Discontinued Operations

12 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE D- DISCONTINUED OPERATIONS

Major Categories of Assets and Liabilities Sold

On January 27, 2011, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Web Merchants, Inc., a Delaware corporation (“WMI”) and Fyodor Petrenko and Dmitrii Spetetchii, the holders of 100% of WMI’s capital stock (the “WMI Shareholders”), to acquire 100% of WMI’s issued and outstanding equity ownership in exchange for 28,394,400 shares of our common stock to the WMI Shareholders.  Dmitrii Spetetchii also received $100,000 in cash, which represented $79,000 for the repayment of a loan to WMI and $21,000 in consideration for signing a non-compete agreement with the Company.  Pursuant to the Purchase Agreement, WMI was to operate as a wholly owned subsidiary of the Company.

Effective October 1, 2011, the Company consummated the sale of its interest in its subsidiary WMI to Web Merchants Atlanta, LLC, an entity controlled by the President and former majority shareholder of WMI, Fyodor Petrenko. The sale took place pursuant to the terms of a definitive Stock Purchase Agreement (the “WMI Sale Agreement”).

Effective October 1, 2011, approximately 25.4 million shares of Liberator common stock owned by Mr. Petrenko were surrendered by Mr. Petrenko and placed into escrow until certain outstanding loans of the Company were either satisfied or WMI and Mr. Petrenko were provided with a written release of any liability as a guarantor. On February 7, 2012, the Company obtained the written releases described in the escrow agreement and the 25,394,400 shares were disbursed from escrow to the Company and the shares were retired.

Also effective at the closing of the transaction, (a) Fyodor Petrenko resigned as a director and Executive Vice President of the Company, and Rufina Bulatova resigned as Vice President - Online Marketing of the Company (b) the Voting Agreement between the Company, Louis S. Friedman and Fyodor Petrenko, dated January 27, 2011, was cancelled, and (c) the Employment Agreement between the Company and Fyodor Petrenko, dated January 27, 2011, was terminated and cancelled.

At October 1, 2011, the major categories of assets and liabilities of WMI were comprised of the following:

	October 1, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	170,572
Accounts receivable, net		77,828
Inventories, net		868,275
Prepaid expenses		54,663
Total current assets		1,171,338
Equipment, net		49,446
Intangible assets, net		836,260
Goodwill		1,633,592
Total assets	$	3,690,636
LIABILITIES
Current liabilities:
Accounts payable	$	695,224
Accrued compensation		24,381
Accrued expenses and interest		38,797
Total liabilities	$	758,402

The following table sets forth the components of discontinued operations:

	For the Period July 1, 2011 to October 1, 2011
Net sales	$	2,626,608
Cost of sales		1,739,277
Gross profit		887,331
Advertising expenses		315,551
Other sales and marketing expenses		376,693
General and administrative expenses		216,117
Depreciation and amortization expenses		5,011
Total operating expenses		913,372
Loss from Operations of Discontinued Operations	$	(26,041	)