10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

or

☐  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________________________ to____________________________

Commission File Number: 001-37459

YULONG ECO-MATERIALS LIMITED

(Exact name of registrant as specified in its charter)

Cayman Islands	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer  Identification Number)
Eastern End of Xiwuzhuang Village Jiaodian Town, Xinhua Area Pingdingshan, Henan Province People’s Republic of China
(Address of principal executive offices)	(Zip Code)

+86-375-8888988

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 the preceding 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 past 90 days. Yes þ     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 submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ     No ☐

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 growth company. See the 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	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	þ
		Emerging growth 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 any new 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 þ

As of August 31, 2017, the registrant had 12,055,324 shares of ordinary shares outstanding.

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION	49
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51
SIGNATURES		52

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements contained in this report, other than statements of historical facts, that address future activities, events or developments, are forward-looking statements, including, but not limited to, statements containing the words “believe,” “anticipate,” “expect,” “project,” “may,” “might,” “will,” the negative forms thereof, and words of similar import. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by forward-looking statements depending on a variety of important factors, including, but not limited to, weather, local, regional, national and global coke and coal price fluctuations, levels of coal and coke production in the region, the demand for raw materials such as iron and steel which require coke to produce, availability of financing and interest rates, competition, changes in, or failure to comply with, government regulations, costs, uncertainties and other effects of legal and other administrative proceedings, and other risks and uncertainties. Such risks and uncertainties are described in greater details in the “Risk Factors” section beginning on page 16 of the registrant’s annual report on Form 10-K for the year ended June 30, 2016 filed with the Securities and Exchange Commission (the “SEC”) on August 25, 2017 (the “Annual Report”).

Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the registrant’s business operations. The registrant is not undertaking to update or revise any forward-looking statement, whether as a result of new information, future events or circumstances or otherwise.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			June 30,
	2016			2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,663,943		$	2,734,540
Restricted cash		500,000			500,000
Accounts receivable, net		4,922,463			5,728,334
Deposits and other receivables		1,144,851			1,002,713
Inventories		899,092			364,891
Advances to suppliers		225,932			222,239
Prepaid expenses and other		108,658			108,716
Total current assets		10,464,939			10,661,433
PROPERTY, PLANT AND EQUIPMENT, net		7,270,775			7,425,445
OTHER ASSETS
Other receivables, non-current		15,670,691			15,727,696
Prepayments		3,722			15,050
Intangible assets, net		2,143,248			2,163,791
Deferred tax asset, net		488,346			388,970
Long-term deposit		10,677			10,716
Prepaid expenses, non-current		50,000			50,000
Total other assets		18,366,684			18,356,223
Total assets	$	36,102,398		$	36,443,101
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loan - bank	$	5,653,445		$	5,674,011
Accounts payable, trade		1,661,167			1,710,881
Other payables and accrued liabilities		8,322,086			7,601,354
Other payables - related parties		1,688,383			1,965,237
Customer deposits		4,404,720			2,571,846
Taxes payable		1,628,501			1,498,083
Capital lease obligations		4,076,315			4,062,291
Warrant liabilities		91,670			65,605
Total current liabilities		27,526,287			25,149,308
NON-CURRENT LIABILITIES
Capital lease obligations - non-current		-			28,852
Total liabilities		27,526,287			25,178,160
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, $0.00125 par value, 100,000,000 shares authorized, 12,055,324 and 11,997,184 shares issued and outstanding at September 30, 2016 and June 30, 2016, respectively		15,070			14,997
Subscription receivable		(10,000	)		(10,000	)
Additional paid-in capital		40,584,987			40,497,594
Statutory reserves		3,922,228			3,922,228
Stock to be issued		-			37,500
Retained earnings		(34,816,970	)		(31,978,194	)
Accumulated other comprehensive loss		(1,119,204	)		(1,219,184	)
Total equity		8,576,111			11,264,941
Total liabilities and equity	$	36,102,398		$	36,443,101

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

	For the Three Months Ended September 30,
	2016			2015
REVENUES
Bricks	$	585,470		$	4,035,101
Concrete		1,728,971			7,338,329
Recycling		489,589			1,977,438
TOTAL REVENUES		2,804,030			13,350,868
COST OF REVENUES
Bricks		411,691			1,785,624
Concrete		1,328,002			5,396,158
Recycling		153,108			723,325
TOTAL COST OF REVENUES		1,892,801			7,905,107
GROSS PROFIT		911,229			5,445,761
OPERATING EXPENSES:
Selling		79,821			144,648
General and administrative		1,906,720			778,625
Impairment loss on construction-in-progress		1,500,632			-
Total operating expenses		3,487,173			923,273
(LOSS)/INCOME FROM OPERATIONS		(2,575,944	)		4,522,488
OTHER (EXPENSE) INCOME, net
Bank charges		(452	)		-
Interest income		2,971			19,903
Interest expense		(196,140	)		(268,165	)
Change in fair value of warrant liabilities		(26,065	)		348,199
Foreign exchange transaction loss		-			(5,934	)
Other finance expense		-			(16,510	)
Other income (expense), net		74,645			49,334
Total other (expense) income, net		(145,041	)		126,827
(LOSS)/INCOME BEFORE INCOME TAXES		(2,720,985	)		4,649,315
PROVISION FOR INCOME TAXES		117,791			1,068,632
NET (LOSS)/INCOME		(2,838,776	)		3,580,683
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments		(697,613	)		(2,651,502	)
COMPREHENSIVE (LOSS)/INCOME	$	(3,536,389	)	$	929,181
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic and diluted		12,026,886			11,869,938
(LOSS) EARNINGS PER SHARE
Basic and diluted	$	(0.24	)	$	0.30

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended September 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,838,776	)	$	3,580,683
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation		146,003			568,014
Amortization		12,709			37,901
Deferred tax benefit		(100,856	)		(56,930	)
Change in fair value of warrant liabilities		26,065			(348,199	)
Stock-based compensation expense		49,966			135,000
Impairment loss on construction in progress		1,500,632			-
Provision for doubtful accounts		896,185			-
Change in operating assets and liabilities
Accounts receivable		(110,530	)		134,164
Deposits and other receivables		(145,873	)		(694,173	)
Inventories		(535,897	)		(148,072	)
Advances to suppliers		(4,502	)		(21,199	)
Prepaid expense and other		-			13,410
Other receivables – related parties		-			(159,600	)
Accounts payable, trade		(43,544	)		860,878
Other payables and accrued liabilities		678,627			(506,997	)
Payroll payable		66,257			-
Other payables – related parties		-			75,000
Customer deposits		1,843,478			1,596
Taxes payable		135,942			795,076
Net cash provided by operating activities		1,575,886			4,266,552
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for equipment, construction in progress and land use rights		(1,492,456	)		(149,303	)
Prepayments for construction-in-progress		-			(68,752	)
Net cash used in investing activities		(1,492,456	)		(218,055	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans - bank		-			5,027,400
Payments of short-term loans - bank		-			(5,187,000	)
Repayments to related parties		(272,258	)		(204,924	)
Principal payments on capital lease obligations		-			(311,248	)
Proceeds from issuance of IPO shares, net		-			11,510,157
Net cash (used in) provided by financing activities		(272,258	)		10,834,385
EFFECT OF EXCHANGE RATE ON CASH		(381,769	)		(1,029,044	)
CHANGES IN CASH AND CASH EQUIVALENTS		(570,597	)		13,853,838
CASH AND CASH EQUIVALENTS, beginning of period		3,234,540			16,470,299
CASH AND CASH EQUIVALENTS, end of period	$	2,663,943		$	30,324,137
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	129,555		$	833,464
Cash paid for interest	$	18,002		$	195,659
NON-CASH INVESTING AND FINANCING ACTIVITIES
Reclassification of construction-in-progress from prepayments-construction	$	-		$	191,587
Additions to property, plant and equipment, and construction-in-progress through other payables	$	-		$	800,621
Repayments from related parties offset with other payables-related parties	$	1,505,109		$	-
Conversion of shareholders' debt to 1,593,538 ordinary shares	$	-		$	9,959,613
Issuance of ordinary shares for deferred compensation	$	75,000		$	30,000
Valuation of 112,500 warrants allocated to warrant liabilities from additional paid-in capital	$	-		$	475,380
Reclassification of payables for litigations from other payables-related parties	$	-		$	205,908
Other receivables-related parties offset with other payables-related parties	$	2,010,128		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – Nature of business and organization

Yulong Eco-Materials Limited (“Yulong Eco-Materials” or the “Company”) is a holding company incorporated on March 10, 2011, under the laws of the Cayman Islands. The Company has no substantive operations other than owning all of the outstanding share capital of China Xing De (BVI) Limited (“Yulong BVI”). In turn, Yulong BVI is a holding company that owns all of the outstanding share capital of China Xing De (Hong Kong) Limited (“Yulong HK”). Yulong HK is also a holding company that owns all of the outstanding equity capital of Zhengzhou Xing De Enterprise Management & Consulting Co., Ltd. (“Yulong WFOE”).

The Company is a vertically integrated manufacturer of eco-friendly building products. The Company operates principally from the city of Pingdingshan, Henan Province, in the People’s Republic of China (the “PRC” or “China”). The Company produces fly-ash bricks and ready-mixed concrete, and in April 2015, launched its construction waste management, or CWM, business which includes hauling and processing construction waste, and producing crushed construction waste or recycled aggregates, and bricks made from recycled aggregates, or recycled bricks. All of the Company’s business activities are carried out by domestic Chinese companies that the Company controls through contractual arrangements as follows: (1) Henan Jianyida Industrial Co., Ltd. (“Yulong Bricks”), which carries out the bricks business, (2) Pingdingshan Hengji Concrete Co., Ltd. (“Yulong Concrete”) and Pingdingshan Hengji Industrial Co., Ltd. (“Yulong Transport”), which carry out the concrete business, and (3) Pingdingshan Xulong Renewable Resource Co., Ltd. (“Yulong Renewable”), which carries out the CWM business. The contractual arrangements are comprised of a series of agreements entered into by each of these four companies and their shareholders, on the one hand, and Yulong WFOE on the other hand (see “Contractual Arrangements” and “Note 3 – Variable Interest Entities” below).

On October 30, 2015, Pingdingshan Xulong Renewable Resource Co., Ltd. Shangqiu Branch was established and incorporated in the People’s Republic of China. The entity is wholly owned by Pingdingshan Xulong Renewable Resource Co., Ltd. (“Yulong Renewable”) and engages in construction waste hauling and processing for the city center in Shangqiu district.

Contractual Arrangements

Although current PRC regulations do not restrict or prohibit foreign investment in domestic Chinese companies that engage in businesses such as those of Yulong Bricks, Yulong Concrete, Yulong Transport and Yulong Renewable (each a “Yulong operating company” and collectively the “Yulong operating companies”), there is substantial uncertainty regarding the interpretation and application of such regulations. As such, the Yulong operating companies are controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements are a series of four agreements (collectively the “Contractual Arrangements”) which significant terms are as follows:

Exclusive Consulting Services and Operating Agreements

Pursuant to the exclusive consulting and service agreement among Yulong WFOE, each Yulong operating company and its shareholders, Yulong WFOE is engaged as exclusive provider of management consulting services to such Yulong operating company. For such services, the Yulong operating company agrees to pay service fees determined based on all of its net profit after tax payments to Yulong WFOE or Yulong WFOE has obligation to absorb all of the Yulong operating companies’ losses. The agreement remains in effect until and unless all parties agree to its termination. Until such termination, the Yulong operating company may not enter into another agreement for the provision of management consulting services without the prior consent of Yulong WFOE.

Option Agreements

Pursuant to the exclusive equity option agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders jointly and severally grant Yulong WFOE an option to purchase their equity interests in such Yulong operating company. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of such Yulong operating company, the shareholders are required to immediately return any amount in excess of the registered capital to Yulong WFOE or its designee. Yulong WFOE may exercise such option at any time until it has acquired all equity interests of such Yulong operating company, and freely transfer the option to any third party. The agreement will terminate at the earlier of (i) the date on which all of the equity interests of such Yulong operating company has been transferred to Yulong WFOE or its designee or (ii) the unilateral termination by Yulong WFOE.

4

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Equity Pledge Agreements

Pursuant to the equity interest pledge agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders pledge all of their equity interests in such Yulong operating company to Yulong WFOE as collateral to secure the obligations of such Yulong operating company under the exclusive consulting services and operating agreement. The shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Yulong WFOE’s interests, without Yulong WFOE’s prior approval. In the event of default, Yulong WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of such Yulong operating company. The agreement will terminate at the earlier of (i) the date the shareholders have transferred all of their pledged equity interests pursuant to the option agreement or (ii) two years from the satisfaction by such Yulong operating company of all its obligations under the exclusive consulting and service agreement.

Voting Rights Proxy and Financial Supporting Agreements

Pursuant to the voting rights proxy and financial supporting agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders have given Yulong WFOE an irrevocable proxy to act on their behalf on all matters pertaining to such Yulong operating company and to exercise all of their rights as shareholders of such Yulong operating company, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in such Yulong operating company. In consideration of such granted rights, Yulong WFOE agrees to provide the necessary financial support to such Yulong operating company whether or not such Yulong operating company incurs loss, and agrees not to request repayment if such Yulong operating company is unable to do so. The agreement will terminate at the earlier of (i) the date on which all of the equity interests of such Yulong operating company have been transferred to Yulong WFOE or (ii) the unilateral termination by Yulong WFOE.

As a result of the foregoing contractual arrangements, which give Yulong WFOE effective control of the Yulong operating companies, obligate Yulong WFOE to absorb all of the risk of loss from their activities, and enable Yulong WFOE to receive all of their expected residual returns, the Company accounts for each Yulong operating company as a variable interest entity (“VIE”). Additionally, as the parent company of Yulong WFOE, the Company is considered the primary beneficiary of the Yulong operating companies. Accordingly, the Company consolidates the accounts of the Yulong operating companies for the three months ended September 30, 2016 and 2015, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.

The accompanying condensed consolidated financial statements reflect the activities of Yulong Eco-Materials and each of the following entities:

Name	Background		Ownership
Yulong BVI	●	A British Virgin Islands company	100%
	●	Incorporated on June 15, 2011
Yulong HK	●	A Hong Kong company	100%
	●	Incorporated on July 21, 2011
Yulong WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)	100%
	●	Incorporated on September 2, 2011
	●	Registered capital of $9,935,303 fully funded
Yulong Bricks	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on September 20, 2006	arrangements
	●	Registered capital of $4,498,763 (RMB 30,000,000) fully funded
Yulong Concrete	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on December 7, 2004	arrangements
	●	Registered capital of $2,999,175 (RMB 20,000,000) fully funded
Yulong Transport	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on July 13, 2009	arrangements
	●	Registered capital of $1,501,087 (RMB 10,010,000) fully funded
Yulong Renewable	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on August 16, 2011	arrangements
	●	Registered capital of $8,997,526 (RMB 60,000,000) fully funded
	●	Commenced operation in April 2015

5

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 2 – Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended June 30, 2016, that was filed with the SEC on August 25, 2017.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and the VIEs. All intercompany transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation.

Use of estimates and assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and footnotes. Significant accounting estimates reflected in the condensed consolidated financial statements include the useful lives and impairment of property, plant and equipment, collectability of receivables, realization of deferred tax assets, inventory valuation, warrant liabilities, stock-based compensation, and the present value of the net minimum lease payments of the capital lease. Actual results could differ from these estimates.

Going concern consideration

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern basis. The going-concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue as a going concern depends on the liquidation of its current assets. The Company’s operation scale particularly Yulong Renewable was significantly downsized since the first quarter of fiscal year 2017 due to Environment Protection Act passed by the central government of PRC and Blue Sky Action Plan implemented by the Henan province, PRC. The remaining business of Yulong Bricks and Yulong Concrete has not sufficiently made up the cessation of Yulong Renewable’s business which raises a substantial doubt about the Company’s ability to continue as a going concern.

In an effort to maintain its financial position and operations, the Company has successfully entered into a remittance agreement with one of its vendors to refund the prepayment for one of its construction projects in an amount of $15.7 million (RMB104.5 million). Moreover, the Company is working to pursue the potential acquirers for Yulong Renewable’s business. Beginning January 2017, Yulong Bricks and Yulong Concrete gradually resumed their sales revenue by 15% from the Q1 and Q2 2017 level. The Company has initiated negotiations with its financial institutions and lessors to extend the due date of the loan and lease obligations. The founder has provided approximately $1.7 million (RMB 11.6 million) to fund the Company’s operations. The Company may also continue to raise fund through private placement or issuance of shares to support the Company’s operational needs. Management believes that the foregoing actions would enable the Company to continue as a going concern.

Foreign currency translation

The reporting currency of the Company is the U.S. dollar. The Company’s Chinese subsidiary and the VIEs use the local currency, Renminbi (RMB), as their functional currency as determined based on the criteria of ASC 830, Foreign Currency Translation. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China (the “PBOC”) at the end of the period. Income and expense accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the statement of equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income (loss) amounted to a loss of $(1,119,204) and $(1,219,184) as of September 30, 2016 and June 30, 2016, respectively. The balance sheet amounts, with the exception of equity, at September 30, 2016 and June 30, 2016 were translated at 6.67 RMB and 6.64 RMB to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rate applied to statements of operations and comprehensive (loss) income accounts for the three months ended September 30, 2016 and 2015 was 6.66 RMB and 6.27 RMB, respectively. Cash flows are also translated at the average translation rate for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

6

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits and time deposits placed with banks with state owned banks within the PRC and with banks in Hong Kong which are unrestricted as to withdrawal and use and have original maturities of less than three months.

Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions in Hong Kong may, from time to time, exceed Hong Kong Deposit Protection Board’s insured limits. As of September 30, 2016 and June 30, 2016, the Company had approximately $2,662,970 (RMB 17,758,018) and $2,734,015 (RMB 18,165,703), respectively, of cash deposits which were not covered by insurance. The Company has not experienced any losses in such accounts.

Restricted cash

Restricted cash consists of a third-party escrow account in the United States of America. The usage of the amount in the escrow account needs approval from the underwriter.

Accounts and other receivables

During the normal course of business, the Company extends unsecured credit to its customers and others. Management reviews its accounts and other receivables balances each reporting period to determine if an allowance for doubtful accounts is required. Customer accounts are considered past due over 90 days. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. Bad debts are written off against the allowance after all collection efforts have ceased. The Company recorded in an aggregate of approximately $4.8 million and $3.9 million of allowance of doubtful accounts against its accounts receivable and other receivables. The current year provision is based on the past due period over 9 months of its customers.

Inventories

Inventories consist of raw materials and finished goods and are stated at the lower of cost or market, as determined using the weighted average cost method. Management compares the cost of inventories with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost. On an ongoing basis, inventories are reviewed for potential write-down for estimated obsolescence or unmarketable inventories equal to the difference between the costs of inventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or market, it is not marked up subsequently based on changes in underlying facts and circumstances. As of September 30, 2016 and June 30, 2016, the Company determined that no reserves for obsolescence were necessary.

Advances to suppliers

The Company advances money to certain suppliers for raw material purchases. Such advances are interest-free and unsecured. Management regularly reviews the aging of such advances as well as delivery trends of purchased materials, and records an allowance when it believes that delivery of materials due is at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. No allowance for doubtful accounts was considered necessary at the balance sheet dates.

Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the useful lives of the assets are as follows:

	Useful Life
Buildings and improvements	10-30 years
Machinery and equipment	5-10 years
Transportation equipment	5-10 years
Office equipment	3-5 years

7

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company accounts for all significant leases as either operating or capital. At lease inception, if the lease meets any of the following four criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) lease term is equal to 75% or more of the estimated economic life of the leased property, or (d) the present value of the minimum lease payments is 90% or more of the fair value of the leased asset. Otherwise, the lease will be treated as an operating lease.

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the condensed consolidated statements of operations and comprehensive (loss) income.  Construction-in-progress represents labor costs, materials, and capitalized interest incurred in connection with the construction. Interest incurred during construction is capitalized into construction in progress. All other interest is expensed as incurred. No depreciation is provided for construction in progress until it is completed and placed into service. Expenditures for maintenance and repairs are charged to earnings as incurred while additions, renewals and betterments are capitalized.

Prepayments

Prepayments represent advances made to certain suppliers for equipment purchases or advance made to contractors in connection with the Company’s construction-in-progress. Management regularly reviews aging of prepayments and records an allowance when management believes collection of equipment or services to be performed due are at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. As of September 30, 2016 and June 30, 2016, we recorded $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) reserve for prepayments.

Intangible assets

Intangible assets are carried at cost less accumulated amortization.

The Company accounts for all significant leases of land use rights for purposes of classification as either operating or capital. At lease inception, if the lease meets either of the following two criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, or (b) bargain purchase option. Otherwise, the lease will be treated as an operating lease.

Intangible assets with finite useful lives are amortized using a straight-line method of amortization that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The original estimated useful life for the land use rights of the following Yulong operating companies is as follows:

Entity	Description of assets	Estimated useful life
Yulong Bricks	Land use right		50
Yulong Concrete	Land use right		50
Yulong Renewable	Land use right		50

Intangible assets are reviewed at least annually, more often when circumstances require, to determine whether their carrying values have become impaired. The Company considers an asset to be impaired if its carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  As of September 30, 2016 and June 30, 2016, the Company recorded $2,245,796 and $2,253,966 impairment loss on the land use right of Yulong Renewable due to Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC. Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. The Company placed an impairment reserve on the land use rights of Yulong Renewable.

Impairment for long-lived assets

Long-lived assets, including buildings and improvements, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, the Company reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. Due to the Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC in the fourth quarter of fiscal year 2016, Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. For the three months ended September 30, 2016, the Company recorded approximately $1.5 million (RMB 10 million) impairment loss on Yulong Renewable’s construction-in-progress. As of September 30, 2016 and June 30, 2016, the impairment reserve for the long-lived assets (including construction-in-progress) was $50.1 million (RMB 333.9 million) and $40.8 million (RMB 323.9 million).

8

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Fair Values of Financial Instruments

ASC Topic 825, Financial Instruments (“Topic 825”), requires disclosure of fair value information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The Company considers the carrying amount of cash, accounts receivable, other receivables, accounts payable, notes payable and other current liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company determined that the carrying value of the non-current capital lease obligations approximated their fair value using level 2 inputs by comparing the stated loan interest rate to the rate charged by the People’s Bank of China on similar loans.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016:

	Carrying value at September 30, 2016		Fair value measurement at September 30, 2016
			Level 1		Level 2		Level 3
Warrant liabilities	$	91,670	$	-	$	-	$	91,670

Certain inputs used in the valuation of the Company’s warrants are observable and therefore considered level 2. However, as the Company is a newly listed public reporting company and thus lacks historical volatility data, management concluded that level 3 fair valuation measurement is appropriate.

The following is a reconciliation of the beginning and ending balances of warrant liabilities measured at fair value on a recurring basis using observable inputs as of September 30, 2016:

	September 30, 2016
Beginning fair value	$	65,605
Realized loss recorded in earnings		26,065
Ending fair value	$	91,670

9

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue recognition

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition, regarding revenue recognition which specifies that revenue is realized or realizable and earned. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, the Company has no other obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

Revenue from the Company’s brick and concrete businesses represents the invoiced value of goods, net of a value added tax (“VAT”).

The Company sells concrete and bricks primarily to major local real estate development and/or construction companies. Sales agreements are signed with each customer. Each agreement has specific terms and conditions with the exception of delivery date and quantity, which are provided when the customer issues an order pursuant to the agreement. The Company does not sell products to customers on consignment basis. There is no right of return after products are delivered and accepted by the customer.

The Company also provides transportation services for its concrete customers. Revenue is recognized upon delivery of the concrete. Transportation services revenue is immaterial to the Company’s consolidated revenues for the periods presented in the accompanying condensed consolidated financial statements.

Revenue from the CWM business includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

CWM revenue also includes revenue from the following activities:

● Hauling construction waste. The Company operates a fleet of trucks to haul the waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling per truckload.

● Processing construction waste at mobile recycling stations. Revenue is recognized either per cubic meter of waste processed or when processing at a jobsite is completed, depending on the contract terms.

● Subcontracting waste hauling projects. The Company occasionally subcontracts waste hauling projects, whereby the subcontractors are the primary obligors to complete these projects, and the Company does not have any general credit risk as the services are prepaid by the customers. Sales and subcontracting costs from these subcontract arrangements are recorded at the net amount in accordance with ASC 605-45.

Recycling revenues includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

Recycling revenue also include hauling services of construction waste. The Company operates a fleet of trucks to haul construction waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling from the construction and demolition sites per truckloads.

Shipping and handling

Shipping and handling costs pertaining to raw material purchases are included in cost of revenue.

Shipping costs incurred in the delivery of products and depreciation expenses for transportation equipment (under Yulong Transport) are included in selling expense. Shipping costs amounted to $43,922 and $81,611 for the three months ended September 30, 2016 and 2015, respectively. Depreciation expense amounted to $8,008 and $37,219 for the three months ended September 30, 2016 and 2015, respectively.

10

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of September 30, 2016 and June 30, 2016, $2,662,970 and $2,734,016 were deposited with various major financial institutions located in the PRC, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. Historically, deposits in Chinese banks are secure due to state policy to protect depositor interests. However, China promulgated a Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures to provide for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the current Bankruptcy Law, a Chinese bank may file bankruptcy if it deems itself to be insolvent. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have intensified competition in many aspects, especially since the opening of the RMB business to foreign banks in late 2006. Therefore, the risk of bankruptcy at the institutions that the Company maintains deposits has increased. In the event of bankruptcy, the Company is unlikely to reclaim its deposits in full since it is unlikely to be classified as a secured creditor under PRC laws.

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of customer creditworthiness and ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses if necessary, and such losses have generally been within expectations.

Customer and vendor concentration risk

For the three months ended September 30, 2016, two customers accounted for 14% and 10% of the Company's total revenues. For the three months ended September 30, 2015, no customer accounted for more than 10% of the Company’s total revenues.

As of September 30, 2016, two customers accounted for 26% and 17% of the Company’s total accounts receivable. As of June 30, 2016, two customers accounted for 26% and 19% of the Company’s total accounts receivable, respectively.

For the three months ended September 30, 2016, four suppliers accounted for 27%, 17%, 17% and 16% of the Company’s total purchases, respectively. For the three months ended September 30, 2015, four suppliers accounted for 31%, 16%, 12% and 10% of the Company's total purchases, respectively.

As of September 30, 2016, four suppliers accounted for 20%, 19%, 13% and 10% of the Company’s accounts payable balances, respectively. As of June 30, 2016, five suppliers accounted for 21%, 19%, 16%, 16% and 11% of the Company’s accounts payable balances, respectively.

Income taxes

The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

11

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company applies ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

As of September 30, 2016, Yulong WFOE and the VIEs had each filed income tax returns in China for the years ended December 31, 2010 to 2015. All such tax returns are subject to examination by the Chinese taxing authorities.

Warrant liabilities

A contract is designated as an asset or a liability and is carried at fair value on a company’s balance sheet, with any changes in fair value recorded in a company’s results of operations.  The Company then determines which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability. The changes in the values of these instruments are shown in the accompanying condensed consolidated statements of operations and comprehensive (loss) income as “change in fair value of warrant liabilities”.

The Company adopted the provisions of an accounting standard regarding instruments that are indexed to an entity’s own stock.  This accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s ordinary shares and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument.  It provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception within the standards. All warrants issued with the strike price denominated in US dollar were recorded as derivative liability because the strike price of the warrants is denominated in US dollar, a currency other than the Company’s functional currency RMB.

(Loss) earnings per share

(Loss) earnings per share are calculated in accordance with ASC 260-10, Earnings per Share. Basic (loss) earnings per share are computed by dividing net (loss) income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period. Diluted (loss) earnings per ordinary share reflect the potential dilution that could occur if securities to issue ordinary shares were exercised. The dilutive effect of outstanding share-based awards is reflected in the diluted (loss) earnings per share by application of the treasury stock method.

Comprehensive (loss) income

Comprehensive (loss) income is defined to include all changes in shareholders’ equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220-10, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive (loss) income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company adopted ASU No. 2011-05 by presenting items of net (loss) income and other comprehensive (loss) income in one continuous statement, the condensed consolidated statements of operations and comprehensive (loss) income.

Employee benefit

The full-time employees of Yulong WFOE and the VIEs are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expense for the plans was $42,313 and $34,800 for the three months ended September 30, 2016 and 2015, respectively.

12

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Recently issued accounting pronouncements

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management is evaluating the effect, if any, on the Company’s financial position, results of operations or cash flows.

Going Concern Uncertainties: In August 2014, FASB issued ASU No. 2014-15, Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have material impact on our consolidated financial position and results of operations.

Inventory: In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.  The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016.  Early application is permitted for all entities and should be applied prospectively. We do not expect the adoption of ASU 2015-11 to have a material impact on our consolidated financial position and results of operations.

13

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Financial Instruments: In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The main objective in developing this ASU is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of the fiscal year of adoption for public entities if the entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company does not expect the adoption of ASU 2016-01 to have material impact on its financial position, results of operations or cash flows.

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The main objective is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for (1) public business entities, (2) not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and (3) employee benefit plans that file financial statements with the SEC. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2010. Early adoption is permitted for all entities. The Company does not expect the adoption of ASU 2016-02 to have material impact on its financial position, results of operations or cash flows.

Stock-based Compensation: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also requires the Company to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.

Statement of Cash Flows: In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which require that a statement of cash flows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a retrospective approach. As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the consolidated cash flow statements.

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.

Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or condition of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2017-09 on its condensed consolidated financial statements.

Except for the ASU above, in the period from January 1, 2017 to August 2017, the FASB has issued ASU No. 2017-01 through ASU 2017-011, which are not expected to have a material impact on the consolidated financial statements upon adoption.

Note 3 – Variable interest entities

On September 2, 2011, Yulong WFOE entered into the Contractual Arrangements with each Yulong operating company and its shareholders. The Contractual Arrangements were subsequently amended on April 21, 2014 with respect to all of the Yulong operating companies, and again on June 24, 2015, but only with respect to Yulong Renewable. The significant terms of the Contractual Arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result of the Contractual Arrangements, the Company classifies each Yulong operating company as a VIE.

14

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Yulong WFOE is deemed to have a controlling financial interest and be the primary beneficiary of each Yulong operating company because it has both of the following characteristics:

(1) The power to direct activities at each Yulong operating company that most significantly impact such entity’s economic performance, and

(2) The obligation to absorb losses of, and the right to receive benefits from, each Yulong operating company that could potentially be significant to such entity.

Pursuant to the Contractual Arrangements, each Yulong operating company pays service fees equal to all of its net profit after tax payments to Yulong WFOE. At the same time, Yulong WFOE is obligated to absorb all of their losses. The Contractual Arrangements are designed so that the Yulong operating companies operate for the benefit of Yulong WFOE and ultimately, the Company.

Accordingly, the accounts of the Yulong operating companies are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company’s financial statements.

The carrying amount of the VIEs’ consolidated assets and liabilities are as follows:

	September 30, 2016		June 30, 2016
Current assets	$	9,871,201	$	10,068,142
Property, plant and equipment, net		7,270,775		7,425,445
Other non-current assets		18,316,682		18,306,223
Total assets		35,458,658		35,799,810
Total liabilities		35,218,399		33,130,293
Net assets	$	240,259	$	2,669,517

The VIEs’ liabilities consist of the following:

	September 30, 2016		June 30, 2016
Current liabilities:
Short-term loan - banks	$	5,653,445	$	5,674,011
Accounts payable		1,661,167		1,710,881
Other payables and accrued liabilities		6,630,106		5,973,602
Payroll payable		611,219		546,990
Other payables - related parties		1,429,836		1,907,458
Customer deposits		4,404,720		2,571,846
Taxes payable		1,628,002		1,497,583
Capital lease obligations-current		4,076,314		4,062,291
Dividends payable		9,123,590		9,156,779
Total current liabilities		35,218,399		33,101,441
Non-current liabilities:
Capital lease obligations-non-current		-		28,852
Total non-current liabilities		-		28,852
Total liabilities	$	35,218,399	$	33,130,293

15

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The operating results of the VIEs are as follows:

	Three Months ended September 30,
	2016			2015
Revenue	$	2,804,030		$	13,350,868
Gross profit	$	911,229		$	5,445,761
(Loss) income from operations	$	(2,327,922	)	$	4,960,181
Net (loss) income	$	(2,564,416	)	$	3,678,333

Note 4 – Accounts receivable, net

Accounts receivable, net consists of the following:

	September 30, 2016			June 30, 2016
Accounts receivable	$	9,741,530		$	9,666,112
Less: allowance for doubtful accounts		(4,819,067	)		(3,937,778	)
Total accounts receivable, net	$	4,922,463		$	5,728,334

Movement of allowance for doubtful accounts is as follows:

	September 30, 2016			June 30, 2016
Beginning balance	$	3,937,778		$	-
Charge to expense		896,185			4,067,144
Exchange rate effect		(14,896	)		(129,366	)
Ending balance	$	4,819,067		$	3,937,778

Note 5 – Deposits and other receivables

Deposits and other receivables consisted of the following:

	September 30, 2016		June 30, 2016
Refundable deposits for equipment purchase	$	438,424	$	444,439
Deposit for outsourcing agreement (1)		234,324		235,176
Deposit for new project		213,466		63,739
Advances to employees (2)		239,671		240,474
Insurance compensation		15,967		15,874
Deposit with government agency		2,999		3,011
Total	$	1,144,851	$	1,002,713

Other receivables-non-current: 

	September 30, 2016		June 30, 2016
Refundable deposit-construction (3)	$	15,670,691	$	15,727,696
Total	$	15,670,691	$	15,727,696

(1) In December 2011, Yulong Bricks agreed to outsource some brick production to Pingdingshan Hongrui New Construction Materials Co., Ltd., an unrelated third party, and paid approximately $134,963 (RMB 1,562,589) as security deposit, which is due on demand.

(2) The Company entrusts funds to its employees to pay certain of its expenses in the normal course of business, particularly for projects or jobsites beyond Pingdingshan.

(3) As of September 30, 2016 and June 30, 2016, we recorded $15,670,691 (RMB 104.5 million) and $15,727,696 (RMB 104.5 million), respectively, related to the purchase of equipment, in connection with the construction of Yulong Renewable's waste recycling plant and factory construction, would be refundable based on the agreement entered with the contractor, Pingdingshan City HuaShen Trading Co. Ltd., subsequently on July 4, 2017 (see Note 8). The agreement stipulated that the contractor would refund the amount in five (5) equal installment amount on July 10, 2017, October 10, 2017, January 10, 2018, April 10, 2018 and July 10, 2018. The first installment of $3,010,085 was received subsequently in July 2017 as per the refund schedule.

16

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6 – Inventories

Inventories consisted of the following:

	September 30, 2016		June 30, 2016
Raw materials	$	790,922	$	285,459
Semi-finished byproduct		37,003		34,236
Finished goods		71,167		45,196
Total inventories	$	899,092	$	364,891

Raw materials for bricks consist primarily of cement, gypsum, quicklime, aluminum powder and reclaimed fly-ash. Raw materials for concrete consist primarily of cement, admixture, sand and pebble. The cost of finished goods includes direct costs of raw materials as well as direct labor used in production. Indirect production costs at normal capacity such as utilities and indirect labor related to production such as assembling, shipping and handling costs for purchasing are also included in the cost of inventory.

As of September 30, 2016 and June 30, 2016, management believed that no inventory allowance was deemed necessary.

Note 7 – Property, plant and equipment, net 

Property, plant and equipment consisted of the following:

	September 30, 2016			June 30, 2016
Building and improvements	$	24,645,552		$	24,735,204
Machinery and equipment		7,309,120			7,335,708
Machinery and equipment under capital lease		2,092,228			2,099,839
Transportation equipment		852,497			855,598
Transportation equipment under capital lease		2,677,878			2,687,620
Office equipment		109,594			109,993
Construction-in-progress		28,515,608			27,111,181
Subtotal		66,202,477			64,935,143
Less: accumulated depreciation		(8,853,272	)		(8,754,140	)
Less: impairment loss on long-lived assets and construction-in-progress		(50,078,430	)		(48,755,558	)
Total	$	7,270,775		$	7,425,445

As of September 30, 2016 and June 30, 2016, Yulong Renewable has provided an impairment reserves for its building and improvements, machinery and equipment, transportation equipment and construction-in-progress in an amount of $50,078,430 and $48,755,558, respectively.

Construction-in-progress represents labor costs and materials incurred in connection with the construction of office building, employee facilities, equipment and machinery for Yulong Renewable, office building for Yulong Concrete, and an autoclave for Yulong Bricks. No depreciation is provided for construction-in-progress until it is completed and placed into service.

Approximately in the fourth quarter of 2016, the central government of the People's of Republic of China passed Air Pollution Control Act and enforced Air Pollution Control Action Plan. The province of Henan of People's Republic of China implemented "Province of Henan Blue Sky Action Plan" on various industries such as construction materials, coal mining. Due to the Air Pollution Control Act and Blue Sky Action Plan, Yulong Renewable is required to comply with the new environmental regulations and its construction projects were placed on hold since August 2016. Yulong Renewable CIP primarily included the following projects:

Yulong Renewable commenced a construction of the waste recycling plant and brick production plant in 2015. Total budget for these constructions is approximately $44.4 million, of which approximately $8.2 million (RMB 54.4 million) was transferred to fixed assets in the fiscal year ended June 30, 2016. The entity placed the plant construction on hold in August 2016 and accordingly, provided an impairment reserve for the related construction-in-progress amount, approximately $7.7 million (RMB 51.6 million) in the fiscal year ended June 30, 2016.

17

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In March 2016, the Company commenced a construction of environmental product testing and solid waste resource utilization center in Zhengzhou, PRC. Total budget for the construction of this center is approximately 45.0 million (RMB 300 million). During the fiscal year ended June 30, 2016, the Company has incurred approximately $34.7 million (RMB 231.7 million) in construction-in-progress pertinent to this construction. In the early first quarter of fiscal year 2017, Yulong Renewable paid an additional $1.5 million (RMB 10 million) related to this construction project and included such amount in construction-in-progress. In August 2016, the Company placed this construction project on hold. In July 2017, the Company signed a cancellation agreement with the contractor by which the project prepayment, $15.6 million (RMB 104 million) will be refundable by the contractor in five (5) equal installments commencing in July 2017. The remaining construction-in-progress balance related to this construction, approximately $20.5 million (RMB 136.8 million), is considered suspended and the Company provided an impairment reserve for the entire amount, $20.5 million (RMB 136.8 million) as of September 30, 2016.

Construction-in-progress consisted of the following as of September 30, 2016:

Construction-in-progress description	Value		Estimated completion date		Estimated additional cost to complete
Office buildings, staff facilities, equipment and machinery	$	7,339		Early 2018	$	-
Autoclave installation	$	7,081		Early 2018	$	-
Total	$	14,420			$	-

Depreciation expense is $146,003 and $568,014 for the three months ended September 30, 2016 and 2015, respectively.

Machinery and equipment under capital lease

In March 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $136,199 (RMB 908,240). The lease requires a one-time payment of $37,952 and an additional $5,828 as a security deposit paid in March 2014, monthly lease payments of approximately $5,000 from June 2014 to May 2016, with interest rate per annum of 8.8%. The ownership of the trucks will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $28,431 (RMB 189,591).

In March 2014, monthly lease payments of approximately $3,000 from June 2014 to November 2015, with interest rate per annum of 8.5%. The ownership of the trucks will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). During the fiscal year ended June 30, 2016, the Company paid off the lease and ownership of the machines was transferred to the Company.

In September 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $192,697 (RMB 1,285,000). The lease requires a one-time payment of $54,506 and an additional $8,414 as a security deposit paid in October 2014, monthly lease payments of approximately $8,000 from November 2014 to October 2016, with interest rate per annum of 8.7%. The ownership of the excavator will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $136,505 (RMB 910,283). 

In September 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $133,463 (RMB 890,000). The lease requires a one-time payment of $37,952 and an additional $5,828 as a security deposit paid in October 2014, monthly lease payments of approximately $5,000 from November 2014 to October 2016, with interest rate per annum of 8.7%. The ownership of the excavator will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $94,544 (RMB 630,467).

18

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In September 2014, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,836 (RMB 339,000). The lease requires a one-time payment of $17,758 and an additional $5,549 as a security deposit paid in October 2014, monthly lease payments of approximately $3,000 from November 2014 to April 2016, with interest rate per annum of 8.3%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). In May 2016, the lessor verbally agreed to extend the due date to October 2016. As of September 30, 2016, the outstanding balance of the capital lease obligation is $38,593 (RMB 257,354).

In September 2014, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,686 (RMB 338,000). The lease requires a one-time payment of $17,706 and an additional $5,533 as a security deposit paid in October 2014, monthly lease payments of approximately $3,000 from November 2014 to April 2016, with interest rate per annum of 8.3%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term. As of September 30, 2016, the outstanding balance of the capital lease obligation is $38,479 (RMB 256,594).

In June 2015, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $49,486 (RMB 330,000). The lease requires a one-time payment of $15,836 (RMB 105,600) which includes $4,949 (RMB 33,000) as a security deposit paid in June 2015, monthly lease payments of approximately $2,350 (RMB 15,673) from August 2015 to Jan 2017, with interest rate per annum of 9.525%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,386 (RMB 336,600). The lease requires a down payment of $16,124 (RMB 107,520) which includes $5,039 (RMB 33,600) as a security deposit paid in June 2015, monthly lease payments of approximately $2,393 (RMB 15,958) from August 2015 to Jan 2017, with interest rate per annum of 9.525%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a digging machine for eighteen months for approximately $136,199 (RMB 908,240). The lease requires a down payment of $34,766 (RMB 231,840) which includes $5,339 (RMB 35,600) security deposit paid in June 2015, monthly lease payments of approximately $4,868 (RMB 32,462) from August 2015 to July 2017, with interest rate per annum of 9.6%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a digging machine for eighteen months for approximately $136,199 (RMB 908,240). The lease requires a one-time down payment of $34,766 (RMB 231,840) which includes $5,339 (RMB 35,600) security deposit paid in June 2015, monthly lease payments of approximately $4,868 (RMB 32,462) from August 2015 to July 2017, with interest rate per annum of 9.6%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

Transportation equipment under capital leases

In October 2012, the Company entered into a lease agreement with a third party to lease ten waste hauling trucks for two years for approximately of $616,962 (RMB 4,114,208), including $47,687 (RMB 318,000) as security deposits and $62,233 (RMB 415,000) for insurance. The lease also requires a one-time payment of $163,701 in April 2013 and monthly lease payments of approximately $26,000 originally from June 2013 to May 2015, with interest rate at 18.2% per annum. The ownership of the trucks has been transferred to the Company with an attached lien that will be removed if there is no default of the lease payments at the end of the extended lease term. The Company placed these machines into service in June 2013, and they have accordingly been capitalized.

In November 2012, the Company entered into another lease agreement with a third party to lease ten waste hauling trucks for two years for approximately of $603,917 (RMB 4,027,225), including $47,687 (RMB 318,000) as security deposits and $52,186 (RMB 348,000) for insurance. The lease also requires a one-time payment of $163,704 on April 30, 2013, monthly lease payments of approximately $32,000 from July 2013 to June 2014, and monthly lease payments of approximately $15,097 originally from July 2014 to June 2015, with interest rate at 16.8 % per annum. The ownership of the trucks has been transfer to the Company with an attached lien that will be removed if there is no default of the lease payments at the end of the extended lease term. As of September 30, 2016, the amount outstanding was $121,922.

19

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In January 2014, the Company entered into a memorandum of understanding to lease 100 waste hauling trucks with a third party for approximately $62,683 (RMB 418,000) per truck. In July 2014, the Company entered into a binding agreement with the same party to lease the first 30 trucks for two years for approximately $1,666,792 (RMB 11,115,000), or approximately $55,560 (RMB 370,500) per truck. The lease also requires a one-time payment of $350,904 (RMB 2,340,000) as security deposit paid in July 2014 and monthly lease payments of approximately $89,000 from August 2014 to July 2016, with interest rate at 15.6% per annum. The Company has an option to purchase the vehicles for $491 if there is no default of the lease payments at the end of the lease term.

The Company recognized approximately $0 and $188,000 of depreciation expense related to the above capital lease equipment for the three months ended September 30, 2016 and 2015, respectively.

The carrying value of assets under capital leases consisted of the following:

	September 30, 2016			June 30, 2016
Machinery and equipment	$	2,092,228		$	2,099,839
Transportation equipment		2,677,878			2,687,620
Subtotal		4,770,106			4,787,459
Less: accumulated depreciation		(1,685,475	)		(1,691,606	)
Less: impairment reserve		(3,084,631	)		(3,095,853	)
Total	$	-		$	-

20

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 

Note 8 – Prepayments

Prepayments consisted of the following:

	September 30, 2016			June 30, 2016
Prepayment for equipment purchase	$	14,996		$	15,050
Prepayment for construction (a)		2,748,339			2,769,652
Subtotal		2,763,335			2,784,702
Reserve-prepayment for construction(a)		(2,759,613	)		(2,769,652	)
Total prepayments, net	$	3,722		$	15,050

(a) Prepayment for construction in advance was made in connection with the construction factory of Yulong Renewable. We had prepaid the construction fees in advance approximately $2,759,613 (RMB18,402,479) and $2,769,652 (RMB18,402,479) as of September 30, 2016 and June 30, 2016, respectively, to our construction vendors, Henan Sanjian and Henan Guangshen. Due to the new environmental regulations and policies implemented by the central government of PRC and the Environmental Protection Bureau of Henan Province (see Note 7), the factory construction project was placed on hold since August 2016.  We placed a reserve for the entire amount of the prepaid construction fee, $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) as of September 30, 2016 and June 30, 2016, respectively, as there is an uncertainty in the refundable status of the construction vendors.

21

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9 – Intangible assets, net 

Intangible assets consisted of the following:

	September 30, 2016			June 30, 2016
Land use rights	$	4,825,903		$	4,843,458
Less: accumulated amortization		(436,859	)		(425,701	)
Less: impairment reserve		(2,245,796	)		(2,253,966	)
Total	$	2,143,248		$	2,163,791

Land use rights

All land in the PRC is state-owned, but the government can grant “land use rights”. The Company acquired three land use rights in 2007, 2009 and 2015 for a total of $4,557,037 (RMB 30,388,600) and incurred $268,597 (RMB 1,791,136) of associated costs. The Company has not completed the ownership transfer registration for such rights. Pursuant to supplement land usage reimbursement agreements between Yulong Bricks and the Villagers’ Committee of Xiwuzhuang Village dated February 12, 2014, between Yulong Concrete and the Villagers’ Committee of Gaozhuang Village dated February 12, 2014, and between Yulong Renewable and the Villagers’ Committee of Lvzhuang Village dated September 6, 2015, the purchase price of each land use right will be accounted for as lease expense over 50 years, which will expire in December 2058 with respect to Yulong Bricks’ and Yulong Concrete’s rights, and in March 2065 with respect to Yulong Renewable’s right, until the Company can complete their transfer registrations.

Amortization expense for the three months ended September 30, 2016 and 2015 amounted to $12,709 and $37,901, respectively.

The estimated amortization expenses for each of the five succeeding years is as follows:

Year ending September 30,	Estimated amortization expense
2017	$	50,837
2018		50,837
2019		50,837
2020		50,837
2021		50,837
Thereafter		1,889,063
Total	$	2,143,248

22

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10 – Short-term loans

Short-term loans represented amounts due to various banks, normally due within one year. The principal of the loans are due at maturity but can be renewed at the bank’s option. Interest is due monthly.

Short-term loans due to banks consisted of the following:

	September 30, 2016		June 30, 2016
Loan from Pingdingshan Bank, which was originally due in April 2015, with loan amount $599,835 (RMB 4,000,000) and annual interest of 12%. The Company repaid $269,926 (RMB 1,800,000) in April 2015 and obtained the Bank’s approval to extend the remaining $329,909 (RMB 2,200,000) until April 2016. Interest rate is 11.5% per annum. The loan is guaranteed by Yulong Bricks, the executive director of Yulong Bricks, a third party, the Company founder and his relatives. The Company is settling with the bank on loan extension subsequently.	$	329,910	$	331,109
Loan from Pingdingshan Rural Credit Cooperative Union with original loan amount $2,174,402 (RMB 14,500,000) matures in July 2016. Interest rate is 12.1% per annum. The loan is guaranteed by Yulong Bricks, Yulong Renewable, the founder and a company that he owns. This loan is extended by a new loan in January 2017.		2,174,402		2,182,312
Loan from Pingdingshan Bank, original loan amount $674,814 (RMB 4,500,000), at an interest rate 8.73% per annum, matures in August 2016. The loan is guaranteed by Yulong Bricks, the executive director of Yulong bricks, his relative and a third party. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from Pingdingshan rural credit cooperative union, original loan amount $674,814 (RMB 4,500,000) at an interest rate 9%, matures in August 2017. The loan is guaranteed by Yulong Concrete, Yulong Bricks and the company’s founder. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from China Construction Bank, original loan amount $599,835 (RMB 4,000,000), matures in June 2016. Interest rate is 6.4% and 9.6% per annum as of June 30, 2016 and September 30, 2016, respectively. Guaranteed by Yulong Concrete and a third party. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in September 2016. Interest rate is 8.3% per annum. Guaranteed by Yulong Concrete, Yulong Industry and Yulong Renewable. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in March 2017. Interest rate is 8.7% per annum. Guaranteed by Yulong Renewable, Yulong Industry and Yulong Concrete. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Total short-term loans - bank	$	5,653,445	$	5,674,011

Interest expense on short-term loans for the three months ended September 30, 2016 and 2015 amounted to $190,386 and $224,711, respectively. No interest expense has been capitalized into construction-in-progress since all borrowings were for working capital purposes.

23

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11 – Related party transactions 

Other payables - related parties

Other payables – related parties are nontrade payables arising from transactions between the Company and certain related parties, such as loans from such related parties. The loans are unsecured and non-interest bearing. Current payables are due on demand.

The Company’s founder who is also its chief executive officer and majority shareholder has agreed to support the Company financially on an as needed basis, as he has done in the past.

Other payables - related parties consisted of the following:

Name of related parties	Relationship	Nature of transactions	September 30, 2016		June 30, 2016
Yulong Zhu	Founder	Loan for operating cash flows	$	1,688,383	$	1,488,794
Henan Yuliang Hotel Co., Ltd.	Owned by founder	Loan for operating cash flows		-		15,050
Lei Zhu	Relative of founder	Loan for operating cash flow		-		461,393
Total other payables			$	1,688,383	$	1,965,237

Note 12 – Capital lease obligations

Capital lease obligations consisted of the following:

	September 30, 2016			June 30, 2016
Lease obligations for ten waste hauling trucks expired June 2015, lease payment at $29,343 (RMB 195,676) and $15,097 (RMB 100,676) per month from July 2013 to June 2014 and from July 2014 to June 2015, respectively, with interest at 16.8% per annum. In June 2015, lessor verbally agreed to extend due date for the unpaid balance to June 2016. The Company is arranging a repayment plan with the lessor subsequently.		121,923			122,366
Lease obligations for an excavator expiring in May 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.8% per annum.  The Company is arranging a repayment plan with the lessor subsequently.		28,431			28,535
Lease obligations for thirty waste hauling trucks expiring in July 2016, lease payment at $81,585 (RMB 544,050) per month with interest at 15.6% per annum. The Company is arranging a repayment plan with the lessor subsequently.		1,442,970			1,449,258
Lease obligation for a loader expired in April 2016, lease payment at $2,414 (RMB 16,101) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016.  The Company is arranging a repayment plan with the lessor subsequently.		38,593			38,733
Lease obligation for a loader expired in April 2016, lease payment at $2,407 (RMB 16,053) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016. The Company is arranging a repayment plan with the lessor subsequently.		38,479			38,619
Lease obligation for an excavator expiring in October 2016, lease payment at $7,029 (RMB 46,870) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		136,555			137,504
Lease obligation for an excavator expiring in October 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		94,579			95,236
Lease obligation for a land use right which the Company expects to pay in full in late 2017.		1,920,516			1,927,500
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.  The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.   The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for a loader commenced on August 1, 2015 expiring on January 1, 2017, total obligation is approximately $59,198 (RMB 394,764), lease payment at $2,393 (RMB 15,958) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		34,105			34,672
Lease obligation for a loader commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $58,141 (RMB 387,714), lease payment at $2,350 (RMB 15,673) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		33,497			34,052
Subtotal		4,083,026			4,103,649
Less: deferred interest		(6,710	)		(12,506	)
Capital lease obligations, net		4,076,315			4,091,143
Less: capital lease obligations – current		(4,076,315	)		(4,062,291	)
Capital lease obligations – non-current	$	-		$	28,852

24

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of September 30, 2016 and June 30, 2016, the Company has accrued interest of $71,897 and $66,388, respectively, in connection with the capital lease obligations, and were classified in the Company’s consolidated balance sheets under the caption “Other payables and accrued liabilities”. Interest expenses on capital lease obligations for the three months ended September 30, 2016 and 2015 amounted to $5,754 and $43,454, respectively.

Future annual capital lease payments approximately consist of the following:

Twelve months ending September 30,	Amount
2017	$	4,076,315
2018		-
Total	$	4,076,315

Note 13 – Taxes

Income taxes

Cayman Islands

Yulong Eco-Materials is incorporated in the Cayman Islands and conducts all of its business through its PRC subsidiary and VIEs. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to their shareholders, no Cayman Islands withholding tax will be imposed. 

British Virgin Islands

Yulong BVI is incorporated in the British Virgin Islands and conducts all of its businesses through its PRC subsidiary and VIEs. Under the current laws of the British Virgin Islands, Yulong BVI is not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed. 

Hong Kong

Yulong HK is incorporated in the Hong Kong and conducts all of its businesses through its PRC subsidiary and VIEs. Companies registered in Hong Kong are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. Under Hong Kong tax law, Yulong HK is exempted from income tax on its foreign derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

25

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

PRC

Yulong WFOE and the VIEs are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments. 

Yulong Bricks utilizes recycled raw materials to produce bricks and is qualified for preferential income tax granted by the State Administration of Taxation: only 90% of revenue attributable to utilization of recycled materials counts for taxable revenue. 

Under the EIT Laws, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.

The EIT Laws also provide that enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, and other aspects of an enterprise. No detailed interpretation or guidance has been issued to define “place of effective management”. Furthermore, the administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear. If the Company is deemed as a PRC tax resident, it would be subject to PRC tax under the EIT Law. The Company has analyzed the applicability of this law, and for each of the periods presented, the Company has not accrued for PRC tax on such basis. The Company will continue to monitor changes in the interpretation and/or guidance of this law. 

Provision (benefit) for income taxes is comprised of the following:

	For the three months ended September 30,
	2016			2015
Current	$			$
Domestic		-			-
Foreign		218,647			1,125,562
Deferred
Domestic		-			-
Foreign		(100,856	)		(56,930	)
Total provision for income taxes	$	117,791		$	1,068,632

26

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s effective tax rate was approximately (4.1)% and 23.0% for the three months ended September 30, 2016 and 2015, respectively. The decrease in our effective tax rate is primarily attributable to the pre-tax loss, change in valuation allowance related to the deductible temporary differences and net operating loss as well as increase in non-deductible items.

Deferred taxes

The approximate tax effects of temporary differences, which give rise to the deferred tax assets and liabilities, are as follows:

	September 30, 2016			June 30, 2016
Deferred tax assets
Startup cost	$	200,488		$	201,217
Property, plant and equipment		121,229			140,283
Intangible assets		(54,121	)		(49,556	)
Staff education		1,488			1,493
Provision for doubtful accounts		1,204,767			1,184,219
Impairment loss on long-lived assets and construction-in-progress		13,770,960			13,444,794
Net operating loss carryforward in China		354,153			284,276
Total deferred tax assets		15,598,964			15,206,726
Valuation allowance		(15,110,618	)		(14,817,756	)
Total deferred tax assets, net	$	488,346		$	388,970

Uncertain tax positions

Aggregate undistributed earnings of Yulong WFOE and the VIEs that are available for distribution to the Company are approximately $0 and $26.8 million as of September 30, 2016 and 2015, respectively. Such undistributed earnings are considered to be indefinitely reinvested, because the Company does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use in the operation and expansion of its business. Accordingly, no deferred tax liability has been accrued for the Chinese dividend withholding taxes that would be payable upon the distribution of those amounts to the Company as of September 30, 2016 and 2015.

In addition, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting amounts over tax basis amount in the PRC subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means. The Company has not recorded any such deferred tax liability attributable to the undistributed earnings of its financial interest in the VIEs because it believes such excess earnings can be distributed in a manner that would not be subject to income tax.

27

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

There were no unrecognized tax benefits as of September 30, 2016 and June 30, 2016. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions.

Value added tax

Enterprises or individuals who sell commodities, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax (“VAT”) in accordance with PRC laws. The standard VAT rates range from 13% to 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on sales of the finished product.

Yulong Bricks’ products were eligible for VAT tax exemption under the PRC law of [2008] No. 156. The new PRC law of [2015] No. 78, however, replaced [2008] No. 156 and Yulong Bricks’ products are now subject to a VAT rate of 17%, with 70% of the tax being refundable. Under the same law, Yulong Renewable is required to pay VAT rate of 17% for its recycled bricks and recycled aggregates, and 11% for its hauling services. 70% of the tax on recycled bricks and hauling services, and 50% of the tax on recycled aggregates, are refundable. Yulong Concrete’s products are mainly produced with cement and are eligible for a VAT at the rate of 6% of the gross sale prices under the PRC law of [2009] No. 9. Yulong Concrete’s VAT rate decreased to 3% since November 2014 because under the PRC law of [2014] No. 57, concrete products that use cement as raw material are eligible for a reduced VAT rate of 3%.

Taxes payable

Taxes payable consisted of the following:

	September 30, 2016		June 30, 2016
Income taxes payable	$	1,211,015	$	1,126,157
VAT taxes payable		264,379		223,307
Other taxes payable		153,107		148,619
Total	$	1,628,501	$	1,498,083

Note 14 – Equity

Restricted net assets

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Yulong WFOE and the VIEs only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Yulong WFOE and the VIEs.

Under the PRC laws and regulations, each of Yulong WFOE and its consolidated affiliated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds attain 50% of its registed capital. Additionally, Yulong WFOE may allocate portion of its after-tax profits based on PRC accounting standards for enterpise expansion fund and staff bosnus and welfare fund at its discretion. However, the statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of such dividends by a wholly foreign company out of PRC territory is subject to examination by the banks designated by SAFE.

28

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of September 30, 2016 and June 30, 2016, Yulong WFOE and the VIEs collectively appropriated $3,922,228 and $3,922,228 of retained earnings for their statutory reserves.

As a result of the foregoing restrictions, Yulong WFOE and the VIEs are restricted in their ability to transfer their net assets to the Company.

Foreign exchange and other regulation in the PRC may further restrict Yulong WFOE and the VIEs from transferring funds to the Company in the form of dividends, loans and advances. As of September 30, 2016 and June 30, 2016, the aggregate net assets of Yulong WFOE and the VIEs amounted to $787,146 and $3,453,575, respectively.

Initial Public Offering

On July 1, 2015, the Company completed the IPO of 2,250,000 shares of its ordinary shares for gross proceeds of $14,062,500 and, less costs of $2,552,343, for net proceeds of $11,510,157.

In connection with the closing of the IPO, the Company:

● granted a 45-days option to its underwriters to purchase up to 337,500 shares of ordinary shares, to cover over-allotments, which expired on August 15, 2015 without being exercised;

● granted warrants to purchase up to 112,500 shares of ordinary shares in the aggregate, or 5% of the ordinary shares sold in the IPO, to the representative of its underwriters and an independent financial adviser for the IPO (the “warrants”);

● granted 26,400 shares of ordinary shares in the aggregate to its CFO (20,000 shares vested concurrently with the closing of IPO) and two non-executive board members (3,200 shares each vesting quarterly from the closing of IPO) at $6.25 per share and valued at $165,000 in total; and

● converted $9,959,613 in indebtedness to five shareholders, including its founder, into 1,593,538 shares of ordinary shares.

Stock-based compensation expenses amounted to $0 and $135,000 for the three months ended September 30, 2016 and 2015.

Conversion in related party indebtedness

Five shareholders of the Yulong operating companies, including the Company’s founder, converted the RMB equivalent of $9,959,613 due to them in the aggregate from the Yulong operating companies into the Company’s ordinary shares concurrently with the closing of the IPO at the IPO Price, or 1,593,538 shares.

Warrants

The Company follows the provisions of the accounting standard relating to instruments that are indexed to an entity’s own securities. This accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s ordinary shares and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. The Company determined its warrants would be recorded as derivative instruments on the issuance dates because the strike price of the warrants is denominated in US dollars, a currency other than the Company’s functional currency RMB. Therefore the warrants are not considered indexed to the Company’s ordinary shares, and as such, all changes in the fair value of these warrants are recognized currently in earnings from the issuances date until such time as the warrants are exercised or expire.

The value of the warrant liabilities was $91,670 and $65,605 as of September 30, 2016 and June 30, 2016, respectively, in comparison to $475,380 at the issuance date on July 1, 2015. The increase resulted in a $26,065 loss on change in fair value of warrants for the three months ended September 30, 2016. 

29

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Because the warrants are not traded on an active securities market, the Company estimates their fair value using the Binominal Option Pricing model on September 30, 2016 and on July 1, 2015 as follows:

	September 30, 2016			June 30, 2016			July 1, 2015
Number of shares exercisable		112,500			112,500			112,500
Exercise price	$	6.25		$	6.25		$	6.25
Stock price	$	2.33		$	1.71		$	6.00
Expected term (years)		3.75			4.00			5.00
Risk-free interest rate		1.10	%		0.89	%		1.63	%
Expected volatility		80.38	%		84.83	%		92	%

Due to the short trading history of the Company’s ordinary shares, the expected volatility is based primarily on other similar public companies’ historical volatilities, which are traded on United States stock markets. Historical volatility was computed using daily pricing observations for recent periods that correspond to the term of the warrants. The Company believes this method produces an estimate that is representative of the Company’s expectations of future volatility over the expected term of the warrants. The Company currently has no reason to believe future volatility over the expected remaining life of the warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants.

A summary of changes in warrant activity is presented as follows:

	Three Months Ended September 30, 2016		Weighted Average Exercise Price		Average Remaining Contractual Life
Outstanding, beginning balance		-		-		-
Granted		112,500	$	6.25		5
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, ending balance		112,500	$	6.25		3.75

Stock-based compensation – consulting services

On January 19, 2016, the Company’s board of directors approved the following issuances of restricted shares of the Company’s ordinary shares:

● 31,279 shares to a consultant for services pertaining to business growth and strategies for the calendar years ending December 31, 2017 and 2016; and

● 95,967 shares to a consultant for services rendered previously and for the fiscal quarter ended March 31, 2016 pertaining to financial reporting and internal control over financial reporting.

The shares were valued at $3.20 per share, based on the average closing price of the ordinary shares for the three months immediately preceding the board’s approval.

On July 6, 2016, the Company entered into a consulting agreement with Beyond Century for services in conjunction with the pre-audit and consulting services for the periods ended June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017. Total service fee is $150,000 or $37,500 per quarter and will be settled in a form of stock-based payment equivalent to 58,140 shares of the Company's common stock. The shares were valued at $2.58 per share based on the average closing price of the ordinary shares on the date the service agreement was entered. On August 15, 2016, an aggregate of 58,140 shares of our ordinary shares were issued in reliance upon the exemption from securities registration under Section 4(a)(2) of Securities Act of 1933 to this financial consultant.

Stock-based compensation expenses for consulting services amounted to $49,966 and $0 for the three months ended September 30, 2016 and 2015.

30

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 15 – (Loss) earnings per share

The basic and diluted (loss) earnings per share are as follows: 

	For the three months ended September 30, 2016			For the three months ended September 30, 2015
Net (loss)/income	$	(2,838,777	)	$	3,580,683
Weighted average shares outstanding - basic and diluted		12,026,886			11,869,938
(Loss) earnings per share - basic and diluted	$	(0.24	)	$	0.30

Warrants outstanding for the three months ended September 30, 2016 and 2015 were not included in the dilutive shares calculation because the average per share price of the Company’s ordinary shares for the three months ended September 30, 2016, was below the exercise price of the warrants.

Note 16 – Commitments and contingencies

Contingencies

From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

As of September 30, 2016, three of the four Yulong operating companies were subject to 20 civil lawsuits with judgment amounts of approximately $3,144,215 (RMB 20,967,197) in the aggregate, of which unpaid amounts of approximately $108,154 (RMB 721,225) has already been included in capital lease obligations regarding lease agreement for purchasing 10 vehicles from Xuchang Tongli, approximately $346,551 (RMB 2,310,979) already included in bank loans, and approximately $418,732 (RMB 2,792,317) already included in other payables as of September 30, 2016. The remaining balances included $1,815,153 (RMB 12,104,346) related to the guarantee with details disclosed in notes 'Guarantees', and $326,254 (RMB 2,175,622) was pertinent to legal actions filed by various individuals. 

Subsequent to September 30, 2016, three of the four Yulong operating companies were prone to 16 civil lawsuits with judgment amounts of approximately $785,278 (RMB 5,236,625) in the aggregate, of which unpaid amounts of approximately $25,310 (RMB 168,780) related to the illegal occupation of land, and $759,968 (RMB 5,067,845) was pertinent to legal actions filed by various individuals.

Illegal occupation of land

On October 18, 2016, Pingdingshan Land Resources Bureau filed a legal action with the district court to enforce the execution of Ping Guo Tu Zi Fa Zi (2016) no.65 Administrative Penalty Decision that the Company shall:

(1) return 7,137.26 square meters of land which the Company occupied illegally;

31

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2) dismantle the new buildings and other facilities on the 7,137.26 square meters of land which the Company occupied illegally, and restore the original appearance of the land;

(3) pay a fine on the basis that illegal occupation of 5,951.4 square meters of general cultivated land at a fine of RMB 16.00 per square meter, i.e. $14,279 (RMB 95,222.40), and 1,185.86 square meters of other land fines per square meter RMB 3.00, i.e. $533 (RMB 3,557.58), resulting in a total of $14,813 (RMB 98,779.98).

On November 29, 2016, Pingdingshan Environmental Protection Bureau applied to the court to enforce the execution of Ping Huan Fa Zi (2015) no.26 Administrative Penalty Decision that the Company shall:

(1) cease its trial production;

(2) pay a fine of $10,497 (RMB 70,000).

Total unpaid amounts related to illegal occupation of land were therefore $25,310 (RMB 168,780).

Purchase commitment

On November 10, 2012, the Company entered into a sales and purchase contract with an unrelated third party, Xian Oriental Fuxing Machinery Co., Ltd ("Xian Oriental Fuxing") with a contract amount of $418,385 (RMB 2,790,000). As of September 30, 2016, the Company already paid $292,420 (RMB 1,950,000) to Xian Oriental Fuxing. According to the result of the verdict disclosed on September 24, 2016, the court ruled that the Company was required to pay the remaining amount of $125,965 (RMB 840,000) and litigation cost of $3,405 (RMB 22,708).

Guarantees

As of September 30, 2016, the Company guaranteed approximately $3.0 million for a bank loan of an unrelated third-party as follows:

Name	Guaranteed amount		Guarantee expiration date
Pingdingshan Yushi Automobile Accessory Sales Co., Ltd(1)	$	1,204,034	December 29, 2016
Pingdingshan Orr Business Co., Ltd(2)		1,815,153	January 5, 2018
Total	$	3,019,187

(1) The Company did not, however, accrue any liability in connection with such guarantee because the borrower has been current in its repayment obligations and the Company has not experienced any loss from providing such guarantees in the past. The Company has evaluated the guarantee and has concluded that the likelihood of it having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under such commitment is not material.

(2) According to the verdict issued on March 16, 2017, the court ruled that the borrower was required to repay the borrowings of $1,799,505 (RMB 12.0 million) and was liable for the related litigation cost in an amount of $15,648 (RMB 104,346). As the loan term covered the period from January 5, 2015 through January 6, 2016, and the guarantee expires on January 5, 2018, the Company has accrued a liability in connection with such guarantee during the fiscal year ended June 30, 2016.

32

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Variable interest entity structure

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Yulong WFOE and the VIEs are in compliance with existing PRC laws and regulations in all material respects.

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.

Note 17 – Segments

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company’s chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being (loss) income from operations of the Yulong operating companies. 

The Company’s operations currently include three business segments encompassing three different divisions. Such reportable divisions are consistent with the way the Company manages its business, with each division operating under separate management and producing discrete financial information. The accounting principles applied at the operating division level in determining (loss) income from operations is generally the same as those applied at the consolidated financial statement level. 

The operation and products of the three divisions are as follow:

1. Yulong Bricks: production and sales of fly-ash bricks;

2. Yulong Concrete and Yulong Transport: production and sales of ready-mixed concrete; and

3. Yulong Renewable: hauling and processing of construction waste, and production and sales of recycled aggregates and recycled bricks.

The following represents results of divisional operations for the following three months ended September 30:

Revenues:	2016		2015
Yulong Bricks	$	585,470	$	4,035,101
Yulong Concrete and Yulong Transport		1,728,971		7,338,329
Yulong Renewable		489,589		1,977,438
Consolidated revenues	$	2,804,030	$	13,350,868

Gross profit:	2016		2015
Yulong Bricks	$	173,779	$	2,249,477
Yulong Concrete and Yulong Transport		400,969		1,942,171
Yulong Renewable		336,481		1,254,113
Consolidated gross profit	$	911,229	$	5,445,761

(Loss) income from operations:	2016			2015
Yulong Bricks	$	(309,784	)	$	2,168,277
Yulong Concrete and Yulong Transport		(131,981	)		1,728,549
Yulong Renewable		(1,886,157	)		1,063,355
Subtotal		(2,327,922	)		4,960,181
Yulong HK		(198,056	)		(67,693	)
Yulong Eco-Materials		(49,966	)		(370,000	)
Consolidated (loss) income from operations	$	(2,575,944	)	$	4,522,488

33

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Net (loss) income:	2016			2015
Yulong Bricks	$	(291,305	)	$	1,640,745
Yulong Concrete and Yulong Transport		(277,812	)		1,222,408
Yulong Renewable		(1,995,299	)		810,960
Subtotal		(2,564,416	)		3,674,113
Yulong WFOE		-			2,110
Yulong HK		(198,329	)		(73,739	)
Yulong Eco-Materials		(76,031	)		(21,801	)
Consolidated net (loss) income	$	(2,838,776	)	$	3,580,683

Depreciation and amortization:	2016		2015
Yulong Bricks	$	122,602	$	127,330
Yulong Concrete and Yulong Transport		36,110		82,021
Yulong Renewable		-		396,564
Consolidated depreciation and amortization	$	158,712	$	605,915

Interest expenses:	2016		2015
Yulong Bricks	$	38,574	$	116,397
Yulong Concrete and Yulong Transport		151,812		108,313
Yulong Renewable		5,754		43,455
Consolidated interest expenses	$	196,140	$	268,165

Capital expenditures:	2016		2015
Yulong Bricks	$	-	$	20,283
Yulong Concrete and Yulong Transport		-		27,603
Yulong Renewable		-		170,169
Consolidated capital expenditures	$	-	$	218,055

34

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following represents assets of division as of September 30, 2016 and June 30, 2016:

Total Assets as of:	September 30, 2016		June 30, 2016
Yulong Bricks	$	11,227,572	$	11,131,177
Yulong Concrete and Yulong Transport		3,281,371		4,416,866
Yulong Renewable		20,949,715		20,251,768
Interdivision assets		1,040		590
Yulong Eco-Materials		642,700		642,700
Total Assets	$	36,102,398	$	36,443,101

Note 18 – Subsequent events

In late March 2016, the central government of the People's of Republic of China passed Air Pollution Control Act and enforced Air Pollution Control Action Plan. The province of Henan of People's Republic of China implemented "Province of Henan Blue Sky Action Plan" on various industries such as construction materials, coal mining. Due to the Air Pollution Control Act and Blue Sky Action Plan, Yulong Renewable is required to comply with the new environmental regulations. It placed its construction projects on hold and downsized its production since August 2016.

On February 11, 2017, three of the board of directors, Ms. Alice Io Wai Wu, Mr. Michael W. Harlan and Mr. Guosheng Liu (together the “Former Directors”) resigned as directors of the Company. The Company elected Ms. Junfeng Ma, Ms. Yang Li and Mr. Qingsheng Liu to replace the Former Directors. There is no family relationship among any of the New Directors and any of the Company’s other directors or executive officers. In addition, the Board has approved the appointment of Ms. Junfeng Ma as Company’s interim chairperson of the Audit Committee. While Company believe Ms. Ma’s accounting experience qualifies her to be the chairperson of the audit committee, the Company is actively searching for a candidate who is an expert with U.S. GAAP rules to chair the Audit Committee. Ms. Ma will serve as the chairperson of the Audit Committee during the Company’s search.

On March 15, 2017, Yulong Eco-Materials Limited (the “Company”) received a deficiency letter (the “Letter”) from the NASDAQ Stock Market LLC (the “Nasdaq”) regarding the Company’s failure to comply with NASDAQ List Rule 5605(c)(2), pursuant to which an audit committee must have at least three members and be comprised only of independent directors. Due to the resignation of Alice Io Wai Wu, and Michael W. Harlan on February 11, 2017, the Company failed to meet the aforesaid requirement.

Under Rule 5605(c)(4) and 5810(c)(3)(E), the Company has been provided a cure period to regain compliance as follow (the “Cure Period”):

● until the earlier of the Company’s next annual shareholders’ meeting or February 11, 2018; or

● if the next annual shareholders’ meeting is held before August 10, 2017, then the Company must evidence compliance no later than August 10, 2017.

The Company addressed this deficiency by providing a notice of annual general meeting of shareholders to be held on June 29, 2017. The Company has announced the results of its annual general meeting for the fiscal year ended June 30, 2017 on June 30, 2017.

35

YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On March 31, 2017, Yulong Eco-Materials Limited (the “Company”) received a determination letter (the “Letter”) from the NASDAQ Stock Market LLC (the “NASDAQ”) notifying the Company of the NASDAQ Staff’s determination (the “Determination”) to delist the Company’s securities from The NASDAQ Capital Market due to its failure to regain compliance with Listing Rule 5250(c)(1) (the “Rule”) because it had not filed its Annual Report on Form 10-K for the period ended June 30, and Quarterly Reports on Forms 10-Q for the periods ended September 30, 2016 and December 31, 2016, respectively (the “Delinquent Reports”). Pursuant to the Letter, unless the Company requests an appeal of the Determination by 4:00 Eastern Time on April 7, 2017, trading of the Company’s common stock will be suspended at the opening of business on April 11, 2017, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), causing the Company’s securities to be removed from listing and registration on The NASDAQ Stock Market. 

As previously reported, on October 14 and November 22, 2016, the Company received two notification letters (the “Notice”) from NASDAQ advising the Company that it did not comply with the “Rule” because it had not filed its Annual Report on Form 10-K for the period ended June 30, and Quarterly Reports on Forms 10-Q for the periods ended September 30, 2016 and December 31, 2016, respectively. The Company was provided an exception until April 12, 2017, to regain compliance with the Rule. On March 24, 2017, the Company advised that it would be unable to regain compliance with the Rule by April 12, 2017. As of the date of this report, the Company has not regained compliance with the Rule though it is in the process of preparing its annual report.

On April 6, 2017, Yulong Eco-Materials Limited received a notification letter from the Listing Qualifications Department of The NASDAQ Stock Market LLC (“NASDAQ”) indicating that the Company is not in compliance with NASDAQ Listing Rule 5550(a)(2) (the “Rule”) because the closing bid price of the Company’s common stock on The Nasdaq Capital Market has been below $1.00 per share for 30 consecutive business days. The Nasdaq notification has no immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “YECO”.

The Company has 180 calendar days, or until October 3, 2017, to regain compliance. If, at any time before that date, the closing bid price of the Company’s common stock is at least $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will notify the Company that it has achieved compliance with the Rule.

If the Company does not regain compliance by October 3, 2017, the Company may be eligible for a second compliance period of 180 calendar days. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide NASDAQ written notice of its intention to cure the deficiency during the second compliance period.

If it appears to the NASDAQ staff that the Company will not be able to cure the deficiency, or if the Company does not cure the deficiency following the additional time, NASDAQ will notify the Company that its common stock will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Hearings Panel. If the Company timely appeals, it would remain listed pending the Hearing Panel’s decision.

The Company intends to monitor the closing bid price of its common stock and may consider implementing available options to regain compliance with the Rule. This information is being provided to comply with NASDAQ Listing Rules requiring public announcement of the Company’s receipt of the notification letter from NASDAQ.

On May 15, 2017, Yulong Eco-Materials Limited determines that it qualifies as a “foreign private issuer” as defined under Rule 3b-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, effective immediately after the filing of this Form 8-K, the Company will begin reporting under the Exchange Act as a foreign private issuer, including the filing of annual reports on Form 20-F and current reports on Form 6-K.

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YULONG ECO-MATERIALS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On June 12, 2017, Yulong Eco-Materials Limited - (Nasdaq: YECO) announced that following a hearing before the Nasdaq Hearings Panel (the “ Panel ”) on May 25, 2017, the Panel granted the Company’s request for continued listing on Nasdaq, subject to the Company’s timely compliance with a number of interim milestones and, ultimately, the Company’s full compliance with all applicable requirements for continued listing on Nasdaq, including the filing of annual report for fiscal year ended June 30, 2016 and quarterly reports for fiscal periods ended September 30, 2016 and December 31, 2016, by no later than August 31, 2017.

The Company is diligently working to timely evidence compliance with the terms of the Panel’s decision; however, there can be no assurance that the Company will be able to do so.

On July 7, 2017, the Company received a notice from the Nasdaq Hearings Panel (the “Panel”) indicating that it has determined to suspend the Company’s ordinary shares, from trading on The Nasdaq Stock Market, effective at the open of business on July 11, 2017. As a result of the notice, the Company's ordinary shares are currently trading on the OTC Pink marketplace under the symbol “YECOF.” For quotes or additional information on the OTC Pink market, visit http://www.otcmarkets.com.

The Company has a right to appeal the Panel’s determination. The Company has not yet decided whether to request a review of the decision by the Nasdaq Listing and Hearing Review Council. The right to request the review expires on July 24, 2017. In the event the Company does not appeal or the appeal is unsuccessful, Nasdaq will effect the delisting of the Company’s securities by filing a Form 25-NSE (Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934) after applicable appeal periods have lapsed.

As previously reported, the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission. Notwithstanding the Panel’s determination, the Company expects to file its annual report for the fiscal year ended June 30, 2016 and quarterly reports for fiscal periods ended September 30, 2016 and December 31, 2016 as soon as possible and apply to be quoted on the OTCQB market after these delinquent filings are completed.

On July 21, 2017, the Company submitted an appeal request requesting the Nasdaq Listing and Hearing Review Council to review the Panel’s determination and stay any Panel action to suspend the Company’s listing. In addition, the Company intends to submit an updated plan to regain compliance (“Updated Plan”) with Nasdaq’s Listing Rules. The Company is working diligently on its Updated Plan and plans to submit it to the Panel by August 4, 2017.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of our operations and financial condition for the three ended September 30, 2016 and 2015, should be read in conjunction with our financial statements and the notes thereto that are included elsewhere in this report. All monetary figures are presented in U.S. dollars, unless otherwise indicated.

Overview

We are a vertically integrated manufacturer of eco-friendly building products located in the city of Pingdingshan, Henan Province, China. We produce fly-ash bricks and ready-mixed concrete, and in April 2015, we launched our construction waste management, or CWM, business which includes hauling and processing construction waste, and producing and selling crushed construction waste or recycled aggregates, and bricks made from recycled aggregates, or recycled bricks. We are a holding company and our primary business operations are conducted through our consolidated affiliated entities, which are variable interest entities, or VIEs, that we control. These VIEs include Henan Jianyida Industrial Co., Ltd. (“Yulong Bricks”), which operates our fly-ash bricks business, Pingdingshan Hengji Concrete Co., Ltd. (“Yulong Concrete”) and Pingdingshan Hengji Industrial Co., Ltd. (“Yulong Transport”), which operate our concrete business, and Pingdingshan Hengji Industrial Co., Ltd. (“Yulong Renewable”), which operates our CWM business (each a “Yulong operating company” and collectively the “Yulong operating companies”).

We do not have any equity interest in our VIEs, although we have been and are expected to continue to be dependent on our VIEs to operate our business. Instead, we control these entities through a series of contractual arrangements among our PRC subsidiary Zhengzhou Xing De Enterprise Management & Consulting Co., Ltd. (“Yulong WFOE”), our VIEs and their shareholders. While we believe that we have substantial control over our VIEs and their shareholders through the contractual arrangements, such control may not be as effective as direct ownership. Our VIEs and their shareholders may breach their obligations to us under the contractual arrangements, especially if they have a conflict of interest with us. In addition, the PRC government may determine that the contractual arrangements do not comply with applicable PRC regulations. Through the contractual arrangements, each VIE is obligated to pay a service fee in an amount equal to its net profit each fiscal quarter to Yulong WFOE. Such fee can be remitted to us as dividend by Yulong WFOE to our Hong Kong subsidiary China Xing De (Hong Kong) Limited, then to our British Virgin Islands subsidiary China Xing De (BVI) Limited, and finally us. Yulong WFOE, however, is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.

Recent Developments

In late March 2016, the central government of the People’s of Republic of China passed Air Pollution Control Act and enforced Air Pollution Control Action Plan. The province of Henan of People’s Republic of China implemented “Province of Henan Blue Sky Action Plan” on various industries such as construction materials, coal mining. Due to this regulation and action plan, Yulong Renewable placed its construction projects on hold since August 2016 and suspended its CWM operation since January 2017 to further upgrade its equipment and facility to comply with the stricter environmental regulations. Simultaneously, Yulong Bricks and Concrete also reduce their production and clean up the job sites and further enhance its facilities to comply with the new environmental requirements. Management believes that Yulong Bricks and Concrete gradually recover their operations subsequent to June 2017.

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Trends in Our Business

On a macro level, the Chinese government announced a series of new policies at controlling production and development of various industries in China for the purpose of enhancing environmental quality in the territory. The province of Henan implemented the Blue Sky Action Plan in late March 2016 and enforced stricter environmental requirements on industries that conduct business in Henan province including construction materials. Additionally, Yulong Renewable received a notice from the Environmental Protection Bureau of the city of Pingdingshan that the Company is required to clean up its job sites and install environmental protection infrastructure and equipment. The environmental policies and action notice has significantly limited the Company’s capacity to maintain the production of its bricks, concrete and recycled construction materials. Subsequent to the fiscal year ended June 30, 2016, Yulong Bricks, Yulong Concrete and Yulong Renewable have been focusing on upgrading the facilities of their job sites to further comply with the stringent environmental requirements. Sales revenue of Yulong Bricks and Yulong Concrete has been significantly impacted since the first quarter of the fiscal year 2017. Both entities have resumed and gradually increased their productions beginning late April 2017. Three major construction projects of Yulong Renewable have been halted since August 2016 and Yulong Renewable’s operation has been suspended since January 2017. Yulong Renewable is still upgrading its job site and infrastructures and plans to offer for sale or transfer its renewable’s business in fiscal year 2018.

Results of Operations

The tables in the following discussion summarize our consolidated statements of operations for the periods by amount and as a percentage of our total net revenue. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

Three months ended September 30, 2016 and 2015

Revenue

Our revenue decreased by $10,546,838 or 79.0% to $2,804,030, as compared to a year ago. Revenue attributable to bricks or brick revenue, revenue attributable to concrete or concrete revenue, and revenue attributable to CWM or CWM revenue, are as follows for the periods indicated:

	Revenue
	Brick Products			Concrete Products			Construction Waste Management												Total
							Hauling			Recycled Aggregates			Recycled Bricks			Waste Processing Services
Revenue
Three months ended September 30, 2015	$	4,035,101		$	7,338,329		$	592,030		$	27,719		$	163,820		$	1,193,869		$	13,350,868
Three months ended September 30, 2016		585,470			1,728,971			105,463			675			20,259			363,192			2,804,030
Decrease in $	$	(3,449,631	)	$	(5,609,358	)	$	(486,567	)	$	(27,044	)	$	(143,561	)	$	(830,677	)	$	(10,546,838	)
Decrease in %		(85.5	%)		(76.4	%)		(82.2	%)		(97.6	%)		(87.6	%)		(69.6	%)		(79.0	%)

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Overall revenue was reduced by $10,546,838 or 79%. The sales of bricks, concrete and construction waste management dropped by $3,449,632 or 85.5%, $5,609,358 or 76.4% and 1,486,849 or 75.2% respectively. The change was primarily triggered by the depreciation of the RMB against the United States dollars as compared to a year ago, the decline in sales volume, as well as the Air Pollution Control Act passed by the central government and implemented "Province of Henan Blue Sky Action Plan" by the province of Henan of People's Republic of China. Due to the Act and Action Plan, the Company was required to clean up its job sites and upgrade environmental protection infrastructure and equipment. Additionally, Yulong Renewable was required to suspend its production until it upgrades the required environmental protection infrastructure to satisfy the stricter environmental regulations.

The following tables present the average selling prices and quantities sold of our products and services for the periods indicated:

	Bricks			Concrete
Average selling price per m3
Three months ended September 30, 2015	$	26.2		$	44.4
Three months ended September 30, 2016		25.1			40.1
Decrease in $	$	(1.1	)	$	(4.3	)
Decrease in %		(4.2	)%		(9.7	)%
Quantity sold (m3)
Three months ended September 30, 2015		154,279			165,399
Three months ended September 30, 2016		23,300			69,457
Decrease		(130,979	)		(95,942	)
Decrease in %		(84.9	%)		(58.0	)%

	CWM
	Hauling			Recycled Aggregates			Recycled Bricks			Waste Processing Services			Waste Processing Services
Average selling price	Truckload			m3			m3			Jobsite			m3
Three months ended September 30, 2015	$	35.5		$	2.5		$	31.4		$	592.0		$	2.3
Three months ended September 30, 2016		65.0			2.6			19.3			-			2.0
Increase (decrease) in $	$	29.5		$	0.1		$	(12.1	)	$	(592.0	)	$	(0.3	)
Increase (decrease) in %		83.1	%		4.0	%		(38.5	%)		(100.0	%)		(13.0	%)
Quantity sold
Three months ended September 30, 2015		16,664			11,308			5,218			757			320,000
Three months ended September 30, 2016		1,623			263			1,050			-			179,100
Decrease		(15,041	)		(11,045	)		(4,168	)		(757	)		(140,900	)
Decrease in %		(90.3	%)		(97.7	%)		(79.9	%)		(100.0	%)		(44.0	%)

We charged to our hauling customers based on the location of the job site and the type of construction waste to be transported. Therefore, the unit selling price per truckload can vary for each customer.

The decrease in quantity sold is primarily resulted from the reduction of Yulong Renewable’s operation after the Air Pollution Control Act passed by the central government of the PRC and “Province of Henan Blue Sky Action Plan” implemented by the Henan province. Yulong Renewable focused on further enhancing the pollution control infrastructure in order to comply with the stricter environmental requirements.

Under a tax regulation that went into effect in July 2015, bricks that Yulong Bricks produces, which were previously exempted from VAT, are now subject to a VAT rate of 17% which is payable by customers, although the regulation states that 70% of the tax is refundable by the government. Because we chose not pass on the tax increase to our customers in order to remain competitive, our average selling price decreased by approximately the same percentage as the VAT rate.

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Cost of Revenue

Cost of revenue decreased by $6,012,306, or 76.1%, to $1,892,801, as compared to the same period last year. Such cost for each of our revenue streams is presented in the following table:

	Cost of Revenue
	Bricks			Concrete			CWM												Total
							Hauling			Recycled Aggregates			Recycled Bricks			Waste Processing Services
Cost of Revenue
Three months ended September 30, 2015	$	1,785,624		$	5,396,158		$	432,948		$	18,266		$	126,995		$	145,116		$	7,905,107
Three months ended September 30, 2016		411,691			1,328,002			90,101			1,364			27,429			34,214			1,892,801
Decrease in $	$	(1,373,933	)	$	(4,068,156	)	$	(342,847	)	$	(16,902	)	$	(99,566	)	$	(110,902	)	$	(6,012,306	)
Decrease in %		(76.9	%)		(75.4	%)		(79.2	%)		(92.5	%)		(78.4	%)		(76.4	%)		(76.1	%)

The average unit cost per cubic meter of concrete remains constant for the three months ended September 30, 2016 and 2015. The average unit cost per cubic meter of bricks for the three months ended September 30, 2016 was comparatively higher than that for the same period in prior year since we no longer contracted with the third-party manufacturer to produce bricks for us in the first quarter of fiscal year 2017:

	Average unit cost
	Bricks			Concrete
Three months ended September 30, 2015	$	11.6		$	32.6
Three months ended September 30, 2016		17.7			32.2
Increase (decrease) in $	$	6.1		$	(0.4	)
Increase (decrease) in %		52.7	%		(1.2	)%

We used third-party manufacturers generally when orders exceed our production capacities in the past, but we have ceased outsourcing to the third-party manufacturers since the first quarter of the fiscal year 2017.

The major component for the cost of CWM revenue is the depreciation of our hauling trucks and plant equipment. The following table presents the average unit cost for the components of our CWM revenue:

	Average unit cost
	CWM
	Hauling			Recycled Aggregates			Recycled Bricks			Waste Processing Services			Waste Processing Services
	Truckload			m3			m3			Jobsite			m3
Three months ended September 30, 2015	$	26.0		$	1.6		$	24.3		$	71.9		$	0.3
Three months ended September 30, 2016		55.5			5.2			26.1			-			0.2
Increase (decrease) in $	$	29.5		$	3.6		$	1.8		$	(71.9	)	$	(0.1	)
Increase (decrease) in %		113.5	%		225.0	%		7.4	%		(100.0	%)		(33.3	%)

The significant change in the unit cost of hauling was primarily due to the different cost incurred based on the location and nature of the job site.

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Gross Profit

Gross profit was $911,229 for the three months ended September 30, 2016, a decline of $4,534,532 or 83.3% compared to $5,445,761 for the three months ended September 30, 2015. Gross profit margin for the three months ended September 30, 2016 was approximately 32.5% compared to 40.8% for the three months ended September 30, 2015.

For the three months ended September 30, 2016, gross profit attributable to bricks was $173,779, compared to $2,249,477 for the three months ended September 30, 2015, a decrease of $2,075,698 or 92.3%. Gross profit margin was 29.7%, a decrease of 26.1%, from 55.8% a year ago. The reduced gross profit and margin is primarily attributable to the reduced sales volume and higher unit cost of goods sold.

For the three months ended September 30, 2016, gross profit attributable to concrete was $400,969, a decrease of $1,541,202 or 79.4%, compared to the three months ended September 30, 2015. Gross profit margin was 23.2%, which is largely consistent with the 26.5% from a year ago. The decreased gross profit is resulted from the reduced sales volume and the selling price affected by the depreciation of Chinese currency.

For the three months ended September 30, 2016, gross profit attributable to CWM was $336,481, compared to $1,254,113 for the three months ended September 30, 2015, a decrease of $917,632 or 73.2%. Gross profit margin was 68.7%, an increase from 63.4% or by 5.3% compared to the three months ended September 30, 2015. The reduced gross profit is mainly resulted from the lower sales volume due to the reduction of CWM production and operation since August 2016. The higher gross profit amount for the three months ended September 30, 2016 compared to that for the same period in prior year is primarily attributable to the higher average selling price of hauling activities. Selling price of hauling may vary depending on the customer’s location and the type of construction waste to be transported.

Operating Expenses

Operating expenses, which consist of selling expense and general and administrative (“G&A”) expenses as well as impairment loss for the construction-in-progress for the three months ended September 2016, were $3.5 million, an increase of $2.6 million or 277.7% as compared to the three months ended September 30, 2015. G&A expenses, which increased by $1.1 million or 144.9%, were $1.9 million, including increase in provision for doubtful accounts by $0.9 million and litigation expense by $0.5 million. Such increase is offset by a decrease in staff salary and benefit by $ 0.1 million and share-based compensation by $0.08 million. The Company also provided an impairment reserve for its construction-in-progress of Yulong Renewable in an amount of $1.5 million for the three months ended September 30, 2016.

Other (Expense) Income, Net

Other expense includes finance expense (which consist of interest and other finance expenses, net of interest income), and expense not related to our principal operations.

We had other expense of $145,041, as compared to other income of $126,827 a year ago. Other expense primarily consisted of $196,140 in interest expense and $26,065 loss on change in fair value of warrant liabilities, offset by $2,971 in interest income and $74,645 other income.

Provision for Income Taxes

Provision for PRC income taxes declined by $950,841 to $117,791, as compared to a year ago, due to lower taxable income before tax. While we incurred G&A expenses at our Cayman Islands holding company level (i.e., Yulong), we will not be able to utilize the resulting net operating loss in the future as Yulong is not subject to tax on income or capital gains under current Cayman Islands law. Additionally, we expected that it is more likely than not that Yulong Transport and Yulong Renewable continue to incur book loss and tax loss. Therefore, the realization of our deferred tax assets and net operating loss of these two entities are unlikely before the expiration of the net operating loss, and we have provided for a full valuation allowance against such deferred tax assets and net operating loss.

Net (Loss) Income

Net loss for the three months ended September 30, 2016 was $(2,838,776), as compared to the net income $3,580,683 for the same period last year. The change is primarily resulted from the impairment loss from the construction in progress, provision for doubtful accounts and accrued litigation cost.

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Liquidity and Capital Resources

Capital Resources

We will require cash of approximately $23.0 million within the next twelve months, including $5.7 million to repay outstanding short-term bank loans, $11.7 million to satisfy accounts payable and other payables, $1.6 million to remit taxes payable, $4.1 million to satisfy capital lease obligations and the purchase of a land use right.

As of September 30, 2016, we had cash and cash equivalent approximately $2.7 million, accounts receivable (net of provision of doubtful accounts) of $4.9 million and prepayment of $15.7 million which will be refundable to us by one of our construction vendors. The founder has provided approximately $1.7 million (RMB 11.6 million) to fund the Company’s operations in the first quarter of the fiscal year 2017. The Company may also continue to raise fund through private placement or issuance of shares to support the Company’s operational needs. As a result, we believe that our current working capital is sufficient to support routine operations for the next 12 months.

Short-term Loans – Banks

We had $5.7 million and $5.7 million in short-term bank loans as of September 30, 2016 and June 30, 2016, respectively. Such loans mature in one year or less and must be repaid in full upon maturity. Based on our borrowing history, we believe the banks that we work with will renew our loans after they mature, as they had done in the past.

For additional discussion regarding our loans, please refer to Note 10 to our unaudited condensed consolidated financial statements included with this report.

Cash Flows

As of September 30, 2016, our cash was $2,663,943 as compared to $2,734,540 as of June 30, 2016. The following table presents a summary of our cash flows for the periods indicated:

	For the three months ended September 30,
	2016			2015
Net cash provided by operating activities	$	1,575,886		$	4,266,552
Net cash used in investing activities		(1,492,456	)		(218,055	)
Net cash (used in) provided by financing activities		(272,258	)		10,834,385

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the three months ended September 30, 2016, was primarily attributable to cash inflow from the customer deposits, $1.8 million in addition to the non-cash adjustments such as $0.9 million provision for doubtful accounts and $1.5 million in construction-in-progress offset by $2.8 million of net loss. 

Net cash provided by operating activities for the three months ended September 30, 2015, was primarily attributable to $3.6 million of net income, $0.3 million in non-cash adjustments for depreciation expense of our property, plant and equipment, deferred tax benefit pertaining to an increase in our deferred tax assets and change in fair value of warrant liabilities, cash inflows of $0.1 million decrease in accounts receivable due to faster collection from our customers, $0.9 million increase in accounts payable from slower payments to vendors, $0.1 million in other payables – related parties for our CEO’s salary, and $0.8 million in taxes payable due to increased income before tax and the application of the new VAT regulation to our brick revenue, offset by cash outflows of $0.2 million in other receivables – related parties for advancing certain business related expenses to a relative of our founder, $0.5 million in other payables and accrued liabilities for expenses in connection with our IPO and interest on our capital leases, and $0.7 million increase in deposits and other receivables for escrow deposits in connection with our indemnification obligations to the underwriter representative for our IPO. 

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Net Cash Used in Investing Activities

For the three months ended September 30, 2016, we made payments to construction in progress approximately $1.5 million.

For the three months ended September 30, 2015, we made prepayments of approximately $0.1 million, and payments of approximately $0.1 million, for construction-in-progress relating to Yulong Renewable’s new facilities.

Net Cash (Used in) Provided by Financing Activities 

For the three months ended September 30, 2016, net cash used in financing activities resulted from $0.3 million in repayment to related parties. 

For the three months ended September 30, 2015, net cash provided by financing activities resulted from $5.0 million in bank loans, $5.2 million in bank loan repayments as they became due, $0.3 million in principal repayments on capital lease obligations, $11.5 million in net proceeds from our IPO, less $0.2 million in repayments to our founder for advancing certain payments on our behalf.

Off-balance Sheet Arrangements

As of September 30, 2016, we guaranteed two bank loans of unrelated third parties in the aggregate amount of $3.0 million, which guarantees are set to expire on December 29, 2016 and January 5, 2018. For the bank loan that we offered guarantee for Pingdingshan Yushi Automobile Accessory Sales Co., Ltd, we did not, however, accrue any liability in connection with such guarantee because the borrower has been current in their repayment obligations and we have not experienced any losses from providing such guarantees in the past. We have evaluated the guarantee and have concluded that the likelihood of our having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under these commitment is not material. We agreed to provide the guarantee due to our long-term relationship with and the credit worthiness of the borrower.

We have not entered into any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

Critical Accounting Policies

Principles of consolidation

Our consolidated financial statements include the accounts of Yulong, its subsidiaries, and our VIEs. All significant intercompany transactions and balances between Yulong, its subsidiaries and our VIEs are eliminated upon consolidation. Since Yulong WFOE and our VIEs are under common control, the contractual arrangements among Yulong WFOE, our VIEs and their shareholders have been accounted for as a reorganization of entities, and the consolidation of our VIEs through the contractual arrangements has been accounted for at historical cost and prepared on the basis as if these agreements became effective as of the beginning of the first period presented in our consolidated financial statements.

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Variable interest entities

A VIE is an entity that either has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE. Yulong WFOE is deemed to have a controlling financial interest in and be the primary beneficiary of each Yulong Group company because it has both of the following characteristics:

(1) The power to direct activities at each Yulong Group company that most significantly impact such entity’s economic performance, and

(2) The obligation to absorb losses of, and the right to receive benefits from, each Yulong Group company that could potentially be significant to such entity.

Pursuant to the contractual arrangements with Yulong Group, each Yulong Group company pays service fees equal to all of its net profit after tax payments to Yulong WFOE. At the same time, Yulong WFOE is obligated to absorb all of their losses. Such contractual arrangements are designed so that the Yulong Group companies operate for the benefit of Yulong WFOE and ultimately, us.

Accordingly, the accounts of the Yulong Group companies are consolidated in our financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in our financial statements.

Revenue recognition

We recognize revenue in accordance with ASC 605, Revenue Recognition , regarding revenue recognition which specifies that revenue is realized or realizable and earned. Sales revenue is recognized at the date of delivery to customers when a formal arrangement exists, price is fixed or determinable, delivery is completed, we have no other significant obligations, and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are met, are recorded as customer deposits.

We sell concrete and bricks primarily to major local real estate development and/or construction companies. Sales agreements are signed with each customer. Each agreement lists out general terms and conditions, with delivery date and quantity to be specified when a purchase order is issued under such agreement. We do not sell products to customers on a consignment basis. There is no right of return after products are delivered and accepted.

Sales revenue represents the invoiced value of goods, net of a value added tax (“VAT”).

Accounts and other receivables and allowance for doubtful accounts

We extend unsecured credit to our customers as a normal course of business. Management reviews our accounts and other receivables each reporting period to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. Known bad debts are written off against allowance for doubtful accounts after all collection effort has ceased. Our reserves are consistent with historical experience and considered adequate by management. We estimate that most accounts receivable are collected within six months. Accounts receivable are considered past-due after 90 days. For accounts receivable that are past-due for more than one year, we reserve 100% allowance. As of September 30, 2016 and June 30, 2016, we recorded $4.8 million and $3.9 million provision for doubtful accounts for our accounts receivable.

45

Impairment for long-lived assets

Long-lived assets, including buildings and improvements, equipment and intangible assets with finite live, are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of an asset based on the undiscounted future cash flow such asset is expected to generate, and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, is less than the carrying value of the asset. When we identify an impairment, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market value. During the second quarter for the fiscal year 2017, due to Air Pollution Control Act passed by the central government of the People’s Republic of China and the Blue Sky Project Plan enforced by the province of Henan, Yulong Renewable placed construction projects of factory and solid waste facilities on hold on August 2016 and gradually reduced its production. Since January 2017, Yulong Renewable suspended its operation to further upgrade its technique and facility to comply with the stricter environmental regulations. It provided an impairment reserve in an amount of approximately $50.1 million as of September 30, 2016. 

Recent Accounting Pronouncements

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management is evaluating the effect, if any, on the Company’s financial position, results of operations or cash flows.

Going Concern Uncertainties : In August 2014, FASB issued ASU No. 2014-15, Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have material impact on our consolidated financial position and results of operations.

46

Inventory : In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. We do not expect the adoption of ASU 2015-11 to have a material impact on our consolidated financial position and results of operations.

Financial Instruments: In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . The main objective in developing this ASU is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of the fiscal year of adoption for public entities if the entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company does not expect the adoption of ASU 2016-01 to have material impact on its financial position, results of operations or cash flows.

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The main objective is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for (1) public business entities, (2) not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and (3) employee benefit plans that file financial statements with the SEC. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2010. Early adoption is permitted for all entities. The Company does not expect the adoption of ASU 2016-02 to have material impact on its financial position, results of operations or cash flows.

Stock-based Compensation: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also requires the Company to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.

Statement of Cash Flows: In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which require that a statement of cash flows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a retrospective approach. As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the consolidated cash flow statements.

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.

Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or condition of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2017-09 on its condensed consolidated financial statements.

Except for the ASU above, in the period from January 1, 2017 to August 2017, the FASB has issued ASU No. 2017-01 through ASU 2017-011, which are not expected to have a material impact on the consolidated financial statements upon adoption.

47

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the three months ended September 30, 2016, there were no material changes to the quantitative and qualitative information about market risk that we previously disclosed in Item 7A of our Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2016. Our disclosure controls and procedures are designed: (i) to ensure that information required to be disclosed by us in the reports that we file or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that we continue to have the following material weaknesses in its internal control over financial reporting as of September 30, 2016:

● Inadequate U.S. GAAP expertise. The current accounting staff is inexperienced in applying U.S. GAAP standard as they are primarily engaged in ensuring compliance with PRC accounting and reporting requirement for our consolidated operating entities, and thus require substantial training. The current staff’s accounting skills and understanding as to how to fulfill the requirements of U.S. GAAP-based reporting, including subsidiary financial statements consolidation, are inadequate and resulted in a number of adjustments identified by our independent auditors during the audit.

● Inadequate internal audit resources. While we have developed the scope of our internal audit function, it has not yet been fully implemented as we have not been able to hire sufficient qualified resources to do so.  Due to limited availability of qualified resources in the geographical region where we operate, we may not be able to make sufficient hiring within a short period of time.

Based on such evaluation, and considering the material weaknesses identified and discussed above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures at September 30, 2016 were not effective.

Remediation Initiatives

In an effort to remedy the foregoing material weaknesses in the future, we have completed the following initiatives:

● engaged an outside professional consulting firm to supplement our efforts to improve our internal control over financial reporting;

● initiated implementation of the 2013 COSO framework for internal controls, which formalized the principles embedded in the original framework more explicitly, incorporated business and operating environment changes over the past two decades, and improved the framework’s ease of use and application; and

● initiated comprehensive program and development plan to provide ongoing company-wide trainings regarding internal control, with particular emphasis on our accounting staff.

Despite the material weaknesses and deficiencies reported above, Chief Executive Officer and Chief Financial Officer believe that our consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

48

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

As of September 30, 2016, three of the four Yulong operating companies were subject to 20 civil lawsuits with judgment amounts of approximately $3,144,215 (RMB 20,967,197) in the aggregate, of which unpaid amounts of approximately $108,154 (RMB 721,225) has already been included in capital lease obligations regarding lease agreement for purchasing 10 vehicles from Xuchang Tongli, approximately $346,551 (RMB 2,310,979) already included in bank loans, and approximately $418,732 (RMB 2,792,317) already included in other payables as of September 30, 2016. The remaining balances included $1,815,153 (RMB 12,104,346) related to the guarantee with details disclosed in notes 'Guarantees', and $326,254 (RMB 2,175,622) was pertinent to legal actions filed by various individuals. 

Subsequent to September 30, 2016, three of the four Yulong operating companies were prone to 16 civil lawsuits with judgment amounts of approximately $785,278 (RMB 5,236,625) in the aggregate, of which unpaid amounts of approximately $25,310 (RMB 168,780) related to the illegal occupation of land, and $759,968 (RMB 5,067,845) was pertinent to legal actions filed by various individuals.

Illegal occupation of land

On October 18, 2016, Pingdingshan Land Resources Bureau filed a legal action with the district court to enforce the execution of Ping Guo Tu Zi Fa Zi (2016) no.65 Administrative Penalty Decision that the Company shall:

(1) return 7,137.26 square meters of land which the Company occupied illegally;

(2) dismantle the new buildings and other facilities on the 7,137.26 square meters of land which the Company occupied illegally, and restore the original appearance of the land;

(3) pay a fine on the basis that illegal occupation of 5,951.4 square meters of general cultivated land at a fine of RMB 16.00 per square meter, i.e. $14,279 (RMB 95,222.40), and 1,185.86 square meters of other land fines per square meter RMB 3.00, i.e. $533 (RMB 3,557.58), resulting in a total of $14,813 (RMB 98,779.98).

On November 29, 2016, Pingdingshan Environmental Protection Bureau applied to the court to enfore the execution of Ping Huan Fa Zi (2015) no.26 Administrative Penalty Decision that the Company shall:

(3) cease its trial production;

(4) pay a fine of $10,497 (RMB 70,000).

49

Total unpaid amounts related to illegal occupation of land were therefore $25,310 (RMB 168,780).

Purchase commitment

On November 10, 2012, the Company entered into a sales and purchase contract with an unrelated third party, Xian Oriental Fuxing Machinery Co., Ltd ("Xian Oriental Fuxing") with a contract amount of $418,385 (RMB 2,790,000). As of September 30, 2016, the Company already paid $292,420 (RMB 1,950,000) to Xian Oriental Fuxing. According to the result of the verdict disclosed on September 24, 2016, the court ruled that the Company was required to pay the remaining amount of $125,965 (RMB 840,000) and litigation cost of $3,405 (RMB 22,708).

Guarantees

As of September 30, 2016, the Company guaranteed approximately $3.0 million for a bank loan of an unrelated third-party as follows:

Name	Guaranteed amount		Guarantee expiration date
Pingdingshan Yushi Automobile Accessory Sales Co., Ltd(1)	$	1,204,034	December 29, 2016
Pingdingshan Orr Business Co., Ltd(2)		1,815,153	January 5, 2018
Total	$	3,019,187

(3) The Company did not, however, accrue any liability in connection with such guarantee because the borrower has been current in its repayment obligations and the Company has not experienced any loss from providing such guarantees in the past. The Company has evaluated the guarantee and has concluded that the likelihood of it having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under such commitment is not material.

(4) According to the verdict issued on March 16, 2017, the court ruled that the borrower was required to repay the borrowings of $1,799,505 (RMB 12.0 million) and was liable for the related litigation cost in an amount of $15,648 (RMB 104,346). As the loan term covered the period from January 5, 2015 through January 6, 2016, and the guarantee expires on January 5, 2018, the Company has accrued a liability in connection with such guarantee during the fiscal year ended June 30, 2016.

ITEM 1A. RISK FACTORS.

There have been no material changes to the Company’s risk factors which are included and described in our Annual Report.

50

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On August 15, 2016, we issued an aggregate of 58,140 shares of our ordinary shares, at the price of $2.58 per share, to one of our financial consultants for the provision of services related to financial reporting and supports pursuant to a written agreement. All these shares are issued pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES

The disclosures required by Item 4 are not applicable to us, as we have no mining operations in the United States.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

Exhibit Number	Description
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101. INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

51

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	YULONG ECO-MATERIALS LIMITED
Dated: August 31, 2017	By:	/s/ Yulong Zhu
		Yulong Zhu
		Chief Executive Officer
		(Principal Executive Officer)
Dated: August 31, 2017	By:	/s/ Shuai Wang
		Shuai Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

52

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Yulong Zhu, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2016 of Yulong Eco-Materials Limited;
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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external 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 the effectiveness 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 recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely 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 control over financial reporting.

Date: August 31, 2017	By:	/s/ Yulong Zhu
		Yulong Zhu Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Shuai Wang, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2016 of Yulong Eco-Materials Limited;
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 the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external 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 the effectiveness 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 recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely 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 control over financial reporting.

Date: August 31, 2017	By:	/s/ Shuai Wang
		Shuai Wang Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

I, Yulong Zhu, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of Yulong Eco-Materials Limited (the “Company”) for the quarterly period ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 31, 2017	By:	/s/ Yulong Zhu
		Yulong Zhu
		Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

I, Shuai Wang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of Yulong Eco-Materials Limited (the “Company”) for the quarterly period ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 31, 2017	By:	/s/ Shuai Wang
		Shuai Wang
		Chief Financial Officer (Principal Financial and Accounting Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

XML

Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2016	Aug. 31, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Yulong Eco-Materials Ltd
Entity Central Index Key	0001607741
Trading Symbol	YECOF
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2017
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,055,324

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
CURRENT ASSETS
Cash and cash equivalents	$ 2,663,943	$ 2,734,540
Restricted cash	500,000	500,000
Accounts receivable, net	4,922,463	5,728,334
Deposits and other receivables	1,144,851	1,002,713
Inventories	899,092	364,891
Advances to suppliers	225,932	222,239
Prepaid expenses and other	108,658	108,716
Total current assets	10,464,939	10,661,433
PROPERTY, PLANT AND EQUIPMENT, net	7,270,775	7,425,445
OTHER ASSETS
Other receivables, non-current	15,670,691	15,727,696
Prepayments	3,722	15,050
Intangible assets, net	2,143,248	2,163,791
Deferred tax asset, net	488,346	388,970
Long-term deposit	10,677	10,716
Prepaid expenses, non-current	50,000	50,000
Total other assets	18,366,684	18,356,223
Total assets	36,102,398	36,443,101
CURRENT LIABILITIES
Short-term loan - bank	5,653,445	5,674,011
Accounts payable, trade	1,661,167	1,710,881
Other payables and accrued liabilities	8,322,086	7,601,354
Other payables - related parties	1,688,383	1,965,237
Customer deposits	4,404,720	2,571,846
Taxes payable	1,628,501	1,498,083
Capital lease obligations	4,076,315	4,062,291
Warrant liabilities	91,670	65,605
Total current liabilities	27,526,287	25,149,308
NON-CURRENT LIABILITIES
Capital lease obligations-non-current		28,852
Total liabilities	27,526,287	25,178,160
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, $0.00125 par value, 100,000,000 shares authorized, 12,055,324 and 11,997,184 shares issued and outstanding at September 30, 2016 and June 30, 2016, respectively	15,070	14,997
Subscription receivable	(10,000)	(10,000)
Additional paid-in capital	40,584,987	40,497,594
Statutory reserves	3,922,228	3,922,228
Stock to be issued		37,500
Retained earnings	(34,816,970)	(31,978,194)
Accumulated other comprehensive loss	(1,119,204)	(1,219,184)
Total equity	8,576,111	11,264,941
Total liabilities and equity	$ 36,102,398	$ 36,443,101

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares	Sep. 30, 2016	Jun. 30, 2016
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.00125	$ 0.00125
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	12,055,324	11,997,184
Common stock, shares outstanding	12,055,324	11,997,184

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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
REVENUES
Bricks	$ 585,470	$ 4,035,101
Concrete	1,728,971	7,338,329
Recycling	489,589	1,977,438
TOTAL REVENUES	2,804,030	13,350,868
COST OF REVENUES
Bricks	411,691	1,785,624
Concrete	1,328,002	5,396,158
Recycling	153,108	723,325
TOTAL COST OF REVENUES	1,892,801	7,905,107
GROSS PROFIT	911,229	5,445,761
OPERATING EXPENSES:
Selling	79,821	144,648
General and administrative	1,906,720	778,625
Impairment loss on construction-in-progress	1,500,632
Total operating expenses	3,487,173	923,273
(LOSS)/INCOME FROM OPERATIONS	(2,575,944)	4,522,488
OTHER (EXPENSE) INCOME, net
Bank charges	(452)
Interest income	2,971	19,903
Interest expense	(196,140)	(268,165)
Change in fair value of warrant liabilities	(26,065)	348,199
Foreign exchange transaction loss		(5,934)
Other finance expense		(16,510)
Other income (expense), net	74,645	49,334
Total other (expense) income, net	(145,041)	126,827
(LOSS)/INCOME BEFORE INCOME TAXES	(2,720,985)	4,649,315
PROVISION FOR INCOME TAXES	117,791	1,068,632
NET (LOSS)/INCOME	(2,838,776)	3,580,683
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments	(697,613)	(2,651,502)
COMPREHENSIVE (LOSS)/INCOME	$ (3,536,389)	$ 929,181
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic and diluted	12,026,886	11,869,938
(LOSS) EARNINGS PER SHARE
Basic and diluted	$ (0.24)	$ 0.30

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ (2,838,776)	$ 3,580,683
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation	146,003	568,014
Amortization	12,709	37,901
Deferred tax benefit	(100,856)	(56,930)
Change in fair value of warrant liabilities	26,065	(348,199)
Stock-based compensation expense	49,966	135,000
Impairment loss on construction in progress	1,500,632
Provision for doubtful accounts	896,185
Change in operating assets and liabilities
Accounts receivable	(110,530)	134,164
Deposits and other receivables	(145,873)	(694,173)
Inventories	(535,897)	(148,072)
Advances to suppliers	(4,502)	(21,199)
Prepaid expense and other		13,410
Other receivables - related parties		(159,600)
Accounts payable, trade	(43,544)	860,878
Other payables and accrued liabilities	678,627	(506,997)
Payroll payable	66,257
Other payables - related parties		75,000
Customer deposits	1,843,478	1,596
Taxes payable	135,942	795,076
Net cash provided by operating activities	1,575,886	4,266,552
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for equipment, construction in progress and land use rights	(1,492,456)	(149,303)
Prepayments for construction-in-progress		(68,752)
Net cash used in investing activities	(1,492,456)	(218,055)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans - bank		5,027,400
Payments of short-term loans - bank		(5,187,000)
Repayments to related parties	(272,258)	(204,924)
Principal payments on capital lease obligations		(311,248)
Proceeds from issuance of IPO shares, net		11,510,157
Net cash (used in) provided by financing activities	(272,258)	10,834,385
EFFECT OF EXCHANGE RATE ON CASH	(381,769)	(1,029,044)
CHANGES IN CASH AND CASH EQUIVALENTS	(570,597)	13,853,838
CASH AND CASH EQUIVALENTS, beginning of period	2,734,540	16,470,299
CASH AND CASH EQUIVALENTS, end of period	2,663,943	30,324,137
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	129,555	833,464
Cash paid for interest	18,002	195,659
NON-CASH INVESTING AND FINANCING ACTIVITIES
Reclassification of construction-in-progress from prepayments-construction		191,587
Additions to property, plant and equipment, and construction-in-progress through other payables		800,621
Repayments from related parties offset with other payables-related parties	1,505,109
Conversion of shareholders' debt to 1,593,538 ordinary shares		9,959,613
Issuance of ordinary shares for deferred compensation	75,000	30,000
Valuation of 112,500 warrants allocated to warrant liabilities from additional paid-in capital		475,380
Reclassification of payables for litigations from other payables-related parties		205,908
Other receivables-related parties offset with other payables-related parties	$ 2,010,128

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Condensed Consolidated Statements of Cash Flows (Parenthetical) (Unaudited)	3 Months Ended
	Sep. 30, 2015 shares
Statement of Cash Flows [Abstract]
Conversion of debt to ordinary shares	1,593,538
Warrants allocated to warrant liabilities from additional paid-in capital	112,500

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Nature of Business and Organization

3 Months Ended

Sep. 30, 2016

Nature of Business and Organization [Abstract]

Nature of business and organization

Note 1 – Nature of business and organization

Yulong Eco-Materials Limited (“Yulong Eco-Materials” or the “Company”) is a holding company incorporated on March 10, 2011, under the laws of the Cayman Islands. The Company has no substantive operations other than owning all of the outstanding share capital of China Xing De (BVI) Limited (“Yulong BVI”). In turn, Yulong BVI is a holding company that owns all of the outstanding share capital of China Xing De (Hong Kong) Limited (“Yulong HK”). Yulong HK is also a holding company that owns all of the outstanding equity capital of Zhengzhou Xing De Enterprise Management & Consulting Co., Ltd. (“Yulong WFOE”).

The Company is a vertically integrated manufacturer of eco-friendly building products. The Company operates principally from the city of Pingdingshan, Henan Province, in the People’s Republic of China (the “PRC” or “China”). The Company produces fly-ash bricks and ready-mixed concrete, and in April 2015, launched its construction waste management, or CWM, business which includes hauling and processing construction waste, and producing crushed construction waste or recycled aggregates, and bricks made from recycled aggregates, or recycled bricks. All of the Company’s business activities are carried out by domestic Chinese companies that the Company controls through contractual arrangements as follows: (1) Henan Jianyida Industrial Co., Ltd. (“Yulong Bricks”), which carries out the bricks business, (2) Pingdingshan Hengji Concrete Co., Ltd. (“Yulong Concrete”) and Pingdingshan Hengji Industrial Co., Ltd. (“Yulong Transport”), which carry out the concrete business, and (3) Pingdingshan Xulong Renewable Resource Co., Ltd. (“Yulong Renewable”), which carries out the CWM business. The contractual arrangements are comprised of a series of agreements entered into by each of these four companies and their shareholders, on the one hand, and Yulong WFOE on the other hand (see “Contractual Arrangements” and “Note 3 – Variable Interest Entities” below).

On October 30, 2015, Pingdingshan Xulong Renewable Resource Co., Ltd. Shangqiu Branch was established and incorporated in the People’s Republic of China. The entity is wholly owned by Pingdingshan Xulong Renewable Resource Co., Ltd. (“Yulong Renewable”) and engages in construction waste hauling and processing for the city center in Shangqiu district.

Contractual Arrangements

Although current PRC regulations do not restrict or prohibit foreign investment in domestic Chinese companies that engage in businesses such as those of Yulong Bricks, Yulong Concrete, Yulong Transport and Yulong Renewable (each a “Yulong operating company” and collectively the “Yulong operating companies”), there is substantial uncertainty regarding the interpretation and application of such regulations. As such, the Yulong operating companies are controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements are a series of four agreements (collectively the “Contractual Arrangements”) which significant terms are as follows:

Exclusive Consulting Services and Operating Agreements

Pursuant to the exclusive consulting and service agreement among Yulong WFOE, each Yulong operating company and its shareholders, Yulong WFOE is engaged as exclusive provider of management consulting services to such Yulong operating company. For such services, the Yulong operating company agrees to pay service fees determined based on all of its net profit after tax payments to Yulong WFOE or Yulong WFOE has obligation to absorb all of the Yulong operating companies’ losses. The agreement remains in effect until and unless all parties agree to its termination. Until such termination, the Yulong operating company may not enter into another agreement for the provision of management consulting services without the prior consent of Yulong WFOE.

Option Agreements

Pursuant to the exclusive equity option agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders jointly and severally grant Yulong WFOE an option to purchase their equity interests in such Yulong operating company. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of such Yulong operating company, the shareholders are required to immediately return any amount in excess of the registered capital to Yulong WFOE or its designee. Yulong WFOE may exercise such option at any time until it has acquired all equity interests of such Yulong operating company, and freely transfer the option to any third party. The agreement will terminate at the earlier of (i) the date on which all of the equity interests of such Yulong operating company has been transferred to Yulong WFOE or its designee or (ii) the unilateral termination by Yulong WFOE.

Equity Pledge Agreements

Pursuant to the equity interest pledge agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders pledge all of their equity interests in such Yulong operating company to Yulong WFOE as collateral to secure the obligations of such Yulong operating company under the exclusive consulting services and operating agreement. The shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Yulong WFOE’s interests, without Yulong WFOE’s prior approval. In the event of default, Yulong WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of such Yulong operating company. The agreement will terminate at the earlier of (i) the date the shareholders have transferred all of their pledged equity interests pursuant to the option agreement or (ii) two years from the satisfaction by such Yulong operating company of all its obligations under the exclusive consulting and service agreement.

Voting Rights Proxy and Financial Supporting Agreements

Pursuant to the voting rights proxy and financial supporting agreement between the shareholders of each Yulong operating company and Yulong WFOE, such shareholders have given Yulong WFOE an irrevocable proxy to act on their behalf on all matters pertaining to such Yulong operating company and to exercise all of their rights as shareholders of such Yulong operating company, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in such Yulong operating company. In consideration of such granted rights, Yulong WFOE agrees to provide the necessary financial support to such Yulong operating company whether or not such Yulong operating company incurs loss, and agrees not to request repayment if such Yulong operating company is unable to do so. The agreement will terminate at the earlier of (i) the date on which all of the equity interests of such Yulong operating company have been transferred to Yulong WFOE or (ii) the unilateral termination by Yulong WFOE.

As a result of the foregoing contractual arrangements, which give Yulong WFOE effective control of the Yulong operating companies, obligate Yulong WFOE to absorb all of the risk of loss from their activities, and enable Yulong WFOE to receive all of their expected residual returns, the Company accounts for each Yulong operating company as a variable interest entity (“VIE”). Additionally, as the parent company of Yulong WFOE, the Company is considered the primary beneficiary of the Yulong operating companies. Accordingly, the Company consolidates the accounts of the Yulong operating companies for the three months ended September 30, 2016 and 2015, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.

The accompanying condensed consolidated financial statements reflect the activities of Yulong Eco-Materials and each of the following entities:

Name	Background		Ownership
Yulong BVI	●	A British Virgin Islands company	100%
	●	Incorporated on June 15, 2011
Yulong HK	●	A Hong Kong company	100%
	●	Incorporated on July 21, 2011
Yulong WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)	100%
	●	Incorporated on September 2, 2011
	●	Registered capital of $9,935,303 fully funded
Yulong Bricks	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on September 20, 2006	arrangements
	●	Registered capital of $4,498,763 (RMB 30,000,000) fully funded
Yulong Concrete	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on December 7, 2004	arrangements
	●	Registered capital of $2,999,175 (RMB 20,000,000) fully funded
Yulong Transport	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on July 13, 2009	arrangements
	●	Registered capital of $1,501,087 (RMB 10,010,000) fully funded
Yulong Renewable	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on August 16, 2011	arrangements
	●	Registered capital of $8,997,526 (RMB 60,000,000) fully funded
	●	Commenced operation in April 2015

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Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Summary of significant accounting policies

Note 2 – Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended June 30, 2016, that was filed with the SEC on August 25, 2017.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and the VIEs. All intercompany transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation.

Use of estimates and assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and footnotes. Significant accounting estimates reflected in the condensed consolidated financial statements include the useful lives and impairment of property, plant and equipment, collectability of receivables, realization of deferred tax assets, inventory valuation, warrant liabilities, stock-based compensation, and the present value of the net minimum lease payments of the capital lease. Actual results could differ from these estimates.

Going concern consideration

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern basis. The going-concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue as a going concern depends on the liquidation of its current assets. The Company’s operation scale particularly Yulong Renewable was significantly downsized since the first quarter of fiscal year 2017 due to Environment Protection Act passed by the central government of PRC and Blue Sky Action Plan implemented by the Henan province, PRC. The remaining business of Yulong Bricks and Yulong Concrete has not sufficiently made up the cessation of Yulong Renewable’s business which raises a substantial doubt about the Company’s ability to continue as a going concern.

In an effort to maintain its financial position and operations, the Company has successfully entered into a remittance agreement with one of its vendors to refund the prepayment for one of its construction projects in an amount of $15.7 million (RMB104.5 million). Moreover, the Company is working to pursue the potential acquirers for Yulong Renewable’s business. Beginning January 2017, Yulong Bricks and Yulong Concrete gradually resumed their sales revenue by 15% from the Q1 and Q2 2017 level. The Company has initiated negotiations with its financial institutions and lessors to extend the due date of the loan and lease obligations. The founder has provided approximately $1.7 million (RMB 11.6 million) to fund the Company’s operations. The Company may also continue to raise fund through private placement or issuance of shares to support the Company’s operational needs. Management believes that the foregoing actions would enable the Company to continue as a going concern.

Foreign currency translation

The reporting currency of the Company is the U.S. dollar. The Company’s Chinese subsidiary and the VIEs use the local currency, Renminbi (RMB), as their functional currency as determined based on the criteria of ASC 830, Foreign Currency Translation. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China (the “PBOC”) at the end of the period. Income and expense accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the statement of equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income (loss) amounted to a loss of $(1,119,204) and $(1,219,184) as of September 30, 2016 and June 30, 2016, respectively. The balance sheet amounts, with the exception of equity, at September 30, 2016 and June 30, 2016 were translated at 6.67 RMB and 6.64 RMB to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rate applied to statements of operations and comprehensive (loss) income accounts for the three months ended September 30, 2016 and 2015 was 6.66 RMB and 6.27 RMB, respectively. Cash flows are also translated at the average translation rate for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits and time deposits placed with banks with state owned banks within the PRC and with banks in Hong Kong which are unrestricted as to withdrawal and use and have original maturities of less than three months.

Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions in Hong Kong may, from time to time, exceed Hong Kong Deposit Protection Board’s insured limits. As of September 30, 2016 and June 30, 2016, the Company had approximately $2,662,970 (RMB 17,758,018) and $2,734,015 (RMB 18,165,703), respectively, of cash deposits which were not covered by insurance. The Company has not experienced any losses in such accounts.

Restricted cash

Restricted cash consists of a third-party escrow account in the United States of America. The usage of the amount in the escrow account needs approval from the underwriter.

Accounts and other receivables

During the normal course of business, the Company extends unsecured credit to its customers and others. Management reviews its accounts and other receivables balances each reporting period to determine if an allowance for doubtful accounts is required. Customer accounts are considered past due over 90 days. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. Bad debts are written off against the allowance after all collection efforts have ceased. The Company recorded in an aggregate of approximately $4.8 million and $3.9 million of allowance of doubtful accounts against its accounts receivable and other receivables. The current year provision is based on the past due period over 9 months of its customers.

Inventories

Inventories consist of raw materials and finished goods and are stated at the lower of cost or market, as determined using the weighted average cost method. Management compares the cost of inventories with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost. On an ongoing basis, inventories are reviewed for potential write-down for estimated obsolescence or unmarketable inventories equal to the difference between the costs of inventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or market, it is not marked up subsequently based on changes in underlying facts and circumstances. As of September 30, 2016 and June 30, 2016, the Company determined that no reserves for obsolescence were necessary.

Advances to suppliers

The Company advances money to certain suppliers for raw material purchases. Such advances are interest-free and unsecured. Management regularly reviews the aging of such advances as well as delivery trends of purchased materials, and records an allowance when it believes that delivery of materials due is at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. No allowance for doubtful accounts was considered necessary at the balance sheet dates.

Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the useful lives of the assets are as follows:

	Useful Life
Buildings and improvements	10-30 years
Machinery and equipment	5-10 years
Transportation equipment	5-10 years
Office equipment	3-5 years

The Company accounts for all significant leases as either operating or capital. At lease inception, if the lease meets any of the following four criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) lease term is equal to 75% or more of the estimated economic life of the leased property, or (d) the present value of the minimum lease payments is 90% or more of the fair value of the leased asset. Otherwise, the lease will be treated as an operating lease.

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the condensed consolidated statements of operations and comprehensive (loss) income.  Construction-in-progress represents labor costs, materials, and capitalized interest incurred in connection with the construction. Interest incurred during construction is capitalized into construction in progress. All other interest is expensed as incurred. No depreciation is provided for construction in progress until it is completed and placed into service. Expenditures for maintenance and repairs are charged to earnings as incurred while additions, renewals and betterments are capitalized.

Prepayments

Prepayments represent advances made to certain suppliers for equipment purchases or advance made to contractors in connection with the Company’s construction-in-progress. Management regularly reviews aging of prepayments and records an allowance when management believes collection of equipment or services to be performed due are at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. As of September 30, 2016 and June 30, 2016, we recorded $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) reserve for prepayments.

Intangible assets

Intangible assets are carried at cost less accumulated amortization.

The Company accounts for all significant leases of land use rights for purposes of classification as either operating or capital. At lease inception, if the lease meets either of the following two criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, or (b) bargain purchase option. Otherwise, the lease will be treated as an operating lease.

Intangible assets with finite useful lives are amortized using a straight-line method of amortization that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The original estimated useful life for the land use rights of the following Yulong operating companies is as follows:

Entity	Description of assets	Estimated useful life
Yulong Bricks	Land use right		50
Yulong Concrete	Land use right		50
Yulong Renewable	Land use right		50

Intangible assets are reviewed at least annually, more often when circumstances require, to determine whether their carrying values have become impaired. The Company considers an asset to be impaired if its carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  As of September 30, 2016 and June 30, 2016, the Company recorded $2,245,796 and $2,253,966 impairment loss on the land use right of Yulong Renewable due to Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC. Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. The Company placed an impairment reserve on the land use rights of Yulong Renewable.

Impairment for long-lived assets

Long-lived assets, including buildings and improvements, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, the Company reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. Due to the Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC in the fourth quarter of fiscal year 2016, Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. For the three months ended September 30, 2016, the Company recorded approximately $1.5 million (RMB 10 million) impairment loss on Yulong Renewable’s construction-in-progress. As of September 30, 2016 and June 30, 2016, the impairment reserve for the long-lived assets (including construction-in-progress) was $50.1 million (RMB 333.9 million) and $40.8 million (RMB 323.9 million). 

Fair Values of Financial Instruments

ASC Topic 825, Financial Instruments (“Topic 825”), requires disclosure of fair value information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The Company considers the carrying amount of cash, accounts receivable, other receivables, accounts payable, notes payable and other current liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company determined that the carrying value of the non-current capital lease obligations approximated their fair value using level 2 inputs by comparing the stated loan interest rate to the rate charged by the People’s Bank of China on similar loans.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016:

	Carrying value at September 30,  2016		Fair value measurement at September 30, 2016
			Level 1		Level 2		Level 3
Warrant liabilities	$	91,670	$	-	$	-	$	91,670

Certain inputs used in the valuation of the Company’s warrants are observable and therefore considered level 2. However, as the Company is a newly listed public reporting company and thus lacks historical volatility data, management concluded that level 3 fair valuation measurement is appropriate.

The following is a reconciliation of the beginning and ending balances of warrant liabilities measured at fair value on a recurring basis using observable inputs as of September 30, 2016:

	September 30, 2016
Beginning fair value	$	65,605
Realized loss recorded in earnings		26,065
Ending fair value	$	91,670

Revenue recognition

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition, regarding revenue recognition which specifies that revenue is realized or realizable and earned. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, the Company has no other obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

Revenue from the Company’s brick and concrete businesses represents the invoiced value of goods, net of a value added tax (“VAT”).

The Company sells concrete and bricks primarily to major local real estate development and/or construction companies. Sales agreements are signed with each customer. Each agreement has specific terms and conditions with the exception of delivery date and quantity, which are provided when the customer issues an order pursuant to the agreement. The Company does not sell products to customers on consignment basis. There is no right of return after products are delivered and accepted by the customer.

The Company also provides transportation services for its concrete customers. Revenue is recognized upon delivery of the concrete. Transportation services revenue is immaterial to the Company’s consolidated revenues for the periods presented in the accompanying condensed consolidated financial statements.

Revenue from the CWM business includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

CWM revenue also includes revenue from the following activities:

● Hauling construction waste. The Company operates a fleet of trucks to haul the waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling per truckload.

● Processing construction waste at mobile recycling stations. Revenue is recognized either per cubic meter of waste processed or when processing at a jobsite is completed, depending on the contract terms.

● Subcontracting waste hauling projects. The Company occasionally subcontracts waste hauling projects, whereby the subcontractors are the primary obligors to complete these projects, and the Company does not have any general credit risk as the services are prepaid by the customers. Sales and subcontracting costs from these subcontract arrangements are recorded at the net amount in accordance with ASC 605-45.

Recycling revenues includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

Recycling revenue also include hauling services of construction waste. The Company operates a fleet of trucks to haul construction waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling from the construction and demolition sites per truckloads.

Shipping and handling

Shipping and handling costs pertaining to raw material purchases are included in cost of revenue.

Shipping costs incurred in the delivery of products and depreciation expenses for transportation equipment (under Yulong Transport) are included in selling expense. Shipping costs amounted to $43,922 and $81,611 for the three months ended September 30, 2016 and 2015, respectively. Depreciation expense amounted to $8,008 and $37,219 for the three months ended September 30, 2016 and 2015, respectively.

Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of September 30, 2016 and June 30, 2016, $2,662,970 and $2,734,016 were deposited with various major financial institutions located in the PRC, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. Historically, deposits in Chinese banks are secure due to state policy to protect depositor interests. However, China promulgated a Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures to provide for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the current Bankruptcy Law, a Chinese bank may file bankruptcy if it deems itself to be insolvent. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have intensified competition in many aspects, especially since the opening of the RMB business to foreign banks in late 2006. Therefore, the risk of bankruptcy at the institutions that the Company maintains deposits has increased. In the event of bankruptcy, the Company is unlikely to reclaim its deposits in full since it is unlikely to be classified as a secured creditor under PRC laws.

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of customer creditworthiness and ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses if necessary, and such losses have generally been within expectations.

Customer and vendor concentration risk

For the three months ended September 30, 2016, two customers accounted for 14% and 10% of the Company's total revenues. For the three months ended September 30, 2015, no customer accounted for more than 10% of the Company’s total revenues.

As of September 30, 2016, two customers accounted for 26% and 17% of the Company’s total accounts receivable. As of June 30, 2016, two customers accounted for 26% and 19% of the Company’s total accounts receivable, respectively.

For the three months ended September 30, 2016, four suppliers accounted for 27%, 17%, 17% and 16% of the Company’s total purchases, respectively. For the three months ended September 30, 2015, four suppliers accounted for 31%, 16%, 12% and 10% of the Company's total purchases, respectively.

As of September 30, 2016, four suppliers accounted for 20%, 19%, 13% and 10% of the Company’s accounts payable balances, respectively. As of June 30, 2016, five suppliers accounted for 21%, 19%, 16%, 16% and 11% of the Company’s accounts payable balances, respectively.

Income taxes

The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company applies ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

As of September 30, 2016, Yulong WFOE and the VIEs had each filed income tax returns in China for the years ended December 31, 2010 to 2015. All such tax returns are subject to examination by the Chinese taxing authorities.

Warrant liabilities

A contract is designated as an asset or a liability and is carried at fair value on a company’s balance sheet, with any changes in fair value recorded in a company’s results of operations.  The Company then determines which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability. The changes in the values of these instruments are shown in the accompanying condensed consolidated statements of operations and comprehensive (loss) income as “change in fair value of warrant liabilities”.

The Company adopted the provisions of an accounting standard regarding instruments that are indexed to an entity’s own stock.  This accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s ordinary shares and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument.  It provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception within the standards. All warrants issued with the strike price denominated in US dollar were recorded as derivative liability because the strike price of the warrants is denominated in US dollar, a currency other than the Company’s functional currency RMB.

(Loss) earnings per share

(Loss) earnings per share are calculated in accordance with ASC 260-10, Earnings per Share. Basic (loss) earnings per share are computed by dividing net (loss) income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period. Diluted (loss) earnings per ordinary share reflect the potential dilution that could occur if securities to issue ordinary shares were exercised. The dilutive effect of outstanding share-based awards is reflected in the diluted (loss) earnings per share by application of the treasury stock method.

Comprehensive (loss) income

Comprehensive (loss) income is defined to include all changes in shareholders’ equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220-10, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive (loss) income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company adopted ASU No. 2011-05 by presenting items of net (loss) income and other comprehensive (loss) income in one continuous statement, the condensed consolidated statements of operations and comprehensive (loss) income.

Employee benefit

The full-time employees of Yulong WFOE and the VIEs are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expense for the plans was $42,313 and $34,800 for the three months ended September 30, 2016 and 2015, respectively.

Recently issued accounting pronouncements

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management is evaluating the effect, if any, on the Company’s financial position, results of operations or cash flows.

Going Concern Uncertainties: In August 2014, FASB issued ASU No. 2014-15, Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have material impact on our consolidated financial position and results of operations.

Inventory: In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.  The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016.  Early application is permitted for all entities and should be applied prospectively. We do not expect the adoption of ASU 2015-11 to have a material impact on our consolidated financial position and results of operations.

Financial Instruments: In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The main objective in developing this ASU is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of the fiscal year of adoption for public entities if the entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company does not expect the adoption of ASU 2016-01 to have material impact on its financial position, results of operations or cash flows.

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The main objective is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for (1) public business entities, (2) not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and (3) employee benefit plans that file financial statements with the SEC. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2010. Early adoption is permitted for all entities. The Company does not expect the adoption of ASU 2016-02 to have material impact on its financial position, results of operations or cash flows.

Stock-based Compensation: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also requires the Company to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.

Statement of Cash Flows: In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which require that a statement of cash flows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a retrospective approach. As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the consolidated cash flow statements.

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.

Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or condition of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2017-09 on its condensed consolidated financial statements.

Except for the ASU above, in the period from January 1, 2017 to August 2017, the FASB has issued ASU No. 2017-01 through ASU 2017-011, which are not expected to have a material impact on the consolidated financial statements upon adoption.

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Variable Interest Entities

3 Months Ended

Sep. 30, 2016

Variable Interest Entities [Abstract]

Variable interest entities

Note 3 – Variable interest entities

On September 2, 2011, Yulong WFOE entered into the Contractual Arrangements with each Yulong operating company and its shareholders. The Contractual Arrangements were subsequently amended on April 21, 2014 with respect to all of the Yulong operating companies, and again on June 24, 2015, but only with respect to Yulong Renewable. The significant terms of the Contractual Arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result of the Contractual Arrangements, the Company classifies each Yulong operating company as a VIE.

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Yulong WFOE is deemed to have a controlling financial interest and be the primary beneficiary of each Yulong operating company because it has both of the following characteristics:

(1) The power to direct activities at each Yulong operating company that most significantly impact such entity’s economic performance, and

(2) The obligation to absorb losses of, and the right to receive benefits from, each Yulong operating company that could potentially be significant to such entity.

Pursuant to the Contractual Arrangements, each Yulong operating company pays service fees equal to all of its net profit after tax payments to Yulong WFOE. At the same time, Yulong WFOE is obligated to absorb all of their losses. The Contractual Arrangements are designed so that the Yulong operating companies operate for the benefit of Yulong WFOE and ultimately, the Company.

Accordingly, the accounts of the Yulong operating companies are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company’s financial statements.

The carrying amount of the VIEs’ consolidated assets and liabilities are as follows:

	September 30, 2016		June 30, 2016
Current assets	$	9,871,201	$	10,068,142
Property, plant and equipment, net		7,270,775		7,425,445
Other non-current assets		18,316,682		18,306,223
Total assets		35,458,658		35,799,810
Total liabilities		35,218,399		33,130,293
Net assets	$	240,259	$	2,669,517

The VIEs’ liabilities consist of the following:

	September 30, 2016		June 30, 2016
Current liabilities:
Short-term loan - banks	$	5,653,445	$	5,674,011
Accounts payable		1,661,167		1,710,881
Other payables and accrued liabilities		6,630,106		5,973,602
Payroll payable		611,219		546,990
Other payables - related parties		1,429,836		1,907,458
Customer deposits		4,404,720		2,571,846
Taxes payable		1,628,002		1,497,583
Capital lease obligations-current		4,076,314		4,062,291
Dividends payable		9,123,590		9,156,779
Total current liabilities		35,218,399		33,101,441
Non-current liabilities:
Capital lease obligations-non-current		-		28,852
Total non-current liabilities		-		28,852
Total liabilities	$	35,218,399	$	33,130,293

The operating results of the VIEs are as follows:

	Three Months ended September 30,
	2016			2015
Revenue	$	2,804,030		$	13,350,868
Gross profit	$	911,229		$	5,445,761
(Loss) income from operations	$	(2,327,922	)	$	4,960,181
Net (loss) income	$	(2,564,416	)	$	3,678,333

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Accounts Receivable, Net

3 Months Ended

Sep. 30, 2016

Accounts Receivable, Net/Deposits and Other Receivables [Abstract]

Accounts receivable, net

Note 4 – Accounts receivable, net

Accounts receivable, net consists of the following:

	September 30, 2016			June 30, 2016
Accounts receivable	$	9,741,530		$	9,666,112
Less: allowance for doubtful accounts		(4,819,067	)		(3,937,778	)
Total accounts receivable, net	$	4,922,463		$	5,728,334

Movement of allowance for doubtful accounts is as follows:

	September 30, 2016			June 30, 2016
Beginning balance	$	3,937,778		$	-
Charge to expense		896,185			4,067,144
Exchange rate effect		(14,896	)		(129,366	)
Ending balance	$	4,819,067		$	3,937,778

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Deposits and Other Receivables

3 Months Ended

Sep. 30, 2016

Accounts Receivable, Net/Deposits and Other Receivables [Abstract]

Deposits and other receivables

Note 5 – Deposits and other receivables

Deposits and other receivables consisted of the following:

	September 30, 2016		June 30, 2016
Refundable deposits for equipment purchase	$	438,424	$	444,439
Deposit for outsourcing agreement (1)		234,324		235,176
Deposit for new project		213,466		63,739
Advances to employees (2)		239,671		240,474
Insurance compensation		15,967		15,874
Deposit with government agency		2,999		3,011
Total	$	1,144,851	$	1,002,713

Other receivables-non-current: 

	September 30, 2016		June 30, 2016
Refundable deposit-construction (3)	$	15,670,691	$	15,727,696
Total	$	15,670,691	$	15,727,696

(1) In December 2011, Yulong Bricks agreed to outsource some brick production to Pingdingshan Hongrui New Construction Materials Co., Ltd., an unrelated third party, and paid approximately $134,963 (RMB 1,562,589) as security deposit, which is due on demand.

(2) The Company entrusts funds to its employees to pay certain of its expenses in the normal course of business, particularly for projects or jobsites beyond Pingdingshan.

(3) As of September 30, 2016 and June 30, 2016, we recorded $15,670,691 (RMB 104.5 million) and $15,727,696 (RMB 104.5 million), respectively, related to the purchase of equipment, in connection with the construction of Yulong Renewable's waste recycling plant and factory construction, would be refundable based on the agreement entered with the contractor, Pingdingshan City HuaShen Trading Co. Ltd., subsequently on July 4, 2017 (see Note 8). The agreement stipulated that the contractor would refund the amount in five (5) equal installment amount on July 10, 2017, October 10, 2017, January 10, 2018, April 10, 2018 and July 10, 2018. The first installment of $3,010,085 was received subsequently in July 2017 as per the refund schedule.

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Inventories

3 Months Ended

Sep. 30, 2016

Inventories [Abstract]

Inventories

Note 6 – Inventories

Inventories consisted of the following:

	September 30, 2016		June 30, 2016
Raw materials	$	790,922	$	285,459
Semi-finished byproduct		37,003		34,236
Finished goods		71,167		45,196
Total inventories	$	899,092	$	364,891

Raw materials for bricks consist primarily of cement, gypsum, quicklime, aluminum powder and reclaimed fly-ash. Raw materials for concrete consist primarily of cement, admixture, sand and pebble. The cost of finished goods includes direct costs of raw materials as well as direct labor used in production. Indirect production costs at normal capacity such as utilities and indirect labor related to production such as assembling, shipping and handling costs for purchasing are also included in the cost of inventory.

As of September 30, 2016 and June 30, 2016, management believed that no inventory allowance was deemed necessary.

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Property, Plant and Equipment, Net

3 Months Ended

Sep. 30, 2016

Property, Plant and Equipment, Net [Abstract]

Property, plant and equipment, net

Note 7 – Property, plant and equipment, net 

Property, plant and equipment consisted of the following:

	September 30, 2016			June 30, 2016
Building and improvements	$	24,645,552		$	24,735,204
Machinery and equipment		7,309,120			7,335,708
Machinery and equipment under capital lease		2,092,228			2,099,839
Transportation equipment		852,497			855,598
Transportation equipment under capital lease		2,677,878			2,687,620
Office equipment		109,594			109,993
Construction-in-progress		28,515,608			27,111,181
Subtotal		66,202,477			64,935,143
Less: accumulated depreciation		(8,853,272	)		(8,754,140	)
Less: impairment loss on long-lived assets and construction-in-progress		(50,078,430	)		(48,755,558	)
Total	$	7,270,775		$	7,425,445

As of September 30, 2016 and June 30, 2016, Yulong Renewable has provided an impairment reserves for its building and improvements, machinery and equipment, transportation equipment and construction-in-progress in an amount of $50,078,430 and $48,755,558, respectively.

Construction-in-progress represents labor costs and materials incurred in connection with the construction of office building, employee facilities, equipment and machinery for Yulong Renewable, office building for Yulong Concrete, and an autoclave for Yulong Bricks. No depreciation is provided for construction-in-progress until it is completed and placed into service.

Approximately in the fourth quarter of 2016, the central government of the People's of Republic of China passed Air Pollution Control Act and enforced Air Pollution Control Action Plan. The province of Henan of People's Republic of China implemented "Province of Henan Blue Sky Action Plan" on various industries such as construction materials, coal mining. Due to the Air Pollution Control Act and Blue Sky Action Plan, Yulong Renewable is required to comply with the new environmental regulations and its construction projects were placed on hold since August 2016. Yulong Renewable CIP primarily included the following projects:

Yulong Renewable commenced a construction of the waste recycling plant and brick production plant in 2015. Total budget for these constructions is approximately $44.4 million, of which approximately $8.2 million (RMB 54.4 million) was transferred to fixed assets in the fiscal year ended June 30, 2016. The entity placed the plant construction on hold in August 2016 and accordingly, provided an impairment reserve for the related construction-in-progress amount, approximately $7.7 million (RMB 51.6 million) in the fiscal year ended June 30, 2016.

In March 2016, the Company commenced a construction of environmental product testing and solid waste resource utilization center in Zhengzhou, PRC. Total budget for the construction of this center is approximately 45.0 million (RMB 300 million). During the fiscal year ended June 30, 2016, the Company has incurred approximately $34.7 million (RMB 231.7 million) in construction-in-progress pertinent to this construction. In the early first quarter of fiscal year 2017, Yulong Renewable paid an additional $1.5 million (RMB 10 million) related to this construction project and included such amount in construction-in-progress. In August 2016, the Company placed this construction project on hold. In July 2017, the Company signed a cancellation agreement with the contractor by which the project prepayment, $15.6 million (RMB 104 million) will be refundable by the contractor in five (5) equal installments commencing in July 2017. The remaining construction-in-progress balance related to this construction, approximately $20.5 million (RMB 136.8 million), is considered suspended and the Company provided an impairment reserve for the entire amount, $20.5 million (RMB 136.8 million) as of September 30, 2016.

Construction-in-progress consisted of the following as of September 30, 2016:

Construction-in-progress description	Value		Estimated completion date		Estimated additional cost to complete
Office buildings, staff facilities, equipment and machinery	$	7,339		Early 2018	$	-
Autoclave installation	$	7,081		Early 2018	$	-
Total	$	14,420			$	-

Depreciation expense is $146,003 and $568,014 for the three months ended September 30, 2016 and 2015, respectively.

Machinery and equipment under capital lease

In March 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $136,199 (RMB 908,240). The lease requires a one-time payment of $37,952 and an additional $5,828 as a security deposit paid in March 2014, monthly lease payments of approximately $5,000 from June 2014 to May 2016, with interest rate per annum of 8.8%. The ownership of the trucks will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $28,431 (RMB 189,591).

In March 2014, monthly lease payments of approximately $3,000 from June 2014 to November 2015, with interest rate per annum of 8.5%. The ownership of the trucks will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). During the fiscal year ended June 30, 2016, the Company paid off the lease and ownership of the machines was transferred to the Company.

In September 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $192,697 (RMB 1,285,000). The lease requires a one-time payment of $54,506 and an additional $8,414 as a security deposit paid in October 2014, monthly lease payments of approximately $8,000 from November 2014 to October 2016, with interest rate per annum of 8.7%. The ownership of the excavator will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $136,505 (RMB 910,283). 

In September 2014, the Company entered into a lease agreement with a third party to lease an excavator for two years for approximately $133,463 (RMB 890,000). The lease requires a one-time payment of $37,952 and an additional $5,828 as a security deposit paid in October 2014, monthly lease payments of approximately $5,000 from November 2014 to October 2016, with interest rate per annum of 8.7%. The ownership of the excavator will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). As of September 30, 2016, the outstanding balance of the capital lease obligation is $94,544 (RMB 630,467).

In September 2014, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,836 (RMB 339,000). The lease requires a one-time payment of $17,758 and an additional $5,549 as a security deposit paid in October 2014, monthly lease payments of approximately $3,000 from November 2014 to April 2016, with interest rate per annum of 8.3%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12). In May 2016, the lessor verbally agreed to extend the due date to October 2016. As of September 30, 2016, the outstanding balance of the capital lease obligation is $38,593 (RMB 257,354).

In September 2014, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,686 (RMB 338,000). The lease requires a one-time payment of $17,706 and an additional $5,533 as a security deposit paid in October 2014, monthly lease payments of approximately $3,000 from November 2014 to April 2016, with interest rate per annum of 8.3%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term. As of September 30, 2016, the outstanding balance of the capital lease obligation is $38,479 (RMB 256,594).

In June 2015, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $49,486 (RMB 330,000). The lease requires a one-time payment of $15,836 (RMB 105,600) which includes $4,949 (RMB 33,000) as a security deposit paid in June 2015, monthly lease payments of approximately $2,350 (RMB 15,673) from August 2015 to Jan 2017, with interest rate per annum of 9.525%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a loader for eighteen months for approximately $50,386 (RMB 336,600). The lease requires a down payment of $16,124 (RMB 107,520) which includes $5,039 (RMB 33,600) as a security deposit paid in June 2015, monthly lease payments of approximately $2,393 (RMB 15,958) from August 2015 to Jan 2017, with interest rate per annum of 9.525%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a digging machine for eighteen months for approximately $136,199 (RMB 908,240). The lease requires a down payment of $34,766 (RMB 231,840) which includes $5,339 (RMB 35,600) security deposit paid in June 2015, monthly lease payments of approximately $4,868 (RMB 32,462) from August 2015 to July 2017, with interest rate per annum of 9.6%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

In June 2015, the Company entered into a lease agreement with a third party to lease a digging machine for eighteen months for approximately $136,199 (RMB 908,240). The lease requires a one-time down payment of $34,766 (RMB 231,840) which includes $5,339 (RMB 35,600) security deposit paid in June 2015, monthly lease payments of approximately $4,868 (RMB 32,462) from August 2015 to July 2017, with interest rate per annum of 9.6%. The ownership of the loader will transfer to the Company if there is no default of the lease payments at the end of the lease term (see Note 12).

Transportation equipment under capital leases

In October 2012, the Company entered into a lease agreement with a third party to lease ten waste hauling trucks for two years for approximately of $616,962 (RMB 4,114,208), including $47,687 (RMB 318,000) as security deposits and $62,233 (RMB 415,000) for insurance. The lease also requires a one-time payment of $163,701 in April 2013 and monthly lease payments of approximately $26,000 originally from June 2013 to May 2015, with interest rate at 18.2% per annum. The ownership of the trucks has been transferred to the Company with an attached lien that will be removed if there is no default of the lease payments at the end of the extended lease term. The Company placed these machines into service in June 2013, and they have accordingly been capitalized.

In November 2012, the Company entered into another lease agreement with a third party to lease ten waste hauling trucks for two years for approximately of $603,917 (RMB 4,027,225), including $47,687 (RMB 318,000) as security deposits and $52,186 (RMB 348,000) for insurance. The lease also requires a one-time payment of $163,704 on April 30, 2013, monthly lease payments of approximately $32,000 from July 2013 to June 2014, and monthly lease payments of approximately $15,097 originally from July 2014 to June 2015, with interest rate at 16.8 % per annum. The ownership of the trucks has been transfer to the Company with an attached lien that will be removed if there is no default of the lease payments at the end of the extended lease term. As of September 30, 2016, the amount outstanding was $121,922.

In January 2014, the Company entered into a memorandum of understanding to lease 100 waste hauling trucks with a third party for approximately $62,683 (RMB 418,000) per truck. In July 2014, the Company entered into a binding agreement with the same party to lease the first 30 trucks for two years for approximately $1,666,792 (RMB 11,115,000), or approximately $55,560 (RMB 370,500) per truck. The lease also requires a one-time payment of $350,904 (RMB 2,340,000) as security deposit paid in July 2014 and monthly lease payments of approximately $89,000 from August 2014 to July 2016, with interest rate at 15.6% per annum. The Company has an option to purchase the vehicles for $491 if there is no default of the lease payments at the end of the lease term.

The Company recognized approximately $0 and $188,000 of depreciation expense related to the above capital lease equipment for the three months ended September 30, 2016 and 2015, respectively.

The carrying value of assets under capital leases consisted of the following:

	September 30, 2016			June 30, 2016
Machinery and equipment	$	2,092,228		$	2,099,839
Transportation equipment		2,677,878			2,687,620
Subtotal		4,770,106			4,787,459
Less: accumulated depreciation		(1,685,475	)		(1,691,606	)
Less: impairment reserve		(3,084,631	)		(3,095,853	)
Total	$	-		$	-

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Prepayments

3 Months Ended

Sep. 30, 2016

Prepayments [Abstract]

Prepayments

Note 8 – Prepayments

Prepayments consisted of the following:

	September 30, 2016			June 30, 2016
Prepayment for equipment purchase	$	14,996		$	15,050
Prepayment for construction (a)		2,748,339			2,769,652
Subtotal		2,763,335			2,784,702
Reserve-prepayment for construction(a)		(2,759,613	)		(2,769,652	)
Total prepayments, net	$	3,722		$	15,050

(a) Prepayment for construction in advance was made in connection with the construction factory of Yulong Renewable. We had prepaid the construction fees in advance approximately $2,759,613 (RMB18,402,479) and $2,769,652 (RMB18,402,479) as of September 30, 2016 and June 30, 2016, respectively, to our construction vendors, Henan Sanjian and Henan Guangshen. Due to the new environmental regulations and policies implemented by the central government of PRC and the Environmental Protection Bureau of Henan Province (see Note 7), the factory construction project was placed on hold since August 2016.  We placed a reserve for the entire amount of the prepaid construction fee, $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) as of September 30, 2016 and June 30, 2016, respectively, as there is an uncertainty in the refundable status of the construction vendors.

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Intangible Assets, Net

3 Months Ended

Sep. 30, 2016

Intangible Assets, Net [Abstract]

Intangible assets, net

Note 9 – Intangible assets, net 

Intangible assets consisted of the following:

	September 30, 2016			June 30, 2016
Land use rights	$	4,825,903		$	4,843,458
Less: accumulated amortization		(436,859	)		(425,701	)
Less: impairment reserve		(2,245,796	)		(2,253,966	)
Total	$	2,143,248		$	2,163,791

Land use rights

All land in the PRC is state-owned, but the government can grant “land use rights”. The Company acquired three land use rights in 2007, 2009 and 2015 for a total of $4,557,037 (RMB 30,388,600) and incurred $268,597 (RMB 1,791,136) of associated costs. The Company has not completed the ownership transfer registration for such rights. Pursuant to supplement land usage reimbursement agreements between Yulong Bricks and the Villagers’ Committee of Xiwuzhuang Village dated February 12, 2014, between Yulong Concrete and the Villagers’ Committee of Gaozhuang Village dated February 12, 2014, and between Yulong Renewable and the Villagers’ Committee of Lvzhuang Village dated September 6, 2015, the purchase price of each land use right will be accounted for as lease expense over 50 years, which will expire in December 2058 with respect to Yulong Bricks’ and Yulong Concrete’s rights, and in March 2065 with respect to Yulong Renewable’s right, until the Company can complete their transfer registrations.

Amortization expense for the three months ended September 30, 2016 and 2015 amounted to $12,709 and $37,901, respectively.

The estimated amortization expenses for each of the five succeeding years is as follows:

Year ending September 30,	Estimated  amortization expense
2017	$	50,837
2018		50,837
2019		50,837
2020		50,837
2021		50,837
Thereafter		1,889,063
Total	$	2,143,248

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Short-Term Loans

3 Months Ended

Sep. 30, 2016

Short-Term Loans [Abstract]

Short-term loans

Note 10 – Short-term loans

Short-term loans represented amounts due to various banks, normally due within one year. The principal of the loans are due at maturity but can be renewed at the bank’s option. Interest is due monthly.

Short-term loans due to banks consisted of the following:

	September 30, 2016		June 30, 2016
Loan from Pingdingshan Bank, which was originally due in April 2015, with loan amount $599,835 (RMB 4,000,000) and annual interest of 12%. The Company repaid $269,926 (RMB 1,800,000) in April 2015 and obtained the Bank’s approval to extend the remaining $329,909 (RMB 2,200,000) until April 2016. Interest rate is 11.5% per annum. The loan is guaranteed by Yulong Bricks, the executive director of Yulong Bricks, a third party, the Company founder and his relatives. The Company is settling with the bank on loan extension subsequently.	$	329,910	$	331,109
Loan from Pingdingshan Rural Credit Cooperative Union with original loan amount $2,174,402 (RMB 14,500,000) matures in July 2016. Interest rate is 12.1% per annum. The loan is guaranteed by Yulong Bricks, Yulong Renewable, the founder and a company that he owns. This loan is extended by a new loan in January 2017.		2,174,402		2,182,312
Loan from Pingdingshan Bank, original loan amount $674,814 (RMB 4,500,000), at an interest rate 8.73% per annum, matures in August 2016. The loan is guaranteed by Yulong Bricks, the executive director of Yulong bricks, his relative and a third party. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from Pingdingshan rural credit cooperative union, original loan amount $674,814 (RMB 4,500,000) at an interest rate 9%, matures in August 2017. The loan is guaranteed by Yulong Concrete, Yulong Bricks and the company’s founder. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from China Construction Bank, original loan amount $599,835 (RMB 4,000,000), matures in June 2016. Interest rate is 6.4% and 9.6% per annum as of June 30, 2016 and September 30, 2016, respectively. Guaranteed by Yulong Concrete and a third party. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in September 2016. Interest rate is 8.3% per annum. Guaranteed by Yulong Concrete, Yulong Industry and Yulong Renewable. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in March 2017. Interest rate is 8.7% per annum. Guaranteed by Yulong Renewable, Yulong Industry and Yulong Concrete. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Total short-term loans - bank	$	5,653,445	$	5,674,011

Interest expense on short-term loans for the three months ended September 30, 2016 and 2015 amounted to $190,386 and $224,711, respectively. No interest expense has been capitalized into construction-in-progress since all borrowings were for working capital purposes.

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Related Party Transactions

3 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Related party transactions

Note 11 – Related party transactions 

Other payables - related parties

Other payables – related parties are nontrade payables arising from transactions between the Company and certain related parties, such as loans from such related parties. The loans are unsecured and non-interest bearing. Current payables are due on demand.

The Company’s founder who is also its chief executive officer and majority shareholder has agreed to support the Company financially on an as needed basis, as he has done in the past.

Other payables - related parties consisted of the following:

Name of related parties	Relationship	Nature of  transactions	September 30, 2016		June 30, 2016
Yulong Zhu	Founder	Loan for operating cash flows	$	1,688,383	$	1,488,794
Henan Yuliang Hotel Co., Ltd.	Owned by founder	Loan for operating cash flows		-		15,050
Lei Zhu	Relative of founder	Loan for operating cash flow		-		461,393
Total other payables			$	1,688,383	$	1,965,237

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Capital Lease Obligations

3 Months Ended

Sep. 30, 2016

Capital Lease Obligations [Abstract]

Capital lease obligations

Note 12 – Capital lease obligations

Capital lease obligations consisted of the following:

	September 30, 2016			June 30, 2016
Lease obligations for ten waste hauling trucks expired June 2015, lease payment at $29,343 (RMB 195,676) and $15,097 (RMB 100,676) per month from July 2013 to June 2014 and from July 2014 to June 2015, respectively, with interest at 16.8% per annum. In June 2015, lessor verbally agreed to extend due date for the unpaid balance to June 2016. The Company is arranging a repayment plan with the lessor subsequently.		121,923			122,366
Lease obligations for an excavator expiring in May 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.8% per annum.  The Company is arranging a repayment plan with the lessor subsequently.		28,431			28,535
Lease obligations for thirty waste hauling trucks expiring in July 2016, lease payment at $81,585 (RMB 544,050) per month with interest at 15.6% per annum. The Company is arranging a repayment plan with the lessor subsequently.		1,442,970			1,449,258
Lease obligation for a loader expired in April 2016, lease payment at $2,414 (RMB 16,101) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016.  The Company is arranging a repayment plan with the lessor subsequently.		38,593			38,733
Lease obligation for a loader expired in April 2016, lease payment at $2,407 (RMB 16,053) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016. The Company is arranging a repayment plan with the lessor subsequently.		38,479			38,619
Lease obligation for an excavator expiring in October 2016, lease payment at $7,029 (RMB 46,870) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		136,555			137,504
Lease obligation for an excavator expiring in October 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		94,579			95,236
Lease obligation for a land use right which the Company expects to pay in full in late 2017.		1,920,516			1,927,500
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.  The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.   The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for a loader commenced on August 1, 2015 expiring on January 1, 2017, total obligation is approximately $59,198 (RMB 394,764), lease payment at $2,393 (RMB 15,958) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		34,105			34,672
Lease obligation for a loader commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $58,141 (RMB 387,714), lease payment at $2,350 (RMB 15,673) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		33,497			34,052
Subtotal		4,083,026			4,103,649
Less: deferred interest		(6,710	)		(12,506	)
Capital lease obligations, net		4,076,315			4,091,143
Less: capital lease obligations – current		(4,076,315	)		(4,062,291	)
Capital lease obligations – non-current	$	-		$	28,852

As of September 30, 2016 and June 30, 2016, the Company has accrued interest of $71,897 and $66,388, respectively, in connection with the capital lease obligations, and were classified in the Company’s consolidated balance sheets under the caption “Other payables and accrued liabilities”. Interest expenses on capital lease obligations for the three months ended September 30, 2016 and 2015 amounted to $5,754 and $43,454, respectively.

Future annual capital lease payments approximately consist of the following:

Twelve months ending September 30,	Amount
2017	$	4,076,315
2018		-
Total	$	4,076,315

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Taxes

3 Months Ended

Sep. 30, 2016

Taxes [Abstract]

Taxes

Note 13 – Taxes

Income taxes

Cayman Islands

Yulong Eco-Materials is incorporated in the Cayman Islands and conducts all of its business through its PRC subsidiary and VIEs. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to their shareholders, no Cayman Islands withholding tax will be imposed. 

British Virgin Islands

Yulong BVI is incorporated in the British Virgin Islands and conducts all of its businesses through its PRC subsidiary and VIEs. Under the current laws of the British Virgin Islands, Yulong BVI is not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed. 

Hong Kong

Yulong HK is incorporated in the Hong Kong and conducts all of its businesses through its PRC subsidiary and VIEs. Companies registered in Hong Kong are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. Under Hong Kong tax law, Yulong HK is exempted from income tax on its foreign derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

PRC

Yulong WFOE and the VIEs are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments. 

Yulong Bricks utilizes recycled raw materials to produce bricks and is qualified for preferential income tax granted by the State Administration of Taxation: only 90% of revenue attributable to utilization of recycled materials counts for taxable revenue. 

Under the EIT Laws, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.

The EIT Laws also provide that enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, and other aspects of an enterprise. No detailed interpretation or guidance has been issued to define “place of effective management”. Furthermore, the administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear. If the Company is deemed as a PRC tax resident, it would be subject to PRC tax under the EIT Law. The Company has analyzed the applicability of this law, and for each of the periods presented, the Company has not accrued for PRC tax on such basis. The Company will continue to monitor changes in the interpretation and/or guidance of this law. 

Provision (benefit) for income taxes is comprised of the following:

	For the three months ended September 30,
	2016			2015
Current	$			$
Domestic		-			-
Foreign		218,647			1,125,562
Deferred
Domestic		-			-
Foreign		(100,856	)		(56,930	)
Total provision for income taxes	$	117,791		$	1,068,632

The Company’s effective tax rate was approximately (4.1)% and 23.0% for the three months ended September 30, 2016 and 2015, respectively. The decrease in our effective tax rate is primarily attributable to the pre-tax loss, change in valuation allowance related to the deductible temporary differences and net operating loss as well as increase in non-deductible items.

Deferred taxes

The approximate tax effects of temporary differences, which give rise to the deferred tax assets and liabilities, are as follows:

	September 30, 2016			June 30, 2016
Deferred tax assets
Startup cost	$	200,488		$	201,217
Property, plant and equipment		121,229			140,283
Intangible assets		(54,121	)		(49,556	)
Staff education		1,488			1,493
Provision for doubtful accounts		1,204,767			1,184,219
Impairment loss on long-lived assets and construction-in-progress		13,770,960			13,444,794
Net operating loss carryforward in China		354,153			284,276
Total deferred tax assets		15,598,964			15,206,726
Valuation allowance		(15,110,618	)		(14,817,756	)
Total deferred tax assets, net	$	488,346		$	388,970

Uncertain tax positions

Aggregate undistributed earnings of Yulong WFOE and the VIEs that are available for distribution to the Company are approximately $0 and $26.8 million as of September 30, 2016 and 2015, respectively. Such undistributed earnings are considered to be indefinitely reinvested, because the Company does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use in the operation and expansion of its business. Accordingly, no deferred tax liability has been accrued for the Chinese dividend withholding taxes that would be payable upon the distribution of those amounts to the Company as of September 30, 2016 and 2015.

In addition, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting amounts over tax basis amount in the PRC subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means. The Company has not recorded any such deferred tax liability attributable to the undistributed earnings of its financial interest in the VIEs because it believes such excess earnings can be distributed in a manner that would not be subject to income tax.

There were no unrecognized tax benefits as of September 30, 2016 and June 30, 2016. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its tax positions.

Value added tax

Enterprises or individuals who sell commodities, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax (“VAT”) in accordance with PRC laws. The standard VAT rates range from 13% to 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on sales of the finished product.

Yulong Bricks’ products were eligible for VAT tax exemption under the PRC law of [2008] No. 156. The new PRC law of [2015] No. 78, however, replaced [2008] No. 156 and Yulong Bricks’ products are now subject to a VAT rate of 17%, with 70% of the tax being refundable. Under the same law, Yulong Renewable is required to pay VAT rate of 17% for its recycled bricks and recycled aggregates, and 11% for its hauling services. 70% of the tax on recycled bricks and hauling services, and 50% of the tax on recycled aggregates, are refundable. Yulong Concrete’s products are mainly produced with cement and are eligible for a VAT at the rate of 6% of the gross sale prices under the PRC law of [2009] No. 9. Yulong Concrete’s VAT rate decreased to 3% since November 2014 because under the PRC law of [2014] No. 57, concrete products that use cement as raw material are eligible for a reduced VAT rate of 3%.

Taxes payable

Taxes payable consisted of the following:

	September 30, 2016		June 30, 2016
Income taxes payable	$	1,211,015	$	1,126,157
VAT taxes payable		264,379		223,307
Other taxes payable		153,107		148,619
Total	$	1,628,501	$	1,498,083

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Equity

3 Months Ended

Sep. 30, 2016

Equity [Abstract]

Equity

Note 14 – Equity

Restricted net assets

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Yulong WFOE and the VIEs only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Yulong WFOE and the VIEs.

Under the PRC laws and regulations, each of Yulong WFOE and its consolidated affiliated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds attain 50% of its registed capital. Additionally, Yulong WFOE may allocate portion of its after-tax profits based on PRC accounting standards for enterpise expansion fund and staff bosnus and welfare fund at its discretion. However, the statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of such dividends by a wholly foreign company out of PRC territory is subject to examination by the banks designated by SAFE.

As of September 30, 2016 and June 30, 2016, Yulong WFOE and the VIEs collectively appropriated $3,922,228 and $3,922,228 of retained earnings for their statutory reserves.

As a result of the foregoing restrictions, Yulong WFOE and the VIEs are restricted in their ability to transfer their net assets to the Company.

Foreign exchange and other regulation in the PRC may further restrict Yulong WFOE and the VIEs from transferring funds to the Company in the form of dividends, loans and advances. As of September 30, 2016 and June 30, 2016, the aggregate net assets of Yulong WFOE and the VIEs amounted to $787,146 and $3,453,575, respectively.

Initial Public Offering

On July 1, 2015, the Company completed the IPO of 2,250,000 shares of its ordinary shares for gross proceeds of $14,062,500 and, less costs of $2,552,343, for net proceeds of $11,510,157.

In connection with the closing of the IPO, the Company:

● granted a 45-days option to its underwriters to purchase up to 337,500 shares of ordinary shares, to cover over-allotments, which expired on August 15, 2015 without being exercised;

● granted warrants to purchase up to 112,500 shares of ordinary shares in the aggregate, or 5% of the ordinary shares sold in the IPO, to the representative of its underwriters and an independent financial adviser for the IPO (the “warrants”);

● granted 26,400 shares of ordinary shares in the aggregate to its CFO (20,000 shares vested concurrently with the closing of IPO) and two non-executive board members (3,200 shares each vesting quarterly from the closing of IPO) at $6.25 per share and valued at $165,000 in total; and

● converted $9,959,613 in indebtedness to five shareholders, including its founder, into 1,593,538 shares of ordinary shares.

Stock-based compensation expenses amounted to $0 and $135,000 for the three months ended September 30, 2016 and 2015.

Conversion in related party indebtedness

Five shareholders of the Yulong operating companies, including the Company’s founder, converted the RMB equivalent of $9,959,613 due to them in the aggregate from the Yulong operating companies into the Company’s ordinary shares concurrently with the closing of the IPO at the IPO Price, or 1,593,538 shares.

Warrants

The Company follows the provisions of the accounting standard relating to instruments that are indexed to an entity’s own securities. This accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s ordinary shares and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. The Company determined its warrants would be recorded as derivative instruments on the issuance dates because the strike price of the warrants is denominated in US dollars, a currency other than the Company’s functional currency RMB. Therefore the warrants are not considered indexed to the Company’s ordinary shares, and as such, all changes in the fair value of these warrants are recognized currently in earnings from the issuances date until such time as the warrants are exercised or expire.

The value of the warrant liabilities was $91,670 and $65,605 as of September 30, 2016 and June 30, 2016, respectively, in comparison to $475,380 at the issuance date on July 1, 2015. The increase resulted in a $26,065 loss on change in fair value of warrants for the three months ended September 30, 2016. 

Because the warrants are not traded on an active securities market, the Company estimates their fair value using the Binominal Option Pricing model on September 30, 2016 and on July 1, 2015 as follows:

	September 30, 2016			June 30, 2016			July 1, 2015
Number of shares exercisable		112,500			112,500			112,500
Exercise price	$	6.25		$	6.25		$	6.25
Stock price	$	2.33		$	1.71		$	6.00
Expected term (years)		3.75			4.00			5.00
Risk-free interest rate		1.10	%		0.89	%		1.63	%
Expected volatility		80.38	%		84.83	%		92	%

Due to the short trading history of the Company’s ordinary shares, the expected volatility is based primarily on other similar public companies’ historical volatilities, which are traded on United States stock markets. Historical volatility was computed using daily pricing observations for recent periods that correspond to the term of the warrants. The Company believes this method produces an estimate that is representative of the Company’s expectations of future volatility over the expected term of the warrants. The Company currently has no reason to believe future volatility over the expected remaining life of the warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants.

A summary of changes in warrant activity is presented as follows:

	Three Months Ended September 30, 2016		Weighted Average Exercise Price		Average Remaining Contractual Life
Outstanding, beginning balance		-		-		-
Granted		112,500	$	6.25		5
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, ending balance		112,500	$	6.25		3.75

Stock-based compensation – consulting services

On January 19, 2016, the Company’s board of directors approved the following issuances of restricted shares of the Company’s ordinary shares:

● 31,279 shares to a consultant for services pertaining to business growth and strategies for the calendar years ending December 31, 2017 and 2016; and

● 95,967 shares to a consultant for services rendered previously and for the fiscal quarter ended March 31, 2016 pertaining to financial reporting and internal control over financial reporting.

The shares were valued at $3.20 per share, based on the average closing price of the ordinary shares for the three months immediately preceding the board’s approval.

On July 6, 2016, the Company entered into a consulting agreement with Beyond Century for services in conjunction with the pre-audit and consulting services for the periods ended June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017. Total service fee is $150,000 or $37,500 per quarter and will be settled in a form of stock-based payment equivalent to 58,140 shares of the Company's common stock. The shares were valued at $2.58 per share based on the average closing price of the ordinary shares on the date the service agreement was entered. On August 15, 2016, an aggregate of 58,140 shares of our ordinary shares were issued in reliance upon the exemption from securities registration under Section 4(a)(2) of Securities Act of 1933 to this financial consultant.

Stock-based compensation expenses for consulting services amounted to $49,966 and $0 for the three months ended September 30, 2016 and 2015.

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(Loss) Earnings Per Share

3 Months Ended

Sep. 30, 2016

(Loss) Earnings Per Share [Abstract]

(Loss) earnings per share

Note 15 – (Loss) earnings per share

The basic and diluted (loss) earnings per share are as follows: 

	For the three months ended September 30, 2016			For the three months ended September 30, 2015
Net (loss)/income	$	(2,838,777	)	$	3,580,683
Weighted average shares outstanding - basic and diluted		12,026,886			11,869,938
(Loss) earnings per share - basic and diluted	$	(0.24	)	$	0.30

Warrants outstanding for the three months ended September 30, 2016 and 2015 were not included in the dilutive shares calculation because the average per share price of the Company’s ordinary shares for the three months ended September 30, 2016, was below the exercise price of the warrants.

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Commitments and Contingencies

3 Months Ended

Sep. 30, 2016

Commitments and Contingencies [Abstract]

Commitments and contingencies

Note 16 – Commitments and contingencies

Contingencies

From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

As of September 30, 2016, three of the four Yulong operating companies were subject to 20 civil lawsuits with judgment amounts of approximately $3,144,215 (RMB 20,967,197) in the aggregate, of which unpaid amounts of approximately $108,154 (RMB 721,225) has already been included in capital lease obligations regarding lease agreement for purchasing 10 vehicles from Xuchang Tongli, approximately $346,551 (RMB 2,310,979) already included in bank loans, and approximately $418,732 (RMB 2,792,317) already included in other payables as of September 30, 2016. The remaining balances included $1,815,153 (RMB 12,104,346) related to the guarantee with details disclosed in notes 'Guarantees', and $326,254 (RMB 2,175,622) was pertinent to legal actions filed by various individuals. 

Subsequent to September 30, 2016, three of the four Yulong operating companies were prone to 16 civil lawsuits with judgment amounts of approximately $785,278 (RMB 5,236,625) in the aggregate, of which unpaid amounts of approximately $25,310 (RMB 168,780) related to the illegal occupation of land, and $759,968 (RMB 5,067,845) was pertinent to legal actions filed by various individuals.

Illegal occupation of land

On October 18, 2016, Pingdingshan Land Resources Bureau filed a legal action with the district court to enforce the execution of Ping Guo Tu Zi Fa Zi (2016) no.65 Administrative Penalty Decision that the Company shall:

(1) return 7,137.26 square meters of land which the Company occupied illegally; 

(2) dismantle the new buildings and other facilities on the 7,137.26 square meters of land which the Company occupied illegally, and restore the original appearance of the land;

(3) pay a fine on the basis that illegal occupation of 5,951.4 square meters of general cultivated land at a fine of RMB 16.00 per square meter, i.e. $14,279 (RMB 95,222.40), and 1,185.86 square meters of other land fines per square meter RMB 3.00, i.e. $533 (RMB 3,557.58), resulting in a total of $14,813 (RMB 98,779.98).

On November 29, 2016, Pingdingshan Environmental Protection Bureau applied to the court to enforce the execution of Ping Huan Fa Zi (2015) no.26 Administrative Penalty Decision that the Company shall:

(1) cease its trial production;

(2) pay a fine of $10,497 (RMB 70,000).

Total unpaid amounts related to illegal occupation of land were therefore $25,310 (RMB 168,780).

Purchase commitment

On November 10, 2012, the Company entered into a sales and purchase contract with an unrelated third party, Xian Oriental Fuxing Machinery Co., Ltd ("Xian Oriental Fuxing") with a contract amount of $418,385 (RMB 2,790,000). As of September 30, 2016, the Company already paid $292,420 (RMB 1,950,000) to Xian Oriental Fuxing. According to the result of the verdict disclosed on September 24, 2016, the court ruled that the Company was required to pay the remaining amount of $125,965 (RMB 840,000) and litigation cost of $3,405 (RMB 22,708).

Guarantees

As of September 30, 2016, the Company guaranteed approximately $3.0 million for a bank loan of an unrelated third-party as follows:

Name	Guaranteed amount		Guarantee expiration date
Pingdingshan Yushi Automobile Accessory Sales Co., Ltd(1)	$	1,204,034	December 29, 2016
Pingdingshan Orr Business Co., Ltd(2)		1,815,153	January 5, 2018
Total	$	3,019,187

(1) The Company did not, however, accrue any liability in connection with such guarantee because the borrower has been current in its repayment obligations and the Company has not experienced any loss from providing such guarantees in the past. The Company has evaluated the guarantee and has concluded that the likelihood of it having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under such commitment is not material.

(2) According to the verdict issued on March 16, 2017, the court ruled that the borrower was required to repay the borrowings of $1,799,505 (RMB 12.0 million) and was liable for the related litigation cost in an amount of $15,648 (RMB 104,346). As the loan term covered the period from January 5, 2015 through January 6, 2016, and the guarantee expires on January 5, 2018, the Company has accrued a liability in connection with such guarantee during the fiscal year ended June 30, 2016.

Variable interest entity structure

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Yulong WFOE and the VIEs are in compliance with existing PRC laws and regulations in all material respects.

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.

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Segments

3 Months Ended

Sep. 30, 2016

Segments [Abstract]

Segments

Note 17 – Segments

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company’s chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being (loss) income from operations of the Yulong operating companies. 

The Company’s operations currently include three business segments encompassing three different divisions. Such reportable divisions are consistent with the way the Company manages its business, with each division operating under separate management and producing discrete financial information. The accounting principles applied at the operating division level in determining (loss) income from operations is generally the same as those applied at the consolidated financial statement level. 

The operation and products of the three divisions are as follow:

1. Yulong Bricks: production and sales of fly-ash bricks;

2. Yulong Concrete and Yulong Transport: production and sales of ready-mixed concrete; and

3. Yulong Renewable: hauling and processing of construction waste, and production and sales of recycled aggregates and recycled bricks.

The following represents results of divisional operations for the following three months ended September 30:

Revenues:	2016		2015
Yulong Bricks	$	585,470	$	4,035,101
Yulong Concrete and Yulong Transport		1,728,971		7,338,329
Yulong Renewable		489,589		1,977,438
Consolidated revenues	$	2,804,030	$	13,350,868

Gross profit:	2016		2015
Yulong Bricks	$	173,779	$	2,249,477
Yulong Concrete and Yulong Transport		400,969		1,942,171
Yulong Renewable		336,481		1,254,113
Consolidated gross profit	$	911,229	$	5,445,761

(Loss) income from operations:	2016			2015
Yulong Bricks	$	(309,784	)	$	2,168,277
Yulong Concrete and Yulong Transport		(131,981	)		1,728,549
Yulong Renewable		(1,886,157	)		1,063,355
Subtotal		(2,327,922	)		4,960,181
Yulong HK		(198,056	)		(67,693	)
Yulong Eco-Materials		(49,966	)		(370,000	)
Consolidated (loss) income from operations	$	(2,575,944	)	$	4,522,488

Net (loss) income:	2016			2015
Yulong Bricks	$	(291,305	)	$	1,640,745
Yulong Concrete and Yulong Transport		(277,812	)		1,222,408
Yulong Renewable		(1,995,299	)		810,960
Subtotal		(2,564,416	)		3,674,113
Yulong WFOE		-			2,110
Yulong HK		(198,329	)		(73,739	)
Yulong Eco-Materials		(76,031	)		(21,801	)
Consolidated net (loss) income	$	(2,838,776	)	$	3,580,683

Depreciation and amortization:	2016		2015
Yulong Bricks	$	122,602	$	127,330
Yulong Concrete and Yulong Transport		36,110		82,021
Yulong Renewable		-		396,564
Consolidated depreciation and amortization	$	158,712	$	605,915

Interest expenses:	2016		2015
Yulong Bricks	$	38,574	$	116,397
Yulong Concrete and Yulong Transport		151,812		108,313
Yulong Renewable		5,754		43,455
Consolidated interest expenses	$	196,140	$	268,165

Capital expenditures:	2016		2015
Yulong Bricks	$	-	$	20,283
Yulong Concrete and Yulong Transport		-		27,603
Yulong Renewable		-		170,169
Consolidated capital expenditures	$	-	$	218,055

The following represents assets of division as of September 30, 2016 and June 30, 2016:

Total Assets as of:	September 30, 2016		June 30, 2016
Yulong Bricks	$	11,227,572	$	11,131,177
Yulong Concrete and Yulong Transport		3,281,371		4,416,866
Yulong Renewable		20,949,715		20,251,768
Interdivision assets		1,040		590
Yulong Eco-Materials		642,700		642,700
Total Assets	$	36,102,398	$	36,443,101

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Subsequent Events

3 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent events

Note 18 – Subsequent events

In late March 2016, the central government of the People's of Republic of China passed Air Pollution Control Act and enforced Air Pollution Control Action Plan. The province of Henan of People's Republic of China implemented "Province of Henan Blue Sky Action Plan" on various industries such as construction materials, coal mining. Due to the Air Pollution Control Act and Blue Sky Action Plan, Yulong Renewable is required to comply with the new environmental regulations. It placed its construction projects on hold and downsized its production since August 2016.

On February 11, 2017, three of the board of directors, Ms. Alice Io Wai Wu, Mr. Michael W. Harlan and Mr. Guosheng Liu (together the “Former Directors”) resigned as directors of the Company. The Company elected Ms. Junfeng Ma, Ms. Yang Li and Mr. Qingsheng Liu to replace the Former Directors. There is no family relationship among any of the New Directors and any of the Company’s other directors or executive officers. In addition, the Board has approved the appointment of Ms. Junfeng Ma as Company’s interim chairperson of the Audit Committee. While Company believe Ms. Ma’s accounting experience qualifies her to be the chairperson of the audit committee, the Company is actively searching for a candidate who is an expert with U.S. GAAP rules to chair the Audit Committee. Ms. Ma will serve as the chairperson of the Audit Committee during the Company’s search.

On March 15, 2017, Yulong Eco-Materials Limited (the “Company”) received a deficiency letter (the “Letter”) from the NASDAQ Stock Market LLC (the “Nasdaq”) regarding the Company’s failure to comply with NASDAQ List Rule 5605(c)(2), pursuant to which an audit committee must have at least three members and be comprised only of independent directors. Due to the resignation of Alice Io Wai Wu, and Michael W. Harlan on February 11, 2017, the Company failed to meet the aforesaid requirement.

Under Rule 5605(c)(4) and 5810(c)(3)(E), the Company has been provided a cure period to regain compliance as follow (the “Cure Period”):

● until the earlier of the Company’s next annual shareholders’ meeting or February 11, 2018; or

● if the next annual shareholders’ meeting is held before August 10, 2017, then the Company must evidence compliance no later than August 10, 2017.

The Company addressed this deficiency by providing a notice of annual general meeting of shareholders to be held on June 29, 2017. The Company has announced the results of its annual general meeting for the fiscal year ended June 30, 2017 on June 30, 2017.

On March 31, 2017, Yulong Eco-Materials Limited (the “Company”) received a determination letter (the “Letter”) from the NASDAQ Stock Market LLC (the “NASDAQ”) notifying the Company of the NASDAQ Staff’s determination (the “Determination”) to delist the Company’s securities from The NASDAQ Capital Market due to its failure to regain compliance with Listing Rule 5250(c)(1) (the “Rule”) because it had not filed its Annual Report on Form 10-K for the period ended June 30, and Quarterly Reports on Forms 10-Q for the periods ended September 30, 2016 and December 31, 2016, respectively (the “Delinquent Reports”). Pursuant to the Letter, unless the Company requests an appeal of the Determination by 4:00 Eastern Time on April 7, 2017, trading of the Company’s common stock will be suspended at the opening of business on April 11, 2017, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), causing the Company’s securities to be removed from listing and registration on The NASDAQ Stock Market. 

As previously reported, on October 14 and November 22, 2016, the Company received two notification letters (the “Notice”) from NASDAQ advising the Company that it did not comply with the “Rule” because it had not filed its Annual Report on Form 10-K for the period ended June 30, and Quarterly Reports on Forms 10-Q for the periods ended September 30, 2016 and December 31, 2016, respectively. The Company was provided an exception until April 12, 2017, to regain compliance with the Rule. On March 24, 2017, the Company advised that it would be unable to regain compliance with the Rule by April 12, 2017. As of the date of this report, the Company has not regained compliance with the Rule though it is in the process of preparing its annual report.

On April 6, 2017, Yulong Eco-Materials Limited received a notification letter from the Listing Qualifications Department of The NASDAQ Stock Market LLC (“NASDAQ”) indicating that the Company is not in compliance with NASDAQ Listing Rule 5550(a)(2) (the “Rule”) because the closing bid price of the Company’s common stock on The Nasdaq Capital Market has been below $1.00 per share for 30 consecutive business days. The Nasdaq notification has no immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “YECO”.

The Company has 180 calendar days, or until October 3, 2017, to regain compliance. If, at any time before that date, the closing bid price of the Company’s common stock is at least $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will notify the Company that it has achieved compliance with the Rule.

If the Company does not regain compliance by October 3, 2017, the Company may be eligible for a second compliance period of 180 calendar days. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide NASDAQ written notice of its intention to cure the deficiency during the second compliance period.

If it appears to the NASDAQ staff that the Company will not be able to cure the deficiency, or if the Company does not cure the deficiency following the additional time, NASDAQ will notify the Company that its common stock will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Hearings Panel. If the Company timely appeals, it would remain listed pending the Hearing Panel’s decision.

The Company intends to monitor the closing bid price of its common stock and may consider implementing available options to regain compliance with the Rule. This information is being provided to comply with NASDAQ Listing Rules requiring public announcement of the Company’s receipt of the notification letter from NASDAQ.

On May 15, 2017, Yulong Eco-Materials Limited determines that it qualifies as a “foreign private issuer” as defined under Rule 3b-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, effective immediately after the filing of this Form 8-K, the Company will begin reporting under the Exchange Act as a foreign private issuer, including the filing of annual reports on Form 20-F and current reports on Form 6-K.

On June 12, 2017, Yulong Eco-Materials Limited - (Nasdaq: YECO) announced that following a hearing before the Nasdaq Hearings Panel (the “ Panel ”) on May 25, 2017, the Panel granted the Company’s request for continued listing on Nasdaq, subject to the Company’s timely compliance with a number of interim milestones and, ultimately, the Company’s full compliance with all applicable requirements for continued listing on Nasdaq, including the filing of annual report for fiscal year ended June 30, 2016 and quarterly reports for fiscal periods ended September 30, 2016 and December 31, 2016, by no later than August 31, 2017.

The Company is diligently working to timely evidence compliance with the terms of the Panel’s decision; however, there can be no assurance that the Company will be able to do so.

On July 7, 2017, the Company received a notice from the Nasdaq Hearings Panel (the “Panel”) indicating that it has determined to suspend the Company’s ordinary shares, from trading on The Nasdaq Stock Market, effective at the open of business on July 11, 2017. As a result of the notice, the Company's ordinary shares are currently trading on the OTC Pink marketplace under the symbol “YECOF.” For quotes or additional information on the OTC Pink market, visit http://www.otcmarkets.com.

The Company has a right to appeal the Panel’s determination. The Company has not yet decided whether to request a review of the decision by the Nasdaq Listing and Hearing Review Council. The right to request the review expires on July 24, 2017. In the event the Company does not appeal or the appeal is unsuccessful, Nasdaq will effect the delisting of the Company’s securities by filing a Form 25-NSE (Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934) after applicable appeal periods have lapsed.

As previously reported, the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission. Notwithstanding the Panel’s determination, the Company expects to file its annual report for the fiscal year ended June 30, 2016 and quarterly reports for fiscal periods ended September 30, 2016 and December 31, 2016 as soon as possible and apply to be quoted on the OTCQB market after these delinquent filings are completed.

On July 21, 2017, the Company submitted an appeal request requesting the Nasdaq Listing and Hearing Review Council to review the Panel’s determination and stay any Panel action to suspend the Company’s listing. In addition, the Company intends to submit an updated plan to regain compliance (“Updated Plan”) with Nasdaq’s Listing Rules. The Company is working diligently on its Updated Plan and plans to submit it to the Panel by August 4, 2017.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Basis of presentation

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended June 30, 2016, that was filed with the SEC on August 25, 2017.

Principles of consolidation

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and the VIEs. All intercompany transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation.

Use of estimates and assumptions

Use of estimates and assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and footnotes. Significant accounting estimates reflected in the condensed consolidated financial statements include the useful lives and impairment of property, plant and equipment, collectability of receivables, realization of deferred tax assets, inventory valuation, warrant liabilities, stock-based compensation, and the present value of the net minimum lease payments of the capital lease. Actual results could differ from these estimates.

Going concern consideration

Going concern consideration

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern basis. The going-concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the financial statements. The Company’s ability to continue as a going concern depends on the liquidation of its current assets. The Company’s operation scale particularly Yulong Renewable was significantly downsized since the first quarter of fiscal year 2017 due to Environment Protection Act passed by the central government of PRC and Blue Sky Action Plan implemented by the Henan province, PRC. The remaining business of Yulong Bricks and Yulong Concrete has not sufficiently made up the cessation of Yulong Renewable’s business which raises a substantial doubt about the Company’s ability to continue as a going concern.

In an effort to maintain its financial position and operations, the Company has successfully entered into a remittance agreement with one of its vendors to refund the prepayment for one of its construction projects in an amount of $15.7 million (RMB104.5 million). Moreover, the Company is working to pursue the potential acquirers for Yulong Renewable’s business. Beginning January 2017, Yulong Bricks and Yulong Concrete gradually resumed their sales revenue by 15% from the Q1 and Q2 2017 level. The Company has initiated negotiations with its financial institutions and lessors to extend the due date of the loan and lease obligations. The founder has provided approximately $1.7 million (RMB 11.6 million) to fund the Company’s operations. The Company may also continue to raise fund through private placement or issuance of shares to support the Company’s operational needs. Management believes that the foregoing actions would enable the Company to continue as a going concern.

Foreign currency translation

Foreign currency translation

The reporting currency of the Company is the U.S. dollar. The Company’s Chinese subsidiary and the VIEs use the local currency, Renminbi (RMB), as their functional currency as determined based on the criteria of ASC 830, Foreign Currency Translation. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China (the “PBOC”) at the end of the period. Income and expense accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the statement of equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income (loss) amounted to a loss of $(1,119,204) and $(1,219,184) as of September 30, 2016 and June 30, 2016, respectively. The balance sheet amounts, with the exception of equity, at September 30, 2016 and June 30, 2016 were translated at 6.67 RMB and 6.64 RMB to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rate applied to statements of operations and comprehensive (loss) income accounts for the three months ended September 30, 2016 and 2015 was 6.66 RMB and 6.27 RMB, respectively. Cash flows are also translated at the average translation rate for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

Cash and cash equivalents

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits and time deposits placed with banks with state owned banks within the PRC and with banks in Hong Kong which are unrestricted as to withdrawal and use and have original maturities of less than three months.

Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions in Hong Kong may, from time to time, exceed Hong Kong Deposit Protection Board’s insured limits. As of September 30, 2016 and June 30, 2016, the Company had approximately $2,662,970 (RMB 17,758,018) and $2,734,015 (RMB 18,165,703), respectively, of cash deposits which were not covered by insurance. The Company has not experienced any losses in such accounts.

Restricted cash

Restricted cash

Restricted cash consists of a third-party escrow account in the United States of America. The usage of the amount in the escrow account needs approval from the underwriter.

Accounts and other receivables

Accounts and other receivables

During the normal course of business, the Company extends unsecured credit to its customers and others. Management reviews its accounts and other receivables balances each reporting period to determine if an allowance for doubtful accounts is required. Customer accounts are considered past due over 90 days. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. Bad debts are written off against the allowance after all collection efforts have ceased. The Company recorded in an aggregate of approximately $4.8 million and $3.9 million of allowance of doubtful accounts against its accounts receivable and other receivables. The current year provision is based on the past due period over 9 months of its customers.

Inventories

Inventories

Inventories consist of raw materials and finished goods and are stated at the lower of cost or market, as determined using the weighted average cost method. Management compares the cost of inventories with the market value and an allowance is made for writing down the inventory to its market value, if lower than cost. On an ongoing basis, inventories are reviewed for potential write-down for estimated obsolescence or unmarketable inventories equal to the difference between the costs of inventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or market, it is not marked up subsequently based on changes in underlying facts and circumstances. As of September 30, 2016 and June 30, 2016, the Company determined that no reserves for obsolescence were necessary.

Advances to suppliers

Advances to suppliers

The Company advances money to certain suppliers for raw material purchases. Such advances are interest-free and unsecured. Management regularly reviews the aging of such advances as well as delivery trends of purchased materials, and records an allowance when it believes that delivery of materials due is at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. No allowance for doubtful accounts was considered necessary at the balance sheet dates.

Property, plant and equipment

Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the useful lives of the assets are as follows:

	Useful Life
Buildings and improvements	10-30 years
Machinery and equipment	5-10 years
Transportation equipment	5-10 years
Office equipment	3-5 years

The Company accounts for all significant leases as either operating or capital. At lease inception, if the lease meets any of the following four criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) lease term is equal to 75% or more of the estimated economic life of the leased property, or (d) the present value of the minimum lease payments is 90% or more of the fair value of the leased asset. Otherwise, the lease will be treated as an operating lease.

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the condensed consolidated statements of operations and comprehensive (loss) income.  Construction-in-progress represents labor costs, materials, and capitalized interest incurred in connection with the construction. Interest incurred during construction is capitalized into construction in progress. All other interest is expensed as incurred. No depreciation is provided for construction in progress until it is completed and placed into service. Expenditures for maintenance and repairs are charged to earnings as incurred while additions, renewals and betterments are capitalized.

Prepayments

Prepayments

Prepayments represent advances made to certain suppliers for equipment purchases or advance made to contractors in connection with the Company’s construction-in-progress. Management regularly reviews aging of prepayments and records an allowance when management believes collection of equipment or services to be performed due are at risk. Advances aged over one year and considered uncollectible are written off after exhaustive efforts at collection. As of September 30, 2016 and June 30, 2016, we recorded $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) reserve for prepayments.

Intangible assets

Intangible assets

Intangible assets are carried at cost less accumulated amortization.

The Company accounts for all significant leases of land use rights for purposes of classification as either operating or capital. At lease inception, if the lease meets either of the following two criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, or (b) bargain purchase option. Otherwise, the lease will be treated as an operating lease.

Intangible assets with finite useful lives are amortized using a straight-line method of amortization that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The original estimated useful life for the land use rights of the following Yulong operating companies is as follows:

Entity	Description of assets	Estimated useful life
Yulong Bricks	Land use right		50
Yulong Concrete	Land use right		50
Yulong Renewable	Land use right		50

Intangible assets are reviewed at least annually, more often when circumstances require, to determine whether their carrying values have become impaired. The Company considers an asset to be impaired if its carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  As of September 30, 2016 and June 30, 2016, the Company recorded $2,245,796 and $2,253,966 impairment loss on the land use right of Yulong Renewable due to Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC. Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. The Company placed an impairment reserve on the land use rights of Yulong Renewable.

Impairment for long-lived assets

Impairment for long-lived assets

Long-lived assets, including buildings and improvements, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, the Company reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. Due to the Air Pollution Control Act and Air Pollution Control Action Plan passed by the central government of PRC and the Blue Sky Action Plan implemented by the Henan Province of PRC in the fourth quarter of fiscal year 2016, Yulong Renewable placed its construction projects on hold since August 2016 and suspend its operation since January 2017. For the three months ended September 30, 2016, the Company recorded approximately $1.5 million (RMB 10 million) impairment loss on Yulong Renewable’s construction-in-progress. As of September 30, 2016 and June 30, 2016, the impairment reserve for the long-lived assets (including construction-in-progress) was $50.1 million (RMB 333.9 million) and $40.8 million (RMB 323.9 million).

Fair Values of Financial Instruments

Fair Values of Financial Instruments

ASC Topic 825, Financial Instruments (“Topic 825”), requires disclosure of fair value information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The Company considers the carrying amount of cash, accounts receivable, other receivables, accounts payable, notes payable and other current liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The Company determined that the carrying value of the non-current capital lease obligations approximated their fair value using level 2 inputs by comparing the stated loan interest rate to the rate charged by the People’s Bank of China on similar loans.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016:

	Carrying value at September 30,  2016		Fair value measurement at September 30, 2016
			Level 1		Level 2		Level 3
Warrant liabilities	$	91,670	$	-	$	-	$	91,670

Certain inputs used in the valuation of the Company’s warrants are observable and therefore considered level 2. However, as the Company is a newly listed public reporting company and thus lacks historical volatility data, management concluded that level 3 fair valuation measurement is appropriate.

The following is a reconciliation of the beginning and ending balances of warrant liabilities measured at fair value on a recurring basis using observable inputs as of September 30, 2016:

	September 30, 2016
Beginning fair value	$	65,605
Realized loss recorded in earnings		26,065
Ending fair value	$	91,670

Revenue recognition

Revenue recognition

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition, regarding revenue recognition which specifies that revenue is realized or realizable and earned. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, the Company has no other obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

Revenue from the Company’s brick and concrete businesses represents the invoiced value of goods, net of a value added tax (“VAT”).

The Company sells concrete and bricks primarily to major local real estate development and/or construction companies. Sales agreements are signed with each customer. Each agreement has specific terms and conditions with the exception of delivery date and quantity, which are provided when the customer issues an order pursuant to the agreement. The Company does not sell products to customers on consignment basis. There is no right of return after products are delivered and accepted by the customer.

The Company also provides transportation services for its concrete customers. Revenue is recognized upon delivery of the concrete. Transportation services revenue is immaterial to the Company’s consolidated revenues for the periods presented in the accompanying condensed consolidated financial statements.

Revenue from the CWM business includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

CWM revenue also includes revenue from the following activities:

● Hauling construction waste. The Company operates a fleet of trucks to haul the waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling per truckload.

● Processing construction waste at mobile recycling stations. Revenue is recognized either per cubic meter of waste processed or when processing at a jobsite is completed, depending on the contract terms.

● Subcontracting waste hauling projects. The Company occasionally subcontracts waste hauling projects, whereby the subcontractors are the primary obligors to complete these projects, and the Company does not have any general credit risk as the services are prepaid by the customers. Sales and subcontracting costs from these subcontract arrangements are recorded at the net amount in accordance with ASC 605-45.

Recycling revenues includes sales of recycled aggregates and recycled bricks. Sales agreements are signed with each customer. Revenue is recognized similar to sales of concrete and bricks.

Recycling revenue also include hauling services of construction waste. The Company operates a fleet of trucks to haul construction waste, consisting primarily of bricks and concrete, from construction and demolition sites. Revenue is recognized upon completion of hauling from the construction and demolition sites per truckloads.

Shipping and handling

Shipping and handling

Shipping and handling costs pertaining to raw material purchases are included in cost of revenue.

Shipping costs incurred in the delivery of products and depreciation expenses for transportation equipment (under Yulong Transport) are included in selling expense. Shipping costs amounted to $43,922 and $81,611 for the three months ended September 30, 2016 and 2015, respectively. Depreciation expense amounted to $8,008 and $37,219 for the three months ended September 30, 2016 and 2015, respectively.

Concentration of risk

Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of September 30, 2016 and June 30, 2016, $2,662,970 and $2,734,016 were deposited with various major financial institutions located in the PRC, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. Historically, deposits in Chinese banks are secure due to state policy to protect depositor interests. However, China promulgated a Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures to provide for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the current Bankruptcy Law, a Chinese bank may file bankruptcy if it deems itself to be insolvent. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have intensified competition in many aspects, especially since the opening of the RMB business to foreign banks in late 2006. Therefore, the risk of bankruptcy at the institutions that the Company maintains deposits has increased. In the event of bankruptcy, the Company is unlikely to reclaim its deposits in full since it is unlikely to be classified as a secured creditor under PRC laws.

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of customer creditworthiness and ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses if necessary, and such losses have generally been within expectations.

Customer and vendor concentration risk

For the three months ended September 30, 2016, two customers accounted for 14% and 10% of the Company's total revenues. For the three months ended September 30, 2015, no customer accounted for more than 10% of the Company’s total revenues.

As of September 30, 2016, two customers accounted for 26% and 17% of the Company’s total accounts receivable. As of June 30, 2016, two customers accounted for 26% and 19% of the Company’s total accounts receivable, respectively.

For the three months ended September 30, 2016, four suppliers accounted for 27%, 17%, 17% and 16% of the Company’s total purchases, respectively. For the three months ended September 30, 2015, four suppliers accounted for 31%, 16%, 12% and 10% of the Company's total purchases, respectively.

As of September 30, 2016, four suppliers accounted for 20%, 19%, 13% and 10% of the Company’s accounts payable balances, respectively. As of June 30, 2016, five suppliers accounted for 21%, 19%, 16%, 16% and 11% of the Company’s accounts payable balances, respectively.

Income taxes

Income taxes

The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company applies ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

As of September 30, 2016, Yulong WFOE and the VIEs had each filed income tax returns in China for the years ended December 31, 2010 to 2015. All such tax returns are subject to examination by the Chinese taxing authorities.

Warrant liabilities

Warrant liabilities

A contract is designated as an asset or a liability and is carried at fair value on a company’s balance sheet, with any changes in fair value recorded in a company’s results of operations.  The Company then determines which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability. The changes in the values of these instruments are shown in the accompanying condensed consolidated statements of operations and comprehensive (loss) income as “change in fair value of warrant liabilities”.

The Company adopted the provisions of an accounting standard regarding instruments that are indexed to an entity’s own stock.  This accounting standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s ordinary shares and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument.  It provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception within the standards. All warrants issued with the strike price denominated in US dollar were recorded as derivative liability because the strike price of the warrants is denominated in US dollar, a currency other than the Company’s functional currency RMB.

(Loss) earnings per share

(Loss) earnings per share

(Loss) earnings per share are calculated in accordance with ASC 260-10, Earnings per Share. Basic (loss) earnings per share are computed by dividing net (loss) income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period. Diluted (loss) earnings per ordinary share reflect the potential dilution that could occur if securities to issue ordinary shares were exercised. The dilutive effect of outstanding share-based awards is reflected in the diluted (loss) earnings per share by application of the treasury stock method.

Comprehensive (loss) income

Comprehensive (loss) income

Comprehensive (loss) income is defined to include all changes in shareholders’ equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220-10, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive (loss) income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company adopted ASU No. 2011-05 by presenting items of net (loss) income and other comprehensive (loss) income in one continuous statement, the condensed consolidated statements of operations and comprehensive (loss) income.

Employee benefit

Employee benefit

The full-time employees of Yulong WFOE and the VIEs are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expense for the plans was $42,313 and $34,800 for the three months ended September 30, 2016 and 2015, respectively.

Recently issued accounting pronouncements

Recently issued accounting pronouncements

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (modified retrospective method). We are currently assessing the impact to our consolidated financial statements, and have not yet selected a transition approach.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management is evaluating the effect, if any, on the Company’s financial position, results of operations or cash flows.

Going Concern Uncertainties: In August 2014, FASB issued ASU No. 2014-15, Preparation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements-Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have material impact on our consolidated financial position and results of operations.

Inventory: In July 2015, the FASB issued ASU No. 2015-11, an amendment to Topic 330 for simplifying the measurement of inventory. The update requires that inventory be measured at the lower of cost and net realizable value where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.  The amendment is intended to provide clarification on the measurement and disclosure of inventory in Topic 330 and not intended for those clarifications to result in any changes in practice. The ASU is effective for interim and annual periods beginning after December 15, 2016.  Early application is permitted for all entities and should be applied prospectively. We do not expect the adoption of ASU 2015-11 to have a material impact on our consolidated financial position and results of operations.

Financial Instruments: In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The main objective in developing this ASU is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of the fiscal year of adoption for public entities if the entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company does not expect the adoption of ASU 2016-01 to have material impact on its financial position, results of operations or cash flows.

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The main objective is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for (1) public business entities, (2) not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and (3) employee benefit plans that file financial statements with the SEC. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2010. Early adoption is permitted for all entities. The Company does not expect the adoption of ASU 2016-02 to have material impact on its financial position, results of operations or cash flows.

Stock-based Compensation: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also requires the Company to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.

Statement of Cash Flows: In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which require that a statement of cash flows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a retrospective approach. As a result, the Company will no longer present transfers between cash and cash equivalents and restricted cash in the consolidated cash flow statements.

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for us in the first quarter of 2018 on a prospective basis, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements.

Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or condition of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2017-09 on its condensed consolidated financial statements.

Except for the ASU above, in the period from January 1, 2017 to August 2017, the FASB has issued ASU No. 2017-01 through ASU 2017-011, which are not expected to have a material impact on the consolidated financial statements upon adoption.

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Nature of Business and Organization (Tables)

3 Months Ended

Sep. 30, 2016

Nature of Business and Organization [Abstract]

Schedule of consolidated financial statements reflect the activities of Yulong Eco-Materials

Name	Background		Ownership
Yulong BVI	●	A British Virgin Islands company	100%
	●	Incorporated on June 15, 2011
Yulong HK	●	A Hong Kong company	100%
	●	Incorporated on July 21, 2011
Yulong WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)	100%
	●	Incorporated on September 2, 2011
	●	Registered capital of $9,935,303 fully funded
Yulong Bricks	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on September 20, 2006	arrangements
	●	Registered capital of $4,498,763 (RMB 30,000,000) fully funded
Yulong Concrete	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on December 7, 2004	arrangements
	●	Registered capital of $2,999,175 (RMB 20,000,000) fully funded
Yulong Transport	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on July 13, 2009	arrangements
	●	Registered capital of $1,501,087 (RMB 10,010,000) fully funded
Yulong Renewable	●	A PRC limited liability company	VIE by contractual
	●	Incorporated on August 16, 2011	arrangements
	●	Registered capital of $8,997,526 (RMB 60,000,000) fully funded
	●	Commenced operation in April 2015

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Schedule of estimated useful life of plant and equipment

	Useful Life
Buildings and improvements	10-30 years
Machinery and equipment	5-10 years
Transportation equipment	5-10 years
Office equipment	3-5 years

Schedule of estimated useful life of land use rights

Entity	Description of assets	Estimated useful life
Yulong Bricks	Land use right		50
Yulong Concrete	Land use right		50
Yulong Renewable	Land use right		50

Schedule of fair value of warrants liabilities on a recurring basis

	Carrying value at September 30,  2016		Fair value measurement at September 30, 2016
			Level 1		Level 2		Level 3
Warrant liabilities	$	91,670	$	-	$	-	$	91,670

Schedule of warrant liabilities measured at fair value on a recurring basis

	September 30, 2016
Beginning fair value	$	65,605
Realized loss recorded in earnings		26,065
Ending fair value	$	91,670

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Variable Interest Entities (Tables)

3 Months Ended

Sep. 30, 2016

Variable Interest Entities [Abstract]

Schedule of VIEs' consolidated assets and liabilities

	September 30, 2016		June 30, 2016
Current assets	$	9,871,201	$	10,068,142
Property, plant and equipment, net		7,270,775		7,425,445
Other non-current assets		18,316,682		18,306,223
Total assets		35,458,658		35,799,810
Total liabilities		35,218,399		33,130,293
Net assets	$	240,259	$	2,669,517

Schedule of VIEs' liabilities

	September 30, 2016		June 30, 2016
Current liabilities:
Short-term loan - banks	$	5,653,445	$	5,674,011
Accounts payable		1,661,167		1,710,881
Other payables and accrued liabilities		6,630,106		5,973,602
Payroll payable		611,219		546,990
Other payables - related parties		1,429,836		1,907,458
Customer deposits		4,404,720		2,571,846
Taxes payable		1,628,002		1,497,583
Capital lease obligations-current		4,076,314		4,062,291
Dividends payable		9,123,590		9,156,779
Total current liabilities		35,218,399		33,101,441
Non-current liabilities:
Capital lease obligations-non-current		-		28,852
Total non-current liabilities		-		28,852
Total liabilities	$	35,218,399	$	33,130,293

Schedule of VIEs' operating results

	Three Months ended September 30,
	2016			2015
Revenue	$	2,804,030		$	13,350,868
Gross profit	$	911,229		$	5,445,761
(Loss) income from operations	$	(2,327,922	)	$	4,960,181
Net (loss) income	$	(2,564,416	)	$	3,678,333

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Accounts Receivable, Net (Tables)

3 Months Ended

Sep. 30, 2016

Accounts Receivable, Net/Deposits and Other Receivables [Abstract]

Schedule of accounts receivable, net

	September 30, 2016			June 30, 2016
Accounts receivable	$	9,741,530		$	9,666,112
Less: allowance for doubtful accounts		(4,819,067	)		(3,937,778	)
Total accounts receivable, net	$	4,922,463		$	5,728,334

Schedule of movement of allowance for doubtful accounts

	September 30, 2016			June 30, 2016
Beginning balance	$	3,937,778		$	-
Charge to expense (benefit)		896,185			4,067,144
Exchange rate effect		(14,896	)		(129,366	)
Ending balance	$	4,819,067		$	3,937,778

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Deposits and Other Receivables (Tables)

3 Months Ended

Sep. 30, 2016

Accounts Receivable, Net/Deposits and Other Receivables [Abstract]

Schedule of deposits and other receivables

	September 30, 2016		June 30, 2016
Refundable deposits for equipment purchase	$	438,424	$	444,439
Deposit for outsourcing agreement (1)		234,324		235,176
Deposit for new project		213,466		63,739
Advances to employees (2)		239,671		240,474
Insurance compensation		15,967		15,874
Deposit with government agency		2,999		3,010
Total	$	1,144,851	$	1,002,713

(1) In December 2011, Yulong Bricks agreed to outsource some brick production to Pingdingshan Hongrui New Construction Materials Co., Ltd., an unrelated third party, and paid approximately $134,963 (RMB 1,562,589) as security deposit, which is due on demand.

(2) The Company entrusts funds to its employees to pay certain of its expenses in the normal course of business, particularly for projects or jobsites beyond Pingdingshan.

Schedule of other receivables, non-current

	September 30, 2016		June 30, 2016
Refundable deposit-construction (3)	$	15,670,691	$	15,727,696
Total	$	15,670,691	$	15,727,696

(3) As of September 30, 2016 and June 30, 2016, we recorded $15,670,691 (RMB 104.5 million) and $15,727,696 (RMB 104.5 million), respectively, related to the purchase of equipment, in connection with the construction of Yulong Renewable's waste recycling plant and factory construction, would be refundable based on the agreement entered with the contractor, Pingdingshan City HuaShen Trading Co. Ltd., subsequently on July 4, 2017 (see Note 8). The agreement stipulated that the contractor would refund the amount in five (5) equal installment amount on July 10, 2017, October 10, 2017, January 10, 2018, April 10, 2018 and July 10, 2018. The first installment of $3,010,085 was received subsequently in July 2017 as per the refund schedule.

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Inventories (Tables)

3 Months Ended

Sep. 30, 2016

Inventories [Abstract]

Schedule of inventories

	September 30, 2016		June 30, 2016
Raw materials	$	790,922	$	285,459
Semi-finished byproduct		37,003		34,236
Finished goods		71,167		45,196
Total inventories	$	899,092	$	364,891

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Property, Plant and Equipment, Net (Tables)

3 Months Ended

Sep. 30, 2016

Property, Plant and Equipment, Net [Abstract]

Schedule of property, plant and equipment

	September 30, 2016			June 30, 2016
Building and improvements	$	24,645,552		$	24,735,204
Machinery and equipment		7,309,120			7,335,708
Machinery and equipment under capital lease		2,092,228			2,099,839
Transportation equipment		852,497			855,598
Transportation equipment under capital lease		2,677,878			2,687,620
Office equipment		109,594			109,993
Construction-in-progress		28,515,608			27,111,181
Subtotal		66,202,477			64,935,143
Less: accumulated depreciation		(8,853,272	)		(8,754,140	)
Less: impairment loss on long-lived assets and construction-in-progress		(50,078,430	)		(48,755,558	)
Total	$	7,270,775		$	7,425,445

Schedule of construction-in-progress

Construction-in-progress description	Value		Estimated completion date		Estimated additional cost to complete
Office buildings, staff facilities, equipment and machinery	$	7,339		Early 2018	$	-
Autoclave installation	$	7,081		Early 2018	$	-
Total	$	14,420			$	-

Schedule of capital lease assets

	September 30, 2016			June 30, 2016
Machinery and equipment	$	2,092,228		$	2,099,839
Transportation equipment		2,677,878			2,687,620
Subtotal		4,770,106			4,787,459
Less: accumulated depreciation		(1,685,475	)		(1,691,606	)
Less: impairment reserve		(3,084,631	)		(3,095,853	)
Total	$	-		$	-

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Prepayments (Tables)

3 Months Ended

Sep. 30, 2016

Prepayments [Abstract]

Schedule of prepayments

	September 30, 2016			June 30, 2016
Prepayment for equipment purchase	$	14,996		$	15,050
Prepayment for construction (a)		2,748,339			2,769,652
Subtotal		2,763,335			2,784,702
Reserve-prepayment for construction(a)		(2,759,613	)		(2,769,652	)
Total prepayments, net	$	3,722		$	15,050

(a) Prepayment for construction in advance was made in connection with the construction factory of Yulong Renewable. We had prepaid the construction fees in advance approximately $2,759,613 (RMB18,402,479) and $2,769,652 (RMB18,402,479) as of September 30, 2016 and June 30, 2016, respectively, to our construction vendors, Henan Sanjian and Henan Guangshen. Due to the new environmental regulations and policies implemented by the central government of PRC and the Environmental Protection Bureau of Henan Province (see Note 7), the factory construction project was placed on hold since August 2016.  We placed a reserve for the entire amount of the prepaid construction fee, $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) as of September 30, 2016 and June 30, 2016, respectively, as there is an uncertainty in the refundable status of the construction vendors.

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Intangible Assets, Net (Tables)

3 Months Ended

Sep. 30, 2016

Intangible Assets, Net [Abstract]

Summary of intangible assets

	September 30, 2016			June 30, 2016
Land use rights	$	4,825,903		$	4,843,458
Less: accumulated amortization		(436,859	)		(425,701	)
Less: impairment reserve		(2,245,796	)		(2,253,966	)
Total	$	2,143,248		$	2,163,791

Schedule of estimated amortization expenses

Year ending September 30,	Estimated  amortization expense
2017	$	50,837
2018		50,837
2019		50,837
2020		50,837
2021		50,837
Thereafter		1,889,063
Total	$	2,143,248

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Short-Term Loans (Tables)

3 Months Ended

Sep. 30, 2016

Short-Term Loans [Abstract]

Schedule of short-term loans

	September 30, 2016		June 30, 2016
Loan from Pingdingshan Bank, which was originally due in April 2015, with loan amount $599,835 (RMB 4,000,000) and annual interest of 12%. The Company repaid $269,926 (RMB 1,800,000) in April 2015 and obtained the Bank’s approval to extend the remaining $329,909 (RMB 2,200,000) until April 2016. Interest rate is 11.5% per annum. The loan is guaranteed by Yulong Bricks, the executive director of Yulong Bricks, a third party, the Company founder and his relatives. The Company is settling with the bank on loan extension subsequently.	$	329,910	$	331,109
Loan from Pingdingshan Rural Credit Cooperative Union with original loan amount $2,174,402 (RMB 14,500,000) matures in July 2016. Interest rate is 12.1% per annum. The loan is guaranteed by Yulong Bricks, Yulong Renewable, the founder and a company that he owns. This loan is extended by a new loan in January 2017.		2,174,402		2,182,312
Loan from Pingdingshan Bank, original loan amount $674,814 (RMB 4,500,000), at an interest rate 8.73% per annum, matures in August 2016. The loan is guaranteed by Yulong Bricks, the executive director of Yulong bricks, his relative and a third party. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from Pingdingshan rural credit cooperative union, original loan amount $674,814 (RMB 4,500,000) at an interest rate 9%, matures in August 2017. The loan is guaranteed by Yulong Concrete, Yulong Bricks and the company’s founder. The Company is settling with the bank on loan extension subsequently.		674,814		677,269
Loan from China Construction Bank, original loan amount $599,835 (RMB 4,000,000), matures in June 2016. Interest rate is 6.4% and 9.6% per annum as of June 30, 2016 and September 30, 2016, respectively. Guaranteed by Yulong Concrete and a third party. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in September 2016. Interest rate is 8.3% per annum. Guaranteed by Yulong Concrete, Yulong Industry and Yulong Renewable. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Loan from Pingdingshan Bank, original loan amount $599,835 (RMB 4,000,000), matures in March 2017. Interest rate is 8.7% per annum. Guaranteed by Yulong Renewable, Yulong Industry and Yulong Concrete. The Company is settling with the bank on loan extension subsequently.		599,835		602,017
Total short-term loans - bank	$	5,653,445	$	5,674,011

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Related Party Transactions (Tables)

3 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Schedule of other payables - related parties

Name of related parties	Relationship	Nature of  transactions	September 30, 2016		June 30, 2016
Yulong Zhu	Founder	Loan for operating cash flows	$	1,688,383	$	1,488,794
Henan Yuliang Hotel Co., Ltd.	Owned by founder	Loan for operating cash flows		-		15,050
Lei Zhu	Relative of founder	Loan for operating cash flow		-		461,393
Total other payables			$	1,688,383	$	1,965,237

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Capital Lease Obligations (Tables)

3 Months Ended

Sep. 30, 2016

Capital Lease Obligations [Abstract]

Schedule of capital lease obligations

	September 30, 2016			June 30, 2016
Lease obligations for ten waste hauling trucks expired June 2015, lease payment at $29,343 (RMB 195,676) and $15,097 (RMB 100,676) per month from July 2013 to June 2014 and from July 2014 to June 2015, respectively, with interest at 16.8% per annum. In June 2015, lessor verbally agreed to extend due date for the unpaid balance to June 2016. The Company is arranging a repayment plan with the lessor subsequently.		121,923			122,366
Lease obligations for an excavator expiring in May 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.8% per annum.  The Company is arranging a repayment plan with the lessor subsequently.		28,431			28,535
Lease obligations for thirty waste hauling trucks expiring in July 2016, lease payment at $81,585 (RMB 544,050) per month with interest at 15.6% per annum. The Company is arranging a repayment plan with the lessor subsequently.		1,442,970			1,449,258
Lease obligation for a loader expired in April 2016, lease payment at $2,414 (RMB 16,101) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016.  The Company is arranging a repayment plan with the lessor subsequently.		38,593			38,733
Lease obligation for a loader expired in April 2016, lease payment at $2,407 (RMB 16,053) per month with interest at 8.3% per annum. In May 2016, the lessor verbally agreed to extend the due date for the unpaid balance to October 2016. The Company is arranging a repayment plan with the lessor subsequently.		38,479			38,619
Lease obligation for an excavator expiring in October 2016, lease payment at $7,029 (RMB 46,870) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		136,555			137,504
Lease obligation for an excavator expiring in October 2016, lease payment at $4,868 (RMB 32,462) per month with interest at 8.7% per annum. The Company is arranging a repayment plan with the lessor subsequently.		94,579			95,236
Lease obligation for a land use right which the Company expects to pay in full in late 2017.		1,920,516			1,927,500
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.  The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $151,598 (RMB 1,010,928), lease payment at $4,868 (RMB 32,462) per month with interest at 9.593%.   The Company is arranging a repayment plan with the lessor subsequently.		96,689			98,587
Lease obligation for a loader commenced on August 1, 2015 expiring on January 1, 2017, total obligation is approximately $59,198 (RMB 394,764), lease payment at $2,393 (RMB 15,958) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		34,105			34,672
Lease obligation for a loader commenced on August 1, 2015 expiring on July 1, 2017, total obligation is approximately $58,141 (RMB 387,714), lease payment at $2,350 (RMB 15,673) per month with interest at 9.525%.  The Company is arranging a repayment plan with the lessor subsequently.		33,497			34,052
Subtotal		4,083,026			4,103,649
Less: deferred interest		(6,710	)		(12,506	)
Capital lease obligations, net		4,076,315			4,091,143
Less: capital lease obligations – current		(4,076,315	)		(4,062,291	)
Capital lease obligations – non-current	$	-		$	28,852

Schedule of future annual capital lease payments

Twelve months ending September 30,	Amount
2017	$	4,076,315
2018		-
Total	$	4,076,315

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Taxes (Tables)

3 Months Ended

Sep. 30, 2016

Taxes [Abstract]

Schedule of provision (benefit) for income taxes

	For the three months ended September 30,
	2016			2015
Current	$			$
Domestic		-			-
Foreign		218,647			1,125,562
Deferred
Domestic		-			-
Foreign		(100,856	)		(56,930	)
Total provision for income taxes	$	117,791		$	1,068,632

Schedule of deferred tax assets and liabilities

	September 30, 2016			June 30, 2016
Deferred tax assets
Startup cost	$	200,488		$	201,217
Property, plant and equipment		121,229			140,283
Intangible assets		(54,121	)		(49,556	)
Staff education		1,488			1,493
Provision for doubtful accounts		1,204,767			1,184,219
Impairment loss on long-lived assets and construction-in-progress		13,770,960			13,444,794
Net operating loss carryforward in China		354,153			284,276
Total deferred tax assets		15,598,964			15,206,726
Valuation allowance		(15,110,618	)		(14,817,756	)
Total deferred tax assets, net	$	488,346		$	388,970

Schedule of taxes payable

	September 30, 2016		June 30, 2016
Income taxes payable	$	1,211,015	$	1,126,157
VAT taxes payable		264,379		223,307
Other taxes payable		153,107		148,619
Total	$	1,628,501	$	1,498,083

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Equity (Tables)

3 Months Ended

Sep. 30, 2016

Equity [Abstract]

Schedule of estimates their fair value using the Binomial Option Pricing Model

	September 30, 2016			June 30, 2016			July 1, 2015
Number of shares exercisable		112,500			112,500			112,500
Exercise price	$	6.25		$	6.25		$	6.25
Stock price	$	2.33		$	1.71		$	6.00
Expected term (years)		3.75			4.00			5.00
Risk-free interest rate		1.10	%		0.89	%		1.63	%
Expected volatility		80.38	%		84.83	%		92	%

Summary of changes in warrant activity

	Three Months Ended September 30, 2016		Weighted Average Exercise Price		Average Remaining Contractual Life
Outstanding, beginning balance		-		-		-
Granted		112,500	$	6.25		5
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, ending balance		112,500	$	6.25		3.75

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(Loss) Earnings Per Share (Tables)

3 Months Ended

Sep. 30, 2016

(Loss) Earnings Per Share [Abstract]

Schedule of basic and diluted (loss) earnings per share

	For the three months ended September 30, 2016			For the three months ended September 30, 2015
Net (loss)/income	$	(2,838,777	)	$	3,580,683
Weighted average shares outstanding - basic and diluted		12,026,886			11,869,938
(Loss) earnings per share - basic and diluted	$	(0.24	)	$	0.30

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Commitments and Contingencies (Tables)

3 Months Ended

Sep. 30, 2016

Commitments and Contingencies [Abstract]

Schedule of guaranteed in bank loans of unrelated third-party

Name	Guaranteed amount		Guarantee expiration date
Pingdingshan Yushi Automobile Accessory Sales Co., Ltd(1)	$	1,204,034	December 29, 2016
Pingdingshan Orr Business Co., Ltd(2)		1,815,153	January 5, 2018
Total	$	3,019,187

(1) The Company did not, however, accrue any liability in connection with such guarantee because the borrower has been current in its repayment obligations and the Company has not experienced any loss from providing such guarantees in the past. The Company has evaluated the guarantee and has concluded that the likelihood of it having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under such commitment is not material.

(2) According to the verdict issued on March 16, 2017, the court ruled that the borrower was required to repay the borrowings of $1,799,505 (RMB 12 million) and was liable for the related litigation cost in an amount of $15,648 (RMB 104,346). As the loan term covered the period from January 5, 2015 through January 6, 2016, and the guarantee expires on January 5, 2018, the Company has accrued a liability in connection with such guarantee during the fiscal year ended June 30, 2016.

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Segments (Tables)

3 Months Ended

Sep. 30, 2016

Segments [Abstract]

Schedule of divisional operations

Revenues:	2016		2015
Yulong Bricks	$	585,470	$	4,035,101
Yulong Concrete and Yulong Transport		1,728,971		7,338,329
Yulong Renewable		489,589		1,977,438
Consolidated revenues	$	2,804,030	$	13,350,868

Gross profit:	2016		2015
Yulong Bricks	$	173,779	$	2,249,477
Yulong Concrete and Yulong Transport		400,969		1,942,171
Yulong Renewable		336,481		1,254,113
Consolidated gross profit	$	911,229	$	5,445,761

Income (loss) from operations:	2016			2015
Yulong Bricks	$	(309,784	)	$	2,168,277
Yulong Concrete and Yulong Transport		(131,981	)		1,728,549
Yulong Renewable		(1,886,157	)		1,063,355
Subtotal		(2,327,922	)		4,960,181
Yulong HK		(198,056	)		(67,693	)
Yulong Eco-Materials		(49,966	)		(370,000	)
Consolidated income from operations	$	(2,575,944	)	$	4,522,488

Net income (loss):	2016			2015
Yulong Bricks	$	(291,305	)	$	1,640,745
Yulong Concrete and Yulong Transport		(277,812	)		1,222,408
Yulong Renewable		(1,995,299	)		810,960
Subtotal		(2,564,416	)		3,674,113
Yulong WFOE		-			2,110
Yulong HK		(198,329	)		(73,739	)
Yulong Eco-Materials		(76,031	)		(21,801	)
Consolidated net income	$	(2,838,776	)	$	3,580,683

Depreciation and amortization:	2016		2015
Yulong Bricks	$	122,602	$	127,330
Yulong Concrete and Yulong Transport		36,110		82,021
Yulong Renewable		-		396,564
Consolidated depreciation and amortization	$	158,712	$	605,915

Interest expenses:	2016		2015
Yulong Bricks	$	38,574	$	116,397
Yulong Concrete and Yulong Transport		151,812		108,313
Yulong Renewable		5,754		43,455
Consolidated interest expenses	$	196,140	$	268,165

Capital expenditures:	2016		2015
Yulong Bricks	$	-	$	20,283
Yulong Concrete and Yulong Transport		-		27,603
Yulong Renewable		-		170,169
Consolidated capital expenditures	$	-	$	218,055

Schedule of assets of division

Total Assets as of:	September 30, 2016		June 30, 2016
Yulong Bricks	$	11,227,572	$	11,131,176
Yulong Concrete and Yulong Transport		3,281,371		4,416,866
Yulong Renewable		20,949,715		20,251,768
Interdivision assets		1,040		590
Yulong Eco-Materials		642,700		642,700
Total Assets	$	36,102,398	$	36,443,101

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Nature of Business and Organization (Details)

3 Months Ended

Sep. 30, 2016

Yulong BVI [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong BVI

Background

• A British Virgin Islands company

• Incorporated on June 15, 2011

Ownership

100.00%

Yulong HK [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong HK

Background

• A Hong Kong company

• Incorporated on July 21, 2011

Ownership

100.00%

Yulong WFOE [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong WFOE

Background

• A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)

• Incorporated on September 2, 2011

• Registered capital of $9,935,303 fully funded

Ownership

100.00%

Yulong Bricks [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong Bricks

Background

• A PRC limited liability company

• Incorporated on September 20, 2006

• Registered capital of $4,498,763 (RMB 30,000,000) fully funded

Ownership

VIE by contractual arrangements

Yulong Concrete [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong Concrete

Background

• A PRC limited liability company

• Incorporated on December 7, 2004

• Registered capital of $2,999,175 (RMB 20,000,000) fully funded

Ownership

VIE by contractual arrangements

Yulong Transport [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong Transport

Background

• A PRC limited liability company

• Incorporated on July 13, 2009

• Registered capital of $1,501,087 (RMB 10,010,000) fully funded

Ownership

VIE by contractual arrangements

Yulong Renewable [Member]

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]

Name

Yulong Renewable

Background

● A PRC limited liability company

● Incorporated on August 16, 2011

● Registered capital of $8,997,526 (RMB 60,000,000) fully funded

● Commenced operation in April 2015

Ownership

VIE by contractual arrangements

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Nature of Business and Organization (Details Textual) - Sep. 30, 2016	USD ($)	CNY (¥)
Yulong WFOE [Member]
Nature of Business and Organization (Textual)
Registered capital	$ 9,935,303
Yulong Bricks [Member]
Nature of Business and Organization (Textual)
Registered capital	4,498,763	¥ 30,000,000
Yulong Concrete [Member]
Nature of Business and Organization (Textual)
Registered capital	2,999,175	20,000,000
Yulong Transport [Member]
Nature of Business and Organization (Textual)
Registered capital	1,501,087	10,010,000
Yulong Renewable [Member]
Nature of Business and Organization (Textual)
Registered capital	$ 8,997,526	¥ 60,000,000

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Summary of Significant Accounting Policies (Details)	3 Months Ended
	Sep. 30, 2016
Maximum [Member] | Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Useful Life	30 years
Maximum [Member] | Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	10 years
Maximum [Member] | Transportation equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	10 years
Maximum [Member] | Office equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	5 years
Minimum [Member] | Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Useful Life	10 years
Minimum [Member] | Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	5 years
Minimum [Member] | Transportation equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	5 years
Minimum [Member] | Office equipment [Member]
Property, Plant and Equipment [Line Items]
Useful Life	3 years

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Summary of Significant Accounting Policies (Details 1)	3 Months Ended
	Sep. 30, 2016
Yulong Bricks [Member]
Property, Plant and Equipment [Line Items]
Description of assets	Land use right
Estimated useful life	50 years
Yulong Concrete [Member]
Property, Plant and Equipment [Line Items]
Description of assets	Land use right
Estimated useful life	50 years
Yulong Renewable [Member]
Property, Plant and Equipment [Line Items]
Description of assets	Land use right
Estimated useful life	50 years

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Summary of Significant Accounting Policies (Details 2) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrant liabilities	$ 91,670	$ 65,605
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrant liabilities
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrant liabilities
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrant liabilities	$ 91,670

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Summary of Significant Accounting Policies (Details 3)	3 Months Ended
	Sep. 30, 2016 USD ($)
Summary of Significant Accounting Policies [Abstract]
Beginning fair value	$ 65,605
Realized loss recorded in earnings	26,065
Ending fair value	$ 91,670

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Summary of Significant Accounting Policies (Details Textual)	3 Months Ended				12 Months Ended
	Sep. 30, 2016 USD ($) Suppliers Customers	Sep. 30, 2016 CNY (¥) Suppliers Customers	Sep. 30, 2015 USD ($) Suppliers	Sep. 30, 2015 CNY (¥) Suppliers	Jun. 30, 2016 USD ($) Suppliers Customers	Jun. 30, 2016 CNY (¥) Suppliers Customers	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 CNY (¥)	Jun. 30, 2015 USD ($)
Summary of Significant Accounting Policies (Textual)
Accumulated other comprehensive income (loss) | $	$ (1,119,204)				$ (1,219,184)
Exception of equity	$ 1.00				1.00		¥ 6.67	¥ 6.64
Comprehensive (loss) income | ¥		¥ 6.66		¥ 6.27
Description of leases criteria	At lease inception, if the lease meets any of the following four criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) lease term is equal to 75% or more of the estimated economic life of the leased property, or (d) the present value of the minimum lease payments is 90% or more of the fair value of the leased asset. Otherwise, the lease will be treated as an operating lease.	At lease inception, if the lease meets any of the following four criteria, the Company will classify it as a capital lease: (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) lease term is equal to 75% or more of the estimated economic life of the leased property, or (d) the present value of the minimum lease payments is 90% or more of the fair value of the leased asset. Otherwise, the lease will be treated as an operating lease.
Shipping costs | $	$ 43,922		$ 81,611
Total expense for employee benefit plans | $	$ 42,313		34,800
Tax, description	A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement.	A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement.
Depreciation expense | $	$ 146,003		$ 568,014
Prepayment for construction projects	2,759,613				2,769,652		18,402,479	18,402,479
Cash deposits covered insurance	2,662,970				2,734,015		17,758,018	¥ 18,165,703
Allowance for doubtful accounts | $	4,819,067				3,937,778
Cash and cash equivalents and accounts receivable | $	$ 2,662,970				2,734,016
Sales revenue, description	Beginning January 2017, Yulong Bricks and Yulong Concrete gradually resumed their sales revenue by 15% from the Q1 and Q2 2017 level.	Beginning January 2017, Yulong Bricks and Yulong Concrete gradually resumed their sales revenue by 15% from the Q1 and Q2 2017 level.
Impairment loss on land use right of Yulong Renewable | $	$ 2,245,796				2,253,966
Impairment loss on Yulong Renewable's construction-in-progress	1,500,000	¥ 10,000,000
Impairment reserve of long-lived assets	50,100,000	333,900,000			40,800,000	¥ 323,900,000
Founder [Member]
Summary of Significant Accounting Policies (Textual)
Fund for company's operations	1,700,000	¥ 11,600,000
Remittance Agreement [Member]
Summary of Significant Accounting Policies (Textual)
Prepayment for construction projects	15,700,000						¥ 104,500,000
Total revenues [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk			10.00%	10.00%
Accounts receivable [Member]
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts | $	$ 4,800,000				$ 3,900,000
Customer One [Member] | Total revenues [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	14.00%	14.00%
Number of customer | Customers	2	2
Customer One [Member] | Accounts receivable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	26.00%	26.00%			26.00%	26.00%
Number of customer | Customers	2	2			2	2
Supplier One [Member] | Accounts Payable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	20.00%	20.00%			21.00%	21.00%
Number of suppliers	4	4			5	5
Supplier One [Member] | Total purchases [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	27.00%	27.00%	31.00%	31.00%
Number of suppliers	4	4	4	4
Customer Two [Member] | Total revenues [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	10.00%	10.00%
Number of customer | Customers	2	2
Customer Two [Member] | Accounts receivable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	17.00%	17.00%			19.00%	19.00%
Number of customer | Customers	2	2			2	2
Supplier Two [Member] | Accounts Payable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	19.00%	19.00%			19.00%	19.00%
Number of suppliers	4	4			5	5
Supplier Two [Member] | Total purchases [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	17.00%	17.00%	16.00%	16.00%
Number of suppliers	4	4	4	4
Supplier Three [Member] | Accounts Payable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	13.00%	13.00%			16.00%	16.00%
Number of suppliers	4	4			5	5
Supplier Three [Member] | Total purchases [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	17.00%	17.00%	12.00%	12.00%
Number of suppliers	4	4	4	4
Supplier Four [Member] | Accounts Payable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	10.00%	10.00%			16.00%	16.00%
Number of suppliers	4	4			5	5
Supplier Four [Member] | Total purchases [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk	16.00%	16.00%	10.00%	10.00%
Number of suppliers	4	4	4	4
Supplier Five [Member] | Accounts Payable [Member]
Summary of Significant Accounting Policies (Textual)
Percentage of concentration risk					11.00%	11.00%
Number of suppliers					5	5

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Variable Interest Entities (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Variable Interest Entities [Line Items]
Current assets	$ 10,464,939	$ 10,661,433
Property, plant and equipment, net	7,270,775	7,425,445
Other non-current assets	18,366,684	18,356,223
Variable Interest Entities [Member]
Variable Interest Entities [Line Items]
Current assets	9,871,201	10,068,142
Property, plant and equipment, net	7,270,775	7,425,445
Other non-current assets	18,316,682	18,306,223
Total assets	35,458,658	35,799,810
Total liabilities	35,218,399	33,130,293
Net assets	$ 240,259	$ 2,669,517

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Variable Interest Entities (Details 1) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Current liabilities:
Short-term loan - banks	$ 5,653,445	$ 5,674,011
Accounts payable	1,661,167	1,710,881
Other payables and accrued liabilities	8,322,086	7,601,354
Other payables - related parties	1,688,383	1,965,237
Customer deposits	4,404,720	2,571,846
Taxes payable	1,628,501	1,498,083
Capital lease obligations-current	4,076,315	4,062,291
Total current liabilities	27,526,287	25,149,308
Non-current liabilities:
Capital lease obligations-non-current		28,852
Variable Interest Entities [Member]
Current liabilities:
Short-term loan - banks	5,653,445	5,674,011
Accounts payable	1,661,167	1,710,881
Other payables and accrued liabilities	6,630,106	5,973,602
Payroll payable	611,219	546,990
Other payables - related parties	1,429,836	1,907,458
Customer deposits	4,404,720	2,571,846
Taxes payable	1,628,002	1,497,583
Capital lease obligations-current	4,076,314	4,062,291
Dividends payable	9,123,590	9,156,779
Total current liabilities	35,218,399	33,101,441
Non-current liabilities:
Capital lease obligations-non-current		28,852
Total non-current liabilities		28,852
Total liabilities	$ 35,218,399	$ 33,130,293

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Variable Interest Entities (Details 2) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Variable Interest Entities [Line Items]
Revenue	$ 2,804,030	$ 13,350,868
Gross profit	911,229	5,445,761
(Loss) income from operations	(2,575,944)	4,522,488
Net (loss) income	(2,838,776)	3,580,683
Variable Interest Entities [Member]
Variable Interest Entities [Line Items]
Revenue	2,804,030	13,350,868
Gross profit	911,229	5,445,761
(Loss) income from operations	(2,327,922)	4,960,181
Net (loss) income	$ (2,564,416)	$ 3,678,333

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Accounts Receivable, Net (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Accounts Receivable, Net/Deposits and Other Receivables [Abstract]
Accounts receivable	$ 9,741,530	$ 9,666,112
Less: allowance for doubtful accounts	(4,819,067)	(3,937,778)
Total accounts receivable, net	$ 4,922,463	$ 5,728,334

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Accounts Receivable, Net (Details 1) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Accounts Receivable, Net/Deposits and Other Receivables [Abstract]
Beginning balance	$ 3,937,778
Charge to expense	896,185		4,067,144
Exchange rate effect	(14,896)		(129,366)
Ending balance	$ 4,819,067		$ 3,937,778

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Deposits and Other Receivables (Details) - USD ($)		Sep. 30, 2016	Jun. 30, 2016
Accounts Receivable, Net/Deposits and Other Receivables [Abstract]
Refundable deposits for equipment purchase		$ 438,424	$ 444,439
Deposit for outsourcing agreement	[1]	234,324	235,176
Deposit for new project		213,466	63,739
Advances to employees	[2]	239,671	240,474
Insurance compensation		15,967	15,874
Deposit with government agency		2,999	3,011
Total		$ 1,144,851	$ 1,002,713

[1] In December 2011, Yulong Bricks agreed to outsource some brick production to Pingdingshan Hongrui New Construction Materials Co., Ltd., an unrelated third party, and paid approximately $134,963 (RMB 1,562,589) as security deposit, which is due on demand.

[2] The Company entrusts funds to its employees to pay certain of its expenses in the normal course of business, particularly for projects or jobsites beyond Pingdingshan.

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Deposits and Other Receivables (Details 1) - USD ($)		Sep. 30, 2016	Jun. 30, 2016
Accounts Receivable, Net/Deposits and Other Receivables [Abstract]
Refundable deposit-construction	[1]	$ 15,670,691	$ 15,727,696
Total		$ 15,670,691	$ 15,727,966

[1] As of September 30 and June 30, 2016, we recorded $15,670,691 (RMB104.5 million) and $15,727,696 (RMB104.5 million), respectively, related to the purchase of equipment, in connection with the construction of Yulong Renewable's waste recycling plant and factory construction, would be refundable based on the agreement entered with the contractor, Pingdingshan City HuaShen Trading Co. Ltd., subsequently on July 4, 2017 (see Note 8). The agreement stipulated that the contractor would refund the amount in five (5) equal installment amount on July 10, 2017, October 10, 2017, January 10, 2018, April 10, 2018 and July 10, 2018. The first installment of $3,010,085 was received subsequently in July 2017 as per the refund schedule.

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Deposits and Other Receivables (Details Textual)	3 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 USD ($)	Jun. 30, 2016 CNY (¥)	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY (¥)
July 4, 2017 [Member]
Deposits and other receivables (Textual)
Purchase of equipment	$ 15,670,691	¥ 104,500,000	$ 15,727,696	¥ 104,500,000
Installment received	$ 3,010,085
Pingdingshan Hongrui New Construction Materials Co., Ltd., [Member]
Deposits and other receivables (Textual)
Security deposit					$ 134,963	¥ 1,562,589

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Inventories (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Inventories [Abstract]
Raw materials	$ 790,922	$ 285,459
Semi-finished byproduct	37,003	34,236
Finished goods	71,167	45,196
Total inventories	$ 899,092	$ 364,891

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Property, Plant and Equipment, Net (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Property, Plant and Equipment [Line Items]
Plant and equipment gross	$ 66,202,477	$ 64,935,143
Less: accumulated depreciation	(8,853,272)	(8,754,140)
Less: impairment loss on long-lived assets and construction-in-progress	(50,078,430)	(48,755,558)
Total	7,270,775	7,425,445
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	24,645,552	24,735,204
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	7,309,120	7,335,708
Machinery and equipment under capital lease [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	2,092,228	2,099,839
Transportation equipment [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	852,497	855,598
Transportation equipment under capital lease [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	2,677,878	2,687,620
Office equipment [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	109,594	109,993
Construction-in-progress [Member]
Property, Plant and Equipment [Line Items]
Plant and equipment gross	$ 28,515,608	$ 27,111,181

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Property, Plant and Equipment, Net (Details 1)	3 Months Ended
	Sep. 30, 2016 USD ($)
Schedule of Construction-in-progress
Construction-in-progress value	$ 14,420
Estimated additional cost to complete
Office buildings, staff facilities, equipment and machinery [Member]
Schedule of Construction-in-progress
Construction-in-progress value	$ 7,339
Estimated completion date	Jun. 30, 2018
Estimated additional cost to complete
Autoclave Installation [Member]
Schedule of Construction-in-progress
Construction-in-progress value	$ 7,081
Estimated completion date	Jun. 30, 2018
Estimated additional cost to complete

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Property, Plant and Equipment, Net(Details 2) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Schedule of capital leased assets
Capital leased assets, gross	$ 4,770,106	$ 4,787,459
Less: accumulated depreciation	(1,685,475)	(1,691,606)
Less: impairment reserve	(3,084,631)	(3,095,853)
Total
Machinery and equipment [Member]
Schedule of capital leased assets
Capital leased assets, gross	2,092,228	2,099,839
Transportation equipment [Member]
Schedule of capital leased assets
Capital leased assets, gross	$ 2,677,878	$ 2,687,620

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Property, Plant and Equipment, Net (Details Textual)	1 Months Ended														3 Months Ended				12 Months Ended
	Jul. 31, 2017 USD ($) Installments	Jul. 31, 2017 CNY (¥) Installments	Jun. 30, 2015 USD ($)	Jun. 30, 2015 CNY (¥)	Sep. 30, 2014 USD ($)	Jul. 31, 2014 USD ($)	Jul. 31, 2014 CNY (¥)	Mar. 31, 2014 USD ($)	Jan. 31, 2014 USD ($) Haulingtrucks	Apr. 30, 2013 USD ($)	Nov. 30, 2012 USD ($) Haulingtrucks	Nov. 30, 2012 CNY (¥) Haulingtrucks	Oct. 31, 2012 USD ($) Haulingtrucks	Oct. 31, 2012 CNY (¥) Haulingtrucks	Sep. 30, 2017 USD ($)	Sep. 30, 2017 CNY (¥)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Installments	Jun. 30, 2016 CNY (¥) Installments	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 CNY (¥)	Mar. 31, 2016 USD ($)	Mar. 31, 2016 CNY (¥)	Jun. 30, 2015 CNY (¥)	Sep. 30, 2014 CNY (¥)	Jul. 31, 2014 CNY (¥)	Mar. 31, 2014 CNY (¥)	Jan. 31, 2014 CNY (¥)	Nov. 30, 2012 CNY (¥)	Oct. 31, 2012 CNY (¥)
Property, Plant and Equipment, Net (Textual)
Construction-in-progress value																	$ 14,420
Payments for construction-in-progress																		$ 68,752
Payables for construction-in-progress																			$ 34,700,000			¥ 231,700,000
Depreciation expense																	146,003	568,014
Lease agreement amount																	4,076,315		4,091,143
Other receivables, non-current																	15,670,691		15,727,696
Impairment provision																	20,500,000				¥ 136,800,000
Forecast [Member]
Property, Plant and Equipment, Net (Textual)
Payments for construction-in-progress															$ 1,500,000	¥ 10,000,000
Zhengzhou [Member]
Property, Plant and Equipment, Net (Textual)
Construction-in-progress value																							$ 45,000,000	¥ 300,000,000
Building and improvements [Member]
Property, Plant and Equipment, Net (Textual)
Impairment provision																	50,078,430		48,755,558
Machinery and equipment [Member]
Property, Plant and Equipment, Net (Textual)
Impairment provision																	50,078,430		48,755,558
Transportation equipment [Member]
Property, Plant and Equipment, Net (Textual)
Impairment provision																	50,078,430		48,755,558
Construction-in-progress [Member]
Property, Plant and Equipment, Net (Textual)
Construction-in-progress value																	20,500,000				126,800,000
Impairment provision																	50,078,430		48,755,558
Fixed Assets [Member]
Property, Plant and Equipment, Net (Textual)
Amount transferred to fixed assets																			8,200,000	¥ 54,400,000
Construction-in-progress value																			44,400,000
Impairment Reserve [Member]
Property, Plant and Equipment, Net (Textual)
Construction-in-progress value																			7,700,000			¥ 51,600,000
Cancellation Agreement [Member] | Contractor [Member]
Property, Plant and Equipment, Net (Textual)
Payments for construction-in-progress																			$ 15,600,000	¥ 104,000,000
Number of installments | Installments																			5	5
Cancellation Agreement [Member] | Contractor [Member] | Forecast [Member]
Property, Plant and Equipment, Net (Textual)
Payments for construction-in-progress	$ 15,600,000	¥ 104,000,000
Number of installments | Installments	5	5
Machinery and equipment under capital lease [Member] | Lease Agreements [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount								$ 136,199									28,431				189,591							¥ 908,240
One time payment of lease								37,952
Security deposit								5,828
Monthly lease payment								$ 5,000
Interest rate per annum								8.80%																				8.80%
Lease agreements term with third party								2 years
Machinery and equipment under capital lease [Member] | Lease Agreements One [Member]
Property, Plant and Equipment, Net (Textual)
Monthly lease payment								$ 3,000
Interest rate per annum								8.50%																				8.50%
Lease agreements term with third party								18 months
Machinery and equipment under capital lease [Member] | Lease Agreements Two [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount					$ 192,697												136,505				910,283					¥ 1,285,000
One time payment of lease					54,506
Security deposit					8,414
Monthly lease payment					$ 8,000
Interest rate per annum					8.70%																					8.70%
Lease agreements term with third party					2 years
Machinery and equipment under capital lease [Member] | Lease Agreements Three [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount					$ 133,463												94,544				630,467					¥ 890,000
One time payment of lease					37,952
Security deposit					5,828
Monthly lease payment					$ 5,000
Interest rate per annum					8.70%																					8.70%
Lease agreements term with third party					2 years
Machinery and equipment under capital lease [Member] | Lease Agreements Four [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount					$ 50,836												38,593				257,354					¥ 339,000
One time payment of lease					17,758
Security deposit					5,549
Monthly lease payment					$ 3,000
Interest rate per annum					8.30%																					8.30%
Lease agreements term with third party					18 months
Machinery and equipment under capital lease [Member] | Lease Agreements Five [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount					$ 50,686												38,479				¥ 256,594					¥ 338,000
One time payment of lease					17,706
Security deposit					5,533
Monthly lease payment					$ 3,000
Interest rate per annum					8.30%																					8.30%
Lease agreements term with third party					18 months
Machinery and equipment under capital lease [Member] | Lease Agreements Six [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount			$ 49,486																						¥ 330,000
One time payment of lease			15,836	¥ 105,600
Security deposit			4,949																						¥ 33,000
Monthly lease payment			$ 2,350	15,673
Interest rate per annum			9.525%																						9.525%
Machinery and equipment under capital lease [Member] | Lease Agreements Seven [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount			$ 50,386																						¥ 336,600
One time payment of lease			16,124	107,520
Security deposit			5,039																						¥ 33,600
Monthly lease payment			$ 2,393	¥ 15,958
Interest rate per annum			9.525%																						9.525%
Lease agreements term with third party			18 months	18 months
Machinery and equipment under capital lease [Member] | Lease Agreements Eight [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount			$ 136,199																						¥ 908,240
One time payment of lease			34,766	¥ 231,840
Security deposit			5,339																						¥ 35,600
Monthly lease payment			$ 4,868	¥ 32,462
Interest rate per annum			9.60%																						9.60%
Lease agreements term with third party			18 months	18 months
Machinery and equipment under capital lease [Member] | Lease Agreements Nine [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount			$ 136,199																						¥ 908,240
One time payment of lease			34,766	¥ 231,840
Security deposit			5,339																						¥ 35,600
Monthly lease payment			$ 4,868	¥ 32,462
Interest rate per annum			9.60%																						9.60%
Lease agreements term with third party			18 months	18 months
Transportation equipment under capital lease [Member]
Property, Plant and Equipment, Net (Textual)
Depreciation expense																	0	$ 188,000
Monthly lease payment											$ 15,097
Transportation equipment under capital lease [Member] | Lease Agreements One [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount													$ 616,962																		¥ 4,114,208
One time payment of lease										$ 163,701
Security deposit													47,687																		¥ 318,000
Monthly lease payment													$ 26,000
Interest rate per annum													18.20%																		18.20%
Number of hauling trucks | Haulingtrucks													10	10
Insurance													$ 62,233	¥ 415,000
Transportation equipment under capital lease [Member] | Lease Agreements Two [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount											603,917						$ 121,922													¥ 4,027,225
One time payment of lease										$ 163,704
Security deposit											47,687																			¥ 318,000
Monthly lease payment											$ 32,000
Interest rate per annum											16.80%																			16.80%
Lease agreements term with third party											2 years	2 years
Number of hauling trucks | Haulingtrucks											10	10
Insurance											$ 52,186	¥ 348,000
Transportation equipment under capital lease [Member] | Lease Agreements Three [Member]
Property, Plant and Equipment, Net (Textual)
Lease agreement amount						$ 1,666,792			$ 62,683																		¥ 11,115,000		¥ 418,000
One time payment of lease						350,904	¥ 2,340,000
Monthly lease payment						$ 89,000
Interest rate per annum						15.60%																					15.60%
Number of hauling trucks | Haulingtrucks									100
Lease agreements with third party, description						Binding agreement with the same party to lease the first 30 trucks for two years for approximately $1,666,792 (RMB 11,115,000), or approximately $55,560 (RMB 370,500) per truck. The lease also requires a one-time payment of $350,904 (RMB 2,340,000) as security deposit paid in July 2014 and monthly lease payments of approximately $89,000 from August 2014 to July 2016, with interest rate at 15.6% per annum. The Company has an option to purchase the vehicles for $491 if there is no default of the lease payments at the end of the lease term.	Binding agreement with the same party to lease the first 30 trucks for two years for approximately $1,666,792 (RMB 11,115,000), or approximately $55,560 (RMB 370,500) per truck. The lease also requires a one-time payment of $350,904 (RMB 2,340,000) as security deposit paid in July 2014 and monthly lease payments of approximately $89,000 from August 2014 to July 2016, with interest rate at 15.6% per annum. The Company has an option to purchase the vehicles for $491 if there is no default of the lease payments at the end of the lease term.

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Prepayments (Details) - USD ($)		Sep. 30, 2016	Jun. 30, 2016
Prepayments [Abstract]
Prepayment for equipment purchase		$ 14,996	$ 15,050
Prepayment for construction	[1]	2,748,339	2,769,652
Subtotal		2,763,335	2,784,702
Reserve-prepayment for construction	[1]	(2,759,613)	(2,769,652)
Total prepayments, net		$ 3,722	$ 15,050

[1] Prepayment for construction in advance was made in connection with the construction factory of Yulong Renewable. We had prepaid the construction fees in advance approximately $2,759,613 (RMB18,402,479) and $2,769,652 (RMB18,402,479) as of September 30, 2016 and June 30, 2016, respectively, to our construction vendors, Henan Sanjian and Henan Guangshen. Due to the new environmental regulations and policies implemented by the central government of PRC and the Environmental Protection Bureau of Henan Province (see Note 7), the factory construction project was placed on hold since August 2016. We placed a reserve for the entire amount of the prepaid construction fee, $2,759,613 (RMB18,402,479) and $2,769,652 (RMB 18,402,479) as of September 30, 2016 and June 30, 2016, respectively, as there is an uncertainty in the refundable status of the construction vendors.

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Prepayments (Details Textual)	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 USD ($)	Jun. 30, 2016 CNY (¥)
Prepayments (Textual)
Prepaid construction fees	$ 2,759,613	¥ 18,402,479	$ 2,769,652	¥ 18,402,479
Prepayment for construction reserve	$ 2,759,613	¥ 18,402,479	$ 2,769,652	¥ 18,402,479

XML

Intangible Assets, Net (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Intangible Assets, Net [Abstract]
Land use rights	$ 4,825,903	$ 4,843,458
Less: accumulated amortization	(436,859)	(425,701)
Less: impairment reserve	(2,245,796)	(2,253,966)
Total	$ 2,143,248	$ 2,163,791

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Intangible Assets, Net (Details 1)	Sep. 30, 2016 USD ($)
Estimated amortization expenses [Abstract]
2017	$ 50,837
2018	50,837
2019	50,837
2020	50,837
2021	50,837
Thereafter	1,889,063
Total	$ 2,143,248

XML

Intangible Assets, Net (Details Textual)	3 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 CNY (¥)
Intangibles Assets, Net (Textual)
Total land use rights under capital leases	$ 2,143,248
Lease expiration period	50 years
Amortization expenses	$ 12,709	$ 37,901
Yulong Bricks and Yulong Concrete [Member]
Intangibles Assets, Net (Textual)
Lease expenses expire	Dec. 31, 2058
Yulong Renewable [Member]
Intangibles Assets, Net (Textual)
Lease expenses expire	Mar. 31, 2065
Land use rights [Member]
Intangibles Assets, Net (Textual)
Total land use rights under capital leases	$ 4,557,037		¥ 30,388,600
Associated costs	$ 268,597		¥ 1,791,136

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Short-Term Loans (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Schedule of Short-term loans
Total short-term loans - bank	$ 5,653,445	$ 5,674,011
Loan from Pingdingshan Bank, due in April 2015 [Member]
Schedule of Short-term loans
Total short-term loans - bank	329,910	331,109
Loan from Pingdingshan Rural Credit Cooperative Union, matures in July 2016
Schedule of Short-term loans
Total short-term loans - bank	2,174,402	2,182,312
Loan from Pingdingshan Bank, matured in August 2016 [Member]
Schedule of Short-term loans
Total short-term loans - bank	674,814	677,269
Loan from Pingdingshan Rural Credit Cooperative Union, matures in August 2017 [Member]
Schedule of Short-term loans
Total short-term loans - bank	674,814	677,269
Loan from China Construction Bank, matures in June 2016 [Member]
Schedule of Short-term loans
Total short-term loans - bank	599,835	602,017
Loan from Pingdingshan Bank, matures in September 2016 [Member]
Schedule of Short-term loans
Total short-term loans - bank	599,835	602,017
Loan from Pingdingshan Bank, matures in March 2017 [Member]
Schedule of Short-term loans
Total short-term loans - bank	$ 599,835	$ 602,017

XML

Short-Term Loans (Details Textual)	3 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Sep. 30, 2015 USD ($)	Jun. 30, 2016
Short-Term Loans (Textual)
Repayment of short term bank loan			$ 5,187,000
Interest expense on debts	$ 190,386		$ 224,711
Loan from Pingdingshan Bank, due in April 2015 [Member]
Short-Term Loans (Textual)
Loan maturity date	Apr. 30, 2015	Apr. 30, 2015
Interest rate per annum	12.00%	12.00%
Interest rate during period	11.50%	11.50%
Repayment of short term bank loan	$ 269,926	¥ 1,800,000
Interest expense on debts	329,909	2,200,000
Short-term loan amount	$ 599,835	¥ 4,000,000
Loan from Pingdingshan Rural Credit Cooperative Union, matures in July 2016
Short-Term Loans (Textual)
Loan maturity date	Jul. 31, 2016	Jul. 31, 2016
Interest rate per annum	12.10%	12.10%
Short-term loan amount	$ 2,174,402	¥ 14,500,000
Loan from Pingdingshan Bank, matured in August 2016 [Member]
Short-Term Loans (Textual)
Loan maturity date	Aug. 31, 2016	Aug. 31, 2016
Interest rate per annum	8.73%	8.73%
Short-term loan amount	$ 674,814	¥ 4,500,000
Loan from Pingdingshan Rural Credit Cooperative Union, matures in August 2017 [Member]
Short-Term Loans (Textual)
Loan maturity date	Aug. 31, 2017	Aug. 31, 2017
Interest rate per annum	9.00%	9.00%
Short-term loan amount	$ 674,814	¥ 4,500,000
Loan from China Construction Bank, matures in June 2016 [Member]
Short-Term Loans (Textual)
Loan maturity date	Jun. 30, 2016	Jun. 30, 2016
Interest rate per annum	6.40%	6.40%		9.60%
Short-term loan amount	$ 599,835	¥ 4,000,000
Loan from Pingdingshan Bank, matures in September 2016 [Member]
Short-Term Loans (Textual)
Loan maturity date	Sep. 30, 2016	Sep. 30, 2016
Interest rate per annum	8.30%	8.30%
Short-term loan amount	$ 599,835	¥ 4,000,000
Loan from Pingdingshan Bank, matures in March 2017 [Member]
Short-Term Loans (Textual)
Loan maturity date	Mar. 31, 2017	Mar. 31, 2017
Interest rate per annum	8.70%	8.70%
Short-term loan amount	$ 599,835	¥ 4,000,000

XML

Related Party Transactions (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Jun. 30, 2016
Related Party Transaction [Line Items]
Total other payables	$ 1,688,383	$ 1,965,237
Yulong Zhu [Member]
Related Party Transaction [Line Items]
Relationship	Founder
Nature of transactions	Loan for operating cash flows
Total other payables	$ 1,688,383	1,488,794
Henan Yuliang Hotel Co., Ltd.[Member]
Related Party Transaction [Line Items]
Relationship	Owned by founder
Nature of transactions	Loan for operating cash flows
Total other payables		15,050
Lei Zhu [Member]
Related Party Transaction [Line Items]
Relationship	Relative of founder
Nature of transactions	Loan for operating cash flow
Total other payables		$ 461,393

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Capital Lease Obligations (Details)	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 USD ($)
Capital Leased Assets [Line Items]
Subtotal	$ 4,083,026		$ 4,103,649
Less: deferred interest	(6,710)		(12,506)
Capital lease obligations, net	4,076,315		4,091,143
Less: capital lease obligations - current	4,076,315		4,062,291
Capital lease obligations-non-current			28,852
Lease obligations for ten waste hauling trucks expired June 2015 [Member]
Capital Leased Assets [Line Items]
Subtotal	121,923		122,366
Lease obligations for an excavator expiring in May 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	28,431		28,535
Lease obligations for thirty waste hauling trucks expiring in July 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	1,442,970		1,449,258
Lease obligation for a loader expired in April 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	38,593		38,733
Lease obligation for a loader expired in April 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	38,479		38,619
Lease obligation for an excavator expiring in October 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	136,555		137,504
Lease obligation for an excavator expiring in October 2016 [Member]
Capital Leased Assets [Line Items]
Subtotal	94,579		95,236
Lease obligation for a land use right in late 2017 [Member]
Capital Leased Assets [Line Items]
Subtotal	1,920,516		1,927,500
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Leased Assets [Line Items]
Subtotal	96,689		98,587
Capital lease obligations, net	151,598	¥ 1,010,928
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Leased Assets [Line Items]
Subtotal	96,689		98,587
Capital lease obligations, net	151,598	1,010,928
Lease obligation for a loader commenced on August 1, 2015 expiring on January 1, 2017 [Member]
Capital Leased Assets [Line Items]
Subtotal	34,105		34,672
Capital lease obligations, net	59,198	394,764
Lease obligation for a loader commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Leased Assets [Line Items]
Subtotal	33,497		$ 34,052
Capital lease obligations, net	$ 58,141	¥ 387,714

XML

Capital Lease Obligations (Details 1)	Sep. 30, 2016 USD ($)
Future annual capital lease payments
2017	$ 4,076,315
2018
Total	$ 4,076,315

XML

Capital Lease Obligations (Details Textual)	3 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 CNY (¥)	Jun. 30, 2016 USD ($)
Capital Lease Obligations (Textual)
Accrued interest in connection with capital lease obligations	$ 71,897			$ 66,388
Interest expenses on capital lease obligations	5,754	$ 43,454
Total lease obligation	4,076,315			$ 4,091,143
Lease obligations for ten waste hauling trucks expired June 2015 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 29,343		¥ 195,676
Capital lease obligations, Expiration date	Jun. 30, 2015
Percentage of interest on capital lease obligations	16.80%		16.80%
Lease obligations for ten waste hauling trucks expired June 2015 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 15,097		¥ 100,676
Capital lease obligations, Expiration date	Jun. 30, 2015
Percentage of interest on capital lease obligations	16.80%		16.80%
Lease obligations for an excavator expiring in May 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 4,868		¥ 32,462
Capital lease obligations, Expiration date	May 31, 2016
Percentage of interest on capital lease obligations	8.80%		8.80%
Lease obligations for thirty waste hauling trucks expiring in July 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 81,585		¥ 544,050
Capital lease obligations, Expiration date	Jul. 31, 2016
Percentage of interest on capital lease obligations	15.60%		15.60%
Lease obligation for a loader expired in April 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 2,414		¥ 16,101
Capital lease obligations, Expiration date	Apr. 30, 2016
Percentage of interest on capital lease obligations	8.30%		8.30%
Lease obligation for a loader expired in April 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 2,407		¥ 16,053
Capital lease obligations, Expiration date	Apr. 30, 2016
Percentage of interest on capital lease obligations	8.30%		8.30%
Lease obligation for an excavator expiring in October 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 7,029		¥ 46,870
Capital lease obligations, Expiration date	Oct. 31, 2016
Percentage of interest on capital lease obligations	8.70%		8.70%
Lease obligation for an excavator expiring in October 2016 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 4,868		¥ 32,462
Capital lease obligations, Expiration date	Oct. 31, 2016
Percentage of interest on capital lease obligations	8.70%		8.70%
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 4,868		¥ 32,462
Capital lease obligations, Expiration date	Jul. 01, 2017
Percentage of interest on capital lease obligations	9.593%		9.593%
Total lease obligation	$ 151,598		¥ 1,010,928
Lease obligation for an excavator commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 4,868		¥ 32,462
Capital lease obligations, Expiration date	Jul. 01, 2017
Percentage of interest on capital lease obligations	9.593%		9.593%
Total lease obligation	$ 151,598		¥ 1,010,928
Lease obligation for a loader commenced on August 1, 2015 expiring on January 1, 2017 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 2,393		¥ 15,958
Capital lease obligations, Expiration date	Jan. 01, 2017
Percentage of interest on capital lease obligations	9.525%		9.525%
Total lease obligation	$ 59,198		¥ 394,764
Lease obligation for a loader commenced on August 1, 2015 expiring on July 1, 2017 [Member]
Capital Lease Obligations (Textual)
Lease payment	$ 2,350		¥ 15,673
Capital lease obligations, Expiration date	Jul. 01, 2017
Percentage of interest on capital lease obligations	9.525%		9.525%
Total lease obligation	$ 58,141		¥ 387,714

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Taxes (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Taxes [Abstract]
Current
Domestic
Foreign	218,647	1,125,562
Deferred
Domestic
Foreign	(100,856)	(56,930)
Total provision for income taxes	$ 117,791	$ 1,068,632

XML

Taxes (Details 1) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Deferred tax assets
Startup cost	$ 200,488	$ 201,217
Property, plant and equipment	121,229	140,283
Intangible assets	(54,121)	(49,556)
Staff education	1,488	1,493
Provision for doubtful accounts	1,204,767	1,184,219
Impairment loss on long-lived assets and construction-in-progress	13,770,960	13,444,794
Net operating loss carryforward in China	354,153	284,276
Total deferred tax assets	15,598,964	15,206,726
Valuation allowance	(15,110,618)	(14,817,756)
Total deferred tax assets, net	$ 488,346	$ 388,970

XML

Taxes (Details 2) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Taxes [Abstract]
Income taxes payable	$ 1,211,015	$ 1,126,157
VAT taxes payable	264,379	223,307
Other taxes payable	153,107	148,619
Total	$ 1,628,501	$ 1,498,083

XML

Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Taxes (Textual)
China income tax rate	25.00%
Effective tax rate	(4.10%)	23.00%
Aggregate undistributed earnings	$ 0.0	$ 26.8
VAT tax exemption, description	Yulong Bricks' products are now subject to a VAT rate of 17%, with 70% of the tax being refundable. Under the same law, Yulong Renewable is required to pay VAT rate of 17% for its recycled bricks and recycled aggregates, and 11% for its hauling services. 70% of the tax on recycled bricks and hauling services, and 50% of the tax on recycled aggregates, are refundable. Yulong Concrete's products are mainly produced with cement and are eligible for a VAT at the rate of 6% of the gross sale prices under the PRC law of [2009] No. 9. Yulong Concrete's VAT rate decreased to 3% since November 2014 because under the PRC law of [2014] No. 57, concrete products that use cement as raw material are eligible for a reduced VAT rate of 3%.
Hong Kong [Member]
Taxes (Textual)
Hong Kong income tax rate	16.50%
PRC [Member]
Taxes (Textual)
China income tax rate	25.00%
Taxable revenue percentage	90.00%
PRC withholding tax percentage	10.00%
Minimum [Member]
Taxes (Textual)
VAT percentage	13.00%
Maximum [Member]
Taxes (Textual)
VAT percentage	17.00%

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Equity (Details) - $ / shares	3 Months Ended	12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Equity [Abstract]
Number of shares exercisable	112,500	112,500	112,500
Exercise price	$ 6.25	$ 6.25	$ 6.25
Stock price	$ 2.33	$ 1.71	$ 6.00
Expected term (years)	3 years 9 months	4 years	5 years
Risk-free interest rate	1.10%	0.89%	1.63%
Expected volatility	80.38%	84.83%	92.00%

XML

Equity (Details 1) - Warrant [Member]	3 Months Ended
	Sep. 30, 2016 $ / shares shares
Outstanding, beginning balance | shares
Granted | shares	112,500
Forfeited | shares
Exercised | shares
Outstanding, ending balance | shares	112,500
Weighted Average Exercise Price, Outstanding, beginning balance | $ / shares
Weighted Average Exercise Price, Granted | $ / shares	6.25
Weighted Average Exercise Price, Forfeited | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Outstanding, ending balance | $ / shares	$ 6.25
Average Remaining Contractual Life, Granted	5 years
Average Remaining Contractual Life, Outstanding, ending balance	3 years 9 months

XML

Equity (Details Textual)

3 Months Ended

12 Months Ended

Aug. 15, 2016

shares

Jul. 06, 2016

Jan. 19, 2016

$ / shares

Sep. 30, 2016

USD ($)

shares

Sep. 30, 2015

USD ($)

Shareholders

shares

Jun. 30, 2016

USD ($)

Jul. 03, 2015

USD ($)

Equity (Textual)

Variable interest entity, description

Yulong WFOE and its consolidated affiliated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds attain 50% of its registed capital.

Net assets

$ 787,146

$ 3,453,575

Gain on change in fair value of warrant

26,065

$ (348,199)

Proceeds from issuance of IPO shares, net

11,510,157

Stock-based compensation expenses

49,966

$ 0

Share price | $ / shares

$ 3.20

Statutory reserves

3,922,228

3,922,228

Consulting agreement, description

Services in conjunction with the pre-audit and consulting services for the periods ended June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017. Total service fee is $150,000 or $37,500 per quarter and will be settled in a form of stock-based payment equivalent to 58,140 shares of the Company's common stock. The shares were valued at $2.58 per share based on the average closing price of the ordinary shares on the date the service agreement was entered.

Stock-based compensation - consulting services, description

● 31,279 shares to a consultant for services pertaining to business growth and strategies for the calendar years ending December 31, 2017 and 2016; and

● 95,967 shares to a consultant for services rendered previously and for the fiscal quarter ended March 31, 2016 pertaining to financial reporting and internal control over financial reporting.

Aggregate ordinary shares issued | shares

58,140

Warrant [Member]

Equity (Textual)

Gain on change in fair value of warrant

409,775

Warrant liabilities

91,670

$ 65,605

$ 475,380

IPO [Member]

Equity (Textual)

Conversion into ordinary shares

$ 9,959,613

Conversion into ordinary shares, Shares | shares

1,593,538

Description of initial public offering

● granted a 45-days option to its underwriters to purchase up to 337,500 shares of ordinary shares, to cover over-allotments, which expired on August 15, 2015 without being exercised;

● granted warrants to purchase up to 112,500 shares of ordinary shares in the aggregate, or 5% of the ordinary shares sold in the IPO, to the representative of its underwriters and an independent financial adviser for the IPO (the “warrants”);

● granted 26,400 shares of ordinary shares in the aggregate to its CFO (20,000 shares vested concurrently with the closing of IPO) and two non-executive board members (3,200 shares each vesting quarterly from the closing of IPO) at $6.25 per share and valued at $165,000 in total; and

● converted $9,959,613 in indebtedness to five shareholders, including its founder, into 1,593,538 shares of ordinary shares.

Number of shares issued | shares

2,250,000

Proceeds from issuance of common stock

$ 14,062,500

Stock issuance cost

2,552,343

Proceeds from issuance of IPO shares, net

11,510,157

Stock-based compensation expenses

$ 0

$ 135,000

Number of shareholders | Shareholders

5

XML

(Loss) Earnings Per Share (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
(Loss) Earnings Per Share [Abstract]
Net (loss)/income	$ (2,838,776)	$ 3,580,683
Weighted average shares outstanding - basic and diluted	12,026,886	11,869,938
(Loss) earnings per share - basic and diluted	$ (0.24)	$ 0.30

XML

Commitments and Contingencies (Details)	3 Months Ended
	Sep. 30, 2016 USD ($)
Loss Contingencies [Line Items]
Guaranteed amount	$ 3,019,187
Pingdingshan Yushi Automobile Accessory Sales Co., Ltd [Member]
Loss Contingencies [Line Items]
Guaranteed amount	$ 1,204,034	[1]
Guarantee expiration date	Dec. 29, 2016	[1]
Pingdingshan Orr Business Co., Ltd [Member]
Loss Contingencies [Line Items]
Guaranteed amount	$ 1,815,153	[2]
Guarantee expiration date	Jan. 05, 2018	[2]

[1] The Company did not, however, accrue any liability in connection with such guarantee because the borrower has been current in its repayment obligations and the Company has not experienced any loss from providing such guarantees in the past. The Company has evaluated the guarantee and has concluded that the likelihood of it having to make payments under the guarantee is remote and that the fair value of the stand-ready obligation under such commitment is not material. The guarantee expired on December 29, 2016 and there was no default on this loan.

[2] According to the verdict issued on March 16, 2017, the court ruled that the borrower was required to remit the loan principal in an amount of $1,806,051 (RMB 12 million) and the litigation cost in an amount of $15,705 (RMB 104,346) in litigation costs. As the loan term being from January 5, 2015 to January 6, 2016, and the guarantee will expire on January 5, 2018, the Company has accrued a liability in connection with such guarantee.

XML

Commitments and Contingencies (Details Textual)

1 Months Ended

3 Months Ended

Mar. 16, 2017

USD ($)

Mar. 16, 2017

CNY (¥)

Nov. 29, 2016

USD ($)

Nov. 29, 2016

CNY (¥)

Oct. 18, 2016

Sep. 24, 2016

USD ($)

Sep. 24, 2016

CNY (¥)

Nov. 10, 2012

USD ($)

Nov. 10, 2012

CNY (¥)

Sep. 30, 2016

USD ($)

Sep. 30, 2016

CNY (¥)

Sep. 30, 2016

CNY (¥)

Commitments and Contingencies (Textual)

Aggregate judgment amounts

$ 3,144,215

¥ 20,967,197

Loss contingency damages paid value

$ 125,965

¥ 840,000

litigation costs

$ 3,405

¥ 22,708

Guaranteed amount

3,019,187

Unpaid amounts of other payables

108,154

¥ 721,225

Legal actions filed by individuals

759,968

5,067,845

Loss contingency judgment amount unpaid

785,278

5,236,625

Unpaid occupation of land

25,310

168,780

Bank loan of unrelated amount

3,000,000

Scenario, Forecast [Member]

Commitments and Contingencies (Textual)

litigation costs

$ 15,648

¥ 104,346

Guarantee will expires date

Jan. 05, 2018

Jan. 05, 2018

Repayment of borrowings

$ 1,799,505

¥ 12,000,000

Description of loan term

As the loan term covered the period from January 5, 2015 through January 6, 2016.

As the loan term covered the period from January 5, 2015 through January 6, 2016.

Guarantees [Member]

Commitments and Contingencies (Textual)

Legal actions filed by individuals

326,254

2,175,622

Subsequent Event [Member]

Commitments and Contingencies (Textual)

Description of illegal occupation of land settlement in court

(1) return 7,137.26 square meters of land which the Company occupied illegally; (2) dismantle the new buildings and other facilities on the 7,137.26 square meters of land which the Company occupied illegally, and restore the original appearance of the land;(3) pay a fine on the basis that illegal occupation of 5,951.4 square meters of general cultivated land at a fine of RMB 16.00 per square meter, i.e. $14,279 (RMB 95,222.40), and 1,185.86 square meters of other land fines per square meter RMB 3.00, i.e. $533 (RMB 3,557.58), resulting in a total of $14,813 (RMB 98,779.98).

Unpaid occupation of land

$ 25,310

¥ 168,780

Payment of fine

$ 10,497

¥ 70,000

Xuchang Tongli [Member]

Commitments and Contingencies (Textual)

Guaranteed amount

1,815,153

12,104,346

Unpaid amounts of other payables

418,732

2,792,317

Bank loan of unrelated amount

346,551

¥ 2,310,979

Xian Oriental Fuxing [Member]

Commitments and Contingencies (Textual)

Related to purchase commitment

$ 418,385

¥ 2,790,000

Purchase commitment contract amount paid

$ 292,420

¥ 1,950,000

XML

Segments (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Consolidated revenues	$ 2,804,030	$ 13,350,868
Gross profit:
Consolidated gross profit	911,229	5,445,761
(Loss) income from operations:
Consolidated (loss) income from operations	(2,575,944)	4,522,488
Net (loss) income :
Consolidated net (loss) income	(2,838,776)	3,580,683
Depreciation and amortization:
Consolidated depreciation and amortization	158,712	605,915
Interest expenses:
Consolidated interest expenses	196,140	268,165
Capital expenditures:
Consolidated capital expenditures		218,055
Subtotal [Member]
Revenues:
Consolidated revenues	2,804,030	13,350,868
Gross profit:
Consolidated gross profit	911,229	5,445,761
(Loss) income from operations:
Consolidated (loss) income from operations	(2,327,922)	4,960,181
Net (loss) income :
Consolidated net (loss) income	(2,564,416)	3,678,333
Yulong Bricks [Member]
Revenues:
Consolidated revenues	585,470	4,035,101
Gross profit:
Consolidated gross profit	173,779	2,249,477
(Loss) income from operations:
Consolidated (loss) income from operations	(309,784)	2,168,277
Net (loss) income :
Consolidated net (loss) income	(291,305)	1,640,745
Depreciation and amortization:
Consolidated depreciation and amortization	122,602	127,330
Interest expenses:
Consolidated interest expenses	38,574	116,397
Capital expenditures:
Consolidated capital expenditures		20,283
Yulong Concrete and Yulong Transport [Member]
Revenues:
Consolidated revenues	1,728,971	7,338,329
Gross profit:
Consolidated gross profit	400,969	1,942,171
(Loss) income from operations:
Consolidated (loss) income from operations	(131,981)	1,728,549
Net (loss) income :
Consolidated net (loss) income	(277,812)	1,222,408
Depreciation and amortization:
Consolidated depreciation and amortization	36,110	82,021
Interest expenses:
Consolidated interest expenses	151,812	108,313
Capital expenditures:
Consolidated capital expenditures		27,603
Yulong Renewable [Member]
Revenues:
Consolidated revenues	489,589	1,977,438
Gross profit:
Consolidated gross profit	336,481	1,254,113
(Loss) income from operations:
Consolidated (loss) income from operations	(1,886,157)	1,063,355
Net (loss) income :
Consolidated net (loss) income	(1,995,299)	810,960
Depreciation and amortization:
Consolidated depreciation and amortization		396,564
Interest expenses:
Consolidated interest expenses	5,754	43,455
Capital expenditures:
Consolidated capital expenditures		170,169
Yulong Eco-Materials [Member]
(Loss) income from operations:
Consolidated (loss) income from operations	(49,966)	(370,000)
Net (loss) income :
Consolidated net (loss) income	(76,031)	(21,801)
Yulong WFOE [Member]
Net (loss) income :
Consolidated net (loss) income		2,110
Yulong HK [Member]
(Loss) income from operations:
Consolidated (loss) income from operations	(198,056)	(67,693)
Net (loss) income :
Consolidated net (loss) income	$ (198,329)	$ (73,739)

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Segments (Details 1) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	$ 36,102,398	$ 36,443,101
Yulong Bricks [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	11,227,572	11,131,177
Yulong Concrete and Yulong Transport [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	3,281,371	4,416,866
Yulong Renewable [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	20,949,715	20,251,768
Interdivision assets [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	1,040	590
Yulong Eco-Materials [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Total assets	$ 642,700	$ 642,700

XML

Segments (Details Textual)	3 Months Ended
	Sep. 30, 2016 Segments
Segments (Textual)
Number of segment reporting divisions	3