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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

(Mark one)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ______________.

 

Commission file number: 000-24477

 

DIFFUSION PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

 

Delaware	30-0645032
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

 

1317 Carlton Avenue, Suite 200
Charlottesville, VA 22902
(Address of principal executive offices, including zip code)

 

(434) 220-0718

(Registrant’s telephone number including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes ☐   No ☒

 

The number of shares of common stock outstanding at May 5, 2018 was 50,526,547 shares.

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DIFFUSION PHARMACEUTICALS INC.

FORM 10-Q

MARCH 31, 2018

 

INDEX

 

	Page
PART I – FINANCIAL INFORMATION	1
ITEM 1.     FINANCIAL STATEMENTS	1
ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21
ITEM 4.     CONTROLS AND PROCEDURES	21
PART II – OTHER INFORMATION	22
ITEM 1.     LEGAL PROCEEDINGS	22
ITEM 1A.  RISK FACTORS	22
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	22
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES	22
ITEM 4.     MINE SAFETY DISCLOSURES	22
ITEM 5.     OTHER INFORMATION	22
ITEM 6.     EXHIBITS	22

 

Unless the context otherwise requires, in this report, references to the “Company,” “we,” “our” or “us” refer to Diffusion Pharmaceuticals Inc. and its subsidiaries and references to “common stock” refer to the common stock, par value $0.001 per share, of the Company.

 

This report contains the following trademarks, trade names and service marks of ours: Diffusion. All other trade names, trademarks and service marks appearing in this quarterly report on Form 10-Q are the property of their respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such terms appear without the trade name, trademark or service mark notice for convenience only and should not be construed as being used in a descriptive or generic sense.

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

Diffusion Pharmaceuticals Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Diffusion Pharmaceuticals Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Diffusion Pharmaceuticals Inc.

Condensed Consolidated Statement of Changes in Convertible Preferred Stock and Stockholders' Equity

Three Months Ended March 31, 2018

(unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Diffusion Pharmaceuticals Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Diffusion Pharmaceuticals Inc.

 

NOTES TO UNAUDITED Condensed Consolidated FINANCIAL Statements

 

 

 

 

 

 

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion of our financial condition and results of operations together with the unaudited interim condensed consolidated financial statements and the notes thereto included elsewhere in this report and other financial information included in this report. The following discussion may contain predictions, estimates and other forward looking statements that involve a number of risks and uncertainties, including those discussed under “Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward Looking Statements” in this report and under “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2017. These risks could cause our actual results to differ materially from any future performance suggested below.

 

Business Overview

 

We are a clinical stage biotechnology company focused on extending the life expectancy of cancer patients by improving the effectiveness of current standard-of-care treatments, including radiation therapy and chemotherapy. We are developing our lead product candidate, transcrocetinate sodium, also known as trans sodium crocetinate (“TSC”), for use in the many cancer types in which tumor oxygen deprivation (“hypoxia”) is known to diminish the effectiveness of current treatments. TSC is designed to target the cancer’s hypoxic micro-environment, re-oxygenating treatment-resistant tissue and making the cancer cells more susceptible to the therapeutic effects of standard-of-care radiation therapy and chemotherapy.

 

Our lead development programs target TSC against cancers known to be inherently treatment-resistant, including brain cancers and pancreatic cancer. A Phase 2 clinical program, completed in the second quarter of 2015, evaluated 59 patients with newly diagnosed glioblastoma multiforme (“GBM”). This open label, historically controlled study demonstrated a favorable safety and efficacy profile for TSC combined with standard of care, including a 37% improvement in overall survival over the control group at two years. A particularly strong efficacy signal was seen in the inoperable patients, where survival of TSC-treated patients at two years was increased by almost four-fold over the controls. In December 2017, the Company initiated the INvestigation of TSC Against Cancerous Tumors (INTACT) Phase 3 trial in the newly diagnosed inoperable GBM patient population. Patient enrollment began in January 2018. The trial will enroll 236 patients in total, with 118 in the treatment arm and 118 in the control arm.

 

 

Using its novel mechanism of action, TSC has been shown to safely re-oxygenate a range of tumor types in our preclinical and clinical studies. Diffusion believes its therapeutic potential is not limited to one specific tumor type, thereby making it potentially useful to improve standard-of-care treatments of other life-threatening cancers. Given TSC’s safety profile and animal data, we can, with appropriate funding, move directly into Phase 2 studies in other cancers. We also believe that TSC has potential application in other indications involving hypoxia, such as stroke, cardiovascular disease, neurodegenerative diseases and emergency medicine. A program is now being developed in cooperation with UCLA and the University of Virginia, to test TSC in the treatment of acute ischemic stroke, with an in-ambulance Phase 2 trial being planned. This trial, named the PreHospital Acute Stroke Therapy - TSC (PHAST - TSC) is expected to enroll 160 patients, with 80 in the treatment arm and 80 in the control arm.

 

In addition to the TSC programs, we are exploring alternatives regarding how best to capitalize upon our product candidate RES-529, which may include possible out-licensing and other options. RES-529 is a novel PI3K/Akt/mTOR pathway inhibitor which has completed two Phase 1 clinical trials for age-related macular degeneration and was in preclinical development in oncology, specifically GBM. RES-529 has shown activity in both in vitro and in vivo glioblastoma animal models and has been demonstrated to be orally bioavailable and can cross the blood brain barrier.

 

 

Financial Summary

 

In January 2018, we closed our previously announced underwritten public offering of 15,000,000 shares of our Common Stock, par value $0.001 per share, and warrants to purchase 15,000,000 shares of Common Stock. At the closing, we also issued warrants to purchase an additional 1,970,625 shares of Common Stock pursuant to the underwriter's partial exercise of its overallotment option. The shares of Common Stock and warrants were sold at a combined public offering price of $0.80 per share and warrant for total gross proceeds of approximately $12.0 million. The warrants have an exercise price of $0.80 per share and a term of five years from the date of issuance. In addition, at the closing, the Company issued to designees of the underwriter of the offering warrants to purchase up to 750,000 shares of Common Stock. The underwriter’s warrants have an exercise price of $1.00, a term of five years from the date of issuance and otherwise substantially similar terms to the form of investor warrant.

 

As of March 31, 2018, we had cash and cash equivalents balances of $16.2 million. We have incurred operating losses since inception, have not generated any product sales revenue and have not achieved profitable operations. We incurred a net loss of $3.3 million for the three months ended March 31, 2018. Our accumulated deficit as of March 31, 2018 was $64.9 million, and we expect to continue to incur substantial losses in future periods. We anticipate that our operating expenses will increase as we continue to advance our lead, clinical-stage product candidate, TSC. We anticipate that our expenses will substantially increase as we:

 

	•	complete regulatory and manufacturing activities and commence or progress our planned Phase II and Phase III clinical trials for TSC;
	•	continue the research, development and scale-up manufacturing capabilities to optimize products and dose forms for which we may obtain regulatory approval;
	•	conduct other preclinical and clinical studies to support the filing of a New Drug Application (“NDA”) with the FDA;
	•	maintain, expand and protect our global intellectual property portfolio;

 

 

	•	hire additional clinical, manufacturing, and scientific personnel; and
	•	add operational, financial and management information systems and personnel, including personnel to support our drug development and potential future commercialization efforts.

     

We intend to use our existing cash and cash equivalents for working capital and to fund the research and development of TSC for use in the treatment of GBM and other hypoxia related indications. We believe that our cash and cash equivalents as of March 31, 2018, will enable us to fund our operating expenses and capital expenditure requirements through June 2019. However, we will need to secure additional funding in the future, from one or more equity or debt financings, collaborations, or other sources, in order to carry out all of our planned research and development activities with respect to TSC and our other product candidates.

 

Financial Operations Overview

 

Revenues

 

We have not yet generated any revenue from product sales. We do not expect to generate revenue from product sales for the foreseeable future.

 

Research and Development Expense

 

Research and development costs are charged to expense as incurred. These costs include, but are not limited to, expenses related to third-party contract research arrangements, employee-related expenses, including salaries, benefits, stock-based compensation and travel expense reimbursement. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As we advance our product candidates, we expect the amount of research and development costs will continue to increase for the foreseeable future.

 

General and Administrative Expense

 

General and administrative expenses consist principally of salaries and related costs for executive and other personnel, including stock-based compensation, expenses associated with investment bank and other financial advisory services, and travel expenses. Other general and administrative expenses include professional fees, facility-related costs, communication expenses and professional fees for legal, patent prosecution and maintenance, and consulting and accounting services.

 

Interest (Income) Expense, Net

 

Interest expense, net consists principally of the interest expense recorded in connection with our convertible debt instruments offset by the interest earned from our cash and cash equivalents.

 

Change in Fair Value of Warrant Liabilities, Warrant Related Expenses, and Other Financing Expenses

 

In connection with our private placement in March 2017, we recorded warrant expense associated with the change in fair value of the common stock warrants from issuance, the excess fair value of the common stock warrants over the gross cash proceeds from the Series A convertible preferred stock offering, and placement agent commissions and other offering costs. Until their reclassification into stockholders’ equity in November 2017 in connection with the amendment of our certificate of incorporation, the warrants were liability classified and remeasured at each reporting period with changes in fair value recorded through earnings.

 

 

Results of Operations for Three Months Ended March 31, 2018 Compared to Three Months Ended March 31 2017

 

The following table sets forth our results of operations for the three months ended March 31, 2018 and 2017.

 

		Three Months Ended March 31, 2018
		2018				2017				Change
Operating expenses:
Research and development			1,825,568				1,007,571				817,997
General and administrative			1,497,839				1,553,139				(55,300	)
Depreciation			28,018				6,603				21,415
Loss from operations			3,351,425				2,567,313				784,112
Other expense:
Interest (income) expense, net			(37,464	)			55,719				(93,183	)
Change in fair value of warrant liabilities			—				12,919,674				(12,919,674	)
Warrant related expenses			—				10,225,846				(10,225,846	)
Other financing expenses			—				2,870,226				(2,870,226	)
Net loss			(3,313,961	)			(28,638,778	)			25,324,817

 

We recognized $1.8 million in research and development expenses during the three months ended March 31, 2018 compared to $1.0 million during the three months ended March 31, 2017. The increase in research and development expense was mainly attributable to a $1.1 million increase in expense related to our Phase 3 GBM trial, offset by a $0.3 million decrease in manufacturing costs.

 

General and administrative expenses decreased by $0.1 million during the three months ended March 31, 2018 compared to the three months ended March 31, 2017. Salaries and wages increased by $0.2 million due to the increase in headcount, which was offset by a decrease in professional fees of approximately $0.3 million.

 

The change in interest expense, net, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 is primarily attributable to having larger debt principal balance with a higher interest rate outstanding during the three months ended March 31, 2017 compared to the same time period in 2018. We also received more interest income during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 due to a larger balance being held in our money market account.

 

In connection with the private placement of our Series A preferred stock and common stock warrants in March 2017, we determined the warrants to be classified as liabilities and subject to remeasurement at each reporting period. As a result of the liability classification, we recognized $10.2 million in excess fair value of the common stock warrants over the gross proceeds from our private placement. We also recognized $2.9 million in placement agent commission and other offering costs. For the three months ended March 31, 2017, we recorded a $12.9 million expense for the change in fair value of our common stock warrant liabilities which was primarily attributable to the increase in the market price for our Common Stock. There were no such charges in 2018 as the warrants were reclassified into equity in November of 2017.

 

 

Liquidity and Capital Resources

 

Working Capital

 

To date, we have funded our operations primarily through the sale and issuance of preferred stock, common stock and convertible promissory notes. In January 2018, the Company closed an underwritten public offering of 15,000,000 shares of Common Stock and warrants to purchase 15,000,000 shares of Common Stock and received approximately $10.6 million aggregate net proceeds. As of March 31, 2018, we had $16.2 million in cash and cash equivalents, working capital of $15.7 million and an accumulated deficit of $64.9 million. We expect to continue to incur net losses for the foreseeable future. We intend to use our existing cash and cash equivalents to fund our working capital and research and development of our product candidates.

 

 Cash Flows

 

The following table sets forth our cash flows for the three months ended March 31, 2018 and 2017:

 

		Three Months Ended March 31,
		2018				2017
Net cash (used in) provided by:
Operating activities			(3,289,284	)			(3,415,901	)
Investing activities			—				(6,372	)
Financing activities			10,592,297				14,081,446
Net increase in cash and cash equivalents			7,303,013				10,659,173

 

Operating Activities

 

Net cash used in operating activities of $3.3 million during the three months ended March 31, 2018 was primarily attributable to our net loss of $3.3 million and our net change in operating assets and liabilities of $0.3 million. This amount was offset by $0.4 million in stock-based compensation expense and depreciation expense. The net change in our operating assets and liabilities is primarily attributable to the decrease in our accounts payable and accrued expenses due to the payments of employee bonuses and payments to our vendors.

 

Net cash used in operating activities of $3.4 million during the three months ended March 31, 2017 was primarily attributable to our net loss of $28.6 million and our net change in operating assets and liabilities of $1.2 million. This amount was offset by $26.0 million in non-cash, warrant related and other financing expenses and $0.4 million in stock-based compensation expense. The net change in our operating assets and liabilities is primarily attributable to the decrease in our accounts payable and accrued expenses due to the payments of employee bonuses and payments to our vendors for professional services and costs associated with our clinical and preclinical activities.

 

Investing Activities

 

During the three months ended March 31, 2017, we had approximately $6,000 in fixed asset purchases. We had no such purchases in 2018.

 

 

Financing Activities

 

Net cash provided by financing activities was $10.6 million during the three months ended March 31, 2018 which was attributable to the $10.8 million in proceeds received upon the sale of our Common Stock, offset by $0.2 million in payments for related offering costs. Net cash provided by financing activities was $14.1 million during the three months ended March 31, 2017 which was attributable to the $14.3 million in proceeds received upon the initial closing of our Series A private placement on March 14, 2017 (but did not include additional amounts received upon the final closing of the private placement on March 31, 2017), offset by $0.2 million in payments for related offering costs.

 

Capital Requirements

 

We expect to continue to incur substantial expenses and generate significant operating losses as we continue to pursue our business strategy of developing our lead product candidate, TSC, for use in the treatment of GBM and other hypoxia related indications.

 

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts of cash to advance the clinical development of our product candidates and to commercialize any product candidates for which we receive regulatory approval. At the current time, the bulk of our cash resources for clinical development is dedicated to the Phase 3 trial for TSC in inoperable GBM. While we believe we have adequate cash resources to continue operations through June 2019, we will need to raise additional funds in order to complete this trial. We do not expect to commence any clinical trials beyond the inoperable GBM trial unless we are able to raise additional capital or make alternative financing arrangements for any such trial.

 

To date, we have funded our ongoing business operations and short-term liquidity needs, primarily through the sale and issuance of preferred stock, common stock and convertible promissory notes. We expect to continue this practice for the foreseeable future. We believe our cash and cash equivalents as of March 31, 2018 will be sufficient to fund our planned operations through June 2019.

 

As of March 31, 2018, we did not have credit facilities under which we could borrow funds or any other sources of committed capital. We may seek to raise additional funds through various sources, such as equity and debt financings, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us. This risk may increase if economic and market conditions deteriorate. If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify or delay the development of our product candidates and our operations, or we may need to obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. If we are unable to raise any additional capital in the near-term and/or we cannot significantly reduce our expenses and are forced to terminate our operations, investors may experience a complete loss of their investment.

 

To the extent that we raise additional capital through the sale of our Common Stock, the interests of our current stockholders may be diluted. If we issue additional preferred stock or convertible debt securities, it could affect the rights of our common stockholders or reduce the value of our Common Stock or any outstanding classes of preferred stock. In particular, specific rights granted to future holders of preferred stock or convertible debt securities may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

 

 

On March 2, 2018, we received a written notice from NASDAQ indicating we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Common Stock had closed below $1.00 per share for the previous 30 consecutive business days. See Note 2 of our unaudited interim condensed consolidated statements for further details.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, as defined by the rules and regulations of the SEC that have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

 

Critical Accounting Policies

 

The Critical Accounting Policies included in our Form 10-K for the year ended December 31, 2017, filed with the SEC pursuant to Section 13 or 15(d) under the Securities Act on April 2, 2018, as amended to this date, have not changed.

 

Special Note Regarding Forward-Looking Statements

 

This report includes forward-looking statements. We may, in some cases, use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned preclinical development and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, our intellectual property position, the degree of clinical utility of our products, particularly in specific patient populations, our ability to develop commercial functions, expectations regarding clinical trial data, our results of operations, cash needs, financial condition, liquidity, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

 

 

Actual results could differ materially from our forward-looking statements due to a number of factors, including risks related to:

 

●

our ability to obtain additional financing;

 

●

our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

 

●

the success and timing of our preclinical studies and clinical trials;

 

●

the difficulties in obtaining and maintaining regulatory approval of our products and product candidates, and the labeling under any approval we may obtain;

 

●

our plans and ability to develop and commercialize our product candidates;

 

●

our failure to recruit or retain key scientific or management personnel or to retain our executive officers;

 

●

the accuracy of our estimates of the size and characteristics of the potential markets for our product candidates and our ability to serve those markets;

 

●

regulatory developments in the United States and foreign countries;

 

●

the rate and degree of market acceptance of any of our product candidates;

 

●

obtaining and maintaining intellectual property protection for our product candidates and our proprietary technology;

 

●

our ability to operate our business without infringing the intellectual property rights of others;

 

●

recently enacted and future legislation regarding the healthcare system;

 

●

our ability to maintain our listing on the Nasdaq Capital Market;

 

●

the success of competing products that are or may become available; and

 

●

the performance of third parties, including contract research organizations, collaborators and manufacturers.

 

 

You should also read carefully the factors described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the SEC on April 2, 2018, as amended, and elsewhere in our public filings to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.

 

Any forward-looking statements that we make in this Quarterly Report speak only as of the date of such statement, and, except as required by applicable law, we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This Item 3 is not applicable to us as a smaller reporting company and has been omitted.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible internal controls. Our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

 

Change in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

For this item, please refer to Note 7, Commitments and Contingencies to the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

 

ITEM 1A.

RISK FACTORS

 

In addition to the other information set forth in this Quarterly report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item IA - "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2017, which could materially affect our business, financial condition or future results.

 

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes with respect to the Company’s risk factors previously disclosed on Form 10-K for the year ended December 31, 2017.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered Sales of Equity Securities

 

None.

 

 Issuer Purchases of Equity Securities

 

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.

OTHER INFORMATION

 

None.

 

ITEM 6.

EXHIBITS

 

See attached Exhibit Index.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 10, 2018

 

 

		DIFFUSION PHARMACEUTICALS INC.
	By:	/s/ David G. Kalergis
		David G. Kalergis
		Chairman and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Ben L. Shealy
		Ben L. Shealy
		Senior Vice President, Finance, Treasurer and Secretary
		(Principal Financial Officer)

 

 

 

DIFFUSION PHARMACEUTICALS INC.

 

QUARTERLY REPORT ON FORM 10-Q

EXHIBIT INDEX

 

Exhibit No.		Description		Method of Filing
1.1		Underwriting Agreement, dated January 18, 2018, by and between Diffusion Pharmaceuticals Inc. and H.C. Wainwright & Co. LLC		Incorporated by reference to Exhibit 1.1 to the registrant's current report on Form 8-K filed on January 19, 2018
4.1		Form of 2018 Underwriters' Warrant		Incorporated by reference to Exhibit 4.2 to the registrant's current report on Form 8-K filed on January 22, 2018
4.2		Form of 2018 Common Stock Warrant		Incorporated by reference to Exhibit 4.1 to the registrant's current report on Form 8-K filed on January 19, 2018
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)		Filed herewith
31.2		Certification of principal financial officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)		Filed herewith
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Furnished herewith
32.2		Certification of principal financial officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Furnished herewith
101		The following materials from Diffusion’s quarterly report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit), (iv) the Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements		Filed herewith

 

 

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