NEAH POWER SYSTEMS, INC. FILES (8-K) Disclosing Other Events

Item 8.01 Other Events

Terms of Settlement of Abramowitz Litigation

On January 6, 2012, Neah Power Systems, Inc. agreed to settlement terms (the "Settlement") with Paul Abramowitz, former Chairman, Director and CEO of the Company, whereby we agreed to settle outstanding claims and counter-claims under litigation. Under the terms of the Settlement, we agreed to pay Abramowitz an aggregate of $128,000, payable as follows: (i) $30,000 will be due no later than one business day after execution of a mutual release (the "Release") and other settlement documents, (ii) $45,000 will be due within 45 days of the Release, to be paid by our directors' and officers' liability insurer (after execution of appropriate documentation that is satisfactory to the insurer and all parties) and (iii) with respect to the remaining balance of $53,000, Abramowitz is to receive 20% of any new funding received by the Company, the payments of which will be applied against the remaining balance. Regardless of whether we receive any new funding, full payment of the $128,000 will be due no later than July 31, 2012. In addition, we agreed to sign a stipulated judgment in the amount of $106,000, with 5 % interest from the date of default, to be entered only upon an event of default in the payment schedule (after written notice and an opportunity to cure).

We are in the process of negotiating and finalizing the Release, other settlement documents and the required documentation for the insurance carrier. The Release will include Abramowitz's release of the defendants from any and all claims pertaining to the Litigation, and our release of Abramowitz from any and all counter-claims pertaining to the Litigation.

The Abramowitz lawsuit was scheduled to go to trial on January 23, 2012, and in connection with the Settlement, we and Abramowitz have agreed to mutually extend the trial date to August 27, 2012, which is pending Court approval. The settlement documents will also include both parties' agreement to execute a Stipulation and Order of Dismissal of the Litigation with prejudice, to be filed after payment in full of the $128,000.

The Settlement is a result of compromise and shall not be construed as an admission of liability to any person and/or entity, breach of any agreement, or violation of any law or regulation.

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