Ballard said the problem stems from alleged contract breaches by Azure Hydrogen, which was licensed to assemble Ballard products for the Chinese market.
The fuel cell company says it has given notice that it's terminating two licensing agreements with Azure, one to assemble bus power modules and the other to assemble telecom backup power systems.
Vancouver-based Ballard says it won't recognize any of the $3 million in revenue it had expected to book from Azure in the fourth quarter and will record an impairment charge of $4.5 million from outstanding receivables owed by Azure.
The company said in October it expected 2014 revenue to be 20 per cent above the previous year, down from its previous guidance of 30 per cent revenue growth.
As of Sept. 30, Ballard had recognized US$53.1 million in revenue over three quarters, up 21 per cent from the comparable nine-month period of 2013.
The company had also reduced its nine-month adjusted loss (adjusted earnings before interest, taxes, depreciation and amortization) to US$2.6 million from US$8.4 million over the first three quarters of 2013.
In 2013, Ballard had US$61.3 million of revenue and an adjusted EBITDA loss of US$8.4-million.
Ballard says it will provide further details about the Azure contract in late February when it discusses 2014 audited financial results and its 2015 outlook.
On the Toronto Stock Exchange, Ballard shares were down 25 cents or 10.55 per cent at $2.12 in late afternoon trading Friday.