@Solvetheriddle - well, your hunch was well-founded, as is now clear to all.

Part of the support for the thesis was the strong insider investment from Tony and Ron Perich. I only ever attended investor calls and AGMs by phone and I never picked anything up in what was said by Rory (CEO) and Campbell (CFO) or in nuances and consistencies between reporting events - which is something I purposefully look out for. That's why I prefer video calls, where you get to see the "whites of the eyes" and the body language. But I guess there is no substitute for being there in person. Its just not practical for me.

So, then the s*** hit the fan I was totally shocked. I didn't see it coming.

Going back over my notes at the time, I realise this was a time when I was riding high on fours years of "incredible success" in my ASX investing journey. Remember, early 2020 was still zero interest rates, and we were all making phenomenal returns on questionable businesses. So, another lesson was that I was full of hubris. $FNP helped inject some humility back into my investment deicsion-making.

@Wini also said something that really resonated with me at the SM Meeting. Words to the effect that a 0% risk free rate is unhealthy, because you see value everywhere, and that its actually better to have 3-4% risk free rates. I hink this is very true.

Anyway - while the losses hurt, it is good to learn.

@mikebrisy fair enough, every now and then, when dealing with visiting a company or dealing with them on a non formal issues reveals something not in the numbers. Rare but insightful

Yes, I agree @Strawman. I don't feel justice has been done, and the signal is not a strong deterrent.

The fraudulent reporting directly misled me on two counts. First, some products appeared to have a positive gross margins, whereas in reality - due to misallocation of costs, they cost more to make than was recovered in the prices given by Woollies and Coles. Second, significant inventory - subsequently written off - was hidden as "startup costs" (i.e. booked within capex) of the big shiny new plant (a core part of enabling the growth thesis).

Had statutory reporting been made with integrity, I arguably would not have been so bullish, as the economics of the business would have been plain to see.

I imagine that the CEO and CFO decided that as volumes scaled, the unit fixed cost contribution of manufacturing costs would fall, and true positive margins would be achieved. I speculate that it was a "this is a temporary fix, because the numbers don't reflect our real performance when we are up and running, so we're not doing anything wrong..." type of conversation. It probably started as some minor tweaking, maybe even with the rules, but then became a bigger lie as margins didn't expand as quickly as projected.

However, it also highlights the weakness of the audit process. I am no auditor, but testing cost allocations across products and between opex and capex is - I would have thought - core audit function.

It reminds me of Nick Leeson at Barings Bank many years ago. He shovelled his trading losses into a hidden account only booking his profits in his visible P&L, planning to make good on the losses when he eventually made big enough profits. Problem is, he blew up the bank before those profits were realisd.

However, even taking all this into account, I made mistakes and should not have lost as much as I did.