Explanation., page-32

I feel motivated to make a comment about the general thrust/narrative of this thread - which I'd summarise as:

"Gee, no new official news for a while, so something bad must be happening - hey, lets all get scared that the company has lost the plot, and the sky is falling, and the staff are bunkered down in a back room somewhere, panicking about some undisclosed disaster and hoping nobody notices".

As the largest single shareholder in the company my interests are, very clearly, aligned with those of other shareholders in the most obvious of ways.


I want to explain why you can feel some sense of certainty that the sky is not falling - and it is based on something fundamental about the rule set under which Australian public companies work.

In particular, there is a specific strong protection for shareholders in all public companies, that being the Continuous Disclosure rules. The gist is simple - and its worth appreciating.

Here is how I'd summarise it:

If the directors of a public company - any public company - are sitting on bad news that would affect the views of a shareholder (i.e. that would potentially cause them to change their view about whether to buy, sell, or hold a stock), then the directors must release that information to the market.

A specific example of this in the Redflow context are the releases we made - because we had to - some time ago - about issues with battery failures related to battery contamination.

The challenge for public companies is that this rule requires the release of the fact that 'something is wrong' immediately - and in particular that has to happen, typically, before a solution has been determined and implemented. That's how the rules are written.

This in turn means that a public company does not have the luxury a private one has, of finding something 'bad', but sitting on it for a few months while they figure out how to solve it.

The Continuous Disclosure rules are not that bad for companies who are old and established, reporting regular routine activity. However, they can be a serious challenge for startups working in a new and unique realm where - by definition - things can be challenging, and can go wrong  - and where those challenges, where they are serious, must be announced before a solution has been found. Redflow is of course a case in point.


Where am I going with all of this?

I am pointing out that the lack of a disclosure that 'the sky is falling' by Redflow lately, under Continuous Disclosure rules means the sky is not falling.

So what is happening? The company is working diligently in accordance with the last set of announcements about its plans and intentions that were released to the market.

These things take time - and if you are a shareholder in Redflow because you expect overnight results, you may not have chosen the right company to invest in. This is a serious journey requiring serious time and effort - and those efforts are ongoing.

The company has built a new factory and its making batteries there. That is an incredibly important milestone for Redflow - based on a decision I was a part of making, to move to Thailand, because not moving would not have ended well.

That required a fair bit of money (a large amount of it contributed by me personally), a great deal of effort, and a remarkably short period of time.

(If you think it was not a remarkably short period of time to fire up a new factory from scratch, sincerely, please go and find someone who has set up a factory from scratch to make a complex product and ask them).

I am personally thrilled with both the outcome and with the obvious quality and consistency of what is being made there. Quality - given our history (and ASX disclosures!) on that topic - is absolutely paramount. It matters, to me personally, in the medium term, far more than quantity.


I want to make a few more points here that are obvious to me, but perhaps less obvious to others, of relevance to the process of Redflow ramping up production in Thailand.

The first is that we have unavoidably gone through a period where we have run out of all existing battery stock, in the process of filling the most recent large (and much appreciated!) order from HiTech. We have filled that order. Running out of stock in the meantime is the obvious consequence of having down our old factory and having had to boot up a new one.


We have other customers who are still waiting for batteries, right now - and I expect it'll take a few months to finish catching up with that backlog.

I understand that very well indeed because one of the customers in backlog is me! (I deferred the remainder of my own order for my large system in Adelaide in favour of getting new batteries shipped to HiTech)

My own residual battery stock for my Adelaide system (30 more batteries, in my case) actually left the factory on a truck just a few days ago, heading for the port (yay!).


The next point is that we have, of course, not been able to make significant new large sales until we have a factory making new batteries to sell. Nobody is going to make a large new commitment if they aren't sure that we can fill the order.

We can do so now , but only a few months ago we were still yet to prove that we could!

So... now is the time that our sales team are working on re-starting the sales pipeline and in obtaining new orders. This is going to take a while - unavoidably so. This should not be a surprise to anyone.

What is important about our battery production rate in this transitional period is that - as we've made clear in prior ASX releases - we are tuning that battery production rate (our supply) to be appropriate to our ongoing (and evolving) order curve - our demand.


That demand includes completion of existing orders in backlog, supply into new orders (and we are working on ramping that up - of course), and on building up over time a reasonable (but not excessive) inventory of stock-on-hand in a few relevant spots around the world (to allow us to better close new sales without a prospective new customer having to wait months for products to ship).


In the middle of that process - where we are right now - there really isn't a whole lot to say in public about it that isn't commercial sensitive and hence confidential data - until we close some significant new sales and/or until something else of relevance happens that makes sense to announce (or that we are required to announce).

Meantime we are making expenditures and doing work in accordance with our business plan and things are basically ticking along according to that plan right now.

So how do you form a belief structure around those reassurances, when you read this?


I can only bring you back to where this post began - the Continuous Disclosure rules mean that any major negative deviation (with major implications - financial or otherwise) from the activities of the company as most recently advised to the market would be released under Continuous Disclosure rules - necessarily so.


Obviously when Redflow has something cool and new to announce, it'll do so - its in its interests to do so.

But until then, the handle is turning, Redflow is making batteries, and they are re-starting the process of building a sales pipeline up to go with the progressive buildup of manufacturing capability.

And for me - I'm continuing to work away in the battery integration lab, doing good things with our software team to keep developing and improving the integration and control interfaces our batteries use, so that they just keep on working better and better in real world systems with real world customers. That's what I like doing, personally. I'm thrilled with the work being done by the team concerned, and our battery software and control technology just keeps on getting better and better as a result of our ongoing work with real world customers.