Biotech firm declares bankruptcy after receiving tax breaks

BioRestorative Therapies has found a buyer: intellectual property attorney John M. Desmarais. Credit: Newsday / James T. Madore
A Melville biotechnology company that received hundreds of thousands of dollars in state and county tax breaks has filed for Chapter 11 bankruptcy protection from its creditors.
BioRestorative Therapies Inc. is using the bankruptcy to sell itself, according to securities filings. The company will be auctioned off in U.S. Bankruptcy Court in Central Islip after failing to raise between $10 million and $12 million for a clinical trial of its stem-cell therapy for bulging spinal discs, executives said in the filings.
The trial was authorized by the U.S. Food and Drug Administration three years ago.
BioRestorative, whose shares are traded on the Over-The-Counter Pink Sheet Market, has found a buyer: intellectual property attorney John M. Desmarais. He served on the company’s board of directors until January and loaned it $1.3 million, including interest, in 2016-17.
Desmarais has bid $500,000 through another business he owns, Phoenix Cell Group Holdings LLC. Phoenix also is providing $1.4 million to keep BioRestorative operating, the filings state.
Desmarais’ purchase of BioRestorative “remains subject to higher or better offers, as well as approval of the bankruptcy court,” the filings state. The company filed for Chapter 11 on March 20.
Neither Desmarais nor BioRestorative CEO Mark Weinreb responded to email seeking comment.
Weinreb, in a court declaration, said the firm's assets total $929,062 against liabilities of $15.1 million. “The primary reason for [the company’s] bankruptcy filing is to conduct a public sale of its assets,” he said.
BioRestorative reported a loss of $13.1 million for the January-September 2019 period compared with a loss of $8.9 million in the same nine months of 2018, according to most recent earnings statement. Revenue totaled $98,000 in January-September 2019 compared with $82,000 a year earlier.
Weinreb brought the company to Long Island from Florida, securing $724,246 in tax breaks over 10 years from New York State and Suffolk County in 2014. In return, he promised to grow the payroll from three people to 18 in two years.
The payroll totaled nine people as of March 2019, with salaries averaging $192,917, according to a state filing by the Suffolk County Industrial Development Agency.
The state and county generally can claw back tax incentives when a business fails to keep employment and/or investment promises.
BioRestorative’s alternative to back surgery involves collecting stem cells from the patient’s bone marrow and injecting them into the damaged disc. It also is exploring how stem cells can be used to treat diabetes, obesity and skin problems.
New York State officials were thrilled six years ago when Weinreb announced the company would be moving from Juniper, Florida to 40 Marcus Dr. in Melville. Then-Florida chief financial officer Jeff Atwater had criticized Gov. Andrew M. Cuomo’s national advertising campaign for the Start-Up NY tax-free zones program, saying it misled business owners into thinking New York was a better state to do business in.
Weinreb is best known for starting Big City Bagels Inc. in Hicksville, a small national chain of bagel stores that eventually merged with an Internet service provider. The securities filings state he will be leaving BioRestorative by Sept. 30.

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Put a little love in your heart with the NewsdayTV Valentine's Day Special! From Love Lane in Mattituck, NewsdayTV's Elisa DiStefano and Newsday deputy lifestyle editor Meghan Giannotta have your look at ways to celebrate Valentine's Day this year.