1317 Carlton Avenue, Suite 400
Charlottesville, VA 22902PRELIMINARY 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.
300 East Main Street, Suite 201
Charlottesville, Virginia 22902

February [•], 2022         

Dear Fellow Stockholders:

We are pleased to invite you to join us for a Special Meeting of Stockholders of Diffusion Pharmaceuticals Inc. to be held on Thursday, April 14, 2022, at 9:00 a.m., Eastern Time. The meeting will be conducted virtually and hosted by means of a live webcast. You or your proxyholder will be able to attend the meeting by following the instructions provided in the accompanying notice of meeting 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 instructions in the accompanying 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

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 SPECIAL MEETING OF STOCKHOLDERS

To Be Held on November 1, 2017
TO BE HELD ONTHURSDAY, APRIL 14, 2022

Dear Stockholder:To the Stockholders of Diffusion Pharmaceuticals Inc.:

You are cordially invited to attend a special meetingA Special Meeting of Stockholders (the “Special Meeting”) of Diffusion Pharmaceuticals Inc., a Delaware corporation, (the “Company”), which will be held virtually on November 1, 2017,Thursday, April 14, 2022 at 2:9:00 a.m. Eastern Time by means of a live webcast for the following purposes:

The meeting will be completely virtual and there will be no physical location for stockholders to attend. In order to attend the meeting, you must pre-register at [http://www.viewproxy.com/DFFN/2022/] by 11:59 p.m. local time,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 Company’s offices, locatedmeeting, 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, that email will also contain a control number that will allow you to vote at 1317 Carlton Avenue,the meeting. If you hold your shares through our transfer agent, use the control number on your proxy card to vote at the meeting.

The meeting webcast will begin promptly at 9:00 a.m. Eastern Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:45 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 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 meeting, please see the instructions beginning on page 1 of the proxy statement that follows.

Only stockholders of record at the close of business on February 18, 2022 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. A stockholder list will be available electronically upon request to the Company 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.

February [•], 2022
Charlottesville, Virginia

TABLE OF CONTENTS

As used in this proxy statement, references to “Diffusion,” the “Company,”“we,”“us,”“our” and similar references refer to Diffusion Pharmaceuticals Inc. and our consolidated subsidiaries, the term “common stock” refers to our common stock, par value $0.001 per share.

300 East Main Street, Suite 400, 201
Charlottesville, Virginia 22902. Only22902

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ONTHURSDAY 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 a Special Meeting of Stockholders (the “Special Meeting”) to be held virtually at 9:00 a.m., Eastern Time, on Thursday, April 14, 2022. The Board expects to mail our stockholders whothis Proxy Statement and a form of proxy on or about February [•], 2022.

GENERAL INFORMATION ABOUT THE SPECIAL 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 Special Meeting. The Special Meeting will be conducted online only. You are invited to virtually attend the Special Meeting to vote on the proposals described in this Proxy Statement by following instructions included 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 Special Meeting be held?

The Special Meeting will be on Thursday, April 14, 2022, at 9:00 a.m., Eastern Time.

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

We 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 increase stockholder communication. However, you will bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

The online meeting will begin promptly at 9:00 a.m. Eastern Time on 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 Special 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 stockin “street name” and you provided a 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 card to vote at the meeting. You will not need the Virtual Control Number to join the meeting, you will need it if you choose to vote during the meeting.

How do I submit questions for the Special Meeting?

You can submit questions pertinent to meeting matters at the virtual Special Meeting only if you are a stockholder of record of the Company at the close of business on the record date, September 8, 2017, may vote atRecord Date or if you were a beneficial owner as of the Record Date and you registered in advance to attend the Special Meeting.

During the Special Meeting, including any adjournment or postponement thereof.

Atwe are committed to acknowledging each appropriate question in the Special Meeting, you will be asked to consider and vote upon the following proposals:

(1) To approve the proposed amendmentorder in which it was received. Stockholders may also submit questions prior to the Company’s Certificate of Incorporation, as amended, to permit the Company to pay dividends on the Company’s Series A Convertible Preferred Stock in either cash or shares of the Company’s Common Stock, at the determination of the Board of Directors of the Company; and

(2) To authorize the adjournmentdate of the Special Meeting if necessaryby 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 appropriate, if a quorumher question is present,answered. Any questions relevant to solicit additional proxies if there are insufficient votes atthe 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 favor of Proposal 1;the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast.

(3)In accordance with the rules of order, a copy of which will be available during the Special 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 transactionCompany 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.

Whom do I contact if I am encountering difficulties attending the Special 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 other business thattechnical difficulties may properly comebe addressed before the Special Meeting live audio webcast begins. If you encounter any difficulties accessing the webcast during the check-in or any adjournmentmeeting time, please email VirtualMeeting@viewproxy.com or postponement thereof.call 866-612-8937.

What is the purpose of the Special Meeting?

The accompanying Proxy Statement more fully describes the detailspurpose of the businessSpecial Meeting is to be conducted atvote on the Special Meeting. After careful consideration, the Company’s Board of Directors has unanimously approved the proposals and recommends that you voteFOR each proposal described in the Proxy Statement.

We look forward to seeing you at the Special Meeting.following proposals:

                       , 2017

1317 Carlton Avenue, Suite 400

Charlottesville, VA 22902

PROXY STATEMENT FOR

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 1, 2017

GENERAL INFORMATION ABOUT THE SPECIAL MEETING AND VOTING

When and Where Will theSpecial Meeting Be Held?

The Special Meeting will be held on November 1, 2017, at 2:00 p.m., Eastern Time, at the Company’s offices, located at 1317 Carlton Avenue, Suite 400, Charlottesville, Virginia 22902.

What are the Purposes of theSpecial Meeting?

The purposes of the Special Meeting are to vote on the following items:

Who is Entitledentitled to Votevote at the Special Meeting?

Stockholders of record of our common stock at the close of business on September 8, 2017February 18, 2022 (the “Record Date”) will be entitled to notice of and to vote at the meeting orSpecial Meeting and any adjournment of the Special Meeting. thereof.

As of the Record Date, there were [101,924,581] shares of our common stock outstanding and                   shares of our Series A Convertible Preferred Stock outstanding. Pursuant to the Certificate of Designation, which was approved by the holders of a majority of our common stock on January 6, 2017, the holders of our Series A Convertible Preferred Stock are entitled to vote with the holders of common stock on the basis described below, and not as a separate class, on all matters at the Special Meeting, except as described elsewhere in this Proxy Statement with respect to the Charter Proposal.

What Number of Votes is Each Share Entitled To?

Each share of our common stock is entitled to one vote on each matter to be voted on atproperty brought before the Special Meeting.

Pursuant to the Certificate of Designation, when voting as a single class with the holders of shares of our common stock, each holder of shares of our Series A Convertible Preferred Stock is entitled to that number of votes equal to the whole number of shares of common stock into which the aggregate number of shares of Series A Convertible Preferred Stock held of record by such holder are convertible as of the Record Date, based on a conversion price equal to the closing price of our common stock on the date such Series A Convertible Preferred Stock was issued.

Accordingly, shares of Series A Convertible Preferred Stock issued in the initial closing of the Series A private placement on March 14, 2017 are entitled to 0.84874 votes per share, shares of Series A Convertible Preferred Stock issued in the final closing of the Series A private placement on March 31, 2017 are entitled to 0.50627 votes per share and, in the aggregate, the holders of our Series A Convertible Preferred Stock are entitled to                                 votes at the Special Meeting in the single class vote.

As a result, the effective number of aggregate votes entitled to be cast at the Special Meeting in the single class vote is            .

For purposes of the separate vote of the Series A Convertible Preferred Stock, each share is entitled to a number of votes based upon the Conversion Price of such shares calculated in accordance with the Certificate of Designation.

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 Special Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker or nominee.

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

If your shares are held in street name, you may receive a separate voting instruction form or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.

The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Time, on October 31, 2017. 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 Will My Shares Be Voted?

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

For Proposal No. 1—Approval of the Charter Proposal

For Proposal No. 2—Approval of Adjournment

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:

How Does the Board of Directors Recommend that I Vote?

The Board of Directors recommends that you vote:

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?

We will pay for the entire cost of soliciting proxies. 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 Special Meeting?

The presence at the Special Meeting, in personvirtually or by proxy, of the holders of a majority (      shares) of the voting power represented by theour outstanding shares of our common stock and our Series A Convertible Preferred Stockentitled 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 of our common stock and Series A Convertible Preferred Stock 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 of our common stock and Series A Convertible Preferred Stock 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 voting power represented by the shares of our common stock and our Series A Convertible Preferred Stockvotes 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 Special 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 on your behalf.

How may my shares be voted?

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

For both Proposal 1 – Approval of the Reverse Stock Split and Proposal 2 – Approval of Adjournment of the Special Meeting, you may:

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 Votevote is Requiredrequired for Each Proposal?each proposal to be approved?

Assuming a quorum is representedpresent at the Special Meeting, either in person or by proxy, the following vote is required for each of the following matters:

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 held 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 Will Countis paying for this proxy solicitation?

The Company will pay for the Votes?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.

Who will count the votes at the Special Meeting?

We currently expect that Broadridge Financial Solutions, Inc.[•] will tabulate the votes and our General Counsel & Corporate Secretary will be our inspector of elections for the Special Meeting.

Who DoWhom do I Contactcontact if I Have Questions Regardinghave questions regarding the Special Meeting?

If you have questions about the Special Meeting or would like additional copies of this proxy statement,Proxy Statement, you should contact our Senior Vice President – Finance, Treasurer & Secretary, Ben L. Shealy, 1317 Carlton Avenue, Suite 400, Charlottesville, Virginia 22902.us via e-mail at proxyrequests@diffusionpharma.com or [•].

Are There Any Matters toHow will business be Voted onconducted at the Special Meeting that are not Included in this Proxy Statement?

We currently are not aware of any business to be acted upon at the Special Meeting other than that described in this proxy statement. If, however, other matters properly are brought before the Special Meeting, or any adjournment or postponement of the Special 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 Special Meeting if a quorum is not present.

How Will Business Be Conducted at the Special Meeting?

The presiding officer at the Special Meeting will determine how business at the meeting will be conducted. Only nominations and other proposals brought before the Special Meeting in accordance with the advance notice and information requirements of our Amended and Restated 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 Special Meeting, our Secretary must have received such proposal a reasonable period of time before we began to print and send our proxy materials.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSPROPOSAL 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

This proxy statement (includingSummary 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 documents incorporatedreclassification and combination of all shares of common stock outstanding at a ratio of not less than one-for-two and not greater than one-for-50 (the “Reverse Stock Split”), with the final 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 reference herein) contains forward-looking statementsthe Board, in its discretion, at any time prior to December 31, 2022.

As described in more detail below under the heading, “Company Background, Recent Financing Transaction, and Reasons for the Reverse Stock Split,” the Board 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 development of 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.

If 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.

If the Board decides to implement the Reverse Stock Split, it will be realized simultaneously and uniformly by all shares and all holders of outstanding 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 total percentage of the Company that you own.

The Reverse Stock Split will not change the par value of our common stock or the number of authorized shares of common stock under our Charter. However, the exercise price and number 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 effective time based on the Split Ratio in accordance with their respective terms.

Reasons for the Reverse Stock Split

Curing our 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 meaningfirst 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.

We 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.

Delisting 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 common stock of 55 companies in the 30 days preceding and 30 days following the stock’s delisting from the New York Stock Exchange and corresponding listing on the over-the-counter pink sheets. Among other findings, the 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.

Liquidity, Low-Transaction Costs, and Reduced Barriers to Entry for Our Stockholders

We 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 listing 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 orderly trading, decreased price discovery, increased bid-ask spreads, and higher overall transaction costs as compared to those listed on a large, national exchange like the Nasdaq Capital Market.Moreover, if our stock were to begin trading on an over-the-counter market, it may, as a result, be subject to the “penny stock” rules adopted under Section 27A15(g) of the Securities Exchange Act of 1933,1934, 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 provide investors with certain information concerning trading in the security prior to facilitating a transaction. If we become subject to the penny stock rules, it could result in increased administrative burden and disclosure requirements for our investors, adversely affect the marketability of our securities, and make it more difficult for our stockholders to buy and sell shares.

Increasing Interest, Marketability, and the Perception of Our Common Stock as an Investment Security

Given the capital needs required to develop TSC through potential approval and commercialization, we believe our chances of success are improved by opening up the market for our 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 stock may provide support to the degree of liquidity in the market for our common stock.

Although there is no assurance that the Reverse Stock Split will result in an increase to the trading price of 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:

We have identifiedcannot predict whether the Reverse Stock Split will increase the market price for our common stock. The history of similar stock split combinations for companies in like circumstances is varied, and the market price of our common stock will also be based on our performance and other factors, some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “possible,” “potential,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” and “continue”,which are unrelated to the negativenumber of these words, other words and termsshares outstanding. Further, there are a number of similar meaning and the use of future dates. Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all businesses as well as matters specific to us. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Uncertainties and risks may cause our actual results to be materially different than those expressed in or implied by our forward-looking statements. For us, particular uncertainties and risks include, among others, our history of operating losses and negative cash flow, uncertainties regarding clinical testing, the difficulty of developing pharmaceutical products, obtaining regulatory and other approvals and achieving market acceptance and other risks and uncertainties described in our filingsassociated with the Securities and Exchange Commission (the “SEC”),Reverse Stock Split, including:

All forward-looking statementsProcess 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 proxyproposal 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 speakof holding from our transfer agent that indicates the number of post-reverse stock split shares of our common stock owned in book-entry form.

If 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.

Certificated Shares

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 the 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 a 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 amount in cash (without interest or deduction) equal to the fraction of 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 minor adjustments for fractional shares. Immediately after the Reverse Stock Split, the per share net income or loss and net book value of our common stock will be increased because there will be fewer shares of common stock outstanding. All historic share and per share amounts in our financial statements and related footnotes will be adjusted accordingly for the 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 this proxy statementwhich are subject to change, possibly on a retroactive basis. Tax consequences under state, local, foreign, and other laws are based on our current beliefsnot addressed herein. Each stockholder should consult their tax advisor as to the particular facts and expectations. We undertakecircumstances 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 obligationgain 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 updatecash 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.

Tax Consequences to Stockholders

Stockholders should not recognize any gain or revise any forward-looking statement, whetherloss for U.S. federal income tax purposes as a result of new information, future events or otherwise,the Reverse Stock Split, except as otherwise required by law.

RECENT CHANGE OF CONTROLOF REGISTRANT

As of December 31, 2015, our Company operated as RestorGenex Corporation, (“RestorGenex”). On January 8, 2016, we completed the merger (the “Merger”) of our wholly owned subsidiary, Arco Merger Sub, LLC (“Merger Sub”), with and into Diffusion Pharmaceuticals LLC, a Virginia limited liability company (“Diffusion”), in accordance with the terms of the Agreement and Plan of Merger, dated as of December 15, 2015, among the Company, Merger Sub and Diffusion (the “Merger Agreement”). As a result of the Merger, Diffusion, the surviving company in the Merger, became a wholly owned subsidiary of the Company.

In connection with the Merger, the Company issued to the holdersextent of the outstanding unitsany cash received in lieu of membership interest of Diffusion (the “Diffusion Units”) an aggregate of 81,640,637 sharesa fractional share of common stock. As a result of the Merger, the former equity holders of Diffusion owned approximately 84.1% ofstock (which fractional share will be treated as received and then exchanged for cash). Each stockholder’s aggregate tax basis in the common stock ofreceived in the combined company,Reverse Stock Split, including any fractional share treated as received and then exchanged for cash, should equal the stockholders of RestorGenex immediately prior to the Merger owned approximately 15.9% ofstockholder’s aggregate tax basis in the common stock ofexchanged in the combined company,Reverse Stock Split. In addition, each stockholder’s holding period for the common stock it receives in each case, immediately following the consummation ofReverse Stock Split should generally be the Merger (the “Effective Time”) on a fully-diluted basis (subject to certain exceptions and adjustments) and calculatedsame as the stockholder’s holding period for the common stock exchanged in accordance with the terms of the Merger Agreement. Reverse Stock Split.

In connection withgeneral, a stockholder who receives cash in lieu of a fractional share of common stock pursuant to the completionReverse Stock Split should be treated for U.S. federal income tax purposes as having 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 greater than one year as of the Merger and in accordance with the termseffective date of the Merger Agreement,Reverse Stock Split. Special rules may apply to cause all or a portion of the Board acceptedcash 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 resignations fromshares outstanding) or who exercise some control over the Boardaffairs 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 each of its committees, effective immediately priorExecutive Officers

Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal except to the Effective Time,extent of eachtheir ownership of the directorsshares of the Company as of immediately prior to the Effective Time.  The Board also accepted, effective immediately prior to the Effective Time, the resignations of each of the executive officers of the Company as of immediately prior to the Effective Time.our common stock.

In addition, the outgoing directors, prior to their resignation and in accordance with the Company’s bylaws, fixed the number of directors at six, and appointed the following six individuals, constituting all of the directors of Diffusion prior to the Merger, to serve as directors of the Company, effective at the Effective Time and until the Company’s next annual meeting of stockholders, and until their respective successors are elected and qualified or until their earlier resignation or removal:  David G. Kalergis, John L. Gainer, Thomas Byrne, Robert Adams, Mark T. Giles and Alan Levin. David G. Kalergis was appointed Chairman of the Board. Mr. Byrne resigned from the Board and was appointed the Company’s General Counsel effective, in each case, April 1, 2016. Effective August 11, 2016, Isaac Blech was appointed as a director and, effective June 29, 2017, Robert R. Ruffolo was appointed as a director. Subsequently, the newly constituted Board also appointed the following individuals to serve as executive officers of the Company until their successors have been duly elected and qualified or until their earlier resignation or removal: David G. Kalergis as Chief Executive Officer, John L. Gainer Ph.D. as Chief Scientific Officer, David R. Jones M.D. as Chief Medical Officer and Ben L. Shealy asSenior Vice President – Finance, Treasurer and Secretary.

Following the close of the Merger, the Company filed a Certificate of Amendment to itsOur Charter

If the Reverse Stock Split is approved, the following paragraph shall be added at the end of subsection A of Article IV of the Charter:

“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 which amended the Company’s Charter, to effect a change(the “Effective Time”), each [intentionally left blank] shares of the Company’s corporate name from “RestorGenex Corporation” to “Diffusion Pharmaceuticals Inc.” On January 25, 2016, the 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”). No fractional shares shall be issued in connection with the Company began tradingReverse 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 amount equal to the product obtained by multiplying such fractional share of Common Stock by the inverse of Reverse Stock Split ratio times the average closing price per share of Common Stock on theOTCQX marketplace 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 OTC Market Groups (the “OTCQX”) undershares of Common Stock represented by the new ticker symbol “DFFN” (previously “RESX”). On August 17, 2016,Old Certificate shall have been combined, subject to the Company filed aelimination of fractional shares as described above.”

The Certificate of Amendment attached hereto as Appendix A reflects the changes that will be made to itsour Charter 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 Incorporation, as amended,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 State 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 1-to-10 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 best interests of the shares of the Company’s common stock (the “Reverse Stock Split”). On November 8, 2016, the Common Stock was approved for listing on the Nasdaq Capital Market (the “Nasdaq”) and commenced trading on the Nasdaq at the open of trading on November 9, 2016 under the ticker symbol “DFFN.”

Except as otherwise noted, references to “common stock” in this proxy statement refer to common stock, par value $0.001 per share, of the Company. Unless noted otherwise, any share or per share amounts in this proxy statement give effect to the Reverse Stock Split.our stockholders.

*****

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR 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.

PROPOSAL 2

APPROVAL OF ADJOURNMENT OF THE SPECIAL MEETING TO THE EXTENT THERE ARE INSUFFICIENT VOTES AT THE SPECIAL MEETING TO APPROVE PROPOSAL 1

Summary

If the number of shares present virtually or represented by proxy at the Special Meeting and voting “FOR” the adoption of Proposal 1 are insufficient to approve such proposal, we may move to adjourn the Special Meeting in order to enable us to solicit additional proxies in favor of the adoption of Proposal 1. If the adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the Special Meeting.

For the avoidance of doubt, any proxy authorizing the adjournment of the Special Meeting shall also authorize successive adjournments thereof, at any meeting so adjourned, to the extent necessary for us to solicit additional proxies in favor of the adoption of such proposal.

*****

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF AN ADJOURNMENT OF THE SPECIAL MEETING TO THE EXTENT THERE ARE INSUFFICIENT VOTES AT THE SPECIAL MEETING TO APPROVE PROPOSAL 1.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

Based on information available to the Companyus and filings with the SEC, the following table sets forth certain information regarding the beneficial ownership (as defined by Rule 13d-3 under Securitiesthe Exchange Act of 1934, as amended (the “Exchange Act”))Act) of our Common Stockoutstanding common stock as of the Record Date (except as noted below) for (i) each person who beneficially ownsor group of affiliated persons known by us to be the beneficial owner of more than 5% or more of our common Stock then outstanding;stock, if any, (ii) each of our current directors; (iii) each of our current named executive officers (as defined in Item 402(a)(3) of Regulation S-K under the Exchange Act); and (iv) all of our current directors and named executive officers as a group. As of the date of this Proxy Statement, no beneficial owner owned 5% or more of the shares of common stock then outstanding.

Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of common stock issuable under shares of preferred stock, stock options or warrants that are exercisable or convertible within sixty (60)60 days of the Record Date are deemed outstanding for the purpose of computing the beneficial ownership percentage ownership of the person holding the options or warrants,holder thereof, but are not deemed outstanding for the purpose of computing the beneficial ownership percentage ownership of any other person. Ownership is based upon information provided by each respective director and officer and public documents filed with the SEC, including Forms 3 and 4, Schedules 13D and 13G and certain other public documents, filed with the SEC for somewhich information may not be accurate as of the stockholders.Record Date.

Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over their Common Stock,shares of common stock, except for those jointly owned with that person’s spouse. Unless otherwise indicated below, the address of each person listed on the table is c/o Diffusion Pharmaceuticals Inc. 1317 Carlton Avenue,300 East Main Street, Suite 400,201, Charlottesville, Virginia 22902.

PROPOSAL NO. 1

APPROVAL OF AN AMENDMENT TO DIFFUSION PHARMACEUTICALS INC.’S CERTIFICATE OF INCORPORATION TO PERMIT DIVIDENDS ON SERIES A CONVERTIBLE PREFERRED STOCK TO BE PAID IN CASH OR SHARES OF COMMON STOCK

General

Our Board has unanimously approved, and recommended that our stockholders approve, an amendment to our Charter (the “Charter AmendmentOTHER MATTERS”) to amend the Certificate of Designation to allow dividends on the Series A Convertible Preferred Stock of the Company to be paid in either cash or in shares of Common Stock of the Company at the Company’s discretion (the “Charter Proposal”).

The full text of the proposed Charter Amendment is attached to this Proxy Statement asAppendixA.

Purpose of theCharterAmendment

The purpose ofSpecial Meeting is being called for the proposed Charter Amendment is to increase the flexibility of the Company to determine the method of payment of dividends on the Company’s Series A Convertible Preferred Stock as the Board deems appropriate andpurposes set forth in the best interestNotice of the stockholders of the Company based on the Company’s then-current stock price, cash position and additional market and other considerations.Meeting. The Board believes it is in the Company’s best interest to allow the Company the flexibility to, in its discretion, make dividend payments to holders of Series A Convertible Preferred Stock in either cash or shares of Common Stock, whereas the Certificate of Designation currently mandates that Regular Dividend payments (as defined in the Certificate of Designation) be made in only shares of Common Stock. However, the amount, frequency and other terms of the Certificate of Designation related to the dividends payable on the Series A Convertible Preferred Stock would be unchanged and remain in full force and effect.

Currently, the Company is obligated to issue a variable number of shares of its common stock to settle the 8% cumulative dividend on the Series A Convertible Preferred Stock, with the number of shares issuable determined based on the then-current trading price of the Company’s common stock in accordance with the terms of the Certificate of Designation. Depending on the Company’s stock price at the time such shares are issuable, it is possible there will not be enough authorized shares available to settle future exercises of the Company's outstanding warrants. As such, for accounting purposes, the Company cannot assert settlement of the associated warrants in shares of Common Stock in all possible circumstances and, accordingly, the warrants are required to be recorded as a liability under U.S. generally accepted accounting principles. The warrant liability associated with the Series A Convertible Preferred Stock and the associated warrants resulted in a reduction of our stockholders’ equity, as of each of March 31, 2017 and June 30, 2017, below the required level under the Nasdaq Capital Market’s continued listing standards. The Charter Amendment, by permitting the Company to, at its option, assert share or cash settlement of the warrants, would result in a reclassification of the warrant liability as of the date of reclassification to stockholders’ equity.

Accordingly, the Board believes it is in the best interest of the Company for the stockholders to approve the Charter Amendment in order to improve our financial condition and give the Company greater flexibility in considering and planning for future potential business needs.

Impact of Not Approving the Charter Amendment

In the event that the proposed Charter Amendment does not receive the requisite stockholder approval, the Certificate of Designation will remain in its current form and all regular dividend payments to holders of Series A Convertible Preferred Stock will continue to be required to be paid in shares of Common Stock. The Board will lack the flexibility to make decisions based on then-current market and other conditions that the Board may deem in the best interest of the Company and the stockholders.

In addition, if the Company is unable to eliminate the warrant liability associated with the accounting treatment of the Series A Convertible Preferred Stock, either through the Charter Amendment or otherwise, the Company may be unable to satisfy the continued listing requirements of the Nasdaq Capital Market with respect to minimum stockholders’ equity. If our common stock is delisted, trading, if any, of our common stock would thereafter be conducted in the over-the-counter market. As a consequence of any such delisting, our share price and trading liquidity could be negatively affected and our stockholders would likely find it more difficult to dispose of, or to obtain accurate quotations as to the prices of, our common stock. In addition, it may be difficult to raise additional capital, if needed, as a company whose stock is not listed on Nasdaq or another exchange.

Accordingly, if the approval of the Charter Amendment is postponed until specific needs arise, the delay and expense incident to obtaining approval of the stockholders at that time could harm our financial condition, result in our inability to satisfy the continued listing standards of the Nasdaq Capital Market and potential delisting therefrom and generally impair our ability to meet the objectives.

There can be no assurance that our common stock will not be delisted from the Nasdaq Capital Market for other reasons.

Effectiveness of the Amendment

If adopted by the stockholders, the proposed Charter Amendment will become effective upon filing with the Delaware Secretary of State. As permitted under Section 242(c) of the Delaware General Corporation Law, the Board may delay or abandon the proposed amendment without further action by the stockholders if it should so decide, in its sole discretion, that such action is in the best interests of the Company and its stockholders.

Appraisal Rights

Under Delaware General Corporation Law, stockholders are not entitled to appraisal rights with respect to the proposed Charter Amendment described in this Proposal 1.

Vote Required

The affirmative vote of the majority of the voting power of the outstanding shares of common stock and Series A Convertible Preferred Stock, voting as a single class, and majority of voting power of the outstanding Series A Convertible Preferred Stock, voting as a separate class is required to approve the Charter Amendment. Abstentions and broker non-votes, if any, will thus count as votesAGAINST the Charter Amendment.

Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, thenFOR the Charter Proposal.

Recommendation

The Board recommends a vote “FOR” the Charter Proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

PROPOSAL NO. 2

ADJOURNMENT PROPOSAL

If at the Special Meeting the number of shares of Common Stock present or represented and voting in favor of the Charter Proposal is insufficient to approve the Charter Proposal, management may move to adjourn, postpone or continue the Special Meeting in order to enable the Board to continue to solicit additional proxies in favor of the proposed Charter Proposal.

In this Adjournment Proposal, we are asking you to authorize the holder of any proxy solicited by the Board to vote in favor of adjourning, postponing or continuing the Special Meeting and any later adjournments. If the stockholders approve the Adjournment Proposal, we could adjourn, postpone or continue the Special Meeting, and any adjourned session of the Special Meeting, to use the additional time to solicit additional proxies in favor of the Charter Proposal. Among other things, approval of the Adjournment Proposal could mean that, even if proxies representing a sufficient number of votes against the Charter Proposal have been received, we could adjourn, postpone or continue the Special Meeting without a vote on the Charter Proposal, and seek to convince the holders of those shares to change their votes to votes in favor of the Charter Proposal.

Vote Required

The Adjournment Proposal will be approved if a majority vote of the shares cast affirmatively or negatively for this proposal is castFOR the proposal. Accordingly, abstentions and broker-non-votes will not be counted as votes cast and, therefore, will have no impact on the approval of this proposal.

Recommendation

The Board recommends a vote “FOR” the Adjournment Proposal. No proxy that is specifically markedAGAINST the Charter Amendment will be voted in favor of the Adjournment Proposal, unless it is specifically markedFOR the discretionary authority to adjourn, postpone or continue the Special Meeting to a later date.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

OTHER BUSINESS

We know of noany other matters to be submitted to a vote ofconsidered by the stockholders at the Special Meeting. If anyMeeting other matter is properly brought beforethan the Special Meeting or any adjournment thereof, it is the intention of the persons namedmatters described in the enclosed proxy to vote the shares they represent in accordance with their best judgment.Notice.

To assure the presence of the necessary quorumStockholder Proposals for 2022 Annual Meeting and to vote on the matters to come before the Special Meeting, please promptly indicate your choices via the internet, by phone or by mail, according to the procedures described on the proxy card. The submission of a proxy via the internet, by phone or by mail does not prevent you from attending and voting at the Special Meeting.

STOCKHOLDER PROPOSALS FOR 201Director Nominations8 ANNUAL MEETINGAND DIRECTOR NOMINATIONS

Under the rules of the SEC, stockholders wishing to have a proposal included in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held in 20182022 must submithave submitted the proposal so that the Corporate Secretary of the Company receivesreceived it no later than February 11, 2018.120 days prior to the one-year anniversary of the date of the Proxy Statement for our 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”), or December 30, 2021. The SEC rules set forth standards as to what stockholder proposals are required to be included in a proxy statement. Under the Company’s Amended and Restatedour Bylaws, certain procedures must be followed for a stockholder to nominate persons as directors or to introduce a proposal at an annual meeting of stockholders. ASubject to certain exceptions described in our Bylaws, a stockholder wishing to make a nomination for election to the Board of Directors or to have a proposal presented at an annual meeting of stockholders must submithave submitted written notice of such nomination or proposal so that the Corporate Secretary of the Company receivesreceived it not lessno later than that date which is90 days prior to the one year anniversary of the 2021 Proxy Statement, or January 30, 2022, and no earlier than 120 days prior to the one year anniversary of the date the Company’s proxy statement was released to stockholders in connection with the preceding year’s annual meeting of stockholders; provided, however, that in the event that the Company did not hold an annual meeting of stockholders the preceding year2021 Proxy Statement, or if the date of the annual meeting of stockholders is changed by more thanDecember 30, days from the date of the preceding year’s annual meeting of stockholders, notice by the stockholder must be delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. The Company’s Amended and Restated2021. Our Bylaws also set forth certain informational requirements for stockholders’ nominations of directors and proposals.

Annual Report

HOUSEHOLDING

We have made available electronically to each of our stockholders a copy of our annual report on Form 10-K (without exhibits) for the year ended December 31, 2020. The exhibits to our Form 10-K are available by accessing the SEC’s EDGAR filing database at www.sec.gov. We will furnish a copy of any exhibit to our Form 10-K upon receipt from any such person of a written request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits. This request should be sent via e-mail to proxyrequests@diffusionpharma.com or via mail to [•].

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 300 East Main Street, Suite 201, 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.

Householding of Materials

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our Proxy Statementproxy statement or annual report to stockholders may have been sent to multiple stockholders in each household. We will deliver promptly a separate copy of either document to any stockholder upon writtenrequest via e-mail to proxyrequests@diffusionpharma.com or oral requestvia mail to our Investor Relations Department,[•], Attn: Diffusion Pharmaceuticals Inc., 1317 Carlton Avenue, Suite 400, Charlottesville, Virginia 22902, telephone: (434) 220-0718. – Legal Proxy. Any stockholder who wants to receive separate copies of our Proxy Statementproxy statement or annual report to stockholders in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder’s bank, broker, or other nominee record holder, or the stockholder may contact us at the aboveprovided address and phone number.

COST AND METHOD OF SOLICITATION

In addition to solicitation by mail, our directors, officers, employees and agents may solicit proxies from our stockholders by personal interview, telephone, telegram or other electronic means. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of our common stock for the forwarding of solicitation materials to the beneficial owners of our common stock. We will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports and other information with the SEC. Any interested party may inspect information filed by the Company, without charge, at the public reference facilities of the SEC at its principal office at 100 F. Street, N.E., Washington, D.C. 20549. Any interested party may obtain copies of all or any portion of the information filed by the Company at prescribed rates from the Public Reference Section of the SEC at its principal office at 100 F. Street, N.E., Washington, D.C. 20549. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding the Company and other registrants that file electronically with the SEC at http://www.sec.gov.

The Company’s Common Stock is listed on theNasdaq Capital Market and trades under the symbol “DFFN.”

_________________________

Your vote is important. Whether or not you plan to attend the Special Meeting, please exercise your right to vote as soon as possible by completing, signing, dating, and returning your proxy card or by using Internet or telephone voting as described on the proxy card.

card and in this Proxy Statement. You may still join the Special Meeting and vote online, even if you have already voted by proxy.

February [•], 2017

EACH STOCKHOLDER IS URGED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN

THE ENCLOSED PROXY.2022
Charlottesville, Virginia

APPENDIX A

CERTIFICATE OF AMENDMENTOF THECERTIFICATE OF INCORPORATION (AS AMENDED)OF
DIFFUSION PHARMACEUTICALS INC.

DIFFUSION PHARMACEUTICALS INC., a corporation incorporated and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"“Corporation”) does hereby certify:

FIRST: That, at a meeting of the Board of Directors of the Corporation (the “Board of Directors”) on September 7, 2016,February 16, 2022 a resolution was duly adopted setting forth a proposed amendment to the Certificate of Incorporation (as amended) of the Corporation in the form set forth below (the “Charter,” and such amendment, the “Amendment”), declaring said Amendment to be advisable and calling for consideration of said proposed Amendment by the stockholders of the Corporation.

"“RESOLVED, that the Board has deemed it advisable and in the best interest of the Corporation to amend the Certificate of Incorporation as amended,(as amended) of the Corporation (the “Charter,”shall be amended by adding at the end of subsection A of Article IV thereof the following: ‘Effective upon [Time and such amendment,Date of Filing of Amendment with the “Amendment”)Secretary of State], to amend and restate in its entirety Section 2the effective time of this Certificate of Amendment of the Certificate of DesignationIncorporation with the Secretary of Preferences, Rights and LimitationsState of the Series A Convertible Preferred StockState of the Corporation, which is part of the Charter:

“The Corporation shall pay a cumulative preferential dividendDelaware (the “Regular Dividend”“Effective Time”) on, each share of Series A Preferred Stock from the issue date of such share of Series A Preferred Stock, accruing at a rate of 8.0% of the Stated Value per annum (computed on the basis of a 360-day year of twelve 30-day months, accruing daily)), payable semiannually in arrears on April 1 and October 1 of each year commencing on October 1, 2017, or if any such date is not a business day, on the next succeeding business day (each such date, a “Dividend Payment Date”), to the Holders of record on the preceding March 15 and September 15 of each year, respectively, in cash or[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”). No fractional shares shall be issued in connection with the Corporation’s sole discretion. For purposesReverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of determiningCommon Stock shall be entitled to receive cash (without interest and subject to applicable withholding taxes) in lieu of such fractional shares in an amount equal to the product obtained by multiplying such fractional share of Common Stock by the inverse of the 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 issuable to a Holder in connection with any such dividend,into which the value of a shareshares of Common Stock represented by the Old Certificate shall be deemedhave been combined, subject to be the closing priceelimination of the Common Stock on the NASDAQ Capital Market (or such other national securities exchangefractional shares as the Common Stock may be principally traded on at such time) on the business day immediately preceding the Dividend Payment Date. The Regular Dividend shall begin to accrue and be cumulative on the first day of each applicable Regular Dividend period and shall remain accumulated dividends with respect to such Series A Preferred Stock until paid; provided, that the first Regular Dividend payable with respect to any share of Preferred Stock shall not begin to accrue until the date of original issuance of such share of Preferred Stock. Regular Dividends shall accrue whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends but shall not be payable until legally permissible, as applicable.described above.’”

SECOND: Thereafter,That, thereafter, pursuant to the resolution of the Board of Directors, the proposed Amendment was approved by the stockholders of the Corporation at a special meetingSpecial Meeting of stockholders on , 2017._______, 2022.

THIRD: That the Amendment was duly adopted in accordance with the provisions of Sections 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Amendment to the Certificate of Incorporation of the Corporation (as amended) to be executed by David G. Kalergis,Robert J. Cobuzzi, Jr., Ph.D., its President and Chief Executive Officer, on this __ day of ____, 2022.

DIFFUSION PHARMACEUTICALS INC.

By:

Name: Robert J. Cobuzzi, Jr., 2017.Ph.D.