**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-K/A**

**Amendment      No. 2**

| x                                             | ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE                ACT OF                1934    |
|-----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                                          | For                the period ended                                                                                                   | December                31, 2006 |
|                                          | OR                                                                                                                                    |
|  ̈                                        | 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 0-12965 |

|                                                                       |
|----------------------------------------------------------------------------|
| (Exact                name of registrant as specified in its charter)      |
| DELAWARE                                                                   |   | 13-3163744 |
| (State                of incorporation)                                    |   | (I.R.S.                Employer Identification No.) |
|                                                                       |
| 42                Oriental Street; Providence, Rhode Island                | 02908 |
| (Address                of principal executive offices)                    | Zip                Code |
|                                                                       |   |
| (401)                274-5658                                              |
| (Registrant’s                Telephone Number, Including Area Code)  |
|                                                                       |   |
| Securities                registered pursuant to Section 12(b) of the Act: |
| NONE                                                                       |
|                                                                       |   |
| Securities                registered pursuant to Section 12(g) of the Act: |
|                                                                       | Common                Stock, $.01 Par Value (Title                of Class) |

| Indicated                by check mark if the registrant is a well-known seasoned issuer,                as                defined in Rule 405 of the Securities Act.                                                                                                                                                                                                                                                                         | Yes:                                    |  ̈ | No:    | x                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|--------|--------|-----------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate                by check mark if the registrant is not required to file reports pursuant                to Section 13 or Section 15(d) of the Act.                                                                                                                                                                                                                                                                                    | Yes:                                    |  ̈ | No:    | x                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 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 than the                Registrant was required to file such reports), and (2) has been subject                to                such filing |
| requirements                for the past 90 days.                                                                                                                                                                                                                                                                                                                                                                                             | Yes:                                    | x      | No:    |  ̈                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate                by check mark if disclosure of delinquent filers pursuant to Item                405 of                Regulation S-K is not contained herein, and will not be contained,                to the                best of Registrant’s knowledge, in definitive proxy or information                statements incorporated by reference in Part III of this Form 10-K                or any                       |
| amendment                to this Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                   |  ̈                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate                by check mark whether the Registrant is a large accelerated filer,                an                accelerated filer, or a non-accelerated filer. See definition of                “accelerated filer and large accelerated filer” in Rule 12b-2 of the                Exchange Act. (Check one):                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          | Large                Accelerated filer: |  ̈ |   | Accelerated                filer: |  ̈ |   | Non-accelerated                filer: | x |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicated                by check mark whether the registrant is a shell company:                                                                                                                                                                                                                                                                                                                                                             | Yes:                                    |  ̈ | No:    | x                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| The                aggregate market value of the 10,319,296 shares of voting stock held                by                non-affiliates of the registrant on June 30, 2006, based on the closing                price of such stock on June 30, 2006, was $33.3                million.                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| The                number of shares outstanding of the Registrant’s Common Stock at April 25,                2006 was 20,421,816.                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **DOCUMENTS                INCORPORATED BY REFERENCE**                                                                                                                                                                                                                                                                                                                                                                                        |
| None                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

**PART      III**

**Item      10.**
**Directors,      Executive Officers and Corporate Governance.**

**Directors      and Executive Officers **

| Name                                    |   | Age |   | Director/OfficerSince |   | Capacities                in which served                                                                                                                                                 |
|-----------------------------------------|--------|-----|--------|-----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| George                L. Ball           |   | 68  |   | 2003                  |   | Director,                Chairman of the Board                                                                                                                                            |
| William                B. Danzell       |   | 52  |   | 2003                  |   | Director,                President and Chief Executive Officer                                                                                                                            |
| Clarence                A. Davis        |   | 65  |   | 2006                  |   | Director                                                                                                                                                                                  |
| Michael                C. James         |   | 48  |   | 2006                  |   | Director                                                                                                                                                                                  |
| David                N. Jordan          |   | 63  |   | 2003                  |   | Director                                                                                                                                                                                  |
| Nina                R. Mitchell         |   | 48  |   | 2006                  |   | Director                                                                                                                                                                                  |
| Theodore                Petroulas       |   | 52  |   | 2006                  |   | Director                                                                                                                                                                                  |
| Daryl                Silzer             |   | 52  |   | 2006                  |   | Director                                                                                                                                                                                  |
| Nigel                P. Hebborn         |   | 48  |   | 1996                  |   | Executive                Vice President, Treasurer and Chief                Financial Officer of Nestor, Inc. and President of Nestor Traffic                Systems,                Inc. |
| Tadas                (Todd) A. Eikinas  |   | 40  |   | 2005                  |   | Vice                President, Chief Operating Officer                                                                                                                                    |
| Brian                R. Haskell         |   | 44  |   | 2007                  |   | Vice                President, General Counsel and Secretary                                                                                                                              |
| Teodor                (Ted) Klowan, Jr. |   | 38  |   | 2006                  |   | Vice                President, Corporate Controller and Chief Accounting                Officer                                                                                           |

**George      L. Ball**

**William      B. Danzell**

----

**Clarence      A. Davis **

**Michael      C. James **

**David      N. Jordan**

**Nina      R. Mitchell,**

**Theodore      Petroulas**
**,      **
** **

**Daryl      Silzer**

----

**Nigel      P. Hebborn**

**Tadas      (Todd) A. Eikinas**

**Brian      R. Haskell**
*summa      cum laude *

**Teodor      (Ted) Klowan, Jr.**

**Audit      Committee**

**Exchange      Act**

----

**Audit      Committee Financial Expert**

**SEC      Rule 10A-3**

**Code      of Ethics**

**Section      16(A) Beneficial Ownership Reporting Compliance**

**Procedure      for Nominating Directors**

----

**Item      11.**
**Compensation      of Directors and Executive Officers**

***Compensation      Discussion and Analysis***

**Committee**

| ·   | To                focus senior management on achieving financial and operating objectives                that provide long-term shareholder                value; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | To                align the interests of senior management with the interests of the                Company’s shareholders; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | To                attract and retain senior executive                talent. |
|--------------------|------------------------------------------------------------------------------|

**annual      incentive**

----

*Base      Salary*

*Annual      Incentive*

*Long-Term      Performance-Based Awards*

*Other      Compensation*

----

*Competitive      Market Assessment*

*Management’s      Role in Executive Compensation*

*Tax      and Accounting Implications*

**Certain      Relationships and Related Transactions and Director      Independence**

**Compensation      Committee Report**

----

**Named      Executives**

**SUMMARY      COMPENSATION TABLE**

| NameandPrincipalPosition                                                                                                                                                     | Calendar                  Year | Salary($)     | Bonus($)     | OptionAwards($)                  (1) | Change                  in PensionValue                  and Non-Qualified DeferredCompen-sationEarnings($) | All                  OtherComp-ensation                  (2) | Total($) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|---------------|--------------|--------------------------------------|-------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|----------|
| *William                  B. Danzell**President                  and CEO*                                                                                                    | 2006                           | 231,621  | 0       | 0                                    | 0                                                                                                           | 516                                                          | 232,137  |
| *Nigel                  P. Hebborn**EVP,                  Treasurer and CFO of Nestor, Inc. and President of Nestor Traffic                  Systems,                  Inc.* | 2006                      | 187,789  | 0       | 0                                    | 0                                                                                                           | 516                                                          | 188,305  |
| *Tadas                  A. Eikinas**Chief                  Operating Officer*                                                                                                | 2006                           | 159,755       | 10,000  | 0                                    | 0                                                                                                           | 516                                                          | 170,271  |
| *Benjamin                  M. Alexander (3)**Vice                  President, General Counsel and Secretary*                                                                 | 2006                           | 163,588       | 0            | 0                                    | 0                                                                                                           | 516                                                          | 164,104  |
| *Teodor                  Klowan, Jr., CPA (4)**Vice                  President, Corporate Controller , and Chief Accounting                  Officer*                        | 2006                           | 77,942        | 0            | 0                                    | 0                                                                                                           | 45,363                                                       | 123,305  |

| (1)   | The                SFAS 123R expense was determined using the Black Scholes option pricing                model without regard to estimated forfeitures. The assumptions used                to                calculate the SFAS 123R expense are disclosed in footnote 11 to the                audited financial statements included in the Company’s Annual Report on                Form 10-K for the fiscal year ended December 31,                2006. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Payment                of group term life insurance premiums and consulting fees paid to                Mr.                Klowan prior to his employment with the Company. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Mr.                Alexander resigned from the Company effective February 14,                2007. |
|-----------------|----------------------------------------------------------------------------------------------------|

| (4)   | Mr.                Klowan joined the Company in May 2006. Mr. Klowan was a consultant                to the                Company from January 2006 to April                2006. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Employment      Agreement with William B. Danzell. *

----

*Employment      Agreement with Nigel P. Hebborn.*

*Employment      Agreement with Tadas A. Eikinas. *

*Employment      Agreement with Teodor Klowan, Jr. *

----

**GRANTS      OF PLAN BASED AWARDS**

| Name                                                                                                                                                                               |   |   | Grant                  Date |   |   | All                  Other Stock Awards: Number of Shares of Stock or Units(#) |   |   | All                  Other Option Awards: Number of Securities Underlying Options(#)                  (1) |   |   | Exercise                  or Base Price of Option Awards ($/Sh)(2) |    |   | Grant                  Date Fair Value of Stock and Option Awards (3) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------|--------|--------|--------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------|--------------|--------|-----------------------------------------------------------------------|--------|
|                                                                                                                                                                               |   |   |                        |   |   |                                                                           |   |   |                                                                                                      |   |   |                                                               |         |   |                                                                  |   |
| William                  B. DanzellPresident                  and CEO                                                                                                              |   |   |                        |   |   | 0                                                                         |   |   |                                                                                                      |   |   |                                                               |         |   |                                                             |   |
|  *Nigel                  P. Hebborn**EVP,                  Treasurer and CFO of Nestor, Inc. and President of Nestor Traffic                  Systems,                  Inc.* |   |   | 11/01/2006                  |   |   | 0                                                                              |   |   | 10,000                                                                                                    |   | $      | 2.16                                                               |         | $      | 20,853                                                                |   |
|  *Tadas                  A. Eikinas**Chief                  Operating Officer*                                                                                                |   |   | 9/8/2006                    |   |   | 0                                                                              |   |   | 25,000                                                                                                    |   | $      | 2.90                                                               |         | $      | 70,038                                                                |   |
|  *Benjamin                  M. Alexander**Vice                  President, General Counsel and Secretary*                                                                     |   |   | 11/01/2006                  |   |   | 0                                                                              |   |   | 25,000                                                                                                    |   | $      | 2.16                                                               |         | $      | 52,132                                                                |   |
|  *T**eodor                  Klowan, Jr., CPA**Vice                  President, Corporate Controller , and Chief* *Accounting                  Officer*                   |   |   | 5/4/200611/01/2006          |   |   | 0                                                                              |   |   | 75,00010,000                                                                                              |   | $$     | 3.402.16                                                           |         | $$     | 242,82020,853                                                         |   |

| (1)   | Reflects                the number of ISO and non-qualified stock options granted by the                Compensation Committee. These options will generally vest over five                years. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Reflects                the closing price of the common stock on the date of                grant. |
|-----------------|----------------------------------------------------------------------------------------------------|

| (3)   | Reflects                the SFAS 123R fair value the stock option grant made on the date                of grant                without regard to forfeitures. Assumptions used to value these awards                using the Black-Scholes option pricing model are disclosed in footnote                11                to the audited financial statements included in the Company’s Annual                Report of Form 10-K for the fiscal year ended December 31,                2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

**Outstanding      Equity Awards At Fiscal Year-End**

| Name                                                                                                                                                                                       |   |   | Number                    of securities underlying unexercised Options (#)Exercisable                    (1) |   |   | Number                    of securities underlying unexercised options (#) unexercisable                    (1) |   |   | Equity                    IncentivePlan                    Awards: Number of securities underlying unexercised unearned                    options                    (#) |   |   | Option                    exerciseprice                    ($) |   |   | Option                    expirationdate              |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|
|  *William                    B. Danzell**President                    and CEO*                                                                                                        |   |   | 1,400800,000                                                                                                 |   |   | 700200,000                                                                                                      |   |   | 00                                                                                                                                                                        |   | $$     | 3.554.95                                                       |   |   | 4/8/201210/13/2012                                    |   |
|  *Nigel                    P. Hebborn**EVP,                    Treasurer and CFO of Nestor, Inc. and President of Nestor Traffic                    Systems,                    Inc.* |   |   |  8,2495,4994,8001,400480,0000                                                                           |   |   | 001,200700120,00010,000                                                                                         |   |   | 000000                                                                                                                                                                    |   | $$$$$$ | 5.505.501.903.554.952.16                                       |   |   | 1/2/20099/13/20096/10/20104/8/201210/13/201211/1/2014 |   |
|  *Tadas                    A. Eikinas**Chief                    Operating Officer*                                                                                                    |   |   |  30,00020,0000                                                                                          |   |   | 20,00010,00025,000                                                                                              |   |   | 000                                                                                                                                                                       |   | $$$    | 4.505.952.90                                                   |   |   | 9/15/20123/29/20139/8/2014                            |   |
|  *Benjamin                    M. Alexander**Vice                    President, General Counsel and Secretary*                                                                         |   |   | 25,0000                                                                                                      |   |   | 110,00025,000                                                                                                   |   |   | 00                                                                                                                                                                        |   | $$     | 5.952.16                                                       |   |   | 3/29/201311/1/2014                                    |   |
|  *Teodor                    Klowan, Jr., CPA**Vice                    President, Corporate Controller , and Chief* *Accounting                    Officer*                       |   |   | 15,0000                                                                                                      |   |   | 60,00010,000                                                                                                    |   |   | 00                                                                                                                                                                        |   | $$     | 3.402.16                                                       |   |   | 5/4/201411/1/2014                                     |   |

| (1) | The                  expiration date for all grants is generally between eight and ten                  years                  from the date of grant. With the exception of the options expiring                  on                  October 13, 2012, vesting for stock options is generally 20 or                  25%                  annually on the date of grant. The unexercisable stock options                  expiring on                  October 13, 2012 vest on the first date when the Company’s stock exceeds                  $8.03 per share. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Director      Compensation Fiscal Year 2006**

| Name                                |   |   | Total($) |   |   | Fees                  earned or paid in cash ($) |   |   | Stock                  Awards ($) (1) |   |   | Option                  Awards ($) |   |   | Non-Equity                  Incentive Plan Compensation |   |   | All                  Other Compensation |   |
|-------------------------------------|--------|--------|----------|--------|--------|--------------------------------------------------|--------|--------|---------------------------------------|--------|--------|------------------------------------|--------|--------|---------------------------------------------------------|--------|--------|-----------------------------------------|--------|
| George                  L. Ball     |   | $      | 20,325   |   | $      | 8,000                                            |   | $      | 12,325                                |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Albert                  H. Cox, Jr. |   | $      | 17,310   |   | $      | 5,750                                            |   | $      | 11,560                                |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Clarence                  A. Davis  |   | $      | 12,500   |   | $      | 12,500                                           |   | $      | 0                                     |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Terry                  E. Fields    |   | $      | 12,500   |   | $      | 1,250                                            |   | $      | 11,250                                |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Michael                  C. James   |   | $      | 7,500    |   | $      | 7,500                                            |   | $      | 0                                     |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| David                  N. Jordan    |   | $      | 18,000   |   | $      | 6,750                                            |   | $      | 11,250                                |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Nina                  R. Mitchell   |   | $      | 4,750    |   | $      | 4,750                                            |   | $      | 0                                     |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Theodore                  Petroulas |   | $      | 3,500    |   | $      | 3,500                                            |   | $      | 0                                     |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |
| Daryl                  Silzer       |   | $      | 3,000    |   | $      | 3,000                                            |   | $      | 0                                     |   | $      | 0                                  |   | $      | 0                                                       |   | $      | 0                                       |   |

| (1) | Mr.                  Fields and Mr. Jordan were each issued 5,000 shares of stock on                  August 2,                  2006, Mr. Ball was issued 5,000 shares of stock on August 8, 2006,                  and Mr.                  Cox was issued 5,000 shares of stock on August 9, 2006. No restrictions                  were placed on these shares. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      12.**
**Security      Ownership of Certain Beneficial Owners and Management and Related Shareholder      Matters**

**Securities      Authorized for Issuance Under Equity Compensation Plans at Fiscal      Year-End**

|                                                                        | Number                  of securities to be issued upon exercise of outstanding options,                  warrants                  and rights | Weighted-average                  exercise price of outstanding options, warrants and rights | Number                  of securities remaining available for future issuance under equity                  compensation plans (excluding securities reflected in column                  (a)) |
|-----------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity                  compensation plans approved by security holders     | 2,953,853                                                                                                                                      | $                  4.55                                                                      | 1,695,094(1)                                                                                                                                                                                   |
|                                                                        |                                                                                                                                           |                                                                                         |                                                                                                                                                                                           |
| Equity                  compensation plans not approved by security holders | ---                                                                                                                                            | ---                                                                                          | ---                                                                                                                                                                                            |
| Total                                                                       | 2,953,853                                                                                                                                      | $                  4.55                                                                      | 1,695,094                                                                                                                                                                                      |

| (1) | Issuable                under our 2004 Stock Incentive Plan, which may be issued as restricted                stock or similar awards or as stock                options. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Security      Ownership of Certain Beneficial Owners and Management**

| **Name                  and Address of****Beneficial                  Owner** |   | **Amount                  and nature of****Beneficial                  Ownership** |                     | **Percent                  of Class** |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------------------------|---------------------------------------|
| DG                  Capital Management, Inc.                                  |   | 1,384,536                                                                          | (1)                      |                                  | 6.8  |
| 260                  Franklin Street; Suite 1600                              |   |                                                                               |                     |                                  |   |
| Boston,                  MA 02110                                             |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Manu                  P. Daftary                                              |   | 1,384,536                                                                          | (1)                      |                                  | 6.8  |
| c/o                  DG Capital Management, Inc.                              |   |                                                                               |                     |                                  |   |
| 260                  Franklin Street; Suite 1600                              |   |                                                                               |                     |                                  |   |
| Boston,                  MA 02110                                             |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Evolution                  Capital Management LLC                             |   | 1,215,278                                                                          |                     |                                  | 6.0 |
| 1132                  Bishop Street; Suite 1880                               |   |                                                                               |                     |                                  |   |
| Honolulu,                  Hawaii 96813                                       |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Edward                  F. Heil                                               |   | 1,114,705                                                                          |                     |                                  | 5.5 |
| 8052                  Fisher Island Drive                                     |   |                                                                               |                     |                                  |   |
| Fisher                  Island, FL 33109                                      |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Silver                  Star Partners I, LLC                                  |   | 9,856,430                                                                          | (2)                      |                                  | 48.3 |
| c/o                  William B. Danzell                                       |   |                                                                               |                     |                                  |   |
| The                  Professional Building                                    |   |                                                                               |                     |                                  |   |
| 2                  Corpus Christi; Suite 300                                  |   |                                                                               |                     |                                  |   |
| Hilton                  Head Island, SC 29938                                 |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| William                  B. Danzell                                           |   | 10,876,496                                                                         | (2)                  (3) |                                  | 53.3 |
| The                  Professional Building                                    |   |                                                                               |                     |                                  |   |
| 2                  Corpus Christi; Suite 300                                  |   |                                                                               |                     |                                  |   |
| Hilton                  Head Island, SC 29938                                 |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| George                  L. Ball                                               |   | 149,250                                                                            | (4)                  (5) |                                  | * |
| Sanders                  Morris & Harris Group                            |   |                                                                               |                     |                                  |   |
| 600                  Travis, Suite 3100                                       |   |                                                                               |                     |                                  |   |
| Houston,                  TX 77002                                            |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| David                  N. Jordan                                              |   | 39,365                                                                             | (5)                      |                                  | * |
| c/o                  Silver Star Partners I, LLC                              |   |                                                                               |                     |                                  |   |
| The                  Professional Building                                    |   |                                                                               |                     |                                  |   |
| 2                  Corpus Christi; Suite 300                                  |   |                                                                               |                     |                                  |   |
| Hilton                  Head Island, SC 29938                                 |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Clarence                  A. Davis                                            |   | 5,000                                                                              |                     |                                  | * |
| c/o                  Nestor, Inc.                                             |   |                                                                               |                     |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |                     |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |                     |                                  |   |
|                                                                          |   |                                                                               |                     |                                  |   |
| Michael                  C. James                                             |   | 554,933                                                                            | (6)                      |                                  | 2.7 |
| c/o                  Nestor, Inc.                                             |   |                                                                               |                     |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |                     |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |                     |                                  |   |

----

| **Name                  and Address of****Beneficial                  Owner** |   | **Amount                  and nature of****Beneficial                  Ownership** |   | **Percent                  of Class** |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|---------------------------------------|
| Nina                  R. Mitchell                                             |   | 5,000                                                                              |   |                                  | * |
| c/o                  Nestor, Inc.                                             |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Theodore                  Petroulas                                           |   | 25,000                                                                             |   |                                  | * |
| c/o                  Nestor, Inc.                                             |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Daryl                  Silzer                                                 |   | 5,000                                                                              |   |                                  | * |
| c/o                  Nestor, Inc.                                             |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Nigel                  P. Hebborn                                             |   | 379,38                                                                             | (7)    |                                  | 2.4 |
| Nestor,                  Inc.                                                 |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Tadas                  A. Eikinas                                             |   | 60,000                                                                             | (7)    |                                  | * |
| Nestor,                  Inc.                                                 |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Brian                  R. Haskell                                             |   | 0                                                                                  |   |                                  |  * |
| Nestor,                  Inc.                                                 |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Teodor                  Klowan, Jr.                                           |   | 15,000                                                                             | (7)    |                                  | * |
| Nestor,                  Inc.                                                 |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| Benjamin                  M. Alexander                                        |   | 0                                                                                  | (8)    |                                  | * |
| Nestor,                  Inc.                                                 |   |                                                                               |   |                                  |   |
| 42                  Oriental Street                                           |   |                                                                               |   |                                  |   |
| Providence,                  RI 02908                                         |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| All                  executive officers and directors                         |   | 12,239,392                                                                         | (9)    |                                  | 55.4 |
| as                  a group (11persons)                                       |   |                                                                               |   |                                  |   |
|                                                                          |   |                                                                               |   |                                  |   |
| *Less                  than 1%                                                |   |                                                                               |   |                                  |   |

| (1) | Includes                    347,221 shares that may be acquired upon conversion of our 5%                    Senior                    Convertible Notes. DG Capital Management, Inc., in its capacity                    as an                    investment adviser, has the sole right to vote and dispose of                    the shares                    of the Company’s Common Stock. Manu P. Daftary is the sole shareholder and                    President of DG Capital Management, Inc. DG Capital Management,                    Inc. and                    Mr. Daftary disclaim beneficial ownership of the Common Stock                    of the                    Company.                                                                                               |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | William                    B. Danzell has an approximate 8.6% ownership interest in, and                    is the                    Managing Director of, Silver Star Partners I, LLC and as such                    shares with                    Silver Star Partners I, LLC the power to vote and dispose of                    the shares                    held by it. David N. Jordan, a director of the Company, is the                    president                    of L-J Inc., which has an approximate 20.8% ownership interest                    in Silver                    Star Partners I, LLC. Thodore Petroulas, a nominee for director,                    has an                    approximate 1.9% ownership interest in Silver Star Partners I,                    LLC. |
| (3) | This                    number represents (i) 9,856,430 shares of Capital Stock held                    by Silver                    Star Partners I, LLC; (ii) 10,400 of Common Stock held by William                    B.                    Danzell, having the sole power to vote and dispose of such shares;                    (iii)                    802,100 shares of Common Stock which Mr. Danzell may acquire                    upon the                    exercise of options and (iv) 207,566 shares held by Danzell Investment                    Management, Ltd., an investment management firm of which Mr.                    Danzell is                    the Founder and President.                                                                                          |
| (4) | Includes                    100,000 shares of Common Stock, which are owned by a limited                    liability                    company of which Mr. Ball’s wife is a member, beneficial ownership of                    which Mr. Ball disclaims, except                    to the extent of his wife’s pecuniary interest therein.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (5) | Includes                    23,000 shares of Common Stock, which Messrs. Ball, and Jordan                    may each                    acquire upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (6) | Includes                    23,300 shares in an investment account over which Mr. James has                    sole                    dispositive power and 425,317 shares beneficially owned by Kuekenhof                    Equity Fund, L.P. (the “Fund”) over which Mr. James has sole disposition                    and voting power, and of which 255,856 may be acquired upon the                    exercise                    of convertible notes, warrants or options held by the Fund. Includes                    28,736 shares issuable upon exercise of warrants held by the                    Fund                                                                                                                                                                     |
| (7) | Includes                    500,648, 60,000 and 15,000 of Common Stock, respectively, which                    Mr.                    Hebborn, Mr. Eikinas and Mr. Klowan, Officers of the Company,                    may acquire                    upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (8) | Mr.                    Alexander resigned from the Company effective February 14, 2007.                    His                    options have all expired without being exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (9) | This                    number includes: (i) 1,679,604 vested options owned or controlled                    by                    officers and directors of the Company and (ii) all other shares                    beneficially owned by the current directors and executive officers                    of the                    Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**Item      13.**
**Certain      Relationships and Related Transactions**

**Item      14.**
**Principal      Accounting Fees and Services.**

|                                  |   |   | 2006  |   |   |   | 2005  |
|---------------------------------------|--------|--------|------------|--------|--------|--------|------------|
| Audit                Fees (1):        |   | $      | 150,651    |   |   | $      | 191,884    |
| Audit-Related                Fees(1): |   |   | ---        |   |   |   | ---        |
| Tax                Fees(2):           |   |   | 25,500     |   |   |   | 24,821     |
| All                Other Fees:        |   |   | ---        |   |   |   | ---        |
|                                  |   | $      | 176,151    |   |   | $      | 216,705    |

| (1) | These                fees are for the audit of our financial statements for 2006 and 2005,                respectively, for quarterly reviews, registration statements and                accounting consultations related to the audited financial                statements. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Tax                fees consisted of tax compliance paid to CCR in 2006 and                2005.                                                                                                                                                                               |

*Pre-Approval      of Audit and Non-Audit Services *

----

**SIGNATURE**

|   |                                                 | NESTOR,                INC. |
|--------|------------------------------------------------------|-----------------------------|
|   | (Registrant)                                         |
|   |                                                 |
|   | /s/                William B. Danzell                |
|   | William                B. Danzell, President and CEO |
|   |                                                 |
|   |                                                 |
| Date:  | April                30, 2007                        |                        |
|   |                                                 |

----

| **Exhibit                No.** | **Description                of Exhibits**                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                            | Restated                Certificate of Incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.1                            | Specimen                Certificate for shares of Common Stock, $.01 par value, of the Registrant                filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-2                (File No. 333-108432), filed September 2, 2003, is hereby incorporated                herein by reference.                                                                                                                                                                |
| 10.1                           | Asset                Purchase Agreement and License Agreement between the Company and                National                Computer Systems, Inc., filed as an Exhibit to the Company's Current                Report on Form 8-K dated June 11, 1996, is hereby incorporated by                reference.                                                                                                                                                                             |
| 10.2                           | PRISM                Non-Exclusive License Agreement between the Company and Applied                Communications, Inc., filed as an Exhibit to the Company's Current                Report                on Form 8-K dated September 19, 1996, is hereby incorporated by reference.                Portions of the Exhibit omitted, pursuant to a grant of confidential                treatment.                                                                                     |
| 10.3                           | License                Agreement dated as of March 28, 1997, between Nestor, Inc. and Total                System Services, Inc. filed as an Exhibit to the Company's Current                report                on Form 8-K dated April 8, 1997, is hereby incorporated by reference.                Portions of the Exhibit omitted, pursuant to a grant of confidential                treatment.                                                                                   |
| 10.4                           | Amendment                to the PRISM Non-Exclusive License Agreement dated as of April 18,                1997,                between Nestor, Inc. and Applied Communications, Inc. filed as an                Exhibit                to the Company's Current Report on Form 8-K dated April 30, 1997                is hereby                incorporated by reference. Portions of the Exhibit omitted pursuant                to a                grant of confidential treatment. |
| 10.5                           | Exclusive                License Agreement between Nestor, Inc. and Nestor Traffic Systems,                Inc.                dated January 1, 1999 filed as an Exhibit to the Company's Current                Report                on Form 8-K dated March 25, 1999.                                                                                                                                                                                                                 |
| 10.6                           | Secured                Note Agreement by and among Nestor, Inc., Nestor Traffic Systems,                Inc. and                NTS Investors LLC dated January 9, 2001 and filed as an Exhibit to                the                Company's Current Report on Form 8-K on January 18, 2001 is hereby                incorporated by reference.                                                                                                                                        |
| 10.7                           | License                Agreement between Nestor, Inc. and ACI Worldwide, Inc. dated February                1,                2001 filed as an Exhibit to the Company's Current Report on Form                8-K on                February 9, 2001 is hereby incorporated by reference.                                                                                                                                                                                                |
| 10.8                           | License                Agreement dated May 18, 2001 between the Company and Retail Decisions,                Inc. filed as an exhibit to the Company's current report on Form                8K dated                May 18, 2001, which is hereby incorporated by reference.                                                                                                                                                                                                            |
| 10.9                           | Security                Purchase Agreement dated July 31, 2003 between Nestor, Inc. and Laurus                Master Fund, Ltd. filed as an exhibit to the Company's current report                on                Form 8-K dated July 31, 2003, which is hereby incorporated by                reference.                                                                                                                                                                             |
| 10.10                          | Convertible                Note dated July 31, 2003 made by Nestor, Inc. to Laurus Master Fund,                Ltd.                filed as an exhibit to the Company's current report on Form 8-K dated                July                31, 2003 which is hereby incorporated by reference.                                                                                                                                                                                          |
| 10.11                          | Registration                Rights Agreement dated July 31, 2003 between Nestor, Inc. and Laurus                Master Fund, Ltd. filed as an exhibit to the Company's current report                on                Form 8-K dated July 31, 2003, which is hereby incorporated by                reference.                                                                                                                                                                           |
| 10.12                          | Common                Stock Purchase Warrant dated July 31, 2003 issued by Nestor, Inc.                to                Laurus Master Fund, Ltd. filed as an exhibit to the Company's current                report on Form 8-K dated July 31, 2003 which is hereby incorporated                by                reference.                                                                                                                                                            |

| 10.13 | Stock                Pledge Agreement dated July 31, 2003 between Nestor Traffic Systems,                Inc.                and Laurus Master Fund, Ltd. filed as an exhibit to the Company's                current                report on Form 8-K dated July 31, 2003, which is hereby incorporated                by                reference. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14 | Pledge                and Security Agreement dated July 31, 2003 between CrossingGuard,                Inc. and                Laurus Master Fund, Ltd. filed as an exhibit to the Company's current                report on Form 8-K dated July 31, 2003 which is hereby incorporated                by                reference.                   |

----

| **Exhibit                No.** | **Description                of Exhibits** |
|--------------------------------|--------------------------------------------|

| 10.15 | Guaranty                dated July 31, 2003 by CrossingGuard, Inc. to Laurus Master Fund,                Ltd.                filed as an exhibit to the Company's current report on Form 8-K dated                July                31, 2003, which is hereby incorporated by reference.                                                                                                                                                            |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.16 | Nestor,                Inc. Incentive Stock Option Plan, as amended, filed as an Exhibit                to the                Company’s Registration Statement on Form S-8, filed May 5, 1987, is hereby                incorporated herein by reference                                                                                                                                                                                        |
| 10.17 | Nestor,                Inc. 1997 Incentive Stock Option Plan, as amended, filed as an Exhibit                to                the Company's Registration Statement on Form S-8, filed May 16, 1997,                is                hereby incorporated by reference.                                                                                                                                                                               |
| 10.18 | Nestor                Traffic Systems, Inc., Form of Subscription Agreement dated March                25,                1999, to sell a 37.5% equity position in its common stock and issue                a                warrant for an additional 17.5% common stock interest filed as an                Exhibit                to Nestor's Current Report on Form 8-K dated April 23, 1999 is hereby                incorporated by reference. |
| 10.19 | Security                Purchase Agreement dated January 14, 2004 between Nestor, Inc. and                Laurus                Master Fund, Ltd. filed as an Exhibit to Nestor's Current Report                on Form                8-K dated December 31, 2003 is hereby incorporated by                reference.                                                                                                                                |
| 10.20 | Convertible                Note dated January 14, 2004 made by Nestor, Inc. to Laurus Master                Fund,                Ltd. filed as an Exhibit to Nestor's Current Report on Form 8-K dated                December 31, 2003 is hereby incorporated by reference.                                                                                                                                                                          |
| 10.21 | Registration                Rights Agreement dated January 14, 2004 between Nestor, Inc. and                Laurus                Master Fund, Ltd. filed as an Exhibit to Nestor's Current Report                on Form                8-K dated December 31, 2003 is hereby incorporated by                reference.                                                                                                                              |
| 10.22 | Redemption                and Conversion Agreement dated January 14, 2004 between Nestor, Inc.                and                Laurus Master Fund, Ltd. filed as an Exhibit to the Company's Registration                Statement on Form S-2, as amended (File No. 333-108432), is hereby                incorporated by reference.                                                                                                               |
| 10.23 | Placement                Agent Agreement dated December 24, 2003 among Nestor, Inc., Sanders                Morris                Harris, Inc., and Barrett & Company, Inc. filed as an Exhibit to the                Company's Registration Statement on Form S-2, as amended (File No.                333-108432), is hereby incorporated by reference.                                                                                         |
| 10.24 | Registration                Rights Agreement dated December 31, 2003 among Nestor, Inc., Sanders                Morris Harris, Inc., and Barrett & Company, Inc. filed as an Exhibit                to the Company's Registration Statement on Form S-2, as amended (File                No.                333-108432), is hereby incorporated by reference.                                                                                     |
| 10.25 | Nestor,                Inc. 2004 Stock Incentive Plan filed as an Exhibit to Nestor's Current                Report on Form 8-K dated June 24, 2003 and filed                as an Exhibit to the Company's Registration Statement on Form S-8                filed                January 21, 2005, is                hereby incorporated by reference.                                                                                              |
| 10.26 | Employment                Agreement dated October 13, 2004 between Nestor, Inc. and William                B.                Danzell, filed as an Exhibit to Nestor's Current Report on Form 8-K                dated                October 13, 2004, is hereby incorporated by reference.                                                                                                                                                           |
| 10.27 | Employment                Agreement dated October 13, 2004 between Nestor, Inc. and Nigel P.                Hebborn, filed as an Exhibit to Nestor's Current Report on Form 8-K                dated                October 13, 2004, is hereby incorporated by reference.                                                                                                                                                                            |
| 10.28 | Note                Purchase Agreement dated November 5, 2004 between Nestor, Inc. and                the                purchasers named therein, filed as an Exhibit to Nestor's Current                Report                on Form 8-K dated November 5, 2004, is hereby incorporated by                reference.                                                                                                                               |
| 10.29 | Registration                Rights Agreement dated November 5, 2004 among Nestor, Inc. and the                purchasers named therein, filed as an Exhibit to Nestor's Current                Report                on Form 8-K dated November 5, 2004, is hereby incorporated by                reference.                                                                                                                                          |
| 10.30 | Warrant                to Purchase Common Stock, issued by Nestor, Inc. to Sanders Morris                Harris,                Inc. dated November 5, 2004, filed as an Exhibit to Nestor's Current                Report on Form 8-K dated November 5, 2004, is hereby incorporated                by                reference.                                                                                                                     |

----

| **Exhibit                No.** | **Description                of Exhibits** |
|--------------------------------|--------------------------------------------|

| 10.31 | Distributorship                Agreement by and between Nestor, Inc. and Vitronics Machine Vision,                Ltd.                dated August 17, 2004 filed as an Exhibit to Nestor's Quarterly Report                on                Form 10-Q for the quarter ended September 30, 2004, is hereby incorporated                by reference.                                    |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32 | Incentive                Stock Option Agreement by and between Nestor, Inc. and William B.                Danzell                dated October 13, 2004 filed as an Exhibit to Nestor's Quarterly                Report on                Form 10-Q for the quarter ended September 30, 2004, is hereby incorporated                by reference.                                        |
| 10.33 | Incentive                Stock Option Agreement by and between Nestor, Inc. and William B.                Danzell                dated October 13, 2004 filed as an Exhibit to Nestor's Quarterly                Report on                Form 10-Q for the quarter ended September 30, 2004, is hereby incorporated                by reference.                                        |
| 10.34 | Incentive                Stock Option Agreement by and between Nestor, Inc. and Nigel P. Hebborn                dated October 13, 2004 filed as an Exhibit to Nestor's Quarterly                Report on                Form 10-Q for the quarter ended September 30, 2004, is hereby incorporated                by reference.                                                         |
| 10.35 | Incentive                Stock Option Agreement by and between Nestor, Inc. and Nigel P. Hebborn                dated October 13, 2004 filed as an Exhibit to Nestor's Quarterly                Report on                Form 10-Q for the quarter ended September 30, 2004, is hereby incorporated                by reference.                                                         |
| 10.36 | Employment                Agreement dated March 29, 2005 between Nestor, Inc. and Tadas A.                Eikinas                filed as an Exhibit to Nestor's Annual Report on Form 10-K for the                year                ended December 31, 2004, is hereby incorporated by                reference.                                                                      |
| 10.37 | Employment                Agreement dated March 29, 2005 between Nestor, Inc. and Benjamin                M.                Alexander filed as an Exhibit to Nestor's Annual Report on Form 10-K                for                the year ended December 31, 2004, is hereby incorporated by                reference.                                                                 |
| 10.38 | Incentive                Stock Option Agreement by and between Nestor, Inc. and Tadas A. Eikinas                dated March 29, 2005 filed as an Exhibit to Nestor's Annual Report                on Form                10-K for the year ended December 31, 2004, is hereby incorporated                by                reference.                                                   |
| 10.39 | Incentive                Stock Option Agreement by and between Nestor, Inc. and Benjamin M.                Alexander dated March 29, 2005 filed as an Exhibit to Nestor's Annual                Report on Form 10-K for the year ended December 31, 2004, is hereby                incorporated by reference.                                                                            |
| 10.40 | Bonus                Targets Letter to William B. Danzell dated March 29, 2005 filed as                an                Exhibit to Nestor's Annual Report on Form 10-K for the year ended                December                31, 2004, is hereby incorporated by reference.                                                                                                         |
| 10.41 | Bonus                Targets Letter to Nigel P. Hebborn dated March 29, 2005 filed as                an                Exhibit to Nestor's Annual Report on Form 10-K for the year ended                December                31, 2004, is hereby incorporated by reference.                                                                                                           |
| 10.42 | Lease                Agreement between Nestor Traffic Systems, Inc. and Admiral Associates                dated May 27, 2005 filed as an Exhibit to Nestor's Current Report                on Form                8-K dated May 27, 2005, is hereby incorporated by                reference.                                                                                            |
| 10.43 | Subsidiary                Guaranty dated May 16, 2005 by Nestor, Inc. to Laurus Master Fund,                Ltd.                filed as an Exhibit to Nestor's Registration Statement on Form S-2                (File                No. 333-126047), is hereby incorporated by reference.                                                                                             |
| 10.44 | Security                Agreement by Nestor, Inc. and Nestor Traffic Systems, Inc. to Laurus                Master Fund, Ltd. filed as an Exhibit to Nestor's Registration Statement                on Form S-2 (File No. 333-126047), is hereby incorporated by                reference.                                                                                               |
| 10.45 | NTSI                Pledge and Security Agreement dated May 16, 2005, between Laurus                Master                Fund, Ltd and Nestor Traffic Systems, Inc. filed as an Exhibit to                Nestor's                Registration Statement on Form S-2 (File No. 333-126047), is hereby                incorporated by reference.                                         |
| 10.46 | Common                Stock Purchase Warrant dated May 16, 2005 by Nestor, Inc. to Laurus                Master                Fund, Ltd. filed as an Exhibit to Nestor's Registration Statement                on Form                S-2 (File No. 333-126047), is hereby incorporated by                reference.                                                                    |
| 10.47 | Settlement                Agreement and Mutual Release by and between Transol Corporation Ltd.,                Transol USA, Inc. and Nestor, Inc. dated June 28, 2005 filed as an                Exhibit                to Nestor's Quarterly Report on Form 10-Q for the quarter ended June                30,                2005, is hereby incorporated by                reference. |

----

| **Exhibit                No.** | **Description                of Exhibits** |
|--------------------------------|--------------------------------------------|

| 10.48 | Secured                Promissory Note by Nestor, Inc. to Foundation Partners I, LLC. dated                August 30, 2005 filed as an Exhibit to Nestor's Current Report on                Form 8-K                dated August 30, 2005, is hereby incorporated by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.49 | Purchase                and Sale Agreement dated August 31, 2005 by and among Transol Holdings                Pty                Limited (ACN 100 078 046) (receivers and managers appointed), Transol                PTY                Limited (ABN 65 095 538 828) (receivers and managers appointed),                Transol                Corporation Limited (ABN 73 089 224 402) (receivers and managers                appointed), Alleasing Finance Australia Limited (ABN 94 003 421 136)                and                Nestor Traffic Systems, Inc. filed as an Exhibit to Nestor's Quarterly                Report on Form 10-Q for the quarter ended September 30, 2005, is                hereby                incorporated by reference. |
| 10.50 | Securities                Purchase Agreement by and between Nestor, Inc. and Laurus Master                Fund,                Ltd. dated December 28, 2005 filed as an Exhibit to Nestor's Current                Report on Form 8-K dated December 28, 2005, is hereby incorporated                by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.51 | Secured                Term Note made by Nestor, Inc. to Laurus Master Fund, Ltd. dated                December                28, 2005 filed as an Exhibit to Nestor's Current Report on Form 8-K                dated                December 28, 2005, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.52 | Registration                Rights Agreement by and between Nestor, Inc. and Laurus Master Fund,                Ltd.                dated December 28, 2005 filed as an Exhibit to Nestor's Current Report                on                Form 8-K dated December 28, 2005, is hereby incorporated by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.53 | Reaffirmation                and Ratification Agreement and Amendment by and among Nestor, Inc.,                Nestor                Traffic Systems, Inc. and Laurus Master Fund, Ltd. dated December                28, 2005                filed as an Exhibit to Nestor's Current Report on Form 8-K dated                December                28, 2005, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                         |
| 10.54 | Letter                agreement from William B. Danzell to Nestor, Inc. dated March 6,                2006                filed as an Exhibit to Nestor's Current Report on Form 8-K dated                March 6,                2006, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.55 | Letter                agreement from Nigel P. Hebborn to Nestor, Inc. dated March 6, 2006                dated                March 6, 2006 filed as an Exhibit to Nestor's Current Report on Form                8-K                dated March 6, 2006, is hereby incorporated by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.56 | Letter                agreement from Tadas A. Eikinas to Nestor, Inc. dated March 6, 2006                dated                March 6, 2006 filed as an Exhibit to Nestor's Current Report on Form                8-K                dated March 6, 2006, is hereby incorporated by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.57 | Letter                agreement from Benjamin M. Alexander to Nestor, Inc. dated March                6, 2006                dated March 6, 2006 filed as an Exhibit to Nestor's Current Report                on Form                8-K dated March 6, 2006, is hereby incorporated by                reference.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.58 | Memorandum                of Agreement dated November 10, 2005 by and between Vitronic Machine                Vision Ltd., a Georgia limited partnership and Nestor Traffic Systems,                Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.59 | Securities                Purchase Agreement dated January 31, 2006 by and among Nestor, Inc.                and                the investors named therein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.60 | Form                of Common Stock Warrant dated January 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.61 | Incentive                Stock Option Grant Agreement between Nestor and Teodor Klowan, Jr.,                dated                May 5, 2006 filed as an Exhibit to Nestor's Current Report on Form                8-K                dated May 1, 2006, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.62 | Securities                Purchase Agreement by and among Nestor, Inc. and the Purchasers signatory                thereto (the “Purchasers”) dated May 24, 2006 (including exhibits                thereto) filed as an Exhibit to Nestor's Current Report on Form 8-K                dated                May 26, 2006, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                               |
| 10.63 | Form                of Restricted Stock Agreement dated July 3, 2006 filed as an Exhibit                to                Nestor's Current Report on Form 8-K dated July 3, 2006, is hereby                incorporated by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

| **Exhibit                No.** | **Description                of Exhibits** |
|--------------------------------|--------------------------------------------|

| 10.64 | Schedule                of Director Payments filed as an Exhibit to Nestor's Current Report                on                Form 8-K dated July 3, 2006, is hereby incorporated by                reference                                                                                                                                       |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.65 | Form                of Senior Convertible Notes dated May 25, 2006, incorporated by reference                from Exhibit 10.1 to Nestor’s Current Report on Form 8-K filed May 26,                2006 (at Exhibit A thereto)                                                                                                               |
| 10.66 | Form                of Warrants dated May 25, 2006, incorporated by reference from Exhibit                10.1 to Nestor’s Current Report on Form 8-K filed May 26, 2006 (at Exhibit                B thereto)                                                                                                                               |
| 10.67 | Warrants                in favor of Cowen & Co., LLC dated May 25, 2006, incorporated by                reference from Nestor’s Quarterly Report on Form 10-Q filed August 14,                2006                                                                                                                                       |
| 10.68 | Security                Agreement by and among U.S. Bank National Association, Nestor, Inc.,                Nestor Traffic Systems, Inc., CrossingGuard, Inc., dated May 25,                2006                incorporated by reference from Nestor’s Quarterly Report on Form 10-Q                filed August 14, 2006                   |
| 10.69 | Guaranty                and Suretyship Agreement by and among U.S. Bank National Association,                Nestor, Inc., Nestor Traffic Systems, Inc., CrossingGuard, Inc.,                dated May                25, 2006 incorporated by reference from Nestor’s Quarterly Report on Form                10-Q filed August 14, 2006    |
| 10.70 | Borrower/Subsidiary                Pledge Agreement by and among U.S. Bank National Association, Nestor,                Inc., Nestor Traffic Systems, Inc., CrossingGuard, Inc., dated May                25,                2006 incorporated by reference from Nestor’s Quarterly Report on Form 10-Q                filed August 14, 2006 |
| 10.71 | Security                Agreement -- Trademarks, Patents and Copyrights by and between U.S.                Bank                National Association and Nestor, Inc., dated May 25, 2006 incorporated                by                reference from Nestor’s Quarterly Report on Form 10-Q filed August 14,                2006            |
| 10.72 | Registration                Rights Agreement by and among Nestor, Inc. and the buyers named therein                dated May 25, 2006, incorporated by reference from Exhibit 10.1 to                Nestor’s Current Report on Form 8-K filed May 26, 2006 (at Exhibit F                thereto)                                            |
| 10.73 | Form                of Amended & Restated 5% Senior Convertible Notes dated May 25, 2006,                incorporated by reference from Exhibit 10.1 to Nestor’s Current Report on                Form 8-K filed May 26, 2006 (at Exhibit B to Exhibit J                thereto)                                                         |
| 10.74 | Form                of Common Stock Warrants dated May 25, 2006, incorporated by reference                from Exhibit 10.1 to Nestor’s Current Report on Form 8-K filed May 26,                2006 (at Exhibit C to Exhibit J                thereto)                                                                                      |

| 10.75 | Form                  of Incentive Stock Option Agreement dated November 1, 2006 filed                  as an                  Exhibit to Nestor's Current Report on Form 8-K dated November1,                  2006, is                  hereby incorporated by reference                                 |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.76 | Incentive                  Stock Option Agreement between Nestor, Inc. and Tadas A. Eikinas                  dated                  September 8, 2006 incorporated                  by reference from Nestor’s Quarterly Report on Form 10-Q filed November                  14, 2006           |
| 10.77 | Employment                  Agreement between Nestor, Inc. and Teodor Klowan, Jr., dated February                  1,                  2007 filed as an Exhibit to Nestor's Current Report on Form 8-K                  dated                  February 1, 2007, is hereby incorporated by reference       |
| 10.78 | Employment                  Agreement between Nestor, Inc. and Brian R. Haskell, dated February                  7,                  2007 filed as an Exhibit to Nestor's Current Report on Form 8-K                  dated                  February 1, 2007, is hereby incorporated by reference         |
| 10.79 | Consulting                  Letter Agreement between Nestor, Inc. and Clarence A. Davis, dated                  February 7, 2007 filed as an Exhibit to Nestor's Current Report                  on Form                  8-K dated February 1, 2007, is hereby incorporated by                  reference |
| 10.80 | Form                  of Restricted Stock Agreement dated February 1, 2007 filed as an                  Exhibit                  to Nestor's Current Report on Form 8-K dated February 1, 2007,                  is hereby                  incorporated by reference                                      |
| 10.81 | Nestor                  Traffic Systems, Inc. Note Purchase Agreement effective as of April                  1,                  2007.                                                                                                                                                                     |
| 23.01 | Consent                  of Carlin, Charron & Rosen LLP dated March 30,                  2007                                                                                                                                                                                                          |

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| **Exhibit                  No.** | **Description                  of Exhibits** |
|----------------------------------|----------------------------------------------|

| 31.1 | Certification                  of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a)                  of the                  Securities Exchange Act of 1934, as amended |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification                  of principal                  financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities                  Exchange Act of 1934, as amended |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *      | Certification                is not deemed “filed” for purposes of Section 18 of the Exchange Act, or                otherwise subject to the liability of that section. Such certification                is                not deemed to be incorporated by reference into any filing under                the                Securities Act or the Exchange Act, except to the extent that the                registrant specifically incorporates it by                reference. |

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