ORDER Plaintiff Power Up Lending Group, LTD. (“Plaintiff” or “Power Up”) brought this action against Defendants Parallax Health Sciences, Inc. (“Parallax”) and Paul R. Arena (“Arena”) arising out of Parallax’s breach of two convertible promissory notes. Plaintiff alleges that Arena, who was Parallax’s CEO, tortiously interfered with those notes, causing Parallax to breach its obligations to Plaintiff. Currently pending before the Court is Plaintiff’s motion for a default judgment against Arena. For the reasons stated below, that motion is GRANTED in part and DENIED in part. I. BACKGROUND A. Factual Background Based on the Complaint As discussed infra, because of Arena’s default, all the relevant factual allegations from the Complaint — which are set out below — are deemed admitted. Arena was the Chief Executive Officer of Parallax. (Compl. 3.) He had “total and unfettered control of” Parallax’s “business, legal and financial affairs.” (Id. 4.) Arena’s compensation included a substantial number of stock options.1 (Parallax 10-K at 69, ECF No. 36-9.) In December 2019 and January 2020, Power Up and Parallax entered into two Convertible Promissory Notes (the “Notes”) and related Securities Purchase Agreements.2 In the first Note, dated December 4, 2019, Power Up loaned Parallax $83,000 (the “Dec. 4. Note”). (Compl. 6.) In the second Note, dated January 22, 2020, Power Up loaned Parallax an additional $78,000 (the “Jan. 22 Note”). (Id. 7; Kramer Decl. 5.) The relevant provisions of the Notes discussed below are the same. Arena signed these agreements on behalf of Parallax but did not personally guarantee either Note. The Notes granted Power Up the right to convert all or part of the outstanding and unpaid principal on the loans into shares of Parallax’s common stock. (Dec. 4 Note 10.) Parallax had the ability to pre-pay the Notes under certain conditions within 180 days of issuance. (Id. 1.7.) However, after 180 days, Power Up had the right to exercise the conversion option in the Notes. (Id. 1.4.) Power Up’s conversion rights allowed it to convert the principal amount of the loan and any accrued interest into shares of Parallax on the following terms. (Id. 1.1.) Power Up could exercise this conversion right at the lesser of $0.12 per share or the “Variable Conversion Price,” which was the “Market Price” of the shares minus a 35 percent discount. (Id. 1.2.) The Market Price was based on the average of the three lowest share prices during the fifteen-day period before the conversion. (Id.) After exercising its conversion rights, Power Up would then sell those shares to third parties, which could create downward pressure on Parallax’s stock price. The Complaint explains the purposes and value of Power Up’s conversion rights in the Notes: The purpose of the [conversion provisions in the Notes] is to ensure that the [Power Up] will be able to convert debt into stock of [Parallax] and will then be able to sell that stock on the open market, as it is well known to both parties and the investment community in general that companies such as [Parallax] are not expected to pay these obligations as they generally do not have the cash or other resources to do so and instead all parties expect and agree that payment shall be made by the conversion process, such that it is the acquisition of free trading stock that is the purpose of the transaction and without which the transaction is valueless and would never be entered into by the Plaintiff. (Compl. 39.) The Notes included safeguards to protect Power Up in the event that Power Up exercised its conversion rights and Parallax sought to avoid the conversion request. (2019 Note
1.3, 3.12; 2019 Securities Purchase Agreement 5.) The Notes required Parallax to use a transfer agent who was: (1) bound by irrevocable instructions to effectuate the conversions, and (2) required to hold a reserve of Parallax shares that would be provided to Power Up without necessitating any further action by Parallax. (Id.) The Notes provided that Power Up could declare the Notes in default if Parallax did not abide by these requirements concerning the transfer agent.3 (2019 Note
