content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
  
                                Washington D.C. 20549
  
                                      FORM 8-K
  
                                   CURRENT REPORT
  
       Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  
                                  December 28, 2005
  --------------------------------------------------------------------------------
                  Date of Report (Date of earliest event reported)
  
                                    NESTOR, INC.
  --------------------------------------------------------------------------------
                Exact name of registrant as specified in its charter)
  
                                      Delaware
  --------------------------------------------------------------------------------
                    State or other jurisdiction of incorporation)
  
              0-12965                                   13-3163744
     --------------------------           --------------------------------------
      (Commission file number)             (IRS employer identification number)
  
                           42 ORIENTAL STREET; THIRD FLOOR
                           PROVIDENCE, RHODE ISLAND 02908
  --------------------------------------------------------------------------------
                      (Address of principal executive offices)
  
                                   (401) 274-5658
  --------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                   Not Applicable
  --------------------------------------------------------------------------------
            (Former name or former address if changed since last report)
  
  Check the appropriate box below if the Form 8-K filing is intended to
  simultaneously satisfy the filing obligation of the registrant under any of the
  following provisions (see General Instruction A.2. below):
  
    [ ]     Written  communications  pursuant to Rule 425 under the Securities Act
            (17 CFR 230.425)
  
    [ ]     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
            CFR 240.14a-12)
  
    [ ]     Pre-commencement  communications  pursuant to Rule 14d-2(b)  under the
            Exchange Act (17 CFR 240.14d-2(b))
  
    [ ]     Pre-commencement  communications  pursuant to Rule 13e-4(c)  under the
            Exchange Act (17 CFR 240.13e-4(c))
  
  
  
  
  
  
  <PAGE>
  
  ITEM 1.01.  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
  
  On December 28, 2005, we entered into a Securities Purchase Agreement (the
  "Agreement") with Laurus Master Fund, Ltd. ("Laurus"). Pursuant to the
  Agreement, we issued to Laurus a Secured Term Note (the "New Note") in the
  principal amount of $6,000,000 and redeemed our $6,000,000 original principal
  amount Convertible Note due May 16, 2008 (the "Old Note") held by Laurus. The
  New Note, which is not convertible, bears interest at the coupon rate of the
  prime rate plus 2.00% (or 9.25% as of January 3, 2006) and is subject to a floor
  interest rate of 7.00%. The New Note matures on December 28, 2008. The initial
  monthly principal payment of $181,818 is due on April 1, 2006. In connection
  with the sale of the New Note to Laurus, we issued 203,774 shares of our common
  stock to Laurus for $.01 per share in a private placement exempt from
  registration pursuant to Section 4(2) of the Securities Act of 1933. The
  redemption price of the Old Note was $5,318,425, comprising outstanding
  principal and accrued interest. We paid Laurus fees of $75,000 in connection
  with the New Note and an amount equal to the cost of our common shares sold to
  Laurus was deducted from the loan proceeds.
  
  The net proceeds from the New Note will be used for the design, engineering,
  construction, installation and maintenance of certain of our traffic
  surveillance systems. We have the option of prepaying the New Note without
  penalty upon seven days' written notice. The New Note is collateralized by a
  security interest in the proceeds of certain of our existing CrossingGuard
  contracts and in the proceeds of any CrossingGuard contract that we enter into
  with the City of Los Angeles and guarantied by our operating subsidiary, Nestor
  Traffic Systems, Inc.
  
  We are obligated to file a registration statement for the shares of common stock
  sold to Laurus pursuant to a Registration Rights Agreement by and between Laurus
  and us entered into concurrently with the Agreement (the "New Registration
  Rights Agreement"). The registration statement is required to be filed within
  120 days of the consummation of the transaction described above and is required
  to be declared effective within 180 days of the consummation of the transaction
  described above.
  
  We had entered into a Registration Rights Agreement with Laurus on May 16, 2005
  (the "Old Registration Rights Agreement") in connection with the sale of the Old
  Note. Pursuant to the Agreement, Laurus released us from any obligation under
  the Old Registration Rights Agreement to pay liquidated damages for failing to
  (a) timely file, (b) timely cause the effectiveness of, or (c) maintain the
  effectiveness of, a registration statement required under that agreement.
  
  If we were to default on the New Note, the amount of the principal balance would
  increase to 130% of the then-outstanding principal and be subject to
  acceleration. Events of default comprise any of the following conditions
  existing beyond the applicable cure period, if any:
  
           - We fail to pay principal, interest or other fees under the New Note
  when due.
  
           - We breach any material covenant or other term or condition of the New
  Note or the Agreement in any material respect.
  
           - Any material representation or warranty of ours in the New Note, in
  the Agreement, or in any agreement, statement or certificate given in writing
  pursuant to the New Note or in connection with the New Note shall be false or
  misleading.
  
           - We (i) apply for, consent to, or suffer to exist the appointment of,
  or the taking of possession by, a receiver, custodian, trustee, liquidator or
  other fiduciary of ourselves or of all or a substantial part of our property,
  (ii) make a general assignment for the benefit of creditors, (iii) commence a
  voluntary case under any state or federal bankruptcy laws (as now or hereafter
  in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
  seeking to take advantage of any other law providing for the relief of debtors,
  (vi) acquiesce to, or fail to have dismissed, within ninety (90) days, any
  petition filed against us in any involuntary case under such bankruptcy laws, or
  (vii) take any action for the purpose of effecting any of the foregoing.
  <PAGE>
  
           - Any money judgment, writ or similar final process shall be entered or
  filed against us or any of our property or other assets for more than $500,000,
  and shall remain unvacated, unbonded or unstayed for a period of ninety (90)
  days.
  
           - We default under the Agreement or any Related Agreements (as defined
  therein).
  
           - An SEC stop trade order or Nasdaq (or our principal trading market at
  the time, if different)trading suspension of our common stock for 5 consecutive
  days or 5 days during a period of 10 consecutive days.
  
  This summary of the Agreement, the New Note, New Registration Rights Agreement
  and the Reaffirmation and Ratification Agreement and Amendment by and among us,
  Nestor Traffic Systems, Inc. and Laurus dated as of December 28, 2005 is
  qualified in its entirety by the actual text of said agreements which are
  attached as Exhibits to this Report and are incorporated herein by this
  reference.
  
  ITEM            2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
                  UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
  
  The disclosure under Item 1.01 is incorporated herein by reference.
  
  ITEM 3.02.  UNREGISTERED SALES OF EQUITY SECURITIES.
  
  The disclosure under Item 1.01 is incorporated herein by reference.
  
  ITEM 8.01.  OTHER EVENTS.
  
  We issued a press release describing the transaction described in this Report on
  January 4, 2006, a copy of which is included as an Exhibit to this Report.
  
  
  ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.
  
                 (c) Exhibits
  
                     See Exhibit Index attached to this Current Report on Form 8-K
  
  
  
  <PAGE>
  
  
  
                                     SIGNATURES
  
  
            Pursuant to the requirements of the Securities Exchange Act of 1934,
  the Registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
  
                                         NESTOR, INC.
                                         (Registrant)
  
  
  
                                         By: /s/ William B. Danzell
                                            --------------------------------------
                                            William B. Danzell
                                            President and Chief Executive Officer
  
  Dated:     January 4, 2006
  
  
  
  
  
  <PAGE>
  
  
                                    EXHIBIT INDEX
                                    -------------
  
  
      Exhibit Number                          Description
      --------------                          -----------
  
          10.1            Securities  Purchase  Agreement  by and between  Nestor,
                          Inc. and Laurus  Master Fund,  Ltd.  dated  December 28,
                          2005
  
          10.2            Secured Term Note made by Nestor,  Inc. to Laurus Master
                          Fund, Ltd. dated December 28, 2005
  
          10.3            Registration  Rights  Agreement  by and between  Nestor,
                          Inc. and Laurus  Master Fund,  Ltd.  dated  December 28,
                          2005
  
          10.4            Reaffirmation  and Ratification  Agreement and Amendment
                          by and among Nestor, Inc., Nestor Traffic Systems,  Inc.
                          and Laurus Master Fund, Ltd. dated December 28, 2005
  
          99.1            Press Release dated January 4, 2006
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text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
  
                                Washington D.C. 20549
  
                                      FORM 8-K
  
                                   CURRENT REPORT
  
       Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  
                                  December 28, 2005
  --------------------------------------------------------------------------------
                  Date of Report (Date of earliest event reported)
  
                                    NESTOR, INC.
  --------------------------------------------------------------------------------
                Exact name of registrant as specified in its charter)
  
                                      Delaware
  --------------------------------------------------------------------------------
                    State or other jurisdiction of incorporation)
  
              0-12965                                   13-3163744
     --------------------------           --------------------------------------
      (Commission file number)             (IRS employer identification number)
  
                           42 ORIENTAL STREET; THIRD FLOOR
                           PROVIDENCE, RHODE ISLAND 02908
  --------------------------------------------------------------------------------
                      (Address of principal executive offices)
  
                                   (401) 274-5658
  --------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                   Not Applicable
  --------------------------------------------------------------------------------
            (Former name or former address if changed since last report)
  
  Check the appropriate box below if the Form 8-K filing is intended to
  simultaneously satisfy the filing obligation of the registrant under any of the
  following provisions (see General Instruction A.2. below):
  
    [ ]     Written  communications  pursuant to Rule 425 under the Securities Act
            (17 CFR 230.425)
  
    [ ]     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
            CFR 240.14a-12)
  
    [ ]     Pre-commencement  communications  pursuant to Rule 14d-2(b)  under the
            Exchange Act (17 CFR 240.14d-2(b))
  
    [ ]     Pre-commencement  communications  pursuant to Rule 13e-4(c)  under the
            Exchange Act (17 CFR 240.13e-4(c))
  ITEM 1.01.  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
  
  On December 28, 2005, we entered into a Securities Purchase Agreement (the
  "Agreement") with Laurus Master Fund, Ltd. ("Laurus"). Pursuant to the
  Agreement, we issued to Laurus a Secured Term Note (the "New Note") in the
  principal amount of $6,000,000 and redeemed our $6,000,000 original principal
  amount Convertible Note due May 16, 2008 (the "Old Note") held by Laurus. The
  New Note, which is not convertible, bears interest at the coupon rate of the
  prime rate plus 2.00% (or 9.25% as of January 3, 2006) and is subject to a floor
  interest rate of 7.00%. The New Note matures on December 28, 2008. The initial
  monthly principal payment of $181,818 is due on April 1, 2006. In connection
  with the sale of the New Note to Laurus, we issued 203,774 shares of our common
  stock to Laurus for $.01 per share in a private placement exempt from
  registration pursuant to Section 4(2) of the Securities Act of 1933. The
  redemption price of the Old Note was $5,318,425, comprising outstanding
  principal and accrued interest. We paid Laurus fees of $75,000 in connection
  with the New Note and an amount equal to the cost of our common shares sold to
  Laurus was deducted from the loan proceeds.
  
  The net proceeds from the New Note will be used for the design, engineering,
  construction, installation and maintenance of certain of our traffic
  surveillance systems. We have the option of prepaying the New Note without
  penalty upon seven days' written notice. The New Note is collateralized by a
  security interest in the proceeds of certain of our existing CrossingGuard
  contracts and in the proceeds of any CrossingGuard contract that we enter into
  with the City of Los Angeles and guarantied by our operating subsidiary, Nestor
  Traffic Systems, Inc.
  
  We are obligated to file a registration statement for the shares of common stock
  sold to Laurus pursuant to a Registration Rights Agreement by and between Laurus
  and us entered into concurrently with the Agreement (the "New Registration
  Rights Agreement"). The registration statement is required to be filed within
  120 days of the consummation of the transaction described above and is required
  to be declared effective within 180 days of the consummation of the transaction
  described above.
  
  We had entered into a Registration Rights Agreement with Laurus on May 16, 2005
  (the "Old Registration Rights Agreement") in connection with the sale of the Old
  Note. Pursuant to the Agreement, Laurus released us from any obligation under
  the Old Registration Rights Agreement to pay liquidated damages for failing to
  (a) timely file, (b) timely cause the effectiveness of, or (c) maintain the
  effectiveness of, a registration statement required under that agreement.
  
  If we were to default on the New Note, the amount of the principal balance would
  increase to 130% of the then-outstanding principal and be subject to
  acceleration. Events of default comprise any of the following conditions
  existing beyond the applicable cure period, if any:
  
           - We fail to pay principal, interest or other fees under the New Note
  when due.
  
           - We breach any material covenant or other term or condition of the New
  Note or the Agreement in any material respect.
  
           - Any material representation or warranty of ours in the New Note, in
  the Agreement, or in any agreement, statement or certificate given in writing
  pursuant to the New Note or in connection with the New Note shall be false or
  misleading.
  
           - We (i) apply for, consent to, or suffer to exist the appointment of,
  or the taking of possession by, a receiver, custodian, trustee, liquidator or
  other fiduciary of ourselves or of all or a substantial part of our property,
  (ii) make a general assignment for the benefit of creditors, (iii) commence a
  voluntary case under any state or federal bankruptcy laws (as now or hereafter
  in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
  seeking to take advantage of any other law providing for the relief of debtors,
  (vi) acquiesce to, or fail to have dismissed, within ninety (90) days, any
  petition filed against us in any involuntary case under such bankruptcy laws, or
  (vii) take any action for the purpose of effecting any of the foregoing.
  - Any money judgment, writ or similar final process shall be entered or
  filed against us or any of our property or other assets for more than $500,000,
  and shall remain unvacated, unbonded or unstayed for a period of ninety (90)
  days.
  
           - We default under the Agreement or any Related Agreements (as defined
  therein).
  
           - An SEC stop trade order or Nasdaq (or our principal trading market at
  the time, if different)trading suspension of our common stock for 5 consecutive
  days or 5 days during a period of 10 consecutive days.
  
  This summary of the Agreement, the New Note, New Registration Rights Agreement
  and the Reaffirmation and Ratification Agreement and Amendment by and among us,
  Nestor Traffic Systems, Inc. and Laurus dated as of December 28, 2005 is
  qualified in its entirety by the actual text of said agreements which are
  attached as Exhibits to this Report and are incorporated herein by this
  reference.
  
  ITEM            2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
                  UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
  
  The disclosure under Item 1.01 is incorporated herein by reference.
  
  ITEM 3.02.  UNREGISTERED SALES OF EQUITY SECURITIES.
  
  The disclosure under Item 1.01 is incorporated herein by reference.
  
  ITEM 8.01.  OTHER EVENTS.
  
  We issued a press release describing the transaction described in this Report on
  January 4, 2006, a copy of which is included as an Exhibit to this Report.
  
  ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.
  
                 (c) Exhibits
  
                     See Exhibit Index attached to this Current Report on Form 8-K
  SIGNATURES
  
            Pursuant to the requirements of the Securities Exchange Act of 1934,
  the Registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
                                         NESTOR, INC.
                                         (Registrant)
  
                                         By: /s/ William B. Danzell
                                            --------------------------------------
                                            William B. Danzell
                                            President and Chief Executive Officer
  
  Dated:     January 4, 2006
  EXHIBIT INDEX
                                    -------------
  
      Exhibit Number                          Description
      --------------                          -----------
  
          10.1            Securities  Purchase  Agreement  by and between  Nestor,
                          Inc. and Laurus  Master Fund,  Ltd.  dated  December 28,
                          2005
  
          10.2            Secured Term Note made by Nestor,  Inc. to Laurus Master
                          Fund, Ltd. dated December 28, 2005
  
          10.3            Registration  Rights  Agreement  by and between  Nestor,
                          Inc. and Laurus  Master Fund,  Ltd.  dated  December 28,
                          2005
  
          10.4            Reaffirmation  and Ratification  Agreement and Amendment
                          by and among Nestor, Inc., Nestor Traffic Systems,  Inc.
                          and Laurus Master Fund, Ltd. dated December 28, 2005
  
          99.1            Press Release dated January 4, 2006