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OHL USA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 Note 1 - Nature of Operations and Principles of --onsolidation (cont'd.) Business Activitv (cont'd In March 2010, USA entered into a joint venture agreement with Tully Construction Co., Inc. to form Tully-OHL Joint Venture, LLC ("Tally"). The purpose of the joint venture is to perform a contract for the New York City Economic Development Corporation ("EDC") for the replacement of existing water siphons between the boroughs of Brooklyn and Staten Island, Contract No. 22560002 (the "Contract") On March 15, 2011, USA and Tully Construction Co., Inc. entered into an agreement which superseded the joint venture agreement. Under the terms of said agreement, USA was appointed the managing member of the joint venture and is fully and solely empowered to represent and bind the joint venture. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810, Consolidation, USA has analyzed its relationship with its joint venture, Tully, and determined it is a variable interest entity and USA is the primary beneficiary. USA is the primary beneficiary of Tully because USA has the power to direct the activities of Tully that most significantly impact Tully's economic performance. Those activities include USA being solely responsible for the performance and completion of the Contract. Tully Construction Co., Inc. remains obligated under the payment and performance bonds. Therefore, USA has consolidated Tully's net assets in these consolidated financial statements. At December 31, 2020, the total assets and liabilities of Tully were approximately $1,363,000 and $1,353,000, respectively. For the year ended December 31, 2020, revenues and costs of Tully were approximately $377,000 and 8377,000, respectively. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the wholly- owned subsidiaries of the Company, and the accounts of the variable interest entity for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in the consolidated financial statements. Additionally, the Company includes the accounts of the unconsolidated joint ventures on a proportionate consolidation basis (see Note 10). 11