Audit Qualification Highlights Risks in 4DMedical’s Intangible Asset Valuation
4DMedical has responded to ASX queries over its FY2025 financial report, clarifying assumptions behind intangible asset valuations and addressing the auditor’s qualified opinion.
- Impairment assessment hinges on revenue forecasts yet to be contractually secured
- Goodwill and software assets valued post-Imbio acquisition total $68.9 million
- Auditor unable to verify revenue assumptions leads to qualified audit opinion
- Board confirms robust financial controls and compliance with listing rules
- 4DMedical commits to securing stronger commercial evidence to clear audit concerns
Background on Intangible Assets and Acquisition
4DMedical Limited (ASX – 4DX), a medical technology company focused on lung health, has provided detailed responses to the Australian Securities Exchange (ASX) following a qualified audit opinion on its FY2025 financial statements. The qualification centers on the impairment assessment of intangible assets, including goodwill, largely stemming from its December 2023 acquisition of Imbio Inc.
At 30 June 2025, 4DMedical reported intangible assets other than goodwill valued at approximately $26.5 million, including software, development costs, patents, trademarks, and licenses. The goodwill from the Imbio acquisition alone was recorded at $42.7 million. These assets underpin the company’s advanced AI-driven lung imaging technology platform.
Key Assumptions and Audit Challenges
Management’s impairment testing relies heavily on discounted cash flow (DCF) models projecting revenue growth, margins, and cash flows through to 2030. However, the auditor flagged insufficient appropriate audit evidence supporting the magnitude and timing of these forecasted revenues, given the early commercialisation stage of the technology and limited firm contracts at balance date.
4DMedical disclosed that while internal forecasts and strategic outlooks underpin the valuation, the sensitivity of the DCF model to revenue assumptions means that any shortfall could materially impact asset recoverability. The company has engaged independent valuation experts and conducted thorough internal reviews of its intangible asset register, but the auditor remains cautious without stronger contractual backing.
Board Oversight and Compliance Assurance
The 4DMedical Board has actively engaged with management to ensure financial records are properly maintained and that accounting policies comply with Australian standards. The Board received formal declarations from the CEO and CFO affirming the integrity of the financial statements and the effectiveness of internal controls. The company also confirmed compliance with ASX Listing Rules, including continuous disclosure obligations.
Next Steps Toward Audit Clearance
To address the audit qualification, 4DMedical plans to bolster its commercial evidence base by securing additional signed contracts and partnerships that can substantiate revenue forecasts. The company is committed to ongoing dialogue with auditors to achieve an unqualified opinion in future reporting periods. This strategic focus on commercial traction will be critical to validating the carrying value of its intangible assets and maintaining investor confidence.
Investors should watch closely how 4DMedical translates its promising technology into tangible revenue streams, as this will directly influence the company’s asset valuations and financial statement clarity going forward.
Bottom Line?
4DMedical’s path to audit clarity hinges on converting promising forecasts into concrete commercial contracts.
Questions in the middle?
- How soon can 4DMedical secure binding contracts to support its revenue forecasts?
- What impact might a revision in impairment assumptions have on the company’s balance sheet?
- Will the company’s technology adoption accelerate enough to meet optimistic cash flow projections?
