----

----

| x      | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF      1934    |
|--------|----------------------------------------------------------------------------------------------------|
|   | For      the fiscal year ended                                                                     | December      31, 2007 |
|   | 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, a non-accelerated filer or a smaller reporting      company.  See the definitions of “large accelerated filer,”      “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the      Exchange Act.  (Checkone): |

| Large      accelerated filer: | ¨ |   | Accelerated      filer: | ¨ |   | Non-accelerated      filer: | ¨ | Smaller      reporting company: | x |   |   |
|-------------------------------|--------|--------|-------------------------|--------|--------|-----------------------------|--------|---------------------------------|---|--------|--------|

|                                                                                                                                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Indicated      by check mark whether the registrant is a shell company:                                                                                                                                                 | Yes: | ¨ | No: | x |
|                                                                                                                                                                                                                    |
| The      aggregate market value of the 9,683,364 shares of voting stock held by      non-affiliates of the registrant on June 30, 2007, based on the closing      price of such stock on June 30, 2007, was $4,067,013. |
|                                                                                                                                                                                                                    |
| The      number of shares outstanding of the Registrant’s Common Stock at April 25,      2008 was 28,954,219.                                                                                                     |
|                                                                                                                                                                                                                    |
| DOCUMENTS      INCORPORATED BY REFERENCE                                                                                                                                                                                |
|                                                                                                                                                                                                                    |
| Sections      of Nestor, Inc.’s definitive Proxy Statement for the 2008 Annual Meeting      of Stockholders are incorporated by reference into Parts II and III of      this report.                              |

----

| Item      10. | Directors, Executive      Officers and CorporateGovernance |
|---------------|------------------------------------------------------------|

| Name                          |   | Age |   | Director/OfficerSince |   | Capacities      in which served                       |
|-------------------------------|--------|-----|--------|-----------------------|--------|-------------------------------------------------------|
| George      L. Ball           |   | 69  |   | 2003                  |   | Director,      Chairman of the Board                  |
| Clarence      A. Davis        |   | 66  |   | 2006                  |   | Director,      Chief Executive Officer                |
| Harold      E. Ford           |   | 62  |   | 2007                  |   | Director                                              |
| Edward      F. Heil           |   | 63  |   | 2007                  |   | Director                                              |
| Michael      C. James         |   | 49  |   | 2006                  |   | Director                                              |
| David      N. Jordan          |   | 64  |   | 2003                  |   | Director                                              |
| Nina      R. Mitchell         |   | 48  |   | 2006                  |   | Director                                              |
| Theodore      Petroulas       |   | 52  |   | 2006                  |   | Director                                              |
| Daryl      Silzer             |   | 53  |   | 2006                  |   | Director                                              |
| Tadas      (Todd) A. Eikinas  |   | 41  |   | 2005                  |   | Vice      President, Chief Operating Officer          |
| Brian      R. Haskell         |   | 45  |   | 2007                  |   | Vice      President, General Counsel                  |
| Teodor      (Ted) Klowan, Jr. |   | 39  |   | 2006                  |   | Chief      Financial Officer                          |
| Brian      M. Milette         |   | 38  |   | 2007                  |   | Corporate      Controller and Chief AccountingOfficer |

----

----

----

----

| Item      11. | Compensation of      Directors and ExecutiveOfficers |
|---------------|------------------------------------------------------|

| NameandPrincipal      Position                                                                                       | Calendar      Year | Salary($) | Bonus($) | OptionAwards($)      (4) | Change      in Pension Value and Non-Qualified DeferredCompensationEarnings($) | All      OtherCompensation      (5) |    |   | Total($) |   |
|----------------------------------------------------------------------------------------------------------------------|--------------------|-----------|----------|--------------------------|--------------------------------------------------------------------------------|-------------------------------------|---------|--------|----------|--------|
| Clarence      A. Davis (1)                                                                                           | 2007               |      | 145,385  |                     | 0                                                                              |                                | 219,638 |   | 0        |   | 151,697 |   |   |   | 516,720 |   |
| President      and CEO                                                                                               | 2006               |      | 0        |                     | 0                                                                              |                                | 0       |   | 0        |   | 0 |   |   |   | 0 |   |
|                                                                                                                 |               |      |     |                     |                                                                           |                                |    |   |     |   |   |   |   |   |   |   |
| Nigel      P. Hebborn (2)                                                                                            | 2007               |      | 189,616  |                     | 5,000                                                                          |                                | 0       |   | 0        |   | 138 |   |   |   | 194,754 |   |
| VP of Mergers and Acquisitions      and Strategic Alliances; Former EVP, Treasurer and CFO      of Nestor, Inc. | 2006               |      | 187,789  |                     | 0                                                                              |                                | 0       |   | 0        |   | 516 |   |   |   | 188,305 |   |
|                                                                                                                 |               |      |     |                     |                                                                           |                                |    |   |     |   |   |   |   |   |   |   |
| Tadas      A. Eikinas                                                                                                | 2007               |      | 166,250  |                     | 5,000                                                                          |                                | 0       |   | 0        |   | 102 |   |   |   | 171,352 |   |
| Chief      Operating Officer                                                                                         | 2006               |      | 159,755  |                     | 10,000                                                                         |                                | 0       |   | 0        |   | 516 |   |   |   | 170,271 |   |
|                                                                                                                 |               |      |     |                     |                                                                           |                                |    |   |     |   |   |   |   |   |   |   |
| Brian      R. Haskell (3)                                                                                            | 2007               |      | 156,685  |                     | 5,000                                                                          |                                | 0       |   | 0        |   | 110 |   |   |   | 161,795 |   |
| Vice      President and General      Counsel                                                                         | 2006               |      | 0        |                     | 0                                                                              |                                | 0       |   | 0        |   | 0 |   |   |   | 0 |   |

----

| (1)   | Mr.      Davis joined the Company effective July 30,  2007. |
|-----------------|-------------------------------------------------------------|

| (2)   | Mr.      Hebborn served as EVP, Treasurer and CFO of Nestor, Inc. through December      1, 2007, when he assumed the role of VP of Mergers and Acquisitions and      Strategic Alliances. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Mr.      Haskell joined the Company effective February 7,  2007. |
|-----------------|------------------------------------------------------------------|

| (4)   | The      SFAS 123(R) expense was determined using the Black-Scholes option pricing      model without regard to estimated forfeitures. The assumptions used to      calculate the SFAS 123(R) expense are disclosed in Note 8 to the audited      financial statements included in the Company’s Annual Report on Form 10-K      for the fiscal year ended December 31,2007. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Represents      payment of group term life insurance premiums and consulting fees paid to      Mr. Davis prior to his employment with the  Company. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

|      Name                               |   | Number      of securities underlying unexercised OptionsExercisable      (1) |    |   | Number      of securities underlying unexercised options unexercisable    (1) |   |    | Equity      IncentivePlan      Awards: Number of securities underlying unexercised unearned      options |   |   |   Option      exercise Price |   |    Option      expiration date |
|------------------------------------------------------------------|--------|------------------------------------------------------------------------------|---------|--------|-------------------------------------------------------------------------------|--------|---------|----------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------|--------|-----------------------------------------------|
| Clarence      A. DavisPresident      and CEO                     |   |                                                                         | 166,700 |   |                                                                          |   | 333,300 |                                                                                                     |   |   | 0                                      |   |                                          | $ | 0.76 |   | 7/30/2015 |
|                                                             |   |                                                                         |    |   |                                                                          |   |    |                                                                                                     |   |   |                                   |   |                                          |   |   |   |   |
| Nigel      P. Hebborn                                            |   |                                                                         | 8,249   |   |                                                                          |   | 0       |                                                                                                     |   |   | 0                                      |   |                                          | $ | 5.50 |   | 1/2/2009 |
| Vice      President of Mergers,                                  |   |                                                                         | 5,499   |   |                                                                          |   | 0       |                                                                                                     |   |   | 0                                      |   |                                          | $ | 5.50 |   | 9/13/2009 |
| Acquisitions      and Strategic                                  |   |                                                                         | 6,000   |   |                                                                          |   | 0       |                                                                                                     |   |   | 0                                      |   |                                          | $ | 1.90 |   | 6/10/2010 |
| Alliances; Former    EVP,                                   |   |                                                                         | 2,100   |   |                                                                          |   | 0       |                                                                                                     |   |   | 0                                      |   |                                          | $ | 3.55 |   | 4/8/2012 |
| Treasurer      and CFO of                                        |   |                                                                         | 480,000 |   |                                                                          |   | 120,000 |                                                                                                     |   |   | 0                                      |   |                                          | $ | 4.95 |   | 10/13/2012 |
| Nestor,      Inc.                                                |   |                                                                         | 2,500   |   |                                                                          |   | 7,500   |                                                                                                     |   |   | 0                                      |   |                                          | $ | 2.16 |   | 11/1/2014 |
|                                                             |   |                                                                         |    |   |                                                                          |   |    |                                                                                                     |   |   |                                   |   |                                          |   |   |   |   |
| Tadas      A. Eikinas                                            |   |                                                                         | 40,000  |   |                                                                          |   | 10,000  |                                                                                                     |   |   | 0                                      |   |                                          | $ | 4.50 |   | 9/15/2012 |
| Chief      Operating Officer                                     |   |                                                                         | 30,000  |   |                                                                          |   | 0       |                                                                                                     |   |   | 0                                      |   |                                          | $ | 5.95 |   | 3/29/2013 |
|                                                             |   |                                                                         | 6,250   |   |                                                                          |   | 18,750  |                                                                                                     |   |   | 0                                      |   |                                          | $ | 2.90 |   | 9/8/2014 |
|                                                             |   |                                                                         |    |   |                                                                          |   |    |                                                                                                     |   |   |                                   |   |                                          |   |   |   |   |
| Brian      R. HaskellVice      President andGeneral      Counsel |   |                                                                         | 0       |   |                                                                          |   | 135,000 |                                                                                                     |   |   | 0                                      |   |                                          | $ | 1.16 |   | 3/2/2015 |

| (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 July 30, 2015 and 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 pershare. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Name        |   | Total($) |   |   | Fees      earned or paid in cash ($) |   |   | Stock      Awards ($) (1) |   |   | Option      Awards ($) |   |   | Non-Equity      Incentive Plan Compensation |   |   | All      Other Compensation |   |
|-------------------------|--------|----------|--------|--------|--------------------------------------|--------|--------|---------------------------|--------|--------|------------------------|--------|--------|---------------------------------------------|--------|--------|-----------------------------|--------|
| George      L. Ball     |   | $        | 10,650 |   |                                 | $      | 7,500  |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Clarence      A. Davis  |   | $        | 9,900  |   |                                 | $      | 6,750  |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Michael      C. James   |   | $        | 24,650 |   |                                 | $      | 21,500 |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| David      N. Jordan    |   | $        | 11,400 |   |                                 | $      | 8,250  |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Nina      R. Mitchell   |   | $        | 13,900 |   |                                 | $      | 10,750 |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Theodore      Petroulas |   | $        | 14,650 |   |                                 | $      | 11,500 |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Daryl      Silzer       |   | $        | 11,400 |   |                                 | $      | 8,250  |                      |   | $      | 3,150                  |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Edward      F. Heil     |   | $        | 1,500  |   |                                 | $      | 1,500  |                      |   | $      | 0                      |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |
|                    |   |     |   |   |                                 |   |   |                      |   |   |                   |   |   |                                        |   |   |                        |   |   |   |   |   |   |   |
| Harold      E. Ford     |   | $        | 2,000  |   |                                 | $      | 2,000  |                      |   | $      | 0                      |   |   | $                                           | 0      |   |                        | $      | 0 |   |   | $ | 0 |   |

| (1) | All      Directors with the exception of Mr. Heil and Mr. Ford were each issued      5,000 shares of restricted stock on February 1, 2007.  All      restrictions were lifted on these shares after the 2006 Annual Meeting,      which was held on December 12,2007. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 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     | 3,186,753                                                                                             | $    3.72                                                    | 1,811,307(1)                                                                                                                                               |
|                                                            |                                                                                                  |                                                                             |                                                                                                                                                       |
| Equity      compensation plans not approved by security holders |               ---               |          ---                        |              ---                                                                          |
| Total                                                           |  3,186,753                                                                                       | $    3.72                                                    |  1,811,307                                                                                                                                            |

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

| Name      and Address of Beneficial      Owner |   | Amount      and nature of Beneficial      Ownership |         | Percent      of Class |
|------------------------------------------------|--------|-----------------------------------------------------|--------------|-----------------------|
| Silver      Star Partners I, LLC               |   | 9,936,430                                           | (1)          |                  | 34.3 |
| c/o      William B. Danzell                    |   |                                                |         |                  |   |
| The      Professional Building            |   |                                                |         |                  |   |
| 2      Corpus Christi; Suite 300               |   |                                                |         |                  |   |
| Hilton      Head Island, SC 29938         |   |                                                |         |                  |   |
|                                           |   |                                                |         |                  |   |
| William      B. Danzell                        |   | 10,185,196                                          | (1)      (2) |                  | 35.2 |
| The      Professional Building            |   |                                                |         |                  |   |
| 2      Corpus Christi; Suite 300               |   |                                                |         |                  |   |
| Hilton      Head Island, SC 29938         |   |                                                |         |                  |   |
|                                           |   |                                                |         |                  |   |
| George      L. Ball                            |   | 199,250                                             | (3)      (4) |                  | * |
| Sanders      Morris & Harris Group         |   |                                                |         |                  |   |
| 600      Travis, Suite 3100                    |   |                                                |         |                  |   |
| Houston,      TX 77002                    |   |                                                |         |                  |   |

----

| Name      and Address of Beneficial      Owner |   | Amount      and nature of Beneficial      Ownership |   | Percent      of Class |
|------------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------|

| David      N. Jordan                   |   | 771,720   | (4)    |   | 2.7    |
|----------------------------------------|--------|-----------|--------|--------|--------|
| c/o      Silver Star Partners I, LLC   |   |      |   |   |   |
| The      Professional Building    |   |      |   |   |   |
| 2      Corpus Christi; Suite 300       |   |      |   |   |   |
| Hilton      Head Island, SC 29938 |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Edward      F. Heil                    |   | 5,854,450 |   |   | 20.2   |
| 8052      Fisher Island Drive          |   |      |   |   |   |
| Fisher      Island, FL 33109      |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Clarence      A. Davis                 |   | 338,300   | (5)    |   | 1.2    |
| c/o      Nestor, Inc.                  |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Michael      C. James                  |   | 986,119   | (6)    |   | 3.4    |
| c/o      Nestor, Inc.                  |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Nina      R. Mitchell                  |   | 5,000     |   |   | *      |
| c/o      Nestor, Inc.                  |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Theodore      Petroulas                |   | 55,000    |   |   | *      |
| c/o      Nestor, Inc.                  |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Harold      E. Ford                    |   | 0         |   |   | *      |
| 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      E. Hebborn                  |   | 508,048   | (7)    |   | 1.7    |
| Nestor,      Inc.                      |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Tadas      A. Eikinas                  |   | 77,250    | (7)    |   | *      |
| Nestor,      Inc.                      |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |
|                                   |   |      |   |   |   |
| Teodor      Klowan, Jr.                |   | 60,000    | (7)    |   | *      |
| Nestor,      Inc.                      |   |      |   |   |   |
| 42      Oriental Street                |   |      |   |   |   |
| Providence,      RI 02908         |   |      |   |   |   |

----

| Name      and Address of Beneficial      Owner |   | Amount      and nature of Beneficial      Ownership |   | Percent      of Class |
|------------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------|

| Brian      R. Haskell                                             |   | 25,000    | (7)    |   | *      |
|-------------------------------------------------------------------|--------|-----------|--------|--------|--------|
| Nestor,      Inc.                                                 |   |      |   |   |   |
| 42      Oriental Street                                           |   |      |   |   |   |
| Providence,      RI 02908                                    |   |      |   |   |   |
|                                                              |   |      |   |   |   |
| Brian      M. Milette                                             |   | 0         |   |   | *      |
| Nestor,      Inc.                                                 |   |      |   |   |   |
| 42      Oriental Street                                           |   |      |   |   |   |
| Providence,      RI 02908                                    |   |      |   |   |   |
|                                                              |   |      |   |   |   |
| All      executive officers and directors as a group (14 persons) |   | 8,885,137 | (8)    |   | 29.6   |
|                                                              |   |      |   |   |   |
|                                                              |   |      |   |   |   |
| *Less      than 1%                                                |   |      |   |   |   |

| (1) | William      B. Danzell, who was terminated as Chief Executive Officer on July 16, 2007      and who resigned as a Director on October 2, 2007 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.  Theodore Petroulas, a Director of the Company, has an      approximate 1.9% ownership interest in Silver Star Partners I,      LLC.   Edward F. Heil, a Director of the Company, has an      approximate 4.9564% ownership interest in Silver Star Partners I,      LLC. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | This      number represents (i) 9,936,430 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; and      (iii) 238,366 shares held by Danzell Investment Management, Ltd., an      investment management firm of which Mr. Danzell is the Founder and      President.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (4) | Includes      23,000 shares of Common Stock, which Messrs. Ball and Jordan may each      acquire upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (5) | Includes      333,300 shares of Common Stock, which Mr. Davis may acquire upon exercise      of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (6) | Includes      762,527 shares held by Kuekenhof Equity Fund, L.P. over which Mr. James      has sole dispositive and voting power, of which 184,592 may be acquired      upon the exercise of convertible notes, warrants or options held by the      Fund.  Includes 23,300 shares owned by Mr. James’s mother and      over which shares Mr. James has sole dispositive power and disclaims      beneficial ownership of all securities reported, except to the extent of      his pecuniary interest, therein.   Includes 6,700 shares      held by Kuekenhof Partners, L.P. and over which shares Mr. James has sole      dispositive and voting power.  Includes 4,000 shares held by Mr.      James’s wife.                                                                                                                |
| (7) | Includes      504,348, 76,250, 60,000 and 25,000 shares of Common Stock, respectively,      which Mr. Hebborn, Mr. Eikinas, Mr. Klowan and Mr. Haskell, Officers of      the Company, may acquire upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (8) | This      number includes: (i) 1,044,898 shares of Common Stock which may be      acquired upon the exercise of options and warrants 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, and Director  Independence |
|---------------|---------------------------------------------------------------------------------|

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|                        |   | 2007   |    |   | 2006   |   |
|-----------------------------|--------|--------|---------|--------|--------|--------|
| Audit      Fees (1):        |   | $      | 197,177 |   |   | $      | 150,651 |   |
| Audit-Related      Fees(1): |   |   | ---     |   |   |   | --- |   |
| Tax      Fees(2):           |   |   | 29,600  |   |   |   | 25,500 |   |
| All      Other Fees:        |   |   | ---     |   |   |   | --- |   |
|                        |   | $      | 226,777 |   |   | $      | 176,151 |   |

| (1) | These      fees are for the audit of our financial statements during 2007 and 2006,      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 2007 and2006.                                                                                                                                                                     |

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|   | NESTOR,      INC.                               |
|--------|-------------------------------------------------|
|   | (Registrant)                                    |
|   |                                            |
|   | /s/      Clarence A. Davis                      |
|   | Clarence      A. Davis, Chief Executive Officer |
|   |                                            |
|   |                                            |
| Date:  | April      29, 2008                             |   |
|   |                                            |

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