Item 1.01 Entry into a Material Definitive Agreement.

On December 15, 2022, Diffusion Pharmaceuticals Inc. (the "Company") entered into a binding settlement agreement (the "Agreement") with LifeSci Special Opportunities Master Fund Ltd. and certain of its affiliates (collectively, "LifeSci Special Opportunities"), the principal terms of which are summarized below. The summary that follows does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

Upon the terms and subject to the conditions set forth in the Agreement, (i) LifeSci Special Opportunities has agreed that, (x) it will irrevocably withdraw its notices submitted to the Company in November 2022 in which LifeSci Special Opportunities sought to nominate certain individuals (collectively, the "LifeSci Nominees") for election to the Company's board of directors (the "Board") at the Company's 2022 annual meeting of stockholders, currently scheduled to be held December 30, 2022 (such meeting, as may be adjourned, postponed, recessed or otherwise delayed, the "Annual Meeting"), and (y) LifeSci Special Opportunities will vote all of its shares of the Company's common stock in favor of the election of the nominees recommended by the Board in the Company's definitive proxy statement filed with the U.S. Securities and Exchange Commission on December 6, 2022 (the "Proxy Statement") and in accordance with the Board's recommendations on each of the other proposals included in the Proxy Statement and (ii) the Company has agreed that, in the event it has not completed an Extraordinary Transaction (as defined in the Agreement) prior to July 1, 2023 and so long as LifeSci Special Opportunities collectively owns at least 96,976 of the Company's outstanding shares of common stock, the Company will promptly appoint one of the LifeSci Nominees to the Board.

Certain other principal terms of the Agreement include the following:



  ? LifeSci Special Opportunities agreed to irrevocably withdraw its demand to
    review the books and records of the Company under 8 Del. C. § 220.



  ? From the date of the Agreement and until the later of (x) the Company's
    consummation of an Extraordinary Transaction or (y) December 31, 2024 (such
    period, the "Standstill Period"), the members of LifeSci Special Opportunities
    and certain of their affiliates have agreed to refrain from, among other
    things, (i) acquiring or seeking to acquire any shares or other securities the
    Company, (ii) soliciting proxies in opposition of any recommendation or
    proposal of the Board, (iii) nominating persons for election to, or seeking to
    remove any persons from, the Board, (iv) seeking to initiate or join in any
    extraordinary transaction, including any merger, consolidation or business
    combination, and (v) commencing, encouraging or supporting any derivative
    action in the name of, or pursuing any class action against, the Company.



  ? The Company and LifeSci Special Opportunities each agreed to customary, mutual
    non-disparagement covenants for the duration of the Standstill Period.



  ? The Company agreed to reimburse LifeSci Special Opportunities for up to
    $50,000 in reasonable and documented out-of-pocket expenses incurred by
    LifeSci Special Opportunities in connection with its nomination of the LifeSci
    Nominees and the negotiation of the Agreement.



  ? The Company and LifeSci Special Opportunities each agreed to the issuance of
    the press release attached hereto as Exhibit 99.1.

Item 8.01 Other Events

On December 16, 2022, the Company issued a press release announcing its entry into the Agreement with LifeSci Special Opportunities. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 - Financial Statements and Exhibits



(d) Exhibits

Exhibit                                Description
Number



10.1      Agreement, dated as of December 15, 2022, by and among Diffusion
        Pharmaceuticals Inc, LifeSci Special Opportunities Master Fund Ltd.,
        LifeSci Special Opportunities Partners L.P., LifeSci Special
        Opportunities Offshore Fund, Ltd., LifeSci Special Opportunities Partners
        GP, LLC, LifeSci Management Company LLC, Pirate Cove Capital Ltd. and
        David Dobkin.

99.1      Press Release, issued December 16, 2022

104     Cover Page Interactive Data File (embedded within the Inline XBRL
        document)

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses