- Bluechiip (BCT) has revealed its key customer, Labcon North America, is trying to terminate its $15.9 million three-year chip supply agreement
- Labcon has also made a claim for damages totalling US$500,000 (around A$715,350)
- But Bluechiip labelled the termination ‘unlawful’ and refused to pay the damages
- Instead, the tracking technology company is demanding US$3.5 million (approximately A$5.01 million) from Labcon in owed payments under the agreement
- The breakdown in negotiations between the two companies comes after COVID-19 restrictions stopped them both from engaging customers
- Shares in Bluechiip have had a turbulent day on ASX since the news broke, currently down 28.1 per cent at 4.1 cents per share
Bluechiip (BCT) has had one of its key customers try and terminate its agreement and claim US$500,000 (around A$715,350) in damages.
Labcon North America is trying to terminate its three-year chip supply agreement, worth $15.9 million and signed back in 2018, a move which Bluechiip has labelled ‘unlawful.’
Labcon is also claiming damages along with the termination, though Bluechiip has stated it won’t be paying.
Instead, the company will seek to be paid US$3.5 million (approximately A$5.01 million) by Labcon, the amount it argues it’s still owed under the supply agreement.
“We are very disappointed in Labcon’s decision not to perform its obligations under our agreement,” said Bluechiip CEO Andrew McLellan.
“Bluechiip directors have no alternative but to enforce Bluechiip’s rights under the supply agreement to the fullest extent possible,” he added.
The breakdown between the two companies occurred earlier this year when COVID-19 began affecting both businesses ability to engage customers.
In a statement released today, Bluechiip said it had been negotiating possibly deferring contract payments, at Labcon’s request.
Following the recent notice of termination from Labcon, negotiations have been abandoned and lawyers called in.
Bluechiip said it will instruct its legal team to “pursue all rights and remedies available to it” under the agreement signed with Labcon.
The company also said it was well-positioned to ride out the rest of COVID-19 financially, with $7.9 million cash in the bank at the end of the financial year.
However, news of the lawsuit has sent Bluechiip’s share price plummeting, with a turbulent performance on the ASX since opening today.
Shares are currently trading down 28.1 per cent at 4.1 cents per share at 3.02 pm AEST.