four years with equal portions of thegrant vesting on an annual basis and expire ten years from the date of grant. In accordance with U.S. generally accepted accounting principles, we recognizecompensation expense at an amount equal to the fair value of share‑based payments granted under compensation arrangements. We calculate the fair value ofstock options using the Black‑Scholes option pricing model. Determining the fair value of share‑based awards at the grant date requires judgment indeveloping assumptions, which involve a number of variables. These variables include, but are not limited to, the expected stock price volatility over theterm of the awards, the expected dividend yield, the risk free rate, the expected term and expected stock option exercise behavior. In addition, we also usejudgment in estimating the number of share‑based awards that are expected to be forfeited. Share‑based compensation expense was $3.3 million for the fiscalyear ended June 30, 2018, $4.2 million for the fiscal year ended June 30, 2017 and $3.1 million for the fiscal year ended June 30, 2016.Income taxes—We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determinedbased on differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that willbe in effect when the differences are expected to reverse. Deferred tax assets and liabilities are recorded in our consolidated balance sheets. A valuationallowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. In assessing theneed for a valuation allowance, all available evidence is considered including past operating results, future reversals of taxable temporary differences,estimates of future income and tax planning strategies. We have elected to utilize the “with and without” method for purposes of determining when excesstax benefits will be realized. We are subject to income tax in many jurisdictions, including the United States, various states and localities. At any point intime, we may not be subject to audit by any of the various jurisdictions; however, we record estimated reserves for uncertain tax benefits for potentialdomestic tax audits. The timing of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. If differentassumptions had been used, our tax expense or benefit, assets and liabilities could have varied from recorded amounts. If actual results differ from estimatedresults or if we adjust these assumptions in the future, we may need to adjust our reserves for uncertain tax benefits or our deferred tax assets or liabilities,which could impact our effective tax rate.Off‑Balance Sheet ArrangementsWe had no off‑balance sheet arrangements as of June 30, 2018.Contractual ObligationsThe following table summarizes our contractual obligations at June 30, 2018 and the effects that such obligations are expected to have on ourliquidity and cash flow in future periods (in thousands): Payments Due by Period Contractual Obligations Total 1 Yearor Less 2 - 3Years 4 - 5Years More than5 Years Operating leases $503,099 $92,104 $143,117 $107,061 $160,817 Maintenance, insurance and taxes on operating leases 99,195 18,160 28,218 21,109 31,708 Capital lease 616 172 344 100 — Borrowings under revolving credit facility 38,480 — 38,480 — — Interest and commitment fees on revolving credit facility 3,984 1,864 2,120 — — Total $645,374 $112,300 $212,279 $128,270 $192,525 Contractually required payments for maintenance, insurance and taxes on our leased properties are estimated as a percentage of rent based onhistorical trends. These amounts can vary based on multiple factors including inflation, macroeconomic conditions, various local tax rates and appraisedvalues of our rental properties. The operating lease obligations include the lease obligations of28 our new, additional distribution center in Phoenix, Arizona opened in the fourth quarter of fiscal 2016. We do not consider most merchandise purchase ordersto be contractual obligations due to designated cancellation dates on the face of the purchase order.Commitment fees and interest on the Revolving Credit Facility are calculated based on contractual commitment fees, standby letter of credit fees, andinterest based on the outstanding balance on the Revolving Credit Facility of $38.5 million and letters of credit totaling $9.5 million. See "—Liquidity andCapital Resources—Revolving Credit Facility" above. The interest and commitment fees on our Revolving Credit Facility reflect the future cashrequirements for interest payments, assuming the $38.5 million outstanding balance is not repaid until maturity and incorporates the interest rates in effect asof June 30, 2018. The interest on the letter of credit utilization and unused commitments are fixed at 1.375% and 0.25%, respectively. The interest rate onswingline revolver borrowings is variable and is based on the prime rate plus margin, and was 5.0% at June 30, 2018. The interest rate on traditional revolverborrowings is variable and is based on either LIBOR or the prime rate plus margin, at our option, which was LIBOR for which interest rates ranged between3.18% and 3.30% for multiple tranches.We have not included other long-term liabilities related to self-insurance reserves in the contractual obligations table, as they do not represent cashrequirements arising from contractual payment obligations. While self-insurance reserves represent an estimate of our future obligation and not a contractualpayment obligation, we have disclosed our self-insurance reserves under "Critical Accounting Policies and Estimates - Insurance and Self-InsuranceReserves."Quarterly Results and SeasonalityThe following tables set forth certain quarterly financial data for the eight quarters ended June 30, 2018. The quarterly information is unaudited, buthas been prepared on the same basis as the audited financial statements included elsewhere in this Form 10‑K. We believe that all necessary adjustments(consisting only of normal recurring adjustments) have been included to present fairly the unaudited quarterly results when read in conjunction with ourconsolidated financial statements and related notes included elsewhere in this Form 10‑K. The results of operations for any quarter are not necessarilyindicative of the results for any future period. (In thousands, except for per share data and comparable store sales.) Quarters Ended Sept. 30, Dec. 31, Mar. 31, June 30, 2017 2017 2018 2018 Net sales $218,756 $333,807 $223,296 $230,473 Gross profit (1) 77,950 105,685 80,303 77,036 Operating income/(loss) (1) (11,994) 8,276 (7,789) (9,443)Net income/(loss) (1) (12,254) 8,692 (8,080) (10,296)Basic income/(loss) per share (2) $(0.28) $0.19 $(0.18) $(0.23)Diluted income/(loss) per share (2) $(0.28) $0.19 $(0.18) $(0.23)Comparable store sales increase 3.6% 1.8% 9.1% 2.4% Quarters Ended Sept. 30, Dec. 31, Mar. 31, June 30, 2016 2016 2017 2017 Net Sales $211,885 $328,137 $203,001 $223,642 Gross profit(1) 77,339 105,982 67,156 70,268 Operating income/(loss) (1) (9,240) 8,767 (14,678) (17,129)Net income/(loss) (1) (8,855) 8,430 (14,796) (17,321)Basic income/(Loss) per share (2) $(0.20) $0.19 $(0.34) $(0.39)Diluted income/(loss) per share (2) $(0.20) $0.19 $(0.34) $(0.39)Comparable store sales increase 5.1% 3.8% (2.7)% 1.8% (1)Our results are computed independently for each of the quarters presented. Therefore, the sum of the quarterly amounts presented may not equal thetotal computed for the year due to rounding.(2)Net income/(loss) per share amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly netincome/(loss) per share in fiscal years 2018 and 2017 may not equal the total computed for the year.Our quarterly results of operations may fluctuate based upon such factors as the number and timing of store openings, the amount of net salescontributed by new and existing stores, the mix of merchandise sold, pricing, store closings or relocations, competitive factors and general economic andweather‑related conditions. The timing of advertised and promotional events could impact the weighting of sales between quarters. We expect to continue toexperience seasonal fluctuations in our business, with a29 significant percentage of our net sales and operating income being generated in the quarter ending December 31, which includes the holiday selling season.InflationIn our opinion, the overall impact of inflation has not had a material effect on our results of operations in any of the fiscal years of 2018, 2017, or2016. We cannot assure that inflation will not materially affect our results of operations in the future.Recent Accounting PronouncementsRefer to Note 1 to the Consolidated Financial Statements. Item 7A. Quantitative and Qualitative Disclosures About Market RiskWe are exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in marketprices and rates, such as interest rates. Based on our market risk sensitive instruments outstanding as of June 30, 2018, as described below, we havedetermined that there was no material market risk exposure to our consolidated financial position, results of operations or cash flows as of such date. We donot enter into derivatives or other financial instruments for trading or speculative purposes.Interest Rates. Our Revolving Credit Facility is a variable interest rate agreement, and therefore affected by fluctuations in market interest rates.Borrowings may incur interest at either LIBOR or the prime rate, plus the applicable margin, at our election (except with respect to swing loans, which incurinterest solely at the prime rate plus the applicable margin). In fiscal 2018, we borrowed $195.5 million and repaid $187.5 million under our RevolvingCredit Facility. We consider our exposure to adverse market interest rate fluctuations to be minimal. As of June 30, 2018, we had $38.5 million ofoutstanding borrowings under our Revolving Credit Facility. More information about debt held by us is available in Note 3 to the Consolidated FinancialStatements.30 Item 8. Financial Statements and Supplementary DataThe following consolidated financial statements of Tuesday Morning Corporation and its subsidiaries and Report of Independent Registered PublicAccounting Firm are included in this Form 10‑K and incorporated herein by reference. Index PageNumberReport of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets as of June 30, 2018 and 2017 F‑3Consolidated Statements of Operations for the fiscal years ended June 30, 2018, 2017, and 2016 F‑4Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2018, 2017, and 2016 F‑5Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2018, 2017, and 2016 F‑6Notes to Consolidated Financial Statements for the fiscal years ended June 30, 2018, 2017, and 2016 F‑7 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresBased on our management’s evaluation (with participation of our principal executive officer and our principal financial officer), our principalexecutive officer and our principal financial officer have concluded that our disclosure controls and procedures (as defined in Rule 13a‑15(e) under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of June 30, 2018 to provide reasonable assurance that informationrequired to be disclosed by us in reports that we file or submit under the Exchange Act, is (1) recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including ourprincipal executive and principal financial officers, 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 the objectives of the controlsystem are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that control issues, if any,within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance thattheir objectives are met and, as set forth above, our principal executive officer and principal financial officer have concluded, based on their evaluation as ofthe end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that their objectiveswere met.Management’s Annual Report on Internal Control Over Financial ReportingManagement of Tuesday Morning is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a‑15(f) or Rule 15(d)‑15(f) under the Exchange Act. Tuesday Morning’s internal control over financial reporting is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systemsdetermined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.Our management (with the participation of our principal executive officer and our principal financial officer) assessed the effectiveness of TuesdayMorning’s internal control over financial reporting as of June 30, 2018. In making this assessment, management used the criteria set forth by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework). Based on this assessment,management concluded that, as of June 30, 2018, Tuesday Morning’s internal control over financial reporting is effective based on those criteria.The Company’s independent registered public accounting firm has issued an attestation report on the effectiveness of the Company’s internal controlover financial reporting as of June 30, 2018. The report follows on the next page. 31 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Tuesday Morning Corporation Opinion on Internal Control over Financial ReportingWe have audited Tuesday Morning Corporation’s internal control over financial reporting as of June 30, 2018, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).In our opinion, Tuesday Morning Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as ofJune 30, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of Tuesday Morning Corporation as of June 30, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity andcash flows for each of the three years in the period ended June 30, 2018, and the related notes and our report dated August 21, 2018 expressed an unqualifiedopinion thereon. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Ernst & Young LLP Dallas, TexasAugust 21, 2018 32 Report of Independent Registered Public Accounting Firm on Consolidated Financial StatementsThe report of Independent Registered Public Accounting Firm on the consolidated financial statements is included in page F‑2 of this Form 10‑K.Changes in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected or arereasonably likely to materially affect our internal control over financial reporting.Item 9B. Other InformationNone. PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this Item 10 is incorporated herein by reference to the disclosure found in our definitive proxy statement to be filed withthe SEC pursuant to Regulation 14A of the Exchange Act in connection with Tuesday Morning’s 2018 Annual Meeting of Stockholders under the captions“Proposal No. 1—Election of Directors”, “Corporate Governance”, “Executive Officers”, “Meetings and Committees of the Board”, and “Section 16(a)Beneficial Ownership Reporting Compliance.”.We have adopted a “Code of Business Conduct” that establishes the business conduct to be followed by all of our officers, employees and members ofour Board of Directors, which is available on our website at www.tuesdaymorning.com under “Investor Relations—Corporate Governance.” Any amendmentof our Code of Business Conduct or waiver to our Code of Business Conduct with respect to our directors and executive officers, will be posted on ourwebsite.There have been no changes to the procedures by which stockholders may recommend candidates for our Board of Directors.Item 11. Executive CompensationThe information required by this Item 11 is incorporated herein by reference to the applicable disclosure found in our definitive proxy statement to befiled with the SEC pursuant to Regulation 14A of the Exchange Act in connection with Tuesday Morning’s 2018 Annual Meeting of Stockholders under thecaptions “Compensation Committee Report”, “Executive Compensation”, and “Director Compensation.”Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 is incorporated herein by reference to the applicable disclosure found in our definitive proxy statement to befiled with the SEC pursuant to Regulation 14A of the Exchange Act in connection with Tuesday Morning’s 2018 Annual Meeting of Stockholders under thecaption “Security Ownership of Certain Beneficial Owners and Management.”33 Equity Compensation Plan InformationThe following table provides information about our common stock that may be issued upon the exercise of options under equity compensation plansapproved by stockholders as of the fiscal year ended June 30, 2018. We do not have any equity compensation plans that were not approved by ourstockholders. Plan Category Number of Securitiesto be IssuedUpon Exercise ofOutstanding Options,Warrants and Rights(thousands) Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Available forFuture IssuanceUnder EquityCompensation Plans(excluding securitiesreflected in column)(thousands) Equity Compensation Plans Approved by Security Holders 3,957 $7.21 3,094 Equity Compensation Plans Not Approved by Security Holders — — — Total 3,957 $7.21 3,094 Item 13. Certain Relationships and Related Transactions, Director IndependenceThe information required by this Item 13 is incorporated herein by reference to the applicable disclosure found in our definitive proxy statement to befiled with the SEC pursuant to Regulation 14A of the Exchange Act in connection with Tuesday Morning’s 2018 Annual Meeting of Stockholders under thecaptions “Certain Relationships and Related Transactions” and “Corporate Governance.”Item 14. Principal Accountant Fees and ServicesThe information required by this Item 14 is incorporated herein by reference to the applicable disclosure found in our definitive proxy statement to befiled with the SEC pursuant to Regulation 14A of the Exchange Act in connection with Tuesday Morning’s 2018 Annual Meeting of Stockholders under thecaption “Independent Registered Public Accounting Firm.”PART IVItem 15. Exhibits and Financial Statement Schedules(a)The following documents are filed as part of this Form 10‑K. (1)Financial Statements:The list of financial statements required by this Item is set forth in Item 8. (2)Financial Statement Schedules:All financial statement schedules called for under Regulation S‑X are omitted because either they are not required under the relatedinstructions and/or are not material or are included in the consolidated financial statements or notes thereto included elsewhere in thisForm 10‑K.34 (3)Exhibits:See the list of exhibits in the “Exhibits Index” to this Form 10‑K, which are incorporated herein by reference. The agreements have been filedto provide investors with information regarding their respective terms. The agreements are not intended to provide any other actual informationabout the Company or its business or operations. In particular, the assertions embodied in any representations, warranties, and covenantscontained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable toinvestors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedulesmay contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in theagreements. Moreover, certain representations, warranties, and covenants in the agreements may have been used for the purpose of allocatingrisk between parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations,warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fullyreflected in the Company’s public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in theagreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof. Item 16. Form 10-K SummaryNot applicable. 35 EXHIBIT INDEX Exhibit No. Description 3.1.1 Certificate of Incorporation of Tuesday Morning Corporation (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’sRegistration Statement on Form S‑4 (File No. 333‑46017) filed with the Securities and Exchange Commission (the “Commission”) onFebruary 10, 1998) 3.1.2 Certificate of Amendment to the Certificate of Incorporation of the Company dated March 25, 1999 (incorporated by reference toExhibit 3.3 to the Company’s Registration Statement on Form S‑1/A (File No. 333‑74365) filed with the Commission on March 29, 1999) 3.1.3 Certificate of Amendment to the Certificate of Incorporation of the Company dated May 7, 1999 (incorporated by reference to Exhibit 3.1.3to the Company’s Form 10‑Q (File No. 000‑19658) filed with the Commission on May 2, 2005) 3.2 Amended and Restated By‑laws of the Company effective as of September 16, 2014 (incorporated by reference to Exhibit 3.2 to theCompany’s Form 8‑K (File No. 000‑19658) filed with the Commission on September 19, 2014) 10.1.1 Credit Agreement, dated as of August 18, 2015, by and among Tuesday Morning, Inc., each of the subsidiary guarantors, the Company, TMIHoldings, Inc., the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as Administrative Agent, Wells Fargo, NationalAssociation, as Syndication Agent (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-19658) filed withthe Commission on August 19, 2015) 10.1.2 Guarantee and Collateral Agreement, dated as of August 18, 2015, by and among the Company, TMI Holdings, the Borrower and certainsubsidiaries of the Borrower and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A., as administrativeagent (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission on August 19,2015) 10.2† Tuesday Morning Corporation Corporate Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’sForm 8‑K (File No. 000‑19658) filed with the Commission on November 8, 2013) 10.3.1† Tuesday Morning Corporation 2008 Long‑Term Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form8‑K (File No. 000‑19658) filed with the Commission on November 19, 2008) 10.3.2† First Amendment to Tuesday Morning Corporation 2008 Long‑Term Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to theCompany’s Form 8‑K (File No. 000‑19658) filed with the Commission on November 9, 2012) 10.3.3† Second Amendment to Tuesday Morning Corporation 2008 Long‑Term Equity Incentive Plan (incorporated by reference to Exhibit 10.1 tothe Company’s Form 8‑K (File No. 000‑19658) filed with the Commission on October 23, 2012) 10.4† Form of Incentive Stock Option Award Agreement for Employees under the Tuesday Morning Corporation 2008 Long‑Term EquityIncentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 8‑K (File No. 000‑19658) filed with the Commission onMarch 3, 2009) 10.5† Form of Nonqualified Stock Option Award Agreement for Employees under the Tuesday Morning Corporation 2008 Long‑Term EquityIncentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 8‑K (File No. 000‑19658) filed with the Commission onMarch 3, 2009) 10.6† Form of Restricted Stock Award Agreement under the Tuesday Morning Corporation 2008 Long‑Term Equity Incentive Plan (incorporatedby reference to Exhibit 10.4 to the Company’s Form 8‑K (File No. 000‑19658) filed with the Commission on March 3, 2009) 10.7† Form of Nonqualified Stock Option Award Agreement for Directors under the Tuesday Morning Corporation 2008 Long‑Term EquityIncentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Form 10‑K (File No. 000‑19658) filed with the Commission onAugust 28, 2013) 10.8† Form of Nonqualified Stock Option Agreement for Employees under the Tuesday Morning Corporation 2008 Long‑Term Equity IncentivePlan (incorporated by reference to Exhibit 10.2 to the Company’s Form 10‑Q (File No. 000‑19658) filed with the Commission on May 8,2014) 10.9† Form of Restricted Stock Award Agreement for Employees under the Tuesday Morning Corporation 2008 Long‑Term Equity Incentive Plan(incorporated by reference to Exhibit 10.4 to the Company’s Form 10‑Q (File No. 000‑19658) filed with the Commission on May 8, 2014) 36 Exhibit No. Description 10.10† Form of Performance Based Nonqualified Stock Option Award Agreement for Employees under the Tuesday Morning Corporation 2008Long‑Term Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Form 10‑Q (File No. 000‑19658) filed withthe Commission on May 8, 2014) 10.11† Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-19658) filed withthe Commission on September 19, 2014) 10.12.1† Composite Copy of Tuesday Morning Corporation 2014 Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.1to the Company’s Form 8-K (File No. 000-19658) as filed with the Commission on November 22, 2016) 10.12.2† Second Amendment to Tuesday Morning Corporation 2014 Long‑Term Equity Incentive Plan (incorporated by reference to Exhibit 10.34to the Company’s Form 10‑K (File No. 000‑19658) filed with the Commission on August 24, 2017) 10.13† Form of Nonqualified Stock Option Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term IncentivePlan (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission on November14, 2014) 10.14† Form of Restricted Stock Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan(incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission on November 14,2014) 10.15† Form of Restricted Stock Award Agreement for Directors under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan(incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission on November 14,2014) 10.16.1† Employment Agreement, dated December 11, 2015, by and between Steven R. Becker and the Company (the “Becker EmploymentAgreement”) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission onDecember 14, 2015) 10.16.2† Amendment, dated May 1, 2018, to Employment Agreement, by and between Steven R. Becker and the Company (incorporated byreference to Exhibit 10.1 to the Company’s Form 10-Q (File No. 000-19658) filed with the Commission on May 3, 2018) 10.17† Form of Nonqualified Stock Option Award Agreement (Time-Based Vesting) under the Becker Employment Agreement and the TuesdayMorning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 000-19658) filed with the Commission on December 14, 2015) 10.18† Form of Nonqualified Stock Option Award Agreement (Performance-Based Vesting) under the Becker Employment Agreement and theTuesday Morning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K (FileNo. 000-19658) filed with the Commission on December 14, 2015) 10.19† Form of Non-Qualified Stock Option Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan(incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q (File No. 000-19658) filed with the Commission on October 29,2015) 10.20† Form of Restricted Stock Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan(incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q (File No. 000-19658) filed with the Commission on October 29,2015) 10.21† Tuesday Morning Executive Severance Plan, effective May 1, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q(File No. 000-19658) filed with the Commission on May 3, 2018) 10.22† Form of Retention Agreement (Executive Officers other than Chief Executive Officer) (incorporated by reference to Exhibit 10.3 to theCompany’s Form 10-Q (File No. 000-19658) filed with the Commission on May 3, 2018 10.23 Agreement dated as of October 1, 2017, by and among Tuesday Morning Corporation, Jeereddi II, LP, Purple Mountain Capital PartnersLLC and the entities and natural persons set forth in the signature pages thereto (incorporated by reference to Exhibit 10.1 to theCompany’s Form 8-K (File No. 000-19658) as filed with the Commission on October 2, 2017) 37 Exhibit No. Description 10.24† Form of Restricted Stock Award Agreement for Directors under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan 10.25† Form of Non-Qualified Stock Option Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term IncentivePlan 10.26† Form of Restricted Stock Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan 10.27† Form of Performance-Based Restricted Stock Award Agreement for Employees under the Tuesday Morning Corporation 2014 Long-TermIncentive Plan 21.1 Subsidiaries of the Company 23.1 Consent of Independent Registered Public Accounting Firm 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 theSarbanes‑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 theSarbanes‑Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.DEF XBRL Taxonomy Definition Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document †Management contract or compensatory plan or arrangement 38 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. TUESDAY MORNING CORPORATIONDate: August 21, 2018 By: /s/ Steven R. Becker Steven R. BeckerChief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Name Title Date /s/ Steven R. Becker Chief Executive Officer (Principal Executive Officer) andDirector August 21, 2018Steven R. Becker /s/ Stacie R. Shirley Executive Vice President, Chief Financial Officer andTreasurer (Principal Financial Officer and PrincipalAccounting Officer) August 21, 2018Stacie R. Shirley /s/ terry burman Chairman of the Board August 21, 2018Terry Burman /s/ James T. Corcoran Director August 21, 2018James T. Corcoran /s/ barry s. gluck Director August 21, 2018Barry S. Gluck /s/ frank m. hamlin Director August 21, 2018Frank M. Hamlin /s/ william montalto Director August 21, 2018William Montalto /s/ sherry m. smith Director August 21, 2018Sherry M. Smith /s/ richard s willis Director August 21, 2018Richard S Willis 39 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting FirmF‑2Consolidated Balance Sheets as of June 30, 2018 and 2017F‑3Consolidated Statements of Operations for the fiscal years ended June 30, 2018, 2017, and 2016F‑4Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2018, 2017, and 2016F‑5Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2018, 2017, and 2016F‑6Notes to Consolidated Financial Statements for the fiscal years ended June 30, 2018, 2017, and 2016F‑7 F-1  Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Tuesday Morning Corporation Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Tuesday Morning Corporation (the Company) as of June 30, 2018 and 2017, and therelated consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2018, and therelated notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of the Company at June 30, 2018 and 2017, and the results of its operations and its cash flows foreach of the three years in the period ended June 30, 2018, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of June 30, 2018, based on criteria established in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 21, 2018 expressed an unqualifiedopinion thereon. Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2002. Dallas, TexasAugust 21, 2018 F-2 Tuesday Morning CorporationConsolidated Balance Sheets(In thousands, except for per share data) June 30, 2018 2017 ASSETS Current assets: Cash and cash equivalents $9,510 $6,263 Inventories 234,365 221,906 Prepaid expenses 6,301 6,367 Other current assets 1,206 1,982 Total Current Assets 251,382 236,518 Property and equipment, net 121,117 118,397 Deferred financing costs 671 986 Other assets 3,086 2,252 Total Assets $376,256 $358,153 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $88,912 $67,326 Accrued liabilities 41,765 44,260 Income taxes payable 66 11 Total Current Liabilities 130,743 111,597 Borrowings under revolving credit facility 38,480 30,500 Deferred rent 22,883 13,883 Asset retirement obligation — non-current 3,100 2,307 Other liabilities — non-current 796 1,027 Total Liabilities 196,002 159,314 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; 47,648,958 shares issuedand 45,865,297 shares outstanding at June 30, 2018 and 46,904,295 shares issued and 45,120,634shares outstanding at June 30, 2017 469 469 Additional paid-in capital 237,957 234,604 Retained deficit (51,360) (29,422)Less: 1,783,661 common shares in treasury, at cost, at June 30, 2018, 1,783,661 common shares intreasury at cost at June 30, 2017 (6,812) (6,812)Total Stockholders’ Equity 180,254 198,839 Total Liabilities and Stockholders’ Equity $376,256 $358,153 The accompanying notes are an integral part of these consolidated financial statements. F-3 Tuesday Morning CorporationConsolidated Statements of Operations(In thousands, except per share data) Fiscal Years Ended June 30, 2018 2017 2016 Net sales $1,006,332 $966,665 $956,396 Cost of sales 665,358 645,920 614,594 Gross profit 340,974 320,745 341,802 Selling, general and administrative expenses 361,924 353,025 339,398 Operating income/(loss) (20,950) (32,280) 2,404 Other income/(expense): Interest expense (2,061) (1,485) (1,068)Other income, net 934 1,420 2,640 Income/(loss) before income taxes (22,077) (32,345) 3,976 Income tax provision/(benefit) (139) 197 263 Net income/(loss) $(21,938) $(32,542) $3,713 Earnings Per Share Net income/(loss) per common share: Basic $(0.50) $(0.74) $0.08 Diluted $(0.50) $(0.74) $0.08 Weighted average number of common shares: Basic 44,282 43,943 43,705 Diluted 44,282 43,943 43,736 The accompanying notes are an integral part of these consolidated financial statements. F-4 Tuesday Morning CorporationConsolidated Statements of Stockholders’ Equity(In thousands) Common Stock AdditionalPaid-In Retained(Deficit) Treasury TotalStockholders’ Shares Amount Capital Earnings Stock Equity Balance at June 30, 2015 44,069 $458 $227,085 $(593) $(6,661) $220,289 Net income — — — 3,713 — 3,713 Shares issued or canceled in connection with employee stock incentive plans and related tax effect 505 5 — — — 5 Shares issued in connection with exercises of employee stock options 5 — — — — — Purchase of treasury stock (18) — — — (128) (128)Share-based compensation expense — — 3,403 — — 3,403 Balance at June 30, 2016 44,561 $463 $230,488 $3,120 $(6,789) $227,282 Net loss — — — (32,542) — (32,542)Shares issued or canceled in connection with employee stock incentive plans and related tax effect 558 6 — — — 6 Shares issued in connection with exercises of employee stock options 6 — 2 — — 2 Purchase of treasury stock (4) — — — (23) (23)Share-based compensation expense — — 4,114 — — 4,114 Balance at June 30, 2017 45,121 $469 $234,604 $(29,422) $(6,812) $198,839 Net loss — — — (21,938) — (21,938)Shares issued or canceled in connection with employee stock incentive plans and related tax effect 741 — — — — — Shares issued in connection with exercises of employee stock options 3 — 4 — — 4 Purchase of treasury stock — — — — — — Share-based compensation expense — — 3,349 — — 3,349 Balance at June 30, 2018 45,865 $469 $237,957 $(51,360) $(6,812) $180,254 The accompanying notes are an integral part of these consolidated financial statements. F-5 Tuesday Morning CorporationConsolidated Statements of Cash Flows(In thousands) Years Ended June 30, 2018 2017 2016 Cash flows from operating activities: Net income/(loss) $(21,938) $(32,542) $3,713 Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization 25,671 21,349 16,010 Amortization of financing costs 315 326 462 Loss on disposal of assets 82 79 700 Gain on sale-leaseback transaction (371) (741) (2,515)Share-based compensation 3,433 4,184 3,115 Deferred income taxes (565) 31 11 Construction allowances from landlords 8,568 2,566 — Change in operating assets and liabilities: Inventories (12,543) 20,339 (32,043)Prepaid and other current assets 559 (1,138) 633 Accounts payable 22,612 (16,337) 6,611 Accrued liabilities (362) (2,047) 6,653 Deferred rent 1,280 4,964 2,805 Income taxes payable 62 19 (10)Other liabilities—non-current 368 (648) 2,268 Net cash provided by operating activities 27,171 404 8,413 Cash flows from investing activities: Capital expenditures (30,764) (41,682) (45,545)Proceeds from sale-leaseback transaction — — 8,797 Purchase of intellectual property (42) (5) (1,318)Proceeds from sale of assets 83 127 41 Net cash used in investing activities (30,723) (41,560) (38,025)Cash flows from financing activities: Proceeds under revolving credit facility 195,500 176,500 — Repayments under revolving credit facility (187,520) (146,000) — Change in cash overdraft (1,026) 2,810 — Proceeds from the exercise of employee stock options 4 8 5 Payments on capital leases (159) (26) — Purchase of treasury stock — (23) (128)Payment of financing costs — — (903)Net cash provided by/(used in) financing activities 6,799 33,269 (1,026)Net increase/(decrease) in cash and cash equivalents 3,247 (7,887) (30,638)Cash and cash equivalents, beginning of period 6,263 14,150 44,788 Cash and cash equivalents, end of period $9,510 $6,263 $14,150 Supplemental cash flow information: Interest paid $1,615 $1,113 $541 Income taxes paid 285 310 256 Capital lease obligation incurred — 817 — The accompanying notes are an integral part of these consolidated financial statements. F-6 TUESDAY MORNING CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Throughout these notes, Tuesday Morning Corporation is referred to as “Tuesday Morning,” “we” or “the Company”.Tuesday Morning is a leading off-price retailer, specializing in name-brand, high-quality products for the home, including upscale textiles,furnishings, housewares, gourmet food, toys and seasonal décor at prices generally below those charged by boutique, specialty and department stores,catalogs and on‑line retailers in the United States. We operated 726 discount retail stores in 40 states as of June 30, 2018 (731 and 751 stores atJune 30, 2017 and 2016, respectively). We distribute periodic circulars and direct mail that keep customers familiar with Tuesday Morning.(a)Basis of Presentation—The accompanying consolidated financial statements include the accounts of Tuesday Morning Corporation, a Delawarecorporation, and its wholly‑owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We operate ourbusiness as a single operating segment. Certain reclassifications were made to prior period amounts to conform to the current periodpresentation. None of the reclassifications affected our net income/(loss) in any period. We do not present a separate statement of comprehensiveincome, as we have no material other comprehensive income items. Our fiscal year ended on June 30, 2018, which we refer to as fiscal 2018.(b)Use of Estimates—The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the consolidated financial statements, and the reported amounts of net sales and expenses during the reporting period. Actualresults could differ from those estimates.(c)Cash and Cash Equivalents—Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities ofthree months or less. Cash equivalents are carried at cost, which approximates fair value. At June 30, 2018 and 2017, credit card receivables from thirdparty consumer credit card providers were $7.9 million and $4.9 million, respectively. Such receivables are generally collected within one week of thebalance sheet date.(d)Inventories—Inventories, consisting of finished goods, are stated at the lower of cost or market using the retail inventory method for store inventoryand the specific identification method for warehouse inventory. We have a perpetual inventory system that tracks on hand inventory and inventorysold at a SKU level. Inventory is relieved and cost of sales is recorded based on the current cost of the item sold. Buying, distribution, freight andcertain other costs are capitalized as part of inventory and are charged to cost of sales as the related inventory is sold. We charged $109.1 million,$108.2 million, and $83.7 million, of such capitalized inventory costs to cost of sales for the fiscal years ended June 30, 2018, 2017, and 2016,respectively. We have capitalized $32.5 million and $33.9 million of such costs in inventory at June 30, 2018 and 2017, respectively.Stores conduct annual physical inventories, staggered during the second half of the fiscal year. We make adjustments to our financial statements basedon the results of the physical inventories. During periods in which no physical inventories occur, we utilize an estimate for recording shrinkagereserves, based on historical trends of physical inventory results. These shrinkage reserves may require a favorable or unfavorable adjustment to actualresults to the extent our subsequent physical inventories yield a different result.We review our inventory during and at the end of each quarter to ensure that all necessary pricing actions are taken to adequately value our inventoryat the lower of cost or market by recording permanent markdowns to our on hand inventory. Management believes these markdowns result in theappropriate prices necessary to stimulate demand for the merchandise. Actual recorded permanent markdowns could differ materially frommanagement’s initial estimates based on future customer demand or economic conditions.F-7 (e)Property and Equipment—Property and equipment are stated at cost. Buildings, furniture, fixtures, leasehold improvements, capital leases andequipment are depreciated on a straight‑line basis over the estimated useful lives of the assets as follows:Estimated Useful Lives Buildings 30 yearsFurniture and fixtures 3 to 7 yearsLeasehold improvements Shorter of useful life or lease termEquipment 5 to 10 yearsAssets under capital lease Shorter of useful life or lease termSoftware 3 to 10 years Upon sale or retirement of an asset, the related cost and accumulated depreciation are removed from our balance sheet and any gain or loss isrecognized in the statement of operations. Expenditures for maintenance, minor renewals and repairs are expensed as incurred, while majorreplacements and improvements are capitalized. For both the fiscal years ended June 30, 2018 and June 30, 2017, we disposed of assets with a netbook value of approximately $0.1 million, primarily related to our store closing and relocation program. Gains or losses related to the sale or otherdisposal of such assets in these periods were presented in other income/(expense) on our Consolidated Statement of Operations.(f)Deferred Financing Costs—Deferred financing costs represent costs paid in connection with obtaining bank and other long‑term financing. Thesecosts are amortized over the term of the related financing using the effective interest method.(g)Income Taxes—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective taxbases. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which thosetemporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period that includes the date of enactment. Valuation allowances are established against deferred tax assets when it is more likely thannot that the realization of those deferred tax assets will not occur. Valuation allowances are released when positive evidence becomes available thatfuture taxable income is sufficient to utilize the underlying deferred tax assets.We file our annual federal income tax return on a consolidated basis. Furthermore, we recognize uncertain tax positions when we have determined it ismore likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws orregulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded.Our results of operations included the estimated impact of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”), which was signed into lawon December 22, 2017. The TCJA makes significant and complex changes to U.S. tax law including, but not limited to, (i) reducing the U.S. federalcorporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and providing a refund mechanism for existingAMT credits; (iii) creating a new limitation on the deductibility of interest expense; (iv) changing rules related to uses and limitation of net operatingloss carryforwards created in tax years beginning after December 31, 2017; and (v) significant acceleration of depreciation expense. As a result of theadoption of the TCJA upon enactment during fiscal year 2018, the blended statutory federal tax rate for the year was 27.2%. We continue to assess ouraccounting for the tax effects of enactment of the TCJA. Final calculations will be completed within the one year measurement period endingDecember 22, 2018, as required under the rules issued by the SEC. We currently expect the effect of the tax law change to have a nominal impact onour annual effective tax rate, given our cumulative loss position and the related valuation allowance on our deferred tax assets. The future impacts ofthe TCJA may differ due to, among other things, changes in interpretations, assumptions made, the issuance of additional guidance, and actions wemay take as a result of the TCJA. In the second fiscal quarter of 2018, we applied the provisions of the newly enacted TCJA, resulting in an approximate $0.5 million income taxbenefit connected with future refunds of AMT credits no longer requiring a valuation allowance. In the third fiscal quarter of 2018, we recognized a$0.1 million additional benefit related to AMT credits. Applying the provisions of TCJA, including the remeasurement of our deferred taxes at thenew corporate tax rate, had a material impact on our gross deferred taxes; however, the impact was mitigated as substantially all of our net deferred taxassets have corresponding valuation allowances.(h)Self-Insurance Reserves—We use a combination of insurance and self‑insurance plans to provide for the potential liabilities associated with workers’compensation, general liability, property insurance, director and officers’ liability insurance, vehicleF-8 liability and employee health care benefits. Our stop loss limits per claim are $500,000 for workers’ compensation, $250,000 for general liability, and$150,000 for medical. Liabilities associated with the risks that are retained by us are estimated, in part, by historical claims experience, severity factorsand the use of loss development factors.The insurance liabilities we record are primarily influenced by the frequency and severity of claims, and include a reserve for claims incurred but notyet reported. Our estimated reserves may be materially different from our future actual claim costs, and, when required adjustments to our estimatereserves are identified, the liability will be adjusted accordingly in that period. Our self‑insurance reserves for workers’ compensation, general liabilityand medical were $10.1 million and $1.8 million and $0.9 million, respectively, at June 30, 2018 and $8.6 million, $2.5 million, and $1.1 million,respectively, at June 30, 2017. We recognize insurance expenses based on the date of an occurrence of a loss including the actual and estimated ultimate costs of our claims. Claimsare paid from our reserves and our current period insurance expense is adjusted for the difference in prior period recorded reserves and actual paymentsas well as changes in estimated reserves. Current period insurance expenses also include the amortization of our premiums paid to our insurancecarriers. Expenses for workers’ compensation, general liability and medical insurance were $5.3 million, $2.9 million and $6.4 million, respectively,for the fiscal year ended June 30, 2018, $4.8 million, $3.4 million and $7.7 million, respectively, for the fiscal year ended June 30, 2017, and$3.4 million, $4.0 million and $7.3 million, respectively, for the fiscal year ended June 30, 2016. (i)Revenue Recognition—Sales are recorded at the point of sale and conveyance of merchandise to customers. Sales are net of returns and exclude salestax. We maintain a reserve for estimated returns. We use historical customer return behavior to estimate our reserve requirements. Gift cards are sold tocustomers in our stores and we issue gift cards for merchandise returns in our stores. Revenue from sales of gift cards and issuances of merchandisecredits 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 breakageis applied over the period of estimated performance (36 months as of the end of fiscal 2018) and the breakage amounts are included in net sales in theConsolidated Statement of Operations. We recorded $0.6 million, $0.9 million and $0.6 million of gift card breakage in fiscal years 2018, 2017 and2016 respectively.(j)Advertising—Costs for direct mail, television, radio, newspaper, digital and other media are expensed as the advertised events take place. Advertisingexpenses for the fiscal years ended June 30, 2018, 2017, and 2016 were $27.2 million, $29.0 million, and $28.9 million, respectively. We do notreceive consideration from vendors to support our advertising expenditures. As of June 30, 2018, prepaid advertising was approximately $60,000compared to $149,000 at June 30, 2017.(k)Financial Instruments—The fair value of financial instruments is determined by reference to various market data and other valuation techniques asappropriate. The only financial instrument we carry is our revolving credit facility. See Note 3. (l)Share‑Based Compensation—The fair value of each stock option granted during the fiscal years ended June 30, 2018, 2017 and 2016 was estimated atthe date of grant using a Black‑Scholes option pricing model.The risk‑free interest rate is the constant maturity risk free interest rate for U.S. Treasury instruments with terms consistent with the expected lives ofthe awards. The expected term of an option is based on our historical review of employee exercise behavior based on the employee class (executive ornon‑executive) and based on our consideration of the remaining contractual term if limited exercise activity existed for a certain employee class. Theexpected volatility is based on both the historical volatility of our stock based on our historical stock prices and implied volatility of our traded stockoptions. The expected dividend yield is based on our expectation of not paying dividends on our common stock for the foreseeable future.These inputs were as follows: Fiscal Years Ended June 30, 2018 2017 2016 Weighted average risk-free interest rate 1.7 - 2.5% 0.6 - 1.9% 1.0 - 1.9% Expected life of options (years) 3.8 - 4.9 3.0 - 5.5 2.9 - 5.6 Expected stock volatility 60.0 - 63.3% 52.7 - 61.0% 46.4 - 56.1% Expected dividend yield 0.0% 0.0% 0.0% (m)Net Income/(Loss) Per Common Share—Basic net income/(loss) per common share for the fiscal years ended June 30, 2018, 2017, and 2016, wascalculated by dividing net income/(loss) by the weighted average number of common shares outstanding for each period. Diluted net income/(loss)per common share for the fiscal years ended June 30, 2018, 2017, and 2016, was calculated by dividing net income by the weighted average numberof common shares including the impact of dilutive common stock equivalents. See Note 9.(n)Impairment of Long‑Lived Assets and Long‑Lived Assets to Be Disposed Of — Long‑lived assets, principally property and equipment and leaseholdimprovements, are reviewed for impairment when circumstances indicate the carrying amount of anF-9 asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flowsassociated with the asset or group of assets is less than their carrying amount. If impairment exists, an adjustment is recorded to write the asset down toits fair value, and a loss is recorded as the difference between the carrying amount and fair value. Fair values are determined based on quoted marketvalues, discounted cash flows or internal appraisals, as applicable. Assets to be disposed of are reported at the lower of the carrying amount or fairvalue less costs to sell. Impairment of long‑lived assets has not had a material impact on our financial position, results of operations or liquidity for theperiods presented. (o)Intellectual Property — Our intellectual property primarily consists of indefinite lived trademarks. We evaluate annually whether the trademarkscontinue to have an indefinite life. Trademarks and other intellectual property are reviewed for impairment annually in the fourth quarter, and may bereviewed more frequently if indicators of impairment are present.As of June 30, 2018, the carrying value of the intellectual property, which included indefinite lived trademarks, was $1.2 million and no impairmentwas identified or recorded.(p)Cease use Liability — Amounts in “Accrued liabilities” and “Other liabilities – non-current” in the Consolidated Balance Sheets include the currentand 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 cease use liability was $77,000 at June 30, 2018, and was all classified as short-term. The short-term and long-term cease use liabilities were $1.0 and $0.5 million at June 30, 2017, respectively. Expenses related to store closingsare included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations. (q)Sale-leaseback — During the fourth quarter of 2016, we entered into a sale-leaseback transaction to sell two buildings and land utilized in our Dallasdistribution center operations, which we did not consider part of our long-term distribution network, and leased back these facilities throughDecember 2017. We subsequently exercised our option to extend the related lease through March 2018, which was accounted for as an operating leaseand has now expired. We had no continuing involvement with the properties sold other than a normalleaseback. The consideration received for the sale, as reduced by closing and transaction costs, was $8.8 million, and the net book value of properties sold was$5.2 million, resulting in a $3.6 million gain. The gain recognized in fiscal year 2016 was $2.5 million, which included the portion of the gain inexcess of the present value of the minimum lease payments for the leaseback, and was included in “Other income” in our Consolidated Statement ofOperations. During fiscal 2017, we recognized $0.7 million of the gain. During fiscal 2018, we recognized the remaining $0.4 million of the gain. (r)Asset Retirement Obligations — We account for asset retirement obligations (“ARO”) in accordance with ASC 410, Asset Retirement andEnvironmental Obligations, which requires the recognition of a liability for the fair value of a legally required asset retirement obligation whenincurred if the liability’s fair value can be reasonably estimated. Our ARO liabilities are associated with the disposal and retirement of leaseholdimprovements and removal of installed equipment, resulting from contractual obligations, at the end of a lease to restore a facility to a conditionspecified in the lease agreement.We record the net present value of the ARO liability and also record a related capital asset, in an equal amount, for leases which contractually result inan asset retirement obligation. The estimated ARO liability is based on a number of assumptions, including costs to return facilities back to specifiedconditions, inflation rates and discount rates. Accretion expense related to the ARO liability is recognized as operating expense in our ConsolidatedStatements of Operations. The capitalized asset is depreciated on a straight-line basis over the useful life of the related leasehold improvements. UponARO fulfillment, any difference between the actual retirement expense incurred and the recorded estimated ARO liability is recognized as anoperating gain or loss in our Consolidated Statements of Operations. Our ARO liability, which totaled $3.2 million at June 30, 2018, was comprised ofa $0.1 million short-term portion included in accrued liabilities and $3.1 million long-term portion included in “Other liabilities—non-current” onour Consolidated Balance Sheet at June 30, 2018. At June 30, 2017, our ARO liability, which totaled $2.5 million, was comprised of a $0.2 millionshort-term portion included accrued liabilities and $2.3 million long term portion included in “Other liabilities – non-current” on our ConsolidatedBalance Sheet at June 30, 2017.(s)Capital lease – During fiscal 2017, we entered into a 5-year capital lease maturing on January 31, 2022 for equipment and software. At June 30, 2018,the capital lease asset balance was $0.6 million, the current lease liability was $0.2 million and the long-term lease liability was $0.4 million. Thecapital lease is amortized on a straight-line basis. During fiscal year 2018, the capital lease amortization was $0.2 million. At June 30, 2017, thecapital lease asset balance was $0.8 million, the current lease liability was $0.1 million and the long-term lease liability was $0.6 million. Duringfiscal year 2017, the capital asset amortization was less than $0.1 million.(t)Legal Proceedings — The Company was a defendant in a purported class action lawsuit, Jerry Castillo v. Tuesday Morning Inc., which was filed onDecember 28, 2017 in the United States District Court, Middle District of Florida. The case was brought under the Fair Labor Standards Act andincluded allegations that the Company violated various wage and hour labor laws. Relief was sought on behalf of current and former Companyemployees. The lawsuit sought to recover damages,F-10 penalties and attorneys’ fees as a result of the alleged violations. The matter settled for an amount not material to the Company and the Courtapproved the settlement on July 9, 2018.The Company was also a defendant in a purported class action lawsuit, Hector Velarde, on behalf of himself and all other similar situated, Pltf. vs.Tuesday Morning, Inc., which was filed on February 26, 2018 in state court and was pending in the United States District Court, Central District ofCalifornia. The case was brought under the Unruh Civil Rights Act, California Code § 51 ci seq. (“Unruh Act”), the California Disabled persons Act,California Civil Code § 54 et seq. (“CDPA”), and Cal. Civ. Code § 55 et seq. and included allegations that the Company violated various publicaccess laws. The lawsuit sought to recover damages, penalties and attorneys' fees as a result of the alleged violations. The matter settled for an amountnot material to the Company and the Court approved the settlement on July 11, 2018. (u)Recent Accounting Pronouncements — In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, “Income Tax AccountingImplications of the Tax Cuts and Jobs Act (SAB 118),” which allows the Company to record provisional amounts during a measurement period not toextend beyond one year of the enactment date. Since the TCJA was passed late in the fourth calendar quarter of 2017, and ongoing guidance andaccounting interpretation is expected over the next twelve months, management considers the deferred tax re-measurements and other items to beincomplete due to the forthcoming guidance and the ongoing analysis of final year-end data and tax positions. The Company expects to complete itsanalysis within the measurement period in accordance with SAB 118. In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement ofCash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which provides guidance on eight specificcash 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 effectivefor fiscal years beginning after December 15, 2017, including interim periods within those years. The amendments in ASU 2016-15 should be adoptedon a retrospective basis unless it is impracticable to apply, in which case the amendments should be applied prospectively as of the earliest datepracticable. The Company currently expects to adopt this standard in the first quarter of fiscal 2019 and is evaluating the impact that this standard willhave 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-BasedPayment 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, including the accounting for the income taxconsequences of share-based awards. For public companies, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interimperiods within those fiscal years. The Company adopted ASU 2016-09 in the first quarter of fiscal 2018 and elected to continue to estimate forfeituresexpected 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 fromthe computation. The adoption of this standard did not materially impact our consolidated financial statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is intended to improve financial reporting inconnection with leasing transactions. ASU 2016-02 will require entities (“lessees”) that lease assets with lease terms of more than twelve months torecognize 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 assetand lease obligation will be recorded for all leases, whether operating or finance, while the income statement will reflect lease expense for operatingleases and amortization/interest expense for finance leases. Accounting by entities that own the assets leased by lessees (“lessors”) will remain largelyunchanged from current GAAP. In addition, ASU 2016-02 requires disclosures to help investors and other financial statement users better understandthe amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for fiscal years beginning afterDecember 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. A modified retrospective approach is required for allleases existing or entered into after the beginning of the earliest comparative period in the financial statements. The Company currently expects toadopt this standard in the first quarter of fiscal 2020. While the Company is currently evaluating the provisions of ASU 2016-02 to assess the impacton the Company’s consolidated financial statements and disclosures, the primary effect of adopting the new standard will be to record assets andobligations 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 changesthe measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value, except for companies using theRetail Inventory Method which will continue to use existing impairment models. ASU 2015-11 defines net realizable value as estimated selling pricesin the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance was required to beapplied on a prospective basis and was effective for fiscal years beginning after December 15, 2016, and interim periods within those years. TheF-11 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’sconsolidated 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 onrevenue recognition, and has since modified the standard with additional ASUs. The new guidance provides enhancements to the quality andconsistency 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 thatreflect the consideration, or payment, to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASBdeferred the effective date of ASU 2014-09. Accordingly, this standard is effective for reporting periods beginning after December 15, 2017, includinginterim periods within that year. The Company has substantially concluded its assessment of the new revenue standard and will adopt this standard inthe first quarter of fiscal 2019 using the modified retrospective method. The Company currently expects that this standard will not have a materialimpact on its consolidated financial statements but will require additional disclosures. (2) PROPERTY AND EQUIPMENTProperty and equipment, net of accumulated depreciation, consisted of the following (in thousands): June 30, 2018 2017 Land $6,628 $6,628 Buildings and building improvements 41,479 40,879 Furniture and fixtures 61,963 56,877 Equipment 66,268 65,884 Software 43,664 40,750 Leasehold improvements 57,371 44,838 Assets under capital lease 788 804 278,161 256,660 Less accumulated depreciation (157,044) (138,263)Net property and equipment $121,117 $118,397 (3) DEBTOn August 18, 2015, we entered into a new credit agreement providing for an asset-based, five-year senior secured revolving credit facility in theamount of up to $180.0 million which matures on August 18, 2020 (the “Revolving Credit Facility”), and which replaced our previous revolving creditfacility. The availability of funds under the Revolving Credit Facility is limited to the lesser of a calculated borrowing base and the lenders’ aggregatecommitments under the Revolving Credit Facility. Our indebtedness under the Revolving Credit Facility is secured by a lien on substantially all of ourassets. The Revolving Credit Facility contains certain restrictive covenants, which affect, among others, our ability to incur liens or incur additionalindebtedness, change the nature of our business, sell assets or merge or consolidate with any other entity, or make investments or acquisitions unless theymeet certain requirements. The Revolving Credit Facility requires that we satisfy a fixed charge coverage ratio at any time that our availability is less than thegreater of 10% of our calculated borrowing base or $12.5 million. Our Revolving Credit Facility may, in some instances, limit our ability to pay cashdividends and repurchase our common stock. In order for the borrower under the Revolving Credit Facility, our subsidiary, to make a restricted payment to usfor 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 borrowingbase or our lenders’ aggregate commitments under the Revolving Credit Facility on a pro forma basis for a specified period prior to and immediatelyfollowing the restricted payment. As of June 30, 2018, we were in compliance with all of the Revolving Credit Facility covenants.At June 30, 2018, we had $38.5 million outstanding under the Revolving Credit Facility, $9.5 million of outstanding letters of credit and availabilityof $60.5 million. Letters of credit under the Revolving Credit Facility are primarily for self-insurance purposes. We incur commitment fees of up to 0.25% onthe unused portion of the Revolving Credit Facility, payable quarterly. Any borrowing under the Revolving Credit Facility incurs interest at LIBOR or theprime rate, plus an applicable margin, at our election (except with respect to swing loans, which incur interest solely at the prime rate plus the applicablemargin), subject to a floor of the one month LIBOR plus an applicable margin in the case of loans based on the prime rate. Interest expense for fiscal year2018 from the Revolving Credit Facility of $2.1 million was comprised of interest of $1.3 million, commitment fees of $0.4 million, and the amortization offinancing fees of $0.4 million. Interest expense from the Revolving Credit Facility of $1.5 million for fiscal year 2017 was comprised of interest of $0.7million, commitment fees of $0.4 million, and amortization of financing fees of $0.4 million.F-12 The fair value of the Company's debt approximated its carrying amount as of June 30, 2018.See Note 11 for additional discussion on dividend restrictions under the Revolving Credit Facility. (4) ACCRUED LIABILITIESAccrued liabilities consisted of the following (in thousands): June 30, 2018 2017 Sales and use tax $3,467 $3,543 Self-insurance reserves 12,823 12,192 Wages, benefits and payroll taxes 6,006 5,710 Property taxes 1,612 1,524 Freight and distribution 4,807 4,490 Capital expenditures 1,585 4,780 Utilities 1,234 1,282 Advertising 1,102 525 Deferred rent 2,028 1,408 Cease use rent 77 991 Other 7,024 7,815 Total accrued liabilities $41,765 $44,260 (5) INCOME TAXESIncome tax provision/(benefit) consisted of (in thousands): Current Deferred Total Fiscal Year Ended June 30, 2018 Federal $— $(568) $(568)State and local 426 3 429 Total $426 $(565) $(139)Fiscal Year Ended June 30, 2017 Federal $— $27 $27 State and local 166 4 170 Total $166 $31 $197 Fiscal Year Ended June 30, 2016 Federal $(147) $186 $39 State and local 399 (175) 224 Total $252 $11 $263A reconciliation between income taxes computed at the blended statutory federal income tax rate of 27.2% in fiscal 2018 (see Note 1) and thestatutory federal income tax rate of 34% in fiscal 2017 and 2016, and income taxes recognized in the Consolidated Statements of Operations was as follows(in thousands): F-13 Fiscal Year Ended June 30, 2018 2017 2016 Federal income tax provision/(benefit) computed at statutory rate $(6,005) $(10,997) $1,351 State income taxes, net of related federal tax benefit 314 106 157 Increase/(decrease) in federal valuation allowance 5,182 10,076 (668)Federal tax credits (200) 68 (670)Stock option expiration/deficiencies 586 938 — Federal tax rate change (19) — — Other, net 3 6 93 Provision for income taxes $(139) $197 $263 Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for the fiscal years ended June 30,2018, 2017 and 2016, all of which are classified as non-current in our Consolidated Balance Sheets, were comprised of the following (in thousands): June 30, 2018 2017 2016 Deferred tax assets: Other payroll and benefits $580 $681 $1,482 Inventory reserves 266 195 268 Self-insurance reserves 3,389 4,517 4,611 Share-based compensation 2,104 3,564 3,807 Other current assets 2,441 2,829 2,250 Deferred rent 5,705 5,068 2,266 Net operating loss and tax credits 26,040 25,610 18,497 Other noncurrent assets — 537 1,121 Total gross deferred tax assets $40,525 $43,001 $34,302 Deferred tax liabilities: Inventory costs $5,518 $9,468 $8,199 Prepaid supplies 1,582 2,392 2,506 Property and equipment 9,215 4,033 7,616 Total gross deferred tax liabilities 16,315 15,893 18,321 Valuation allowance (23,688) (27,150) (15,992)Net deferred tax asset/(liability) $522 $(42) $(11) During fiscal 2013, we established a valuation allowance related to deferred tax assets. In assessing whether a deferred tax asset would be realized, weconsidered whether it is more likely than not that some portion or all of the deferred tax assets would not be realized. We considered the reversal of existingtaxable temporary differences, projected future taxable income, tax planning strategies and loss carry back potential in making this assessment. In evaluatingthe likelihood that sufficient future earnings would be available in the near future to realize the deferred tax assets, we considered our cumulative losses overthree years including the then-current year. Based on the foregoing, we concluded that a valuation allowance was necessary, and based on our results sincefiscal 2013, we have continued to conclude that a full valuation allowance is necessary. In fiscal 2018, as a result of the TCJA enactment, the federalcomponent of deferred taxes was remeasured at 21%, the tax rate at which they are expected to turn in future years. The valuation allowance offsetting thesedeferred taxes was reduced accordingly. The valuation allowance previously recorded against our AMT credits of $571,000 was removed to reflect that theywill be refunded pursuant to the TCJA beginning in our fiscal year 2020. Further, federal deferred tax liabilities related to the amortization of trademarks fortax purposes, which are not considered for purposes of the valuation allowance computation, were reduced by $19,000 during the year, resulting in a taxbenefit of that amount. In fiscal 2018, the deferred tax asset valuation allowance decreased $3.5 million. At the end of fiscal 2018, net deferred tax assetstotaled $24.2 million, with an offsetting valuation allowance of $23.7 million.We have federal net operating loss carryforwards of $89.3 million. These losses can only be carried forward and utilized to offset future taxableincome, but will expire in fiscal years 2033 through 2038 if not utilized before then. Additionally, we have taxF-14 effected state net operating loss carryforwards of $4.8 million, which will expire throughout the years 2018 through 2038, if not utilized before then.Accounting for Uncertainty in Income Taxes. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and variousstate jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for yearsbefore fiscal 2014. The Internal Revenue Service has concluded an examination of the Company for years ending on or before June 30, 2010.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): Balance at June 30, 2015 $147 Additions for tax positions of prior years — Reductions for lapse of statute of limitations — Balance at June 30, 2016 $147 Additions for tax positions of prior years — Reductions for lapse of statute of limitations — Balance at June 30, 2017 $147 Additions for tax positions of prior years — Reductions for lapse of statute of limitations — Balance at June 30, 2018 $147 The balance of taxes, interest, and penalties at June 30, 2018, that if recognized, would affect the effective tax rate is $294,000. We classify andrecognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the fiscal years ended June 30, 2018, 2017 and2016, we recognized $7,000, $9,000, and $16,000 in interest, respectively. No interest or penalties were paid in the tax years ended June 30, 2018, 2017 and2016.We do not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease the effective tax rate within 12 monthsof June 30, 2018. (6) SHARE‑BASED INCENTIVE PLANSStock Option Awards. We have established the Tuesday Morning Corporation 2008 Long-Term Equity Incentive Plan (the “2008 Plan”) and theTuesday 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 longerbe granted under the 2008 Plan, but equity awards granted under the 2008 Plan are still outstanding. On September 16, 2014, our Board of Directors adopted the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (the “2014 Plan”), and the2014 Plan was approved by our stockholders at the 2014 annual meeting of stockholders on November 12, 2014. The 2014 Plan became effective onSeptember 16, 2014, and the maximum number of shares reserved for issuance under the 2014 Plan, as amended, is 6.1 million shares plus any awards underthe 2008 Plan (i) that were outstanding on September 16, 2014, and, on or after September 16, 2014, are forfeited, expired or are cancelled, and (ii) any sharessubject to such awards that, on or after September 16, 2014 are used to satisfy the exercise price or tax withholding obligations with respect to such awards.Our Board of Directors also approved the termination of the Company’s ability to grant new awards under the 2008 Plan, effective upon the date ofstockholder approval of the 2014 Plan, and no new awards will be made under the 2008 Plan. On September 22, 2016, our Board of Directors adoptedamendments to the 2014 Plan, which were approved at the 2016 Annual Meeting of Stockholders, to increase the number of shares of our common stockavailable for issuance under the 2014 Plan and to make additional amendments to the 2014 Plan to, among other things, remove liberal share recycling,reduce the number of shares exempt from minimum vesting, and eliminate discretion to accelerate vesting upon a change in control. On August 22, 2017, ourBoard of Directors adopted a Second Amendment to the 2014 Plan that modified the minimum vesting provisions as they apply to non-employee directors. The 2014 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restrictedstock units, performance awards, dividend equivalent rights, and other awards which may be granted singly, in combination, or in tandem, and which may bepaid in cash, shares of common stock, or a combination of cash and shares of common stock. Under the 2014 Plan, stock options may not vest earlier thanone year after the date of grant. “Full Value Awards” (i.e., restricted stock or restricted stock units) that constitute performance awards must vest no earlierthan one year after the date of grant and Full Value Awards that constituted “Tenure Awards” (i.e., awards that vest upon passage of time) may not vest earlierthan over the three-year period commencing on the date of grant (other than awards to non-employee directors which may not vest earlierF-15 than one year from the date of grant). The Compensation Committee of our Board of Directors may grant only stock options or Full Value Awards withvesting conditions that are more favorable than the foregoing restrictions with respect to up to 5% of the shares of common stock authorized under the 2014Plan (referred to in the 2014 Plan as “exempt shares”). On November 16, 2016, our stockholders approved amendments to the 2014 Plan to increase the number of shares of the Company’s common stockavailable for issuance under the 2014 Plan by 2,500,000 shares and to make additional amendments to the 2014 Plan, including (i) reducing the percentageof shares exempt from the minimum vesting requirements under the 2014 Plan, (ii) adding a clawback policy, (iii) generally eliminating the discretion of theBoard of Directors to accelerate the vesting of outstanding and unvested awards upon a change of control and (iv) providing that certain shares surrendered inpayment of the exercise price of awards or withheld for tax withholding would count against the shares available under the 2014 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 the2008 Plan and the 2014 Plan.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 2008 Plan and the 2014 Plan may have certain performance requirements in addition to service terms. If the performanceconditions are not satisfied, the options are forfeited. The exercise prices of stock options outstanding on June 30, 2018, range between $1.24 per share and$20.91 per share. The 2008 Plan terminated as to new awards as of September 16, 2014. There were 3.1 million shares available for grant under the 2014 Planat June 30, 2018.Following is a summary of transactions relating to the 2008 Plan and 2014 Plan options for the fiscal years ended June 30, 2018, 2017, and 2016(share amounts and aggregate intrinsic value in thousands): Number ofShares Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm (Years) AggregateIntrinsicValue Options Outstanding at June 30, 2015 1,838 $13.37 8.25 $1,384 Granted during year 2,500 6.48 Exercised during the year (5) 1.24 Forfeited or expired during year (1,121) 11.81 Options Outstanding at June 30, 2016 3,212 8.57 7.61 2,111 Granted during year 1,564 6.11 Exercised during the year (6) 1.24 Forfeited or expired during year (1,254) 9.88 Options Outstanding at June 30, 2017 3,516 7.02 7.86 2 Granted during year 621 2.46 Exercised during the year (3) 1.24 Forfeited or expired during year (177) 7.21 Options Outstanding at June 30, 2018 3,957 6.30 7.21 475 Exercisable at June 30, 2018 1,478 $7.93 5.49 $22 The weighted average grant date fair value of stock options granted during the fiscal years ended June 30, 2018, 2017, and 2016, was $2.46 per share,$2.55 per share, and $2.75 per share, respectively. The intrinsic value of vested unexercised options at June 30, 2018 is $22,000.There were options to purchase 3,000, 6,208 and 4,667 shares of our common stock, which were exercised during the fiscal years ended June 30, 2018,2017 and 2016, respectively. The aggregate intrinsic value of stock options exercised was $3,700, $20,100, and $27,000 during the fiscal years endedJune 30, 2018, 2017, and 2016, respectively. At June 30, 2018, we had $6.0 million of total unrecognized share‑based compensation expense related to stockoptions that is expected to be recognized over a weighted average period of 1.9 years.F-16 The following table summarizes information about stock options outstanding at June 30, 2018: Options Outstanding Options Exercisable Range of Exercise Prices NumberOutstanding Weighted AverageRemainingContractual Life(Years) WeightedAverageExercise PricePer Share NumberExercisable WeightedAverageExercise PricePer Share $1.24 - $2.45 632,358 9.16 $2.30 22,928 $2.07 $3.12 - $5.59 238,098 7.28 4.47 104,283 4.81 $5.64 - $5.64 690,414 7.59 5.64 197,454 5.64 $5.88 - $5.89 305,508 7.35 5.89 10,000 5.88 $5.95 - $5.95 462,825 7.03 5.95 462,825 5.95 $6.29 - $6.58 25,948 7.44 6.54 14,641 6.51 $6.71 - $6.71 913,950 8.17 6.71 104,302 6.71 $7.90 - $8.55 397,013 4.01 8.08 290,711 8.14 $10.46 - $19.36 283,597 3.40 15.18 265,580 14.96 $20.91 - $20.91 7,532 6.37 20.91 5,649 20.91 3,957,243 7.21 $6.30 1,478,373 $7.93 Restricted Stock Awards—The 2008 Plan and the 2014 Plan authorize the grant of restricted stock awards to directors, officers, key employees andcertain other key individuals who perform services for us and our subsidiaries. Equity awards may no longer be granted under the 2008 Plan, but restrictedstock awards granted under the 2008 Plan are still outstanding. Restricted stock awards are not transferable, but bear certain rights of common stockownership including voting and dividend rights. Shares are valued at the fair market value of our common stock at the date of award. Shares may be subjectto certain performance requirements. If the performance requirements are not met, the restricted shares are forfeited. Under the 2008 Plan and the 2014 Plan, asof June 30, 2018, there were 1,433,269 shares of restricted stock outstanding with award vesting periods, both performance-based and service-based, of one tofour years and a weighted average grant date fair value of $3.95 per share.The following table summarizes information about restricted stock awards outstanding for the fiscal years ended June 30, 2018, 2017, and 2016 (shareamounts in thousands): Number ofShares Weighted-AverageFair Value atDate of Grant Outstanding at June 30, 2015 432 $16.95 Granted during year 869 6.98 Vested during year (175) 12.52 Forfeited during year (364) 12.65 Outstanding at June 30, 2016 762 $8.65 Granted during year 941 5.80 Vested during year (230) 8.38 Forfeited during year (383) 7.73 Outstanding at June 30, 2017 1,090 $6.57 Granted during year 981 2.44 Vested during year (398) 6.81 Forfeited during year (240) 4.94 Outstanding at June 30, 2018 1,433 $3.95 Performance-Based Restricted Stock Awards and Performance-Based Stock Option Awards. As of June 30, 2018, there were 1,643,918 unvestedperformance-based restricted stock awards and performance-based stock options outstanding under the 2014 Plan, which are included in the respective stockoption and restricted stock tables above. F-17 Share-based compensation costs: We recognized share‑based compensation costs as follows (in thousands): Fiscal Years Ended June 30, 2018 2017 2016 Amortization of share-based compensation during the period $3,349 $4,114 $3,403 Amounts capitalized in inventory (1,280) (1,497) (1,724)Amount recognized and charged to cost of sales 1,364 1,567 1,436 Amounts charged against income for the period before tax $3,433 $4,184 $3,115 (7) OPERATING LEASESWe lease substantially all store locations under operating leases. Our existing store leases generally are for an initial term of five to ten years with twofive‑year renewal options and, in limited circumstances, our store leases involve a tenant allowance for leasehold improvements. We record rent expenseratably over the life of the lease beginning with the date we take possession of or have the right to use the premises, and if our leases provide for a tenantallowance, we record the landlord reimbursement as a liability and ratably amortize the liability as a reduction to rent expense over the lease term beginningwith the date we take possession of or control the physical access to the premises. Leases for new stores also typically allow us the ability to terminate a leaseafter 24 to 60 months if the store does not deliver sales expectations.In fiscal 2015, we executed a lease for approximately 0.6 million square feet related to our new, additional distribution center in Phoenix, Arizona,which started operations in the fourth quarter of fiscal year 2016.The future minimum rental payments for this lease are included in the table below.Future minimum rental payments under our operating leases are as follows (in thousands): Fiscal Years Ending June 30, 2019 $92,104 2020 77,523 2021 65,594 2022 56,753 2023 50,308 Thereafter 160,817 Total minimum rental payments $503,099 Rent expense for the fiscal years ended June 30, 2018, 2017, and 2016 was $118.3 million, $108.0 million, and $98.3 million, respectively. Rentexpense includes rent for store locations and our distribution centers. Contingent rent based on sales is not material to our financial statements. (8) 401(K) PROFIT SHARING PLANWe have a 401(k) profit sharing plan for the benefit of our full‑time employees who become eligible after one month of service, and for our part-timeemployees who become eligible after both 12 months of service and a minimum of 1,000 hours worked. Under the plan, eligible employees may request us todeduct and contribute from 1% to 75% of their salary to the plan, subject to Internal Revenue Service Regulations. We match each participant’s contributionup to 4% of participant’s compensation. We expensed contributions of $1.4 million, $1.3 million, and $1.2 million for the fiscal years ended June 30, 2018,2017, and 2016, respectively. F-18 (9) EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings/(loss) per common share (in thousands, except per share amounts): Fiscal Year Ended June 30, 2018 2017 2016 Net income/(loss) $(21,938) $(32,542) $3,713 Less: Income to participating securities — — 40 Net income/(loss) attributable to common shares $(21,938) $(32,542) $3,673 Weighted average common shares outstanding—basic 44,282 43,943 43,705 Effect of dilutive stock equivalents — — 31 Weighted average common shares outstanding—dilutive 44,282 43,943 43,736 Net income/(loss) per common share—basic $(0.50) $(0.74) $0.08 Net income/(loss) per common share—diluted $(0.50) $(0.74) $0.08 For the years ended June 30, 2018 and June 30, 2017, all options representing the rights to purchase shares were not included in the diluted loss pershare calculation, because the assumed exercise of such options would have been anti-dilutive. Options representing rights to purchase shares of commonstock of 0.1 million for the year ended June 30, 2016 were not included in the diluted earnings per share calculation because the assumed exercise of suchoptions would have been anti‑dilutive. (10) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)A summary of the unaudited quarterly results is as follows for the years ended June 30, 2018 and 2017 (in thousands, except per share amounts): Quarters Ended Sept. 30, Dec. 31, Mar. 31, June 30, 2017 2017 2018 2018 Net sales $218,756 $333,807 $223,296 $230,473 Gross profit (1) 77,950 105,685 80,303 77,036 Operating income/(loss) (1) (11,994) 8,276 (7,789) (9,443)Net income/(loss) (1) (12,254) 8,692 (8,080) (10,296)Basic income/(loss) per share (2) $(0.28) $0.19 $(0.18) $(0.23)Diluted income/(loss) per share (2) $(0.28) $0.19 $(0.18) $(0.23) Quarters Ended Sept. 30, Dec. 31, Mar. 31, June 30, 2016 2016 2017 2017 Net sales $211,885 $328,137 $203,001 $223,642 Gross profit (1) 77,339 105,982 67,156 70,268 Operating income/(loss) (1) (9,240) 8,767 (14,678) (17,129)Net income/(loss) (1) (8,855) 8,430 (14,796) (17,321)Basic income/(loss) per share (2) $(0.20) $0.19 $(0.34) $(0.39)Diluted income/(loss) per share (2) $(0.20) $0.19 $(0.34) $(0.39) (1)Our results are computed independently for each of the quarters presented. Therefore, the sum of the quarterly amounts presented may not equal thetotal computed for the year due to rounding.(2)Net income/(loss) per share amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly netincome/(loss) per share in fiscal years 2018 and 2017 may not equal the total computed for the year.A significant portion of our net sales and net earnings are realized during the period from October through December while the increase inmerchandise purchases in preparation for this holiday selling season occurs in prior months. F-19 (11) DIVIDEND RESTRICTIONS The Revolving Credit Facility discussed in Note 3 restricts the ability of Tuesday Morning, Inc., the borrower under the Revolving Credit Facility andTuesday Morning’s principal operating subsidiary, to incur additional liens and indebtedness, make investments and dispositions, pay dividends (includingto Tuesday Morning), or enter into certain other transactions, among other restrictions. As a consolidated deficit exists as of June 30, 2018, no retainedearnings are free of limitation on the payment of dividends on that date. At June 30, 2018, restricted net assets of consolidated subsidiaries were $12.1 million. Tuesday Morning Corporation (parent company only) Condensed Balance Sheets June 30, June 30, 2018 2017 ASSETS Current assets: Accounts receivable from subsidiaries $26,529 $24,489 Total current assets 26,529 24,489 Noncurrent assets: Investment in subsidiaries 153,725 174,350 Total noncurrent assets 153,725 174,350 Total Assets $180,254 $198,839 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable to subsidiaries $— $— Total current liabilities — — Noncurrent Liabilities — — Total Liabilities — — Stockholders' equity: Common stock 469 469 Additional paid-in capital 237,957 234,604 Retained deficit (51,360) (29,422)Less: Treasury stock (6,812) (6,812)Total stockholders' equity 180,254 198,839 Total Liabilities and Stockholders' Equity $180,254 $198,839 Tuesday Morning Corporation (parent company only) Condensed Statement of Operations Fiscal Years Ended June 30 2018 2017 2016 Net sales $— $— $— Cost of sales — — — Gross profit — — — Selling, general and administrative expenses — — — Operating income/(loss) — — — Other income/(expense): Interest expense — — — Other income/(expense), net — — — Income/(loss) before taxes — — — Income tax provision — — — Net income/(loss) of subsidiaries (21,938) (32,542) 3,713 Net income/(loss) $(21,938) $(32,542) $3,713 F-20 A.Basis of presentationIn the condensed, parent company-only financial statements, Tuesday Morning Corporation’s investment in subsidiaries is stated at cost plus equityin undistributed earnings of subsidiaries since the date of acquisition. These condensed parent company-only financial statements should be read inconjunction with Tuesday Morning Corporation’s consolidated financial statements. Condensed statements of cash flows were not presented becauseTuesday Morning Corporation had no cash flow activities during fiscal 2018, fiscal 2017, or fiscal 2016. B.Guarantees and RestrictionsAs of June 30, 2018, Tuesday Morning, Inc. had $60.5 million of available credit on the Revolving Credit Facility that provides commitments of up to$180.0 million for revolving loans and letters of credit. Tuesday Morning Corporation, Tuesday Morning Inc. and the subsidiaries of Tuesday Morning, Inc.have guaranteed all obligations under the Revolving Credit Facility. In the event of default under the Revolving Credit Facility, Tuesday MorningCorporation, Tuesday Morning, Inc. and the subsidiaries of Tuesday Morning, Inc. will be directly liable to the debt holders. The Revolving Credit Facilityincludes restrictions on the ability of Tuesday Morning Corporation, Tuesday Morning, Inc. and the subsidiaries of Tuesday Morning, Inc. to incuradditional liens and indebtedness, make investments and dispositions, pay dividends or make other transactions, among other restrictions. Under theRevolving Credit Facility, in order for Tuesday Morning, Inc. to make a dividend to Tuesday Morning Corporation for the payment of a dividend or arepurchase of shares, Tuesday Morning, Inc. must, among other things, maintain availability of 20% of the lesser of the calculated borrowing base or thelenders’ aggregate commitments under the Revolving Credit Facility on a pro forma basis for a specified period prior to and immediately following therestricted payment. F-21 Exhibit 10.24 RESTRICTED STOCK AWARD AGREEMENTTuesday Morning Corporation2014 Long-Term Incentive PlanThis RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) is entered into between Tuesday MorningCorporation, a Delaware corporation (the “Company”), and _________________ [Name] (the “Participant”) effective as of_______________ [Option_Date,’Month DD, YYYY] (the “Date of Grant”), pursuant to the Tuesday Morning Corporation 2014Long-Term Incentive Plan, as amended (the “Plan”), the terms of which are incorporated by reference herein in their entirety.WHEREAS, the Company desires to grant to the Participant the shares of common stock, par value $0.01 per share(“Common Stock”), as an inducement for the Participant’s continued and effective performance of services for the Company as amember of the Board of Directors of the Company (the “Board”), subject to the terms and conditions of this Agreement; andWHEREAS, the Participant desires to have the opportunity to hold the Common Stock subject to the terms and conditionsof this Agreement;NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained herein, and othergood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to belegally bound hereby, agree as follows:1.Grant of Restricted Stock. Effective as of the Date of Grant, the Company shall cause to be issued in theParticipant’s name ________ [ number of Total_Shares_Granted] shares of Common Stock (the “Restricted Stock”). The Companyshall electronically register the Restricted Stock, and any Retained Distributions issued with respect to the Restricted Stock, in theParticipant’s name and note that such shares are Restricted Stock. If certificates evidencing the Restricted Stock, or any RetainedDistributions, are issued to the Participant during the Restricted Period, such certificates shall bear a restrictive legend, substantially asprovided in Section 15.10 of the Plan, to the effect that ownership of such Restricted Stock (and any such Retained Distributions), andthe enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and thisAgreement. The Participant shall have the right to vote the Restricted Stock awarded to the Participant and to receive and retain allregular cash dividends, and to exercise all other rights, powers and privileges of a holder of Common Stock, with respect to suchRestricted Stock, with the exception that (a) the Participant shall not be entitled to delivery of a stock certificate or certificatesrepresenting such Restricted Stock until the Forfeiture Restrictions applicable thereto shall have expired and the Participant requestsdelivery of a certificate as described in Section 6.4(a) of the Plan, (b) the Company shall retain custody of all Retained Distributionsmade or declared with respect to the Restricted Stock (and such Retained Distributions shall be subject to the same restrictions, termsand conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which suchRetained Distributions shall have been made, paid, or declared shall have become vested, and such Retained Distributions shall not  bear interest or be segregated in separate accounts and (c) the Participant may not sell, assign, transfer, pledge, exchange, encumber, ordispose of the Restricted Stock or any Retained Distributions during the Restricted Period. Upon issuance, the certificates for theRestricted Stock shall be delivered to the Secretary of the Company or to such other depository as may be designated by theCommittee as a depository for safekeeping until the forfeiture of such Restricted Stock occurs or the Forfeiture Restrictions lapse,together with stock powers or other written instruments or electronic agreements of assignment, each endorsed in blank, which willpermit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributionswhich shall be forfeited in accordance with the Plan and this Agreement. In accepting the award of Restricted Stock set forth in thisAgreement, the Participant accepts and agrees to be bound by all the terms and conditions of the Plan and this Agreement.2.Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:(a)“Cause” shall mean the occurrence of one of the following events: (i) commission offraud, embezzlement, theft, felony or an act of dishonesty in the course of the Participant’s service to the Company or an Affiliatewhich conduct damaged the Company or an Affiliate, (ii) disclosure of trade secrets of the Company or an Affiliate, or (iii) violation ofthe terms of any non-competition, non-disclosure or similar agreement with respect to the Company or any Affiliate to which theParticipant is a party.(b)“Forfeiture Restrictions” shall mean any prohibitions and restrictions set forth hereinwith respect to the sale or other disposition of Restricted Stock issued to the Participant hereunder and the obligation to forfeit andsurrender such Restricted Stock to the Company.(c)“Good Reason” shall mean a material breach by the Company of this Agreement that isnot cured within thirty (30) days of written notice by the Participant to the Company. The foregoing event shall not constitute GoodReason unless the Participant delivers to the Company a written notice specifying the alleged Good Reason within ninety (90) daysafter the Participant first learns of the existence of the circumstances giving rise to the Good Reason; within thirty (30) days followingdelivery of such notice, the Company has failed to cure the circumstances giving rise to Good Reason; and the Participant resignswithin sixty (60) days after the end of the cure period.(d)“Restricted Period” shall mean the period designated by the Committee during whichRestricted Stock is subject to the Forfeiture Restrictions and may not be sold, assigned, transferred, pledged, or otherwise encumbered.(e)“Retained Distributions” shall mean any securities or other property (other than regularcash dividends) distributed by the Company in respect of the Restricted Stock during any Restricted Period.Capitalized terms not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan.3.Transfer Restrictions. The Restricted Stock granted hereby may not be sold, assigned, pledged,exchanged, hypothecated or otherwise transferred, encumbered or disposed of  (other than by will or the applicable laws of descent and distribution) to the extent then subject to the Forfeiture Restrictions, except asotherwise authorized by the Committee. Any such attempted sale, assignment, pledge, exchange, hypothecation, transfer,encumbrance or disposition in violation of this Agreement shall be void and the Company shall not be bound thereby. Further, theRestricted Stock granted hereby that is no longer subject to Forfeiture Restrictions may not be sold or otherwise disposed of in anymanner that would constitute a violation of any applicable federal or state securities laws. The Participant also agrees (a) that theCompany may refuse to cause the transfer of the Restricted Stock to be registered on the applicable stock transfer records if suchproposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities lawand (b) that the Company may give related instructions to the transfer agent, if any, to stop registration of the transfer of the RestrictedStock. The Restricted Stock is registered with the Securities and Exchange Commission under a Registration Statement on Form S-8. A Prospectus describing the Plan and the Stock is available from the Company.4.Vesting. The Restricted Stock that is granted hereby shall be subject to Forfeiture Restrictions. TheForfeiture Restrictions shall lapse as to the Restricted Stock that is granted hereby in accordance with the provisions of subsections (a)through (d) of this Section 4.(a)Generally. The Forfeiture Restrictions shall lapse as to the Restricted Stock that isgranted hereby as provided in subsection (b), provided that the Participant has not incurred a Termination of Service prior to the dateprovided in subsection (b). If the Participant has incurred a Termination of Service before the date provided in subsection (b) then,except as otherwise specified in subsections (c) or (d) below, the Forfeiture Restrictions then applicable to any of the Restricted Stockshall not lapse and all of the Restricted Stock with respect to which Forfeiture Restrictions have not then lapsed shall be forfeited to theCompany upon such Termination of Service.(b)Vesting Date. The Forfeiture Restrictions shall lapse, and the Restricted Stock will vest,subject to the provisions of subsection (a), with respect to one hundred percent (100%) of the Restricted Stock on the first anniversaryof the Date of Grant.(c)Death or Total and Permanent Disability. Notwithstanding any provisions of Section 4to the contrary, in the event the Participant’s Termination of Service is due to the Participant’s death or Total and Permanent Disabilityprior to the date provided in subsection (b), the Forfeiture Restrictions shall lapse on the date of such Termination of Service due todeath or Total and Permanent Disability.(d)Change in Control. Notwithstanding any provisions of Section 4 to the contrary, in theevent (i) a Change in Control occurs prior to the date of the Participant’s Termination of Service and (ii) the Participant incurs aTermination of Service during the two (2) year period commencing on the date that the Change in Control occurred, either (A) by theCompany without Cause or (B) by the Participant for Good Reason, the Forfeiture Restrictions shall lapse upon the occurrence of suchChange in Control.5.Effect of Lapse of Restrictions. Upon the lapse of the Forfeiture Restrictions with respect to the RestrictedStock granted hereby, if requested by the Participant as described in  Section 6.4(a) of the Plan, the Company shall cause to be delivered to the Participant a stock certificate representing such RestrictedStock, and such Restricted Stock shall be transferable by the Participant (except to the extent that any proposed transfer would, in theopinion of counsel satisfactory to the Company, constitute a violation of applicable securities law).6.Capital Adjustments and Reorganizations. The existence of the Restricted Stock shall not affect in anyway the right or power of the Company or its stockholders to make or authorize any adjustment, recapitalization, reorganization orother change in the Company’s capital structure or its business, engage in any merger or consolidation, issue any debt or equitysecurities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in anyother corporate act or proceeding.7.Section 83(b) Election. The Participant shall not exercise the election permitted under section 83(b) of theCode with respect to the Restricted Stock without the written approval of the Chief Financial Officer of the Company.8.No Fractional Shares. All provisions of this Agreement concern whole shares of Common Stock. If theapplication of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next wholeshare if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.9.Not a Service Agreement. This Agreement is not an employment or service agreement, and no provisionof this Agreement shall be construed or interpreted to create an employment or service relationship between the Participant and theCompany or guarantee the right to remain a member of the Board for any specified term.10.Limit of Liability. Under no circumstances will the Company or an Affiliate be liable for any indirect,incidental, consequential or special damages (including lost profits or taxes) of any form incurred by any person, whether or notforeseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan, this Agreement or theRestricted Stock.11.Legend. The Participant consents to the placing on the certificate for the Restricted Stock of anappropriate legend restricting resale or other transfer of the Restricted Stock except in accordance with the Securities Act of 1933 andall applicable rules thereunder.12.Notices. Any notice, instruction, authorization, request or demand required hereunder shall be in writing,and shall be delivered either by personal delivery, telegram, telex, telecopy or similar facsimile means, by certified or registered mail,return receipt requested, or by courier or delivery service, addressed to the Company at the Company’s principal business officeaddress and to the Participant at the Participant’s residential address as shown in the records of the Company, or at such other addressand number as a party shall have previously designated by written notice given to the other party in the manner hereinabove setforth. Notices shall be deemed given when received, if sent by facsimile means (confirmation of such receipt by confirmed facsimiletransmission being deemed receipt of communications sent by facsimile means); and when delivered (or upon the date of attempteddelivery where delivery is refused), if hand-  delivered, sent by express courier or delivery service, or sent by certified or registered mail, return receipt requested.13.Amendment and Waiver. Except as otherwise provided herein or in the Plan, or as necessary toimplement the provisions of the Plan, this Agreement may be amended, modified or superseded only by written instrument executed,or an electronic agreement agreed to, by the Company and the Participant. Only a written instrument executed and delivered by, or anelectronic agreement agreed to by, the party waiving compliance hereof shall waive any of the terms or conditions of thisAgreement. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized director orofficer of the Company other than the Participant. The failure of any party at any time or times to require performance of anyprovisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or thebreach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver ofany such condition or breach, a waiver of any other condition, or the breach of any other term or condition.14.Governing Law and Severability. The validity, construction and performance of this Agreement shall begoverned by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise referconstruction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of any provision of thisAgreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.15.Successors and Assigns. Subject to the limitations which this Agreement imposes upon the transferabilityof the Restricted Stock granted hereby, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and itssuccessors and assigns, and to the Participant, the Participant’s permitted assigns and upon the Participant’s death, the Participant’sestate and beneficiaries thereof (whether by will or the laws of descent and distribution), executors, administrators, agents, legal andpersonal representatives.16.Miscellaneous. This Agreement is awarded pursuant to and is subject to all of the provisions of the Plan,including amendments to the Plan, if any. 17.Acceptance. The Participant, by his or her acceptance of the Restricted Stock, agrees to be bound by allof the terms and conditions of this Agreement and the Plan, and further consents to and agrees to be bound by the Irrevocable StockPower presented herewith.  IRREVOCABLE STOCK POWERKNOW ALL MEN BY THESE PRESENTS, That For Value Received, the Participant (as defined in the AwardAgreement) has bargained, sold, assigned and transferred and by these presents does bargain, sell, assign and transfer unto TuesdayMorning Corporation, a Delaware corporation (the “Company”), the Restricted Stock transferred pursuant to the RESTRICTEDSTOCK AWARD AGREEMENT dated as of and effective ___________ [Option_Date, Month DD, YYYY], between theCompany and the Participant granting such Restricted Stock to the Participant (the “Award Agreement”); and subject to and inaccordance with the terms of the Award Agreement the Participant does hereby constitute and appoint the Secretary of the Companythe Participant’s true and lawful attorney, IRREVOCABLY, to sell, assign, transfer, hypothecate, pledge and make over all or any partof such Restricted Stock and for that purpose to make and execute all necessary acts of assignment and transfer thereof, and tosubstitute one or more persons with like full power, hereby ratifying and confirming all that said attorney or his or her substitutes shalllawfully do by virtue hereof. Exhibit 10.25NONQUALIFIED STOCK OPTION AWARD AGREEMENTFOR EMPLOYEESTuesday Morning Corporation2014 Long-Term Incentive PlanThis NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is entered into betweenTuesday Morning Corporation, a Delaware corporation (the “Company”), and ________________ (the “Participant”). The Board ofDirectors of the Company has adopted, and the stockholders of the Company have approved, the Tuesday Morning Corporation 2014Long-Term Incentive Plan, as amended (the “Plan”), the terms of which are incorporated by reference herein in their entirety. TheCompany has agreed to grant the Participant this option to purchase shares of common stock of the Company as an inducement for theParticipant’s continued and effective performance of services for the Company. Any term used in this Agreement that is notspecifically defined herein shall have the meaning specified in the Plan.IT IS AGREED:1.Grant of Option. Subject to the terms of the Plan and this Agreement, on _________ (the “Date ofGrant”), the Company granted to the Participant an option (the “Option”) to purchase ____________ shares of the common stock ofthe Company, $.01 par value per share (“Common Stock”), at a price of $______ per share (the “Option Price”), subject to adjustmentas provided in the Plan.2.Type of Option. The Option is a nonqualified stock option which is not intended to be governed bysection 422 of the Code.3.Participant’s Agreement. In accepting the Option, the Participant accepts and agrees to be bound by allthe terms and conditions of the Plan which pertain to nonqualified stock options granted under the Plan.4.Vesting of Option. Subject to the provisions hereof and the provisions of the Plan, the Option will vest andbecome exercisable as follows:(a)Except as otherwise provided in this Section 4, the Option will vest and become exercisable inaccordance with the following schedule:1(i)on ___________, the Option will vest with respect to, and may beexercised for up to, one-quarter (25%) of the shares of Common Stock subject to the Option;(ii)on ___________, the Option will vest with respect to, and may beexercised for up to, one-quarter (25%) of the shares of Common Stock subject to the Option; 1 NTD: Unless granted as “Exempt Shares,” the Option cannot fully vest prior to the first anniversary of the Date of Grant.36012558v1(iii)on ___________, the Option will vest with respect to, and may beexercised for up to, one-quarter (25%) of the shares of Common Stock subject to the Option; and(iv)on ___________, the Option will vest with respect to, and may beexercised for up to, one-quarter (25%) of the shares of Common Stock subject to the Option.To the extent not exercised, installments shall be cumulative and may be exercised in whole or in part.(b)Notwithstanding any provision of this Section 4 to the contrary, in the event of the Participant’sTermination of Service due to the Participant’s death or Total and Permanent Disability before a date provided in subsection (a), thenall of the shares of Common Stock subject to the Option which have not yet vested will vest and become exercisable on the date of theParticipant’s death or Total and Permanent Disability.(c)Notwithstanding any provisions of this Section 4 to the contrary, in the event (i) a Change inControl occurs prior to the date of the Participant’s Termination of Service and (ii) the Participant incurs a Termination of Serviceduring the two (2) year period commencing on the date that the Change in Control occurred, either (A) by the Company without Cause(as defined below) or (B) by the Participant for Good Reason (as defined below), then all of the shares of Common Stock subject tothe Option which have not yet vested will vest and become exercisable on the date of such Change in Control.(d) For purposes of this Agreement, the following terms shall have the meanings indicated below:(i) “Cause” means the occurrence of one of the following events: (A) commission of fraud,embezzlement, theft, felony or an act of dishonesty in the course of the Participant’s employment by the Company or an Affiliatewhich conduct damaged the Company or an Affiliate, (B) disclosure of trade secrets of the Company or an Affiliate, or (C) violation ofthe terms of any non-competition, non-disclosure or similar agreement with respect to the Company or any Affiliate to which theParticipant is a party.(ii) “Good Reason” means (A) a material reduction by the Company of the Participant’s annualcompensation without the Participant’s consent; (B) a material breach by the Company of this Agreement that is not cured within thirty(30) days of written notice by the Participant to the Company; or (C) without the Participant’s consent, the Company relocates itsprincipal executive offices, or requires the Participant to have the Participant’s principal work location change, which results in theParticipant’s principal work location being changed to a location in excess of fifty (50) miles from the location of the Company’sprincipal executive offices as of the date hereof. The foregoing events shall not constitute Good Reason unless the Participant deliversto the Company a written notice specifying the circumstances giving rise to the alleged Good Reason within ninety (90) days after theParticipant first learns of the existence of the circumstances giving rise to Good Reason; within thirty (30) days following delivery ofsuch notice, the Company has failed to cure the circumstances giving rise to Good Reason; and the Participant resigns within sixty (60)days after the end of the cure period. 5.Manner of Exercise. (a)To the extent that the Option is vested and exercisable in accordance with Section 4 ofthis Agreement, the Option may be exercised by the Participant at any time, or from time to time, in whole or in part, on or prior to thetermination of the Option (as set forth in Sections 4 and 6 of this Agreement) upon payment of the Option Price for the shares to beacquired in accordance with the terms and conditions of this Agreement and the Plan.(b)If the Participant is entitled to exercise the vested and exercisable portion of the Option,and wishes to do so, in whole or part, the Participant shall (i) deliver to the Company a fully completed notice of exercise, in a form asmay hereinafter be designated by the Company in its sole discretion, specifying the exercise date (which shall be at least three (3) daysafter giving such notice unless an earlier time is mutually agreed upon) and the number of shares of Common Stock to be purchasedpursuant to such exercise and (ii) remit to the Company in a form satisfactory to the Company, in its sole discretion, the Option Pricefor the shares of Common Stock to be acquired on exercise of the Option, plus an amount sufficient to satisfy any withholding taxobligations of the Company that arise in connection with such exercise (as determined by the Company) in accordance with theprovisions of Section 7 of this Agreement and Section 15.7 of the Plan.(c)The Company’s obligation to deliver shares of Common Stock to the Participant underthis Agreement is subject to and conditioned upon the Participant satisfying all tax obligations associated with the Participant’s receipt,holding and exercise of the Option. Unless otherwise approved by the Committee, all such tax obligations shall be payable inaccordance with the provisions of Section 7 of this Agreement and Section 15.7 of the Plan. The Company and its Subsidiaries, asapplicable, shall be entitled to deduct from any compensation otherwise due to the Participant the amount necessary to satisfy all suchtaxes.(d)Upon full payment of the Option Price and satisfaction of all applicable tax obligations,and subject to the applicable terms and conditions of the Plan and the terms and conditions of this Agreement, the Company shallelectronically register the shares of Common Stock purchased hereunder in the Participant’s name (or the name of the personexercising the Option in the event of the Participant’s death ) but shall not issue certificates to the Participant (or the person exercisingthe Option in the event of the Participant’s death) unless the Participant (or such other person) requests delivery of a certificate asdescribed in Section 8.3(b) of the Plan.6.Termination of Option. Except as otherwise provided in Section 4 of this Agreement, unless the Optionterminates earlier as provided in this Section 6, the Option shall terminate and become null and void on the tenth anniversary of theDate of Grant (the “Option General Expiration Date”). Except as otherwise provided in Section 4 of this Agreement, if theParticipant incurs a Termination of Service for any reason, the Option shall not continue to vest after such Termination of Service.(a)If the Participant incurs a Termination of Service due to the Participant’s death or Totaland Permanent Disability, the Option shall remain exercisable for, and shall otherwise terminate and become null and void at the endof, a period of one year from the date of such death or Total and Permanent Disability, but in no event after the Option General Expiration Date. (b)If the Participant incurs a Termination of Service upon the occurrence of theParticipant’s Retirement, (i) the portion of the Option that was exercisable on the date of Retirement shall remain exercisable for, andshall otherwise terminate and become null and void at the end of, a period of up to three years after the date of Retirement, but in noevent after (x) the Option General Expiration Date or (y) the day before the date the Participant begins engaging in Competition (asthat term is defined in Section 22) during such three-year period, unless he or she receives written consent to do so from the Board orthe Committee, and (ii) the portion of the Option that was not exercisable on the date of Retirement shall be forfeited and become nulland void immediately upon such Retirement. (c)If the Participant incurs a Termination of Service due to Cause, all of the Option shall beforfeited and become null and void immediately upon such Termination of Service, whether or not then exercisable. (d)If the Participant incurs a Termination of Service for any reason other than death, Totaland Permanent Disability, Retirement or Cause, (i) the portion of the Option that was exercisable on the date of such Termination ofService shall remain exercisable for, and shall otherwise terminate and become null and void at the end of, a period of up to 90-daysafter the date of such Termination of Service, but in no event after (x) the Option General Expiration Date or (y) the day before thedate the Participant begins engaging in Competition during such 90-day period, unless he or she receives written consent to do so fromthe Board or the Committee, and (ii) the portion of the Option that was not exercisable on the date of such Termination of Service shallbe forfeited and become null and void immediately upon such Termination of Service. In the event the Participant has entered into anemployment contract with the Company, the termination provisions of the employment contract will supersede the terms stated inSection 6(d) herein.(e)Upon the death of the Participant prior to the expiration of the Option, the Participant’sexecutors, administrators or any person or persons to whom the Option may be transferred by will or by the laws of descent anddistribution, shall have the right, at any time prior to the termination of the Option, to exercise the Option with respect to the number ofshares of Common Stock that the Participant would have been entitled to exercise if he or she were still alive.(f)Notwithstanding anything to the contrary contained herein, in the event the Participantfails to comply with the confidentiality and non-solicitation provisions of Exhibit A, or the non-solicitation and/or confidentialityprovisions contained in any written agreement by and between the Participant and the Company, then all of the Option shall beforfeited and become null and void immediately upon such Termination of Service, whether or not then exercisable, and thisAgreement (other than the provisions of this subsection (f) and the provisions of Exhibit A) will be terminated on the date of suchviolation.7.Tax Withholding. The Company or, if applicable, any Subsidiary (for purposes of this Section 7, the term“Company” shall be deemed to include any applicable Subsidiary), shall be entitled to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to bewithheld with respect the receipt of the Option, this Agreement, the vesting of the Option or the exercise of the Option. Alternatively,the Company may require the Participant (or other person validly exercising the Option) to pay such sums for taxes directly to theCompany in cash or by check within one (1) day after the date of vesting or exercise of the Option, as applicable. Such payments shallbe required to be made when requested by the Company and may be required to be made prior to the delivery of any certificaterepresenting shares of Common Stock. Such payment may be made by (a) the delivery of cash to the Company in an amount thatequals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligations of the Company;(b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company ofshares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise,which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under(c) below) the required tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’swithholding of a number of shares to be delivered upon the exercise of the Option, which shares so withheld have an aggregate FairMarket Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c).8.Capital Adjustments and Reorganizations. The existence of the Option shall not affect in any way theright or power of the Company or its stockholders to make or authorize any adjustment, recapitalization, reorganization or other changein the Company’s capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolveor liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate actor proceeding.9.Employment Relationship. For purposes of this Agreement, the Participant shall be considered to be in theemployment of the Company as long as the Participant has an employment relationship with the Company. The Committee shalldetermine any questions as to whether and when there has been a Termination of Service, and the cause of such Termination ofService, under the Plan, and the Committee’s determination shall be final and binding on all persons.10.No Fractional Shares. All provisions of this Agreement concern whole shares of Common Stock. If theapplication of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next wholeshare if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.11.Limit of Liability. Under no circumstances will the Company or an Affiliate be liable for any indirect,incidental, consequential or special damages (including lost profits or taxes) of any form incurred by any person, whether or notforeseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan, this Agreement or theOption.12.Not an Employment Agreement. This Agreement is not an employment agreement, and no provision ofthis Agreement shall be construed or interpreted to create an employment relationship between the Participant and the Company, itsSubsidiaries or any of its Affiliates or guarantee the right to remain employed by the Company, its Subsidiaries or any of its Affiliates for any specified term.13.No Rights As Stockholder. The Participant shall not have any rights as a stockholder with respect to anyshares of Common Stock covered by the Option until the date of the registration or issuance of such shares following the Participant’sexercise of the Option pursuant to its terms and conditions and payment of all amounts for and with respect to the shares of CommonStock. No adjustment shall be made for dividends or other rights for which the record date is prior to the date a certificate orcertificates are issued for such shares or an uncertificated book-entry representing such shares is made.14.Legend. The Participant consents to the placing on the certificate for any shares covered by the Option ofan appropriate legend restricting resale or other transfer of such shares except in accordance with the Securities Act of 1933 and allapplicable rules thereunder.15.Notices. Any notice, instruction, authorization, request, demand or other communications requiredhereunder shall be in writing, and shall be delivered either by personal delivery, telegram, telex, telecopy or similar facsimile means, bycertified or registered mail, return receipt requested, or by courier or delivery service, addressed to the Company at the Company’sprincipal business office address to the attention of the Vice President, Tax and to the Participant at the Participant’s residential addressas it appears on the books and records of the Company, or at such other address and number as a party shall have previouslydesignated by written notice given to the other party in the manner hereinabove set forth. Notices shall be deemed given whenreceived, if sent by facsimile means (confirmation of such receipt by confirmed facsimile transmission being deemed receipt ofcommunications sent by facsimile means); and when delivered (or upon the date of attempted delivery where delivery is refused), ifhand-delivered, sent by express courier or delivery service, or sent by certified or registered mail, return receipt requested.16.Amendment and Waiver. Except as otherwise provided herein or in the Plan, or as necessary toimplement the provisions of the Plan, this Agreement may be amended, modified or superseded only by written instrument executed,or an electronic agreement agreed to, by the Company and the Participant. Only a written instrument executed and delivered by, or anelectronic agreement agreed to by, the party waiving compliance hereof shall waive any of the terms or conditions of thisAgreement. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized director orofficer of the Company other than the Participant. The failure of any party at any time or times to require performance of anyprovisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or thebreach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver ofany such condition or breach, a waiver of any condition, or the breach of any other term of condition.17.Dispute Resolution. In the event of any difference of opinion concerning the meaning or effect of thePlan or this Agreement, such difference shall be resolved by the Committee. 18.Governing Law and Severability. The validity, construction and performance of this Agreement shall begoverned by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise referconstruction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of any provision of thisAgreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.19.Transfer Restrictions. The shares of Common Stock subject to the Option granted hereby may not besold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. TheParticipant also agrees (a) that the Company may refuse to cause the transfer of shares of Common Stock subject to the Option to beregistered on the applicable stock transfer records if such proposed transfer would, in the opinion of counsel satisfactory to theCompany, constitute a violation of any applicable securities law and (b) that the Company may give related instructions to the transferagent, if any, to stop registration of the transfer of the shares of Common Stock subject to the Option.20.Successors and Assigns. This Agreement shall, except as herein stated to the contrary, inure to thebenefit of and bind the legal representatives, successors and assigns of the parties hereto.21.Option Transfer Prohibitions. Except as otherwise authorized by the Committee, the Option granted tothe Participant under this Agreement shall not be transferable or assignable by the Participant other than by will or the laws of descentand distribution, and shall be exercisable during the Participant’s lifetime only by the Participant.22.Definition. Unless the context reasonably requires a broader, narrower or different meaning,"Competition" means the Participant engaging in, or otherwise directly or indirectly being employed by or acting as a consultant orlender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting theParticipant’s name to be used in connection with the activities of any other business or organization which competes, directly orindirectly, with the business of the Company as the same shall be constituted at any time during the period the Participant wasemployed by or affiliated with the Company.23.Acceptance. The Participant, by his or her acceptance of the Option, agrees to be bound by all of theterms and conditions of this Agreement, including, without limitation, the provisions of Exhibit A, and the Plan.24.Disclaimer of Reliance. Except for the specific representations expressly made by the Company in thisAgreement and Exhibit A, the Participant specifically disclaims that the Participant is relying upon or has relied upon anycommunications, promises, statement, inducements or representation(s) that may have been made, oral or written regarding the subjectmatter of this Agreement. The Participant represents that the Participant relied solely and only on the Participant’s own judgment inmaking the decision to enter into this Agreement. EXHIBIT A 1.Confidential Information, the Participant’s Non-Disclosure Agreement and Work Product Ownership. (a)Confidential Information. During the Participant’s employment with the Company, the Company shall providethe Participant otherwise prohibited access to certain of its Confidential Information which is not known to theCompany’s competitors or within the Company’s industry generally, which was developed by the Company overa long period of time and/or at its substantial expense, and which is of great competitive value to theCompany. For purposes of this Agreement, “Confidential Information” includes all trade secrets and confidentialand proprietary information of the Company, including, but not limited to, the following: all documents orinformation, in whatever form or medium, concerning or relating to the Company’s operations; procedures;computer systems; customer information; methods of doing business; merchandise; marketing plans and methods;financial and accounting information; policies and practices; product information and strategy; project andprospect locations and leads; developmental or experimental work; research; development; know-how; technicaldata; designs; plans for research or future products; improvements; discoveries; database schemas or tables;development tools or techniques; finances; business plans; sales plans and strategies; budgets; pricing and pricingstrategies and techniques; costs; customer and client lists and profiles; customer and client nonpublic personalinformation; supplier lists; business records; audits; management methods and information; reports,recommendations and conclusions; business practices; strategies; training manuals; vendors; suppliers; contractualrelationships; and other business information disclosed or made available to the Participant by the Company, eitherdirectly or indirectly, in writing, orally, or by drawings or observation, that is not known to the public or any of theCompany’s competitors or within the Company’s industry generally, which was developed by the Company at itsexpense, and which is of value to the Company. Confidential Information prepared or compiled by the Participantand/or the Company or furnished to the Participant during the Participant’s employment with the Company shallbe the sole and exclusive property of the Company, and none of such Confidential Information or copies thereof,shall be retained by the Participant. The Participant acknowledges that the Company does not voluntarily discloseConfidential Information, but rather takes precautions to prevent dissemination of Confidential Informationbeyond those employees such as the Participant entrusted with such information. The Participant furtheracknowledges that the Confidential Information: (i) is entrusted to the Participant because of the Participant’sposition with the Company; and (ii) is of such value and nature as to make it reasonable and necessary for theParticipant to protect and preserve the confidentiality and secrecy of the Confidential Information. The Participantacknowledges and agrees that the Confidential Information is a valuable, special, and a unique asset of theCompany, the disclosure of which could cause substantial injury and loss of profits and goodwill to theCompany. While the Participant may not disclose any such Confidential Information, the Participant has the rightto discuss wages, benefits or other terms  and conditions of employment. Nothing in this Agreement, including the definition of “ConfidentialInformation” above and the nondisclosure requirements in Section 1(b) is intended to restrict the Participant’sright to have such discussions. (b)Non-Disclosure. (i)The Participant shall hold all Confidential Information in strict confidence. The Participant shall not,during the period of the Participant’s employment or at any time thereafter, disclose to anyone, orpublish, use for any purpose, exploit, or allow or assist another person to use, disclose or exploit, exceptfor the benefit of the Company, without prior written authorization, any Confidential Information or partthereof, except as permitted: (1) in the ordinary course of the Company’s business or the Participant’swork for the Company; or (2) by law. The Participant shall use all reasonable precautions to assure thatall Confidential Information is properly protected and kept from unauthorized persons. Further, theParticipant shall not directly or indirectly, use the Company’s Confidential Information or informationregarding the names, contact information, skills and compensation of employees and contractors of theCompany to: (1) call upon, solicit business from, attempt to conduct business with, conduct businesswith, interfere with or divert business away from any customer, client, vendor or supplier of theCompany with whom or which the Company conducted business within the eighteen (18) months priorto the Participant’s termination from employment with the Company; and/or (2) recruit, solicit, hire orattempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by or associatedwith the Company. The Participant agrees that the Participant shall take all steps necessary to safeguardall Confidential Information and prevent its wrongful use, disclosure, or dissemination of any otherperson or entity. The Participant further agrees that in the event the Participant is subpoenaed, servedwith any legal process or notice or otherwise requested to produce or divulge, directly or indirectly, anyConfidential Information by any entity, agency, or person in any formal or informal proceedingincluding, but not limited to, any interview, deposition, administrative or judicial hearing and/or trial,and upon the Participant’s receipt of such subpoena, process, notice or request, the Company requeststhat the Participant notify and deliver via overnight delivery service a copy of the subpoena, process,notice or other request to: the Company’s General Counsel at 6250 LBJ Freeway, Dallas, Texas 75240. (ii)The Participant shall immediately notify the Company’s General Counsel if the Participant learns of orsuspects any unauthorized disclosure of Confidential Information concerning the Company. (iii)Subject to Section 1(b)(iv), the Participant agrees that the Participant shall not use or disclose anyconfidential or trade secret information belonging to any former employer or third party, and theParticipant shall not bring onto  the premises of the Company or onto any the Company property any confidential or trade secretinformation belonging to any former employer or third party without such third parties’ consent. (iv)During the Participant’s employment, the Company will receive from third parties their confidentialand/or proprietary information, subject to a duty on the Company’s part to maintain the confidentialityof and to use such information only for certain limited purposes. The Participant agrees to hold all suchconfidential or proprietary information in the strictest confidence and not to disclose it to any person ororganization or to use it except as necessary in the course of the Participant’s employment with theCompany and in accordance with the Company’s agreement with such third party. (c)Return of the Company Property. Upon the termination of the Participant’s employment for any reason, theParticipant shall immediately return and deliver to the Company any and all property, including, withoutlimitation, Confidential Information, software, devices, data, reports, proposals, lists, correspondence, materials,equipment, computers, hard drives, papers, books, records, documents, memoranda, manuals, e-mail, electronic ormagnetic recordings or data, including all copies thereof, books of account, drawings, prints, plans, and the likewhich belong to the Company or which relate to the Company’s business and which are in the Participant’spossession, custody or control, whether prepared by the Participant or others. If at any time after termination ofthe Participant’s employment, for any reason, the Participant determines that the Participant has any ConfidentialInformation in the Participant’s possession or control, the Participant shall immediately return to the Company allsuch Confidential Information in the Participant’s possession or control, including all copies and portionsthereof. Further, the Participant shall not retain any property, including, without limitation, ConfidentialInformation, data, information, or documents, belonging to the Company or any copies thereof (in electronic orhard copy format). 2.Non-Solicitation. In Section 1, the Company promised to provide the Participant certain Confidential Information. TheParticipant recognizes and agrees that: (i) the Company has devoted a considerable amount of time, effort, and expense todevelop its Confidential Information and business goodwill; (ii) the Company’s Confidential Information and businessgoodwill are valuable assets to the Company; and (iii) any unauthorized use or disclosure of the Confidential Informationwould cause irreparable harm to the Company for which there is no adequate remedy at law, including damage to theCompany’s business goodwill. To protect the Confidential Information and business goodwill of the Company, theParticipant agrees to the following restrictive covenants. (a)Non-Solicitation. The Participant agrees that, as part of the Participant’s employment or association with theCompany, the Participant will become familiar with the salary, pay scale, capabilities, experiences, skill anddesires of the Company’s employees and consultants. For these reasons, the Participant agrees that to protect theCompany’s Confidential Information, legitimate business  interests, and business goodwill, it is necessary to enter into the following restrictive covenant. The Participantagrees that, during the Participant’s employment and for a period of twelve (12) months following the date onwhich the Participant’s employment with the Company terminates for any reason (“Restrictive CovenantPeriod”), the Participant, whether directly or indirectly, shall not recruit, solicit, hire or attempt to recruit, solicit, orhire, directly or by assisting others, any persons employed by or associated with the Company, nor shall theParticipant contact or communicate with any such persons for the purpose of inducing such persons to terminatetheir employment or association with the Company. For purposes of this paragraph, the “persons” covered by thisprohibition include current employees and persons who were employed by the Company within twelve (12)months of the time of the attempted recruiting, solicitation, or hiring. (b)Remedies. The Participant acknowledges that the restrictions contained in Section 1 and Section 2, in view of thenature of the Company’s business, are reasonable and necessary to protect their legitimate business interests,business goodwill and reputation, and that any violation of these restrictions would result in irreparable injury andcontinuing damage to the Company, and that money damages would not be a sufficient remedy to the Companyfor any such breach or threatened breach. Therefore, the Participant agrees that the Company shall be entitled to atemporary restraining order and injunctive relief restraining the Participant from the commission of any breach orthreatened breach of Section 1 or Section 2, without the necessity of establishing irreparable harm or the posting ofa bond, and to recover from the Participant damages incurred by the Company as a result of the breach, as well asthe Company’s attorneys’ fees, costs and expenses related to any breach or threatened breach of this Agreementand enforcement of this Agreement. Nothing contained in this Agreement shall be construed as prohibiting theCompany from pursuing any other remedies available to it for any breach or threatened breach, including, withoutlimitation, the recovery of money damages, attorneys’ fees, and costs. The existence of any claim or cause ofaction by the Participant against the Company, whether predicated on this Agreement or otherwise, shall notconstitute a defense to the enforcement by the Company of the restrictive covenants contained in Section 1 orSection 2, or preclude injunctive relief. (c)Tolling. If the Participant violates any of the restrictions contained in this Section 2, the Restrictive CovenantPeriod shall be suspended and shall not run in favor of the Participant until such time that the Participant cures theviolation to the satisfaction of the Company; the period of time in which the Participant is in breach shall be addedto the Restrictive Covenant Period. (d)Notice. If the Participant, in the future, seeks or is offered employment, or any other position or capacity withanother company or entity, the Participant agrees to inform each new employer or entity, before acceptingemployment, of the existence of the restrictions in Section 1 and Section 2. The Company shall be entitled toadvise such person or subsequent employer of the provisions of Section 1 and  Section 2 and to otherwise deal with such person to ensure that the provisions of Section 1 and Section 2 areenforced and duly discharged.  Exhibit 10.26 RESTRICTED STOCK AWARD AGREEMENT Tuesday Morning Corporation2014 Long-Term Incentive PlanThis RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) is entered into between Tuesday MorningCorporation, a Delaware corporation (the “Company”), and _______________ (the “Participant”) effective as of ________________(the “Date of Grant”), pursuant to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, as amended (the “Plan”), theterms of which are incorporated by reference herein in their entirety. WHEREAS, the Company desires to grant to the Participant the shares of common stock, par value $0.01 per share(“Common Stock”), as an inducement for the Participant’s continued and effective performance of services for the Company, subjectto the terms and conditions of this Agreement; andWHEREAS, the Participant desires to have the opportunity to hold the Common Stock subject to the terms and conditionsof this Agreement;NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained herein, and othergood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to belegally bound hereby, agree as follows:1.Grant of Restricted Stock. Effective as of the Date of Grant, the Company shall cause to be issued in the Participant’s name___________ shares of Common Stock (the “Restricted Stock”). The Company shall electronically register the RestrictedStock, and any Retained Distributions issued with respect to the Restricted Stock, in the Participant’s name and note thatsuch shares are Restricted Stock. If certificates evidencing the Restricted Stock, or any Retained Distributions, are issued tothe Participant during the Restricted Period, such certificates shall bear a restrictive legend, substantially as provided inSection 15.10 of the Plan, to the effect that ownership of such Restricted Stock (and any such Retained Distributions), andthe enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan andthis Agreement. The Participant shall have the right to vote the Restricted Stock awarded to the Participant and to receiveand retain all regular cash dividends, and to exercise all other rights, powers and privileges of a holder of Common Stock,with respect to such Restricted Stock, with the exception that (a) the Participant shall not be entitled to delivery of a stockcertificate or certificates representing such Restricted Stock until the Forfeiture Restrictions applicable thereto shall haveexpired and the Participant requests delivery of a certificate as described in Section 6.4(a) of the Plan, (b) the Company shallretain custody of all Retained Distributions made or declared with respect to the Restricted Stock (and such RetainedDistributions shall be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) untilsuch time, if ever, as the Restricted Stock with  respect to which such Retained Distributions shall have been made, paid, or declared shall have become vested, and suchRetained Distributions shall not bear interest or be segregated in separate accounts and (c) the Participant may not sell,assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or any Retained Distributions during theRestricted Period. Upon issuance, the certificates for the Restricted Stock shall be delivered to the Secretary of the Companyor to such other depository as may be designated by the Committee as a depository for safekeeping until the forfeiture ofsuch Restricted Stock occurs or the Forfeiture Restrictions lapse, together with stock powers or other written instruments orelectronic agreements of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portionof the Restricted Stock and any securities constituting Retained Distributions which shall be forfeited in accordance with thePlan and this Agreement. In accepting the award of Restricted Stock set forth in this Agreement, the Participant accepts andagrees to be bound by all the terms and conditions of the Plan and this Agreement.2.Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (a)“Cause” shall mean the occurrence of one of the following events: (i) commission of fraud, embezzlement, theft,felony or an act of dishonesty in the course of the Participant’s employment by the Company or an Affiliate whichconduct damaged the Company or an Affiliate, (ii) disclosure of trade secrets of the Company or an Affiliate, or(iii) violation of the terms of any non-competition, non-disclosure or similar agreement with respect to theCompany or any Affiliate to which the Participant is a party. (b)“Forfeiture Restrictions” shall mean any prohibitions and restrictions set forth herein with respect to the sale orother disposition of Restricted Stock issued to the Participant hereunder and the obligation to forfeit and surrendersuch Restricted Stock to the Company. (c)“Good Reason” shall mean (i) a material reduction by the Company of the Participant’s annual compensationwithout the Participant’s consent; (ii) a material breach by the Company of this Agreement that is not cured withinthirty (30) days of written notice by the Participant to the Company; or (iii) without the Participant’s consent, theCompany relocates its principal executive offices, or requires the Participant to have the Participant’s principalwork location change, which results in the Participant’s principal work location being changed to a location inexcess of fifty (50) miles from the location of the Company’s principal executive offices as of the date hereof. Theforegoing events shall not constitute Good Reason unless the Participant delivers to the Company a written noticespecifying the circumstances giving rise to the alleged Good Reason within ninety (90) days after the Participantfirst learns of the existence of the circumstances giving rise to Good Reason; within thirty (30) days followingdelivery of such notice, the Company has failed to cure the circumstances giving rise to Good Reason; and theParticipant resigns within sixty (60) days after the end of the cure period.  (d)“Restricted Period” shall mean the period designated by the Committee during which Restricted Stock is subjectto the Forfeiture Restrictions and may not be sold, assigned, transferred, pledged, or otherwise encumbered. (e)“Retained Distributions” shall mean any securities or other property (other than regular cash dividends)distributed by the Company in respect of the Restricted Stock during any Restricted Period.Capitalized terms not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan.3.Transfer Restrictions. Except as otherwise authorized by the Committee, the Restricted Stock granted hereby may not besold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will orthe applicable laws of descent and distribution) to the extent then subject to the Forfeiture Restrictions. Any such attemptedsale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shallbe void and the Company shall not be bound thereby. Further, the Restricted Stock granted hereby that is no longer subjectto Forfeiture Restrictions may not be sold or otherwise disposed of in any manner that would constitute a violation of anyapplicable federal or state securities laws. The Participant also agrees (a) that the Company may refuse to cause the transferof the Restricted Stock to be registered on the applicable stock transfer records if such proposed transfer would, in theopinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law and (b) that theCompany may give related instructions to the transfer agent, if any, to stop registration of the transfer of the RestrictedStock. The Restricted Stock is registered with the Securities and Exchange Commission under a Registration Statement onForm S-8. A Prospectus describing the Plan and the Stock is available from the Company.4.Vesting. The Restricted Stock that is granted hereby shall be subject to Forfeiture Restrictions. The Forfeiture Restrictionsshall lapse as to the Restricted Stock that is granted hereby in accordance with the provisions of subsections (a) through (d)of this Section 4. (a)Generally. The Forfeiture Restrictions shall lapse as to the Restricted Stock that is granted hereby as provided insubsection (b), provided that the Participant has not incurred a Termination of Service prior to the applicable dateprovided in subsection (b). If the Participant has incurred a Termination of Service before a date provided insubsection (b) then, except as otherwise specified in subsections (c) or (d) below, the Forfeiture Restrictions thenapplicable to any of the Restricted Stock shall not lapse and all of the Restricted Stock with respect to whichForfeiture Restrictions have not then lapsed shall be forfeited to the Company upon such Termination of Service.  (b)Vesting Date. The Forfeiture Restrictions shall lapse, and the Restricted Stock will vest (subject to the provisionsof subsection (a)) in accordance with the following schedule:1 (i)on __________, the Forfeiture Restrictions shall lapse, and the Restricted Stock will vest, with respectto one-quarter (25%) of the Restricted Stock; (ii)on __________, the Forfeiture Restrictions shall lapse, and the Restricted Stock will vest, with respectto an additional one-quarter (25%) of the Restricted Stock; (iii)on __________, the Forfeiture Restrictions shall lapse, and the Restricted Stock will vest, with respectto an additional one-quarter (25%) of the Restricted Stock; and (iv)on __________, the Forfeiture Restrictions shall lapse, and the Restricted Stock will vest, with respectto the remaining one-quarter (25%) of the Restricted Stock, so that on __________, the Restricted Stockwill vest in full. (c)Death or Total and Permanent Disability. Notwithstanding any provisions of Section 4 to the contrary, in theevent the Participant’s Termination of Service is due to the Participant’s death or Total and Permanent Disabilityprior to a date provided in subsection (b), the Forfeiture Restrictions for all of the Restricted Stock with respect towhich Forfeiture Restrictions have not then lapsed shall lapse on the date of such Termination of Service due todeath or Total and Permanent Disability. (d)Change in Control. Notwithstanding any provisions of Section 4 to the contrary, in the event (i) a Change inControl occurs prior to the date of the Participant’s Termination of Service and (ii) the Participant incurs aTermination of Service during the two (2) year period commencing on the date that the Change in Controloccurred, either (A) by the Company without Cause or (B) by the Participant for Good Reason, the ForfeitureRestrictions for all of the Restricted Stock with respect to which Forfeiture Restrictions have not then lapsed shalllapse upon the occurrence of such Change in Control. (e)Forfeiture Upon Violation of Confidentiality/Nonsolicitation Provisions. Notwithstanding anything to thecontrary contained herein, in the event the Participant fails to comply with the confidentiality and non-solicitationprovisions of Exhibit A, or the non-solicitation and/or confidentiality provisions contained in any writtenagreement by and between the Participant and the Company, then (i) the Forfeiture Restrictions shall not lapse,and any unvested Restricted Stock shall be immediately forfeited to the Company as of the date of such violation,and (ii) any Restricted Stock for which the Forfeiture Restrictions have lapsed, but that had 1NTD: Unless granted as “Exempt Shares,” the Restricted Stock cannot vest earlier than over the three-year period commencing on the Date ofGrant, and on a pro rata basis. The Company’s standard four-year pro rata vesting schedule complies with this requirement.  not yet been delivered to the Participant shall be immediately forfeited and this Agreement (other than theprovisions of this subsection (e) and the provisions of Exhibit A) will be terminated on the date of such violation.5.Effect of Lapse of Restrictions. Upon the lapse of the Forfeiture Restrictions with respect to the Restricted Stock grantedhereby, if requested by the Participant as described in Section 6.4(a) of the Plan, the Company shall cause to be delivered tothe Participant a stock certificate representing such Restricted Stock, and such Restricted Stock shall be transferable by theParticipant (except to the extent that any proposed transfer would, in the opinion of counsel satisfactory to the Company,constitute a violation of applicable securities law).6.Capital Adjustments and Reorganizations. The existence of the Restricted Stock shall not affect in any way the right orpower of the Company or its stockholders to make or authorize any adjustment, recapitalization, reorganization or otherchange in the Company’s capital structure or its business, engage in any merger or consolidation, issue any debt or equitysecurities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, orengage in any other corporate act or proceeding.7.Section 83(b) Election. The Participant shall not exercise the election permitted under section 83(b) of the Code withrespect to the Restricted Stock without the written approval of the Chief Financial Officer of the Company.8.No Fractional Shares. All provisions of this Agreement concern whole shares of Common Stock. If the application of anyprovision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if itis less than 0.5 and rounded up to the next whole share if it is 0.5 or more.9.Not an Employment Agreement. This Agreement is not an employment or service agreement, and no provision of thisAgreement shall be construed or interpreted to create an employment or service relationship between the Participant and theCompany or guarantee the right to continue in the employment of the Company or a Subsidiary for any specified term.10.Limit of Liability. Under no circumstances will the Company or an Affiliate be liable for any indirect, incidental,consequential or special damages (including lost profits or taxes) of any form incurred by any person, whether or notforeseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan, thisAgreement or the Restricted Stock.11.Legend. The Participant consents to the placing on the certificate for the Restricted Stock of an appropriate legendrestricting resale or other transfer of the Restricted Stock except in accordance with the Securities Act of 1933 and allapplicable rules thereunder.12.Notices. Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall bedelivered either by personal delivery, telegram, telex, telecopy or similar facsimile means, by certified or registered mail,return receipt requested, or by  courier or delivery service, addressed to the Company at the Company’s principal business office address and to theParticipant at the Participant’s residential address as shown in the records of the Company, or at such other address andnumber as a party shall have previously designated by written notice given to the other party in the manner hereinabove setforth. Notices shall be deemed given when received, if sent by facsimile means (confirmation of such receipt by confirmedfacsimile transmission being deemed receipt of communications sent by facsimile means); and when delivered (or upon thedate of attempted delivery where delivery is refused), if hand-delivered, sent by express courier or delivery service, or sentby certified or registered mail, return receipt requested.13.Amendment and Waiver. Except as otherwise provided herein or in the Plan, or as necessary to implement the provisions ofthe Plan, this Agreement may be amended, modified or superseded only by written instrument executed, or an electronicagreement agreed to, by the Company and the Participant. Only a written instrument executed and delivered by, or anelectronic agreement agreed to by, the party waiving compliance hereof shall waive any of the terms or conditions of thisAgreement. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorizeddirector or officer of the Company other than the Participant. The failure of any party at any time or times to requireperformance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of anyterm or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall beconstrued as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any otherterm or condition.14.Governing Law and Severability. The validity, construction and performance of this Agreement shall be governed by thelaws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise referconstruction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of anyprovision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force andeffect.15.Successors and Assigns. Subject to the limitations which this Agreement imposes upon the transferability of the RestrictedStock granted hereby, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and itssuccessors and assigns, and to the Participant, the Participant’s permitted assigns and upon the Participant’s death, theParticipant’s estate and beneficiaries thereof (whether by will or the laws of descent and distribution), executors,administrators, agents, legal and personal representatives.16.Miscellaneous. This Agreement is awarded pursuant to and is subject to all of the provisions of the Plan, includingamendments to the Plan, if any. 17.Tax Withholding. The Company or, if applicable, any Subsidiary (for purposes of this Section 17, the term “Company”shall be deemed to include any applicable Subsidiary), shall be entitled to deduct from other compensation payable to theParticipant any sums required by federal, state or local tax law to be withheld with respect to the vesting of, or lapse ofrestrictions on, this Award. Alternatively, the Company may require the Participant (or other person validly exercising theAward) to pay such sums for taxes  directly to the Company in cash or by check within one (1) day after the date of vesting or lapse of restrictions. Suchpayments shall be required to be made when requested by the Company and may be required to be made prior to theremoval of any restrictions on such shares or the delivery of any certificate representing shares of Common Stock, if suchcertificate is requested by the Participant in accordance with Section 6.4(a) of the Plan. Such payment may be made by (a)the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c)below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents inwriting, the actual delivery by the Participant to the Company of shares of Common Stock that the Participant has notacquired from the Company within six (6) months prior thereto, which shares so delivered have an aggregate Fair MarketValue that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholdingpayment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of sharesto be delivered upon the vesting of the Restricted Stock, which shares so withheld have an aggregate Fair Market Value thatequals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). 18.Acceptance. The Participant, by his or her acceptance of the Restricted Stock, agrees to be bound by all of the terms andconditions of this Agreement, including, without limitation, the provisions of Exhibit A, and the Plan, and further consents toand agrees to be bound by the Irrevocable Stock Power presented herewith. 19.Disclaimer of Reliance. Except for the specific representations expressly made by the Company in this Agreement andExhibit A, the Participant specifically disclaims that the Participant is relying upon or has relied upon any communications,promises, statement, inducements or representation(s) that may have been made, oral or written regarding the subject matterof this Agreement. The Participant represents that the Participant relied solely and only on the Participant’s own judgment inmaking the decision to enter into this Agreement.  EXHIBIT A1.Confidential Information, the Participant’s Non-Disclosure Agreement and Work Product Ownership. (a)Confidential Information. During the Participant’s employment with the Company, the Company shall providethe Participant otherwise prohibited access to certain of its Confidential Information which is not known to theCompany’s competitors or within the Company’s industry generally, which was developed by the Company overa long period of time and/or at its substantial expense, and which is of great competitive value to theCompany. For purposes of this Agreement, “Confidential Information” includes all trade secrets and confidentialand proprietary information of the Company, including, but not limited to, the following: all documents orinformation, in whatever form or medium, concerning or relating to the Company’s operations; procedures;computer systems; customer information; methods of doing business; merchandise; marketing plans and methods;financial and accounting information; policies and practices; product information and strategy; project andprospect locations and leads; developmental or experimental work; research; development; know-how; technicaldata; designs; plans for research or future products; improvements; discoveries; database schemas or tables;development tools or techniques; finances; business plans; sales plans and strategies; budgets; pricing and pricingstrategies and techniques; costs; customer and client lists and profiles; customer and client nonpublic personalinformation; supplier lists; business records; audits; management methods and information; reports,recommendations and conclusions; business practices; strategies; training manuals; vendors; suppliers; contractualrelationships; and other business information disclosed or made available to the Participant by the Company, eitherdirectly or indirectly, in writing, orally, or by drawings or observation, that is not known to the public or any of theCompany’s competitors or within the Company’s industry generally, which was developed by the Company at itsexpense, and which is of value to the Company. Confidential Information prepared or compiled by the Participantand/or the Company or furnished to the Participant during the Participant’s employment with the Company shallbe the sole and exclusive property of the Company, and none of such Confidential Information or copies thereof,shall be retained by the Participant. The Participant acknowledges that the Company does not voluntarily discloseConfidential Information, but rather takes precautions to prevent dissemination of Confidential Informationbeyond those employees such as the Participant entrusted with such information. The Participant furtheracknowledges that the Confidential Information: (i) is entrusted to the Participant because of the Participant’sposition with the Company; and (ii) is of such value and nature as to make it reasonable and necessary for theParticipant to protect and preserve the confidentiality and secrecy of the Confidential Information. The Participantacknowledges and agrees that the Confidential Information is a valuable, special, and a unique asset of theCompany, the disclosure of which could cause substantial injury and loss of profits and goodwill to theCompany. While the Participant may not disclose any such Confidential  Information, the Participant has the right to discuss wages, benefits or other terms and conditions ofemployment. Nothing in this Agreement, including the definition of “Confidential Information” above and thenondisclosure requirements in Section 1(b) is intended to restrict the Participant’s right to have such discussions.(b)Non-Disclosure. (i)The Participant shall hold all Confidential Information in strict confidence. The Participant shall not,during the period of the Participant’s employment or at any time thereafter, disclose to anyone, orpublish, use for any purpose, exploit, or allow or assist another person to use, disclose or exploit, exceptfor the benefit of the Company, without prior written authorization, any Confidential Information or partthereof, except as permitted: (1) in the ordinary course of the Company’s business or the Participant’swork for the Company; or (2) by law. The Participant shall use all reasonable precautions to assure thatall Confidential Information is properly protected and kept from unauthorized persons. Further, theParticipant shall not directly or indirectly, use the Company’s Confidential Information or informationregarding the names, contact information, skills and compensation of employees and contractors of theCompany to: (1) call upon, solicit business from, attempt to conduct business with, conduct businesswith, interfere with or divert business away from any customer, client, vendor or supplier of theCompany with whom or which the Company conducted business within the eighteen (18) months priorto the Participant’s termination from employment with the Company; and/or (2) recruit, solicit, hire orattempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by or associatedwith the Company. The Participant agrees that the Participant shall take all steps necessary to safeguardall Confidential Information and prevent its wrongful use, disclosure, or dissemination of any otherperson or entity. The Participant further agrees that in the event the Participant is subpoenaed, servedwith any legal process or notice or otherwise requested to produce or divulge, directly or indirectly, anyConfidential Information by any entity, agency, or person in any formal or informal proceedingincluding, but not limited to, any interview, deposition, administrative or judicial hearing and/or trial,and upon the Participant’s receipt of such subpoena, process, notice or request, the Company requeststhat the Participant notify and deliver via overnight delivery service a copy of the subpoena, process,notice or other request to: the Company’s General Counsel at 6250 LBJ Freeway, Dallas, Texas 75240. (ii)The Participant shall immediately notify the Company’s General Counsel if the Participant learns of orsuspects any unauthorized disclosure of Confidential Information concerning the Company.  (iii)Subject to Section 1(b)(iv), the Participant agrees that the Participant shall not use or disclose anyconfidential or trade secret information belonging to any former employer or third party, and theParticipant shall not bring onto the premises of the Company or onto any the Company property anyconfidential or trade secret information belonging to any former employer or third party without suchthird parties’ consent. (iv)During the Participant’s employment, the Company will receive from third parties their confidentialand/or proprietary information, subject to a duty on the Company’s part to maintain the confidentialityof and to use such information only for certain limited purposes. The Participant agrees to hold all suchconfidential or proprietary information in the strictest confidence and not to disclose it to any person ororganization or to use it except as necessary in the course of the Participant’s employment with theCompany and in accordance with the Company’s agreement with such third party. (c)Return of the Company Property. Upon the termination of the Participant’s employment for any reason, theParticipant shall immediately return and deliver to the Company any and all property, including, withoutlimitation, Confidential Information, software, devices, data, reports, proposals, lists, correspondence, materials,equipment, computers, hard drives, papers, books, records, documents, memoranda, manuals, e-mail, electronic ormagnetic recordings or data, including all copies thereof, books of account, drawings, prints, plans, and the likewhich belong to the Company or which relate to the Company’s business and which are in the Participant’spossession, custody or control, whether prepared by the Participant or others. If at any time after termination ofthe Participant’s employment, for any reason, the Participant determines that the Participant has any ConfidentialInformation in the Participant’s possession or control, the Participant shall immediately return to the Company allsuch Confidential Information in the Participant’s possession or control, including all copies and portionsthereof. Further, the Participant shall not retain any property, including, without limitation, ConfidentialInformation, data, information, or documents, belonging to the Company or any copies thereof (in electronic orhard copy format). 2.Non-Solicitation. In Section 1, the Company promised to provide the Participant certain Confidential Information. TheParticipant recognizes and agrees that: (i) the Company has devoted a considerable amount of time, effort, and expense todevelop its Confidential Information and business goodwill; (ii) the Company’s Confidential Information and businessgoodwill are valuable assets to the Company; and (iii) any unauthorized use or disclosure of the Confidential Informationwould cause irreparable harm to the Company for which there is no adequate remedy at law, including damage to theCompany’s business goodwill. To protect the Confidential Information and business goodwill of the Company, theParticipant agrees to the following restrictive covenants.  (a)Non-Solicitation. The Participant agrees that, as part of the Participant’s employment or association with theCompany, the Participant will become familiar with the salary, pay scale, capabilities, experiences, skill anddesires of the Company’s employees and consultants. For these reasons, the Participant agrees that to protect theCompany’s Confidential Information, legitimate business interests, and business goodwill, it is necessary to enterinto the following restrictive covenant. The Participant agrees that, during the Participant’s employment and for aperiod of twelve (12) months following the date on which the Participant’s employment with the Companyterminates for any reason (“Restrictive Covenant Period”), the Participant, whether directly or indirectly, shall notrecruit, solicit, hire or attempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by orassociated with the Company, nor shall the Participant contact or communicate with any such persons for thepurpose of inducing such persons to terminate their employment or association with the Company. For purposesof this paragraph, the “persons” covered by this prohibition include current employees and persons who wereemployed by the Company within twelve (12) months of the time of the attempted recruiting, solicitation, orhiring. (b)Remedies. The Participant acknowledges that the restrictions contained in Section 1 and Section 2, in view of thenature of the Company’s business, are reasonable and necessary to protect their legitimate business interests,business goodwill and reputation, and that any violation of these restrictions would result in irreparable injury andcontinuing damage to the Company, and that money damages would not be a sufficient remedy to the Companyfor any such breach or threatened breach. Therefore, the Participant agrees that the Company shall be entitled to atemporary restraining order and injunctive relief restraining the Participant from the commission of any breach orthreatened breach of Section 1 or Section 2, without the necessity of establishing irreparable harm or the posting ofa bond, and to recover from the Participant damages incurred by the Company as a result of the breach, as well asthe Company’s attorneys’ fees, costs and expenses related to any breach or threatened breach of this Agreementand enforcement of this Agreement. Nothing contained in this Agreement shall be construed as prohibiting theCompany from pursuing any other remedies available to it for any breach or threatened breach, including, withoutlimitation, the recovery of money damages, attorneys’ fees, and costs. The existence of any claim or cause ofaction by the Participant against the Company, whether predicated on this Agreement or otherwise, shall notconstitute a defense to the enforcement by the Company of the restrictive covenants contained in Section 1 orSection 2, or preclude injunctive relief. (c)Tolling. If the Participant violates any of the restrictions contained in this Section 2, the Restrictive CovenantPeriod shall be suspended and shall not run in favor of the Participant until such time that the Participant cures theviolation to the  satisfaction of the Company; the period of time in which the Participant is in breach shall be added to theRestrictive Covenant Period. (d)Notice. If the Participant, in the future, seeks or is offered employment, or any other position or capacity withanother company or entity, the Participant agrees to inform each new employer or entity, before acceptingemployment, of the existence of the restrictions in Section 1 and Section 2. The Company shall be entitled toadvise such person or subsequent employer of the provisions of Section 1 and Section 2 and to otherwise dealwith such person to ensure that the provisions of Section 1 and Section 2 are enforced and duly discharged.  IRREVOCABLE STOCK POWERKNOW ALL MEN BY THESE PRESENTS, That For Value Received, the Participant (as defined in the AwardAgreement) has bargained, sold, assigned and transferred and by these presents does bargain, sell, assign and transfer unto TuesdayMorning Corporation, a Delaware corporation (the “Company”), the Restricted Stock transferred pursuant to the RESTRICTEDSTOCK AWARD AGREEMENT dated as of and effective ______________, 201__, between the Company and the Participantgranting such Restricted Stock to the Participant (the “Award Agreement”); and subject to and in accordance with the terms of theAward Agreement the Participant does hereby constitute and appoint the Secretary of the Company the Participant’s true and lawfulattorney, IRREVOCABLY, to sell, assign, transfer, hypothecate, pledge and make over all or any part of such Restricted Stock andfor that purpose to make and execute all necessary acts of assignment and transfer thereof, and to substitute one or more persons withlike full power, hereby ratifying and confirming all that said attorney or his or her substitutes shall lawfully do by virtue hereof. Exhibit 10.27 RESTRICTED STOCK AWARD AGREEMENT(Performance Based) Tuesday Morning Corporation2014 Long-Term Incentive PlanThis RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”) is entered into between Tuesday MorningCorporation, a Delaware corporation (the “Company”), and ________________ (the “Participant”) effective as of ______________(the “Date of Grant”), pursuant to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, as amended (the “Plan”), theterms of which are incorporated by reference herein in their entirety. WHEREAS, the Company desires to grant to the Participant the shares of common stock, par value $0.01 per share(“Common Stock”), as an inducement for the Participant’s continued and effective performance of services for the Company, subjectto the terms and conditions of this Agreement; andWHEREAS, the Participant desires to have the opportunity to hold the Common Stock subject to the terms and conditionsof this Agreement;NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained herein, and othergood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to belegally bound hereby, agree as follows:1.Grant of Restricted Stock. Effective as of the Date of Grant, the Company shall cause to be issued in the Participant’s name[TOTAL NUMBER OF SHARES THAT COULD VEST AT MAXIMUM PERFORMANCE] shares of CommonStock (the “Restricted Stock”), [TOTAL NUMBER OF SHARES THAT COULD VEST AT TARGET] shares ofwhich are “Target Shares” for purposes of Exhibit A. The Company shall electronically register the Restricted Stock, andany Retained Distributions issued with respect to the Restricted Stock, in the Participant’s name and note that such shares areRestricted Stock. If certificates evidencing the Restricted Stock, or any Retained Distributions, are issued to the Participantduring the Restricted Period, such certificates shall bear a restrictive legend, substantially as provided in Section 15.10 of thePlan, to the effect that ownership of such Restricted Stock (and any such Retained Distributions), and the enjoyment of allrights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and this Agreement. TheParticipant shall have the right to vote the Restricted Stock awarded to the Participant and to receive and retain all regularcash dividends, and to exercise all other rights, powers and privileges of a holder of Common Stock, with respect to suchRestricted Stock, with the exception that (a) the Participant shall not be entitled to delivery of a stock certificate or certificatesrepresenting such Restricted Stock until the Forfeiture Restrictions applicable thereto shall have expired and the Participantrequests delivery of a certificate as described in Section 6.4(a) of the Plan, (b) the Company shall retain custody of allRetained Distributions made or declared with respect to the Restricted Stock (and such Retained Distributions shall be subject to the same restrictions, terms andconditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to whichsuch Retained Distributions shall have been made, paid, or declared shall have become vested, and such RetainedDistributions shall not bear interest or be segregated in separate accounts and (c) the Participant may not sell, assign, transfer,pledge, exchange, encumber, or dispose of the Restricted Stock or any Retained Distributions during the RestrictedPeriod. Upon issuance, the certificates for the Restricted Stock shall be delivered to the Secretary of the Company or to suchother depository as may be designated by the Committee as a depository for safekeeping until the forfeiture of suchRestricted Stock occurs or the Forfeiture Restrictions lapse, together with stock powers or other written instruments orelectronic agreements of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portionof the Restricted Stock and any securities constituting Retained Distributions which shall be forfeited in accordance with thePlan and this Agreement. In accepting the award of Restricted Stock set forth in this Agreement, the Participant accepts andagrees to be bound by all the terms and conditions of the Plan and this Agreement.2.Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (a)“Cause” shall mean the occurrence of one of the following events: (i) commission of fraud, embezzlement, theft,felony or an act of dishonesty in the course of the Participant’s employment by the Company or an Affiliate whichconduct damaged the Company or an Affiliate, (ii) disclosure of trade secrets of the Company or an Affiliate, or(iii) violation of the terms of any non-competition, non-disclosure or similar agreement with respect to theCompany or any Affiliate to which the Participant is a party. (b)“Forfeiture Restrictions” shall mean any prohibitions and restrictions set forth herein with respect to the sale orother disposition of Restricted Stock issued to the Participant hereunder and the obligation to forfeit and surrendersuch Restricted Stock to the Company. (c)“Good Reason” shall mean (i) a material reduction by the Company of the Participant’s annual compensationwithout the Participant’s consent; (ii) a material breach by the Company of this Agreement that is not cured withinthirty (30) days of written notice by the Participant to the Company; or (iii) without the Participant’s consent, theCompany relocates its principal executive offices, or requires the Participant to have the Participant’s principalwork location change, which results in the Participant’s principal work location being changed to a location inexcess of fifty (50) miles from the location of the Company’s principal executive offices as of the date hereof. Theforegoing events shall not constitute Good Reason unless the Participant delivers to the Company a written noticespecifying the circumstances giving rise to the alleged Good Reason within ninety (90) days after the Participantfirst learns of the existence of the circumstances giving rise to Good Reason; within thirty (30) days followingdelivery of such notice, the Company has  failed to cure the circumstances giving rise to Good Reason; and the Participant resigns within sixty (60) days afterthe end of the cure period. (d)“Restricted Period” shall mean the period designated by the Committee during which Restricted Stock is subjectto the Forfeiture Restrictions and may not be sold, assigned, transferred, pledged, or otherwise encumbered. (e)“Retained Distributions” shall mean any securities or other property (other than regular cash dividends)distributed by the Company in respect of the Restricted Stock during any Restricted Period.Capitalized terms not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan.3.Transfer Restrictions. Except as otherwise authorized by the Committee, the Restricted Stock granted hereby may not besold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will orthe applicable laws of descent and distribution) to the extent then subject to the Forfeiture Restrictions. Any such attemptedsale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shallbe void and the Company shall not be bound thereby. Further, the Restricted Stock granted hereby that is no longer subjectto Forfeiture Restrictions may not be sold or otherwise disposed of in any manner that would constitute a violation of anyapplicable federal or state securities laws. The Participant also agrees (a) that the Company may refuse to cause the transferof the Restricted Stock to be registered on the applicable stock transfer records if such proposed transfer would, in theopinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law and (b) that theCompany may give related instructions to the transfer agent, if any, to stop registration of the transfer of the RestrictedStock. The Restricted Stock is registered with the Securities and Exchange Commission under a Registration Statement onForm S-8. A Prospectus describing the Plan and the Stock is available from the Company.4.Vesting. The Restricted Stock that is granted hereby shall be subject to Forfeiture Restrictions. The Forfeiture Restrictionsshall lapse as to the Restricted Stock that is granted hereby in accordance with the provisions of subsections (a) through (e)of this Section 4. (a)Generally. The Forfeiture Restrictions shall lapse as to the Restricted Stock that is granted hereby as provided insubsection (b), provided that the Participant has not incurred a Termination of Service prior to the applicable dateprovided in subsection (b). If the Participant has incurred a Termination of Service before a date provided insubsection (b) then, except as otherwise specified in subsections (c) or (d) below, the Forfeiture Restrictions thenapplicable to any of the Restricted Stock shall not lapse and all of the Restricted Stock with respect to whichForfeiture Restrictions have not then lapsed shall be forfeited to the Company upon such Termination of Service.  (b)Vesting Date and Criteria. The Restricted Shares will vest, and the Forfeiture Restrictions will lapse, as specifiedherein and upon the satisfaction of the conditions contained in Exhibit A. (c)Death or Total and Permanent Disability. Notwithstanding any provisions of Section 4 to the contrary, in theevent the Participant’s Termination of Service is due to the Participant’s death or Total and Permanent Disabilityprior to a date provided in subsection (b), the Forfeiture Restrictions for all of the Restricted Stock with respect towhich Forfeiture Restrictions have not then lapsed shall lapse on the date of such Termination of Service due todeath or Total and Permanent Disability. (d)[Change in Control. Notwithstanding any provisions of Section 4 to the contrary, in the event (i) a Change inControl occurs prior to the date of the Participant’s Termination of Service and (ii) the Participant incurs aTermination of Service during the two (2) year period commencing on the date that the Change in Controloccurred, either (A) by the Company without Cause or (B) by the Participant for Good Reason, the ForfeitureRestrictions for all of the Restricted Stock with respect to which Forfeiture Restrictions have not then lapsed shalllapse upon the occurrence of such Change in Control.] (e)Forfeiture Upon Violation of Confidentiality/Nonsolicitation Provisions. Notwithstanding anything to thecontrary contained herein, in the event the Participant fails to comply with the confidentiality and non-solicitationprovisions of Exhibit B, or the non-solicitation and/or confidentiality provisions contained in any writtenagreement by and between the Participant and the Company, then (i) the Forfeiture Restrictions shall not lapse,and any unvested Restricted Stock shall be immediately forfeited to the Company as of the date of such violation,and (ii) any Restricted Stock for which the Forfeiture Restrictions have lapsed, but that had not yet been deliveredto the Participant shall be immediately forfeited and this Agreement (other than the provisions of this subsection(e) and the provisions of Exhibit B) will be terminated on the date of such violation.5.Effect of Lapse of Restrictions. Upon the lapse of the Forfeiture Restrictions with respect to the Restricted Stock grantedhereby, if requested by the Participant as described in Section 6.4(a) of the Plan, the Company shall cause to be delivered tothe Participant a stock certificate representing such Restricted Stock, and such Restricted Stock shall be transferable by theParticipant (except to the extent that any proposed transfer would, in the opinion of counsel satisfactory to the Company,constitute a violation of applicable securities law).6.Capital Adjustments and Reorganizations. The existence of the Restricted Stock shall not affect in any way the right orpower of the Company or its stockholders to make or authorize any adjustment, recapitalization, reorganization or otherchange in the Company’s capital structure or its business, engage in any merger or consolidation, issue any debt or equitysecurities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, orengage in any other corporate act or proceeding. 7.Section 83(b) Election. The Participant shall not exercise the election permitted under section 83(b) of the Code withrespect to the Restricted Stock without the written approval of the Chief Financial Officer of the Company.8.No Fractional Shares. All provisions of this Agreement concern whole shares of Common Stock. If the application of anyprovision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if itis less than 0.5 and rounded up to the next whole share if it is 0.5 or more.9.Not an Employment Agreement. This Agreement is not an employment or service agreement, and no provision of thisAgreement shall be construed or interpreted to create an employment or service relationship between the Participant and theCompany or guarantee the right to continue in the employment of the Company or a Subsidiary for any specified term.10.Limit of Liability. Under no circumstances will the Company or an Affiliate be liable for any indirect, incidental,consequential or special damages (including lost profits or taxes) of any form incurred by any person, whether or notforeseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan, thisAgreement or the Restricted Stock.11.Legend. The Participant consents to the placing on the certificate for the Restricted Stock of an appropriate legendrestricting resale or other transfer of the Restricted Stock except in accordance with the Securities Act of 1933 and allapplicable rules thereunder.12.Notices. Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall bedelivered either by personal delivery, telegram, telex, telecopy or similar facsimile means, by certified or registered mail,return receipt requested, or by courier or delivery service, addressed to the Company at the Company’s principal businessoffice address and to the Participant at the Participant’s residential address as shown in the records of the Company, or atsuch other address and number as a party shall have previously designated by written notice given to the other party in themanner hereinabove set forth. Notices shall be deemed given when received, if sent by facsimile means (confirmation ofsuch receipt by confirmed facsimile transmission being deemed receipt of communications sent by facsimile means); andwhen delivered (or upon the date of attempted delivery where delivery is refused), if hand-delivered, sent by express courieror delivery service, or sent by certified or registered mail, return receipt requested.13.Amendment and Waiver. Except as otherwise provided herein or in the Plan, or as necessary to implement the provisions ofthe Plan, this Agreement may be amended, modified or superseded only by written instrument executed, or an electronicagreement agreed to, by the Company and the Participant. Only a written instrument executed and delivered by, or anelectronic agreement agreed to by, the party waiving compliance hereof shall waive any of the terms or conditions of thisAgreement. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorizeddirector or officer of the Company other than the Participant. The failure of any party at any time or times to requireperformance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or the breach of any term or condition contained inthis Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, awaiver of any other condition, or the breach of any other term or condition.14.Governing Law and Severability. The validity, construction and performance of this Agreement shall be governed by thelaws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise referconstruction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of anyprovision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force andeffect.15.Successors and Assigns. Subject to the limitations which this Agreement imposes upon the transferability of the RestrictedStock granted hereby, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and itssuccessors and assigns, and to the Participant, the Participant’s permitted assigns and upon the Participant’s death, theParticipant’s estate and beneficiaries thereof (whether by will or the laws of descent and distribution), executors,administrators, agents, legal and personal representatives.16.Miscellaneous. This Agreement is awarded pursuant to and is subject to all of the provisions of the Plan, includingamendments to the Plan, if any. 17.Tax Withholding. The Company or, if applicable, any Subsidiary (for purposes of this Section 17, the term “Company”shall be deemed to include any applicable Subsidiary), shall be entitled to deduct from other compensation payable to theParticipant any sums required by federal, state or local tax law to be withheld with respect to the vesting of, or lapse ofrestrictions on, this Award. Alternatively, the Company may require the Participant (or other person validly exercising theAward) to pay such sums for taxes directly to the Company in cash or by check within one (1) day after the date of vestingor lapse of restrictions. Such payments shall be required to be made when requested by the Company and may be requiredto be made prior to the removal of any restrictions on such shares or the delivery of any certificate representing shares ofCommon Stock, if such certificate is requested by the Participant in accordance with Section 6.4(a) of the Plan. Suchpayment may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuanceof fractional shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its solediscretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock that theParticipant has not acquired from the Company within six (6) months prior thereto, which shares so delivered have anaggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the requiredtax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of anumber of shares to be delivered upon the vesting of the Restricted Stock, which shares so withheld have an aggregate FairMarket Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or(c). 18.Acceptance. The Participant, by his or her acceptance of the Restricted Stock, agrees to be bound by all of the terms andconditions of this Agreement, including, without limitation, the provisions of Exhibit A, Exhibit B and the Plan, and furtherconsents to and agrees to be bound by the Irrevocable Stock Power presented herewith. 19.Disclaimer of Reliance. Except for the specific representations expressly made by the Company in this Agreement andExhibit A, the Participant specifically disclaims that the Participant is relying upon or has relied upon any communications,promises, statement, inducements or representation(s) that may have been made, oral or written regarding the subject matterof this Agreement. The Participant represents that the Participant relied solely and only on the Participant’s own judgment inmaking the decision to enter into this Agreement. EXHIBIT A [Describe vesting dates and performance criteria here]1 1NTD: Unless granted as “Exempt Shares,” the Restricted Stock granted hereunder cannot vest earlier than one year after the Date of Grant. EXHIBIT B1.Confidential Information, the Participant’s Non-Disclosure Agreement and Work Product Ownership. (a)Confidential Information. During the Participant’s employment with the Company, the Company shall providethe Participant otherwise prohibited access to certain of its Confidential Information which is not known to theCompany’s competitors or within the Company’s industry generally, which was developed by the Company overa long period of time and/or at its substantial expense, and which is of great competitive value to theCompany. For purposes of this Agreement, “Confidential Information” includes all trade secrets and confidentialand proprietary information of the Company, including, but not limited to, the following: all documents orinformation, in whatever form or medium, concerning or relating to the Company’s operations; procedures;computer systems; customer information; methods of doing business; merchandise; marketing plans and methods;financial and accounting information; policies and practices; product information and strategy; project andprospect locations and leads; developmental or experimental work; research; development; know-how; technicaldata; designs; plans for research or future products; improvements; discoveries; database schemas or tables;development tools or techniques; finances; business plans; sales plans and strategies; budgets; pricing and pricingstrategies and techniques; costs; customer and client lists and profiles; customer and client nonpublic personalinformation; supplier lists; business records; audits; management methods and information; reports,recommendations and conclusions; business practices; strategies; training manuals; vendors; suppliers; contractualrelationships; and other business information disclosed or made available to the Participant by the Company, eitherdirectly or indirectly, in writing, orally, or by drawings or observation, that is not known to the public or any of theCompany’s competitors or within the Company’s industry generally, which was developed by the Company at itsexpense, and which is of value to the Company. Confidential Information prepared or compiled by the Participantand/or the Company or furnished to the Participant during the Participant’s employment with the Company shallbe the sole and exclusive property of the Company, and none of such Confidential Information or copies thereof,shall be retained by the Participant. The Participant acknowledges that the Company does not voluntarily discloseConfidential Information, but rather takes precautions to prevent dissemination of Confidential Informationbeyond those employees such as the Participant entrusted with such information. The Participant furtheracknowledges that the Confidential Information: (i) is entrusted to the Participant because of the Participant’sposition with the Company; and (ii) is of such value and nature as to make it reasonable and necessary for theParticipant to protect and preserve the confidentiality and secrecy of the Confidential Information. The Participantacknowledges and agrees that the Confidential Information is a valuable, special, and a unique asset of theCompany, the disclosure of which could cause substantial injury and loss of profits and goodwill to theCompany. While the Participant may not disclose any such Confidential  Information, the Participant has the right to discuss wages, benefits or other terms and conditions ofemployment. Nothing in this Agreement, including the definition of “Confidential Information” above and thenondisclosure requirements in Section 1(b) is intended to restrict the Participant’s right to have such discussions.(b)Non-Disclosure. (i)The Participant shall hold all Confidential Information in strict confidence. The Participant shall not,during the period of the Participant’s employment or at any time thereafter, disclose to anyone, orpublish, use for any purpose, exploit, or allow or assist another person to use, disclose or exploit, exceptfor the benefit of the Company, without prior written authorization, any Confidential Information or partthereof, except as permitted: (1) in the ordinary course of the Company’s business or the Participant’swork for the Company; or (2) by law. The Participant shall use all reasonable precautions to assure thatall Confidential Information is properly protected and kept from unauthorized persons. Further, theParticipant shall not directly or indirectly, use the Company’s Confidential Information or informationregarding the names, contact information, skills and compensation of employees and contractors of theCompany to: (1) call upon, solicit business from, attempt to conduct business with, conduct businesswith, interfere with or divert business away from any customer, client, vendor or supplier of theCompany with whom or which the Company conducted business within the eighteen (18) months priorto the Participant’s termination from employment with the Company; and/or (2) recruit, solicit, hire orattempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by or associatedwith the Company. The Participant agrees that the Participant shall take all steps necessary to safeguardall Confidential Information and prevent its wrongful use, disclosure, or dissemination of any otherperson or entity. The Participant further agrees that in the event the Participant is subpoenaed, servedwith any legal process or notice or otherwise requested to produce or divulge, directly or indirectly, anyConfidential Information by any entity, agency, or person in any formal or informal proceedingincluding, but not limited to, any interview, deposition, administrative or judicial hearing and/or trial,and upon the Participant’s receipt of such subpoena, process, notice or request, the Company requeststhat the Participant notify and deliver via overnight delivery service a copy of the subpoena, process,notice or other request to: the Company’s General Counsel at 6250 LBJ Freeway, Dallas, Texas 75240. (ii)The Participant shall immediately notify the Company’s General Counsel if the Participant learns of orsuspects any unauthorized disclosure of Confidential Information concerning the Company.  (iii)Subject to Section 1(b)(iv), the Participant agrees that the Participant shall not use or disclose anyconfidential or trade secret information belonging to any former employer or third party, and theParticipant shall not bring onto the premises of the Company or onto any the Company property anyconfidential or trade secret information belonging to any former employer or third party without suchthird parties’ consent. (iv)During the Participant’s employment, the Company will receive from third parties their confidentialand/or proprietary information, subject to a duty on the Company’s part to maintain the confidentialityof and to use such information only for certain limited purposes. The Participant agrees to hold all suchconfidential or proprietary information in the strictest confidence and not to disclose it to any person ororganization or to use it except as necessary in the course of the Participant’s employment with theCompany and in accordance with the Company’s agreement with such third party. (c)Return of the Company Property. Upon the termination of the Participant’s employment for any reason, theParticipant shall immediately return and deliver to the Company any and all property, including, withoutlimitation, Confidential Information, software, devices, data, reports, proposals, lists, correspondence, materials,equipment, computers, hard drives, papers, books, records, documents, memoranda, manuals, e-mail, electronic ormagnetic recordings or data, including all copies thereof, books of account, drawings, prints, plans, and the likewhich belong to the Company or which relate to the Company’s business and which are in the Participant’spossession, custody or control, whether prepared by the Participant or others. If at any time after termination ofthe Participant’s employment, for any reason, the Participant determines that the Participant has any ConfidentialInformation in the Participant’s possession or control, the Participant shall immediately return to the Company allsuch Confidential Information in the Participant’s possession or control, including all copies and portionsthereof. Further, the Participant shall not retain any property, including, without limitation, ConfidentialInformation, data, information, or documents, belonging to the Company or any copies thereof (in electronic orhard copy format). 2.Non-Solicitation. In Section 1, the Company promised to provide the Participant certain Confidential Information. TheParticipant recognizes and agrees that: (i) the Company has devoted a considerable amount of time, effort, and expense todevelop its Confidential Information and business goodwill; (ii) the Company’s Confidential Information and businessgoodwill are valuable assets to the Company; and (iii) any unauthorized use or disclosure of the Confidential Informationwould cause irreparable harm to the Company for which there is no adequate remedy at law, including damage to theCompany’s business goodwill. To protect the Confidential Information and business goodwill of the Company, theParticipant agrees to the following restrictive covenants.  (a)Non-Solicitation. The Participant agrees that, as part of the Participant’s employment or association with theCompany, the Participant will become familiar with the salary, pay scale, capabilities, experiences, skill anddesires of the Company’s employees and consultants. For these reasons, the Participant agrees that to protect theCompany’s Confidential Information, legitimate business interests, and business goodwill, it is necessary to enterinto the following restrictive covenant. The Participant agrees that, during the Participant’s employment and for aperiod of twelve (12) months following the date on which the Participant’s employment with the Companyterminates for any reason (“Restrictive Covenant Period”), the Participant, whether directly or indirectly, shall notrecruit, solicit, hire or attempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by orassociated with the Company, nor shall the Participant contact or communicate with any such persons for thepurpose of inducing such persons to terminate their employment or association with the Company. For purposesof this paragraph, the “persons” covered by this prohibition include current employees and persons who wereemployed by the Company within twelve (12) months of the time of the attempted recruiting, solicitation, orhiring. (b)Remedies. The Participant acknowledges that the restrictions contained in Section 1 and Section 2, in view of thenature of the Company’s business, are reasonable and necessary to protect their legitimate business interests,business goodwill and reputation, and that any violation of these restrictions would result in irreparable injury andcontinuing damage to the Company, and that money damages would not be a sufficient remedy to the Companyfor any such breach or threatened breach. Therefore, the Participant agrees that the Company shall be entitled to atemporary restraining order and injunctive relief restraining the Participant from the commission of any breach orthreatened breach of Section 1 or Section 2, without the necessity of establishing irreparable harm or the posting ofa bond, and to recover from the Participant damages incurred by the Company as a result of the breach, as well asthe Company’s attorneys’ fees, costs and expenses related to any breach or threatened breach of this Agreementand enforcement of this Agreement. Nothing contained in this Agreement shall be construed as prohibiting theCompany from pursuing any other remedies available to it for any breach or threatened breach, including, withoutlimitation, the recovery of money damages, attorneys’ fees, and costs. The existence of any claim or cause ofaction by the Participant against the Company, whether predicated on this Agreement or otherwise, shall notconstitute a defense to the enforcement by the Company of the restrictive covenants contained in Section 1 orSection 2, or preclude injunctive relief. (c)Tolling. If the Participant violates any of the restrictions contained in this Section 2, the Restrictive CovenantPeriod shall be suspended and shall not run in favor of the Participant until such time that the Participant cures theviolation to the  satisfaction of the Company; the period of time in which the Participant is in breach shall be added to theRestrictive Covenant Period. (d)Notice. If the Participant, in the future, seeks or is offered employment, or any other position or capacity withanother company or entity, the Participant agrees to inform each new employer or entity, before acceptingemployment, of the existence of the restrictions in Section 1 and Section 2. The Company shall be entitled toadvise such person or subsequent employer of the provisions of Section 1 and Section 2 and to otherwise dealwith such person to ensure that the provisions of Section 1 and Section 2 are enforced and duly discharged. IRREVOCABLE STOCK POWERKNOW ALL MEN BY THESE PRESENTS, That For Value Received, the Participant (as defined in the AwardAgreement) has bargained, sold, assigned and transferred and by these presents does bargain, sell, assign and transfer unto TuesdayMorning Corporation, a Delaware corporation (the “Company”), the Restricted Stock transferred pursuant to the RESTRICTEDSTOCK AWARD AGREEMENT dated as of and effective ____________, between the Company and the Participant grantingsuch Restricted Stock to the Participant (the “Award Agreement”); and subject to and in accordance with the terms of the AwardAgreement the Participant does hereby constitute and appoint the Secretary of the Company the Participant’s true and lawful attorney,IRREVOCABLY, to sell, assign, transfer, hypothecate, pledge and make over all or any part of such Restricted Stock and for thatpurpose to make and execute all necessary acts of assignment and transfer thereof, and to substitute one or more persons with like fullpower, hereby ratifying and confirming all that said attorney or his or her substitutes shall lawfully do by virtue hereof. Exhibit 21.1 Subsidiaries of Tuesday Morning Corporation TMI Holdings, Inc., a Delaware corporation Tuesday Morning, Inc., a Texas corporation Friday Morning, LLC, a Texas limited liability company Days of the Week, Inc., a Delaware corporation Nights of the Week, Inc., a Delaware corporation Tuesday Morning Partners, Ltd., a Texas limited partnership  Exhibit 23.1 Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-3 No. 333-84496) of Tuesday Morning Corporation, (2)Registration Statement (Form S-3 No. 333-108275) of Tuesday Morning Corporation, (3)Registration Statement (Form S-3 No. 333-147103) of Tuesday Morning Corporation, (4)Registration Statement (Form S-8 No. 333-214880) pertaining to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, (5)Registration Statement (Form S-8 No. 333-200779) pertaining to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, (6)Registration Statement (Form S-8 No. 333-185314) pertaining to the Tuesday Morning Corporation 2008 Long-Term Equity Incentive Plan, (7)Registration Statement (Form S-8 No. 333-159035) pertaining to the Tuesday Morning Corporation 2008 Long-Term Equity Incentive Plan, (8)Registration Statement (Form S-8 No. 333-79441) pertaining to the Tuesday Morning Corporation Employee Stock Purchase Plan, (9)Registration Statement (Form S-8 No. 333-90315) pertaining to the Tuesday Morning Corporation 1997 Long-Term Equity Incentive Plan, (10)Registration Statement (Form S-8 No. 333-117880) pertaining to the Tuesday Morning Corporation 2004 Long-Term Equity Incentive Plan, and (11)Registration Statement (Form S-8 No. 333-145811) pertaining to the Tuesday Morning Corporation 1997 Long-Term Equity Incentive Plan;of our reports dated August 21, 2018, with respect to the consolidated financial statements of Tuesday Morning Corporation and the effectiveness of internalcontrol over financial reporting of Tuesday Morning Corporation included in this Annual Report (Form 10-K) for the year ended June 30, 2018./s/ Ernst & Young LLPDallas, TexasAugust 21, 2018  Exhibit 31.1CERTIFICATIONI, Steven R. Becker, certify that:1.I have reviewed this Annual Report on Form 10‑K of Tuesday Morning Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f))for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: August 21, 2018By: /s/ Steven R. Becker Steven R. Becker Chief Executive Officer  Exhibit 31.2CERTIFICATIONI, Stacie R. Shirley, certify that:1.I have reviewed this Annual Report on Form 10‑K of Tuesday Morning Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f))for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: August 21, 2018By: /s/ Stacie R. Shirley Stacie R. Shirley Executive Vice President, Chief Financial Officer and Treasurer  Exhibit 32.1CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OFTUESDAY MORNING CORPORATION PURSUANT TO 18 U.S.C. §1350I, Steven R. Becker, the Chief Executive Officer of Tuesday Morning Corporation, hereby certify that to the best of my knowledge and belief: 1.The Annual Report on Form 10‑K of Tuesday Morning Corporation for the fiscal year ended June 30, 2018 fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the above‑mentioned report fairly presents, in all material respects, the financial condition and results ofoperations of Tuesday Morning Corporation. Date: August 21, 2018By: /s/ Steven R. Becker Steven R. Becker Chief Executive Officer  Exhibit 32.2CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OFTUESDAY MORNING CORPORATION PURSUANT TO 18 U.S.C. §1350I, Stacie R Shirley, the Executive Vice President, Chief Financial Officer and Treasurer of Tuesday Morning Corporation, hereby certify that to the bestof my knowledge and belief: 1.The Annual Report on Form 10‑K of Tuesday Morning Corporation for the fiscal year ended June 30, 2018 fully complies with therequirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the above‑mentioned report fairly presents, in all material respects, the financial condition and results ofoperations of Tuesday Morning Corporation. Date: August 21, 2018By: /s/ Stacie R. Shirley Stacie R. Shirley Executive Vice President, Chief Financial Officer and Treasurer 

Continue reading text version or see original annual report in PDF format above