UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 
 ( X
      )
              ANNUAL
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2009(   )
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.For
      the transition period from _________ to
  __________
 
 
 Commission
File Number 0-31193
 
 EASTERN
ENVIRONMENT SOLUTIONS, CORP.
 (Exact
Name of Registrant as Specified in Its Charter)
 
 NEVADA
              16-1583162(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)
 
 HARBIN
DONGDAZHI STREET 165,
 HARBIN
150001
 PEOPLE’S REPUBLIC OF
CHINA
 (Address
of principal executive offices)
 
 (011)-86-451-53948666
 (Issuer's
telephone number)
 
 Securities
Registered Pursuant to Section 12(b) of the Exchange Act: NONE
 
 Securities
Registered Pursuant to Section 12(g) of the Exchange Act:
 
 COMMON STOCK, $.0001 PAR
VALUE
 (Title of
Class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 406 of the Securities Act.    Yes __ No √
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    Yes __ No √
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes  √   No __
 
 Indicate
by check mark 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405) is not contained herein, and will not be
contained,  to the best of
registrant's  knowledge,  in definitive proxy or
information  statements incorporated  by
reference  in Part III of this Form 10-K or any  amendment
to this Form 10-K. [ ]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check One)
  Large
accelerated filerAccelerated filerNon-accelerated filerSmall reporting company X
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes __ No √
 
 As of
June 30, 2009 (the last business day of the most recently completed second
fiscal quarter) the aggregate market value of the common stock held by
non-affiliates was approximately $2,905,093, based upon the closing sale price
of $.50 per share.
 
 As of
March 15, 2010, there were 14,970,186 shares of common stock
outstanding.
 
 Documents
incorporated by reference: NONE
  
 
 PART
I
 
 FORWARD-LOOKING
STATEMENTS: NO ASSURANCES INTENDED
 
 In
addition to historical information, this Annual Report contains forward-looking
statements, which are generally identifiable by use of the words “believes,”
“expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or
similar expressions. These forward-looking statements represent Management’s
belief as to the future of Eastern Environment Solutions,
Corp.  Whether those beliefs become reality will depend on many
factors that are not under Management’s control.  Many risks and
uncertainties exist that could cause actual results to differ materially from
those reflected in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in the
section entitled “Risk Factors.” Readers are cautioned not to place undue
reliance on these forward-looking statements. We undertake no obligation to
revise or publicly release the results of any revision to these forward-looking
statements.
  ITEM
1.                BUSINESS
 
 Our
Corporate Structure
 
 Our
corporate structure is set forth below:
 
 
 Overview
of Yifeng’s Business
 
 Yifeng is
an environmental engineering company which has been operating since
2003.  Yifeng provides two principal services: (i) non-hazardous
municipal solid waste processing and disposal services and (ii) environmental
engineering consulting services (provided through its wholly-owned subsidiary,
Zhiye).
  2
 
 Non-Hazardous Solid Waste
Processing
 
 Yifeng is
one of the leading regional, private environmental engineering companies in the
PRC. Yifeng currently provides its services through its only landfill site (the
“Landfill”) situated in the town of Jin Jia town, approximately 30 km from
Harbin, which is the capital of Heilongjiang Province. The Harbin Municipal
Urban Administrative Bureau (“HMUAB”) has authorized the Landfill to accept
“municipal solid waste” (“MSW”), which is a type of waste generated by
residential households and businesses such as restaurants and retail
establishments. The Landfill occupies 55 hectares with an anticipated total
capacity of more than 7.8 million tons of MSW.The Landfill can be used to
dispose of 1,500 tons of MSW per day, approximately 42% of the total MSW
produced by the population of Harbin.
 
 Solid
waste management in the PRC is generally administered and financed by the
municipal governments.  The Environmental Protection Bureau and the
Public Sanitation Bureau are responsible for the collection, treatment and
disposal of waste and the Municipal Urban Construction Bureau is responsible for
managing the construction of landfill sites and the disposal of waste. In order
to construct a new landfill, the Municipal Urban Construction Department
conducts a site feasibility study and submits the study to the Municipal
Environmental Protection Bureau for approval. The municipal governments in the
PRC are starting to involve the private sector in solid waste management through
companies such as Yifeng.
 
 Yifeng
currently operates the Landfill under a Build-Operate-Transfer (“BOT”) contract.
It is one of the first companies to work with a municipal government under this
type of contract. BOT is a form of project financing, wherein a private entity
receives a franchise from the public sector to finance, design, construct, and
operate a facility for a specified period, after which ownership is transferred
back to the public sector. During the time that the project proponent operates
the facility, it is allowed to charge facility users appropriate tolls, fees,
rentals, and charges stated in its contract to enable the project proponent to
recover its investment plus the operating and maintenance expenses in the
project.
 
 The PRC
Ministry of Construction has promulgated a Municipal Public Sector BOT
Administrative Measure (the “Measure”). Under the Measure, public sector
services such as water, gas and heat supply, public transportation, and waste
processing can be conducted by the BOT model through open bid. HMUAB and Yifeng
entered into a 17-year BOT Contract on September 1, 2003 as a result of Yifeng
winning in a public bid to build and operate the Landfill in Harbin. The BOT
Contract provides for the construction and operation of the Harbin Xiangyang MSW
Landfill (the “Landfill”).  The agreement has a term of 18 years and
three months, including a 15 month construction period and a 17 year operation
period.  HMUAB agreed to provide 55 hectares of land for the project,
free of charge, and to provide the infrastructure necessary for the construction
of the Landfill.  Yifeng agreed to fund the construction of the
Landfill to a disposal capacity of 1,200 tons per day, which is expected to
entail a commitment of 120 million RMB (@$17.5 million).  Yifeng’s
obligation is secured by a bank letter of credit equal to 30% of its financial
commitment.  During the term of the agreement, Yifeng will manage the
Landfill, and HMUAB will pay Yifeng a monthly fee equal to 42 RMB (@$6.15) per
ton of waste accepted by the Landfill.  Yifeng has the right to seek
price adjustments based on documented expenses.  HMUAB guarantees a
minimum of 800 tons of waste per day will be delivered to the
Landfill.  Upon termination of the agreement, Yifeng will have no
further obligations, but all of the assets related to the Landfill operation
will become property of HMUAB free of liens.
  3
 
 The
purpose of the project is to landfill the MSW in a way that it has little or no
impact on surrounding land and residents. Prior to the project, only
approximately 5.7% of the total MSW was disposed of in a safe manner in Harbin.
It is anticipated that this project can result in the safe disposal of an
additional 34.3% of MSW.
 
 The
development of the Landfill is being carried out in phases, although the
Landfill was ready to accept waste upon completion of Phase 1.  There
are three phases of the project, which will together require a total investment
of approximately RMB 160,000,000 (approximately $21,505,376), of which Yifeng is
required to provide approximately RMB 120,000,000 (approximately $16,129,032).
Yifeng has already contributed RMB 70,000,000 (approximately $9,408,602) and
HMUAB has contributed RMB 40,000,000 (approximately $5,376,344). Phase I of the
project was completed and put into operation in November 2004.  It
included waste landfill areas, a waste water adjusting pool and a processing
station, laboratory and other affiliated construction such as office buildings,
roads, etc. YIfeng has been accepting waste into the Landfill and thus
generating revenues since November 2004, therefore, except during the period of
suspended operations described below.  Yifeng plans to continue to
construct waste landfill areas in Phase II and Phase III which are expected to
be completed in 2011 and 2013, respectively.
 
 In June
2007 the HMUAB was mandated by the PRC National Environment Protection Bureau to
carry out certain modifications to the development of the Landfill for the
protection of local residents.  The modifications involve the
relocation of some of the neighboring residents, as well as the relocation of
our waste water disposal plant.  While the modifications were ongoing,
we suspended our operations at the Landfill, although HMUAB had a continuing
obligation to pay us the base fee provided for in the BOT
contract.  In November 2009 the suspension was lifted, and we have
returned to full operations at the Landfill.  In February 2010 HMUAB
increased our capacity authorization from 1200 tons per day to 1500 tons per
day.
 
 Environmental Engineering
Consulting Services
 
 Yifeng,
through its wholly-owned subsidiary, Zhiye, offers environmental engineering
consulting services.  The services offered by Zhiye
include:
  §
              environmental
      project investment and operation,
 §
              production
      site environmental protection design and
  construction,
 §
              non-hazardous
      waste disposal solutions,
 §
              air,
      water, soil, noise-related environmental product development,
      and
 §
              ecological
      and environmental project consulting
services.
  4
  Zhiye’s
consulting business generated approximately 27% of Yifeng’s total revenues for
the fiscal year ended December 31, 2006.  None of that business
carried over into 2007, however, and we have realized no revenue from Zhiye
since 2006.  Our plan is to seek new consulting business opportunities
in 2010.
 
 Technology
and Processes
  Yifeng
believes that its technologies and landfill site design represent an improvement
over traditional landfill methods. The vast majority of MSW generated in the PRC
is ultimately sent to simple dump sites on the suburban outskirts of cities.
These dump sites without any sanitation measures pose significant environmental
hazards, particularly associated with leachate to underground water. Until 2004,
very few landfill sites in the PRC were equipped with leachate collection and
treatment systems, which are required in developed countries.
 
 The
design of the Landfill incorporates features to protect groundwater and surface
water, prevent soil erosion, protect against fire and provide easy access to
control landfill gases and leachate. It is designed to be compatible with the
surroundings both during its active life and after it is closed.
 
 The
Landfill is designed to meet international standards and comply with all
relevant local PRC regulations, including the Sanitary Landfill Technical
Standards of Municipal Solid Waste issued by the PRC’s National Ministry of
Construction. Yifeng has installed a synthetic 2mm high-density
polyethylene membrane system at the bottom of the Landfill to prevent leachate
from polluting underground water. It has also installed a gas treatment and
collection pipe system at the bottom of the Landfill.
 
 The
Harbin Environment Sanitation Bureau is responsible for collecting and
transporting MSW to the Landfill. At the entrance of the Landfill, inspectors
inspect the waste for its compatibility with the Landfill. Once the waste passes
inspection, it will be weighed using a computer-based weighbridge and then
unloaded into the Landfill.
 
 With the
use of a bulldozer, the waste is pushed up to a height of 50-60 cm. In order to
protect the HDPE membrane from tearing, the initial layer of waste will only be
compacted when it reaches 3-meters thick. It will then be compacted into a 50-60
cm layer, with a waste density of more than 0.8 ton/m3. When
the waste accumulates to a height of 2.5 meters, it will be covered with clay to
prevent mosquitoes and flies from proliferating, and to prevent odor and
light-weight waste from accidentally flying out of the Landfill. The Landfill is
also sprayed periodically and sanitized to protect the surrounding environment
and control mosquitoes.
 
 Yifeng
owns the following equipment, which is utilized in the operation of the
Landfill:
 
 No.
              Description
              Quantity
              Total
      Approximate
                Purchase
      Price (US$)1
              Bulldozer
              2
              134,5002
              Compaction
      machine
              2
              390,0003
              Red
      rock truck transportation vehicle
              2
              60,5154
              Hitachi
      excavator
              1
              165,0005
              Spray
      vehicle
              1
              20,6256
              Car
      loader
              1
              32,5007
              Card
      Ma Si transport vehicle
              2
              52,500Total
              
              855,640
  5
 
 In
summary, the following are the principal technologies used by Yifeng at the
Landfill:
  ·
              Mechanical
      ventilated aerobic and anaerobic landfill
  techniques
 ·
              Leachate
      collection
 ·
              Synthetic
      HDPE horizontal anti-sinking
technique
 ·
              Landfill
      gas and methane collection
 ·
              Municipal
      solid waste compacting technique
 
 Future
Planned Services
  Traditional
methods of municipal waste disposal (open-air dumps) can cause underground water
and air pollution and other environmental problems. Landfill gases, principally
methane, contribute to the production of greenhouse gases (“GHG”). In order to
control GHG emissions, it is necessary to collect and utilize the landfill
gases.
 
 Yifeng is
presently developing methods to utilize these landfill gases, having already
installed collection tubes in the Landfill.  The Landfill presently
does not produce enough methane for collection.  However, in 2010 or
thereafter Yifeng plans to start collecting the landfill gases and either
sell them to a power company or establish a plant for power
generation.  By that time, the Landfill will have accumulated roughly
1-1.5 million tons of resident MSW. Yifeng plans to raise additional capital to
finance the project, the availability of which cannot be assured.
 
 Yifeng is
planning to promote a “Zero-Waste-to-Landfill” plan as part of its environmental
engineering services.  The goal of the plan will be to efficiently
recycle MSW, thus reducing waste disposal and prolonging the longevity of the
Landfill site. Recycling MSW could provide Yifeng with additional
revenue.
 
 Market
Analysis
  Waste
generation is directly related to socio-economic development, industrialization
and the climate. Generally, as an economy prospers and the urban population
grows, more solid waste is produced. During the last two decades, the PRC’s
economy has been growing at an annual rate of almost 10%. Waste generation has
similarly grown at a pace of 8-10% annually. Currently, every Chinese person
produces an average of approximately 440 kg of solid waste per year. With a
total population of 1.25 billion people, the PRC generates approximately 600
million tons of waste per year. The main types of waste generated in Chinese
cities are:
 
 Type
      of Waste
              Organic
              Paper
              Plastic
              Metal
              Glass
              OthersPercentages
              45-55%
              10-20%
              5-15%
              2-4%
              2-4%
              2-36%
 
 (Source:
World Bank 1996)
  6
 
 According
to data from the World Bank, urban residents generate two to three times more
solid waste than rural residents. With the rapid urbanization of the PRC,
Yifeng’s strategy is to concentrate on larger cities and growth centers, where
the need for waste management is greatest.
 
 Landfills
are the most common method of solid waste disposal in the PRC. By the end of
1995, there were over 1,000 landfill sites in large and mid-sized cities in the
PRC, of which 90% were open-air dumps. By 2002, 70% of such sites remained
open-air dumps. These simple open dump sites, without any proper sanitation,
pose a serious environmental hazard. They generally do not have any leachate
collection system, GHG emission control system, compaction or waste screening
processes. There is, accordingly, a huge demand for the technology, methodology
and management expertise that Yifeng offers. In 1989, the PRC Ministry of
Construction developed a comprehensive technical MSW landfill standard. This
standard provides for the design and management of MSW landfills and requires
that such landfills be designed to protect the environment. Our Landfill
conforms to this standard.
 
 Customers
 
 HMUAB
is Yifeng's sole customer. Under the 17-year term BOT Contract, it provides
Yifeng approximately 42% of the total MSW Harbin produces for a fixed disposal
fee of RMB42 (approximately $6.15) per ton.
  Yifeng is
responsible for collecting and processing the MSW in Harbin. HMUAB could
determine that it does not meet the strict requirements for professional
technology or management and revoke the BOT Contract and grant other companies
the right to collect and process the MSW in Harbin. The termination of the BOT
Contract or Yifeng's rights to operate would have a material adverse impact
on its revenues and operations.
  Insurance
  Yifeng
purchased automobile insurance with third party liability coverage for its
vehicles. It does not have other insurance such as property insurance,
business liability or disruption insurance coverage for its operations in the
PRC. Further, it does not have key man insurance for its officers and
executive managers. Therefore, the loss of one or more of its officers and
executive managers will adversely affect its business and operations. While a
lawsuit against a company such as Yifeng in the PRC would be rare, it cannot
make any assurance that it will not have exposure for liability in the
event of a lawsuit.
 
 Competition
  Only
those companies which have been granted a special operating license issued by
the national and local governments are permitted to engage in the waste business
in the PRC. The national and local governments have strict requirements for
professional technology and management.
  Yifeng is
the first privately owned enterprise engaged in MSW disposal under a BOT
contract in Harbin. It disposes of approximately one third of the total MSW
Harbin produces. The other MSW disposal factories are decades old. They are
state owned enterprises using open-air dumps to dispose of MSW, which can cause
underground water and air pollution and other environmental problems. The
Landfill was completed in 2004, adopting a new sanitary waste disposal method
which was in compliance with relevant environmental rules and
regulations.
  7
  Yifeng
believes it has the following competitive advantages over the possible new
private enterprises entering into the same industry:
 
 
 1.
              Sustainable and
      Predictable Revenue: Because the waste disposal price was fixed
      under the 17-year term BOT Contract and it is now in operation and its
      revenue is sustainable and predictable. Yifeng may use the cash from
      operations for facility and technology improvements, such as the waste to
      energy exchange project as described under “Future Planned Services”
      above.2.
              Processing
      Capacity. Yifeng has completed Phase I of the Landfill
      project. It is continuing Phase II and Phase III of the project where
      affiliated facilities will be constructed. Yifeng believes its new
      facilities will allow it to continue the expansion of its waste disposal
      capacity.
 
 3.
              Leading Position in
      Market. Yifeng is the largest MSW disposal enterprise in
      Harbin with the current disposal capacity of 42% of the total MSW Harbin
      produces. It is also the first privately-owned MSW non-hazardous disposal
      company in China.4.
              Experienced
      Management. Its management is familiar with PRC environmental laws
      and regulations. They have hands-on experience in applying and maintaining
      governmental licenses and permits in the waste disposal industry in the
      PRC.
 
 Government
Regulations
 
 Yifeng
constructed the Landfill. Its construction is subject to the Construction
Standards of Municipal Solid Waste Landfill Projects (the “Construction
Standards”) promulgated by the PRC Ministry of Construction. It completed the
landfill project construction in November 2004. The construction was inspected
by a third party construction monitoring entity and met the Construction
Standards. The landfill disposal it conducts is subject to a variety of
rules and regulations promulgated by the PRC National Ministry of Construction
and other environmental bureaus, including Technical Standards of Municipal
Solid Waste, Waste Water Comprehensive Output Standards, Underground Water
Quality Standard and Control Standards on Municipal Solid Waste Landfill. It is
also subject to business license and approval regulations that are required for
all corporations in the PRC.
 
 Employees
 
 The
Company currently has 52 employees:  45 associated with Yifeng and 7
with its subsidiary, Zhiye.  All of the Company’s employees are
engaged full-time.  The Company believes that its relations with its
employees are good.
  8
 
 ITEM
1A   RISK FACTORS
 
 Investing
in our common stock involves a high degree of risk. You should carefully
consider the risks described below together with all of the other information
contained in this Report, including the financial statements and the related
notes, before deciding whether to purchase any shares of our common stock. If
any of the following risks occurs, our business, financial condition or
operating results could materially suffer. In that event, the trading price of
our common stock could decline and you may lose all or part of your
investment.
 
 We rely on one relationship for all of
our current revenues.
  All of our revenues since 2007 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.
  9
  We have limited business insurance
coverage.
  The insurance industry in China is
still at an early stage of development. Insurance companies in China offer
limited business insurance products, and do not, to our knowledge, offer
business liability insurance. As a result, we do not have any business liability
insurance coverage for our operations. Moreover, while business disruption
insurance is available, we have determined that the risks of disruption and cost
of the insurance are such that we do not require it at this time. Any business
disruption, litigation or natural disaster might result in substantial costs and
diversion of our resources.
 
 Environmental compliance and
remediation could result in substantially increased capital requirements and
operating costs.
  Our
operating subsidiary, Yifeng, is subject to numerous Chinese provincial and
local laws and regulations relating to the protection of the environment. These
laws continue to evolve and are becoming increasingly stringent. The ultimate
impact of complying with such laws and regulations is not always clearly known
or determinable because regulations under some of these laws have not yet been
promulgated or are undergoing revision. Our consolidated business and operating
results could be materially and adversely affected if Yifeng were required to
increase expenditures to comply with any new environmental regulations affecting
its operations.
  We may be required to raise
additional financing by issuing new securities with terms or rights superior to
those of our shares of common stock, which could adversely affect the market
price of our shares of common stock.
  We will
require additional financing to fund future operations and to expand into new
markets. We may not be able to obtain financing on favorable terms, if at all.
If we raise additional funds by issuing equity securities, the percentage
ownership of our current shareholders will be reduced, and the holders of the
new equity securities may have rights superior to those of the holders of shares
of common stock, which could adversely affect the market price and the voting
power of shares of our common stock. If we raise additional funds by issuing
debt securities, the holders of these debt securities would similarly have some
rights senior to those of the holders of shares of common stock, and the terms
of these debt securities could impose restrictions on operations and create a
significant interest expense for us.
  We do not intend to pay any cash
dividends on our common stock in the foreseeable future and, therefore, any
return on your investment in our common stock must come from increases in the
fair market value and trading price of our common stock.
  We have
never paid a cash dividend on our common stock.  We do not intend to
pay cash dividends on our common stock in the foreseeable future and, therefore,
any return on your investment in our common stock must come from increases in
the fair market value and trading price of our common stock.
  10
  All
of our assets are located in China and changes in the political and economic
policies of the PRC government could have a significant impact upon what
business we may be able to conduct in the PRC and accordingly on the results of
our operations and financial condition.
  Our
business operations may be adversely affected by the current and future
political environment in the PRC. The Chinese government exerts substantial
influence and control over the manner in which we must conduct our business
activities. Our ability to operate in China may be adversely affected by changes
in Chinese laws and regulations, including those relating to taxation,
environmental regulations, land use rights, property and other matters. Under
the current government leadership, the government of the PRC has been pursuing
economic reform policies that encourage private economic activity and greater
economic decentralization. There is no assurance, however, that the government
of the PRC will continue to pursue these policies, or that it will not
significantly alter these policies from time to time without
notice.
  Our bank deposits are not
insured.
  There is no insurance program in the
PRC that protects bank deposits, in the way that bank deposits in the U.S. are
given limited protection by the FDIC.  If the bank in which we
maintain our cash assets were to fail, it is likely that we would lose most or
all of our deposits.
  Our
operations are subject to PRC laws and regulations that are sometimes vague and
uncertain. Any changes in such PRC laws and regulations, or the interpretations
thereof, may have a material and adverse effect on our business.
  Our
principal operating subsidiary, Yifeng, is considered a foreign invested
enterprise under PRC laws, and as a result is required to comply with PRC laws
and regulations. Unlike the common law system prevalent in the United States,
decided legal cases have little value as precedent in China. There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including but not limited to the laws and regulations
governing our business and the enforcement and performance of our arrangements
with customers in the event of the imposition of statutory liens, death,
bankruptcy or criminal proceedings. The Chinese government has been developing a
comprehensive system of commercial laws. However, because these laws and
regulations are relatively new, and because of the limited volume of published
cases and judicial interpretation and their lack of force as precedents,
interpretation and enforcement of these laws and regulations involve significant
uncertainties. New laws and regulations that affect existing and proposed future
businesses may also be applied retroactively. We cannot predict what effect the
interpretation of existing or new PRC laws or regulations may have on our
businesses. If the relevant authorities find us in violation of PRC laws or
regulations, they would have broad discretion in dealing with such a
violation.
  The
scope of our business license in China is limited, and we may not expand or
continue our business without government approval and renewal,
respectively.
  Our
principal operating subsidiary, Yifeng, is a wholly foreign-owned enterprise
organized under PRC law, commonly known as a WFOE. A WFOE can only conduct
business within its approved business scope, which ultimately appears on its
business license. In order for us to expand our business beyond the scope of our
license, we will be required to enter into a negotiation with the authorities
for the approval to expand the scope of our business. We cannot assure you that
Yifeng will be able to obtain the necessary government approval for any change
or expansion of our business scope.
  11
  We
rely principally on dividends and other distributions on equity paid by our
operating subsidiary to fund our cash and financing requirements, but such
dividends and other distributions are subject to restrictions under
PRC law. Limitations on the ability of our operating subsidiary to pay
dividends or other distributions to us could have a material adverse effect on
our ability to grow, make investments or acquisitions, pay dividends to you, and
otherwise fund and conduct our business.
 We are a
holding company and conduct substantially all of our business through our
operating subsidiary, Yifeng, which is a limited liability company established
in China. We rely on dividends paid by Yifeng for our cash needs, including the
funds necessary to pay dividends and other cash distributions to our
shareholders, to service any debt we may incur and to pay our operating
expenses. The payment of dividends by entities organized in China is subject to
Yifeng to us only out of accumulated profits as determined in accordance with
PRC accounting standards and regulations. Yifeng is also required to set aside
at least 10% of its after-tax profit based on PRC accounting standards each year
to its general reserves until the cumulative amount of such reserves reaches 50%
of its registered capital. These reserves are not distributable as cash
dividends. In addition, Yifeng is required to allocate a portion of its
after-tax profit to its enterprise expansion fund and the staff welfare and
bonus fund at the discretion of its board of directors. Moreover, if Yifeng
incurs debt on its own behalf in the future, the instruments governing the debt
may restrict its ability to pay dividends or make other distributions to us. Any
limitations on the ability of Yifeng to pay dividends or other distributions to
us could have a material adverse effect on our ability to grow, make investments
or acquisitions, pay dividends to you, and otherwise fund or conduct our
business.
 
 ITEM
1B.            UNRESOLVED
STAFF COMMENTS
  Not
Applicable.
 
 ITEM
2.               DESCRIPTION
OF PROPERTY
 
 All land
in the PRC is owned by the government and cannot be sold to any individual or
entity. Instead, the government allocates to landholders a temporary “land use
right.” Yifeng has been allocated the land use rights for the Landfill. Set
forth below is the detailed information regarding the land:
 
 Allocation
      Authority
              Location
              Area
      (Square Meters)
              Construction
      on the Land
              Audited
      Value
              Term
      of Use RightHarbin
      Municipal Urban Administrative Bureau
                (“HMUAB”)
              Northern
      Part to Jin Jia Town, Xiangyang County, City of Harbin
              550,000
              Office
      and Staff Buildings (6,000 Sq. M.)
              RMB
      14,270,928 (approximately US$1,918,015)
              17
      years from September 1, 2003
  12
  HMUAB
allocated the land use rights to the Landfill to Yifeng for no consideration as
part of the BOT Contract. The land use rights are limited: it must be used
as a landfill and Yifeng cannot encumber it. Pursuant to the BOT
Contract, Yifeng has the right to use the offices and staff
buildings Yifeng built on the Landfill for 17 years from September 1, 2003,
the same term as Yifeng is entitled to the use rights to the Landfill
itself.
 
 Yifeng’s
subsidiary, Zhiye, leases its office space (200 square meters) for an annual
rent of RMB 260,000 (approximately US$34,946) from Harbin Yifeng Group Joint
Stock Co., Ltd., a company of which Mr. Yun Wang owns 22.78%. Yun Wang is the
spouse of Feng Yan, our Chief Executive Officer.  The lease is on a
year to year basis.   The rental charge is believed to be equal
to the market rate for similar property in Harbin.
 
 ITEM
3.               LEGAL
PROCEEDINGS
 
 None.
 
 PART
II
 
 ITEM
      4.
              MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES.
 
 (a)
Market Information
  Our common stock is listed for
quotation on the OTC Bulletin Board system under the symbol
“EESC.”  The following table sets forth for the respective periods
indicated the prices of the common stock, as reported by the OTC Bulletin
Board.  Such prices are based on inter-dealer bid and asked prices,
without markup, markdown, commissions, or adjustments and may not represent
actual transactions.
 
 BidQuarter
      Ending
              
              High
              
              
              LowMarch
      31, 2008
              
              $
              1.95
              
              
              $
              .65June
      30, 2008
              
              $
              1.15
              
              
              $
              .41September
      30, 2008
              
              $
              1.00
              
              
              $
              .68December
      31, 2008
              
              $
              .72
              
              
              $
              .20March
      31, 2009
              
              $
              .91
              
              
              $
              .16June
      30, 2009
              
              $
              .55
              
              
              $
              .25September
      30, 2009
              
              $
              .60
              
              
              $
              .15December
      31, 2009
              
              $
              .70
              
              
              $
              .15
  13
 
 (b)
Shareholders
  On March 5, 2010 there were
approximately 259 holders of record of our common stock.
 
 (c)  Dividends
  Since the Company’s incorporation, no
dividends have been paid on our Common Stock. We intend to retain any earnings
for use in our business activities, so it is not expected that any dividends on
our common stock will be declared and paid in the foreseeable
future.
 
 (d)  Securities Authorized
for Issuance Under Equity Compensation Plans
  The
information set forth in the table below regarding equity compensation plans
(which include individual compensation arrangements) was determined as of
December 31, 2009.
 
 Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
              Weighted
      average exercise price of outstanding options, warrants and
      rights
              Number
      of securities remaining available for future issuance under equity
      compensation plansEquity
      compensation plans approved by security holders.
              0
              N.A.
              0Equity
      compensation plans not approved by security holders.
              0
              N.A.
              50,000Total
              0
              N.A.
              50,000
 ___________________________
 (1)           In
April 2008 the Board of Directors adopted the 2008 Equity Incentive
Plan.  The Plan authorizes the Board to issue up to 3,000,000 shares
of common stock to employees of the Company and its subsidiaries or to
consultants providing services to the Company other than services in connection
with capital raising transactions or promoting or maintaining the market for our
common stock.  To date, the Board has granted 2,950,000 shares
pursuant to the Plan.
 
 (e)  Sale
of Unregistered Securities
  Eastern Environment did not effect any
unregistered sales of equity securities during the 4th
quarter of 2009.
 
 (f)
Repurchase of Equity Securities
  Eastern
Environment did not repurchase any of its equity securities that were registered
under Section 12 of the Securities Act during the 4th
quarter of 2009.
  ITEM
5.                SELECTED
FINANCIAL DATA
 
 Not
applicable.
  14
 
 ITEM
      6.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
      OPERATIONS
 
 Results
of Operations
  The
growth of our business was delayed in June 2007, when the Harbin Municipal Urban
Administrative Bureau (“HMUAB”), which is our only customer, was mandated by the
PRC National Environment Protection Bureau to carry out certain modifications to
the development of its landfill for the protection of local
residents.  The modifications involve the relocation of some of the
neighboring residents, as well as the relocation of our wastewater disposal
plant.  The cost of the modifications was born 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 financial statements for 2009,
however, but for the last two months of the year, reflect the results of
suspended operations.
 
 Moreover,
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
accordance with the terms of our contract, the HMUAB was required to pay us,
during the period of suspended operations, a sum equivalent to the fee for
processing 800 tons of waste per day, which is approximately 66% of the
Landfill’s capacity.  As a result, our revenue from waste processing
during 2009 was $1,881,302.  This represented a 6% improvement over
2008, during which operations were also suspended, due primarily to operating
revenue achieved in the last two months of the year, as well as the decreased
value in 2009 of the U.S. Dollar compared to the Chinese
Renminbi.   Revenue in both years fell short of the $2,347,395
that we achieved in 2006, the last full year of Landfill
operations.  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 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
most of our revenues in 2009 were achieved without any production on our part,
we still realized $347,142 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.
 
 Our
selling, general and administrative expenses increased by 9% from 2008
($535,808) to 2009 ($582,536), primarily as a result of the increased
amortization of stock compensation plans due to additional issuance of employee
compensation stocks in April 2008.  In both years, a large portion 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:  $382,750 in 2009 and $322,917
in 2008.  At December 31, 2009 there remained $1,498,319 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.
  15
 
 The Company’s revenue less expenses
produced a pre-tax income of $960,541 during 2009, compared to a pre-tax income
of $938,935 during 2008.  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.  Our net income for 2008, therefore, was identical to our
pre-tax income, representing $0.09 (diluted $0.08) per share. In 2009, after accruing
$174,270 for income taxes, our net income fell to $786,271, representing $0.08
(diluted $0.06) per share.
 
 Our business operates entirely in
Chinese Renminbi, but we report our results in our SEC filings in U.S.
Dollars.  The conversion of our accounts from RMB to Dollars results
in translation adjustments.  While our net income is added to the
retained earnings on our balance sheet; the translation adjustments are added to
a line item on our balance sheet labeled “accumulated other comprehensive
income,” since it is more reflective of changes in the relative values of U.S.
and Chinese currencies than of the success of our business.  During
2009, the effect of converting our financial results to Dollars was to reduce
our accumulated other comprehensive income by $54,835.  During 2008,
when the exchange rate was more volatile, the effect of converting our financial
results to Dollars was to add $842,549 to our accumulated other comprehensive
income.
 
 Liquidity
and Capital Resources
  To date,
we have financed our operation and met capital expenditure requirements
primarily through bank loans and operating income. On November 18, 2004, the
Company received a long-term loan from Industrial and Commercial Bank of China,
Harbin Branch in the amount of $4,832,960, secured by the Company’s building.
The loan 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 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. When our operations at the Landfill were suspended,
the Bank agreed to reduce our debt service requirements, with the result that in
2009, we made principal payments of only $217,484.  That abatement
ended when we recommenced operations at the Landfill.
 
 Our working capital at December 31,
2009 totaled $3,972,972, an increase of $2,199,630 from our working capital at
December 31, 2008.  Although our net income of $786,271 in 2009 added
to our working capital, the primary reason for the increase was the
reclassification of $1,087,416 of principal due to Industrial and Commercial
Bank of China from current liabilities to long-term liabilities.
 
 The largest component of the increase
in our working capital consisted of $1,734,283 in additional accounts
receivable.  The increase results from the fact that we are dependent
on one source of revenue – HMUAB.  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 during the first ten
months.  However, when the Landfill re-opened in November 2009, HMUAB
paid us approximately $144,000.  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.  Accordingly, we do not consider the receivable to be at risk,
and have made no provision for doubtful accounts.
  16
 
 Despite our $786,271 in net income, our
operations used $109,032 in cash during 2009.  As a result, we reduced
our cash assets by $684,435 to $428,052 during 2009.  Three factors
primarily led to the reduction in our cash position during 2009:
  ·
              We
      applied $253,089 of net income to our ongoing construction efforts at the
      Harbin landfill.
 ·
              We
      made a one-year loan in the amount of $439,476 to Harbin Jiayi Import and
      Export Co., Ltd.
 ·
              Our
      accounts receivable increased by
$1,734,283.
  Our
lending relationship with Harbin Jiayi Import and Export Co., Ltd. was initiated
in the 4th
quarter of 2008.  Harbin Jiayi is a Chinese limited liability company
owned by two individuals, neither of whom has any relationship with Yifeng or
its affiliates.  We made the arrangement in order to put our cash
reserves to a productive use while our operations were suspended.  We
chose Harbin Jiayi Import and Export because it has a good reputation in the
local business community.  We made a smaller amount, short-term loan
at a nominal interest rate at the beginning to initiate the relationship, then
followed in the 1st
quarter of 2009 with a larger loan carrying a market rate of
interest.  A balance of $439,431 was outstanding at December 31, 2009,
which was paid in full on March 11, 2010.
  After
property and equipment – primarily our investment in the Landfill – our largest
asset category at December 31, 2009 was “advances to suppliers,” totaling
$3,783,981, a decrease of $41,003 since December 31, 2008.  These
amounts primarily represent payments to contractors for work on Phase I and
Phase II of the Landfill.  The asset will be reclassified as “property
and equipment” when the related construction projects are
completed.
  Our operating subsidiary, Yifeng, has
sufficient liquidity to fund its near-term operations and to fund the working
capital demands of a modest expansion of its operations.  In order to
complete Phase II and Phase III of the Landfill project within the next six
years, it will be necessary that we obtain additional debt or equity
financing.  In addition, if we are to achieve critical mass in our
industry by developing new landfills, we will require substantial infusions of
capital.  We do not know at this time whether we will be able to
secure such financing, or on what terms it might be available.
 
 Based upon the financial resources
available to Yifeng, management believes that it has sufficient capital and
liquidity to sustain operations for at least the next twelve
months.
  17
  Critical
Accounting Policies and Estimates
 
 In
preparing our financial statements we are required to formulate working policies
regarding valuation of our assets and liabilities and to develop estimates of
those values.  In our preparation of the financial statements for
2009, there were three estimates made which were (a) subject to a high degree of
uncertainty and (b) material to our results:
 
 ·
              The
      determination, described in Note 2 (“Accounts Receivable”) to the
      Consolidated Financial Statements that we would not reserve against the
      account receivable of $4,253,203 owed to us by HMUAB, which was past due
      as of December 31, 2009.  The determination was based on
      assurances from HMUAB that the account would be settled in full during
      2010, as well as payments by HMUAB of 1,000,000 RMB (approximately
      $146,199) in 2009 and 2,664,344 RMB (approximately $389,524) in the first
      two months of 2010.
 ·
              The
      determination that we would not reserve against the advances to suppliers
      in the amount of $3,783,981 as of December 31, 2009.  The
      determination was based on our confidence that, operations at the Landfill
      having resumed, it is probable that the advances will be utilized for
      purchase of construction materials and reclassified as construction in
      progress during 2010.
 ·
              The
      determination, described in Note 3 to the Consolidated Financial
      Statements, to amortize construction costs over the full term of the BOT
      Agreement with HMUAB.  The determination was based on our
      assessment that it is probable that we will continue to utilize the Harbin
      landfill for the full term of the BOT
agreement.
 
 We made
no material changes to our critical accounting policies in connection with the
preparation of financial statements for 2009.
 
 Impact of Accounting
Pronouncements
 
 There were no recent accounting
pronouncements that have had a material effect on the Company’s financial
position or results of operations.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition or results of
operations.
 
 ITEM
      6A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
 
 Not
Applicable.
  18
  ITEM
7.                FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
 
 
 INDEX
TO FINANCIAL STATEMENTS
  Page(s)Report
      of Independent Registered Public Accounting Firm - Friedman
      LLP
              20Report
      of Independent Registered Public Accounting Firm - Bagell Josephs, Levin
      & Company, LLC
              21Consolidated
      Balance Sheets as of December 31, 2009 and 2008
              22Consolidated
      Statements of Income for the Years Ended December 31, 2009 and
      2008
              23Consolidated
      Statements of Stockholders’ Equity for the Years Ended December 31, 2009
      and 2008
              24Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
              25Notes
      to Consolidated Financial Statements
              26
   19
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To
the Board of Directors and
 Stockholders
of Eastern Environment Solutions, Corp.
  We
have audited the accompanying consolidated balance sheet of Eastern Environment
Solutions, Corp. as of December 31, 2009, and the related consolidated
statements of income, stockholders’ equity and comprehensive income, and cash
flows for the year ended December 31, 2009. Eastern Environment Solutions,
Corp.’s management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
  In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eastern Environment
Solutions, Corp. as of December 31, 2009, and the results of its operations and
its cash flows for the year ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of
America.
    /s/
Friedman LLP
  Marlton,
New Jersey
  March
18, 2010
  20
  BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.
 Certified
Public Accountants
 406
Lippincott Drive
 Suite
J
 Marlton,
New Jersey 08053
 (856)
346-2828 Fax (856) 396-0022
   REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To
the Board of Directors and
 Stockholders
of Eastern Environment Solutions, Corp.
  We
have audited the accompanying consolidated balance sheet of Eastern Environment
Solutions, Corp. as of December 31, 2008, and the related consolidated
statements of income, stockholders’ equity and comprehensive income, and cash
flows for the year ended December 31, 2008. Eastern Environment Solutions,
Corp.’s management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
  In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eastern Environment
Solutions, Corp. as of December 31, 2008, and the results of its operations and
its cash flows for the year ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America.
    /s/BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.
 
 Marlton,
      New Jersey
 February
25, 2009
 
     The
report is a copy of the previously issued report.
  The
predecessor auditor has not reissued the report.
  21
 EASTERN
      ENVIRONMENT SOLUTIONS CORPORATIONCONSOLIDATED
      BALANCE SHEETSAS
      OF DECEMBER 31,2009
                
                2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                428,052
                
                
                $
                1,112,487Accounts
      receivable
                
                
                4,253,203
                
                
                
                2,518,920Inventory
                
                
                42,650
                
                
                
                81,203Other
      receivables
                
                
                440,208
                
                
                
                183,996Loans
      to related parties
                
                
                42,828
                
                
                
                243,662Total
      Current Assets
                
                
                5,206,941
                
                
                
                4,140,268Property
      and equipment, net of accumulated depreciation of$1,312,131 and
      $1,066,957, respectively
                
                
                6,319,005
                
                
                
                6,276,030Other
      asset:Advance
      to suppliers
                
                
                3,783,981
                
                
                
                3,824,984Total
      Other Asset
                
                
                3,783,981
                
                
                
                3,824,984Total
      Assets
                
                $
                15,309,927
                
                
                $
                14,241,282LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Loan
      payable - current portion
                
                $
                966,592
                
                
                $
                2,271,492Accounts
      payable
                
                
                810
                
                
                
                887Taxes
      payable
                
                
                174,375
                
                
                
                108Accrued
      expenses and other payables
                
                
                92,192
                
                
                
                94,439Total
      Current Liabilities
                
                
                1,233,969
                
                
                
                2,366,926Long-term
      liabilities:Loan
      payable - net of current portion
                
                
                1,087,416
                
                
                
                -Total
      Liabilities
                
                
                2,321,385
                
                
                
                2,366,926Commitments
      and ContingenciesStockholders'
      EquityCommon
      stock, $0.0001 par value, 100,000,000 shares authorized;14,970,186
      shares issued and outstanding as of December 31, 2009 and
    2008
                
                
                1,497
                
                
                
                1,497Additional
      paid-in-capital
                
                
                3,836,165
                
                
                
                3,453,415Accumulated
      other comprehensive income
                
                
                1,945,261
                
                
                
                2,000,096Statutory
      reserves
                
                
                186,156
                
                
                
                186,156Retained
      earnings - Unappropriated
                
                
                7,019,463
                
                
                
                6,233,192Total
      Stockholders' Equity
                
                
                12,988,542
                
                
                
                11,874,356Total
      Liabilities and Stockholders' Equity
                
                $
                15,309,927
                
                
                $
                14,241,282
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  22
 EASTERN
      ENVIRONMENT SOLUTIONS CORPORATIONCONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE YEARS ENDEDDECEMBER
      31,2009
                
                2008Revenues
                
                $
                1,881,302
                
                
                $
                1,770,054Cost
      of Goods Sold
                
                
                347,142
                
                
                
                307,874Gross
      Profit
                
                
                1,534,160
                
                
                
                1,462,180Selling,
      General and Administrative
                
                
                582,536
                
                
                
                535,808Income
      from operations
                
                
                951,624
                
                
                
                926,372Other
      Income (Expense)Interest
      income
                
                
                8,972
                
                
                
                12,563Other
      expense
                
                
                (55
                )
                
                
                -Total
      other income / (expense)
                
                
                8,917
                
                
                
                12,563Income
      from Operations before Income Taxes
                
                
                960,541
                
                
                
                938,935Provision
      for Income Taxes
                
                
                174,270
                
                
                
                -Net
      Income
                
                
                786,271
                
                
                
                938,935Other
      Comprehensive Income -Foreign
      currency translation gain (loss)
                
                
                (54,835
                )
                
                
                842,549Comprehensive
      Income
                
                $
                731,436
                
                
                $
                1,781,484Basic
      & Diluted Income Per ShareBasic
                
                $
                0.08
                
                
                $
                0.09Diluted
                
                $
                0.06
                
                
                $
                0.08Weighted
      Average Number of Common Shares OutstandingBasic
                
                
                10,020,186
                
                
                
                10,020,186Diluted
                
                
                12,466,935
                
                
                
                12,380,881
 The
accompanying notes are an integral part of these consolidated financial
statements
  23
 EASTERN
      ENVIRONMENT SOLUTIONS CORPORATIONCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITYFOR
      THE YEARS ENDED DECEMBER 31, 2009 AND 2008Accumulated
                  OtherCommon
      Stock
                
                
                
                
                
                Additional
                
                
                Comprehensive
                
                
                Statutory
                
                
                Retained
                
                
                ComprehensiveShares
                
                
                Par
      Value
                
                
                Paid
      in Capital
                
                
                Income
                
                
                Reserves
                
                
                Earnings
                
                
                Income
                
                
                TotalBalance
      December 31, 2007
                
                
                12,020,186
                
                
                $
                1,202
                
                
                $
                3,130,793
                
                
                $
                1,157,547
                
                
                $
                186,156
                
                
                $
                5,294,257
                
                
                
                
                
                $
                9,769,955Stock
      issued for employee-based compensation
                
                
                2,950,000
                
                
                
                295
                
                
                
                (295
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Amortization
      of unearned stock compensations
                
                
                
                
                
                
                
                
                
                
                322,917
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                322,917Comprehensive
      incomeNet
      income for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                938,935
                
                
                
                938,935
                
                
                
                938,935Foreign
      currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                842,549
                
                
                
                
                
                
                
                
                
                
                
                842,549
                
                
                
                842,549Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,781,484Balance
      December 31, 2008
                
                
                14,970,186
                
                
                $
                1,497
                
                
                $
                3,453,415
                
                
                $
                2,000,096
                
                
                $
                186,156
                
                
                $
                6,233,192
                
                
                
                
                
                
                $
                11,874,356Amortization
      of unearned stock compensations
                
                
                
                
                
                
                
                
                
                
                382,750
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                382,750Comprehensive
      incomeNet
      income for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                786,271
                
                
                
                786,271
                
                
                
                786,271Foreign
      currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (54,835
                )
                
                
                
                
                
                
                
                
                
                
                (54,835
                )
                
                
                (54,835
                )Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                731,436Balance
      December 31, 2009
                
                
                14,970,186
                
                
                $
                1,497
                
                
                $
                3,836,165
                
                
                $
                1,945,261
                
                
                $
                186,156
                
                
                $
                7,019,463
                
                
                
                
                
                
                $
                12,988,542
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  24
  EASTERN
      ENVIRONMENT SOLUTIONS CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31,2009
                
                
                2008Cash
      Flows From Operating Activities:Net
      income
                
                $
                786,271
                
                
                $
                938,935Adjustments
      to reconcile net income to net cashused in operating
      activities:Depreciation
      and amortization
                
                
                245,734
                
                
                
                241,104Amortization
      of stock compensation
                
                
                382,750
                
                
                
                322,917Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (1,734,283
                )
                
                
                (1,671,389
                )Inventory
                
                
                38,553
                
                
                
                (73,877
                )Other
      receivables
                
                
                -
                
                
                
                16,235Accounts
      payable
                
                
                (77
                )
                
                
                (20,506
                )Taxes
      payable
                
                
                174,266
                
                
                
                (34
                )Accrued
      expenses and other payables
                
                
                (2,246
                )
                
                
                23,044Net
      cash used in operating activities
                
                
                (109,032
                )
                
                
                (223,571
                )Cash
      Flows From Investing Activities:Purchase
      of property and equipment
                
                
                (1,298
                )
                
                
                (494
                )Additions
      to construction in process
                
                
                (42,288
                )
                
                
                (679,411
                )Payment
      of capitalized interests for construction loan
                
                
                (210,801
                )
                
                
                (281,502
                )Payments
      on loans to unrelated party
                
                
                (256,213
                )
                
                
                (182,987
                )Collections
      (payments) on loans to related parties
                
                
                200,835
                
                
                
                (210,693
                )Net
      cash used in investing activities
                
                
                (309,766
                )
                
                
                (1,355,087
                )Cash
      Flows From Financing Activities:Repayment
      of bank loan payable
                
                
                (217,483
                )
                
                
                (96,659
                )Net
      cash used in financing activities
                
                
                (217,483
                )
                
                
                (96,659
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (48,155
                )
                
                
                682,549Decrease
      in Cash and Cash Equivalents
                
                
                (684,435
                )
                
                
                (992,768
                )Cash
      and Cash Equivalents - Beginning of year
                
                
                1,112,487
                
                
                
                2,105,255Cash
      and Cash Equivalents - End of year
                
                $
                428,052
                
                
                $
                1,112,487Supplemental
      Cash Flow Information:During
      the years, cash was paid for the following:Interest
      expense
                
                $
                210,801
                
                
                $
                213,066Income
      taxes
                
                $
                -
                
                
                $
                -Non-Cash
      Financing Activities:Common
      stock issued for incentive employee compensation
                
                $
                -
                
                
                $
                1,327,500
 The
accompanying notes are an integral part of these consolidated financial
statements
  25
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
  NOTE
1. BASIS OF PRESENTATION AND ORGANIZATION
  Eastern
Environment Solutions, Corp. (“the Company” or “EESC”) was incorporated under
the laws of the State of Nevada and formerly known as USIP.COM, Inc.
(“USIP”).
  On
September 6, 2006, USIP entered into a share purchase agreement with each of
Messrs. Yun Wang, Shibin Jiang and Bin Feng (“Purchasers”). Pursuant to the
share purchase agreement, the Company agreed to sell to Purchasers 50.1% of the
Company’s total 49,643,222 shares of issued and outstanding common
stock.
  On the
same day, the Company also signed a Share Exchange Agreement with American
Eco-Environment Corporation (“AEEC”), a privately held Delaware holding
Corporation, whereby, the Company agreed to acquire all of the outstanding
capital stocks of AEEC by issuing a $5,000,000 face value fixed convertible
notes to the shareholders of AEEC, namely, Yun Wang, Shibin Jiang and Bin Feng.
The notes converted on December 27, 2006 upon the occurrence of the Reverse
Split into 9,049,399 post-split shares of common stock of the Company. The Notes
also carried a total of 1,494,144,955 votes and had a right to vote along with
the common stock on all matters.
  As a
result of these transactions, there was a change in control of USIP as the
shareholders of AEEC became the majority shareholders of USIP.
  For
accounting purposes, the transaction has been accounted for as a reverse
acquisition under the purchase method of accounting. Accordingly, AEEC was
treated as the continuing entity for accounting purposes. Following the merger,
the officers and directors of USIP.COM resigned and were replaced with the
officers and directors of AEEC.
  On
October 20, 2006, the Board of Directors of the Company approved to change the
name of the Company to Eastern Environment Solutions Corporation and to effect a
165.1099:1 reverse stock split of the outstanding shares of Common Stock (the
“Reverse Split” and, together with the Name Change, the “Corporate Actions”).
The Definitive Information Statement was filed with the SEC on November 15,
2006. The Corporate Actions became effective on December 27, 2006.
  The
Company operates its business through its wholly-owned subsidiary Harbin Yifeng
Eco-Environment Co., Ltd. (“Harbin Yifeng”), a corporation organized and
existing under the laws of the People’s Republic of China (“PRC”). Harbin Yifeng
is an environmental engineering company in the PRC that specializes in providing
non-hazardous municipal solid waste processing and disposal services in the
northeast regions of China.
  The
accompanying consolidated financial statements of the Company and its
subsidiaries have been prepared in accordance with generally accepted accounting
principles in the United States of America (“US GAAP”).
  26
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Use
of estimates
  In
preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting year. Significant estimates, required by
management, include the recoverability of long-lived assets.  Actual
results could differ from those estimates.
  Principles
of consolidation
  The
consolidated financial statements for the years ended December 31, 2009 and 2008
include the accounts of the Company and its wholly owned subsidiary, Harbin
Yifeng and Harbin Yifeng’s wholly owned subsidiary, Harbin Yifeng Zhiye
Management Co., Ltd. (“Yifeng Zhiye”).   All significant
inter-company balances and transactions are eliminated in
consolidation.
  Cash
and cash equivalents
  For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
  Accounts
Receivables
  Accounts
receivables are stated at net realizable value. Any allowance for doubtful
accounts is established based on the management’s assessment of the
recoverability of accounts and other receivables. A considerate amount of
judgment is required in assessing the realization of these receivables,
including the current credit worthiness of each customer and the related aging
analysis. The Company’s receivables are primarily due from municipal government
of Harbin City and are considered fully collectible. Therefore, no allowance for
doubtful accounts was deemed necessary for the years ended December 31, 2009 and
2008.
  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.
  27
 
 EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
 NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
  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 the
purchase of the 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 have classified the advances as
operating cash flows, since the payments have not been made at the time of
purchase or soon before or after purchase.  The final phase of the
construction is not completed.  As such, no amortization was made for
the years ended December 31, 2009 and 2008.
  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.
  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 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.
  28
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
 NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Income
taxes (Continued)
  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.
 
 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.
  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.
  29
 
 EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 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 the United States
ASC Codification, which establishes the accounting for employee stock-based
awards. Under the above provisions, 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 years ended December 31, 2009 and 2008, $382,750 and $322,917 stock
based compensation expenses were recorded in selling, general and administrative
expenses.
 
 Basic
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.
  30
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  New
accounting pronouncements
 
 In
June 2009, FASB established Accounting Standards Codification
(“Codification”) as the single source of authoritative accounting principles
recognized by the FASB in the preparation of financial statements in conformity
with GAAP. The Codification will supersede all then-existing non-SEC accounting
and reporting standards. All other non-grandfathered non-SEC accounting
literature not included in the Codification will become non-authoritative. The
Codification is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. Adoption of the Codification did
not have a material impact on the Company’s results of operations or financial
position.
 
 In
June 2009, FASB updated the accounting standards related to the
consolidation of variable interest entities (“VIEs”). The standard amends
current consolidation guidance and requires additional disclosures about an
enterprise’s involvement in VIEs. The standard shall be effective as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009, for interim periods within the first annual
reporting period, and for interim and annual reporting periods thereafter.
Earlier application is prohibited. The Company does not expect the adoption to
have a material impact on the Company’s results of operations or financial
position.
 
 In
May 2009, FASB issued FAS No. 165, "Subsequent Events," which was
subsequently codified within ASC 855, “Subsequent Events”. The standard
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. An entity should apply the requirements of ASC 855
to interim or annual financial periods ending after June 15, 2009. Adoption
of this standard does not have a material impact on the Company’s results of
operations or financial position.
  In April
2009, the FASB updated the accounting standards to provide guidance on
estimating the fair value of a financial asset or liability when the trade
volume and level of activity for the asset or liability have significantly
decreased relative to historical levels. The standard requires entities to
disclose the inputs and valuation techniques used to measure fair value and any
changes in valuation inputs or techniques. In addition, debt and equity
securities as defined by GAAP shall be disclosed by major category. This
standard is effective for interim and annual reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009,
and is to be applied prospectively. The adoption did not have a material effect
on the Company's results of operations and financial condition.
 
  31
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  In
April 2009, the FASB updated the accounting standards for the recognition
and presentation of other-than-temporary impairments. The standard amends
existing guidance on other-than-temporary impairments for debt securities and
requires that the credit portion of other-than-temporary impairments be recorded
in earnings and the noncredit portion of losses be recorded in other
comprehensive income. The standard requires separate presentation of both the
credit and noncredit portions of other-than-temporary impairments on the
financial statements and additional disclosures. This standard is effective for
interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. At the date of
adoption, the portion of previously recognized other-than-temporary impairments
that represent the noncredit related loss component shall be recognized as a
cumulative effect of adoption with an adjustment to the opening balance of
retained earnings with a corresponding adjustment to accumulated other
comprehensive income (loss). The adaption of this standard did not have a
material effect on the preparation of the Company’s consolidated financial
statements.
  In August
2009, the FASB updated the accounting standards to provide additional guidance
on estimating the fair value of a liability in a hypothetical transaction where
the liability is transferred to a market participant. The standard is effective
for the first reporting period, including interim periods, beginning after
issuance. The Company does not expect the adoption to have a material effect on
the Company's consolidated results of operations and financial
condition.
  In
October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue
Recognition (Topic 605) “Multiple Deliverable Revenue Arrangements - A Consensus
of the FASB Emerging Issues Task Force”.  This update provides
application guidance on whether multiple deliverables exist, how the
deliverables should be separated and how the consideration should be allocated
to one or more units of accounting.  This update establishes a selling
price hierarchy for determining the selling price of a
deliverable.  The selling price used for each deliverable will be
based on vendor-specific objective evidence, if available, third-party evidence
if vendor-specific objective evidence is not available, or estimated selling
price if neither vendor-specific or third-party evidence is
available.  The Company will be required to apply this guidance
prospectively for revenue arrangements entered into or materially modified after
January 1, 2011; however, earlier application is permitted.  The
management is in the process of evaluating the impact of adopting this standard
on the Company’s financial statements.
  32
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
3. PROPERTY AND EQUIPMENT, NET
 
 Property
and equipment at December 31, 2009 and December 31, 2008 consist of the
following:
 
 December
      31, 2009
              
              December
      31, 2008Machinery
      and equipment
              
              $
              883,523
              
              
              $
              877,375Vehicles
              
              
              385,965
              
              
              
              383,280Landfills
              
              
              2,143,114
              
              
              
              2,128,203Subtotal
              
              
              3,412,602
              
              
              
              3,388,858Less:
      accumulated depreciation
              
              
              (1,312,131
              )
              
              
              (1,066,957
              )Construction
      in progress
              
              
              4,218,534
              
              
              
              3,954,129Total
      property and equipment, net
              
              $
              6,319,005
              
              
              $
              6,276,030
 
 Depreciation
expense for the years ended December 31, 2009 and 2008 was $245,734 and
$241,104, 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.
 
 During
the ten months ended October 31, 2009 and throughout 2008, the landfill was not
utilized due to suspension of operations.  (See:  Note
12)
  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 BOT agreement. Interest expense in the amount of $210,801
and $213,066 was capitalized for the years ended December 31, 2009 and
2008.
  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 December 31, 2009, the capacity of
the Harbin landfill was 1.6 million tons, of which 880,000 tons of capacity had
been utilized.  As of December 31, 2008, the capacity of the Harbin
landfill was 1.2 million tons, of which 820,000 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:
  33
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
  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
as of December 31, 2009 and December 31, 2008 consists of the
following:
 
 December
      31, 2009
              
              December
      31, 2008Materials
              
              $
              5,813
              
              
              $
              11,068Supplies
              
              
              36,837
              
              
              
              70,135Total
              
              $
              42,650
              
              
              $
              81,203
  No
allowance for inventory was made for the years ended December 31, 2009 and
2008.
  NOTE
5. OTHER RECEIVABLES
  As of
December 31, 2009 and 2008, the balance of other receivables consists the
following:
  December
      31, 2009
              
              December
      31, 2008Harbin
      Jiayi Import and Export Co.,Ltd
              
              $
              439,431
              
              
              $
              183,217Others
              
              
              777
              
              
              
              779Total
              
              $
              440,208
              
              
              $
              183,996
  The
balance with Harbin Jiayi Import and Export Co., Ltd. (“Jiayi”) represents a
third-party loan from the Company. The original loan was paid off by the end of
June 2009. As of December 31, 2009, the balance with Jiayi represented a second
loan from the Company. The loan was unsecured and bore 5.31% annual
interest.  The loan was satisfied on  March 11, 2010, the
stated maturity date.
  34
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
   NOTE
6. RELATED PARTY TRANSACTIONS
  As of
December 31, 2009 and 2008, the balance of loans to related parties consists the
following:
 
 December
      31, 2009
              
              December
      31, 2008Shibin
      Jiang
              
              $
              4,744
              
              
              $
              9,144Yan
      Feng
              
              
              38,084
              
              
              
              -Harbin
      Binjiang freight Co.,Ltd
              
              
              -
              
              
              
              234,518$
              42,828
              
              
              $
              243,662
  Mr.
Shibin Jiang and Ms. Yan Feng 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 these loans to shareholders will be repaid within
one year. Harbin Binjiang freight Co., Ltd is an affiliated company partially
owned by Ms. Yan Feng. The loan was unsecured and bears 6.12% annual interest
rate and was collected in March 2009.
  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 alone accounted for 100% of the gross revenues
for the years ended December 31, 2009 and 2008. At December 31, 2009 and
December 31, 2008, the entire balances of accounts receivable were due from
HMUAB.
  NOTE
8. BANK LOAN PAYABLE
 
 On
November 18, 2004, the Company received a long-term loan from Industrial and
Commercial Bank of China, Harbin Branch in the amount of $4,832,960, secured by
the Company’s building. The loan 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 12, 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.
  35
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
  NOTE
8. BANK LOAN PAYABLE (Continued)
  The
Company recommenced the landfill operation in October 2009 and obtained an
extension for the above loan on November 13, 2009. The extended loan now 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 year ended December 31, 2009, the Company repaid $217,484 to the
lender.
 
 As of
December 31, 2009 and December 31, 2008, the loan payable consists of the
following:
  December
      31, 2009
              
              December
      31, 2008Loan
      payable
              
              $
              2,054,008
              
              
              $
              2,271,492Less:
      current portion
              
              
              966,592
              
              
              
              2,271,492Loan
      payable - non-current portion
              
              $
              1,087,416
              
              
              $
              -
 
 NOTE
9.  INCOME TAXES
  United
States Tax
  EESC is
subject to United States of America tax law. No provision for income taxes in
the United States or elsewhere has been made as EESC had no taxable income
subject to U.S. taxes for the years ended December 31, 2009 and
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”).
  36
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
  NOTE
9.  INCOME TAXES (Continued)
  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 abatement in 2009 amounted to
$174,270. The net effect on earnings per share had the full income tax been
applied would decrease basic earnings per share for 2009 from $0.05 to
$0.04.   The estimated tax savings as a result of our tax holiday
in 2008 amounted to $329,781. The net effect on earnings per share had the
income tax been applied would decrease basic earnings per share for 2008 from
$0.07 to $0.04.
  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 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
loss for U.S. income tax purposes for the years ended December 31, 2009 and
2008. The net operating loss carry forwards, including amortization of
share-based compensation, for United States income tax purposes amounted to
$852,267 and $469,515 as of December 31, 2009 and 2008, 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 December 31, 2009 and 2008 for the temporary difference
related to the loss carry-forwards. Management reviews this valuation allowance
periodically and makes adjustments as warranted. At December 31, 2009 and 2008,
the deferred tax assets and the related valuation allowance were as
follows:
  37
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
  NOTE
9.  INCOME TAXES (Continued)
 September
      30, 2009
                
                
                December
      31, 2008Deferred
      Tax Assets
                
                $
                289,771
                
                
                $
                159,635Less:
      Valuation Allowance
                
                
                (289,771
                )
                
                
                (159,635
                )Net
      Deferred Assets
                
                $
                -
                
                
                $
                -
  NOTE
10.   STOCKHOLDERS' EQUITY
  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.
  No
additional stock was issued in 2009.
  As of
December 31, 2009 and 2008, the Company has 14,970,186 shares of common stock
issued and outstanding.
  NOTE
11.   STOCK-BASED COMPENSATION
  In May
2007, the Board of Directors of the Company adopted and approved the 2007
Employee Incentive Stock Option Plan (the “2007 Plan”), which authorized the
issuance of up to 2,000,000 shares of common stock under the 2007 Plan. 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.
  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.
  38
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
  NOTE
11.   STOCK-BASED COMPENSATION (Continued)
  A summary
of the status of the Company’s nonvested shares as of December 31, 2009 and
2008, and changes during the years ended December 31, 2009 and 2008, is
presented below:
  
 Nonvested
      Shares
              
              Shares
              
              Weighted-Average
                Grant
      Date Fair ValueNonvested
      at January 1, 2008
              
              
              2,000,000
              
              
              $
              988,000Granted
              
              
              2,950,000
              
              
              
              1,327,500Vested
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Nonvested
      at December 31, 2008
              
              
              4,950,000
              
              
              $
              2,315,500Granted
              
              
              -
              
              
              
              -Vested
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -Nonvested
      at December 31, 2009
              
              
              4,950,000
              
              
              $
              2,315,500
  A summary
of the status of the Company’s deferred stock compensation under the Plan as of
December 31, 2009 and 2008, and changes for the years ended December 31, 2009
and 2008, is presented below:
  Deferred
      stock compensation as of January 1, 2008
              
              $
              876,486Deferred
      stock compensation granted in 2008
              
              
              1,327,500Compensation
      expenses debited to statement of operationswith
      a credit to additional paid-in capital
              
              
              (322,917
              )Deferred
      stock compensation as of December 31, 2008
              
              $
              1,881,069Compensation
      expenses debited to statement of operationswith
      a credit to additional paid-in capital
              
              
              (382,750
              )Deferred
      stock compensation as of December 31, 2009
              
              $
              1,498,319
  39
  EASTERN
ENVIRONMENT SOLUTIONS, CORP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (CONTINUED)
 
 NOTE
12. SIGNIFICANT EVENT
  On June
13, 2007, the company filed a Form 8-K with SEC, announced that in accordance
with the PRC National Environment Protection Bureau’s request in relation to
landfills and adjustments to their peripheral inhabitants’ well-being, the
Harbin municipal government city administrative bureau is carrying out certain
adjustments to the original landfill plans of our subsidiary, Harbin Yifeng
Eco-environment Co. Ltd. (“Harbin Yifeng”).  Such adjustments will result
in the relocation of some peripheral inhabitants of the landfill and its waste
water disposal plant. The costs of such adjustments will be borne by the Harbin
municipal government city administrative bureau.  These measures will
disrupt Harbin Yifeng’s normal operations.  After careful consideration,
our Board of Directors has decided to temporarily suspend Harbin Yifeng’s
operations effective June 13, 2007, for an estimated period of 12 months (the
“Suspension Period”) while these measures are being carried out. However, Harbin
Yifeng will still be collecting the minimum fixed fees for the Suspension Period
as per the “Special Permission Operation Rights Contract”, which Harbin Yifeng
had signed with the Harbin municipal government city administrative bureau on
September 1, 2003. The bureau will compensate and pay Harbin Yifeng a sum
equivalent to the fee for disposing 800 tons of waste per day during the
Suspension Period.
 
 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.
  40
  ITEM
      8.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
 
 Not applicable.
 
 ITEM
      8A.
              CONTROLS
      AND PROCEDURES
 
 (a)           Evaluation of disclosure controls and
procedures.
  The term “disclosure controls and
procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the Securities
Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and
reported within required time periods. “Disclosure controls and procedures”
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
company’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
  The
Company’s management, with the participation of the Chief Executive Officer and
the Chief Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by this
annual report (the “Evaluation Date”). Based on that evaluation, the Company’s
Chief Executive Officer and Chief Financial Officer have concluded that, as of
the Evaluation Date, such controls and procedures were not effective due to the
material weaknesses mentioned below.
 
 (b)           Changes in internal
controls.
  The term “internal control over
financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a
company that is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. The Company’s management, with the participation of the Chief
Executive Officer and Chief Financial Officer, has evaluated any changes in the
Company’s internal control over financial reporting that occurred during the
fourth quarter of the year covered by this annual report, and they have
concluded that there was no change to the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
 
 (c)
              Management’s Report on Internal
      Control over Financial
Reporting.
  Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934.  We have assessed the effectiveness
of those internal controls as of December 31, 2009 using the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control –
Integrated Framework as a basis for our assessment.
  41
  Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.  All internal
control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
  A
material weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material misstatement of the Company’s annual or interim financial statements
that is more than inconsequential will not be prevented or detected. In the
course of making our assessment of the effectiveness of internal controls over
financial reporting, we identified two material weaknesses in our internal
control over financial reporting.  These material weaknesses consisted
of:
  a.           Inadequate staffing and supervision
within the accounting operations of our company.  The
relatively small number of employees who are responsible for accounting
functions prevents us from segregating duties within our internal control
system.  The inadequate segregation of duties is a weakness because it
could lead to the untimely identification and resolution of accounting and
disclosure matters or could lead to a failure to perform timely and effective
reviews.
  b.           Lack of expertise in U.S accounting
principles among the personnel in our Chinese
headquarters.  Our books are maintained and our financial
statements are prepared by the personnel employed at our executive offices in
the City of Harbin.  Few of our employees have experience or
familiarity with U.S accounting principles.  The lack of personnel in
our Harbin office who are trained in U.S. accounting principles is a weakness
because it could lead to improper classification of items and other failures to
make the entries and adjustments necessary to comply with U.S.
GAAP.
  Management
is currently reviewing its staffing and their training in order to remedy the
weaknesses identified in this assessment.  To date, we are not aware
of significant accounting problems resulting from these weaknesses; so we have
to weigh the cost of improvement against the benefit of strengthened
controls.  However, because of the above conditions, management’s
assessment is that the Company’s internal controls over financial reporting were
not effective as of December 31, 2009
  This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
  ITEM
      8B.
              OTHER
      INFORMATION
 
 None.
  42
 
 PART
III
 
 ITEM
      9.
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
 
 The
officers and directors of the Company are:
 
 Position/Title
              Age
              Director
      SinceFeng
      Yan
              Chairman,
      Chief Executive Officer
              47
              2009Shibin
      Jiang
              Director /Chief
      Operating Officer
              53
              2006Jianhua
      Sun
              Director/Chief
      Financial Officer
              34
              2006
 
 The
following sets forth biographical information regarding the Company’s
directors.
 
 Feng Yan.Ms. Yan
has been employed as President of Harbin Yifeng Group Co., Ltd. since
1999.  Harbin Yifeng Group Co. is engaged in a wide variety of
businesses, including the distribution of construction materials, chemical
products, hardware, groceries, auto parts and agricultural
products.  Since 2002 Ms. Feng has also served as a Director of Harbin
Binjiang Freightage Market Co., Ltd., a property manager.  And since
2003 she has also served as a Director of Harbin Tianli Real Estate Development
Co., Ltd., which is engaged in real estate development and the distribution of
construction materials, chemical products and books.  Since 1997 Ms.
Feng has also served as Director of the Harbin Tianli Taxi Co., Ltd., which
operates a taxi service in Harbin.  In 1999 Ms. Feng earned a
Bachelor’s Degree with a concentration in Accounting from the Harbin Committee
School of the CCP.  Currently she is pursuing a Masters in Business
Administration at the Guanghua School of Management at Peking
University.
 
 Shibin
Jiang.  Mr. Jiang graduated from Harbin Electrical
Manufacture College of the First Mechanical Industry in 1982. From 1983 to 1987,
he was employed as a Senior Engineer at Harbin’s First Metal Vessels Factory.
Thereafter, he was employed as Chief Engineering Manager in Harbin Harping
Construction Company’s technology department from 1988 to 1995. From 1995 to the
present, he has been employed as Vice President of Bin Jiang Commodity
Transportation Market Ltd.   Since 2003 Mr. Jiang has also been
employed as the General Manager, Chief Engineer and Director of Harbin Yifeng
Eco-environment Co., Ltd.
 
 Jianhua Sun.  Mr.
Sun graduated from the Daqing Heilongjiang Petroleum College with a degree in
accounting in 1999. From 1999 to 2004, Mr. Sun was employed as a Director of the
cost section at ACheng Relay Limited Corp., a company listed on the China Stock
Exchange. From 2004 to 2005, he worked as an accountant in the financial
subsidiary of Harbin Orient Group.  Mr. Sun has been employed as
Harbin Yifeng Eco-environment Co., Ltd’s Chief Financial Officer since
2006.
  43
 
 All of
our directors hold offices until the next annual meeting of the shareholders of
the Company, and until their successors have been qualified after being elected
or appointed.  Officers serve at the discretion of the board of
directors.
 
 Audit
Committee; Compensation Committee; Nominating Committee.
 
 Due to the small size of our Board of
Directors, we have not constituted an audit committee, a compensation committee
or a nominating committee.  Decisions regarding nominations to the
Board will be made by all currently-serving members of the Board.  For
the same reason, we do not have an audit committee financial expert among the
members of our Board of Directors.
 
 Code of
Ethics
 
 The Board of Directors has not adopted
a code of ethics applicable to the Company’s executive officers.  The
Board believes that the small number of individuals involved in the Company’s
management makes such a code unnecessary.
 
 Section 16(a) Beneficial
Ownership Reporting Compliance
 
 None of
the officers, directors or beneficial owners of more than 10% of the Company’s
common stock failed to file on a timely basis the reports required by Section
16(a) of the Exchange Act during the year ended December 31, 2009, except that
Feng Yan failed to file a Form 3 on a timely basis.
 
 ITEM
10.             EXECUTIVE
COMPENSATION
 
 The
following table sets forth all compensation awarded to, earned by, or paid by
Eastern Environment and its subsidiaries to (a) Feng Yan, its Chief Executive
Officer, for services rendered in all capacities to the Company during the
period from September 11, 2009 to December 30, 2009, and to (b) Yun Wang, its
previous Chief Executive Officer, for services rendered in all capacities to the
Company during the period from January 1, 2009 through September 11, 2009 and
the years ended December 31, 2008 and 2007.  There were no other
executive officers whose total salary and bonus for the fiscal year ended
December 31, 2009 exceeded $100,000.
 
 Year
              Salary
              Bonus
              Stock
                Awards
              Option
                Awards
              Other
                CompensationFeng
      Yan
              2009
              $2,235
              --
              --
              --
              --Yun
      Wang
              2009
              $4,400
              --
              --
              --
              --2008
              $5,052
              --
              --
              --
              --2007
              $5,052
              --
              --
              --
              --
  44
 
 Employment
Agreements
 
 Feng Yan
has an employment agreement dated September 11, 2009 with Harbin Yifeng
Eco-Environment Co., Ltd., the subsidiary of Eastern Environment Solutions,
Corp.  The agreement provides that she will serve as President for a
term ending on September 10, 2011.  Harbin Yifeng Eco-Environment will
pay her a salary of at least 3800 Renminbi (approximately $556) per
month.  Ms. Feng will continue to perform services for the four
employers identified in her biographical material above while serving as
President of Eastern Environment Solutions, Corp.
 
 The Company has employment agreements
with its other two executive officers, Shibin Jiang and Jianhua Sun, which
outline salary and benefit arrangements.  The two agreements have
similar terms, which include base salaries of cash, the provision of
labor-related insurance, termination for cause or on 30 days’ notice, and the
provision of labor-related benefits in conformance with PRC labor
laws.  These agreements have one-year terms.
 
 Compensation of
Directors
 
 Employees who are also members of the
Board of Directors are not additionally compensated for their services as a
director.  We currently have no directors who are not also
employees.
 
 Equity
Grants
 
 The
following tables set forth certain information regarding the stock options
acquired by the Company’s Chief Executive Officer during the year ended December
31, 2009 and those options held by him on December 31, 2009.
 
 Option Grants in the Last
Fiscal Year
 
 Number
      of
                securities
                underlying
                option
              Percent
                of
      total
                options
                granted
      to
                employees
                in
      fiscal
              Exercise
                Price
              Expiration
              Potential
      realizable
                value
      at assumed
                annual
      rates of
                appreciation
                for
      option termgranted
              year
              ($/share)
              Date
              5%
              10%Feng
      Yan
              --
              --
              --
              --
              --
              --
 
 The
following tables set forth certain information regarding the stock grants
received by the executive officers named in the table above during the year
ended December 31, 2009 and held by them unvested at December 31,
2009.
  45
  Unvested Stock Awards in the
Last Fiscal Year
  Number
      of
                Shares
      That
                Have
      Not
                Vested
              Market
      Value
                of
      Shares That
                Have
      Not
                VestedYun
      Wang
              --
              --
   ITEM
11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 
 The
following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of the date of this prospectus by
the following:
 
 ·
              each
      shareholder known by us to own beneficially more than 5% of our common
      stock;
  ·
              Feng
      Yan, our Chief Executive Officer
  ·
              each
      of our directors; and
  ·
              all
      directors and executive officers as a
group.
 
 There are
14,970,186 shares of our common stock outstanding on the date of this
report.  Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed below have sole voting power and investment
power with respect to their shares,  subject to community property
laws where applicable.  Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange
Commission.
  In
computing the number of shares beneficially owned by a person and the percent
ownership of that person, we include shares of common stock subject to options
or warrants held by that person that are currently exercisable or will become
exercisable within 60 days. We do not, however, include these “issuable” shares
in the outstanding shares when we compute the percent ownership of any other
person.
 
 Name  and
      Address of
                Beneficial
      Owner(1)
              Amount
      and Nature of
                Beneficial
      Ownership
              Percentage of
      ClassFeng
      Yan
              6,278,000
              41.9%Shibin
      Jiang
              1,196,000
              8.0%Jianhua
      Sun
              30,000
              0.2%All
      officers anddirectors
      (3 persons)
              7,504,000
              50.1%Bin
      Feng
              1,656,000
              11.1%
 _____________________________
 (1)
              Unless
      otherwise noted, the shareholder’s address is c/o Harbin Yifeng
      Eco-environment Co., Ltd., Harbin Dongdazhi Street 165, Harbin,
      Heilongjiang, P.R. China.
  46
   ITEM
      12
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
  Certain Relationships and
Related Transactions
  During
2007 Yifeng made loans to two members of its Board of
Directors:  Shibin Jiang and Yun Wang.  During 2008 Yun Wang
repaid his loan, but Yifeng made an additional loan to Shibin
Jiang.  The amount owed by Shibin Jiang at December 31, 2009 was
$4,744.  The loan is unsecured and interest free.  Mr. Jiang
has agreed to repay the loan within one year.
 
 During
2009 Yifeng made a loan to its Chief Executive Officer, Feng Yan.  The
amount owed by Feng Yan at December 31, 2009 was $38,084.  The loan is
unsecured and interest free.  Ms. Feng has agreed to repay the loan
within one year.
 
 During
2008 Yifeng made a loan in the amount of $234,518 to Harbin Binjiang Freight
Co., Ltd., which is owned by Yun Wang, who is the spouse of our Chief Executive
Officer and who was our Chairman at the time of the loan.  The loan
was unsecured and bore interest at a 6.12% annual interest rate.  The
loan was repaid in full during 2009.
 
 Director
Independence
  None of the members of the Company’s
Board of Directors is an independent director, pursuant to the definition of
“independent director” under the Rules of The NASDAQ Stock Market.
 
 ITEM
13.             PRINCIPAL
ACCOUNTANT FEES AND SERVICES
 
 In January 2010 the audit practice of
Bagell, Josephs, Levine & Company, LLP, the Company’s independent registered
public accounting firm, was combined with Friedman LLP.
 
 Audit Fees
 
 Friedman LLP billed $33,000 to the
Company for professional services rendered for the audit of the fiscal 2009
financial statements and review of the financial statements included in fiscal
2009 10-QSB filings Friedman LLP billed $50,000 to the Company for professional
services rendered for the audit of fiscal 2008 financial
statements.
 
 Audit-Related Fees
 
 Friedman LLP billed $2,000 to the
Company during 2009 for assurance and related services that are reasonably
related to the performance of the 2009 audit or review of the quarterly
financial statements.  Friedman LLP billed $2,000 to the Company
during 2008 for assurance and related services that are reasonably related to
the performance of the 2008 audit or review of the quarterly financial
statements.
  47
 
 Tax Fees
 
 Friedman LLP billed $0 to the Company
during 2009 for professional services rendered for tax compliance, tax advice
and tax planning.  Friedman LLP billed $0 to the Company during 2008
for professional services rendered for tax compliance, tax advice and tax
planning.
 
 All Other Fees
 
 Friedman LLP billed $0 to the Company
in 2009 and billed $0 in 2008 for services not described above.
 
 All of the services described
above were approved by the Board of Directors.  It is the policy of
the Company that all services other than audit, review or attest services must
be pre-approved by the Board of Directors.  No such services have been
performed by Friedman LLP.
 
 Subcontracted Services
 
 The hours expended on Friedman LLP’s
engagement to audit the Company’s financial statements for 2009 that were
attributed to work performed by persons other than full-time permanent employees
of Friedman LLP was not greater than 50% of the total hours
expended.
 
 ITEM
14.             EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
 
 (a)
      Exhibit List3-a
              Articles
      of Incorporation – filed as an exhibit to the Information Statement on
      Schedule 14C filed on September 23, 2005 and incorporated herein by
      reference.3-b
              By-laws
      – filed as an exhibit to the Information Statement on Schedule 14C filed
      on September 23, 2005 and incorporated herein by
  reference.10-a
              Franchise
      Contract made in 2003 between Harbin Municipal Urban Administrative Bureau
      and Harbin Yifeng Group Co., Ltd.10-b
              Employment
      Agreement dated September 11, 2009 between Harbin Yifeng Eco-Environment
      Co., Ltd. and Feng Yan - filed as an exhibit to the Current Report on Form
      8-K filed on September 17, 2009 and incorporated herein by
      reference.21
              Subsidiaries
      –
              American
      Eco-Environment Corporation, a Delaware corporationHarbin
      Yifeng Eco-environment Co., Ltd., a PRC corporationHarbin
      Yifeng Zhiye Management Co., Ltd., a PRC corporation31.1
              Rule
      13a-14(a) Certification – CEO31.2
              Rule
      13a-14(a) Certification - CFO32
              Rule
      13a-14(b) Certifications
  48
  SIGNATURES
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 EASTERN
      ENVIRONMENT SOLUTIONS, CORP.Date:
      March 18, 2010
              /s/ Feng
      YanFeng
      Yan, Chief Executive Officer
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
 
 /s/ Feng
      Yan
              March
      18, 2010Feng
      YanDirector,
      Chief Executive Officer/s/ Jianhua
      Sun
              March
      18, 2010Jianhua
      SunDirector,
      Chief Financial Officer/s/ Shibin
      Jiang
              March
      18, 2010Shibin
      Jiang, Director
   49