UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

Diffusion Pharmaceuticals Inc.

(Name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PRELIMINARY COPY SUBJECT TO COMPLETION DATED FEBRUARY 18, 2022

In accordance with Rule 14a-6(d) under Regulation 14A, please be advised that the Diffusion Pharmaceuticals Inc. intends to release definitive copies of this Proxy Statement on or about February 28, 2022.

Diffusion Pharmaceuticals Inc.
1317 Carlton Avenue,300 East Main Street, Suite 200201
Charlottesville, Virginia 22902

May 20, 2021February [•], 2022         

Dear Fellow Stockholders:

We are pleased to invite you to join us for thea Special Meeting of Stockholders of Diffusion Pharmaceuticals Inc. 2021 Annual Meeting of Stockholders to be held on Friday, June 25, 2021,Thursday, April 14, 2022, at 1:9:00 p.m.a.m., Eastern Time. The Annual Meetingmeeting will be conducted as a virtual meetingvirtually and hosted by means of a live webcast. Stockholders will be able to listen, vote, and submit questions from their home or any location with internet connectivity. You or your proxyholder will be able to attend the Annual Meeting online, vote, and submit questionsmeeting by following the instructions provided in the accompanying Notice Regarding the Availabilitynotice of Proxy Materialsmeeting and proxy statement.

It is important that your shares be represented at the meeting, regardless of the number of shares you hold. Accordingly, please exercise your right to vote by completing, signing, dating, and returning your proxy card, by using Internet or telephone voting as described in the accompanying proxy statement, or by voting at the meeting by following the other instructions for voting onin the accompanying Notice Regarding the Availability of Proxy Materials.proxy statement.

On behalf of the Board of Directors and management of Diffusion Pharmaceuticals Inc., it is my pleasure to express our appreciation for your support.

Sincerely,

/s/ Robert J. Cobuzzi, Jr.

Robert J. Cobuzzi, Jr.
President and Chief Executive Officer

Your vote is important. Please exercise your right to vote as soon as possible by completing, signing, dating, and returning your proxy card, by using Internet or telephone voting as described in the accompanying proxy statement, or by following the other instructions for voting on the accompanying Notice Regarding the Availability of Proxy Materials.

You can help us make a difference by eliminating paper proxy mailings. With your consent, we will provide all future proxy materials electronically. Instructions for consenting to electronic delivery can be found on your proxy card. Your consent to receive stockholder materials electronically will remain in effect until canceled.THE ACCOMPANYING PROXY STATEMENT AND PROXY CARD ARE FIRST BEING MAILED TO STOCKHOLDRES ON OR ABOUT FEBRUARY [•], 2022.

PRELIMINARY COPY SUBJECT TO COMPLETION DATED FEBRUARY 18, 2022

In accordance with Rule 14a-6(d) under Regulation 14A, please be advised that the Diffusion Pharmaceuticals Inc. intends to release definitive copies of this Proxy Statement on or about February 28, 2022.

NOTICE OF 2021 ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JUNE 25, 2021THURSDAY, APRIL 14, 2022

To the Stockholders of Diffusion Pharmaceuticals Inc.:

The 2021 AnnualA Special Meeting of Stockholders of Diffusion Pharmaceuticals Inc., a Delaware corporation, will be held virtually on Friday, June 25, 2021Thursday, April 14, 2022 at 1:9:00 p.m.a.m. Eastern Time by means of a live webcast for the following purposes:

YouThe meeting will be ablecompletely virtual and there will be no physical location for stockholders to submit questions in advance ofattend. In order to attend the meeting, listenyou must pre-register at [http://www.viewproxy.com/DFFN/2022/] by 11:59 p.m. ET on April [12], 2022. If you hold your shares in “street name” through a bank, broker or other nominee, and also wish to vote at the meeting, live, and vote online. To access and participate in the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)you will need to followobtain from that entity a “legal proxy” and submit it when you register. After you register, you will receive an email with a unique link and password that will allow you to attend the applicable instructionsmeeting. If your shares are held in “street name” and you provided ina legal proxy when you registered, that email will also contain a control number that will allow you to vote at the meeting. If you hold your shares through our transfer agent, use the control number on your proxy statement that follows.card to vote at the meeting.

The meeting webcast will begin promptly at 1:9:00 p.m.a.m. Eastern Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 12:8:45 p.m.a.m. Eastern Time, and you should allow ample time for the check-in procedures. If you experience technical difficulties during the check-in process or during the Annual Meeting,meeting, please call the number on the virtual meeting portal landing page for assistance. For additional information on how you can attend and participate in the Annual Meeting,meeting, please see the instructions beginning on page 1 of the proxy statement that follows. As the Annual Meeting will be a completely virtual meeting, there will be no physical location for stockholders to attend.

Only stockholders of record at the close of business on May 5, 2021February 18, 2022 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. A stockholder list will be available beginning June 15, 2021,electronically upon request to the date which isCompany beginning ten days prior to the date of the meeting, during normal business hours, for examination by any stockholder registered on Diffusion’s stock ledger as of the record date for any purpose germane to the meeting.

May 20, 2021February [•], 2022
Charlottesville, Virginia

TABLE OF CONTENTS

[●]

INTRODUCTORY NOTES

Note Regarding Company References and Other Defined Terms

Unless the context otherwise requires,As used in the accompanying Proxy Statement and related materials, (i)this proxy statement, references to “Diffusion,”the “Company,“Company,” “we,“we,” “our,“us,” or “us”“our” and similar references refer to Diffusion Pharmaceuticals Inc. and (ii) referencesour consolidated subsidiaries, the term “common stock” refers to “common stock” refer to theour common stock, par value $0.001 per share, of the Company. We have also used several other defined terms in the accompanying Proxy Statement and related materials, which are explained or defined below:

Note Regarding Stock Splits

Unless the context otherwise requires, in this Proxy Statement, all share and per share amounts related to our common stock give effect to (i) our 1-for-15 reverse stock split effective December 13, 2018 and (ii) our 1-for-10 reverse stock split effective August 17, 2016.

Note Regarding Trademarks, Trade Names, and Service Marks

This Proxy Statement contains certain trademarks, trade names, and service marks of ours, including “DIFFUSIO2N.” All other trade names, trademarks, and service marks appearing in this Proxy Statement are, to the knowledge of Diffusion, the property of their respective owners. To the extent any such terms appear without the trade name, trademark, or service mark notice, such presentation is for convenience only and should not be construed as being used in a descriptive or generic sense.share.

1317 Carlton Avenue,300 East Main Street, Suite 200201
Charlottesville, Virginia 22902 

PROXY STATEMENT FOR ANNUALSPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON FRIDAY JUNE 25, 2021THURSDAY APRIL 14, 2022

The board of directors (the “Board”) of Diffusion Pharmaceuticals Inc. (the “Company”) is using this proxy statement (this “Proxy Statement”) to solicit your proxy for use at the Diffusion Pharmaceuticals Inc. 2021 Annuala Special Meeting of Stockholders (the “Special Meeting”) to be held virtually at 1:9:00 p.m.a.m., Eastern Time, on Friday, June 25, 2021.Thursday, April 14, 2022. The Board expects to make available electronically or to send tomail our stockholders the Notice of Annual Meeting of Stockholders, this Proxy Statement and a form of proxy on or about May 20, 2021.February [•], 2022.

GENERAL INFORMATION ABOUT THE ANNUALSPECIAL MEETING AND VOTING

Why am I receiving these materials?

We have sent you this Proxy Statement and the enclosed proxy card because the Board is soliciting your proxy to vote at the AnnualSpecial Meeting. The AnnualSpecial Meeting will be conducted online only. You are invited to virtually attend the AnnualSpecial Meeting to vote on the proposals described in this Proxy Statement by following instructions included in this proxy statement.herein. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or on the Internet.

When and where will the AnnualSpecial Meeting be held?

The AnnualSpecial Meeting will be held online via live webcast on Friday, June 25, 2021,Thursday, April 14, 2022, at 1:9:00 p.m.a.m., Eastern Time.

How do I attend the Annual Meeting?

The AnnualSpecial Meeting will be a completely virtual meeting of stockholders which will be conducted exclusively by live webcast.webcast to enable our stockholders to participate from any location around the world that is convenient to them. No physical meeting will be held.

YouWe have created and implemented the virtual format to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from any location around the world, at no cost. A virtual Special Meeting makes it possible for more stockholders (regardless of size, resources, or physical location) to have direct access to information more quickly, while saving the company and our stockholders time and money, especially as physical attendance at meetings has dwindled. We also believe that the online tools we have selected will be able to attend the Annual Meeting online by visiting www.meetingcenter.io/204775050. You also will be able to vote your shares online by attending the Annual Meeting webcast. To participate in the Annual Meeting,increase stockholder communication. However, you will need to review the information included onbear any costs associated with your Notice, on your proxy card, or on the instructions that accompanied your proxy materials. The password for the meeting is DFFN2021. If you hold your shares through an intermediary,Internet access, such as a bank or broker, you must register in advance using the instructions below.usage charges from Internet access providers and telephone companies.

The online meeting will begin promptly at 1:9:00 p.m.a.m. Eastern Time on June 25, 2021.April 14, 2022. We encourage you to access the meeting approximately 15 minutes prior to the start time in order to leave ample time for the check in. Please follow the registration instructions as outlined in this proxy statement.

How do I attend the Special Meeting? Do I need to register in advance in order to attend the AnnualSpecial Meeting?

Both stockholders of record and street name stockholders will be able to attend the Special Meeting via live audio webcast and vote their shares electronically at the Special Meeting. However, you will need to register in advance in accordance with the instructions below in order to attend.

In order to attend the meeting, you must pre-register at [http://www.viewproxy.com/DFFN/2022/] by 11:59 p.m. ET on April [12], 2022. If you hold your shares in “street name” through a bank, broker or other nominee, and also wish to vote at the meeting, you will need to obtain from that entity a “legal proxy” and submit it when you register. After you register, you will receive an email with a unique link and password that will allow you to attend the meeting. If your shares are held in “street name” and you provided a legal proxy when you registered, shareholder (i.e.,that email will also contain a control number that will allow you to vote at the meeting. If you hold your shares through our transfer agent, Computershare), you douse the control number on your proxy card to vote at the meeting. You will not need the Virtual Control Number to registerjoin the meeting, you will need it if you choose to attendvote during the Annual Meeting virtually on the Internet. Please follow the instructions on the notice or proxy card that you received.meeting.

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Annual Meeting virtually on the Internet.

To register to attend the Annual Meeting online by webcast you must submit proof of your proxy power (legal proxy) reflecting your holdings along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 22, 2021.

You will receive a confirmation of your registration by e-mail after Computershare receives your registration materials.

Requests for registration should be directed to Computer through the following means:

By email : Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com

By mail :         

Computershare

Diffusion Pharmaceuticals Inc. – Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

Do I have the option to call in to the Annual Meeting instead of attending the live webcast?

No. Stockholders will not have the option to call in to the virtual meeting and listen by telephone. To participate in the Annual Meeting, stockholders must stream the Annual Meeting live via webcast.

How do I submit questions for the AnnualSpecial Meeting?

You can submit questions pertinent to meeting matters at the virtual AnnualSpecial Meeting only if you are a stockholder of record of the Company at the close of business on the Record Date or if you were a beneficial owner as of the Record Date and you registered in advance to attend the AnnualSpecial Meeting.

If you wishDuring the Special Meeting, we are committed to submit aacknowledging each appropriate question you may log intoin the virtual annual meeting website beginning 15 minutes prior to the start of the annual meeting and submit questions online. Once past the login screen, click on the “messages” icon at the top of the screen to submit your question.order in which it was received. Stockholders may also submit questions prior to the date of the AnnualSpecial Meeting by e-mailing them to proxyrequests@diffusionpharma.com. When submitting questions, stockholders should identify themselves and provide contact information in the event follow up is necessary. Each stockholder who submits a question will be identified before his or her question is answered. Any questions relevant to the business of the Special Meeting that cannot be answered due to time constraints can be submitted to Diffusion Investor Relations by e-mailing info@diffusionpharma.com. Stockholders participating in the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast.

In accordance with the rules of order, a copy of which will be available during the AnnualSpecial Meeting, only questions pertinent to meeting matters will be answered. In the interest of fairness to all stockholders, the question and answer period will be limited to a total of twenty minutes and multiple questions submitted on the same topic will be summarized and responded to collectively. The Company reserves the right to not address any questions that are repetitious, irrelevant to the Company’s business, related to pending or threatened litigation, derogatory in nature, related to personal grievances, or otherwise inappropriate.

During the Annual Meeting, we are committed to acknowledging each appropriate question in the order in which it was received. When submitting questions, stockholders should identify themselves and provide contact information in the event follow up is necessary. Each stockholder who submits a question will be identified before his or her question is answered. Any questions relevant to the business of the Annual Meeting that cannot be answered due to time constraints can be submitted to Diffusion Investor Relations by e-mailing info@diffusionpharma.com.

Stockholders participating in the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast.

Whom do I contact if I am encountering difficulties attending the AnnualSpecial Meeting online?

There will be technicians ready to assist you with any technical difficulties you may have accessing the Special Meeting live audio webcast. Please be sure to check in by 8:45 a.m. ET on April 14, 2022, (i.e., 15 minutes prior to the start of the meeting is recommended) so that any technical difficulties may be addressed before the Special Meeting live audio webcast begins. If you encounter technicalany difficulties accessing orthe webcast during the virtual Annual Meeting,check-in or meeting time, please click on the “Help” link in the upper right hand corner during the webcast for additional informationemail VirtualMeeting@viewproxy.com or you may call Computershare at 1-888-724-2416 if you need additional assistance866-612-8937.

What is the purpose of the AnnualSpecial Meeting?

The purpose of the AnnualSpecial Meeting is to vote on the following proposals:

Who is entitled to vote at the AnnualSpecial Meeting?

Stockholders of record of our common stock at the close of business on May 5, 2021, the February 18, 2022 (the “Record Date”) will be entitled to notice of and to vote at the meeting orSpecial Meeting and any adjournment of the Annual Meeting. thereof.

As of the Record Date, we anticipate there will be approximately 101,903,979were [101,924,581] shares of our common stock outstanding. The actual number of shares of our common stock outstanding on the Record Date will be reported on a Current Report on Form 8-K following the Record Date. Each share of our common stock is entitled to one vote on each matter to be voted on atproperty brought before the AnnualSpecial Meeting.

How Many Shares Must Be Present to Hold the Special Meeting?

The presence at the Special Meeting, virtually or by proxy, of the holders of a majority of our outstanding shares of stock entitled to vote as of the Record Date will constitute a quorum for the transaction of business at the Special Meeting. Accordingly, the presence at the Special Meeting of holders of at least [50,962,291] shares will be required to achieve a quorum.

In general, shares represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Special Meeting for purposes of determining a quorum. Shares represented by proxies marked “Abstain” and “broker non-votes” are counted in determining whether a quorum is present. A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker does not have discretionary authority to vote on behalf of such customer on such matter. If there is not a quorum, a majority of the votes present at the Special Meeting (including votes represented by proxy) may adjourn the Special Meeting to a later date.

How do I vote my shares?

Your vote is important. Whether you hold shares directly as a stockholder of record or beneficially in “street name” (through a broker, bank, or other nominee), you may vote your shares without attending the AnnualSpecial Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker or nominee.

“Street Name” Holders (e.g., your shares are in a traditional brokerage account)

If you hold your shares in street name, you should follow the instructions provided by your bank, broker, or other nominee to vote your shares before the Special Meeting. You can also vote at the Special Meeting if you register for the meeting following the instructions above under “How do I attend the Special Meeting?”.

Registered Holders (e.g., you have a Diffusion stock certificate or shares in an account with our transfer agent, Computershare)

If you are a stockholder whose shares are registered in your name, you may vote your shares by one of the following methods:

The telephone and internet voting facilities will close at 11:59 p.m. ET on April 13, 2022. If you are a registered holder voting by one of those methods, please cast your votes before that time.

Under the rules of the New York Stock Exchange (the “NYSE”) that govern how brokers may vote shares for which they have not received voting instructions from the beneficial owner, brokers are permitted to exercise discretionary voting authority only on “routine” matters when voting instructions have not been timely received from a beneficial owner. Both Proposal 1 regarding the Reverse Stock Split and Proposal 2 regarding adjournment are considered “routine” matters. Therefore, if you do not provide voting instructions to your broker regarding either proposal, your broker will be permitted to exercise discretionary voting authority to vote your shares are held in street name, you may receive a separate voting instruction form or you may need to contacton your broker, bank, or other nominee to determine whether you will be able to vote virtually at the Annual Meeting or electronically using the Internet or telephone.behalf.

The deadline for voting by telephone or by using the Internet is 11:59 p.m. Eastern Time on Thursday, June 24, 2021. Please see your proxy card or the information your bank, broker or other holder of record provided to you for more information on your options for voting.

How willmay my shares be voted?

If you return your signed proxy card or use Internet or telephone voting before the AnnualSpecial Meeting, the named proxies will vote your shares as you direct.

For both Proposal No. 1—Election1 – Approval of Directors,the Reverse Stock Split and Proposal 2 – Approval of Adjournment of the Special Meeting, you may:

For Proposal No. 2—Ratification of Selection of Independent Registered Public Accounting Firm and Proposal No. 3 – Advisory Vote on Executive Compensation:

For Proposal No. 4—Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation, you may vote for a frequency of EVERY 1 YEAR, EVERY 2 YEARS, or EVERY 3 YEARS, or you may abstain from voting on the proposal.

If you send in your proxy card or use Internet or telephone voting, but you do not specify how you want to vote your shares, the proxies will vote your shares in accordance with the Board’s recommendations.

How does the Board recommend that I vote?

The Board recommends that you vote:

What vote is required for each proposal to be approved?

Assuming a quorum is present at the Special Meeting, the following table summarizes the vote threshold required for approval of each proposal and the effect on the outcome of the vote of abstentions and uninstructed shares by brokers (referred to as broker non-votes).

How can I revoke or change my vote?

If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:

If you hold your shares through a broker, bank or other nominee, you may revoke your proxy by following instructions your broker, bank or other nominee provides.

Who is paying for this proxy solicitation?

WeThe Company will pay for the entire cost of soliciting proxies.

We have engaged Alliance Advisers, LLC to assist in the solicitation of proxies and provide related advice and information support, for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $160,000 in total.

In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks, and other agents for the reasonable cost of forwarding proxy materials to beneficial owners.

How many shares must be present to hold the Annual Meeting?

The presence at the Annual Meeting, virtually or by proxy, of the holders of a majority of the outstanding shares of our common stock as of the Record Date will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares of our common stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Annual Meeting for purposes of determining a quorum. Shares represented by proxies marked “Abstain” and “broker non-votes” are counted in determining whether a quorum is present. A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker does not have discretionary authority to vote on behalf of such customer on such matter. If there is not a quorum, a majority of the shares of our common stock present at the Annual Meeting may adjourn the Annual Meeting to a later date.

What vote is required for each proposal to be approved?

Assuming a quorum is present at the Annual Meeting, the following table summarizes the vote threshold required for approval of each proposal and the effect on the outcome of the vote of abstentions and uninstructed shares by brokers (referred to as broker non-votes).

Who will count the votes at the AnnualSpecial Meeting?

We currently expect that Computershare Inc.[•] will tabulate the votes and our General Counsel & Corporate Secretary will be our inspector of elections for the AnnualSpecial Meeting.

Whom do I contact if I have questions regarding the AnnualSpecial Meeting?

If you have questions about the AnnualSpecial Meeting or would like additional copies of this Proxy Statement, you should contact us via e-mail at proxyrequests@diffusionpharma.com or Computershare via mail at:

Are there any matters to be voted on at the Annual Meeting that are not included in this Proxy Statement?[•].

We currently are not aware of any business to be acted upon at the Annual Meeting other than that described in this Proxy Statement. If, however, other matters are properly brought before the Annual Meeting, or any adjournment or postponement of the Annual Meeting, your proxy includes discretionary authority on the part of the individuals appointed to vote your shares or act on those matters according to their best judgment, including to adjourn the Annual Meeting if a quorum is not present.

How will business be conducted at the AnnualSpecial Meeting?

The presiding officer at the AnnualSpecial Meeting will determine how business at the meeting will be conducted. Only nominations and other proposals brought before the Annual Meeting in accordance with the advance notice and information requirements of our Bylaws will be considered, and no such nominations or other proposals were received. In order for a stockholder proposal to have been included in our proxy statement for the Annual Meeting, our General Counsel & Corporate Secretary must have received such proposal a reasonable period of time before we began to print and send our proxy materials. Under our Bylaws, in order to be included in this Proxy Statement, complete and timely written notice of a proposed nominee for election to the Board at the Annual Meeting or a proposal for any other business to be brought before the Annual Meeting must have been received by our General Counsel & Corporate Secretary not later than the close of business on the ninetieth day prior to the anniversary of the delivery of our proxy statement in connection with our 2020 Annual Meeting of Stockholders (i.e. February 6, 2021).

CORPORATE GOVERNANCEPROPOSAL 1

APPROVAL OF A REVERSE STOCK SPLIT OF OUR OUTSTANDING SHARES OF COMMON STOCK BY A RATIO OF ANY WHOLE NUMBER BETWEEN 1-FOR-2 AND 1-FOR-50, AT ANY TIME PRIOR TO DECEMBER 31, 2022, THE IMPLEMENTATION AND TIMING OF WHICH SHALL BE SUBJECT TO THE DISCRETION OF THE BOARD

IntroductionSummary of Reverse Stock Split Proposal

Our Board of Directors (the “Board”) has unanimously approved, and unanimously recommends that our stockholders approve, an amendment to our Charter (the “Certificate of Amendment”), to effect the reclassification and combination of all shares of common stock is currently listed for quotation onoutstanding at a ratio of not less than one-for-two and not greater than one-for-50 (the “Reverse Stock Split”), with the Nasdaq Capital Marketfinal decision of whether to proceed with the Reverse Stock Split, the effective time of the Reverse Stock Split, and the exact ratio of the Reverse Stock Split (the “Split Ratio”) to be determined by the Board, in its discretion, at any time prior to December 31, 2022.

As described in more detail below under the symbol “DFFN.heading, “Company Background, Recent Financing Transaction, and Reasons for the Reverse Stock Split,” As required by the Listing RulesBoard believes that the Reverse Stock Split is desirable and in the best interests of Diffusion and our stockholders for many reasons, including regaining compliance with the listing requirements of the Nasdaq Capital Market, maintaining increased access to capital markets that we believe will be required to continue funding the Board has adopted certain governance standards, including its standarddevelopment of independence.our product candidates and improving the overall perception of our common stock as an investment security, particularly long-term investors that support and have interest in our product development plans.

Corporate Governance GuidelinesIf our stockholders approve the Reverse Stock Split, and the Board decides to implement it, the Reverse Stock Split will become effective as of 12:01 a.m., Eastern Time on a date to be determined by the Board and specified in the Certificate of Amendment. However, if the Board does not implement the Reverse Stock Split prior to December 31, 2022, the authority to implement the Reverse Stock Split granted by stockholders’ approval of this proposal will terminate.

OurIf the Board has adopted Corporate Governance Guidelines, a copydecides to implement the Reverse Stock Split, it will be realized simultaneously and uniformly by all shares and all holders of which can be foundoutstanding common stock immediately prior to the effective time determined by the Board. Immediately following the Reverse Stock Split, each stockholder will hold the same percentage of common stock outstanding as that stockholder held immediately prior to the Reverse Stock Split, subject to minor adjustments that may result from the treatment of fractional shares described below. In other words, the Reverse Stock Split will have no material impact on the Investor Relations—Corporate Governance sectiontotal percentage of our corporate website at www.diffusionpharma.com. Among the topics addressed in our Corporate Governance Guidelines are:

Directors & Director IndependenceCompany that you own.

The Board has determined that fourReverse Stock Split will not change the par value of our seven current directors — Robert Adams, Mark T. Giles, Jane H. Hollingsworth,common stock or the number of authorized shares of common stock under our Charter. However, the exercise price and Alan Levin — are “independent directors” under the Listing Rulesnumber of shares of common stock underlying warrants, options, restricted stock units, shares of preferred stock, and any other securities exercisable for or convertible into common stock will be adjusted proportionally as of the Nasdaq Capital Market. Two of our current directors – David G. Kalergis and John L. Gainer – will not stand for re-election at the Annual Meeting and, accordingly, their termeffective time based on the Board will end upon the conclusion of the Annual Meeting. Following the Annual Meeting, assuming our stockholders elect the seven nominees of the Board set forth in this Proxy Statement, the Board has determined that six of our seven director nominees – Eric Francois, Diana Lanchoney, and each of the individuals identified above as independent directors – would be “independent directors” under the Listing Rules of the Nasdaq Capital Market.

Board Leadership Structure

The Board believes that our stockholders are best served if the Board retains the flexibility to adapt its leadership structure to applicable facts and circumstances, which necessarily change over time. Accordingly, under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive Officer may or may not be held by one person. The Board believes it is best not to have a fixed policy on this issue and that it should be free to make this determination based on what it believes is best under the circumstances.

Currently, David G. Kalergis serves the Chairman of the Board and Robert J. Cobuzzi, Jr. serves as our Chief Executive Officer. The Board believes that it is currently in the best interests of the Company’s stockholders to separate these offices. This separation allows for our Board Chair to act as a bridge between the Board and the operating organization, while our Chief Executive Officer focuses on running the Company’s business. The Board believes that this separation allows for a more effective utilization of the proven leadership capabilities, breadth of industry experience and business success of the individuals holding both positions, and that the Company and its stockholders are best currently served by this leadership structure. Following the Annual Meeting, assuming our stockholders elect the seven nominees of the Board set forth in this Proxy Statement, the Board will elect a new Chair of the BoardSplit Ratio in accordance with their respective terms.

Reasons for the Reverse Stock Split

Curing our Bylaws.Nasdaq Listing Deficiency and Maintaining Market Access for Our Company and Our Stockholders

On May 6, 2021, we received a written notice from the staff (the “Staff”) of the Listing Qualifications Department of The Nasdaq Stock Market, LLC indicating that we were not in compliance with the minimum bid price requirement contained in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) because the bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive business days. On November 3, 2021, after failing to regain compliance with the Bid Price Rule within 180 days of our receipt of the first notice, we received an additional notice from the Staff providing that, although the Company had not regained compliance with the Bid Price Rule by the previously stated deadline, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company would be granted an additional 180 calendar days, or until May 2, 2022, to regain compliance with the Bid Price Rule. To regain compliance, the bid price for the Company’s common stock must close at $1.00 per share or more for a minimum of 10 consecutive business days.

Executive SessionsWe are optimistic and excited about Diffusion’s future and we believe regaining compliance with the Bid Price Rule and maintaining our Nasdaq listing is a critical near-term step to fulfilling our Company’s potential.

Generally, at regular meetingsDelisting Destroys Stockholder Value

Historical evidence demonstrates the destruction of stockholder value that typically results from a Company’s common stock being delisted from a large, national exchange. A 2003 article in the Journal of Law and Economics studied the market experience of the Board, our independent directors meetcommon stock of 55 companies in executive session with no company management present during a portion of the meeting. Mr. Giles, as our lead independent director, presides over these executive sessions30 days preceding and serves as a liaison between30 days following the independent directorsstock’s delisting from the New York Stock Exchange and our Chief Executive Officer.

Board Meetings and Attendance

During 2020, the Board held 12 meetings, including joint meetings with committees of the Board. Each of the directorscorresponding listing on the Board during 2020 attended 75 percent or more ofover-the-counter pink sheets. Among other findings, the aggregate meetings of the Board and all committees on which he or she served for the period during 2020 in which he or she served as a director. In addition, the Company’s directors are expected to attend annual meetings of stockholders, and all of the Company’s directors who were serving as directors at the time of the 2020 annual meeting attended the 2020 annual meeting of stockholders or participated electronically.

Board Committees

The Board has three standing committees: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of these committees has the composition and responsibilities described below. The Board, from time to time, may establish other committees to facilitate the management of the Company and may change the composition and the responsibilities of the existing committees. Each of the three standing committees has a charter which can be found on the Investor Relations—Corporate Governance section of our corporate website at www.diffusionpharma.com.

Messrs. Adams, Giles, and Levin and Ms. Hollingsworth currently serve as the members of all three of the standing committees. In addition, Dr. Cobuzzi served on the Compensation Committee and Nominating and Corporate Governance Committee following his appointment to the Board in January 2020 until his appointment as President and Chief Executive Officer in September 2020. Following the Annual Meeting, assuming our stockholders elect the seven nominees of the Board set forth in this Proxy Statement, the Board may determine to modify certain committee membership and/or chairs in accordance with our Bylaws and the respective committee charters.

Audit Committee

Responsibilities.

The primary responsibilities of the Audit Committee include:paper reported:

Drug Development Requires Large Investments of Money and Time

Drug development is an extremely expensive, risky, and time-consuming endeavor. For example, a recent study published in JAMA Network found, among 63 therapeutics and biologics approved by the U.S. Food and Drug Administration between 2007 and 2018, the median capitalized research and drug development cost per product was $985 million, and the mean time required to complete development was 8.3 years. Estimates published in prior studies have been even higher.

As most of our stockholders likely know, we are a biopharmaceutical company developing novel therapies that enhance the body’s ability to deliver oxygen to areas where it is needed most. Our lead product candidate, trans sodium crocetinate (“TSC”), is being developed to enhance the diffusion of oxygen to tissues with low oxygen levels, also known as hypoxia, a serious complication of many of medicine’s most intractable and difficult-to-treat conditions, including hypoxic solid tumors.

We anticipate that we will need to secure additional funding to complete development of TSC, either through additional capital raising transactions or other means, such as strategic partnerships or collaborations. As a pre-revenue, early-stage company that has traditionally funded operations through sales of equity securities, we believe maintaining a listing on a premier, nationally recognized exchange such as the Nasdaq Capital Market and provides access to a much larger universe of potential investors which is critical to our ability to drive stockholder value by funding our business and TSC through its potential approval.

The Audit Committee has the authorityLiquidity, Low-Transaction Costs, and Reduced Barriers to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.Entry for Our Stockholders

Composition and Audit Committee Financial Expert. The current members ofWe also believe our Nasdaq Capital Market listing provides value to our stockholders in their capacity as market participants. If we are unable to regain compliance with the Audit Committee are Messrs. Adams, Giles, and Levin and Ms. Hollingsworth. Mr. Levin is the chair of the Audit Committee.

Each current member of the Audit Committee qualifies as “independent” for purposes of membership on audit committees under the Listing Ruleslisting requirements of the Nasdaq Capital Market, our common stock would likely begin trading on an over-the-counter market such as the OTCQX or the pink sheets. Traditionally, securities trading on over-the-counter markets such as these have less liquid and the rulesorderly trading, decreased price discovery, increased bid-ask spreads, and regulations of the SEC and is “financially literate” under the Listing Rules ofhigher overall transaction costs as compared to those listed on a large, national exchange like the Nasdaq Capital Market. In addition, the Board has determined that Mr. Levin qualifies asMoreover, if our stock were to begin trading on an “audit committee financial expert” as defined by the rules and regulations of the SEC and meets the qualifications of “financial sophistication” under the Listing Rules of the Nasdaq Capital Marketover-the-counter market, it may, as a result, of his experience in senior financial positions. Stockholders should understand that these designations relatedbe subject to the Audit Committee members’ experience“penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934, as amended. The penny stock rules can make trading more difficult for retail investors, requiring, among other things, that brokers who trade those stocks to individuals other than “established customers” complete certain documentation, make “suitability” inquiries of investors, and understandingprovide investors with respectcertain information concerning trading in the security prior to certain accountingfacilitating a transaction. If we become subject to the penny stock rules, it could result in increased administrative burden and auditing matters are disclosure requirements for our investors, adversely affect the marketability of the SECour securities, and the Nasdaq Capital Marketmake it more difficult for our stockholders to buy and do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of the Audit Committee or of the Board.sell shares.

MeetingsIncreasing Interest, Marketability, and the Perception of Our Common Stock as an Investment Security. The Audit Committee met four times during 2020.

ProcessesGiven the capital needs required to develop TSC through potential approval and Procedurescommercialization, we believe our chances of success are improved by opening up the market for Complaints. The Audit Committee has established proceduresour common stock to investors who support our strategy, are dedicated to our Company’s long-term and are committed to holding our common stock as an investment security. We believe we can increase the appeal and marketability of our common stock to long-term holders by structuring the characteristics of the security within our control in a manner that allows investment by a broad cross-section of investors, including traditional institutional investors. Many institutional investment funds, family offices, and other private wealth managers have investment policies prohibiting them from buying and/or holding lower-priced stocks in their portfolios, which may prohibit them from investing in our common stock at the current price. In addition, brokerage firms may be reluctant to recommend lower-priced securities to their clients due to the perceived risk profile and/or because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Although there would be a lower number of shares of common stock outstanding following the Reverse stock Split, a larger number of investors participating in the market for the receipt, retention and treatmentstock may provide support to the degree of complaints received by us regarding accounting, internal accounting controls, or auditing matters, andliquidity in the submission bymarket for our employees, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their concerns with their supervisor first, who in turn will be responsible for informing our Chief Executive Officer of any concerns raised. If an employee prefers not to discuss a particular matter with his or her own supervisor, the employee may instead discuss such matter with our Chief Executive Officer. If an individual prefers not to discuss a matter with the Chief Executive Officer or if the Chief Executive Officer is unavailable and the matter is urgent, the individual is encouraged to contact the Chair of the Audit Committee, Mr. Levin.common stock.

Compensation Committee

Responsibilities. The primary responsibilitiesAlthough there is no assurance that the Reverse Stock Split will result in an increase to the trading price of the Compensation Committee include:our common stock, such an increase would potentially result in increased interest and visibility through other channels as well, such as:

Reflecting the Will of Our Stockholders Amidst Evolutions in Financial Markets and the Stockholder Franchise

Based on our past interactions with our stockholders, we believe our stockholders value the same benefits, and recognize the same risks, described above. For example, during investor outreach following our 2020 annual meeting, many stockholders that voted against a reverse stock split proposal included in the proxy statement for that meeting (which was not approved by holders of a majority of our outstanding shares of common stock and, accordingly, not implemented) indicated a significant factor in their vote was our common stock having regained compliance with Nasdaq’s Listing Requirements during the period following delivery of our proxy statement and prior to our annual meeting as a result of its having traded above $1.00 for ten consecutive trading days, making the reverse stock split unnecessary to regain compliance at the time.

Negative Effects of Market Democratization and Broker Rule Change on Meeting Participation

The financial markets and financial industry more generally have experienced their own series of significant changes in recent years, many a result of what is often referred to as the continuing democratization of finance and investing. Advances and innovations have provided market access historically restricted to a select few to increasingly large numbers of investors. At Diffusion, we hope the increasing breadth and diversity of our own stockholder base driven (at least in part) by this evolution is indicative of the broad appeal of Diffusion’s story. However, a growing and increasingly dispersed stockholder base, a legal, regulatory, and administrative infrastructure designed for the old financial market paradigm, and changes to certain broker-dealers discretionary voting policies for shares they hold in “street name” have had a variety of consequences for Diffusion and other similarly situated companies.

Among these consequences are increased trading volume and stockholder turnover, significant reductions in stockholder meeting attendance (despite increased ease of access through developments such as virtual annual meetings), and corresponding challenges approving and implementing ordinary course corporate actions. Some of the negative effects of these trends are highlighted by Diffusion’s own experience at our recent annual meetings:

The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.Growing “Quorum Problem”

Composition. The current membersDiffusion is not alone in this experience. In 2021, many companies were forced to undertake costly solicitation campaigns and/or adjourn their annual meetings multiple times due to an inability to achieve a simple quorum. Certain other companies, though able to reach a quorum, were forced to retract proposals viewed by the companies’ boards as critical to their business due in part to an inability to achieve sufficient turnout despite expending significant time and resources on extended solicitation campaigns. In response to this trend, many issuers have amended their governance documents to reduce the threshold required to achieve a quorum at a meeting of the Compensation Committee are Messrs. Adams, Giles, and Levin and Ms. Hollingsworth. Mr. Adams is the chair of the Compensation Committee. Each of the three current members of the Compensation Committee is an “independent director” under the Listing Rules ofstockholders, with over 40 companies listed on the Nasdaq Capital Marketdoing so between June 1, 2021 and a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.December 31, 2021.

Meetings. The Compensation Committee met 18 times during 2020, including joint meetings withDetermination of the Board.Split Ratio

ProcessesThe ratio of the Reverse Stock Split, if approved and Procedures for Considerationimplemented, will be a ratio of not less than one-for-two and Determinationnot more than one-for-50, as determined by our Board in its sole discretion. The Board believes that stockholder adoption of Executive Compensation. The Compensation Committee has authoritya range of Reverse Stock Split ratios (as opposed to determine all compensation applicableadoption of a single Reverse Stock Split ratio or a set of fixed ratios) provides maximum flexibility to our executive officers.achieve the purposes of a Reverse Stock Split and, therefore, is in the best interests of the Company. In setting executive compensation for our executive officers,determining a ratio following the Compensation Committee considers,receipt of stockholder adoption, the Board (or any authorized committee of the Board) may consider, among other things, the following primary factors: each executive’s position within the Company and the level of responsibility; the ability of the executive to affect key business initiatives; the executive’s individual experience and qualifications; compensation paid to executives of comparable positions by companies similar to our Company; Company and individual performance; and the executive’s current and historical compensation levels. The Compensation Committee has also from time to time – including during 2020 – retained the services of its independent consulting firm, Radford, to provide advice with respect to executive compensation, such as developing a group of comparable peer companies and reviewing executive and director compensation levels. In making decisions regarding the form and amount of compensation to be paid to our executives, the Compensation Committee may consider information gathered by, and the recommendations of, Radford, when necessary and appropriate.

In making decisions regarding the form and amount of compensation to be paid to our executive officers (other than our Chief Executive Officer), the Compensation Committee considers and gives weight to the recommendations of our Chief Executive Officer recognizing that due to his reporting and otherwise close relationship with each executive, the Chief Executive Officer often is in a better position than the Compensation Committee to evaluate the performance of each executive (other than himself). In making decisions regarding the form and amount of compensation to be paid to our Chief Executive Officer, the Compensation Committee considers the recommendation of the Chief Executive Officer with respect to his own compensation and the Compensation Committee’s own assessment of the Chief Executive Officer’s annual performance and input from other Board members. The Compensation Committee meets in executive session regularly and makes all executive compensation decisions about the Chief Executive Officer without the presence of the Chief Executive Officer or any executive or employee of our company.

Processes and Procedures for Consideration and Determination of Director Compensation. The Board has delegated to the Compensation Committee the responsibility, among other things, to establish and lead a process for determining compensation payable to our non-employee directors. The Compensation Committee makes recommendations regarding compensation payable to our non-employee directors to the entire Board, which then makes the final decision.

In making decisions regarding compensation to be paid to our non-employee directors, the Board considers factors such as its own views as to the form and amount of compensation to be paid, the current and anticipated time demands placed on non-employee directors and other factors that may be relevant, including the recommendations of Radford, when necessary and appropriate.

Nominating and Corporate Governance Committee

Responsibilities. The primary responsibilities of the Nominating and Corporate Governance Committee are:as:

The Nominating and Corporate Governance Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Nominating and Corporate Governance Committee are Messrs. Adams, Giles, and Levin and Ms. Hollingsworth. Mr. Giles is the chair of the Nominating and Corporate Governance Committee. Each of the three current members of the Nominating and Corporate Governance Committee is an “independent director” within the meaning of the Listing Rules of the Nasdaq Capital Market.

Meetings. The Nominating and Corporate Governance Committee met three times during 2020 and acted by unanimous written consent once.

Processes and Procedures for Consideration Director Nominations. In selecting nominees for the Board, the Nominating and Corporate Governance Committee first determines whether the incumbent directors are qualified to serve, and wish to continue to serve, on the Board. The Nominating and Corporate Governance Committee believes that our Company and stockholders benefit from the continued service of certain qualified incumbent directors because those directors have familiarity with and insight into our Company’s affairs that they have accumulated during their tenure with Diffusion. Appropriate continuity of Board membership also contributes to the Board’s ability to work as a collective body. Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-nominate an incumbent director at the upcoming annual meeting of stockholders if the director wishes to continue his or her service with the Board, the director continues to satisfy the Nominating and Corporate Governance Committee’s criteria for membership on the Board, the Nominating and Corporate Governance Committee believes the director continues to make important contributions to the Board and there are no special, countervailing considerations against re-nomination of the director.

In identifying and evaluating new candidates for election to the Board, the Nominating and Corporate Governance Committee intends to first solicit recommendations for nominees from persons whom the Nominating and Corporate Governance Committee believes are likely to be familiar qualified candidates having the qualifications, skills and characteristics required for Board nominees from time to time. Such persons may include members of the Board and senior management of Diffusion. In addition, the Nominating and Corporate Governance Committee may engage a search firm to assist it in identifying qualified candidates. The Nominating and Corporate Governance Committee then intends to review and evaluate each candidate whom it believes merits serious consideration, taking into account available information concerning the candidate, any qualifications or criteria for Board membership established by the Nominating and Corporate Governance Committee, the existing composition of the Board (including with respect to diversity), and other factors that it deems relevant. In conducting its review and evaluation, the Nominating and Corporate Governance Committee may solicit the views of our management, other Board members and any other individuals it believes may have insight into a candidate. The Nominating and Corporate Governance Committee may designate one or more of its members and/or other Board members to interview any proposed candidate.

The Nominating and Corporate Governance Committee will consider recommendations for the nomination of directors submitted by our stockholders. The Nominating and Corporate Governance Committee will evaluate candidates recommended by stockholders in the same manner as those recommended described above.

There are no formal requirements or minimum qualifications that a candidate must meet in order for the Nominating and Corporate Governance Committee to recommend the candidate to the Board. The Nominating and Corporate Governance Committee believes that each nominee should be evaluated based on his or her merits as an individual, taking into account the needs of the Company and the Board. However, in evaluating candidates, there are a number of criteria that the Nominating and Corporate Governance Committee generally views as relevant and is likely to consider. Some of these factors include:

WhilePrincipal Effects of Reverse Stock Split

Decrease in the Number of Shares of Common Stock Outstanding

If our stockholders approve the proposed Reverse Stock Split and the Board elects to affect the Reverse Stock Split, our issued and outstanding shares of common stock would be reduced; for example, a one-for-ten Split Ratio would result in one (1) share of common stock for every ten (10) shares of common stock currently outstanding. The Reverse Stock Split would be affected simultaneously for all of our common stock, and the Split Ratio would be the same for all shares of common stock. The Reverse Stock Split would affect all of our stockholders uniformly and would not affect any stockholders’ percentage ownership interests in the Company, except to the extent that it results in a stockholder receiving cash in lieu of fractional shares. The Reverse Stock Split would not affect the relative voting or other rights that accompany the shares of our common stock, except to the extent that it results in a stockholder receiving cash in lieu of fractional shares. Common stock issued pursuant to the Reverse Stock Split would remain fully paid and non-assessable. The Reverse Stock Split would not affect our securities law reporting and disclosure obligations, we do not have a stand-alone diversity policy, in considering whetherwould continue to recommend any director nominee, including candidates recommended by stockholders,be subject to the Nominating and Corporate Governance Committee will consider the factors described above. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity of experience, expertise, and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds and qualificationsperiodic reporting requirements of the directors, consideredSecurities Exchange Act of 1934, as amended, and bid and ask prices for our common stock would continue to be quoted on the Nasdaq Capital Market under the symbol “DFFN”. However, our common stock would receive a group, should provide a significant mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.new CUSIP number.

Board OversightIncrease the Per Share Price of Riskour Common Stock

By effectively combining a number of pre-split shares into one share of common stock, the per share price of a post-split share is generally greater than the per share price of a pre-split share. The amount of the initial increase in per share price and the duration of such increase, however, is uncertain. The Board intends to utilize the Reverse Stock Split as a whole has responsibility for risk oversight, with more in-depth reviewspart of certain areas of risk being conducted byits plan to maintain the relevant Board committees that report on their deliberations to the full Board. The oversight responsibilityrequired minimum per share price of the Board and its committees is enabled by management reporting processes that are designed to provide information tocommon stock under the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. The areas of risk that we focus on include regulatory, operational, financial (accounting, credit, liquidity and tax), legal, compensation, competitive, health, safety and environment, economic, political and reputational risks.Nasdaq listing standards.

The committeesIncrease in the Number of the Board oversee risks associated with their respective principal areasShares of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of financial reporting to stockholders, our processesCommon Stock Available for the management of business and financial risk, our financial reporting obligations, and our compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee, along with management, is also responsible for developing and participating in a process for review of important financial and operating topics that present potential significant risk to our company. The Compensation Committee is responsible for overseeing risks and exposures associated with our compensation programs and arrangements, including our executive and director compensation programs and arrangements. The Nominating and Corporate Governance Committee oversees risks relating to our corporate governance matters and policies and management and director succession planning.Future Issuance

We recognize that a fundamental partBy reducing the number of risk management is understanding not onlyshares outstanding without reducing the risks a company faces and what steps management is taking to manage those risks,number of shares of available but also understanding what levelunissued common stock, the Reverse Stock Split will increase the number of riskauthorized but unissued shares. The Board believes the increase is appropriate for our Company. The involvementuse to fund the future operations of the full BoardCompany. Although the Company does not have any pending acquisitions for which shares are expected to be used, the Company may also use authorized shares in setting our business strategy is a key partconnection with the financing of the Board’s assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for our company.future acquisitions.

We believeAlthough the Reverse Stock Split would not have any dilutive effect on our current Board leadership structure is appropriate and helps ensure proper risk oversight for our company forstockholders, the Reverse Stock Split without a number of reasons, including: (1) general risk oversight by the full Boardreduction in connection with its role in reviewing our key long-term and short-term business strategies and monitoring on an on-going basis the implementation of our key business strategies; (2) more detailed oversight by our Board committees that are currently comprised of and chaired by our independent directors and (3) the focus of our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding the implementation of our key business strategies and specifically risk management.

Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics applies to all of our directors, executive officers and other employees, and meets the requirements of the SEC. A copy of our Code of Business Conduct and Ethics is available on the Investor Relations—Corporate Governance—Code of Business Conduct and Ethics section of our corporate website at www.diffusionpharma.com.

Policy Regarding Director Attendance at Annual Meetings of Stockholders

It is the policy of the Board that directors standing for re-election should attend our annual meeting of stockholders, if their schedules permit.

Process Regarding Stockholder Communications with Board

Stockholders may communicate with the Board or any one particular director by sending correspondence, to our General Counsel & Corporate Secretary via e-mail to proxyrequests@diffusionpharma.com or via mail to 1317 Carlton Avenue, Suite 200, Charlottesville, Virginia 22902, with an instruction to forward the communication to the Board or one or more particular directors. Our General Counsel & Corporate Secretary will forward promptly all such stockholder communications to the Board or the one or more particular directors, with the exception of any advertisements, solicitations for periodical or other subscriptions and other similar communications.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

Number of Directors

Our Bylaws provide that the Board will consist of at least one member, or such other number as may be determined by the Board or our stockholders. The Board has currently fixed the number of directors at seven.shares authorized for issuance would reduce the proportion of shares owned by our stockholders relative to the number of shares authorized for issuance, giving the Board an effective increase in the authorized shares available for issuance, in its discretion. The Board from time to time may deem it to be in the best interests of the Company to enter into transactions and other ventures that may include the issuance of shares of our common stock. If the Board authorizes the issuance of additional shares subsequent to the Reverse Stock Split, the dilution to the ownership interest of our existing stockholders may be greater than would occur had the Reverse Stock Split not been effected.

Nominees for DirectorAdjustment to Currently Outstanding Securities Exercisable or Convertible into Shares of our Common Stock

The Board has nominated the following seven individuals to serve as our directors until the next annual meeting of our stockholders or until their successors are elected and qualified. All of the nominees named below are current members of the Board, other than Mr. Francois and Dr. Lanchoney. Two of our current directors – David G. Kalergis and John L. Gainer – will not stand for re-election at the Annual Meeting and, accordingly, their term on the Board will end upon the conclusion of the Annual Meeting.

Proxies only can be voted forReverse Stock Split would effect a reduction in the number of persons named as nomineesshares of common stock issuable upon the exercise or conversion of our outstanding stock options, settlement of restricted stock units and exercise of our outstanding warrants in this Proxy Statement, which is seven. If priorproportion to the Annual Meeting,Split Ratio. The exercise price of outstanding options and warrants would be subject to a corresponding increase in proportion to the Split Ratio.

Adjustment to the Number of Shares of Common Stock Available for Issuance Under our 2015 Equity Plan

In connection with any reverse stock split, the Board should learn that any nominee will be unable to serve for any reason,would also make a corresponding reduction in the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the discretion of the Board, may be voted for that fewer number of nomineesshares available for future issuance under the foregoing plan so as results fromto avoid the inabilityeffect of any nominee to serve. The Board has no reason to believe that anyincreasing the number of the nominees will be unable to serve.authorized but unissued shares available for future issuance under such plans.

Information About Current Directors Standing for Re-ElectionIllustrative Examples of Effects of Reverse Stock Split at Minimum and Board NomineesMaximum Ratio

The following table below sets forth,contains approximate information relating to our securities as of the date of this Proxy Statement, certain information that has been furnished to us by each current director standing for re-election and each other individual who has been nominated by the Board to serve as a director of our company.Record Date:

* - Current member of each of the Audit, Compensation and Nominating and Corporate Governance Committees.

Additional Information About Current Directors and Board Nominees

The paragraphs below provide information about each current director and nominee for director, including all positions he or she holds, his or her principal occupation and business experience for the past five years, and the names of other publicly held companies of which he or she currently serves as a director or served as a director during the past five years. We believe that all of our directors and director nominees display personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of the Board and its committees; a fit of skills and personality with those of our other directors that helps build a board of directors that is effective, collegial and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our stockholders. The information presented below regarding each director and nominee for director also sets forth specific experience, qualifications, attributes and skills that led the Board to the conclusion that he or she should serve as a director in light of our business and structure.

Board Nominees

Current Directors Standing for Re-Election

Robert Adams — Mr. Adams has served as a director since January 2016 and as a director of Diffusion LLC since 2002. Prior to his retirement in 2015, Mr. Adams was a partner in the intellectual property law firm of Nixon & Vanderhye P.C, where he had practiced for over 25 years, focusing on patent litigation and international patent licensing and negotiations. During that time period, Mr. Adams was lead litigation counsel in more than 50 major intellectual property lawsuits, where he directly handled, for example, all intellectual property valuations and settlements on behalf of his U.S. and foreign clients. Moreover, Mr. Adams served as the head negotiator for a well-known Japanese consumer products company for 15 years in various complicated licensing situations. Those negotiations typically involved the cross-licensing of up to hundreds of U.S. and foreign patent rights. His lead licensing activities on behalf of that client included, among other things, multi-year negotiations with Texas Instruments, Advanced Micro Devices and Freescale. Mr. Adams received a B.A. from the University of Maryland and a J.D. from George Washington University (with honors), and is a member of the Virginia State Bar.

The Board believes Mr. Adams’ perspective and experience as a director of Diffusion, as well as the depth and breadth of his intellectual property experience, provide him with the qualifications to serve as a director.

Robert J. Cobuzzi, Jr., Ph.D. – Dr. Cobuzzi has served as a director since January 2020 and as our President and Chief Executive Officer since September 2020. Prior to joining Diffusion, Dr. Cobuzzi served as Advisor of the Mitochondrial Disease Research Program at the Children’s Hospital of Philadelphia, an internationally recognized hospital and research center devoted to children, from January 2019 to April 2020 and as President and Chief Executive Officer of MitoCUREia, Inc., an affiliated company, from July 2019 to July 2020. From 2005 to 2018, Dr. Cobuzzi served in various roles at Endo International PLC, a specialty branded and generic pharmaceuticals manufacturer, most recently serving as President of Endo Ventures Ltd. Dr. Cobuzzi currently serves as Chairman of the Business Development Board of Sunstone Life Science Ventures, an early-stage, European focused investor in human therapeutics. Dr. Cobuzzi received his Bachelor of Arts in Biochemistry and Art History from Colby College and his Ph.D. in Molecular and Cellular Biochemistry from Loyola University Chicago. He served as a Post-doctoral Fellow in Experimental Therapeutics at Roswell Park Cancer Institute.

The Board believes Dr. Cobuzzi’s experience and insight with drug development and business development and funding, both in the U.S. and abroad, as well as his experience and background as our Chief Executive Officer, provide him with the qualifications to serve as a director.

Mark T. Giles — Mr. Giles has served as a director since January 2016 and as a director of Diffusion LLC since 2008. Since July 2007, Mr. Giles has been the sole managing member of Panda Holdings, LLC, which engages in the investment and management of private capital. Since February 2015, Mr. Giles has been a general partner of Anchormark Holdings, LLC, which engages in the investment and management of private capital. Prior to joining Panda Holdings and Anchormark Holdings, Mr. Giles served as the Chief Executive Officer of Virginia National Bank from July 1998 until June 2007 and thereafter continued to serve as the non-executive Chairman until December 2011. Prior to joining Virginia National Bank, Mr. Giles also served as the president of two publicly traded bank holding companies and subsidiary banks in Texas and practiced law with the banking group of a Houston law firm. He chairs the board of Expedition Trust Company. Mr. Giles received a B.S. from the McIntire School of Commerce at the University of Virginia and a J.D. from the University of Virginia School of Law.

The Board believes Mr. Giles’ perspective and experience as a director of Diffusion, as well as the depth and breadth of his business and legal experience, provide him with the qualifications to serve as a director.

Jane H. Hollingsworth – Ms. Hollingsworth has served as a director since September 2020. She currently serves as Managing Partner of Militia Hill Ventures, an investment firm focused on building, growing and investing in high-quality life sciences companies, a role she has held since Militia Hill’s founding in 2013. Prior to founding Militia Hill, Ms. Hollingsworth served as Executive Chair of Immunonome Inc., a cancer immunotherapy company, and co-founder and Chief Executive Officer of NuPathe, Inc., a publicly-traded biopharmaceutical company focused on diseases of the central nervous system, prior to the acquisition of NuPathe by Teva Pharmaceuticals in 2014. She also currently serves on the board of various industry and community organizations, including DS Biopharma, the University City Science Center, the Kimmel Center for the Performing Arts and Breatcancer.Org. Ms. Hollingsworth received her B.A. from Gettysburg College and her J.D. from Villanova University.

The Board believes Ms. Hollingsworth’s industry perspective and experience, including as chief executive officer and director of a publicly-traded biopharmaceutical company, as well as her depth of her other operating and senior management experience in our industry and educational background, provide her with the qualifications to serve as a director.

Alan Levin — Mr. Levin has served as a director since January 2016 and as a director of Diffusion LLC since June 2015. He previously served as Executive Vice President and Chief Financial Officer of Endo Health Solutions Inc., a global specialty healthcare company, from June 2009 until his retirement in September 2013. Prior to joining Endo, Mr. Levin worked with Texas Pacific Group, a leading private equity firm, and one of their start-up investments. Before that, he was Senior Vice President & Chief Financial Officer of Pfizer, Inc. where he worked for 20 years in a variety of executive positions of increasing responsibility, including Treasurer and Senior Vice President of Finance & Strategic Management for the company’s research and development organization. Mr. Levin received a bachelor’s degree from Princeton University and a master’s degree from New York University’s Stern School of Business. Mr. Levin is a certified public accountant. Mr. Levin currently serves as a member of the board of directors of Biocryst Pharmaceuticals, Inc., a Nasdaq-traded biopharmaceuticals company. He is also a member of the Advisory Board of Auven Therapeutics, a private equity fund; and the Critical Path Institute, a nonprofit collaboration between the Food and Drug Administration and pharmaceutical industry participants focused on streamlining and accelerating the development and regulatory pathways for innovative medicines. From December 2013 to July 2019, he was a member of the board of directors of Aceto Corporation, a Nasdaq-traded company specialized in generics and pharmaceutical intermediate products.

The Board believes that the combination of Mr. Levin’s perspective and experience as a director of Diffusion; his experience in financial reporting, treasury and corporate finance (including his prior positions as chief financial officer of Endo and Pfizer, Inc.); and his executive-level experience in the pharmaceutical industry all provide him with the qualifications and skills to serve as a director.

Nominees Not Currently on the Board Standing for Election

Eric Francois – If elected by our stockholders, Mr. Francois will join the Board as a director immediately upon the conclusion of the Annual Meeting. Since November 2015, Mr. Francois has served as Chief Financial Officer of Scynexis, Inc., a pharmaceutical company pioneering innovative medicines to potentially help millions of patients worldwide in need of new options to overcome and prevent difficult-to-treat and drug-resistant infections. He previously served as co-founder and Chief Operating Officer of Topi, Inc., a technology startup, from July 2013 to October 2015, where he was responsible for all marketing, commercial and financial activities and helped grow the company from inception to over 250 clients worldwide. Previously, Mr. Francois served from September 2007 to July 2013 as a Director in the Equity Capital Markets Group at Lazard Ltd where he led capital raisings and advisory assignments for healthcare and biotechnology companies. He started his career in September 2000 at Cowen and Company in the Equity Capital Markets and Convertible Debt Groups. Mr. Francois holds a B.A. in Economics and Business Administration and a M.A. in Marketing from Pantheon-Sorbonne University, France.

The Board believes that the combination of Mr. Francois’s perspective and industry experience, his experience in financial reporting, corporate finance, and capital raising transactions, and his executive-level experience in the pharmaceutical industry all provide him with the qualifications and skills to serve as a director.

Diana Lanchoney, M.D. – If elected by our stockholders, Dr. Lanchoney will join the Board as a director immediately upon the conclusion of the Annual Meeting. Since 2014, Dr. Lanchoney has served as a Vice President of CSL Behring, Inc., a global biopharmaceutical company manufacturing plasma-derived and recombinant therapeutic products, since January 2018 as Vice President, Clinical Pharmacology and Translational Development and prior to that as Vice President, R&D Project Management, from October 2014 to December 2017. Prior to joining CSL, Dr. Lanchoney served in positions of increasing responsibility with Merck & Co., a global pharmaceutical company, most recently as Associate Vice President, Corporate Strategy. Dr. Lanchoney received her B.A. in Economics and German Studies from Tufts University and her M.D. from the University of Pennsylvania.

The Board believes Dr. Lanchoney’s professional and academic background and experience provide herCertain Risks Associated with the qualifications to serve as a director, including the depth and breadth of her experience with clinical development, corporate strategy, and pharmaceutical industry partnering.

Board Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL SEVEN OF THE NOMINEES FOR DIRECTOR NAMED IN THIS PROXY STATEMENT.

PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReverse Stock Split

SelectionWe cannot predict whether the Reverse Stock Split will increase the market price for our common stock. The history of Independent Registered Public Accounting Firm

The Audit Committee has selected KPMG assimilar stock split combinations for companies in like circumstances is varied, and the market price of our independent registered public accounting firm for the fiscal year ending December 31, 2021.

Neithercommon stock will also be based on our Bylaws norperformance and other governing documents or law require stockholder ratificationfactors, some of the selection of KPMG as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of KPMGwhich are unrelated to the stockholders for ratification asnumber of shares outstanding. Further, there are a matternumber of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in our best interests and the best interests of our stockholders.

Representatives of KPMG will be present at the Annual Meeting to respond to appropriate questions. They also will have an opportunity to make a statement if they wish to do so.

Independent Auditor’s Fees

The table below presents fees billed to us for professional services rendered by KPMG, our current independent registered public accounting firm, for the years ended December 31, 2020 and December 31, 2019.

Tax Fees in 2020 represent fees paid to KPMG in connection with an analysis under Section 382 of the Tax Code.

Pre-Approval Policies and Procedures

The Audit Committee has adopted procedures pursuant to which all audit, audit-related and tax services and all permissible non-audit services provided by our independent registered public accounting firm must be pre-approved by the Audit Committee. All services rendered by KPMG during 2020 and 2019 were permissible under applicable laws and regulations and were approved in advance by the Audit Committee in accordancerisks associated with the rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002.

Board Recommendation

THEBOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER31, 2021.

AUDIT COMMITTEE REPORT

This report is furnished by the Audit Committee of the Board with respect to our financial statements for the year ended December 31, 2020.

One of the purposes of the Audit Committee is to oversee our accounting and financial reporting processes and the audit of our annual financial statements. Our management is responsible for the preparation and presentation of complete and accurate financial statements. Our independent registered public accounting firm is responsible for performing an independent audit of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (U.S.) and for issuing a report on their audit.

In performing its oversight role, the Audit Committee has reviewed and discussed our audited financial statements for the year ended December 31, 2020 with our management. Management represented to the Audit Committee that our financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has discussed with KPMG, our independent registered public accounting firm for the year ended December 31, 2020, the matters required to be discussed under Public Company Accounting Oversight Board standards. The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding communications with audit committees concerning independence. The Audit Committee has discussed with KPMG its independence and concluded that the independent registered public accounting firm is independent from our company and our management.

Based on the review and discussions of the Audit Committee described above, the Audit Committee recommended to the Board that our audited financial statements for the year ended December 31, 2020 be included in our annual report on Form 10-K for the year ended December 31, 2020 for filing with the Securities and Exchange Commission.Reverse Stock Split, including:

EXECUTIVE OFFICERS

The table below sets forth, as of the date of this Proxy Statement, certain information concerning our executive officers. Biographical information for Dr. Cobuzzi is included under the heading, “Proposal No. 1—Election of Directors—AdditionalInformation About Current Directors and Board Nominees”.

William K. Hornung – Mr. Hornung serves as our Chief Financial Officer, a position he has held since September 2018. Prior to his appointment as Chief Financial Officer, Mr. Hornung served as the Chief Business Officer at Diffusion from July 2017 through September 2018. Previously, Mr. Hornung served as Chief Financial Officer of Contravir Pharmaceuticals from June 2014 to November 2015 and helped the company up-list to Nasdaq and raise nearly $30 million. Prior to Contravir, from 2002 through 2014 Mr. Hornung held positions of increasing responsibility with PTC Therapeutics, most recently serving as Vice President of Finance from April 2012 to March 2014. While at PTC Therapeutics he oversaw the IPO process and raised more than $1 billion. From 1998 through 2002 Mr. Hornung was with Elan Pharmaceuticals (formerly The Liposome Company) in various financial roles. At Liposome and Elan he was responsible for strategic planning and operations of the company's UK-based European headquarters. Earlier in his career Mr. Hornung worked for a clinical research organization where he was responsible for project management and nearly all financial aspects of the company. Mr. Hornung holds a Bachelor of Science in Accounting from the William Paterson State University of New Jersey.

Christopher D. Galloway, M.D. – Dr. Galloway has served as our Chief Medical Officer since October 2020. Prior to joining Diffusion, Dr. Galloway served as senior medical director in critical care for La Jolla Pharmaceutical Company from August 2018 to September 2020, where he chaired and oversaw La Jolla’s investigator-initiated and collaborative research programs and supported the commercial and medical teams in connection with the launch of GIAPREZA™(angiotensin II), which has been approved by the U.S. Food and Drug Administration as a vasoconstrictor to increase blood pressure in adults with septic or other distributive shock. Prior to his time at La Jolla, Dr. Galloway served as medical director for global clinical development at Rakuten Medical Inc. (f/k/a Aspyrian Therapeutics, Inc.), a biotechnology company developing cell-targeting investigative immuno-oncology therapies, from December 2016 to July 2018 and as medical affairs director within Merck & Co., Inc.’s immunotherapy division from August 2015 to November 2016. Dr. Galloway received his doctor of medicine from the University of Texas Medical Branch at Galveston, completed his residency in emergency medicine at Carolinas Medical Center in Charlotte, NC, and received a B.A. in biology from the University of Texas at Austin. He is licensed to practice medicine in the State of Colorado and is a diplomate of the American Board of Emergency Medicine.

William R. Elder – Mr. Elder has served as our General Counsel & Corporate Secretary since September 2020. Prior to joining Diffusion, Mr. Elder principally served as president and chief executive officer of BillyVonElds, LLC, a season-long and daily fantasy sports company, where he managed all corporate, legal, and operational aspects of the business from April 2019 to September 2020. From July 2020 to September 2020, Mr. Elder also served as a part-time consultant to Diffusion. From 2011 to February 2019, Mr. Elder served as a corporate and securities associate for Dechert LLP, an international law-firm, where Mr. Elder’s practice focused primarily on counseling public companies on securities laws and regulatory requirements, corporate governance matters, and financial transactions in the equity and debt markets. He received his J.D. from the University of Pennsylvania Law School, an M.S. in finance from Villanova University, and a B.A. in economics from Tufts University.

No family relationships exist among any of our directors or executive officers.

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below provides summary compensation information concerning compensation awarded for service during the years ended December 31, 2020 and December 31, 2019 to the individuals that served as our named executive officers during the year ended December 31, 2020. 

Process for Effecting Reverse Stock Split and Exchanging Stock Certificates

If the Reverse Stock Split is approved by the Company’s stockholders, and if at such time the Board still believes that the Reverse Stock Split is in the best interests of the Company and its stockholders, the Board will determine the ratio of the Reverse Stock Split to be implemented. The Reverse Stock Split will become effective as of 12:01 a.m., Eastern Time on the date specified in the Certificate of Amendment as filed with the office of the Secretary of State of the State of Delaware (the “effective time”). The Board will determine the exact timing of the filing of the Certificate of Amendment based on its evaluation as to when the filing would be the most advantageous to the Company and its stockholders. If the Board does not decide to implement the Reverse Stock Split prior to December 31, 2022, the authority granted in this proposal to implement the Reverse Stock Split will terminate.

Except as described below under the section titled “Fractional Shares,” at the effective time, each number of issued and outstanding pre-Reverse Stock Split shares that the Board has determined will be combined into one post-Reverse Stock Split share and will, automatically and without any further action on the part of our stockholders, be combined into and become one share of common stock, and each certificate which, immediately prior to the effective time represented pre-Reverse Stock Split shares, will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split shares.

Book-Entry Shares

If the Reverse Stock Split is effected, stockholders who hold uncertificated shares (i.e., shares held in book-entry form and not represented by a physical stock certificate), either as direct or beneficial owners, will have their holdings electronically adjusted automatically by our transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Stock Split. Stockholders who hold uncertificated shares as direct owners will be sent a statement of holding from our transfer agent that indicates the number of post-reverse stock split shares of our common stock owned in book-entry form.

Employment AgreementsIf the proposed Reverse Stock Split is approved and effected, we intend to treat common stock held by stockholders in “street name,” through a bank, broker or other nominee, in the same manner as stockholders whose shares are registered in their own names. Banks, brokers or other nominees will be instructed to effect the Reverse Stock Split for their customers holding common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split. If you hold shares of common stock with a bank, broker or other nominee and have any questions in this regard, you are encouraged to contact your bank, broker or other nominee.

Robert J. Cobuzzi, Jr., Ph.D., President & Chief Executive OfficerCertificated Shares. Effective September 8, 2020, we entered into an employment agreement

As soon as practicable after the effective time of the Reverse Stock Split, stockholders will be notified that the Reverse Stock Split has been effected. We expect that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates representing post-split shares in accordance with Dr. Cobuzzithe procedures to be set forth in a letter of transmittal to be sent by us or our exchange agent. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. Any pre-split shares submitted for transfer, whether pursuant to which he serves as our President & Chief Executive Officer. The employment agreement has an indefinite term. Dr. Cobuzzi is currentlya sale or other disposition, or otherwise, will automatically be exchanged for post-split shares.

STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) FOR EXCHANGE UNTIL REQUESTED TO DO SO.

Fractional Shares

No fractional shares will be issued in connection with the Reverse Stock Split. Stockholders of record who otherwise would be entitled to receive fractional shares will be entitled to an initial annual base salaryamount in cash (without interest or deduction) equal to the fraction of $410,000,one share to which such stockholder would otherwise be entitled multiplied by the product of: (i) the average of the closing prices of our common stock on the Nasdaq Capital Market for the five consecutive trading days immediately preceding the effective date of the Reverse Stock Split and (ii) the Split Ratio. Except for the right to receive the cash payment in lieu of fractional shares, stockholders will not have any voting, dividend or other rights with respect to the fractional shares they would otherwise be entitled to receive.

Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders may reside, where we are domiciled, and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective date of the Reverse Stock Split may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by us or the exchange agent concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds will have to seek to obtain them directly from the state to which they were paid.

Accounting Matters; Effect on Par Value

The Reverse Stock Split will not affect the common stock capital account on our balance sheet and will not affect the par value of our common stock, which will remain at $0.001 per share. However, because the par value of our common stock will remain unchanged at the effective time of the Reverse Stock Split, the components that make up the common stock capital account will change by offsetting amounts. Depending on the ratio of the Reverse Stock Split the Board decides to implement, the stated capital component will be reduced proportionately based upon the Reverse Stock Split and the additional paid-in capital component will be increased with the amount by which the stated capital is reduced subject to increase atminor adjustments for fractional shares. Immediately after the discretionReverse Stock Split, the per share net income or loss and net book value of the Board. Dr. Cobuzzi has the opportunity to earn a target annual bonus of 50 percent of his base salary. The Board may, in its discretion, pay a portion of Dr. Cobuzzi’ annual salary and annual bonus in the form of equity or equity-based compensation, provided that commencing with the year following the year in which a “change of control” (as defined in the employment agreement) occurs, Dr. Cobuzzi’ entire base salary and annual bonusour common stock will be paid in cash. For 2020, Dr. Cobuzzi’ entire pro-rated base salary was paid in cash. The employment agreement contains certain severance and change of control provisions as described in more detail under the heading “—Post-Termination Severance and Change in Control Arrangements.” The employment agreement also contains certain non-competition and non-solicitation provisions (each applicable during employment and for 24 months thereafter), as well as confidentiality and non-disparagement provisions (each applicable during employment and at all times thereafter).

William K. Hornung, Chief Financial Officer. Effective September 21, 2018, we entered into an amended and restated employment agreement with Mr. Hornung pursuant to which he serves as our Chief Financial Officer. The employment agreement has an indefinite term. Mr. Hornung was entitled to an annual base salary of $298,100 during 2020, subject to increase at the discretion of the Board. Mr. Hornung has the opportunity to earn a target annual bonus of 35 percent of his base salary. The Board may, in its discretion, pay a portion of Mr. Hornung’s annual salary and annual bonus in the form of equity or equity-based compensation, provided that commencing with the year following the year in which a “change of control” (as defined in the employment agreement) occurs, Mr. Hornung’s entire base salary and annual bonusincreased because there will be paidfewer shares of common stock outstanding. All historic share and per share amounts in cash. For 2020, Mr. Hornung’s entire base salary was paid in cash. The employment agreement contains certain severanceour financial statements and change of control provisions as described in more detail underrelated footnotes will be adjusted accordingly for the heading “—Post-Termination Severance and Change in Control Arrangements.” The employment agreement also contains certain non-competition and non-solicitation provisions (each applicable during employment and for 18 months thereafter), as well as confidentiality and non-disparagement provisions (each applicable during employment and at all times thereafter).

Christopher D. Galloway, Chief Medical Officer. Effective October 19, 2020, we entered into an employment agreement with Dr. Galloway pursuant to which he serves as our Chief Medical Officer. The employment agreement has an indefinite term. Dr. Galloway is entitled to an initial annual base salary of $375,000, subject to increase at the discretion of the Board. Dr. Galloway has the opportunity to earn a target annual bonus of 40 percent of his base salary. The employment agreement contains certain severance and change of control provisions as described in more detail under the heading “—Post-Termination Severance and Change in Control Arrangements.” The employment agreement also contains certain non-competition (applicable during employment and for 12 months thereafter) and non-solicitation provisions (applicable during employment and for 24 months thereafter), as well as confidentiality and non-disparagement provisions (each applicable during employment and at all times thereafter).Reverse Stock Split.

Potential Anti-Takeover Effect; No Going Private Transaction

Even though the proposed Reverse Stock Split would result in an increased proportion of unissued authorized shares to issued shares, which could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction for the combination of us with another company), the Reverse Stock Split is not being proposed in response to any effort of which we are aware to accumulate shares of our common stock or obtain control of us, nor is it part of a plan by management to recommend a series of similar amendments to the Board and our stockholders. Furthermore, notwithstanding the decrease in the number of outstanding shares following the proposed Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.

No Dissenters’ or Appraisal Rights

Under the Delaware General Corporation Law, our Charter or bylaws, the Company’s stockholders are not entitled to dissenters’ appraisal rights with respect to the Reverse Stock Split, and we will not independently provide stockholders with any such right.

Certain United States Federal Income Tax Consequences

The following is not intended as tax or legal advice. Each stockholder should seek advice based on his, her or its particular circumstances from an independent tax advisor.

The following is a summary of certain United States federal income tax consequences of the Reverse Stock Split generally applicable to holders of shares of our common stock. This summary addresses only such stockholders who hold their pre-split shares as capital assets and will hold the post-split shares as capital assets. This discussion does not address all United States federal income tax considerations that may be relevant to particular stockholders in light of their individual circumstances or to stockholders that are subject to special rules, such as financial institutions, trusts, estates, entities treated as partnerships for U.S. federal income tax purposes, tax-exempt organizations, regulated investment companies, real estate investment trusts, insurance companies, dealers in securities and foreign stockholders. The following summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations thereunder, judicial decisions and Internal Revenue Service (“IRS”) rulings, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Tax consequences under state, local, foreign, and other laws are not addressed herein. Each stockholder should consult their tax advisor as to the particular facts and circumstances which may be unique to such stockholder and also as to any estate, gift, state, local or foreign tax considerations arising out of the Reverse Stock Split.

Exchange Pursuant to Reverse Stock Split

The Reverse Stock Split is intended to qualify as a tax-free recapitalization under the Code. Assuming the Reverse Stock Split so qualifies, then generally, for U.S. federal income tax purposes, no gain or loss will be recognized by the Company in connection with the Reverse Stock Split, and no gain or loss will be recognized by the stockholders that exchange their pre-split shares for post-split shares except as described below with respect to cash received in lieu of fractional shares. The post-split shares in the hands of a stockholder following the Reverse Stock Split will generally have an aggregate tax basis equal to the aggregate tax basis of the pre-split shares held by that stockholder immediately prior to the Reverse Stock Split, and a stockholder’s holding period for its post-split shares generally will be the same as its holding period for the pre-split shares.

William R. Elder, General Counsel & Corporate Secretary.Tax Consequences to Stockholders Effective September 23, 2020, we entered into an employment agreement with Mr. Elder

Stockholders should not recognize any gain or loss for U.S. federal income tax purposes as a result of the Reverse Stock Split, except to the extent of any cash received in lieu of a fractional share of common stock (which fractional share will be treated as received and then exchanged for cash). Each stockholder’s aggregate tax basis in the common stock received in the Reverse Stock Split, including any fractional share treated as received and then exchanged for cash, should equal the stockholder’s aggregate tax basis in the common stock exchanged in the Reverse Stock Split. In addition, each stockholder’s holding period for the common stock it receives in the Reverse Stock Split should generally be the same as the stockholder’s holding period for the common stock exchanged in the Reverse Stock Split.

In general, a stockholder who receives cash in lieu of a fractional share of common stock pursuant to which he servesthe Reverse Stock Split should be treated for U.S. federal income tax purposes as our General Counsel & Corporate Secretary. The employment agreement has an indefinite term. Mr. Elderhaving received a fractional share pursuant to the Reverse Stock Split and then as having received cash in exchange for the fractional share and should generally recognize capital gain or loss equal to the difference between the amount of cash received and the stockholder’s tax basis allocable to the fractional share. Any capital gain or loss will generally be long term capital gain or loss if the stockholder’s holding period in the fractional share is entitled to an initial annual base salary of $250,000, subject to increase at the discretiongreater than one year as of the Board. Mr. Elder haseffective date of the opportunityReverse Stock Split. Special rules may apply to earn a target annual bonus of 30 percent of his base salary. The Board may, in its discretion, paycause all or a portion of Mr. Elder’s annual salarythe cash received in lieu of a fractional share to be treated as dividend income with respect to certain stockholders who own more than a minimal amount of common stock (generally more than 1% of the shares outstanding) or who exercise some control over the affairs of the Company. Stockholders should consult their own tax advisors regarding the tax effects to them of receiving cash in lieu of fractional shares based on their particular circumstances.

Interests of Directors and annual bonusExecutive Officers

Our directors and executive officers have no substantial interests, directly or indirectly, in the formmatters set forth in this proposal except to the extent of equity or equity-based compensation, provided that commencing withtheir ownership of shares of our common stock.

Certificate of Amendment to Our Charter

If the yearReverse Stock Split is approved, the following paragraph shall be added at the year in which a “changeend of control” (as defined insubsection A of Article IV of the employment agreement) occurs, Mr. Elder’s entire base salary and annual bonus will be paid in cash. For 2020, Mr. Elder’s entire pro-rated base salary was paid in cash. The employment agreement contains certain severance and change of control provisions as described in more detail under the heading “—Post-Termination Severance and Change in Control Arrangements.” The employment agreement also contains certain non-competition and non-solicitation provisions (each applicable during employment and for 24 months thereafter), as well as confidentiality and non-disparagement provisions (each applicable during employment and at all times thereafter).Charter:

David G. Kalergis, Former Chief Executive Officer“Effective upon [intentionally left blank], the effective time of this Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Effective Time”), each [intentionally left blank] shares of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and without the necessity of any further action, be changed, reclassified and combined into one (1) share of Common Stock (the “Reverse Stock Split”). Effective September 6, 2016, we entered into an employment agreementNo fractional shares shall be issued in connection with David G. Kalergis pursuant to which he served as our Chief Executive Officer until his retirement and resignation on September 8, 2020. Mr. Kalergis wasthe Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of Common Stock shall be entitled to receive cash (without interest and subject to applicable withholding taxes) in lieu of such fractional shares in an annual base salary of $410,000 during 2020 and had the opportunity to earn a target annual bonus of 45 percent of his base salary. The Board may have, in its discretion, paid a portion of Mr. Kalergis’ annual salary and annual bonus in the form of equity or equity-based compensation, provided that commencing with the year following the year in which a “change of control” (as defined in the employment agreement) occurs, Mr. Kalergis’ entire base salary and annual bonus would be paid in cash. For 2020, Mr. Kalergis’ entire pro-rated base salary was paid in cash. The employment agreement contained certain severance and change of control provisions. The employment agreement also contained certain non-competition and non-solicitation provisions (each applicable during employment and for 24 months thereafter), as well as confidentiality and non-disparagement provisions (each applicable during employment and at all times thereafter).

On September 8, 2020, Mr. Kalergis’ employment with the Company ended due to Mr. Kalergis’ retirement and resignation as Chief Executive Officer. In connection with his cessation of employment, the Company and Mr. Kalergis entered into a separation agreement memorializing his severance benefits and providing for certain modificationsamount equal to the vesting and termination provisionproduct obtained by multiplying such fractional share of Mr. Kalergis’ existing equity awards, allCommon Stock by the inverse of Reverse Stock Split ratio times the average closing price per share of Common Stock on the securities trading market on which the shares were traded for the five consecutive trading days immediately preceding the date on which the Effective Time occurs.. Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, subject to the elimination of fractional shares as described in more detail under the heading “—Post-Termination Severance and Change in Control Arrangementsabove..” Following his retirement and resignation as Chief Executive Officer, Mr. Kalergis continued to serve on the Company’s Board as its Chairman and received pro-rated compensation for his services as a non-employee member of the Board and Chairman of the Board during his term.

Long-Term Equity Incentive Compensation and Other Compensatory Arrangements

The Compensation Committee administersCertificate of Amendment attached hereto as Appendix A reflects the 2015 Equity Plan in which our named executive officers participate, the bonus paymentschanges that will be made to our named executive officers provided forCharter if the Reverse Stock Split is approved and the Board decides to implement it.

Reservation of Right to Abandon Reverse Stock Split if Approved

We reserve the right to not file the Certificate of Amendment and to abandon the Reverse Stock Split without further action by our stockholders at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the Certificate of Amendment, even if the authority to effect these amendments is approved by our stockholders at the Special Meeting. By voting in favor of a reverse stock split, you are expressly also authorizing the Board to delay, not proceed with, and abandon, these proposed amendments if it should so decide, in its sole discretion, that such action is in the employment agreements described under the heading “—Employment Agreements,” and any other compensation-related matters as they otherwise determine in their discretion. The option grants made for service during 2020 to the named executive officers vest and become exercisable in equal (or as near equal as possible) installments over a 36-month period until fully vested, subject to their continued employment through the applicable vesting date.

Beginning in 2021, the Compensation Committee determined that 50% of any annual long-term equity incentive awards granted to our named executive officers for service during a given year will be granted at the outset of the year in the form of performance-based options the vesting of which will be dependent on the achievement of specified performance metrics during the year of grant.  The remaining 50 percent will continue to be granted in the form of option awards subject to time-based vesting, such awards (if any) to be granted early in the subsequent year at the discretion of the Compensation Committee (e.g. time-based awards based on performance during 2021 will be granted early in 2022).

The Compensation Committee believes this split will better achieve the dual goals of aligning the compensationbest interests of our named executive officers with the success of the Company and the long-term retention of our named executive officers.stockholders.

2020 Bonus Compensation

Executive bonuses are determined by the Compensation Committee. The Compensation Committee determines whether bonuses are earned and the amounts of the bonus payout by considering a number of factors, the principal factor being based upon the performance goals developed by the Compensation Committee. Other important factors include clinical trial progress, business development activities, status of public filings, capital raising transactions, and stock price performance.

Outstanding Equity Awards at Fiscal Year End*****

Option Awards

The table below provides information regarding unexercised stock option awards held by each of our named executive officers that remained outstanding as of December 31, 2020. Unless otherwise indicated, each grant was awarded under our 2015 Equity Plan.