EXHIBIT 99.1
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RISKS RELATED TO OUR BUSINESS
-----------------------------

NESTOR HAS A HISTORY OF LOSSES AND WILL INCUR LOSSES IN THE FUTURE

        We have a history of net losses.  For the years ended December 31, 2003,
2002,  2001, 2000 and 1999, our net losses have been  approximately  $4,890,458,
$12,634,000,  $1,565,000,  $2,995,000 and $837,000,  respectively.  We expect to
incur  continuing   losses  for  the  foreseeable   future  due  to  significant
engineering,   product  delivery,   marketing  and  general  and  administrative
expenses,  which  losses  could be  substantial.  As a  result,  we will need to
generate significantly higher revenue to achieve profitability,  which we may be
unable to do. Even if we do achieve profitability, we may not be able to sustain
or increase our profitability in the future.

NESTOR MAY NEED ADDITIONAL  FINANCING,  WHICH MAY BE DIFFICULT TO OBTAIN AND MAY
RESTRICT OUR OPERATIONS AND DILUTE YOUR OWNERSHIP INTEREST

        We may  need to  raise  additional  funds  in the  future  to  fund  our
operations, deliver our products, to expand or enhance our products and services
or to respond to  competitive  pressures or perceived  opportunities.  We cannot
make any assurance  that  additional  financing  will be available on acceptable
terms,  or at all. If  adequate  funds are not  available  or not  available  on
acceptable terms, our business and financial results may suffer.

        If we raise  additional  funds by  issuing  equity  securities,  further
dilution  to our then  existing  stockholders  will  result and the terms of the
financing may adversely affect the holdings or the rights of such  stockholders.
In  addition,  the  terms  and  conditions  of  debt  financing  may  result  in
restrictions  on our  operations.  We could be  required  to seek funds  through
arrangements  with  collaborative  partners  or others  that may  require  us to
relinquish rights to certain of our technologies, product candidates or products
which we would otherwise pursue on our own.

FLUCTUATIONS  IN OUR  RESULTS OF  OPERATIONS  MAKE IT  DIFFICULT  TO PREDICT OUR
FUTURE  PERFORMANCE  AND MAY RESULT IN  VOLATILITY  IN THE  MARKET  PRICE OF OUR
COMMON STOCK

        Our  quarterly  operating  results have  fluctuated  in the past and may
fluctuate  significantly  in the future.  Most of our  expenses are fixed in the
short-term,  and we may not be able to reduce spending quickly if our revenue is
lower than expected. In addition, our ability to forecast revenue is limited. As
a result,  our  operating  results are volatile and difficult to predict and you
should  not rely on the  results  of one  quarter  as an  indication  of  future
performance.  Factors that may cause our operating  results to fluctuate include
the risks discussed in this section as well as:

o    costs related to customization of our products and services;

o    the planned expansion of our operations, including opening new offices, and
     the amount and timing of expenditures related to this expansion;

o    announcements  or  introductions  of  new  products  and  services  by  our
     competitors;

o    software defects and other product quality problems;

o    the discretionary nature of our clients' purchasing and budgetary cycles;

o    the varying size,  timing, and contractual terms of orders for our products
     and services; and

o    the mix of revenue from our products and services.
<PAGE>

        It is likely that in some future quarters our operating results may fall
below the expectations of securities analysts and investors.  In this event, the
market price of our common stock could fall significantly.

IF WE LOSE OUR KEY  PERSONNEL  OR ARE  UNABLE TO ATTRACT  AND RETAIN  ADDITIONAL
PERSONNEL, OUR OPERATIONS WOULD BE DISRUPTED AND OUR BUSINESS WOULD BE HARMED

        We believe that the hiring and retaining of qualified individuals at all
levels in our  organization  will be  essential  to our  ability to sustain  and
manage growth successfully. Competition for highly qualified technical personnel
is  intense  and we may  not be  successful  in  attracting  and  retaining  the
necessary  personnel,  which may limit the rate at which we can develop products
and  generate  sales.  We will be  particularly  dependent  on the  efforts  and
abilities of our senior management personnel. The departure of any of our senior
management members or other key personnel could harm our business.

OUR  SALES  CYCLES  VARY  SIGNIFICANTLY  WHICH  MAKES IT  DIFFICULT  TO PLAN OUR
EXPENSES AND FORECAST OUR RESULTS

        Our sales cycles  typically  range from six to twelve months or more. It
is therefore  difficult  to predict the quarter in which a particular  sale will
occur and to plan our  expenses  accordingly.  The period  between  our  initial
contact with potential  clients and their licensing of our products and services
varies due to several factors, including:

o    the complex nature of our products and services;

o    our clients' budget cycles;

o    approval processes at municipalities and other government entities;

o    our clients' internal evaluation and approval requirements; and

o    our  clients'  delays  of  licensing  due  to   announcements   or  planned
     introductions of new products or services by our competitors.

        Any delay or failure to complete  sales in a  particular  quarter  could
reduce our revenue in that quarter,  as well as  subsequent  quarters over which
revenue  or  the  license  would  likely  be  recognized.  If our  sales  cycles
unexpectedly  lengthen  in general or for one or more  large  clients,  it would
delay our receipt of the related  revenue.  If we were to  experience a delay of
several weeks or longer on a large client, it could harm our ability to meet our
forecasts for a given quarter.

OUR NEW PRODUCTS MIGHT NOT ACHIEVE MARKET ACCEPTANCE

        The  market  for our  products  is  still  emerging.  The  rate at which
businesses  and  government  entities  have  adopted  our  products  has  varied
significantly  by market and by product  within  each  market,  and we expect to
continue  to  experience  variations  in the  degree to which our  products  are
accepted.  Our ability to grow will depend on the extent to which our  potential
customers accept our products. This acceptance may be limited by:

o    the  failure  of   prospective   customers  to  conclude   that   adaptive,
     pattern-recognition  or  video-based  solutions  are valuable and should be
     acquired and used;

o    the  reluctance  of our  prospective  customers to replace  their  existing
     solutions with our products;

o    marketing efforts of our competitors; and

o    the emergence of new technologies  that could cause our products to be less
     competitive or obsolete.
<PAGE>

        Because the market for our products is still in a relatively early stage
of development,  we cannot assess the size of the market accurately, and we have
limited  insight  into  trends  that may emerge and  affect  our  business.  For
example,  we may have  difficulty in predicting  customer  needs,  in developing
products  that could  address  those needs and in  establishing  a  distribution
strategy for these  products.  We may also have  difficulties  in predicting the
competitive environment that will develop.

OUR INTELLECTUAL  PROPERTY MIGHT NOT BE PROTECTIBLE,  AND, IF WE FAIL TO PROTECT
AND PRESERVE OUR  INTELLECTUAL  PROPERTY,  WE MAY LOSE AN IMPORTANT  COMPETITIVE
ADVANTAGE

        We  rely  on  a  combination  of  copyright,   trademark,   patent,  and
trade-secret laws, employee and third-party nondisclosure agreements,  and other
arrangements to protect our proprietary  rights.  Despite these precautions,  it
may be possible for  unauthorized  third  parties to copy our products or obtain
and use  information  that we regard as  proprietary  to  create  products  that
compete against ours. In addition,  some license  provisions  protecting against
unauthorized use, copying, transfer, and disclosure of our licensed programs may
be unenforceable under the laws of certain  jurisdictions and foreign countries.
In addition, the laws of some countries do not protect proprietary rights to the
same extent as do the laws of the United States.  To the extent that we increase
our international  activities,  our exposure to unauthorized  copying and use of
our products and  proprietary  information  will  increase.  The scope of United
States patent  protection in the software  industry is not well defined and will
evolve as the  United  States  Patent and  Trademark  Office  grants  additional
patents.  Because some patent applications in the United States are not publicly
disclosed  until  the  patent is issued  or 18  months  after the  filing  date,
applications may exist that would relate to Nestor and NTS products and that are
not publicly accessible.  Moreover, a patent search has not been performed in an
attempt to identify patents applicable to the business of Nestor and/or NTS and,
even if such a search were  conducted,  all patents  applicable  to the business
might not be located.  On November 6, 2003, the Company filed a complaint in the
United States  District Court for Rhode Island against  Redflex  Traffic Systems
Inc.,  alleging that Redflex's  automated red light enforcement systems infringe
the Company's patent. On November 25, 2003, the Company filed a complaint in the
United  States  District  Court for the District of Central  California  against
Transol USA,  Inc.,  alleging that  Transol's  automated  red light  enforcement
systems infringe the Company's patent.  We were denied a preliminary  injunction
in the Transol  litigation,  in part  because we had not shown a  likelihood  of
success on our claim that Transol's product infringes our patent. We cannot give
assurance that we will be successful in either action.

WE ARE AT RISK OF CLAIMS THAT OUR PRODUCTS OR SERVICES  INFRINGE THE PROPRIETARY
RIGHTS OF OTHERS

        Given our  ongoing  efforts to develop and market new  technologies  and
products,  we may from time to time be served  with  claims  from third  parties
asserting that our products or technologies infringe their intellectual property
rights. If, as a result of any claims, we were precluded from using technologies
or intellectual property rights, licenses to the disputed third-party technology
or intellectual  property rights might not be available on reasonable commercial
terms, or at all. We may initiate claims or litigation against third parties for
infringement  of our  proprietary  rights or to  establish  the  validity of our
proprietary rights.  Litigation,  either as plaintiff or defendant, could result
in  significant  expense and divert the efforts of our technical and  management
personnel from  productive  tasks,  whether or not litigation is resolved in our
favor.  An adverse ruling in any litigation  might require us to pay substantial
damages,  to discontinue  our use and sale of infringing  products and to expend
significant  resources in order to develop  non-infringing  technology or obtain
licenses to infringing  technology.  A court might also  invalidate our patents,
trademarks or other  proprietary  rights. A successful claim against us, coupled
with our failure to develop or license a substitute technology,  could cause our
business,  financial  condition  and  results  of  operations  to  be  adversely
affected.  As the number of software products increases and the functionality of
these products further overlaps, we believe that our risk of infringement claims
will increase.

IF WE ARE UNABLE TO SAFEGUARD THE INTEGRITY, SECURITY AND PRIVACY OF OUR DATA OR
OUR CLIENTS' DATA, OUR REVENUE MAY DECLINE,  OUR BUSINESS COULD BE DISRUPTED AND
WE MAY BE SUED

        We need to preserve and protect our data and our  clients'  data against
loss, corruption and misappropriation caused by system failures and unauthorized
access.  We could be  subject  to  liability  claims by  individuals  whose data

<PAGE>

resides  in  our  databases  for  misuse  of  personal  information,   including
unauthorized marketing purposes. These claims could result in costly litigation.
Periodically,  we have  experienced  minor  systems  errors  and  interruptions,
including Internet  disruptions,  which we believe may occur periodically in the
future.  A  party  who  is  able  to  circumvent  our  security  measures  could
misappropriate or destroy proprietary  information or cause interruptions in our
operations.  We may be  required  to make  significant  expenditures  to protect
against systems failures or security breaches or to alleviate problems caused by
any failures or breaches.  Any failure that causes the loss or corruption of, or
unauthorized access to, this data could reduce client satisfaction, expose us to
liability and, if significant, could cause our revenue to decline.

NESTOR'S GROWTH STRATEGY INVOLVES NUMEROUS RISKS AND CHALLENGES

        Nestor has  expanded  and may seek to continue to expand its  operations
through the acquisition of additional businesses that complement its core skills
and have the potential to increase its overall value. Nestor's future growth may
depend, in part, upon the continued success of its acquisition strategy.  Nestor
may not be able to  successfully  identify  and  acquire,  on  favorable  terms,
compatible  businesses.  Acquisitions  involve  many  risks,  which could have a
material adverse effect on Nestor's business, financial condition and results of
operations, including:

o    acquired businesses may not achieve anticipated revenues,  earnings or cash
     flow;

o    integration of acquired  businesses and  technologies may not be successful
     and Nestor may not  realize  anticipated  economic,  operational  and other
     benefits in a timely manner,  particularly if Nestor acquires a business in
     a market in which  Nestor has  limited or no  current  expertise  or with a
     corporate culture different from Nestor's;

o    potential dilutive effect on Nestor's  stockholders from continued issuance
     of Common Stock as consideration for acquisitions;

o    adverse effect on net income of impairment  charges related to goodwill and
     other intangible assets and other  acquisition-related  charges,  costs and
     expenses on net income;

o    competing with other  companies,  many of which have greater  financial and
     other resources to acquire attractive  companies,  making it more difficult
     to acquire suitable companies on acceptable terms; and

o    disruption of Nestor's  existing  business,  distraction  of management and
     other  resources and difficulty in maintaining  Nestor's  current  business
     standards, controls and procedures.

WE FACE SUBSTANTIAL COMPETITION,  WHICH MAY RESULT IN OTHERS DEVELOPING PRODUCTS
AND SERVICES MORE SUCCESSFULLY THAN WE DO

        Many  applications  software  vendors  offer  products that are directly
competitive with  CrossingGuard(R)  and our other products.  Many of our current
and potential  competitors  have  significantly  greater  financial,  marketing,
technical and other  competitive  resources than we do and may be able bring new
technologies  to market before we are able to do so. Some of our competitors may
have a  competitive  advantage  because  of their  size,  market  share,  legacy
customer  relationships,  enhanced driver imaging,  additional products offered,
and/or  citation-processing  experience.  Current and potential  competitors may
establish  cooperative  relationships  with one another or with third parties to
compete more  effectively  against us. It is also possible that new  competitors
may emerge and acquire market share.  If we are not successful in protecting our
patents,  our  competitors  may be able to  offer  enhanced  products.  See "Our
Intellectual  Property Might Not Be Protectible,  And, If We Fail To Protect And
Preserve  Our  Intellectual  Property,  We May  Lose  An  Important  Competitive
Advantage."
<PAGE>

OUR FINANCIAL  RESULTS WILL DEPEND  SIGNIFICANTLY  ON OUR ABILITY TO CONTINUALLY
DEVELOP PRODUCTS AND TECHNOLOGIES

        The markets for which our  products  and  technologies  are designed are
intensely competitive and are characterized by short product lifecycles, rapidly
changing technology and evolving industry standards.  As a result, our financial
performance  will depend to a significant  extent on our ability to successfully
develop and enhance our products.  Because of the rapidly changing  technologies
in the businesses in which we operate, we believe that significant  expenditures
for research and development and engineering will continue to be required in the
future.  To succeed in these  businesses,  we must  anticipate  the features and
functionality  that  customers  will  demand.  We must  then  incorporate  those
features and  functionality  into products that meet the design  requirements of
our customers.  The success of our product  introductions will depend on several
factors, including:

o    proper product definition;

o    timely completion and introduction of enhanced product designs;

o    the ability of  subcontractors  and component  manufacturers to effectively
     design and  implement  the  manufacture  of new or  enhanced  products  and
     technologies;

o    the quality of our products and technologies;

o    product and technology performance as compared to competitors' products and
     technologies;

o    market acceptance of the company's products; and

o    competitive pricing of products, services and technologies.

        We must  successfully  identify  product and service  opportunities  and
develop and bring our products and technologies to market in a timely manner. We
have in the  past  experienced  delays  in  completing  the  development  or the
introduction of new products.  Our failure to successfully develop and introduce
new or enhanced  products and  technologies or to achieve market  acceptance for
such products and  technologies  may materially  harm our business and financial
performance.

WE MAY NOT BE ABLE TO OBTAIN ADEQUATE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS, OR
AT ALL

        We may need to raise capital  through debt and/or  equity  financing for
our  operations.  If adequate funds are not available on acceptable  terms,  our
ability to continue as a going concern will be adversely  affected.  We may need
to raise capital to:

o    maintain current operations;

o    fulfill current and future contracts;

o    support our expansion into other states,  cities,  and  municipalities,  as
     well as internationally;

o    respond to competitive pressures; and

o    acquire complementary businesses or technologies, should such opportunities
     arise.

        Necessary  funding may not be available on terms acceptable to us, or at
all. If adequate  funds were not available on acceptable  terms,  our ability to
develop or  enhance  our  products  and  services  to take  advantage  of future
opportunities  or  respond  to  competitive  pressures  would  be  significantly
limited.  This  limitation  could  harm  our  business,  operating  results  and
financial condition.
<PAGE>

THE FAILURE OF OUR SUPPLIERS TO DELIVER  COMPONENTS,  EQUIPMENT AND MATERIALS IN
SUFFICIENT QUANTITIES AND IN A TIMELY MANNER COULD ADVERSELY AFFECT OUR BUSINESS

        Our  business  employs  a wide  variety  of  components,  equipment  and
materials  from a limited  number of suppliers.  To date, we have found that the
components,  equipment and materials  necessary  for the  development,  testing,
production  and delivery of our products and services  have  sometimes  not been
available in the quantities or at the times we have  required.  Although we make
every effort to assure alternative sources are available if the need arises, our
failure to procure components,  equipment and materials in particular quantities
or at a particular  time may result in delays in meeting our  customer's  needs,
which could have a negative effect on our revenues and results of operations.

OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO SECURE AND
MAINTAIN FUTURE CONTRACTS WITH GOVERNMENT AGENCIES

        Contracts with  government  agencies  account for  substantially  all of
NTS's net  revenues.  Many of these  contracts  are subject to annual review and
renewal by the agencies, and may be terminated at any time on short notice. Each
government  contract,   option  and  extension  is  only  valid  if  the  agency
appropriates  enough  funds  for  expenditure  on  such  contracts,  options  or
extensions.  Accordingly,  we might  fail to derive  any  revenue  from sales of
software  to  government  agencies in any given  future  period.  If  government
agencies fail to renew or terminate any of these  contracts,  it would adversely
affect our business and results of operations.

WE ARE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN COSTLY
AND TIME-CONSUMING LITIGATION

        Although our license agreements typically contain provisions designed to
limit our  exposure  to product  liability  claims,  existing  or future laws or
unfavorable  judicial  decisions  could  negate  these  limitation  of liability
provisions.   Any  product   liability   claim  brought   against  us,  even  if
unsuccessful,   would  likely  be  time-consuming   and  costly,  and  potential
liabilities could exceed our available insurance coverage.

THE FAILURE OF  GOVERNMENTS  TO AUTHORIZE THE TICKETING OF MOTORISTS BY MAIL MAY
HINDER OUR GROWTH AND HARM OUR BUSINESS

        To date,  fourteen  states  authorize law  enforcement  agencies to send
summonses to traffic  violators  through the mail.  It is uncertain at this time
which additional states, if any, will authorize the use of the mail to prosecute
traffic violators or if there will be other changes in the states that currently
allow the practice.  We could be subject to differing and inconsistent  laws and
regulations  with respect to the services we offer.  If that were to happen,  we
may find it necessary to eliminate,  modify or cancel components of our services
that could  result in  additional  development  costs and the  possible  loss of
revenue.  We cannot predict whether future legislative  changes or other changes
in the  fourteen  states  or other  states,  in the  administration  of  traffic
enforcement programs, will have an adverse effect on our business.

RISKS RELATED TO NESTOR'S COMMON STOCK
-------------------------------------

OUR COMMON STOCK PRICE IS VOLATILE AND MAY DECLINE IN THE FUTURE

        The market price of our common stock has  fluctuated  significantly  and
may be affected by our operating  results,  changes in our business,  changes in
the  industries in which we conduct  business,  and general  market and economic
conditions  which are beyond our  control.  In  addition,  the stock  markets in
general have recently experienced extreme price and volume  fluctuations.  These
fluctuations  have affected  stock prices of many  companies  without  regard to
their specific  operating  performance.  These market  fluctuations  may make it
difficult for shareholders to sell their shares at a price equal to or above the
price at which the  shares  were  purchased.  In  addition,  if our  results  of
operations are below the  expectations  of market  analysts and  investors,  the
market price of our common stock could be adversely affected.
<PAGE>

OUR BOARD OF DIRECTORS CAN, WITHOUT STOCKHOLDER APPROVAL,  CAUSE PREFERRED STOCK
TO BE ISSUED ON TERMS THAT ADVERSELY AFFECT COMMON STOCKHOLDERS

        Under  our  certificate  of  incorporation,  our board of  directors  is
authorized to issue up to 10,000,000 shares of preferred stock, of which 190,000
shares  are  issued  and  outstanding,  and  to  determine  the  price,  rights,
preferences,  privileges and  restrictions,  including  voting rights,  of those
shares  without any  further  vote or action by our  stockholders.  If the board
causes any additional preferred stock to be issued, the rights of the holders of
our common stock would be adversely  affected.  The board's ability to determine
the  terms  of  preferred  stock  and to cause  its  issuance,  while  providing
desirable  flexibility  in  connection  with  possible  acquisitions  and  other
corporate  purposes,  could  have the effect of making it more  difficult  for a
third party to acquire a majority of our  outstanding  voting stock.  We have no
current plans to issue additional shares of preferred stock.

OUR DIRECTORS,  OFFICERS AND PRINCIPAL SHAREHOLDERS EXERCISE SIGNIFICANT CONTROL
OVER THE  BUSINESS  AND AFFAIRS OF NESTOR,  INCLUDING  THE APPROVAL OF CHANGE IN
CONTROL TRANSACTIONS

        Our directors, officers, and principal stockholders who own more than 5%
of the outstanding common stock, and entities affiliated with them, beneficially
own  approximately  54.3%  of  our  common  stock.  These  stockholders,  acting
together, will be able to exert substantial influence over all matters requiring
approval by our stockholders.  These matters include the election and removal of
directors and any merger,  consolidation or sale of all or substantially  all of
our assets.  This  concentration  of ownership  may have the effect of delaying,
deferring   or   preventing   a  change  in  control,   or  impeding  a  merger,
consolidation, takeover or business combination even if the transaction might be
beneficial to our stockholders.

        In  addition,  Section  203  of the  Delaware  General  Corporation  Law
restricts business combinations with any "interested  stockholder" as defined by
the  statute.  The  statute  may have  the  effect  of  delaying,  deferring  or
preventing a change in control of our company.

THE PRICE OF OUR COMMON STOCK MAY DECLINE  BECAUSE A  SUBSTANTIAL  AMOUNT OF OUR
COMMON STOCK IS AVAILABLE FOR TRADING IN THE PUBLIC

        Availability  of shares of our common  stock could  depress the price of
our common stock. A substantial  amount of common stock is available for trading
in the public market.  The stock in the market may cause the price of our common
stock to decline.  In addition,  if our stockholders sell substantial numbers of
stock of our common stock in the public markets,  the market price of our common
stock could fall.  These sales might also make it more  difficult for us to sell
equity or equity  related  securities  at a time and  price  that we would  deem
appropriate.

        There  were   approximately   18,009,526  shares  of  our  common  stock
outstanding as of February 19, 2004, of which  5,426,060  were freely  tradeable
without  restrictions or further  registration under the Securities Act of 1933.
The number of shares of common stock  outstanding  will  increase if we exercise
our right, or Laurus exercises its right, to convert any portion of the new note
held by Laurus to shares of our common stock .

OUR  COMMON  STOCK  TRADES ON THE OTC  BULLETIN  BOARD AND MAY BE SUBJECT TO THE
SEC'S "PENNY STOCK" RULES

        Our  stockholders  may find it difficult to buy, sell and obtain pricing
information  about,  as well as news coverage of, our common stock because it is
traded on the OTC Bulletin Board. Being traded on the OTC Bulletin Board, rather
than on a national  securities  exchange,  may lessen investors' interest in our
securities  generally and  materially  adversely  affect the trading  market and
prices for those securities and its ability to issue additional securities or to
secure  additional  financing.  The price of our common stock could make it more
difficult  for  shareholders  to sell their  shares.  Our  common  stock will be

<PAGE>

subject to Rule 15g-9 under the  Securities  Exchange Act of 1934 as long as its
price is less than $5.00 per share. The last reported sale price on February 19,
2004 was $3.20.

        A low stock price could also cause our common stock to become subject to
the SEC's "penny  stock" rules and the  Securities  Enforcement  and Penny Stock
Reform Act of 1990.  The penny  stock rules  impose  additional  sales  practice
requirements on broker-dealers who sell penny stock securities to people who are
not established customers or accredited investors.  For example, the broker must
make a special  suitability  determination  for the buyer and the buyer  must be
given  written  consent  before  the  sale.  The  rules  also  require  that the
broker-dealer:

o    send buyers an SEC-prepared disclosure schedule before completing the sale,
     disclose the broker's commissions and current quotations for the security;

o    disclose  whether the  broker-dealer is the sole market maker for the penny
     stock and, if so, the broker's control over the market; and

o    send monthly  statements  disclosing  recent price  information held in the
     customer's account and information on the limited market in penny stocks.

        These additional  burdens may discourage  broker-dealers  from effecting
transactions  in Nestor's  common stock.  Thus, if our common stock were to fall
within the  definition  of a penny stock,  our liquidity  could be reduced,  and
there could be an adverse effect on the trading market in its common stock.

WE HAVE NOT PAID, AND DO NOT INTEND TO PAY, DIVIDENDS AND THEREFORE,  UNLESS OUR
COMMON STOCK  APPRECIATES  IN VALUE,  OUR INVESTORS MAY NOT BENEFIT FROM HOLDING
OUR COMMON STOCK

        We  have  not  paid  any  cash  dividends  since  inception.  We do  not
anticipate paying any cash dividends in the foreseeable future. As a result, our
investors  will not be able to benefit  from owning our common  stock unless the
market  price of our  common  stock  becomes  greater  than the basis that these
investors have in their shares.