U. S. Securities and Exchange Commission Washington, D. C. 20549  FORM 10-Q  [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2008  [   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____  Commission File No. 0-31193  EASTERN ENVIRONMENT SOLUTIONS CORP.(Name of Small Business Issuer in its Charter)Nevada16-1583162(State or other Jurisdiction of
incorporation or organization)(I.R.S.  Employer
I.D. No.)  Harbin Dongdazhi Street 165,
Harbin, P.R. China150001(Address of Principal Executive Offices)(Zip Code)  Issuer's Telephone Number: 86-451-5394-8666  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 [X]     No [   ] 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 [ X]  APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: November 7, 2008 Common Voting Stock: 14,970,186    EASTERN ENVIRONMENT SOLUTIONS, CORP. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2008 (UNAUDITED)  TABLE OF CONTENTS  Page(s)  Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited)  and December 31, 2007 (Audited) 1  Condensed Consolidated Statements of Income for the Nine Months and Three Months Ended September 30, 2008 and 2007 (Unaudited) 2  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)  3-4 Notes to Condensed Consolidated Financial Statements (Unaudited) 5-15        EASTERN ENVIRONMENT SOLUTIONS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETSSeptember 30,December 31,20082007(Unaudited)(Audited)ASSETSCurrent assets:Cash and cash equivalents$             1,680,306$             2,105,255Accounts receivable2,075,750847,531Inventory11,1037,325Other receivables78218,961Loan to related party278,85832,969Total Current Assets4,046,7993,012,041Property and equipment, net of accumulated depreciation6,184,9095,708,388Other asset:Advance to suppliers3,800,9053,510,606Total other asset3,800,9053,510,606Total Assets$           14,032,613$           12,231,035LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Loan payable - current portion$             2,054,008$             1,401,559Accounts payable22,98221,392Taxes payable119143Accrued expenses and other payables73,19371,394Total Current Liabilities2,150,3021,494,488Long-term liabilities:Loan payable - net of current portion241,648966,592Total Liabilities2,391,9502,461,080Commitments and ContingenciesStockholders' EquityCommon stock, $0.0001 par value, 100,000,000 shares authorized;14,970,186 and 12,020,186 shares issued and outstandingas of September 30, 2008 and December 31, 2007, respectively1,4971,202Additional paid-in-capital3,357,7273,130,793Accumulated other comprehensive income2,071,3701,157,547Statutory reserves186,156186,156Retained earnings6,023,9135,294,257Total Stockholders' Equity11,640,6639,769,955Total Liabilities and Stockholders' Equity$           14,032,613$           12,231,035   The accompanying notes are an integral part of these condensed consolidated financial statements 1     EASTERN ENVIRONMENT SOLUTIONS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOMEFor the Nine and Three months ended September 30, 2008 and 2007Nine-Months EndedThree-Months  EndedSeptember 30,September 30,September 30,September 30,2008200720082007(Unaudited)(Unaudited)(Unaudited)(Unaudited)Revenues$        1,318,179$           1,577,483$          452,080$             411,978Cost of Goods Sold212,013267,83988,39292,901Gross Profit1,106,1661,309,644363,688319,077Operating ExpensesSelling, general and administrative387,018272,147154,576117,808Income before other Income and       (Expenses)719,1481,037,497209,112201,269Other Income and (Expenses)10,508139,4033,45198,582Income Before Income Taxes729,6561,176,900212,563299,851Provision for Income Taxes----Net Income from operations$           729,656$           1,176,900$          212,563$             299,851Net loss from discontinued operations, net of tax effects of $0-197,433--Net income$           729,656$           1,374,333$          212,563$             299,851Other Comprehensive IncomeForeign currency transaction adjustment$           913,823$              894,459$          134,176$             174,960Comprehensive income$        1,643,479$           2,268,792$          346,739$             474,811Basic and diluted income (loss) per shareContinuing operations$                 0.05$                    0.12$                0.01$                   0.03Discontinued operations$                       -$                    0.02$                      -$                         -Weighted average number of common shares outstanding13,678,21510,048,77814,970,18610,120,185   The accompanying notes are an integral part of these condensed consolidated financial statements 2  EASTERN ENVIRONMENT SOLUTIONS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)For the Nine months ended September 30, 2008 and 2007    Nine-Months EndedSeptember 30,September 30,20082007Cash Flows From Operating Activities:Continuing Operations:Net income from continuing operations$             729,656$            1,176,900Adjustments to reconcile net income to net cashprovided by(used in) operating activities:Depreciation and amortization179,871187,047Amortization of stock compensation227,22960,014Changes in operating assets and liabilities:Accounts receivable(1,228,219)(541,299)Inventory(3,778)(5,103)Other receivable18,179(245,357)Advances to suppliers(290,299)(191,581)Accounts payable1,590(63,949)Taxes payable(23)(43,550)Accrued expenses and other payables3,514242,801Net Cash provided by (used in) continuing activities(362,281)575,923Discontinued operations:Net loss from discontinued operations-197,433Adjustments to reconcile net cash-(218,229)(used in) discontinued operationsNet cash (used in) discontinued operations-(20,796)Net cash provided by (used in) operating activities(362,281)555,127Cash Flows From Investing Activities:Purchase of property and equipment(491)(148,971)(Additions) reduction to construction in process(482,580)(489,550)Collections on loan to related parties(245,889)686,032Cash provided by (used in) investing activities(728,960)47,511Cash provided by discontinued activities-26,842Net cash provided by (used in) investing activities(728,960)74,353Cash Flows From Financing Activities-Reduction in bank loan payable(72,495)(507,461)Cash (used in) financing activities(72,495)(507,461)Cash (used in) discontinuing activities-(6,046)Net cash (used in) financing activities(72,495)(513,507)Effect of exchange rate changes on cash and cash equivalents738,787311,170Increase (Decrease) in cash and cash equivalents(424,949)427,143Cash and Cash Equivalents - Beginning of period2,105,2551,230,064Cash and Cash Equivalents - End of period$          1,680,306$            1,657,207  The accompanying notes are an integral part of these condensed consolidated financial statements 3  EASTERN ENVIRONMENT SOLUTIONS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)For the Nine months ended September 30, 2008 and 2007 (Contd)    SUPPLEMENTAL CASH FLOW INFORMATION:During the period, cash was paid for the following:Interest expense$             213,066$               191,189Income taxes$                         -$                 44,628Non-Cash Investing and Financing Activities:Common stock issued for incentive employee compensation$          1,327,500$               988,000Common stock issued for consulting services$                         -$                 19,500  The accompanying notes are an integral part of these condensed consolidated financial statements 4  EASTERN ENVIRONMENT SOLUTIONS, CORP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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).  The Company operates its business primarily 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.  The Companys condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP). In the opinion of management, the accompanying balance sheets and related interim statements of income and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).  Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with Managements Discussion and Analysis and the financial statements and notes thereto included in the Companys 2007 Form 10-KSB. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Management estimates The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of consolidation The accompanying condensed consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, Harbin Yifeng and Harbin Yifengs wholly owned subsidiary, Harbin Yifeng Zhiye Management Co., Ltd. (Yifeng Zhiye). All significant inter-company transactions and balances have been 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.  5


EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)    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 nine months ended September 30, 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 nine months ended September 30, 2008 and 2007. Revenue recognition The Company utilizes the accrual method of accounting.  Revenue is recognized when service is provided and payments of the customers and collection are reasonably assured.  Payments made in advance of the services performed are charged to deferred revenue until performance has been completed.   6   EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentrations of credit risk  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 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. 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.  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.  7


EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Stock-based compensation (continued) 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 September 30, 2008. 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. We are currently evaluating the potential impact of the adoption of SFAS 141R on our consolidated financial position, results of operations or cash flows.  8


EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


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 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. We are currently evaluating the potential impact of the adoption of SFAS 160 on our consolidated financial position, results of operations or cash flows.   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 Company is in the process of evaluating the new disclosure requirements under SFAS 161.  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 application is not permitted. Management is currently evaluating the impact FSP EITF 03-6-1 will have on the Companys EPS calculations.


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 3. PROPERTY AND EQUIPMENT, NET  Property and equipment at September 30, 2008 and December 31, 2007 consist of the following: Septermber 30, 2008December 31, 2007Machinery & Equipment$                    881,588$                    820,278Vehicles385,120358,326Landfills2,138,4201,990,459Subtotal3,405,1293,169,063Less: Accumulated Depreciation(1,010,395)(768,270)Construction in progress3,790,1753,307,595Total Property and equipment, net$                 6,184,909$                 5,708,388  Depreciation expense for the nine months ended September 30, 2008 and 2007 was $179,871 and $187,047 respectively.  Construction in progress represents direct costs of construction or acquisition and design fees incurred for the Companys new operating site and equipments. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for its intended use.  NOTE 4.   INVENTORY  Inventory as of September 30, 2008 and December 31, 2007consists of the following:  September 30, 2008December 31, 2007Materials$                        1,513$                        7,009Supplies9,590316Total$                      11,103$                        7,325  No allowance for inventory was made for the nine months ended September 30, 2008 and 2007.   NOTE 5. RELATED PARTY TRANSACTIONS As of September 30, 2008, the Company has loans receivable in the amount of $278,858 from related party.


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 5. RELATED PARTY TRANSACTIONS (Continued)  September 30, 2008December 31, 2007Loan to Related PartyShibin Jiang$                    20,958$                      4,440Yun Wang22,25628,530Harbin Binjiang Freight Co.,Ltd235,644-Total Loan to related party$                  278,858$                    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 6. 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 nine months ended September 30, 2008. At September 30, 2008, the entire balance of accounts receivable was due from HMUAB.  NOTE 7. 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 nine months ended September 30, 2008, principal payments in the amount of $72,495were


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 7. BANK LOAN PAYABLE (Continued) made. As of September 30, 2008 and December 31, 2007, the loan payable consists of the following: September 30, 2008December 31, 2007Loan payable$                 2,295,656$                 2,368,151Less: current portion2,054,0081,401,559Loan payable - non-current portion$                    241,648$                    966,592  The non-current portion of the loan payable will be due in 2009.  NOTE 8.  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 nine month ended September 30, 2008.  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. 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). On March 16, 2007, National People's Congress passed a new corporate income tax 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.  According to the new corporate income tax law, the applicable corporate income tax rate of our Chinese subsidiaries will incrementally decrease to 25% over a five-year period. 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


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 8.  INCOME TAXES (Continued)  PRC Tax (continued) 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 9.   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.  The Company has 14,970,186 shares of common stock issued and outstanding as of September 30, 2008.


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 10.   STOCK-BASED COMPENSATION  In May 2007, the Board of Directors of the Company adopted and approved the 2007 Employee Incentive Stock Option Plan (the Plan), which authorized the issuance of up to 2,000,000 shares of common stock under the Plan. Subject to the terms and provisions of the 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 $0.45 and average vesting period of 10 years. A summary of the status of the Companys deferred stock compensation under the Plan as of September 30, 2008, and changes for the nine month ended September 30, 2008, is presented below: Deferred stock compensation as of January 1, 2008$                    876,486Deferred stock compensation granted1,327,500Compensation expenses debited to statement of operations-with a credit to additional paid-in capital(227,229)Deferred stock compensation as of March 31, 2008$                 1,976,757   NOTE 11. 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 9 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


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EASTERN ENVIRONMENT SOLUTIONS, CORP CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Continued)


NOTE 11. COMMITMENTS AND CONTINGENCIES and pay Harbin Yifeng a sum equivalent to the fee for disposing 800 tons of waste per day during the Suspension Period. As of September 30, 2008, Harbin Yifeng has not yet resumed the landfill operations. .


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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS  Forward-Looking Statements: No Assurances Intended In addition to historical information, this Quarterly 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 Managements Discussion and AnalysisRisk Factors That May Affect Future Results. 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.  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 paying 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 the first nine months of 2008 fell by 16% from $1,577,483 in the nine months ended September 30, 2007 to $1,318,179.  Although our revenue for the recent quarter increased 10% from $411,978 in the three months ended Sept 30, 2007 to $452,080 during the quarter ended September 30, 2008, this primarily reflected the reduced value of the U.S. Dollar compared to the Chinese Renminbi, as our revenue in Renminbi remained unchanged.We expect that as soon as we recommence operations at the Landfill, we will return to our earlier revenue level for waste processing 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 Chinas cities, we expect there to be plentiful market opportunities.  Although our revenues in the nine months ended September 30, 2008 were achieved without any production on our part, we still realized $212,013 in cost of goods sold.  These costs are


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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 42% from the first nine months of 2007 ($272,147) to the first nine months of 2008 ($387,018).  During the three months ended September 30, 2008 the increase was 31% over the three months ended September 30, 2007.  The increases are entirely attributable to the expensing of stock compensation that we gave to employees and consultants as incentives for future services.  At September 30, 2008 there remained $1,976,757 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 $729,656 during the nine months ended September 30, 2008, compared to a pre-tax income from continuing operations of $1,176,900 during the nine months ended September 30, 2007.  Our net pre-tax income from continuing operations during the three months ended September 30, 2008 was $212,563, compared to $299,851 in the same period of 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 the first, second, and third quarter of 2008, therefore, was identical to our pre-tax income, representing $0.05 per share for the nine month period and $0.01 per share for the three month period ended September 30, 2008. In the corresponding periods of 2007 we realized net income from continuing operations that equaled $0.12 per share for the nine months and $0.03 per share for the three months ended September 30, 2007.  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 the nine months ended September 30, 2008, the effect of converting our financial results to Dollars was to add $913,823 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


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Landfill were suspended, the Bank agreed to reduce our debt service requirements, with the result that in the nine months ended September 30, 2008, we made principal payments of only $72,495.  That abatement will end when we recommence operations at the Landfill.  The entire amount of the loan is due to be paid by the end of 2009.  Our working capital at September 30, 2008 totaled $1,896,497, an increase of $378,944 from our working capital at December 31, 2007.  The increase in working capital lagged our net income for the nine month period, as we applied $482,580 of net income to our ongoing construction efforts at the Harbin landfill.  The largest component of the increase in our working capital consisted of $1,228,219 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 the nine months ended September 30, 2008, HMUAB has 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 September 30, 2008 was advances to suppliers, totaling $3,800,905, an increase of $290,299 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 the foreseeable future.  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.  Risk Factors That May Affect Future Results 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.


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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 activities 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


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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


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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


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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.  ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Not applicable.   ITEM 4.  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. 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 report (the Evaluation Date). Based on that


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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 fiscal quarter covered by this 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.  PART II   -   OTHER INFORMATION Item 6. Exhibits 31.1 Rule 13a-14(a) Certification  CEO 31.2 Rule 13a-14(a) Certification - CFO 32 Rule 13a-14(b) Certifications  SIGNATURES  Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the undersigned thereunto duly authorized.   EASTERN ENVIRONMENT SOLUTIONS, CORP.  Date: November 7 2008 By:/s/Yun Wang Yun Wang, Chief Executive Officer


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