Note 1 - Organization and Description of Business

9 Months Ended

Sep. 30, 2020

1.	Organization and Description of Business

Diffusion Pharmaceuticals Inc., a Delaware corporation, is an innovative biopharmaceutical company developing novel therapies that enhance the body's ability to deliver oxygen to the areas where it is needed most. The Company's lead product candidate, 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.

TSC was designed to enhance the level of organization among water molecules by increasing the amount of hydrogen bonding. This creates a less dense matrix of water molecules, which facilitates the diffusion of oxygen molecules from areas of high to low oxygen concentrations, such as from oxygenated red blood cells into tissues where the oxygen is used to power the cells. In animal models, this diffusion-enhancing mechanism of action has been observed to affect hypoxic tissue preferentially while avoiding excessive oxygen-related tissue toxicity, also known as hyperoxia.

TSC previously has been demonstrated safe and tolerable in over

160

subjects included in the Company's clinical program across a variety of medical conditions often complicated by hypoxia, including the Company's clinical studies conducted in patients afflicted with GBM, peripheral artery disease with intermittent claudication, and stroke, as well as its ongoing

100

303

COVID Trial. In each of these conditions and many others, hypoxia is a significant contributor to morbidity and mortality, and a considerable treatment obstacle for medical providers.

September 2020,

the Company initiated the

100

303

COVID Trial, its ongoing Phase

clinical trial evaluating TSC in hospitalized COVID-

patients and, on

September 10, 2020,

the Company announced the dosing of the

first

two

patients in the trial. As of the date of this Quarterly Report, patient enrollment continues and

dose-limiting toxicities have been observed. However, given the complex design of the

100

303

COVID Trial, the sequential nature of patient enrollment thereunder, and the resulting challenges to expediting the trial when ordinary course delays are encountered, protocol the Company now expects the

100

303

COVID Trial to be completed with topline data available by the end of

first

quarter of

2021.

In addition to TSC, the Company's product candidate DFN-

529,

a novel, allosteric

PI3K/Akt/mTOR

pathway inhibitor, is in early-stage development. The Company previously completed

two

Phase

clinical trials evaluating DFN-

529

in age-related macular degeneration, and DFN-

529

was also previously in preclinical development in oncology, specifically GBM.