Breaking Up is Hard to Do

Science Technology International and Innovative Technical Solutions share more than similar acronyms.

April, 2001

In business, as in love, there are good breakups and there are bad breakups. And then there are those that result in federal investigations. Such is the case of Science & Technology International (STI) versus Innovative Technical Solutions Inc. (ITS).

As similar as their moniker acronyms are, so are the companies’ services and targeted clientele. Both of the Hawaii-based companies specialize in the development and application of hyperspectral imaging systems (using the colors of a spectrum to locate objects) and remote sensing technology. And both are going full-throttle with their operations, despite an ongoing FBI investigation of ITS. With 2000 sales in the ballpark of $4 to $5 million, ITS was formed in 1997 by several disgruntled STI employees, and is under investigation for possible violations of the Economic Espionage Act of 1996.

“The investigation has involved recovery and analysis of certain data by FBI laboratories,” says J. Stephen Street, legal counsel for STI. Rick E. Holasek, director of business development and program manager for ITS, declined to comment about the recovered data or the investigation, other than to say: “Ultimately the FBI found no faults with anybody and found mostly that they had wasted their time in any level of investigation that they did.”

Holasek, who served as STI Director of Technical Services for four years, was among several employees who abruptly left the company in 1997. “Pretty much all of the management, and mid- to high-level technical staff all left,” he says. However, according to Nick Susner, CEO and president of STI, the exodus did little to stifle the company’s growth. He says the company achieved a 42 percent growth in sales from 1998 to 2000, although he would not reveal specific figures, citing proprietary reasons. “The deliberately orchestrated effort to have approximately 25 employees leave STI at the same time and form a new company had an obvious adverse impact on a company of STI’s size,” says Susner. “Management’s ability to turn the company around is a testament to the strength of the company.”

Along with about a dozen other former STI employees, Holasek formed ITS shortly after leaving STI. Through internal investment, the founders generated in excess of $1 million and like most start-ups, struggled through the inaugural period. Last year, however, the company was able to secure several high-profile contracts with the U.S. Navy, NASA and several other private companies. As a result, the company turned its first profits, and saw more than a 400 percent increase in revenues in its first two years. The average contract for hyperspectral imaging services ranges from $50,000 to $6 million.

“It takes a lot of time to set up contacts and start a customer base and take care of all the corporate business needs,” says Holasek. “We did that pretty expediently and efficiently and the results are that we started getting our contracts in.” STI’s Susner, however, has a different take on the matter. “ITS has chosen to follow STI’s successes … ITS has targeted the same customers as STI and even the same contracts as STI,” he says.

ITS, with smaller offices in San Diego and Orlando, Fla., as well, increased its staff last year to roughly 30 employees. In addition, Holasek anticipates a 25 to 50 percent growth in personnel and expects to double or triple sales again this year. “It’s hard to maintain a 400 to 500 percent revenue increase every year,” says Holasek. “But still that’s a good problem, in that it’s the kind of problem that accompanies growth and success.”

 

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Author:

Jacy L. Youn