UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

( X )

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

( )

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 0-31193

EASTERN ENVIRONMENT SOLUTIONS, CORP.

(Exact Name of Registrant as Specified in Its Charter)

NEVADA 16-1583162

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

HARBIN DONGDAZHI STREET 165,

HARBIN 150001

PEOPLE’S REPUBLIC OF CHINA

(Address of principal executive offices)

(011)-86-451-53948666

(Issuer's telephone number)

Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

COMMON STOCK, $.0001 PAR VALUE

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act. Yes __ No √_

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No √_

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 √_ No __

Indicate by check mark disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer Accelerated filer _ Non-accelerated filer Small reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No √_

As of March 13, 2009 the aggregate market value of the common stock held by non-affiliates was approximately $3,369,908, based upon the closing sale price on March 13, 2009 of $.58 per share.

As of March 13, 2009, there were 14,970,186 shares of common stock outstanding.

Documents incorporated by reference: NONE

PART I

FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED

In addition to historical information, this Annual Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Eastern Environment Solutions, Corp. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

ITEM 1.

BUSINESS

Our Corporate Structure

Our corporate structure is set forth below:


Eastern Environment
Solutions, Corp.
("the Company")
	↓
American Eco-Environment
Corporation
("AEEC")
	↓
Harbin Yifeng
Eco-Environment Co., Ltd.
("Yifeng")
	↓
Harbin Yifeng Zhiye
Management Co., Ltd.
("Zhiye")

Overview of Yifeng’s Business

Yifeng is an environmental engineering company which has been operating since 2003. Yifeng provides two principal services: (i) non-hazardous municipal solid waste processing and disposal services and (ii) environmental engineering consulting services (provided through its wholly-owned subsidiary, Zhiye).

Non-Hazardous Solid Waste Processing

Yifeng is one of the leading regional, private environmental engineering companies in the PRC. Yifeng currently provides its services through its only landfill site (the “Landfill”) situated in the town of Jin Jia town, approximately 30 km from Harbin, which is the capital of Heilongjiang Province. The Harbin Municipal Urban Administrative Bureau (“HMUAB”) has authorized the Landfill to accept “municipal solid waste” (“MSW”), which is a type of waste generated by residential households and businesses such as restaurants and retail establishments. The Landfill occupies 55 hectares with an anticipated total capacity of more than 7.8 million tons of MSW. The Landfill can be used to dispose of 1,200 tons of MSW per day, approximately 34% of the total MSW produced by the population of Harbin.

Solid waste management in the PRC is generally administered and financed by the municipal governments. The Environmental Protection Bureau and the Public Sanitation Bureau are responsible for the collection, treatment and disposal of waste and the Municipal Urban Construction Bureau is responsible for managing the construction of landfill sites and the disposal of waste. In order to construct a new landfill, the Municipal Urban Construction Department conducts a site feasibility study and submits the study to the Municipal Environmental Protection Bureau for approval. The municipal governments in the PRC are starting to involve the private sector in solid waste management through companies such as Yifeng.

Yifeng currently operates the Landfill under a Build-Operate-Transfer (“BOT”) contract. It is one of the first companies to work with a municipal government under this type of contract. BOT is a form of project financing, wherein a private entity receives a franchise from the public sector to finance, design, construct, and operate a facility for a specified period, after which ownership is transferred back to the public sector. During the time that the project proponent operates the facility, it is allowed to charge facility users appropriate tolls, fees, rentals, and charges stated in its contract to enable the project proponent to recover its investment plus the operating and maintenance expenses in the project.

The PRC Ministry of Construction has promulgated a Municipal Public Sector BOT Administrative Measure (the “Measure”). Under the Measure, public sector services such as water, gas and heat supply, public transportation, and waste processing can be conducted by the BOT model through open bid. HMUAB and Yifeng entered into a 17-year BOT Contract on September 1, 2003 as a result of Yifeng winning in a public bid to build and operate the Landfill in Harbin. Under the BOT Contract, HMUAB granted Yifeng a 17-year use right for the Landfill site. HMUAB is responsible for the relocation of surrounding residents and installation of necessary infrastructure. Yifeng is responsible for all the construction on, and management of,

the Landfill site. Upon the expiration of the BOT Contract, Yifeng will return the Landfill to HMUAB.

The purpose of the project is to landfill the MSW in a way that it has little or no impact on surrounding land and residents. Prior to the project, only approximately 5.7% of the total MSW was disposed of in a safe manner in Harbin. It is anticipated that this project can result in the safe disposal of an additional 34.3% of MSW.

There are three phases of the project which requires a total investment of approximately RMB 160,000,000 (approximately $21,505,376), of which Yifeng is required to provide approximately RMB 120,000,000 (approximately $16,129,032). Yifeng has already contributed RMB 70,000,000 (approximately $9,408,602) and HMUAB has contributed RMB 40,000,000 (approximately $5,376,344). Phase I of the project was completed in November 2004, which includes waste landfill areas, a waste water adjusting pool and a processing station, laboratory and other affiliated construction such as office buildings, roads, etc. Yifeng plans to continue to construct waste landfill areas in Phase II and Phase III which are expected to be completed in 2011 and 2014, respectively.

In June 2007 the HMUAB was mandated by the PRC National Environment Protection Bureau to carry out certain modifications to the development of the Landfill for the protection of local residents. The modifications involve the relocation of some of the neighboring residents, as well as the relocation of our waste water disposal plant. While the modifications are ongoing, we have suspended our operations at the Landfill, although HMUAB continues to pay us the base fee provided for in the BOT contract.

Environmental Engineering Consulting Services

Yifeng, through its wholly-owned subsidiary, Zhiye, offers environmental engineering consulting services. The services offered by Zhiye include:

environmental project investment and operation,

production site environmental protection design and construction,

non-hazardous waste disposal solutions,

air, water, soil, noise-related environmental product development, and

ecological and environmental project consulting services.

Zhiye’s consulting business generated approximately 27% of Yifeng’s total revenues for the fiscal year ended December 31, 2006. None of that business carried over into 2007, however, and we realized no revenue from Zhiye in either 2007 or 2008. Our plan is to seek new consulting business opportunities in 2009.

Technology and Processes

Yifeng believes that its technologies and landfill site design represent an improvement over traditional landfill methods. The vast majority of MSW generated in the PRC is ultimately sent to simple dump sites on the suburban outskirts of cities. These dump sites without any sanitation measures pose significant environmental hazards, particularly associated with leachate

to underground water. Until 2004, very few landfill sites in the PRC were equipped with leachate collection and treatment systems, which are required in developed countries.

The design of the Landfill incorporates features to protect groundwater and surface water, prevent soil erosion, protect against fire and provide easy access to control landfill gases and leachate. It is designed to be compatible with the surroundings both during its active life and after it is closed.

The Landfill is designed to meet international standards and comply with all relevant local PRC regulations, including the Sanitary Landfill Technical Standards of Municipal Solid Waste issued by the PRC’s National Ministry of Construction. Yifeng has installed a synthetic 2mm high-density polyethylene membrane system at the bottom of the Landfill to prevent leachate from polluting underground water. It has also installed a gas treatment and collection pipe system at the bottom of the Landfill.

The Harbin Environment Sanitation Bureau is responsible for collecting and transporting MSW to the Landfill. At the entrance of the Landfill, inspectors inspect the waste for its compatibility with the Landfill. Once the waste passes inspection, it will be weighed using a computer-based weighbridge and then unloaded into the Landfill.

With the use of a bulldozer, the waste is pushed up to a height of 50-60 cm. In order to protect the HDPE membrane from tearing, the initial layer of waste will only be compacted when it reaches 3-meters thick. It will then be compacted into a 50-60 cm layer, with a waste density of more than 0.8 ton/m³. When the waste accumulates to a height of 2.5 meters, it will be covered with clay to prevent mosquitoes and flies from proliferating, and to prevent odor and light-weight waste from accidentally flying out of the Landfill. The Landfill is also sprayed periodically and sanitized to protect the surrounding environment and control mosquitoes.

Yifeng owns the following equipment, which is utilized in the operation of the Landfill:


No.	Description	Quantity	Approximate Purchase Price (US$)
1	Bulldozer	2	134,500
2	Compaction machine	2	390,000
3	Red rock truck transportation vehicle	2	60,515
4	Hitachi excavator	1	165,000
5	Spray vehicle	1	20,625
6	Car loader	1	32,500
7	Card Ma Si transport vehicle	2	52,500
	Total		855,640

In summary, the following are the principal technologies used by Yifeng at the Landfill:

Mechanical ventilated aerobic and anaerobic landfill techniques

Leachate collection

Synthetic HDPE horizontal anti-sinking technique

Landfill gas and methane collection

Municipal solid waste compacting technique

Future Planned Services

Traditional methods of municipal waste disposal (open-air dumps) can cause underground water and air pollution and other environmental problems. Landfill gases, principally methane, contribute to the production of greenhouse gases (“GHG”). In order to control GHG emissions, it is necessary to collect and utilize the landfill gases.

Yifeng is presently developing methods to utilize these landfill gases, having already installed collection tubes in the Landfill. The Landfill presently does not produce enough methane for collection. However, in 2009 or thereafter Yifeng plans to start collecting the landfill gases and either sell them to a power company or establish a plant for power generation. By that time, the Landfill will have accumulated roughly 1-1.5 million tons of resident MSW. Yifeng plans to raise additional capital to finance the project, the availability of which cannot be assured.

Yifeng is planning to promote a “Zero-Waste-to-Landfill” plan as part of its environmental engineering services. The goal of the plan will be to efficiently recycle MSW, thus reducing waste disposal and prolonging the longevity of the Landfill site. Recycling MSW could provide Yifeng with additional revenue.

Market Analysis

Waste generation is directly related to socio-economic development, industrialization and the climate. Generally, as an economy prospers and the urban population grows, more solid waste is produced. During the last two decades, the PRC’s economy has been growing at an annual rate of almost 10%. Waste generation has similarly grown at a pace of 8-10% annually. Currently, every Chinese person produces an average of approximately 440 kg of solid waste per year. With a total population of 1.25 billion people, the PRC generates approximately 600 million tons of waste per year. The main types of waste generated in Chinese cities are:


Type of Waste	Organic	Paper	Plastic	Metal	Glass	Others
Percentages	45-55%	10-20%	5-15%	2-4%	2-4%	2-36%

(Source: World Bank 1996)

According to data from the World Bank, urban residents generate two to three times more solid waste than rural residents. With the rapid urbanization of the PRC, Yifeng’s strategy is to concentrate on larger cities and growth centers, where the need for waste management is greatest.

Landfills are the most common method of solid waste disposal in the PRC. By the end of 1995, there were over 1,000 landfill sites in large and mid-sized cities in the PRC, of which 90% were open-air dumps. By 2002, 70% of such sites remained open-air dumps. These simple open dump sites, without any proper sanitation, pose a serious environmental hazard. They generally do not have any leachate collection system, GHG emission control system, compaction or waste screening processes. There is, accordingly, a huge demand for the technology, methodology and management expertise that Yifeng offers. In 1989, the PRC Ministry of Construction developed

a comprehensive technical MSW landfill standard. This standard provides for the design and management of MSW landfills and requires that such landfills be designed to protect the environment. Our Landfill conforms to this standard.

Customers

HMUAB is Yifeng's sole customer. Under the 17-year term BOT Contract, it provides Yifeng approximately 34% of the total MSW Harbin produces for a fixed disposal fee of RMB42 (approximately $5.65) per ton.

Yifeng is responsible for collecting and processing the MSW in Harbin. HMUAB could determine that it does not meet the strict requirements for professional technology or management and revoke the BOT Contract and grant other companies the right to collect and process the MSW in Harbin. The termination of the BOT Contract or Yifeng's rights to operate would have a material adverse impact on its revenues and operations.

Insurance

Yifeng purchased automobile insurance with third party liability coverage for its vehicles. It does not have other insurance such as property insurance, business liability or disruption insurance coverage for its operations in the PRC. Further, it does not have key man insurance for its officers and executive managers. Therefore, the loss of one or more of its officers and executive managers will adversely affect its business and operations. While a lawsuit against a company such as Yifeng in the PRC would be rare, it cannot make any assurance that it will not have exposure for liability in the event of a lawsuit.

Competition

Only those companies which have been granted a special operating license issued by the national and local governments are permitted to engage in the waste business in the PRC. The national and local governments have strict requirements for professional technology and management.

Yifeng is the first privately owned enterprise engaged in MSW disposal under a BOT contract in Harbin. It disposes of approximately one third of the total MSW Harbin produces. The other MSW disposal factories are decades old. They are state owned enterprises using open-air dumps to dispose of MSW, which can cause underground water and air pollution and other environmental problems. The Landfill was completed in 2004, adopting a new sanitary waste disposal method which was in compliance with relevant environmental rules and regulations.

Yifeng believes it has the following competitive advantages over the possible new private enterprises entering into the same industry:


	Sustainable and Predictable Revenue: Because the waste disposal price was fixed under the 17-year term BOT Contract and it is now in operation and its revenue is sustainable and predictable. Yifeng may use the cash from operations for facility and technology improvements, such as the waste to energy exchange project as described under “Future Planned Services” above.



	Processing Capacity. Yifeng has completed Phase I of the Landfill project. It is continuing Phase II and Phase III of the project where affiliated facilities will be constructed. Yifeng believes its new facilities will allow it to continue the expansion of its waste disposal capacity.

	Leading Position in Market. Yifeng is the largest MSW disposal enterprise in Harbin with the current disposal capacity of one third of the total MSW Harbin produces. It is also the first privately-owned MSW non-hazardous disposal company in China. Experienced Management. Its management is familiar with PRC environmental laws and regulations. They have hands-on experience in applying and maintaining governmental licenses and permits in the waste

Government Regulations

Yifeng constructed the Landfill. Its construction is subject to the Construction Standards of Municipal Solid Waste Landfill Projects (the “Construction Standards”) promulgated by the PRC Ministry of Construction. It completed the landfill project construction in November 2004. The construction was inspected by a third party construction monitoring entity and met the Construction Standards. The landfill disposal it conducts is subject to a variety of rules and regulations promulgated by the PRC National Ministry of Construction and other environmental bureaus, including Technical Standards of Municipal Solid Waste, Waste Water Comprehensive Output Standards, Underground Water Quality Standard and Control Standards on Municipal Solid Waste Landfill. It is also subject to business license and approval regulations that are required for all corporations in the PRC.

Employees

The Company currently has 53 employees: 45 associated with Yifeng and 8 with its subsidiary, Zhiye. All of the Company’s employees are engaged full-time. The Company believes that its relations with its employees are good.

ITEM 1A RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information contained in this Report, including the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following risks occurs, our business, financial condition or operating results could materially suffer. In that event, the trading price of our common stock could decline and you may lose all or part of your investment.

We rely on one relationship for all of our current revenues.

All of our revenues in 2007 and 2008 have arisen from our relationship with the Government of Harbin, specifically from one landfill operation. We intend that in the future we

will expand our operations to develop other revenue-producing relationships, but we have no immediate prospects for such plan. If our relationship with the City of Harbin becomes disrupted for any reason before we develop other sources of revenue, we will have no source of revenue, and our business would fail.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled engineers, technical and marketing personnel. Qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.

We may have difficulty establishing adequate management and financial controls in China and in complying with U.S. corporate governance and accounting requirements.

The People’s Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because all of our current revenues and most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to fund our business ac tivities outside China or to pay dividends to our shareholders.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of our resources.

Environmental compliance and remediation could result in substantially increased capital requirements and operating costs.

Our operating subsidiary, Yifeng, is subject to numerous Chinese provincial and local laws and regulations relating to the protection of the environment. These laws continue to evolve and are becoming increasingly stringent. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Our consolidated business and operating results could be materially and adversely affected if Yifeng were required to increase expenditures to comply with any new environmental regulations affecting its operations.

We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock.

We will require additional financing to fund future operations and to expand into new markets. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.

We do not intend to pay any cash dividends on our common stock in the foreseeable future and, therefore, any return on your investment in our common stock must come from increases in the fair market value and trading price of our common stock.

We have never paid a cash dividend on our common stock. We do not intend to pay cash dividends on our common stock in the foreseeable future and, therefore, any return on your investment in our common stock must come from increases in the fair market value and trading price of our common stock.

All of our assets are located in China and changes in the political and economic policies of the PRC government could have a significant impact upon what business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Our bank deposits are not insured.

There is no insurance program in the PRC that protects bank deposits, in the way that bank deposits in the U.S. are given limited protection by the FDIC. If the bank in which we maintain our cash assets were to fail, it is likely that we would lose most or all of our deposits.

Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.

Our principal operating subsidiary, Yifeng, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations. Unlike the common law system prevalent in the United States, decided legal cases have little value as precedent in China. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. The Chinese government has been developing a comprehensive system of commercial laws. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation.

The scope of our business license in China is limited, and we may not expand or continue our business without government approval and renewal, respectively.

Our principal operating subsidiary, Yifeng, is a wholly foreign-owned enterprise organized under PRC law, commonly known as a WFOE. A WFOE can only conduct business within its approved business scope, which ultimately appears on its business license. In order for us to expand our business beyond the scope of our license, we will be required to enter into a negotiation with the authorities for the approval to expand the scope of our business. We cannot assure you that Yifeng will be able to obtain the necessary government approval for any change or expansion of our business scope.

We rely principally on dividends and other distributions on equity paid by our operating subsidiary to fund our cash and financing requirements, but such dividends and other distributions are subject to restrictions under PRC law. Limitations on the ability of our operating subsidiary to pay dividends or other distributions to us could have a material adverse effect on our ability to grow, make investments or acquisitions, pay dividends to you, and otherwise fund and conduct our business.

We are a holding company and conduct substantially all of our business through our operating subsidiary, Yifeng, which is a limited liability company established in China. We rely on dividends paid by Yifeng for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our

operating expenses. The payment of dividends by entities organized in China is subject to Yifeng to us only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. Yifeng is also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. In addition, Yifeng is required to allocate a portion of its after-tax profit to its enterprise expansion fund and the staff welfare and bonus fund at the discretion of its board of directors. Moreover, if Yifeng incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Any limitations on the ability of Yifeng to pay dividends or other distributions to us could have a material adverse effect on our ability to grow, make investments or acquisitions, pay dividends to you, and otherwise fund or conduct our business.

Our business development, future performance, strategic plans, and other objectives would be hindered if we lost the services of our Chairman.

Yun Wang is the Chief Executive Officer of Eastern Environment and of our operating subsidiary, Yifeng. Mr. Wang is responsible for strategizing not only our business plan but also the means of financing it. If Mr. Wang were to leave Eastern Environment or become unable to fulfill his responsibilities, our business would be imperiled. At the very least, there would be a delay in the development of Eastern Environment until a suitable replacement for Mr. Wang could be retained.

IITEM 1B UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2.

DESCRIPTION OF PROPERTY

All land in the PRC is owned by the government and cannot be sold to any individual or entity. Instead, the government allocates to landholders a temporary “land use right.” Yifeng has been allocated the land use rights for the Landfill. Set forth below is the detailed information regarding the land:

Allocation Authority

Location

Area (Square Meters)

Construction on the Land

Audited Value

Term of Use Right

Harbin Municipal Urban Administrative Bureau

(“HMUAB”)

Northern Part to Jin Jia Town, Xiangyang County, City of Harbin

550,000

Office and Staff Buildings (6,000 Sq. M.)

RMB 14,270,928 (approximately US$1,918,015)

17 years from September 1, 2003

HMUAB allocated the land use rights to the Landfill to Yifeng for no consideration as part of the BOT Contract. The land use rights are limited: it must be used as a landfill and Yifeng cannot encumber it. Pursuant to the BOT Contract, Yifeng has the right to use the offices and staff buildings Yifeng built on the Landfill for 17 years from September 1, 2003, the same term as Yifeng is entitled to the use rights to the Landfill itself.

Yifeng’s subsidiary, Zhiye, leases its office space (200 square meters) for an annual rent of RMB 260,000 (approximately US$34,946) from Harbin Yifeng Group Joint Stock Co., Ltd., a company of which Mr. Yun Wang, Yifeng's Chairman, owns 22.78%. The lease is on a year to year basis. The rental charge is believed to be equal to the market rate for similar property in Harbin.

ITEM 3.

LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Information

On December 27, 2006 the Company effected a 1-for-165.1099 reverse split of its common stock. All references in this report to numbers of shares or market prices of shares have been adjusted to reflect the reverse split.

Our common stock is listed for quotation on the OTC Bulletin Board system under the symbol “EESC.” The following table sets forth for the respective periods indicated the prices of the common stock, as reported by the OTC Bulletin Board. Such prices are based on inter-dealer

bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.


	Bid
Quarter Ending	High	Low
March 31, 2007	$ 5.00	$ 1.40
June 30, 2007	$ 4.00	$ 1.01
September 30, 2007	$ 1.65	$ .30
December 31, 2007	$ 2.50	$ .60

March 31, 2008	$ 1.95	$ .65
June 30, 2008	$ 1.15	$ .41
September 30, 2008	$ 1.00	$ .68
December 31, 2008	$ .72	$ .20

(b) Shareholders

On March 10, 2009 there were approximately 259 holders of record of our common stock.

(c) Dividends

Since the Company’s incorporation, no dividends have been paid on our Common Stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

The information set forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of December 31, 2008.


	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders.......	0	N.A.	0
Equity compensation plans not approved by security holders......	0	N.A.	0
Total..............	0	N.A.	0

(e) Sale of Unregistered Securities

Eastern Environment did not effect any unregistered sales of equity securities during the 4^th quarter of 2008.

(f) Repurchase of Equity Securities

Eastern Environment did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the 4^th quarter of 2008.

ITEM 6.

SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Results of Operations

The growth of our business was delayed in June 2007, when the Harbin Municipal Urban Administrative Bureau (“HMUAB”), which is our only customer, was mandated by the PRC National Environment Protection Bureau to carry out certain modifications to the development of its landfill for the protection of local residents. The modifications involve the relocation of some of the neighboring residents, as well as the relocation of our wastewater disposal plant. The cost of the modifications is being born entirely by the HMUAB. Nevertheless, while the modifications are ongoing, we have suspended our operations at the Landfill, which are currently our only source of revenue. We expect to recommence operations at the Landfill in the near future, although the date will depend on the efficiency with which HMUAB completes the modifications.

In accordance with the terms of our contract, the HMUAB is required to pay us, during the period of suspended operations, a sum equivalent to the fee for processing 800 tons of waste per day, which is approximately 66% of the Landfill’s capacity. As a result, our revenue from waste processing during 2008 fell by 11% from $1,996,078 in 2007 to $1,770,054. We expect that as soon as we recommence operations at the Landfill, we will return to our earlier revenue level for waste processing operations, which yielded $2,347,395 in 2006, the last full year of Landfill operations. From that baseline, we will endeavor to expand our waste processing operations by (a) pursuing strategic acquisitions, (b) developing additional landfills, and (c) implementing recycling technologies that will provide additional revenue sources, such as the sale of methane to the electric power industry. Given the overwhelming growth of Ch ina’s cities, we expect there to be plentiful market opportunities.

Although our revenues in 2008 were achieved without any production on our part, we still realized $307,874 in cost of goods sold. These costs are attributable to the fact that we have retained our core employees on salary, even as we had no revenue producing work for them to perform. Management determined that eliminating the Company’s employee base during the landfill suspension would make it very difficult to revive that operation when the suspension ends.

Our selling, general and administrative expenses increased by 35% from 2007 ($396,162) to 2008 ($535,808). The increase is entirely attributable to the expensing of stock compensation

that we gave to employees and consultants as incentives for future services. At December 31, 2008 there remained $1,881,069 in deferred stock compensation expense on our books, which will be amortized as expenses over the expected terms of service of the employees and consultants who received the shares.

The Company’s revenue less expenses produced a pre-tax income from continuing operations of $938,935 during 2008, compared to a pre-tax income from continuing operations of $1,415,285 during 2007. As a result of Chinese tax laws that reward foreign investment in China, Yifeng is entitled to exemption from income taxes during 2007 and 2008, followed by a 50% abatement of taxes from 2009 to 2011. Our net income for 2008, therefore, was identical to our pre-tax income, representing $0.07 per share. In 2007 we realized net income from continuing operations that equaled $0.13 per share.

Our business operates entirely in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments. While our net income is added to the retained earnings on our balance sheet; the translation adjustments are added to a line item on our balance sheet labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During 2008, the effect of converting our financial results to Dollars was to add $842,549 to our accumulated other comprehensive income.

Liquidity and Capital Resources

To date, we have financed our operation and met capital expenditure requirements primarily through bank loans and operating income. On November 18, 2004, the Company received a long-term loan from Industrial and Commercial Bank of China, Harbin Branch in the amount of $4,832,960, secured by the Company’s building. The loan is for a 5-year term, maturing November 15, 2009. Pursuant to the loan agreement, the interest rate for the first year was set at 7.605%. Starting from the second year and thereafter, the rates become adjustable based on the change of the official rates at the time. In addition to paying the quarterly interest, the Company is also required to make $241,648 pre-determined principal repayments every quarter. When our operations at the Landfill were suspended, the Bank agreed to reduce our debt service requirements, with the result that in 2008, we made principal payments of only $96,659. That abatement will end when we recommence operations at the Landfill. The entire amount of the loan is due to be paid on November 15, 2009.

Our working capital at December 31, 2008 totaled $1,773,342, an increase of $255,789 from our working capital at December 31, 2007. The increase in working capital lagged our net income for the year, as we applied $646,535 of net income to our ongoing construction efforts at the Harbin landfill. The largest component of the increase in our working capital consisted of $1,671,389 in additional accounts receivable. The increase results from the fact that we are dependent on one source of revenue – compensation payments made by the HMUAB to offset our loss of revenue during the suspension of Landfill operations. While the landfill is closed, HMUAB has made few payments. During 2008, HMUAB paid only $188,752. Nevertheless we do not consider the receivable to be at risk, and have made no provision for doubtful accounts.

After property and equipment – primarily our investment in the Landfill – our largest asset category at December 31, 2008 was “advances to suppliers,” totaling $3,824,984, an increase of $314,378 since December 31, 2007. These amounts primarily represent payments to contractors for work on Phase I and Phase II of the Landfill. The asset will be reclassified as “property and equipment” when the related construction projects are completed.

Our operating subsidiary, Yifeng, has sufficient liquidity to fund its near-term operations and to fund the working capital demands of a modest expansion of its operations. In order to complete Phase II and Phase III of the Landfill project within the next six years, it will be necessary that we obtain additional debt or equity financing. In addition, if we are to achieve critical mass in our industry by developing new landfills, we will require substantial infusions of capital. We do not know at this time whether we will be able to secure such financing, or on what terms it might be available.

Based upon the financial resources available to Yifeng, management believes that it has sufficient capital and liquidity to sustain operations for at least the next twelve months.

Critical Accounting Policies and Estimates

In preparing our financial statements we are required to formulate working policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for 2008, there were no estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results.

We made no material changes to our critical accounting policies in connection with the preparation of financial statements for 2007.

Impact of Accounting Pronouncements

There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2008 and 2007

Consolidated Statements of Income for the Years Ended

December 31, 2008 and 2007

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended

December 31, 2008 and 2007

Consolidated Statements of Cash Flows for the Years Ended

December 31, 2008 and 2007

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Eastern Environment Solutions, Corp.

We have audited the accompanying consolidated balance sheets of Eastern Environment Solutions, Corp. as of December 31, 2008 and 2007 and the related consolidated statements of income and other comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2008. Eastern Environment Solutions, Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and sig nificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eastern Environment Solutions, Corp. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/ Bagell Josephs, Levine & Company, LLC

Bagell Josephs, Levine & Company, LLC

Marlton, New Jersey

February 25, 2009


EASTERN ENVIRONMENT SOLUTIONS CORPORATION
CONSOLIDATED BALANCE SHEETS

	AS OF DECEMBER 31,
	2008	2007
ASSETS
Current assets:
Cash and cash equivalents	$ 1,112,487	$ 2,105,255
Accounts receivable	2,518,920	847,531
Inventory	81,203	7,325
Other receivables	183,996	18,961
Loan to related party	243,662	32,969
Total Current Assets	4,140,268	3,012,041

Property and equipment, net of
accumulated depreciation of
$1,066,957 and $768,270, respectively	6,276,030	5,708,388

Other asset:
Advance to suppliers	3,824,984	3,510,606
Total Other Asset	3,824,984	3,510,606

Total Assets	$ 14,241,282	$ 12,231,035

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Loan payable - current portion	$ 2,271,492	$ 1,401,559
Accounts payable	887	21,392
Taxes payable	108	143
Accrued expenses and other payables	94,439	71,394
Total Current Liabilities	2,366,926	1,494,488

Long-term liabilities:
Loan payable - net of current portion	-	966,592
Total Liabilities	2,366,926	2,461,080

Commitments and Contingencies

Stockholders' Equity
Common stock, $0.0001 par value,
100,000,000 shares authorized;
14,970,186 and 12,020,186 shares issued
and outstanding as of December 31, 2008
and December 31, 2007	1,497	1,202
Additional paid-in-capital	3,453,415	3,130,793
Accumulated other comprehensive income	2,000,096	1,157,547
Statutory reserves	186,156	186,156
Retained earnings - Unappropriated	6,233,192	5,294,257
Total Stockholders' Equity	11,874,356	9,769,955

Total Liabilities and Stockholders' Equity	$ 14,241,282	$ 12,231,035

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


EASTERN ENVIRONMENT SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

	FOR THE YEARS ENDED
	DECEMBER 31,

	2008	2007

Revenues	$ 1,770,054	$ 1,996,078

Cost of Goods Sold	307,874	316,700

Gross Profit	1,462,180	1,679,378

Selling, general and administrative	535,808	396,162

Income from operations	926,372	1,283,216

Other Income
Interest income	12,563	6,178
Other income	-	125,890
Total other income	12,563	132,068

Income from operations before income taxes	938,935	1,415,285

Income Taxes	-	-

Net Income from continuing operations	938,935	1,415,285

Discontinued operations:
(Loss) from discontinued operations	-	(61,900)
Gain on disposal	-	259,333
Net income (loss) from discontinued operations	-	197,433

Net Income	938,935	1,612,718

Other Comprehensive Income -
Foreign currently translation gain	842,549	672,289

Comprehensive Income	$ 1,781,484	$ 2,285,007


Basic & Diluted Income (Loss) Per Share
Continuing Operations	$ 0.07	$ 0.13
Discontinued Operations	$ -	$ (0.01)

Weighted Average Number
of Common Shares Outstanding	14,002,973	10,687,874

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


EASTERN ENVIRONMENT SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

				Accumulated Other
	Common Stock		Additional	Comprehensive	Statutory	Retained	Comprehensive
	Shares	Par Value	Paid in Capital	Income	Reserves	Earnings	Income	Total

Balance December 31, 2006	9,370,186	$ 937	$ 3,000,044	$ 485,258	$186,156	$ 3,681,539		$ 7,353,934

Stock issued for consulting services	650,000	65	19,435					19,500
Stock issued for employee-based compensation	2,000,000	200	987,800					988,000
Unearned stock compensation			(876,486)					(876,486)
Comprehensive income
Net income for the year						1,612,718	1,612,718	1,612,718
Other comprehensive income, net of tax
Foreign currency translation adjustments				672,289			672,289	672,289
Comprehensive income							2,285,007

Balance December 31, 2007	12,020,186	$ 1,202	$ 3,130,793	$ 1,157,547	$186,156	$ 5,294,257		$ 9,769,955

Stock issued for employee-based compensation	2,950,000	295	1,327,205					1,327,500
Unearned stock compensation			(1,004,583)					(1,004,583)
Comprehensive income
Net income for the year						938,935	938,935	938,935
Other comprehensive income, net of tax
Foreign currency translation adjustments				842,549			842,549	842,549
Comprehensive income							1,781,484

Balance December 31, 2008	14,970,186	$ 1,497	$ 3,453,415	$ 2,000,096	$186,156	$ 6,233,192		$ 11,874,356

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


EASTERN ENVIRONMENT SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

	FOR THE YEARS ENDED DECEMBER 31,
	2008	2007
Cash Flows From Operating Activities:
Continuing Operations:
Net income from continuing operations	$ 938,935	1,415,285
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization	241,104	265,324
Amortization of stock compensation	321,201	111,514
Amortization of consulting expenses	-	19,500
Changes in operating assets and liabilities:
Accounts receivable	(1,671,389)	(404,883)
Inventory	(73,877)	4,523
Other receivables	(165,035)	(13,570)
Advances to suppliers	(314,378)	(297,790)
Accounts payable	(20,506)	(63,382)
Taxes payable	(34)	(43,541)
Accrued expenses and other payables	23,044	37,767
Net Cash provided by (used in) continuing activities	(720,936)	1,030,746

Discontinued operations:
Net income from discontinued operations	-	197,433
Adjustments to reconcile net cash
(used in) discontinued operations	-	(218,229)
Net cash (used in) discontinued operations	-	(20,796)
Net cash provided by (used in) operating activities	(720,936)	1,009,950

Cash Flows From Investing Activities:
Purchase of property and equipment	(494)	(146,789)
(Additions) to construction in progress	(646,535)	(641,002)
Collections (payments) on loan to related parties	(210,693)	653,063
Cash provided by (used in) investing activities	(857,722)	(134,728)
Cash provided by discontinued activities	-	26,842
Net cash (used in) investing activities	(857,722)	(107,886)

Cash Flows From Financing Activities
Reduction in bank loan payable	(96,659)	(531,626)
Cash (used in) financing activities	(96,659)	(531,626)
Cash (used in) discontinuing activities	-	(6,046)
Net cash (used in) financing activities	(96,659)	(537,672)

Effect of exchange rate changes on cash and cash equivalents	682,549	510,798

Increase (Decrease) in cash and cash equivalents	(992,768)	875,191

Cash and Cash Equivalents - Beginning of year	2,105,255	1,230,064

Cash and Cash Equivalents - End of year	$ 1,112,487	$ 2,105,255

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


EASTERN ENVIRONMENT SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

SUPPLEMENTAL CASH FLOW INFORMATION:
During the years, cash was paid for the following:
Interest expense	$ 213,066	$ 255,674
Income taxes	$ -	$ -

Non-Cash Investing and Financing Activities:
Common stock issued for incentive employee compensation	$ 1,327,500	$ 988,000
Common stock issued for consulting services	$ -	$ 19,500

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

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1. BASIS OF PRESENTATION AND ORGANIZATION

Eastern Environment Solutions, Corp. (“the Company” or “EESC”) was incorporated under the laws of the State of Nevada and formerly known as USIP.COM, Inc. (“USIP”).

On September 6, 2006, USIP entered into a share purchase agreement with each of Messrs. Yun Wang, Shibin Jiang and Bin Feng (“Purchasers”). Pursuant to the share purchase agreement, the Company agreed to sell to Purchasers 50.1% of the Company’s total 49, 643,222 shares of issued and outstanding common stock.

On the same day, the Company also signed a Share Exchange Agreement with American Eco-Environment Corporation (“AEEC”), a privately held Delaware holding Corporation, whereby, the Company agreed to acquire all of the outstanding capital stocks of AEEC by issuing a $5,000,000 face value fixed convertible notes to the shareholders of AEEC, namely, Yun Wang, Shibin Jiang and Bin Feng. The notes converted on December 27, 2006 upon the occurrence of the Reverse Split into 9,049,399 post-split shares of common stock of the Company. The Notes also carried a total of 1,494,144,955 votes and had a right to vote along with the common stock on all matters.

As a result of these transactions, there was a change in control of USIP as the shareholders of AEEC became the majority shareholders of USIP.

For accounting purposes, the transaction has been accounted for as a reverse acquisition under the purchase method of accounting. Accordingly, AEEC was treated as the continuing entity for accounting purposes. Following the merger, the officers and directors of USIP.COM resigned and were replaced with the officers and directors of AEEC.

On October 20, 2006, the Board of Directors of the Company approved to change the name of the Company to Eastern Environment Solutions Corporation and to effect a 165.1099:1 reverse stock split of the outstanding shares of Common Stock (the “Reverse Split” and, together with the Name Change, the “Corporate Actions”). The Definitive Information Statement was filed with the SEC on November 15, 2006. The Corporate Actions became effective on December 27, 2006.

The Company operates its business through its wholly-owned subsidiary Harbin Yifeng Eco-Environment Co., Ltd. (“Harbin Yifeng”), a corporation organized and existing under the laws of the People’s Republic of China (“PRC”). Harbin Yifeng is an environmental engineering company in the PRC that specializes in providing non-hazardous municipal solid waste processing and disposal services in the northeast regions of China.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1. BASIS OF PRESENTATION AND ORGANIZATION (Continued)

The accompanying consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets and the valuation of inventories. Actual results could differ from those estimates.

Principles of consolidation

The consolidated financial statements for the years ended December 31, 2008 and 2007 include the accounts of the Company, AEEC and its wholly owned subsidiary, Harbin Yifeng and Harbin Yifeng’s wholly owned subsidiary, Harbin Yifeng Zhiye Management Co., Ltd. (“Yifeng Zhiye”) as well as discontinued operations of Datone Inc. and NB Telecom, Inc. All significant inter-company balances and transactions are eliminated in consolidation.

Cash and cash equivalents

For purposes of the statement of cash flow, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivables

Accounts receivables are stated at net realizable value. Any allowance for doubtful accounts is established based on the management’s assessment of the recoverability of accounts and other receivables. A considerate amount of judgment is required in assessing the realization of these receivables, including the current credit worthiness of each customer and the related aging analysis. The Company’s receivables are primarily due from municipal government of Harbin City and are considered fully collectible. Therefore, no allowance for doubtful accounts was deemed necessary for the years ended December 31, 2008 and 2007.

Inventory

Inventories mainly consist of the raw materials and supplies to be used in the regular day-to-day operations. Inventories are valued at the lower of cost or market with cost determined on a first-in first-out basis.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of 5-10 years.

Advance to suppliers

Advance to suppliers represent the payments made and recorded in advance for goods and services. Advances were also made for the purchase of the materials and equipments of the Company’s construction in progress. The final phase of the construction is not completed. As such, no amortization was made for the years ended December 31, 2008 and 2007.

Revenue recognition

The Company’s revenue policies are in compliance with Staff Accounting Bulletin (“SAB”) 104. Revenue is recognized when service is provided and payments of the customers and collection are reasonably assured. Payments received in advance but not yet earned are recorded as deferred revenue.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income taxes

The Company accounts for income tax under the provisions of SFAS No.109 "Accounting for Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company does not have any long-term deferred tax assets or liabilities in China that will exist once the tax holiday expires (See Note 9). The Company does not have any significant deferred tax asset or liabilities that relate to tax jurisdictions not covered by the tax holiday.

Concentrations of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its clients' financial condition and customer payment practices to minimize collection risk on accounts receivable.

The primary operations of the Company are now located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange.

The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segment Reporting

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), "Disclosure About Segments of an Enterprise and Related Information" requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

SFAS 131 has no effect on the Company's financial statements as substantially all of the Company's operations are conducted in one industry segment. The Company consists of one reportable business segment. All of the Company's assets are located in The People's Republic of China.

Fair value of financial instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses, taxes payable, notes payable and other loans payable approximate fair value due to the short-term nature of these items. The carrying amounts of bank borrowings approximate the fair value based on the Company's expected borrowing rate for debt with similar remaining maturities and comparable risk.

Foreign currency translation

The functional currency for the Company’s operations in China is the Renminbi (“RMB”). Foreign currency transactions are translated at the applicable rates of exchange in effect at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. Revenues and expenses are translated at the average exchange rates in effect during the reporting period.

Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated Other Comprehensive Income". Gains and losses resulting from foreign currency translations are included in Accumulated Other Comprehensive Income.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-based compensation

The Company records stock based compensation expense pursuant to Financial Accounting Standards Board Statement of Financial Accounting Standards (“SFAS”) No 123R, “Share-based Payments”, which establishes the accounting for employee stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). Deferred stock compensation represents shares issued to employees that will be vested over a certain service period. Deferred stock compensation is included in additional paid-in capital as an offset to equity.

The Company measures compensation expense for its non-employee stock-based compensation under the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

Earnings per share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no common stock equivalents available for dilution purposes as of December 31, 2008 and 2007.

New accounting pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for us beginning January 1, 2009. The adoption of this SFAS No. 141R did not have a material effect on the Company’s financial position.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for us beginning January 1, 2009. The adoption of this SFAS No. 160 did not have a material effect on the Company’s financial position.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities - An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. SFAS 161 is effective on January 1, 2009. The adoption of this SFAS No. 161 did not have a material effect on the Company’s financial pos ition.

In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142, “Goodwill and Other Intangible Assets.” FSP 142-3 also requires expanded disclosure regarding the determination of intangible asset useful lives. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. Earlier adoption is not permitted. We do not believe the adoption of FSP 142-3 will have a material impact on our consolidated financial statements.

In May 2008, FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS No. 162), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. FASB is responsible for identifying the sources of accounting principles and providing entities with a framework for selecting the principles used in the preparation of financial statements. The Company has reviewed SFAS No. 162 and has assessed that there will be no significant impact to the financial statements.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

In June 2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue 03-6, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early applica tion is not permitted. Management is currently evaluating the impact FSP EITF 03-6-1 will have on the Company’s EPS calculations.

In February 2008, the FASB issued Staff Position No. 157-2 (FSP 157-2), which delays the effective date of FAS 157 one year for all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed at fair value in the financial statements on a recurring basis. FSP 157-2 is effective for us beginning January 1, 2009. We do not believe the adoption of FSP 157-2 will have a material impact on our consolidated financial statements.

On October 10, 2008, the FASB issued FSP No. 157-3. FSP No. 157-3 clarifies the application of SFAS No. 157 in a market that is not active. FSP No. 157-3 addresses how management should consider measuring fair value when relevant observable data does not exist. FSP No. 157-3 also provides guidance on how observable market information in a market that is not active should be considered when measuring fair value, as well as how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. FSP No. 157-3 was effective upon issuance, including prior periods for which financial statement have not been issued. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate (FASB Statement No. 154, “Accounting Ch anges and Error Corrections,” (SFAS No. 154) paragraph 19). The disclosure provisions of SFAS No. 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. The Company has reviewed the statement and has assessed that there will be no significant impact to the financial statements.

On December 30, 2008, FASB issued FSP No. 132R-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP No. 132R-1). FSP No. 132R-1 directs companies to provide additional disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures are to provide users of financial statements with an understanding of: (1) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies, (2) major categories of plan assets, (3) inputs and valuation techniques used to measure the fair value of plan assets, (4) effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period, and (5) significant concentrations of risk within plan assets. FSP No. 132R-1 is effective for the fiscal years ending after December 15, 2009, which will be for the fiscal year ending December 31, 2009, for the Company. The Company is currently assessing the impact of FSP No. 132R-1 on its disclosures.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment at December 31, 2008 and December 31, 2007 consist of the following:


	December 31, 2008	December 31, 2007
Machinery & Equipment	$ 877,375	$ 820,278
Vehicles	383,280	358,326
Landfills	2,128,203	1,990,459
Subtotal	3,388,858	3,169,063
Less: Accumulated Depreciation	(1,066,957)	(768,270)
Construction in progress	3,954,129	3,307,595

Total Property and equipment, net	$ 6,276,030	$ 5,708,388

Depreciation expense for the year ended December 31, 2008 and 2007 was $241,104 and $265,324, respectively.

Construction in progress represents direct costs of construction or acquisition and design fees incurred for the Company’s new operating site and equipments. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for its intended use. Interest expense in the amount of $281,502 and $255,674 was capitalized for the years ended December 31, 2008 and 2007.

NOTE 4. INVENTORY

Inventory as of December 31, 2008 and December 31, 2007 consists of the following:


	December 31, 2008	December 31, 2007
Materials	$ 11,068	$ 7,009
Supplies	70,135	316

Total	$ 81,203	$ 7,325

No allowance for inventory was made for the years ended December 31, 2008 and 2007.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 5. OTHER RECEIVABLES

As of December 31, 2008 and 2007, the balance of other receivables consists the following:


	December 31, 2008	December 31, 2007
Harbin Jiayi Import and Export Co., Ltd	$ 183,217	$ -
Others	779	18,961

Total	$ 183,996	$ 18,961

The balance with Harbin Jiayi Import and Export Co., Ltd. represents a third-party loan from the Company. The loan is unsecured and bears 0.36% annual interest and expires on June 30, 2009.

NOTE 6. RELATED PARTY TRANSACTIONS

As of December 31, 2008 and 2007, the balance of loan to related parties consists the following:


	December 31, 2008	December 31, 2007
Loan to Related Party
Shibin Jiang	$ 9,144	$ 4,440
Yun Wang	-	28,530
Harbin Binjiang Freight Co.,Ltd	234,518	-

Total Loan to related party	$ 243,662	$ 32,969

Mr. Shibin Jiang and Mr. Yun Wang are both shareholders of the Company. The loans to shareholders are unsecured and interest free. The management of the Company expects the entire amount of this outstanding loan to shareholder will be repaid within one year. Harbin Binjiang freight Co., Ltd is an affiliated company partially owned by Mr. Yun Wang. The loan is also unsecured and bears 6.12% annual interest rate and expires on March 16, 2009.

NOTE 7. MAJOR CUSTOMER

The Company has an exclusive 17-year agreement with Harbin Municipal Urban Administrative Bureau (“HMUAB”) to handle approximately one-third of the city’s solid waste disposal. The revenue from HMUAB alone accounted for 100% of the gross revenues for the year ended December 31, 2008 and 2007. At December 31, 2008 and 2007, the entire balance of accounts receivable was due from HMUAB.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 8. BANK LOAN PAYABLE

On November 18, 2004, the Company received a long-term loan from Industrial and Commercial Bank of China, Harbin Branch in the amount of $4,832,960, secured by the Company’s building. The loan is for a 5-year term, maturing November 15, 2009. Pursuant to the loan agreement, the interest rate for the first year was set at 7.605%. Starting from the second year and thereafter, the rates become adjustable based on the change of the official rates at the time. In addition to paying the quarterly interest, the Company is also required to make $241,648 pre-determined principal repayments every quarter.

Upon the suspension of the Company’s landfill operation as discussed in the following Note 11, the Company renegotiated with the Bank for a temporarily reduced quarterly principle repayments in the amount of RMB 200,000 each quarter, starting in the third quarter of 2007.

Once the Company resumes the landfill operation, it will be required to make the regular quarterly repayments as agreed. For the year ended December 31, 2008, principal payments in the amount of $96,659 were made.

As of December 31, 2008 and December 31, 2007, the loan payable consists of the following:


	December 31, 2008	December 31, 2007
Loan payable	$ 2,271,492	$ 2,368,151
Less: current portion	2,271,492	1,401,559

Loan payable - non-current portion	$ -	$ 966,592

NOTE 9. INCOME TAXES

United States Tax

EESC is subject to United States of America tax law. No provision for income taxes in the United States or elsewhere has been made as EESC had no taxable income subject to U.S. taxes for the years ended December 31, 2008 and 2007.

PRC Tax

Two of the Company’s operating subsidiaries, Harbin Yifeng and Yifeng Zhiye are both registered and operate in Harbin, China. They are governed by the Income Tax Law of the People’s Republic of China concerning the private-run enterprises, which are normally subject to tax at a statutory rate of 25% and were, until January 2008, subject to tax at a statutory rate of 33% (30% state income tax plus 3% local income tax) on its taxable income.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 9. INCOME TAXES (Continued)

Upon the acquisition of Harbin Yifeng by AEEC, Harbin Yifeng has applied to be treated as a Wholly Foreign Owned Enterprise (“WFOE”). In accordance with the relevant income tax laws, the profits of WFOEs are fully exempted from income tax for two years, from the first profit making calendar year of operations after offset of accumulated taxable losses, followed by a 50% income tax reduction for the immediate next three calendar years (“tax holiday”).

Harbin Yifeng was granted the status of WFOE in the fourth quarter of 2006 upon the reserve merger with USIP with a choice of starting the tax holiday immediately or the next calendar year. Harbin Yifeng elected for this tax holiday to commence in January 2007. Its two-year tax exemption period will be from January 1, 2007 to December 31, 2008 and the three-year income tax reduction period will be from January 1, 2009 to December 31, 2011.

On the other hand, Yifeng Zhiye, Harbin Yifeng’s wholly-owned subsidiary, is exempted from both income tax and value-added tax for three years starting August 2004 because Zhiye hires retired veterans and the government grants tax incentives for such employers.

On March 16, 2007, National People's Congress passed a new corporate income tax law (the “New CIT Law”), which became effective on January 1, 2008. This new corporate income tax unifies the corporate income tax rate, cost deductions and tax incentive policies for both domestic and foreign-invested enterprises in China. Under the new CIT law, the corporate income tax rate applicable to all Companies will be 25%, replacing the current applicable tax rate of 33%. However, companies previously being approved for any income holiday will not be subject to the new enacted tax rate until the holiday runs out. Accordingly, the applicable corporate income tax rate of our Chinese subsidiaries will incrementally decrease to 12.5% (50% of new applicable rate of 25%) for the three-year income tax reduction period.

NOTE 10. STOCKHOLDERS' EQUITY

On January 10, 2007, the Company issued 650,000 shares of its common stock for consulting services provided to the Company for $19,500, representing the fair value of the shares at the date of grant.

In the second and third quarter of 2007, the Company issued a total of 2,000,000 shares of its common stock as full compensation to 22 employees. An amount of $988,000 represents the aggregate fair value of the shares.

In the second quarter of 2008, the Company issued a total of 2,950,000 shares of its common stock as full compensation to consultants and 8 employees. An amount of $1,327,500 represents the aggregate fair value of the shares.

As of December 31, 2008 and 2007, the Company has 14,970,186 shares and 12,120,186 shares of common stock issued and outstanding, respectively.

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 11. STOCK-BASED COMPENSATION

In May 2007, the Board of Directors of the Company adopted and approved the 2007 Employee Incentive Stock Option Plan (the “2007 Plan”), which authorized the issuance of up to 2,000,000 shares of common stock under the 2007 Plan. In April 2008, the Board of Directors of the Company adopted and approved the 2008 Employee Incentive Stock Option Plan (the “2008 Plan”), which authorized the issuance of up to 3,000,000 shares of common stock under the 2008 Plan. Subject to the terms and provisions of the 2007 Plan and the 2008 Plan, the Board of Directors, at any time and from time to time, may grant shares of stock to eligible persons in such amounts and upon such terms and conditions as the Board of Directors shall determine.

The Company granted a total of 2,000,000 shares of its common stock to twenty two employees in 2007 under the Plan with a weighted average grant price of $0.49 and average vesting period of 3 years.

The Company granted a total of 2,950,000 shares of its common stock to consultants and seven employees in 2008 under the Plan with a weighted average grant price of $0.45 and average vesting period of 10 years.

A summary of the status of the Company’s deferred stock compensation under the Plan as of December 31, 2008 and 2007, and changes for the years ended December 31, 2008 and 2007, is presented below:


Deferred stock compensation as of January 1, 2007			$ -
Deferred stock compensation granted in 2007			988,000
Compensation expenses debited to statement of operations
with a credit to additional paid-in capital			(111,514)

Deferred stock compensation as of December 31, 2007			$ 876,486

Deferred stock compensation granted in 2008			1,327,500
Compensation expenses debited to statement of operations
with a credit to additional paid-in capital			(322,917)

Deferred stock compensation as of December 31, 2008			$ 1,881,069

EASTERN ENVIRONMENT SOLUTIONS, CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 12. COMMITMENTS AND CONTINGENCIES

On June 13, 2007, the company filed a Form 8-K with SEC, announced that in accordance with the PRC National Environment Protection Bureau’s request in relation to landfills and adjustments to their peripheral inhabitants’ well-being, the Harbin municipal government city administrative bureau is carrying out certain adjustments to the original landfill plans of our subsidiary, Harbin Yifeng Eco-environment Co. Ltd. (“Harbin Yifeng”). Such adjustments will result in the relocation of some peripheral inhabitants of the landfill and its waste water disposal plant. The costs of such adjustments will be borne by the Harbin municipal government city administrative bureau. These measures will disrupt Harbin Yifeng’s normal operations. After careful consideration, our Board of Directors has decided to temporarily suspend Harbin Yifeng’s operations effective June 13, 2007, for an estimated period of 12 months (the “Suspension Period”) while these measures are being carried out.

However, Harbin Yifeng will still be collecting the minimum fixed fees for the Suspension Period as per the “Special Permission Operation Rights Contract”, which Harbin Yifeng had signed with the Harbin municipal government city administrative bureau on September 1, 2003. The bureau will compensate and pay Harbin Yifeng a sum equivalent to the fee for disposing 800 tons of waste per day during the Suspension Period. As of December 31, 2008, Harbin Yifeng has not yet resumed the landfill operations.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures.

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report (the “Evaluation Date”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were effective.

(b)

Changes in internal controls.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed 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. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the year covered by this annual report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(c)

Management’s Report on Internal Control over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of December 31, 2008, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified two material weaknesses in our internal control over financial reporting. These material weaknesses consisted of:

Inadequate staffing and supervision within the accounting operations of our company. The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

Lack of expertise in U.S accounting principles among the personnel in our Chinese headquarters. Our books are maintained and our financial statements are prepared by the personnel employed at our executive offices in the City of Harbin. Few of our employees have experience or familiarity with U.S accounting principles. The lack of personnel in our Harbin office who are trained in U.S. accounting principles is a weakness because it could lead to improper classification of items and other failures to make the entries and adjustments necessary to comply with U.S. GAAP.

Management is currently reviewing its staffing and their training in order to remedy the weaknesses identified in this assessment. To date, we are not aware of significant accounting problems resulting from these weaknesses; so we have to weigh the cost of improvement against the benefit of strengthened controls. However, because of the above conditions, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2008.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The officers and directors of the Company are:


	Position/Title	Age	Director Since
Yun Wang	Chairman, Chief Executive Officer	54	2006
Shibin Jiang	Director /Chief Operating Officer	52	2006
Jianhua Sun	Director/Chief Financial Officer	33	2006

The following sets forth biographical information regarding the Company’s directors.

Yun Wang. Mr. Wang graduated from the Heilongjiang Architecture College in 1989. From 1999 to 2006 Mr. Wang was employed as chairman of the board of Harbin Yifeng Group Corp. Since 2006, Mr. Wang has served as chairman and CEO of Harbin Yifeng Eco-environment Co., Ltd.

Shibin Jiang. Mr. Jiang graduated from Harbin Electrical Manufacture College of the First Mechanical Industry in 1982. From 1983 to 1987, he was employed as a Senior Engineer at Harbin’s First Metal Vessels Factory. Thereafter, he was employed as Chief Engineering Manager in Harbin Harping Construction Company’s technology department from 1988 to 1995. From 1995 to the present, he has been employed as Vice President of Bin Jiang Commodity Transportation Market Ltd. Since 2003 Mr. Jiang has also been employed as the General Manager, Chief Engineer and Director of Harbin Yifeng Eco-environment Co., Ltd.

Jianhua Sun. Mr. Sun graduated from the Daqing Heilongjiang Petroleum College with a degree in accounting in 1999. From 1999 to 2004, Mr. Sun was employed as a Director of the cost section at ACheng Relay Limited Corp., a company listed on the China Stock Exchange. From 2004 to 2005, he worked as an accountant in the financial subsidiary of Harbin Orient Group. Mr. Sun has been employed as Harbin Yifeng Eco-environment Co., Ltd’s Chief Financial Officer since 2006.

All of our directors hold offices until the next annual meeting of the shareholders of the Company, and until their successors have been qualified after being elected or appointed. Officers serve at the discretion of the board of directors.

Audit Committee; Compensation Committee; Nominating Committee.

Due to the small size of our Board of Directors, we have not constituted an audit committee, a compensation committee or a nominating committee. Decisions regarding nominations to the Board will be made by all currently-serving members of the Board. For the same reason, we do not have an audit committee financial expert among the members of our Board of Directors.

Code of Ethics

The Board of Directors has not adopted a code of ethics applicable to the Company’s executive officers. The Board believes that the small number of individuals involved in the Company’s management makes such a code unnecessary.

Section 16(a) Beneficial Ownership Reporting Compliance

None of the officers, directors or beneficial owners of more than 10% of the Company’s common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2008,

ITEM 11.

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by, or paid by Eastern Environment and its subsidiaries to Yun Wang, its Chief Executive Officer, for services rendered in all capacities to the Company during the years ended December 31, 2007 and 2006, when he was first employed by the Company. There were no other executive officers whose total salary and bonus for the fiscal year ended December 31, 2007 exceeded $100,000.


	Year	Salary	Bonus	Stock Awards	Option Awards	Other Compensation
Yun Wang	2008	$5,052	--	--	--	--
	2007	$5,052	--	--	--	--
	2006	$5,052	--	--	--	--

Employment Agreements

The Company has three executive officers: Messrs Yun Wang, Shibin Jiang and Jianhua Sun. Each of the three executive officers has an employment agreement with the Company that outlines salary and benefit arrangements. The three agreements have similar terms, which include base salaries of cash, the provision of labor-related insurance, termination for cause or on

30 days’ notice, and the provision of labor-related benefits in conformance with PRC labor laws. These agreements have one-year terms.

Compensation of Directors

Employees who are also members of the Board of Directors are not additionally compensated for their services as a director. We currently have no directors who are not also employees.

Equity Grants

The following tables set forth certain information regarding the stock options acquired by the Company’s Chief Executive Officer during the year ended December 31, 2008 and those options held by him on December 31, 2008.


	Number of securities underlying option granted	Percent of total options granted to employees in fiscal year	Exercise Price ($ share)	Expiration Date	Potential realizable value at assumed annual rates of appreciation for option term
	Number of securities underlying option granted		Exercise Price ($ share)	Expiration Date	5%	10%
Yun Wang	--	--	--	--	--	--

The following tables set forth certain information regarding the stock grants received by the executive officers named in the table above during the year ended December 31, 2008 and held by them unvested at December 31, 2008.

Unvested Stock Awards in the Last Fiscal Year

Number of

Shares That

Have Not

Vested

Market Value

of Shares That

Have Not

Vested

Yun Wang

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of the date of this prospectus by the following:

each shareholder known by us to own beneficially more than 5% of our common stock;

Yun Wang, our Chief Executive Officer

each of our directors; and

all directors and executive officers as a group.

There are 14,970,186 shares of our common stock outstanding on the date of this report. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.

In computing the number of shares beneficially owned by a person and the percent ownership of that person, we include shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days. We do not, however, include these “issuable” shares in the outstanding shares when we compute the percent ownership of any other person.


Name and Address of Beneficial Owner ⁽¹⁾	Amount and Nature of Beneficial Ownership	Percentage of Class
Yun Wang	6,278,000	41.9%
Shibin Jiang	1,196,000	8.0%
Jianhua Sun	30,000	0.2%
All officers and directors (3 persons)	7,504,000	50.1%
Bin Feng	1,656,000	11.1%

_____________________________

(1)

Unless otherwise noted, the shareholder’s address is c/o Harbin Yifeng Eco-environment Co., Ltd., Harbin Dongdazhi Street 165, Harbin, Heilongjiang, P.R. China.

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

In 2006 Yifeng made loans in the amount of $686,032 to two entities controlled by members of the Company’s management: Harbin Tianli Real Estate Co., Ltd. and Harbin Dongbao Property Management Co., Ltd. The loan to Harbin Tianli Real Estate Co., Ltd. in the amount of $640,688 was repaid early in 2007 with interest at a rate of 5.22% per annum. The loan to Harbin Dongbao Property Management Co., Ltd. in the amount of $45,344, was repaid in January 2008 without interest.

During 2007 Yifeng made loans to two members of its Board of Directors: Shibin Jiang and Yun Wang. During 2008 Yun Wang repaid his loan, but Yifeng made an additional loan to

Shibin Jiang. The amount owed by Shibin Yang at December 31, 2008 was $9,144. The loan is unsecured and interest free. Mr. Yang has agreed to repay the loan within one year.

During 2008 Yifeng made a loan in the amount of $234,518 to Harbin Binjiang Freight Co., Ltd., which is owned by our Chairman, Yun Wang. The loan is unsecured and bears interest at 6.12% annual interest rate. It is due on March 16, 2009.

Director Independence

None of the members of the Company’s Board of Directors is an independent director, pursuant to the definition of “independent director” under the Rules of The NASDAQ Stock Market.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Bagell, Josephs, Levine & Company, LLC billed $50,000 to the Company for professional services rendered for the audit of fiscal 2008 financial statements and review of the financial statements included in fiscal 2008 10-QSB filings. Bagell, Josephs, Levine & Company, LLC billed $50,000 to the Company for professional services rendered for the audit of fiscal 2007 financial statements.

Audit-Related Fees

Bagell, Josephs, Levine & Company, LLC billed $0 to the Company during 2008 for assurance and related services that are reasonably related to the performance of the 2008 audit or review of the quarterly financial statements. Bagell, Josephs, Levine & Company, LLC billed $0 to the Company during 2007 for assurance and related services that are reasonably related to the performance of the 2007 audit or review of the quarterly financial statements.

Tax Fees

Bagell, Josephs, Levine & Company, LLC billed $2,000 to the Company during 2008 for professional services rendered for tax compliance, tax advice and tax planning. Bagell, Josephs, Levine & Company, LLC billed $3,000 to the Company during 2007 for professional services rendered for tax compliance, tax advice and tax planning.

All Other Fees

Bagell, Josephs, Levine & Company, LLC billed $0 to the Company in 2008 and $0 in 2007 for services not described above.

It is the policy of the Company that all services other than audit, review or attest services must be pre-approved by the Board of Directors. No such services have been performed by Bagell, Josephs, Levine & Company, LLC.

ITEM 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibit List

3-a

Articles of Incorporation – filed as an exhibit to the Information Statement on Schedule 14C filed on September 23, 2005 and incorporated herein by reference.

3-b

By-laws – filed as an exhibit to the Information Statement on Schedule 14C filed on September 23, 2005 and incorporated herein by reference.

Subsidiaries – American Eco-Environment Corporation, a Delaware corporation

Harbin Yifeng Eco-environment Co., Ltd., a PRC corporation

Harbin Yifeng Zhiye Management Co., Ltd., a PRC corporation

31.1

Rule 13a-14(a) Certification – CEO

31.2

Rule 13a-14(a) Certification - CFO

Rule 13a-14(b) Certifications

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

EASTERN ENVIRONMENT SOLUTIONS, CORP.

Date: March 16, 2009

/s/ Yun Wang

Yun Wang, Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Yun Wang

March 16, 2009

Yun Wang

Director, Chief Executive Officer

/s/ Jianhua Sun

March 16, 2009

Jianhua Sun

Director, Chief Financial Officer

/s/ Shibin Jiang

March 16, 2009

Shibin Jiang, Director