| Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Presentation Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. The fiscal year periods for each of the last three fiscal years consisted of the 52 weeks ended April 30, 2022 (“Fiscal 2022”), 52 weeks ended May 1, 2021 (“Fiscal 2021”), and 53 weeks ended May 2, 2020 (“Fiscal 2020”). Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year. As discussed in Part II - Item 8. Financial Statements and Supplementary Data - Note 1. Organization , our business experienced an unprecedented and significant impact as a result of the COVID-19 pandemic. The impact of the COVID-19 pandemic on our operations affects the comparability of our results of operations and cash flows. Restatement - Fiscal 2021 Consolidated Financial Statements We identified certain out of period adjustments related primarily to the recognition of Income tax benefit related to the recording of an additional deferred tax valuation allowance, and Restructuring and other charges related to severance costs, for the 52 weeks ended May 1, 2021, the 13 weeks ended July 31, 2021, the 26 weeks ended October 30, 2021 and the 39 weeks ended January 29, 2022. The adjustments did not impact Net cash flows provided by operating activities, Net cash flows used in investing activities, or Net cash flows used in financing activities for the periods noted. The impact of the adjustments identified are disclosed as follows: Fiscal 2021 52 weeks ended May 1, 2021 As Reported Adjustment Restated Statement of Operations Restructuring and other charges $ 9,960 $ 718 $ 10,678 Operating loss $ (176,176) $ (718) $ (176,894) Loss before income taxes $ (184,263) $ (718) $ (184,981) Income tax benefit $ (52,476) $ 7,305 $ (45,171) Net loss $ (131,787) $ (8,023) $ (139,810) Basic EPS $ (2.65) $ (0.16) $ (2.81) Diluted EPS $ (2.65) $ (0.16) $ (2.81) As of May 1, 2021 Balance Sheet As Reported Adjustment Restated Deferred tax assets, net $ 23,248 $ (7,305) $ 15,943 Total assets $ 1,038,418 $ (7,305) $ 1,031,113 Accrued liabilities $ 92,871 $ 718 $ 93,589 Total current liabilities $ 372,962 $ 718 $ 373,680 Total liabilities $ 737,384 $ 718 $ 738,102 Accumulated deficit $ (414,614) $ (8,023) $ (422,637) Total stockholders' equity $ 301,034 $ (8,023) $ 293,011 Total liabilities and stockholders' equity $ 1,038,418 $ (7,305) $ 1,031,113 Restatement - Fiscal 2022 Interim Financial Statements (Unaudited) Fiscal 2022 13 weeks ended July 31, 2021 26 weeks ended October 30, 2021 39 weeks ended January 29, 2022 As Adjustment Restated As Adjustment Restated As Adjustment Restated Statement of Operations Restructuring and other charges $ 2,623 $ (718) $ 1,905 $ 3,739 $ (718) $ 3,021 $ 3,785 $ (718) $ 3,067 Operating loss $ (41,453) $ 718 $ (40,735) $ (16,864) $ 718 $ (16,146) $ (49,999) $ 718 $ (49,281) Loss before income taxes $ (43,947) $ 718 $ (43,229) $ (21,622) $ 718 $ (20,904) $ (57,808) $ 718 $ (57,090) Net loss $ (44,346) $ 718 $ (43,628) $ (21,818) $ 718 $ (21,100) $ (58,619) $ 718 $ (57,901) Basic EPS $ (0.86) $ 0.01 $ (0.85) $ (0.42) $ 0.01 $ (0.41) $ (1.13) $ 0.01 $ (1.12) Diluted EPS $ (0.86) $ 0.01 $ (0.85) $ (0.42) $ 0.01 $ (0.41) $ (1.13) $ 0.01 $ (1.12) As of July 31, 2021 As of October 30, 2021 As of January 29, 2022 Balance Sheet As Adjustment Restated As Adjustment Restated As Adjustment Restated Deferred tax assets, net $ 23,248 $ (7,305) $ 15,943 $ 23,248 $ (7,305) $ 15,943 $ 22,918 $ (7,305) $ 15,613 Total assets $ 1,251,315 $ (7,305) $ 1,244,010 $ 1,259,515 $ (7,305) $ 1,252,210 $ 1,274,035 $ (7,305) $ 1,266,730 Accumulated deficit $ (458,960) $ (7,305) $ (466,265) $ (436,432) $ (7,305) $ (443,737) $ (473,233) $ (7,305) $ (480,538) Total stockholders' equity $ 256,595 $ (7,305) $ 249,290 $ 279,494 $ (7,305) $ 272,189 $ 244,765 $ (7,305) $ 237,460 Total liabilities and stockholders' equity $ 1,251,315 $ (7,305) $ 1,244,010 $ 1,259,515 $ (7,305) $ 1,252,210 $ 1,274,035 $ (7,305) $ 1,266,730 Consolidation The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents We consider all short-term, highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted Cash As of April 30, 2022, we had restricted cash of $11,545, comprised of $10,649 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $897 in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans. As of May 1, 2021, we had restricted cash of $8,790, comprised of $7,893 in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the merchandising partnership agreement and $897 in other noncurrent assets in the consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans. Accounts Receivable Receivables represent customer, private and public institutional and government billings (colleges, universities and other financial aid providers), credit/debit card receivables, advances for book buybacks, advertising and other receivables due within one year. The increase in trade accounts receivable is primarily due to the growth of our of First Day inclusive access offerings, where cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. The increase in other receivables is primarily due to vendor reimbursements. Components of accounts receivables are as follows: As of April 30, 2022 May 1, 2021 Trade accounts $ 102,358 $ 99,583 Advances for book buybacks 2,292 2,901 Credit/debit card receivables 5,129 4,433 Other receivables 27,260 14,155 Total receivables, net $ 137,039 $ 121,072 Accounts receivable are presented on our consolidated balance sheets net of allowances. An allowance for doubtful accounts is determined through an analysis of the aging of accounts receivable and assessments of collectability based on historical trends, the financial condition of our customers and an evaluation of economic conditions. We write-off uncollectible trade receivables once collection efforts have been exhausted and record bad debt expenses related to textbook rentals that are not returned and we are unable to successfully charge the customer. Allowance for doubtful accounts were $2,243, and $3,594 as of April 30, 2022 and May 1, 2021, respectively. Merchandise Inventories Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand. Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories. There were no LIFO adjustments in Fiscal 2022, Fiscal 2021 and Fiscal 2020. For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. The Retail Segment fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases textbooks from outside suppliers and publishers. The Retail Segment's four largest suppliers, excluding the supply sourced from our Wholesale Segment, accounted for approximately 30% of our merchandise purchased during the 52 weeks ended April 30, 2022. For our Wholesale Segment, the four largest suppliers, excluding textbooks purchased from students at our Retail Segment's bookstores, accounted for approximately 27% of merchandise purchases during the 52 weeks ended April 30, 2022. As contemplated by the merchandising partnership agreement, we sold our logo and emblematic general merchandise inventory to FLC and received proceeds of $41,773, and recognized a merchandise inventory loss on the sale of $10,262 in cost of goods sold in the consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment. The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $1,906, and recognized a merchandise inventory loss on the sale of $434 in cost of goods sold in the condensed consolidated statement of operations for the Retail Segment. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 1. Organization. Additionally, during the 52 weeks ended May 1, 2021, we also recognized a merchandise inventory write-off of $4,698 in cost of goods sold in the statement of operations for the Retail Segment related to our initiative to exit certain product offerings and streamline/rationalize our overall non-logo general merchandise product assortment resulting from the centralization of our merchandising decision-making during the year. Textbook Rental Inventories Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost. Cloud Computing Arrangements Implementation costs incurred in a cloud computing arrangement (or hosting arrangement) that is a service contract are amortized to hosting expense over the term of the arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. Implementation costs are included in prepaid expenses and other assets in the consolidated balance sheets and amortized to selling and administrative expense in the consolidated statement of operations. Implementation costs incurred in cloud computing arrangements reflected in prepaid and other assets in the consolidated balance sheets were $13,294 and $10,516 as of April 30, 2022 and May 1, 2021, respectively. We had $3,179, $283, and $96 of amortization of implementation costs in selling and administrative expense in the consolidated statement of operations, for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively. Property and Equipment Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over estimated useful lives. Maintenance and repairs are expensed as incurred, however major maintenance and remodeling costs are capitalized if they extend the useful life of the asset. We had $31,785, $35,024, and $42,550, of depreciation expense in the consolidated statement of operations for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively. Content development costs are primarily related to bartleby.com textbook solutions which was launched in Fiscal 2019. Content amortization is computed using the straight-line method over estimated useful lives. Amortization of content development costs is recorded to cost of goods sold. We had $5,454, $5,034, and $4,082, of content amortization expense in the consolidated statement of operations for the 52 weeks ended April 30, 2022, 52 weeks ended May 1, 2021, and 53 weeks ended May 2, 2020, respectively. Components of property and equipment are as follows: As of Useful Life April 30, 2022 May 1, 2021 Property and equipment: Leasehold improvements (a) $ 125,462 $ 131,784 Machinery, equipment and display fixtures 3 - 5 252,582 247,979 Computer hardware and capitalized software costs (b) 163,963 152,941 Office furniture and other 2 - 7 64,375 62,031 Content development costs 3 - 5 34,867 25,526 Construction in progress 3,710 4,444 Total property and equipment 644,959 624,705 Less accumulated depreciation and amortization 550,887 535,533 Total property and equipment, net $ 94,072 $ 89,172 (a) Leasehold improvements are capitalized and depreciated over the shorter of the lease term or the useful life of the improvements, ranging from 1 - 15 years. (b) System costs are capitalized and amortized over their estimated useful lives, from the date the systems become operational. Purchased software is generally amortized over a period of between 2 - 5 years. Intangible Assets Amortizable intangible assets as of April 30, 2022 and May 1, 2021 are as follows: As of April 30, 2022 Amortizable intangible assets Remaining Gross Accumulated Total Customer relationships 8 - 12 $ 253,528 $ (128,229) $ 125,299 Content 1 19,400 (17,375) 2,025 Technology 1 9,500 (9,100) 400 Other (a) 1 - 6 8,737 (6,837) 1,900 $ 291,165 $ (161,541) $ 129,624 As of May 1, 2021 Amortizable intangible assets Remaining Gross Accumulated Total Customer relationships 9 - 13 $ 263,168 $ (122,565) $ 140,603 Content 1 - 2 19,400 (13,495) 5,905 Technology 1 9,500 (7,500) 2,000 Other (a) 1 - 7 8,930 (6,534) 2,396 $ 300,998 $ (150,094) $ 150,904 (a) Other consists of recognized intangibles for non-compete agreements, trade names, and favorable leasehold interests. All amortizable intangible assets are being amortized over their useful life on a straight-line basis. Aggregate Amortization Expense: For the 52 weeks ended April 30, 2022 $ 17,596 For the 52 weeks ended May 1, 2021 $ 17,943 For the 53 weeks ended May 2, 2020 $ 19,310 Estimated Amortization Expense: (Fiscal Year) 2023 $ 13,066 2024 $ 11,201 2025 $ 10,848 2026 $ 10,848 2027 $ 10,790 After 2027 $ 72,871 For additional information about intangible assets, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies . Leases We recognize lease assets and lease liabilities on the consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by FASB ASC 842, Leases (Topic 842). We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 8. Leases . Impairment of Long-Lived Assets As of April 30, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $94,072, $286,584, $129,624, and $23,971, respectively, on our consolidated balance sheet. As of May 1, 2021, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $89,172, $240,456, $150,904, and $29,105, respectively, on our consolidated balance sheet. These amortizable intangible assets relate primarily to our customer and bookstore relationships with our colleges and university clients, and technology acquired. For additional information related to amortizable intangibles, see Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Intangible Assets . We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets . We evaluate the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, we first compared the carrying amount of the asset group to the estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value. Our business has been significantly negatively impacted by the ongoing COVID-19 pandemic during Fiscal 2022 and Fiscal 2021, as many schools continued to adjust their learning models and on-campus activities. Many of the trends observed during Fiscal 2021 continued into Fiscal 2022, as fewer students returned to campus and enrollments declined, including enrollments at community colleges and by international students. Although many academic institutions have reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales. These combined events continue to impact the Company’s course materials and general merchandise business. During the third quarter of Fiscal 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6,411 (both pre-tax and after-tax), comprised of $739, $1,793, $3,668 and $211 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations. During the third quarter of Fiscal 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment. Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27,630, $20,506 after-tax, comprised of $5,085, $13,328, $6,278 and $2,939 of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the consolidated statement of operations. The fair value of the impaired long-lived assets were determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. The significant assumptions used in the income approach included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and discount rate. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 6. Fair Value Measurements . In the first quarter of Fiscal 2020, we recorded an impairment loss (non-cash) of $433 in the Retail segment related to net capitalized development costs for a project which are not recoverable. During the fourth quarter of Fiscal 2020, in conjunction with COVID-19 related campus store closures, we evaluated certain of our long-lived assets associated with our Retail and Wholesale segments for impairment. Based on the results of the tests, for the Retail segment, we recognized an impairment loss of $587 related to store-level assets in restructuring and other charges. These long-lived assets were not recoverable and had a de minimis fair value, as determined using an income approach (Level 3 input), resulting in a non-cash impairment charge for the full carrying value of those long-lived assets. Goodwill The costs in excess of net assets of businesses acquired are carried as goodwill in the accompanying consolidated balance sheets. In accordance with ASC 350-10, Intangibles - Goodwill and Other , we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value. As of both April 30, 2022 and May 1, 2021, we had $0, $0 and $4,700 of goodwill on our consolidated balance sheets related to our Retail, Wholesale, and DSS reporting units, respectively. During the third quarter of Fiscal 2022, Fiscal 2021 and Fiscal 2020, we completed our annual goodwill impairment test and concluded that the fair value of the DSS reporting unit was determined to exceed the carrying value of the reporting unit; therefore, no goodwill impairment was recognized. As of April 30, 2022, goodwill of approximately $60,910 was deductible for federal income tax purposes. This is higher than the goodwill balance reflected on the consolidated balance sheet as of April 30, 2022 due to impairment losses recorded in Fiscal 2018 and Fiscal 2019. Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment of assets and liabilities to reporting units; assignment of goodwill to reporting units; and the determination of the fair value of each reporting unit. In performing the valuation, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. We estimated the fair value of our reporting units using a weighting of fair values derived from the income approach. Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated future cash flows. Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates. We also make certain forecasts about future economic conditions, interest rates, market data, and other observable trends, such as comparable store sales trends, recent changes in publisher relationships, and development of innovative digital products and services in the rapidly changing education landscape. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows. Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates for a discussion of key assumptions used in our testing. Revenue Recognition and Deferred Revenue Product sales and rentals The majority of our revenue is derived from the sales of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 3. Revenue. Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold. Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale. Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete. We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021. We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year. Service and other revenue Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers. Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration. Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions. Cost of Sales Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses. Selling and Administrative Expenses Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive p |
