Where exactly do you see an error here?
And the implication is done like one would except, so if you have two state sets A and B and you want to compute States(A -> B) then the result is:
B U (S \ A) with S being the complete state set S := {s0, ..., s7}
So state si is part of States(A -> B) if either si is part of set B or si is not part of set A. Or you can put it like that:
If a state si is part of set A then it must be also part of set B. If this condition holds true, then si is also element of States(A -> B) otherwise it isn't.