WHAT IS SERVOTRONICS HIDING? Servotronics on Financial Life Support: BHW Uncovers Massive Cash Burn, Secretive Board Conduct, and Imminent Risk to Shareholder Value

Rhea-AI Summary

Beaver Hollow Wellness (BHW), Servotronics' (SVT) largest shareholder with a 15.2% stake, has issued a critical warning about the company's future under its current Board of Directors. The Q1 2025 financial analysis reveals concerning metrics: negative $1.6M cash from operations, a 75% increase in credit line borrowing to $3.7M, and unrestricted cash dropping to just $37,000. BHW claims the reported profit is driven by accounting maneuvers rather than sustainable growth. The activist investor is urging shareholders to vote for its four director nominees on the WHITE proxy card to restore oversight and protect the company's future. BHW accuses the board of lack of transparency, refusing to examine corporate records, and potentially preparing for a company sale without stakeholder input.

Positive

• BHW, as largest shareholder with 15.2% stake, shows commitment to company improvement
• Company reported a modest quarterly profit in Q1 2025

Negative

• Negative $1.6M cash from operations, deteriorating $2M from Q1 2024
• Line of credit borrowing increased 75% to $3.7M in single quarter
• Unrestricted cash dropped to critical level of $37,000
• Interest expense rose 17%
• Increased SG&A costs due to legal, proxy, and investment bank fees
• Board's alleged lack of transparency and refusal to examine corporate records
• Potential risk of company dismantling or sale without shareholder input

Insights

Corporate Governance Analyst

BHW's proxy fight reveals Servotronics' severe financial deterioration with negative cash flow and minimal liquidity, signaling potential existential crisis.

This press release reveals a hostile proxy contest initiated by Beaver Hollow Wellness (BHW), Servotronics' largest shareholder with 15.2% ownership. BHW is soliciting votes for four director nominees while painting a dire financial picture based on Servotronics' own Q1 2025 filings.

The financial deterioration cited from the company's 10-Q is particularly concerning: negative operational cash flow of $1.6 million (a $2 million deterioration year-over-year), a 75% quarterly spike in credit line borrowing to $3.7 million, and unrestricted cash dwindling to just $37,000. These metrics suggest a company in severe financial distress despite management's positive framing of quarterly results.

BHW alleges the board has failed in its fiduciary duties through lack of transparency and potential preparation for a sale or dismantling without shareholder input. Particularly telling is BHW's claim that the board has ignored Delaware General Corporation Law § 220 requests to examine corporate records - a serious accusation implying potential violations of shareholder rights.

The proxy contest centers on conflicting narratives: management claiming operational turnaround versus BHW portraying imminent collapse. The minimal cash reserves combined with increased borrowing lends credibility to BHW's concerns about sustainability. For shareholders, this represents a pivotal governance decision: maintain current leadership or support BHW's nominees who promise increased transparency and local operational preservation.

The intense rhetoric and financial data suggest Servotronics faces not just a leadership challenge but potentially an existential crisis that warrants immediate shareholder attention.

Drastic Change is Needed At Servotronics Today to Safeguard the Interests of Shareholders, Employees and Customers

Beaver Hollow Wellness Urges Shareholders to Vote the WHITE Proxy Card "FOR" Its Four Highly Qualified Director Nominees and "WITHHOLD" on all Company Nominees except for Karen L. Howard

ELMA, N.Y., May 13, 2025 /PRNewswire/ -- Beaver Hollow Wellness, LLC ("BHW"), the largest shareholder of Servotronics, Inc. (NYSE American – SVT, "Servotronics" or the "Company"), owning 15.2% of the outstanding shares, today issued a dire warning about the Company's future under its current Board of Directors. Continuing a pattern of bad faith, obstruction, and brazen disregard for fiduciary responsibility, the Board's secrecy and defiance, if left unchecked, may ultimately lead to the collapse of Servotronics' operations in Western New York — putting hundreds of local jobs at risk, destroying shareholder value and threatening the economic viability of one of the region's last remaining advanced manufacturers.

The Financial Truth Behind Servotronics' Spin
While Servotronics issued a press release for Q1 2025, touting a modest quarterly profit and operational turnaround, a closer review of the Company's financial filings paints a far different picture—one of financial distress, deteriorating liquidity, and structural instability.

Key facts from the Company's own 10-Q filing include:

• Cash from operations fell to negative $1.6 million — a $2 million deterioration from Q1 2024;
• Line of credit borrowing spiked 75% in a single quarter to $3.7 million;
• Unrestricted cash dropped to just $37,000;
• Interest expense rose nearly 17%, further straining profitability; and
• SG&A costs rose due to legal, proxy, and investment bank fees, not operational growth.

This performance does not reflect a healthy or stable business. It reflects a management team attempting to obscure reality from shareholders while preparing a sale or dismantling of the Company without transparency or stakeholder input. The reported profit, driven by accounting maneuvering and one-time addbacks, does not signal sustainable financial health.

Since 2022, BHW has continually pressed for improved transparency, accountability, and oversight from the Company's directors.

Instead, the Board has refused every reasonable offer to work collaboratively with its largest shareholder and inexplicably ignored BHW's requests to examine corporate records — including those concerning a potential sale of the Company, while utilizing delay tactics in responding to lawful requests under Delaware General Corporation Law (§ 220).

"For 100 days, the Board has acted in secret and in defiance of its obligations to shareholders, employees and customers," said Paul L. Snyder III, Managing Member of BHW. "Their refusal to disclose critical information and unwillingness to meet with the Company's largest shareholder sends a chilling signal: this Board is either covering up incompetence or actively preparing to dismantle the Company behind closed doors. Either outcome would be catastrophic for Western New York."

The consequences of this betrayal are real:

• SVT's Elma-based jobs and local manufacturing presence are on the brink.
  
  
• No explanation has been provided for the lack of operational turnaround or strategic direction, as was promised over a year ago.
  
  
• Employees remain in the dark about the future of their Company and their Careers.

"This is not just corporate negligence — it's a slow-motion liquidation of Servotronics' legacy, carried out by a Board that seems more committed to hiding the truth than saving the Company," Snyder continued.

BHW calls on all shareholders — particularly SVT employees and retirees — to demand change now, before it's too late.

Vote FOR the election of Paul L. Snyder III, Christine R. Marlow, Michael W. Dolpp and Charles C. Alfiero on the WHITE proxy card to restore independent oversight, protect jobs, and give this Company a future.

For more information, visit www.SaveServotronics.com

Media Contacts

Michael P. Hughes Masiello Martucci Hughes (716) 983-3731
mike@mmcassoc.com

Kevin Keenan
Keenan Communications Group
(716) 481-6806
kevin@keenancommunicationsgroup.com

Investor Contact
Brian Valerio Alliance Advisors
BHW@allianceadvisors.com

View original content:https://www.prnewswire.com/news-releases/what-is-servotronics-hiding-servotronics-on-financial-life-support-bhw-uncovers-massive-cash-burn-secretive-board-conduct-and-imminent-risk-to-shareholder-value-302454063.html

SOURCE Beaver Hollow Wellness

FAQ

What are the main financial concerns highlighted in BHW's warning about Servotronics (SVT)?

BHW highlighted negative $1.6M cash from operations, 75% increase in credit borrowing to $3.7M, unrestricted cash dropping to $37,000, and 17% rise in interest expense.

What percentage stake does Beaver Hollow Wellness own in Servotronics (SVT)?

Beaver Hollow Wellness owns 15.2% of Servotronics' outstanding shares, making it the company's largest shareholder.

What changes is BHW proposing for Servotronics' (SVT) board in May 2025?

BHW is urging shareholders to vote for four new director nominees: Paul L. Snyder III, Christine R. Marlow, Michael W. Dolpp, and Charles C. Alfiero on the WHITE proxy card.

What are the main accusations BHW makes against Servotronics' (SVT) current board?

BHW accuses the board of lack of transparency, refusing to examine corporate records, using delay tactics, and potentially preparing for a company sale without stakeholder input.

How did Servotronics' (SVT) Q1 2025 financial performance compare to Q1 2024?

Cash from operations deteriorated by $2M compared to Q1 2024, dropping to negative $1.6M, while credit borrowing increased 75% and unrestricted cash fell to $37,000.