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



                                 June 28, 2005
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                Date of Report (Date of earliest event reported)

                                  NESTOR, INC.
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             (Exact name of registrant as specified in its charter)

                                    Delaware
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                 (State or other jurisdiction of incorporation)

          0-12965                                     13-3163744
 --------------------------             --------------------------------------
  (Commission file number)               (IRS employer identification number)

                        400 MASSASOIT AVENUE, SUITE 200
                      EAST PROVIDENCE, RHODE ISLAND 02914
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                    (Address of principal executive offices)

                                 (401) 434-5522
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              (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.

       SETTLEMENT AGREEMENT AND MUTUAL RELEASE

       On June 28, 2005, Nestor,  Inc. (the "Company") entered into a Settlement
Agreement and Mutual Release (the "Settlement Agreement") with Transol USA, Inc.
and Transol  Corporation  Ltd.  (collectively,  "Transol"),  settling the patent
infringement  litigation  between  them that was  pending in the  United  States
District  Court for the Central  District  of  California  at Los  Angeles  (the
"Litigation").

       Pursuant to the Settlement  Agreement,  the Company has agreed not to sue
Transol or its  subsidiaries,  customers and vendors for  infringement of either
the Company's U.S. Patents No.  6,188,329,  "Integrated  traffic light violation
citation generation and court date scheduling system" (the "'329 Patent") or No.
6,754,663  "Video-file  based  citation  generation  system  for  traffic  light
violations"  (the "'993  Patent")or  related claims (together with the claims of
the `329 Patent and the `663 Patent,  the "Subject  Claims")  unless the Subject
Claims are infringed by a system that displays  video  including  multiple image
sequences  synchronized to provide  simultaneous  independent  views of the same
traffic  violation.  Transol may not assign its right to not be sued except that
if Transol is acquired or substantially all of Transol's asset or assets related
to the business of automated  traffic  enforcement  are  acquired,  the acquirer
succeeds  to  those  rights  with  respect  to  Transol's  products  as  of  the
acquisition or substantially similar products.

       Further,  Transol has agreed not to initiate any  challenge to any patent
containing a Subject Claim or  voluntarily  cooperate with any such challenge so
long as it does not have a  reasonable  apprehension  of a law suit based on the
Subject Claims.

       Pursuant to the  Settlement  Agreement,  the Company and Transol  filed a
stipulation of dismissal of the Litigation  that provided for the withdrawal and
vacater of the  court's  April 26,  2005  Order  granting  Transol's  motion for
summary judgment, which Order was withdrawn and vacated by the court.

       In addition, the Company and Transol agreed to release all claims against
one another  arising on or before June 28,  2005,  except that each  retains the
right to raise claims of invalidity and  unenforceability of the other's patents
in any action brought by the other.



                                   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/ Harold A. Joannidi
                                          --------------------------------------
                                          Harold A. Joannidi
                                          Treasurer and Chief Financial Officer


Dated:     July 5, 2005