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Nestor, Inc. Acquires Business and Assets of Transol Group

Nestor, Inc. (NASDAQ: NEST) announced today that its offer has been accepted and it is the winning bidder for the business and assets of the Transol Group of companies. The Australian companies of the Transol Group were placed into receivership on July 14, 2005. The primary assets to be acquired are eight U.S.-based operating contracts and associated equipment. The assets to be acquired also include goodwill, inventory and work in process and the technology of the Transol Group comprising source code for Transol's products and services, the "technical know how" of the Transol Group and one U.S., one Australian, and one international patent application. The purchase price is $2,000,000 and is subject to adjustment in the event any of the U.S.-based operating contracts are terminated because of the assignment of the contract to Nestor or are terminated pursuant to optional termination rights before January 16, 2006 and subject to adjustment for any liens on the assets. We offered to acquire the assets by August 31, 2005. Nestor's offer also provides for transition services to be supplied by Transol to Nestor at Nestor's expense. The scope of those transition services is yet to be determined.

Nigel P. Hebborn, Chief Executive Officer of Nestor Traffic Systems, stated, "We are extremely pleased to be able to announce the acquisition of the Transol business. We look forward to welcoming Transol's customers to the Nestor community and providing them with the quality of service our current customers experience. This transaction is expected to increase Nestor's customer base to 28, to increase our total awarded approaches to over 390 and to increase our installed approaches to over 190 on the closing date. The acquisition will add two new states to our portfolio, Colorado and Iowa, and strengthen our presence in Maryland and California."

Nestor Traffic Systems' Poliscan mobile speed and CrossingGuard® intersection systems offer advanced digital technology for traffic safety and the automated enforcement of traffic laws. Its products incorporate Nestor's advanced image processing technology into intelligent, real-time solutions that promote traffic efficiency and safety. Further information may be found at www.nestor.com.

Statements in this press release about future expectations, plans and prospects for Nestor, including statements containing the words "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements and investors should not place undue reliance on our forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, including: our ability to successfully integrate any acquired assets into our business and to retain new customers, market acceptance of our products, competition, patent protection of our technology, and other factors discussed in our most recent annual and quarterly reports filed with the SEC. The forward-looking statements included in this press release represent our current views and we specifically disclaim any obligation to update these forward-looking statements in the future.

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