SOURCE: Nestor, Inc.

April 05, 2007 18:37 ET

Nestor, Inc. Announces an Amendment to Its 2006 Form 10-K and the Private Placement of $1.5 Million of Variable Rate Senior Notes

PROVIDENCE, RI -- (MARKET WIRE) -- April 5, 2007 -- Nestor, Inc. (NASDAQ: NEST), a leading provider of video-based traffic safety solutions and services, filed an amendment to its Annual Report on Form 10-K/A in which the Company included its performance graph, inadvertently omitted from its original filing. In addition, the Company has corrected disclosure included in Item 1 and also Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company had disclosed that, at December 31, 2006, the Company was generating revenue from 222 installed CrossingGuard-equipped approaches. The correct number is 212 installed CrossingGuard-equipped approaches.

The Company announced that on March 30, 2007, Nestor Traffic Systems, Inc., a wholly owned subsidiary of the Company, entered into a Note Purchase Agreement, which became effective on April 1, 2007, pursuant to which accredited investors (some of whom are affiliates of the Company) agreed to purchase $1.5 million of the Company's Variable Rate Senior Notes due May 25, 2011 (the "Notes"), which Notes are secured by a first priority security interest in all of the Company's assets which are directly and exclusively used for the implementation and performance of existing (entered into after October 1, 2006) and future contracts for fixed and mobile automated speed enforcement units.

Note holders will receive interest payments equal to (a) $5.00 per paid citation issued with the Equipment (for "as issued" contracts), (b) $6.00 per paid citation (for "as paid" contracts) and (c) 17% of amounts collected (for "fixed fee" contracts), subject to a minimum return of 10% per annum, payable quarterly in arrears. Payments will be made based upon citations issued from 16 speed units per $1.5 million in aggregate outstanding principal on all Notes. Once the Company has entered into contracts for the operation of 16 speed units, the Company may, but is not obligated to, sell an additional $1.5 million of Notes.

The Notes will mature on May 25, 2011, at which time the Company will pay all unpaid principal together with all accrued but unpaid interest. The Company may at any time redeem the Notes at 110% of face value plus accumulated but unpaid interest.

The proceeds from the Notes will be used, either prospectively or retrospectively, to fund the purchase price or cost of design, engineering, installation, construction, configuring, maintenance, or operation or improvement of property or equipment used in contracts signed after October 1, 2006 at a customer site, including without limitation, costs of site analysis and preparation.

More details regarding these Notes may be found in our 2006 Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 5, 2007. The opinion of our auditors included in our 2006 Annual Report on Form 10-K/A, and as further discussed by management in Note 1 to the audited financial statements and elsewhere in the Form 10-K/A, contained an unqualified opinion with an explanatory paragraph regarding our substantial net losses in recent years which raised doubt regarding the Company's ability to continue as a going concern. As a result, we continue to seek additional sources of equity and debt financing to fund system installations and to position ourselves to capitalize on new market and growth opportunities; however, there can be no assurance that the funds will be available on terms acceptable to us, if at all.

William Danzell, Chief Executive Officer of Nestor, Inc., stated, "This additional financing coupled with the improving financial performance of the Company, announced earlier this week in our 2006 Fourth Quarter and Year End press release, position the Company to continue to expand into the growing automated enforcement and homeland security markets."

The announcement of this placement of the Variable Rate Senior Notes as detailed in this press release shall not constitute an offer to sell or a solicitation of an offer to buy the notes.

Nestor Traffic Systems provides automated traffic enforcement solutions to state and municipal governments. Nestor Traffic Systems is the exclusive North American distributor for the Vitronic PoliScanSpeed™ scanning LiDAR, capable of tracking multiple vehicles in multiple lanes simultaneously. An industry first, the scanning LIDAR mobile speed enforcement system is an innovative solution for digital speed detection and image recording. The scanning capability of the PoliscanSpeed system minimizes the ambiguity and measuring errors associated with conventional photo speed enforcement systems. Our CrossingGuard® red light enforcement system uses patented multiple, time-synchronized videos to capture comprehensive evidence of red light and speed violations. In addition, CrossingGuard® offers customers a unique Collision Avoidance™ safety feature that can help prevent intersection collisions. CrossingGuard® is a registered trademark of Nestor Traffic Systems, Inc. PoliScanSpeed™ is a trademark of Vitronic. For more information, call (401) 274-5658 or visit 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, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We may not meet the expectations disclosed in our forward-looking statements and investors should not place undue reliance on those statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, including: market acceptance of our products, competition, legal and legislative challenges to automated traffic enforcement, and other factors discussed in Risk Factors in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the SEC. Investors are advised to read Nestor's Annual Report, quarterly reports on Form 10-Q and current reports on Form 8-K filed after our most recent annual or quarterly report. The forward-looking statements in this letter represent our current views and we disclaim any obligation to update these forward-looking statements.