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
      1934For
      the quarterly period ended March 31, 2010[  ]
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _____ to
_____





Commission
File No. 0-31193





EASTERN
ENVIRONMENT SOLUTIONS, CORP.


(Name of
Registrant in its Charter)




Nevada
            16-1583162(State
      or Other Jurisdiction of
            (I.R.S.
      Employer I.D. No.)incorporation
      or organization)





Harbin Dongdazhi Street 165,
Harbin, P.R. China 150001


(Address
of Principal Executive Offices)




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
subjected to such filing requirements for the past 90 days.




YesX                  No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files.)  Yes  ___    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:




May 17,
2010


Common
Voting Stock: 14,970,186





EASTERN
ENVIRONMENT SOLUTIONS, CORP.


QUARTERLY
REPORT ON FORM 10Q


FOR
THE FISCAL QUARTER ENDED MARCH 31, 2010







TABLE
OF CONTENTS


Page
      NoPart
      I
            
            Financial
      InformationItem
      1.
            
            Financial
      Statements:Condensed
      Consolidated Balance Sheet – March 31, 2010 (unaudited) and December 31,
      2009
            2Condensed
      Consolidated Statements of Income and Comprehensive Income – for the Three
      Months Ended March 31, 2010 and 2009 (Unaudited)
            3Condensed
      Consolidated Statements of Cash Flows – for the Three Months Ended March
      31, 2010 and 2009 (Unaudited)
            4Notes
      to Condensed Consolidated Financial Statements (Unaudited)
            5Item
      2.
            
            Management’s
      Discussion and Analysis of Financial Condition and  Results of
      Operations
            19Item
      3.
            
            Quantitative
      and Qualitative Disclosures about Market Risk
            22Item
      4T.
            
            Controls
      and Procedures
            22Part
      II
            
            Other
      InformationItem
      1.
            
            Legal
      Proceedings
            23Items
      1A.
            
            Risk
      Factors
            23Item
      2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            23Item
      3.
            
            Defaults
      upon Senior Securities
            23Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            23Item
      5.
            
            Other
      Information
            23Item
      6.
            
            Exhibits
            23Signatures










EASTERN
      ENVIRONMENT SOLUTIONS, CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETSMarch
      31,
              
              
              December
      31,2010
              
              
              2009(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              1,298,677
              
              
              $
              428,052Accounts
      receivable
              
              
              4,700,006
              
              
              
              4,253,203Inventory
              
              
              52,964
              
              
              
              42,650Other
      receivables
              
              
              778
              
              
              
              440,208Loans
      to related parties
              
              
              65,519
              
              
              
              42,828Total
      Current Assets
              
              
              6,117,944
              
              
              
              5,206,941Property
      and equipment, net of accumulated depreciation of$1,374,767 and
      $1,312,131, respectively
              
              
              6,298,421
              
              
              
              6,319,005Other
      asset:Advance
      to suppliers
              
              
              3,784,613
              
              
              
              3,783,981Total
      Other Asset
              
              
              3,784,613
              
              
              
              3,783,981Total
      Assets
              
              $
              16,200,978
              
              
              $
              15,309,927LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Bank
      loan payable - current portion
              
              $
              966,592
              
              
              $
              966,592Accounts
      payable
              
              
              810
              
              
              
              810Taxes
      payable
              
              
              183,582
              
              
              
              174,375Accrued
      expenses and other payables
              
              
              83,048
              
              
              
              92,192Total
      Current Liabilities
              
              
              1,234,032
              
              
              
              1,233,969Long-term
      liabilities:Bank
      loan payable - net of current portion
              
              
              845,768
              
              
              
              1,087,416Total
      Liabilities
              
              
              2,079,800
              
              
              
              2,321,385Commitments
      and ContingenciesStockholders'
      EquityCommon
      stock, $0.0001 par value, 100,000,000 shares authorized;14,970,186
      shares issued and outstanding as of March 31, 2010 and December 31,
      2009
              
              
              1,497
              
              
              
              1,497Additional
      paid-in-capital
              
              
              3,931,853
              
              
              
              3,836,165Accumulated
      other comprehensive income
              
              
              1,896,686
              
              
              
              1,945,261Statutory
      reserves
              
              
              186,156
              
              
              
              186,156Retained
      earnings - Unappropriated
              
              
              8,104,987
              
              
              
              7,019,463Total
      Stockholders' Equity
              
              
              14,121,179
              
              
              
              12,988,542Total
      Liabilities and Stockholders' Equity
              
              $
              16,200,978
              
              
              $
              15,309,927






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


2


EASTERN
      ENVIRONMENT SOLUTIONS, CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(UNAUDITED)THREE
      MONTHS ENDED MARCH 31,2010
              
              
              2009Revenues
              
              $
              1,587,754
              
              
              $
              442,345Cost
      of Goods Sold
              
              
              209,831
              
              
              
              103,218Gross
      Profit
              
              
              1,377,923
              
              
              
              339,127Selling,
      General and Administrative
              
              
              145,918
              
              
              
              137,631Income
      from operations
              
              
              1,232,005
              
              
              
              201,496Other
      Income (Expense)Interest
      income
              
              
              23,226
              
              
              
              7,507Other
      expense
              
              
              (120
              )
              
              
              (61
              )Total
      other income, net
              
              
              23,106
              
              
              
              7,446Income
      from Operations before Income Taxes
              
              
              1,255,111
              
              
              
              208,942Provision
      for Income Taxes
              
              
              169,587
              
              
              
              38,201Net
      Income
              
              
              1,085,524
              
              
              
              170,741Other
      Comprehensive Income -Foreign
      currency translation loss
              
              
              (48,575
              )
              
              
              (28,038
              )Comprehensive
      Income
              
              $
              1,036,949
              
              
              $
              142,703Basic
      & Diluted Income Per ShareBasic
              
              $
              0.08
              
              
              $
              0.01Diluted
              
              $
              0.07
              
              
              $
              0.01Weighted
      Average Number of Common Shares OutstandingBasic
              
              
              12,408,098
              
              
              
              11,539,774Diluted
              
              
              14,970,186
              
              
              
              14,970,186






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


3


EASTERN
      ENVIRONMENT SOLUTIONS, CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)THREE
      MONTHS ENDED MARCH 312010
              
              
              2009Cash
      Flows From Operating Activities:Net
      income
              
              $
              1,085,524
              
              
              $
              170,741Adjustments
      to reconcile net income to net cash provided by(used in) operating
      activities:Depreciation
      and amortization
              
              
              62,403
              
              
              
              61,266Amortization
      of stock-based compensation
              
              
              95,688
              
              
              
              95,688Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (446,803
              )
              
              
              (438,415
              )Inventory
              
              
              (10,314
              )
              
              
              18,955Accounts
      payable
              
              
              -
              
              
              
              (77
              )Taxes
      payable
              
              
              9,208
              
              
              
              38,195Accrued
      expenses and other payables
              
              
              (9,145
              )
              
              
              (16,348
              )Net
      cash provided by (used in) operating activities
              
              
              786,560
              
              
              
              (69,995
              )Cash
      Flows From Investing Activities:Additions
      to construction in process
              
              
              -
              
              
              
              (29,626
              )Payment
      of capitalized interests for construction loan
              
              
              (40,769
              )
              
              
              (59,018
              )Payments
      on loans to unrelated party
              
              
              -
              
              
              
              (526,506
              )Collections
      on loans to unrelated party
              
              
              439,430
              
              
              
              -Payments
      on loans to related party
              
              
              (22,692
              )
              
              
              -Collections
      on loans to related parties
              
              
              -
              
              
              
              226,397Net
      cash provided by (used in) investing activities
              
              
              375,969
              
              
              
              (388,753
              )Cash
      Flows From Financing ActivitiesRepayment
      of bank loan payable
              
              
              (241,648
              )
              
              
              (24,165
              )Net
      cash used in financing activities
              
              
              (241,648
              )
              
              
              (24,165
              )Effect
      of exchange rate changes on cash and cash equivalents
              
              
              (50,256
              )
              
              
              (24,234
              )Increase
      (decrease) in Cash and Cash Equivalents
              
              
              870,625
              
              
              
              (507,147
              )Cash
      and Cash Equivalents - Beginning of period
              
              
              428,052
              
              
              
              1,112,487Cash
      and Cash Equivalents - End of period
              
              $
              1,298,677
              
              
              $
              605,340Supplemental
      Cash Flow Information:Cash
      paid during the periods:Interest
      expense
              
              $
              40,769
              
              
              $
              59,018Income
      taxes
              
              $
              -
              
              
              $
              -






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


4
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




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 condensed
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”).







NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Management
estimates




The
preparation of financial statements in conformity with generally accepted
accounting principal requires management to make estimates and assumptions that
affect 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 AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




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 considerable 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 the municipal
government of Harbin City and are considered by management to be fully
collectible. Therefore, no allowance for doubtful accounts was deemed necessary
for the three months ended March 31, 2010 and 2009.




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 and amortization are computed using the straight-line
method over the estimated useful lives of 5-10 years.




Advance
to suppliers




Advance to suppliers represents
payments made and recorded in advance for the purchase of materials and
equipment related to the Company’s construction in progress. We expect to
utilize the advances during the next two years.  In accordance with
GAAP, we classify the cash flows related to advances to suppliers under
investing activities when paid and will disclose as a non-cash investing
activity when transferred to property and equipment.  The final phase
of the construction is not completed.  As such, no amortization was
made for the three months ended March 31, 2010 and 2009.




Revenue
recognition




The
Company recognizes revenue in accordance with ASC 360. ASC 360 states that
revenue should not be recognized until it is realized or realizable and earned.
In general, the Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured.


6
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)




Income
taxes





The
Company accounts   for income tax under the provisions of
Financial Accounting Standard Board (“FASB”) Accounting Standards Codification
(“ASC”) No.740 "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.





Harbin
Yifeng was granted the status of wholly foreign-owned entities (“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 was 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, was 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.





The
Company does not have any long-term deferred tax assets or liabilities in China
that will exist once the tax holiday expires. However, the Company has deferred
tax assets that relate to its net operating loss in the U. S., which is 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.





All of
the Company's assets are located in The People's Republic of China. During the
three months ended March 31, 2010, the Company operated in two business segments
- landfill segment and polyethylene terephthalate (“PET”) bottles sorting and
sales segment. The Company operated in one business segment for the three months
ended March 31, 2009.





7
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)




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 and notes payable approximate fair value due to the
short-term nature of these items.  The carrying amount of bank loan
approximates the fair value based on the Company's expected borrowing rate for
debt with similar remaining maturities and comparable risk in
market.





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 gain or loss 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".




Stock-based
compensation




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. For the three months ended March 31,
2010 and 2009, $95,688 stock based compensation expense was recorded in selling,
general and administrative expenses.





Earnings
and diluted earnings per share





Earnings
per share are calculated in accordance with the ASC 260, “Earnings per share.”
Basic net earnings per share are based upon the weighted average number of
common shares outstanding, but excluding shares issued as compensation that have
not yet vested. Diluted net earnings per share are based on the assumption that
all dilutive convertible shares and stock options were converted or exercised,
and that all unvested shares have vested. Dilution is computed by applying
the treasury stock method. Under this method, Stock-based compensation is
assumed to be vested at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock
at the average market price during the period.


8
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)





NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




New
accounting pronouncements




In
December, 2009, FASB issued ASU No. 2009-17, Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities. This Accounting
Standards Update amends the FASB Accounting Standards Codification for the
issuance of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R).
The amendments in this Accounting Standards Update replace the
quantitative-based risks and rewards calculation for determining which reporting
entity, if any, has a controlling financial interest in a variable interest
entity with an approach focused on identifying which reporting entity has the
power to direct the activities of a variable interest entity that most
significantly impact the entity’s economic performance and (1) the obligation to
absorb losses of the entity or (2) the right to receive benefits from the
entity. An approach that is expected to be primarily qualitative will be more
effective for identifying which reporting entity has a controlling financial
interest in a variable interest entity. The amendments in this Update also
require additional disclosures about a reporting entity’s involvement in
variable interest entities, which will enhance the information provided to users
of financial statements. The Company has determined the adoption of this ASU
does not have material impact on its financial statements.





In
January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair
Value Measurements. This update provides amendments to Subtopic 820-10 that
requires new disclosure as follows: 1) Transfers in and out of Levels 1 and
2.  A reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
and describe the reasons for the transfers.  2)  Activity in
Level 3 fair value measurements.  In the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), a reporting entity
should present separately information about purchases, sales, issuances, and
settlements (that is, on a gross basis rather than as one net number). This
update provides amendments to Subtopic 820-10 that clarifies existing
disclosures as follows: 1) Level of disaggregation. A reporting entity
should provide fair value measurement disclosures for each class of assets and
liabilities. A class is often a subset of assets or liabilities within a line
item in the statement of financial position. A reporting entity needs to use
judgment in determining the appropriate classes of assets and liabilities.
2) Disclosures about inputs and valuation techniques. A reporting entity
should provide disclosures about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair value measurements.
Those disclosures are required for fair value measurements that fall in either
Level 2 or Level 3. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosures about purchases, sales,
issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years.
The Company has determined the adoption of this ASU does not have a
material impact on its financial statements.


9
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
3. PROPERTY AND EQUIPMENT, NET





Property
and equipment at March 31, 2010 and December 31, 2009 consist of the
following:




March
      31, 2010
            
            December
      31, 2009(Unaudited)Machinery
      and equipment
            
            $
            883,523
            
            
            $
            883,523Vehicles
            
            
            385,965
            
            
            
            385,965Landfills
            
            
            2,316,065
            
            
            
            2,143,114Subtotal
            
            
            3,585,553
            
            
            
            3,412,602Less:
      accumulated depreciation
            
            
            (1,374,767
            )
            
            
            (1,312,131
            )Construction
      in progress
            
            
            4,087,635
            
            
            
            4,218,534Total
      property and equipment, net
            
            $
            6,298,421
            
            
            $
            6,319,005




Depreciation
and amortization expense for the three months ended March 31, 2010 and 2009 was
$62,403 and $61,266, respectively.





“Landfills”
represents the capitalized expenses attributable to the construction of the
portion of the Harbin landfill that is currently functional.  Landfill
costs are amortized using a straight-line method over the contract term,
commencing when the landfill is first put into use.  The Company has
no obligations relating to capping, closure or other post-closure obligations;
accordingly no reserve for post-closure activities has been
established.





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.
Commencing at that time, the capitalized expenses will be depreciated over the
remaining term of the Build-Operate-Transfer (“BOT”) agreement. Interest expense
in the amount of $40,769 and $59,018 was capitalized for the three months ended
March 31, 2010 and 2009.





The
Harbin landfill is scheduled to have a capacity of 7.8 million tons, when
completed, of which 3.27 million tons will be deposited in an underground sector
developed by the Company.  As of March 31, 2010, the capacity of the
Harbin landfill was 1.6 million tons, of which 969,000 tons of capacity had been
utilized.  As of December 31, 2009, the capacity of the Harbin
landfill was 1.6 million tons, of which 880,000 tons of capacity had been
utilized.   The following table sets forth management’s estimate of
the costs and timing to complete the remaining underground portion of the
Landfill:


10
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)





NOTE
3. PROPERTY AND EQUIPMENT, NET (Continued)




Project
              Additional
      Capacity (Tons)
              Estimated
      Additional Cost to Complete
              Estimated
      Date of CompletionPhase
      II
              670,000
              $3.66
      million
              October
      2011Phase
      III
              1,000,000
              $5.57
      million
              October
      2014





When the
underground portion of the Landfill is
complete, with 3.27 million tons capacity, the Company will be able to utilize
an above ground capacity for 4.53 million tons of waste, for a total Landfill
capacity of 7.8 million tons.








NOTE
4.   INVENTORY





Inventory
consists of the following:





March
      31, 2010
            
            December
      31, 2009(Unaudited)Raw
      material
            
            $
            19,347
            
            
            $
            36,837Finished
      goods
            
            
            28,831
            
            
            
            -Low-value
      consumables
            
            
            4,786
            
            
            
            5,813Total
            
            $
            52,964
            
            
            $
            42,650




No
allowance for inventory was made as of March 31, 2010 and December 31,
2009.






NOTE
5. OTHER RECEIVABLES





Other
receivables primarily represents a third-party loan to Harbin Jiayi Import and
Export Co., Ltd. (“Jiayi”) from the Company. The loan was unsecured and bore
5.31% annual interest and was repaid in March 2010.


11
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
6. RELATED PARTY TRANSACTIONS




Loans to
related parties consists the following:




March
      31, 2010
            
            December
      31, 2009(Unaudited)Shibin
      Jiang
            
            $
            4,744
            
            
            $
            4,744Yan
      Feng
            
            
            60,775
            
            
            
            38,084Total
      loans to related parties
            
            $
            65,519
            
            
            $
            42,828




Ms. Yan
Feng is the CEO of the Company and Mr. Shibin Jiang is the operating director of
the company. Both Ms. Feng and Mr. Jiang are shareholders of the Company. The
loans to shareholders are unsecured and interest free. The management of the
Company expects the entire amount of these loans to shareholders will be repaid
within one year.





NOTE
7. MAJOR CUSTOMER





On
September 1, 2003, the Company signed 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 contract will expire on August
30, 2020. The revenue from HMUAB accounted for 100% of the gross revenues for
the years ended December 31, 2009 and 2008.





In
January 2010, the Company signed a PET bottle processing agreement and a
consignment sales agreement with Harbin Dongxin Group (“Dongxin”). In accordance
with the agreements, Dongxin shall be responsible for processing, packaging and
selling the PET bottles sorted from the landfill by the Company. The Company
shall pay a processing fee to Dongxin in return. The
Company will fix a minimum resale price, which Harbin Dongxin Group must collect
and remit to the Company upon sale of the recycled PET.  Harbin
Dongxin Group is entitled to retain any revenue it obtains from the resale in
excess of the fixed minimum price.





The
following table presents sales from major customers with individual sales over
10% of total net revenue for the three months ended March 31, 2010 and
2009:




Three
      months ended March 31, (Unaudited)2010
            
            
            2009Sales
            
            
            %
      of
              Total
      Sales
            
            
            Sales
            
            
            %
      of
              Total
      SalesHMUAB
            
            $
            1,122,699
            
            
            
            71
            %
            
            $
            442,345
            
            
            
            100
            %Consignment
      sales through Dongxin
            
            
            465,055
            
            
            
            29
            %
            
            
            -
            
            
            
            0
            %Total
            
            $
            1,587,754
            
            
            
            100
            %
            
            $
            442,345
            
            
            
            100
            %




12
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




NOTE
7. MAJOR CUSTOMER (Continued)





Accounts
receivable related to HMUAB and Dongxin are as follows:




March
      31, 2010
            
            December
      31, 2009Accounts
              Receivables
            
            %
      of Accounts
              Receivables
            
            Accounts
              Receivables
            
            %
      of Accounts
              Receivables(Unaudited)HMUAB
            
            $
            4,450,265
            
            
            
            95
            %
            
            $
            4,253,203
            
            
            
            100
            %Dongxin
            
            
            249,741
            
            
            
            5
            %
            
            
            -
            
            
            
            0
            %Total
            
            $
            4,700,006
            
            
            
            100
            %
            
            $
            4,253,203
            
            
            
            100
            %








NOTE
8. SEGMENT INFORMATION





The
Company identified two operating segments for the three months ended March 31,
2010; landfill operation and PET bottle recycling. The landfill operating
segment provides non-hazardous municipal solid waste processing and disposal
services. The PET bottle recycling segment sorts the waste plastic bottles from
the landfill the company is operating, outsources the processing function to
Dongxin and sells the processed PET bottles on consignment basis through
Dongxin. As the Company primarily generates its revenues from customers in the
PRC, no geographical segments are presented.




The
measurement of segment income is determined as earnings before income taxes. The
measurement of segment assets is based on the total assets of the segment,
including intercompany advances among the PRC entities. Segment income and
segment assets are reported to the Company’s chief operating decision maker
(“CODM”) using the same accounting policies as those used in the preparation of
these condensed consolidated financial statements.




The
segment information for the reportable segments for the three months ended March
31, 2010 and the reconciliation of reportable segment net sales, net income
before tax and assets to the consolidated total are as follows:




For
      the Three Months Ended
              March
      31, 2010 (unaudited)
            
            Landfill
              Operation
            
            
            PET
      Bottle
              Recycling
            
            
            Consolidated
              TotalNet
      Sales
            
            
            1,122,699
            
            
            
            465,055
            
            
            
            1,587,754Interest
      income
            
            
            23,226
            
            
            
            -
            
            
            
            23,226Depreciation
      and Amortization
            
            
            60,970
            
            
            
            1,433
            
            
            
            62,403Segment
      assets
            
            
            15,600,620
            
            
            
            600,358
            
            
            
            16,200,978Segment
      net income before tax
            
            
            927,986
            
            
            
            327,125
            
            
            
            1,255,111




13
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
9. 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 had 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 Note 13, the
Company renegotiated with the Bank for a temporarily reduced quarterly principal
repayment in the amount of RMB 200,000 ($29,278) each quarter, starting in the
third quarter of 2007.





The
Company recommenced the landfill operation in October 2009 and obtained an
extension for the above loan on November 13, 2009. The extended loan has a fixed
interest rate of 6.534% per annum and matures on December 25, 2011. In
accordance with the loan extension agreement, the Company will be required to
make the regular quarterly repayments as previously agreed. For the three months
ended March 31, 2010, the Company repaid $241,648 to the
lender.  Interest expense for the three months ended March 31, 2010
and 2009 amounted to $40,769 and $59,018, respectively, and was capitalized as
construction in progress.
 
 As of
March 31, 2010 and December 31, 2009, the loan payable consists of the
following:




March
      31, 2010
            
            December
      31, 2009(Unaudited)Loan
      payable
            
            $
            1,812,360
            
            
            $
            2,054,008Less:
      current portion
            
            
            966,592
            
            
            
            966,592Loan
      payable - non-current portion
            
            $
            845,768
            
            
            $
            1,087,416






NOTE
10.  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 three months ended March 31, 2010 and
2009.




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 subject to tax at a statutory rate of 25%.


14
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




NOTE
10.  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 was 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.




The
estimated tax savings as a result of our tax holidays for the three months ended
March 31, 2010 and 2009 amounted to $169,587 and $38,201, respectively. The net
effect on earnings per share had the income tax been applied would decrease
basic earnings per share for the three months ended March 31, 2010 and 2009 from
$0.09 to $0.07 and from $0.01 to $0.00, respectively.




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 unified 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 is 25%, replacing the previous tax rate of 33%. However, companies
previously approved for any income tax 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.




The
Company was incorporated in the United States.  It incurred net operating
losses for U.S. income tax purposes for the three months ended March 31,
2010 and 2009. The net operating loss carry forwards, including amortization of
share-based compensation, for United States income tax purposes amounted to
$947,955 and $852,267 as of March 31, 2010 and December 31,2009, respectively,
which may be available to reduce future periods' taxable income. These carry
forwards will expire, if not utilized, beginning in 2028 through 2029.
Management believes that the realization of the benefits arising from this loss
appear to be uncertain due to Company's limited operating history and continuing
losses for United States income tax purposes. Accordingly, the Company has
provided a 100% valuation allowance at March 31, 2010 for the temporary
difference related to the loss carry-forwards. Management reviews this valuation
allowance periodically and makes adjustments as warranted.




15
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
10.  INCOME TAXES (Continued)




Deferred
tax assets and the related valuation allowance were as follows:




March
      31, 2010
            
            December
      31, 2009(Unaudited)Deferred
      Tax Assets
            
            $
            322,305
            
            
            $
            289,771Less:
      Valuation Allowance
            
            
            (322,305
            )
            
            
            (289,771
            )Net
      Deferred Assets
            
            $
            -
            
            
            $
            -





Income
tax returns for the years prior to 2006 are no longer subject to examination by
tax authorities.






NOTE
11.   STOCKHOLDERS' EQUITY




In the
second quarter of 2008, the Company issued a total of 2,950,000 shares of its
common stock as compensation to consultants and seven employees for a fair value
of $1,327,500, which was recorded in additional paid-in capital.






NOTE
12.   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. Subject
to the terms and provisions of the 2007 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 2007 Plan with a weighted average grant price of
$0.49 and average vesting period of 3 years.





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 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.




16
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
12.   STOCK-BASED COMPENSATION (Continued)





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 non-vested shares as of March 31, 2010, and
changes during the three months ended March 31, 2010, is presented
below:






Non-vested
      Shares
            
            Shares
            
            Weighted-Average
              Grant
      Date Fair ValueNon-vested
      at December 31, 2009
            
            
            2,706,800
            
            
            $
            1,326,727Granted
            
            
            -
            
            
            
            -Vested
            
            
            217,073
            
            
            
            95,683Forfeited
            
            
            -
            
            
            
            -Non-vested
      at March 31, 2010 (unaudited)
            
            
            2,489,727
            
            
            $
            1,231,044




A summary
of the status of the Company’s deferred stock compensation under the Plan as of
March 31, 2010, and changes for the three months ended March 31, 2010, is
presented below:




Deferred
      stock compensation as of December 31, 2009
            
            $
            1,498,319Compensation
      expenses debited to statement of operationswith
      a credit to additional paid-in capital
            
            
            (95,688
            )Deferred
      stock compensation as of March 31, 2010 (unaudited)
            
            $
            1,402,631




17
 EASTERN
ENVIRONMENT SOLUTIONS, CORP AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE
13. SIGNIFICANT EVENT





On June
13, 2007, the company filed a Form 8-K with the SEC, announcing 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 was
carrying out certain adjustments to the original landfill plans of our
subsidiary, Harbin Yifeng Eco-environment Co. Ltd. (“Harbin Yifeng”).  Such
adjustments resulted 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 disrupted Harbin Yifeng’s normal operations.  After careful
consideration, our Board of Directors decided to temporarily suspend Harbin
Yifeng’s operations while the measures were being carried out. However, Harbin
Yifeng was still entitled to collect 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 was required to compensate and pay
Harbin Yifeng a sum equivalent to the fee for disposing 800 tons of waste per
day during the Suspension Period.




On
November 16, 2009, the Company issued a press release, announced that it has
reopened its MSW landfill in Harbin. As notified by the Harbin Municipal Urban
Administrative Bureau (HMUAB), the Company recommenced its operations at the
landfill on October 30, 2009. Since then, the landfill has been in full
production and returned to the level of operations it carried on prior to the
landfill suspension in June 2007.




On
January 20, 2010, the Company signed a supplementary agreement with HMUAB.
According to the supplementary agreement, from January 1, 2010, the waste
disposal subsidy was raised from RMB42 yuan per ton as set in the original
franchise contract to RMB60 yuan per ton.




18


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  Section 1A of our Annual Report on Form 10-K for the year ended
December 31, 2009 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.




Results
of Operations




The
growth of our business was delayed in June 2007, when the Harbin Municipal Urban
Administrative Bureau (“HMUAB”), which was our only customer at that time, 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 involved the relocation of some of the
neighboring residents, as well as the relocation of our wastewater disposal
plant.  The cost of the modifications was borne entirely by the
HMUAB.  Nevertheless, while the modifications are ongoing, we
suspended our operations at the Landfill, which are currently our only source of
revenue.  The suspension was lifted in November 2009, and we have now
returned to full operations.  Our condensed consolidated financial
statements for the first three months of 2009, however, reflect the results of
suspended operations.





In the
first quarter of 2010, our business prospects brightened
considerably.  The most significant events that occurred in the
quarter were:




·
            In
      January 2010 we executed an agreement with the HMUAB that increased the
      fee payable to us for waste disposal from 42 RMB per ton to 60 RMB per
      ton.


·
            In
      February 2010 the HMUAB increased the limits on our operations from 1,200
      tons of waste per day to 1,500 tons per
day.


·
            In
      January 2010 we took the first major step towards implementing our plan to
      commercialize the resources available in the waste deposited in the
      landfill, as we engaged an agent to process and distribute the
      polyethylene terephthalate ("PET") bottles that we remove from the
      landfill.





Our
agreements with Harbin Dongxin Group mark the expansion of our business from
waste storage toward the efficient recycling of waste into value-added
products.  The use of PET by the bottling industry has increased
dramatically in the past decade, as has the demand for recycled PET for a
variety of industrial purposes, especially as a component of solar-heating
installations.  With both supply and demand for PET established, the
logic of
positioning ourselves as middleman becomes evident.  Since January
2010, we have been removing the PET bottles from waste deposited in the Harbin
landfill and delivering the bottles to Harbin Dongxin Group on a consignment
basis.  We pay Harbin Dongxin Group a per-ton fee for processing the
bottles into usable PET, and then we consign the resulting PET to Harbin Dongxin
Group for resale to industry.  We fix a minimum resale price, which
Harbin Dongxin Group must collect and remit to us upon sale of the recycled
PET.  Harbin Dongxin Group is entitled to retain any revenue it
obtains from the resale in excess of the fixed minimum
price.


19





Already
the sale of recovered PET bottles produced 29% of our revenue ($465,055) in the
first quarter of 2010.  With the $1,122,699 contributed by HMUAB
reimbursements for our landfill operations, we increased revenue by 259% from
$442,345 in the first three months of 2009 to $1,587,754 in the first three
months of 2009, during which we accrued only the minimum fee guaranteed by HMUAB
in our agreement.  For the future we expect growth to
continue.  Having now returned to operations, we will endeavor to
expand our waste processing operations by (a) pursuing strategic acquisitions,
(b) developing additional landfills, and (c) implementing additional 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 first three months of 2009 were achieved without any
production on our part, we still realized $103,218 in cost of goods
sold.  These costs were attributable to the fact that we 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 ended.  This decision proved
advantageous as 2010 began, as we were able to return promptly to full-scale
operation without significant start-up costs or
inefficiencies.  During the three months ended March 31, 2010 our cost
of goods sold was only twice the level of the year-earlier period, although
revenues more than tripled.





The
relative efficiency of our operations (and the wisdom of retaining our employees
on salary during the suspension of operations) were demonstrated by the modest
(6%) increase in selling, general and administrative expenses that we
experienced in the first quarter of 2010.  In both periods, the
majority of our selling, general and administrative expense was attributable to
the expensing of stock compensation that we gave to employees and consultants in
2008 as incentives for future services:  $95,688 in both the first
quarter of 2010 and the first quarter of 2009.  At March 31, 2010 the
remaining $1,402,631 in deferred stock compensation expense 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
resulted in a pre-tax income of $1,255,111 for the three months ended March 31,
2010, compared to a pre-tax income of $208,942 during first three months of
2009.  As a result of Chinese tax laws that reward foreign investment
in China, Yifeng was entitled to exemption from income taxes during 2007 and
2008, followed by a 50% abatement of taxes from 2009 to 2011.  In the
first quarter of 2010, after accruing $169,587
for income taxes, our net income was $1,085,524, representing $0.08 (diluted
$0.07) per share.  Net income in the first quarter of 2009 was
$170,741, or $.01 per share (basic and diluted).


20





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 included in the
retained earnings on our balance sheet; the translation adjustments are included
in 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 first quarter of 2010, the effect of converting our financial results from
RMB to U.S. Dollars was to reduce our accumulated other comprehensive
income by $48,575.  During the first quarter of 2009, when the
exchange rate was more stable, the effect of converting our financial results
from RMB to U.S. Dollars was to reduce our accumulated other comprehensive
income by $28,038.





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 was for a 5-year term, maturing November 15, 2009 with interest
adjustable based on official rates. The loan agreement does not include any
financial covenants with which the Company must comply.  In November
2009 the Bank extended the due date of the loan to December 25, 2011 and fixed
the interest rate at 6.534% per annum.  In addition to paying the
quarterly interest, the Company is also required to make $241,648 pre-determined
principal repayments every quarter.





Our working capital at March 31, 2010
totaled $4,883,912, an increase of $910,940 from our working capital at December
31, 2009.  The increase was mainly attributable to our net income, as
the $446,803 increase in our accounts receivable was offset by the repayment in
March 2010 of the $440,000 loan we had made to Harbin Jiayi Import and Export
Co., Ltd. in 2009.





The largest component of our working
capital at March 31, 2010 consisted of $4,450,265 owed to us by
HMUAB.  The receivable reached this level during the suspension of
operations.  Although under the BOT agreement, payments were due
thirty days after each month, during the suspension of Landfill operations
between June 2007 and October 2009, HMUAB made few payments.  During
2009, HMUAB made no payments at all during the first ten
months.  However, since the Landfill re-opened in November 2009, HMUAB
has begun to pay both current accounts and portions of the past due
account.  In February 2010 HMUAB also sent us a written
acknowledgement of the $4,253,203 that it owed us at December 31, 2009, with a
schedule of payments that will satisfy the receivable during 2010:  4
million RMB in the first quarter of 2010, 5 million RMB in the second quarter, 8
million RMB in the third quarter, and the balance of 12.037 million RMB in the
fourth quarter.  Accordingly, 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 – and accounts
receivable, our largest asset category at March 31, 2010 was “advances to
suppliers,” totaling $3,784,613,
an increase of $632 since December 31, 2009.  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 operations during the three months
ended March 31, 2010 provided $786,560 in net cash.  Net cash from
operations was less than net income for the period primarily due to a $446,803
increase in accounts receivable during the quarter.  Accounts
receivable increased as a result of the revival of operations at the Landfill,
and as a result of the initiation of sales of PET, both of which resulted in
sales in the first quarter for which we will collect in the second
quarter.  During the first quarter of fiscal year 2009, by comparison,
our operations used $69,995 in cash, as our landfill operations were suspended
during that period and HMUAB was accruing but not paying the minimum contractual
fee.
  During the first three months of 2009,
when our operations were suspended, we utilized our cash reserves by making
loans to third parties, to achieve better interest rates than were offered by
local banks.  We made a loan of $526,511 during that quarter to Harbin
Jiayi Import and Export Co., Ltd., which agreed to pay us 5.31% annual
interest.  During the same period we collected a loan of $234,518 that
we had previously made to Harbin Binjiang Freight Co., Ltd., which was owned by
our then-President.  Our investing activities during the first quarter
of 2009, therefore, used $388,753 in cash.  During the first quarter
of 2010, on the other hand, we collected the remaining balance of the loan made
a year earlier to Harbin Jiayi Import and Export Co., and so our investing
activities provided $375,969 in cash.
  The cash provided by investing
activities in the first quarter of 2010 was offset in part by $241,648 that we
used during the first quarter of 2010 to satisfy our bank loan
obligations.  In the first quarter of 2009, the bank had reduced our
payment obligations due to the suspension of landfill operations, and we paid
only $24,165 on account of our bank loan.  Now that the landfill is
operating again, we will incur quarterly payment obligations to the bank of
$241,648 plus interest.
  21




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.





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
      3
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      4T
            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 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.


22





PART
II   -   OTHER INFORMATION




Item
1.        Legal Proceedings.




None.





Item
1A.     Risk Factors.




There
have been no material changes from the risk factors included in the Annual
Report on Form 10-K for the year ended December 31, 2009.





Item
2.        Unregistered Sales of Equity
Securities and Use of Proceeds.




(a) Unregistered Sale of Equity
Securities




None.





(c)  
   Repurchase of Equity Securities




The
Company did not repurchase any shares of its common stock during the 1st
quarter of 2010.





Item
3.        Defaults Upon Senior
Securities.




None.





Item
4.        Reserved.




Item
5.        Other
Information.




None.




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


23


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:
      May 17, 2010
            By:
      /s/ Feng
      YanFeng
      Yan, Chief Executive Officer