Microsoft Investment	6 Months Ended
Nov. 01, 2014
Microsoft Investment	(14) Microsoft Investment On April 27, 2012, the Company entered into an investment agreement between the Company, Morrison Investment Holdings, Inc. (Morrison), and Microsoft Corporation (Microsoft) pursuant to which the Company would form a Delaware limited liability company (NOOK Media), and transfer to NOOK Media the Company’s digital device, digital content and college bookstore businesses and NOOK Media would sell to Morrison, and Morrison would purchase, 300,000 convertible preferred membership interests in NOOK Media (Series A Preferred) for an aggregate purchase price of $300,000. Concurrently with its entry into this agreement, the Company also entered into a commercial agreement with Microsoft, pursuant to which, among other things, NOOK Media would develop and distribute a Windows 8 application for eReading and digital content purchases, and an intellectual property license and settlement agreement with Microsoft and Microsoft Licensing GP. The parties closed Morrison’s investment in NOOK Media and the commercial agreement became effective on October 4, 2012. On December 3, 2014, Morrison, Microsoft, the Company and NOOK Media Inc. entered into agreements pursuant to which Morrison’s interest in NOOK Media was purchased by NOOK Media Inc. and the Microsoft commercial agreement was terminated effective as of such date. Pursuant to the Purchase Agreement (the Purchase Agreement) among the Company, NOOK Media Inc., Morrison, and Microsoft, NOOK Media Inc. purchased from Morrison, and Morrison sold, all of its $300,000 convertible Series A preferred limited liability company interest in NOOK Media in exchange for an aggregate purchase price of $124,850 consisting of (i) $62,425 in cash and (ii) 2,737,290 shares of common stock, par value $.001 per share, of the Company. The Purchase Agreement closed on December 4, 2014. As a condition to closing, the parties entered into a Digital Business Contingent Payment Agreement, pursuant to which Microsoft became entitled to 22.7% of the proceeds from, among other events or transactions, any future dividends or other distributions to NOOK Media Inc. from the Company’s digital business until the date that is three years from the transaction’s closing, subject to a one year extension under certain circumstances, and the sale of the Company’s digital business until the date that is three years from the closing, subject to a one year extension under certain circumstances. As a further condition to closing, the parties entered into a Registration Rights Agreement of Barnes & Noble, Inc., pursuant to which Microsoft became entitled to certain customary registration rights. *Investment Agreement* Pursuant to the agreement, Microsoft invested $300,000 in NOOK Media in exchange for 300,000 Series A Preferred interests, representing approximately 17.6% of the common membership interests in NOOK Media on an as-converted basis as of closing. Following Microsoft’s investment, the Company retained the common membership interest in NOOK Media, representing approximately 82.4% of the common membership interests in NOOK Media (after giving effect to the conversion of the Series A Preferred interests into common membership interests) as of closing. The investment agreement is classified as temporary equity in the mezzanine section of the balance sheet between liabilities and permanent equity, net of investment fees. The temporary equity designation was due to a potential put feature after five years from the closing of the investment agreement on the preferred membership interests. The preferred membership interests had a liquidation preference equal to the original investment. *Commercial Agreement* Under the commercial agreement, NOOK Media has developed certain applications for Windows 8 for purchasing and consumption of digital reading content. The commercial agreement also required NOOK Media to use its good faith effort to undertake an international expansion of the digital business. As part of the commercial agreement, NOOK Media and Microsoft shared in the revenues, net of certain items, from digital content purchased from NOOK Media by customers using the NOOK Media Windows 8 applications or through certain Microsoft products and services that were developed and designed to interact with the NOOK Media online bookstore. Microsoft has made and was obligated to continue to make certain guaranteed advance payments to NOOK Media in connection with such revenue sharing. For each of the first three years after the launch of such application for Windows 8, those advance payments were equal to $60,000 per year. Microsoft also has paid and was obligated to continue to pay to NOOK Media $25,000 each year for the first five years of the term for purposes of assisting NOOK Media in acquiring local digital reading content and technology development in the performance of NOOK Media’s obligations under the commercial agreement. The guaranteed advance payments in connection with revenue sharing as well as the amounts received for purposes of assisting NOOK Media in acquiring local digital reading content and technology development received from Microsoft were treated as debt in accordance with ASC 470-10-25-2, Sales of Future Revenues or Various Other Measures of Income. The Company estimated the cash flows associated with the commercial agreement and was amortizing the discount on the debt to interest expense over the term of the agreement in accordance with ASC 835-30-35-2, The Interest Method. Notwithstanding this treatment, the limited liability company agreement of NOOK Media provides that, under certain conditions, partnership losses or deductions can be allocated for income tax purposes to Microsoft in respect of amounts advanced to NOOK Media under the terms of the commercial agreement. *Settlement and License Agreement* The patent agreement provides for Microsoft and its subsidiaries to license to the Company and its affiliates certain intellectual property in exchange for royalty payments based on sales of certain devices. Additionally, the Company and Microsoft dismissed certain outstanding patent litigation between the Company, Microsoft and their respective affiliates in accordance with the settlement and license agreement. The Company recorded the royalty expense on NOOK^® sales in the statement of operations in cost of sales and occupancy with no expense or liability for the sale of devices prior to this agreement.

(14) Microsoft Investment

On April 27, 2012, the Company entered into an investment agreement between the Company, Morrison Investment Holdings, Inc. (Morrison), and Microsoft Corporation (Microsoft) pursuant to which the Company would form a Delaware limited liability company (NOOK Media), and transfer to NOOK Media the Company’s digital device, digital content and college bookstore businesses and NOOK Media would sell to Morrison, and Morrison would purchase, 300,000 convertible preferred membership interests in NOOK Media (Series A Preferred) for an aggregate purchase price of $300,000.

Concurrently with its entry into this agreement, the Company also entered into a commercial agreement with Microsoft, pursuant to which, among other things, NOOK Media would develop and distribute a Windows 8 application for eReading and digital content purchases, and an intellectual property license and settlement agreement with Microsoft and Microsoft Licensing GP.

The parties closed Morrison’s investment in NOOK Media and the commercial agreement became effective on October 4, 2012.

On December 3, 2014, Morrison, Microsoft, the Company and NOOK Media Inc. entered into agreements pursuant to which Morrison’s interest in NOOK Media was purchased by NOOK Media Inc. and the Microsoft commercial agreement was terminated effective as of such date. Pursuant to the Purchase Agreement (the Purchase Agreement) among the Company, NOOK Media Inc., Morrison, and Microsoft, NOOK Media Inc. purchased from Morrison, and Morrison sold, all of its $300,000 convertible Series A preferred limited liability company interest in NOOK Media in exchange for an aggregate purchase price of $124,850 consisting of (i) $62,425 in cash and (ii) 2,737,290 shares of common stock, par value $.001 per share, of the Company. The Purchase Agreement closed on December 4, 2014. As a condition to closing, the parties entered into a Digital Business Contingent Payment Agreement, pursuant to which Microsoft became entitled to 22.7% of the proceeds from, among other events or transactions, any future dividends or other distributions to NOOK Media Inc. from the Company’s digital business until the date that is three years from the transaction’s closing, subject to a one year extension under certain circumstances, and the sale of the Company’s digital business until the date that is three years from the closing, subject to a one year extension under certain circumstances. As a further condition to closing, the parties entered into a Registration Rights Agreement of Barnes & Noble, Inc., pursuant to which Microsoft became entitled to certain customary registration rights.

Investment Agreement

Pursuant to the agreement, Microsoft invested $300,000 in NOOK Media in exchange for 300,000 Series A Preferred interests, representing approximately 17.6% of the common membership interests in NOOK Media on an as-converted basis as of closing. Following Microsoft’s investment, the Company retained the common membership interest in NOOK Media, representing approximately 82.4% of the common membership interests in NOOK Media (after giving effect to the conversion of the Series A Preferred interests into common membership interests) as of closing. The investment agreement is classified as temporary equity in the mezzanine section of the balance sheet between liabilities and permanent equity, net of investment fees. The temporary equity designation was due to a potential put feature after five years from the closing of the investment agreement on the preferred membership interests. The preferred membership interests had a liquidation preference equal to the original investment.

Commercial Agreement

Under the commercial agreement, NOOK Media has developed certain applications for Windows 8 for purchasing and consumption of digital reading content. The commercial agreement also required NOOK Media to use its good faith effort to undertake an international expansion of the digital business.

As part of the commercial agreement, NOOK Media and Microsoft shared in the revenues, net of certain items, from digital content purchased from NOOK Media by customers using the NOOK Media Windows 8 applications or through certain Microsoft products and services that were developed and designed to interact with the NOOK Media online bookstore. Microsoft has made and was obligated to continue to make certain guaranteed advance payments to NOOK Media in connection with such revenue sharing. For each of the first three years after the launch of such application for Windows 8, those advance payments were equal to $60,000 per year. Microsoft also has paid and was obligated to continue to pay to NOOK Media $25,000 each year for the first five years of the term for purposes of assisting NOOK Media in acquiring local digital reading content and technology development in the performance of NOOK Media’s obligations under the commercial agreement.

The guaranteed advance payments in connection with revenue sharing as well as the amounts received for purposes of assisting NOOK Media in acquiring local digital reading content and technology development received from Microsoft were treated as debt in accordance with ASC 470-10-25-2, Sales of Future Revenues or Various Other Measures of Income. The Company estimated the cash flows associated with the commercial agreement and was amortizing the discount on the debt to interest expense over the term of the agreement in accordance with ASC 835-30-35-2, The Interest Method. Notwithstanding this treatment, the limited liability company agreement of NOOK Media provides that, under certain conditions, partnership losses or deductions can be allocated for income tax purposes to Microsoft in respect of amounts advanced to NOOK Media under the terms of the commercial agreement.

Settlement and License Agreement

The patent agreement provides for Microsoft and its subsidiaries to license to the Company and its affiliates certain intellectual property in exchange for royalty payments based on sales of certain devices. Additionally, the Company and Microsoft dismissed certain outstanding patent litigation between the Company, Microsoft and their respective affiliates in accordance with the settlement and license agreement. The Company recorded the royalty expense on NOOK^® sales in the statement of operations in cost of sales and occupancy with no expense or liability for the sale of devices prior to this agreement.