Company: OSIS
Filing Date: 2025-08-25
Form Type: 10-K
Source: 0001410578-25-001887
Chunk: 11

Company: OSI SYSTEMS INC
Filing Date: 2025-08-25
Form: 10-K
Item: Item 1A
Chunk 11
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ITEM 1A. RISK FACTORS

Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of the risks and uncertainties that could materially and adversely affect our business, financial condition and results of operations and could make an investment in our securities speculative or risky. We encourage you to carefully consider all such risk factors when making investment decisions regarding our company. If any such risks, or any other risks that we do not currently consider to be material, or which are not known to us, materialize, our business, financial condition and operating results could be materially adversely affected. 

Business and Industry Risks

If operators of, or algorithms installed on, our security and inspection systems fail to detect weapons, explosives or other devices or materials that are used to commit a crime, terrorist act or other mass casualty event, we could be exposed to product and professional liability and related claims for which we may not have adequate insurance coverage. Our business exposes us to potential product liability risks that are inherent in the development, manufacturing, sale, maintenance and repair of security and inspection systems, software and threat detection algorithms, as well as in the provision of training to our customers in the use and operation of such systems. Our customers use our security and inspection systems to help them detect items that could be used in performing terrorist acts, mass casualty events or other crimes. Some of our security and inspection systems require that an operator interpret an image of suspicious items within a bag, parcel, container, vehicle or other vessel. Others rely on threat detection algorithms, or use such algorithms to signal to the operator that further investigation is recommended. The selection, training, supervision, reliability and competence of such operators are often crucial to the detection of suspicious items.

Security inspection systems that rely on threat detection algorithms or that use such algorithms to signal to the operator that further investigation is recommended are sometimes referred to in the security industry as “automatic” detection systems. If such a system were to fail to signal when an explosive, weapon or other contraband was present, resulting in loss of life or damage, we would be subject to risk of significant product liability claims. Security inspection by such technological means is circumstance and application-specific. Our security and inspection systems offer significant capabilities, but also have performance limitations and cannot be designed to reveal or detect contraband under all circumstances, particularly if criminal actors successfully conceal such items. They can also malfunction or underperform, including if not properly maintained or repaired.

We also offer various turnkey security screening solutions under which we perform