UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number 0-12965
NESTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3163744
(State of incorporation) (I.R.S. Employer
Identification No.)
One Richmond Square, Providence, RI 02906
(Address of principal executive offices)(Zip Code)
401-331-9640
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period than the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _________
Common stock, par value .01 per share: 9,165,741 shares
outstanding as of March 31, 1997
NESTOR, INC.
FORM 10Q - March 31, 1997
INDEX
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1997 and 1996
Consolidated Balance Sheet (Unaudited)
March 31, 1997 and December 31, 1996
Statement of Consolidated Cash Flows (Unaudited)
Three Months Ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART 2 OTHER INFORMATION
<TABLE>
Nestor, Inc.
Consolidated Statements of Operations
<CAPTION>
Three Months Ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Revenues:
Software licensing $ 525,994 $ 375,380
Engineering services 694,325 547,947
Tangible product sales 20,057 50,726
Total Revenue 1,240,376 974,053
Operating Expenses:
Engineering services 583,687 507,868
Tangible product sales 6,084 35,524
Research and development 275,809 129,775
Selling and marketing expenses 462,727 381,212
General and administrative
expenses 354,917 255,080
Total costs and expenses 1,683,224 1,309,459
(Loss) from operations (442,848) (335,406)
Other income (expense) (21,309) 2,272
(Loss) for the period before
income taxes (464,156) (333,134)
Income taxes --- ---
Net (Loss) for the Period $ (464,156) $ (333,134)
Dividends accrued on
preferred stock 103,163 83,529
Net Loss Available for
Common Stock $ (567,319) $ (416,663)
(Loss) Per Share $ (0.06) $ (0.05)
Weighted Average Number of
Shares Outstanding 8,936,610 7,909,010
The notes to the financial statements are an integral part of
this statement.
</TABLE>
<TABLE>
Nestor, Inc.
Consolidated Balance Sheets
March 31, December 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 320,705 $ 774,457
Accounts receivable, net of
allowance for doubtful accounts 880,152 1,009,149
Unbilled contract revenue 221,994 126,945
Deferred development costs --- 364,405
Other current assets 266,996 276,615
Total current assets 1,689,847 2,551,571
Long term portion of unbilled
contract revenue 400,000 ---
Property and equipment at cost -
net of accumulated depreciation 250,878 255,590
Intangible assets - net of
accumulated amortization 394,518 ---
Other assets 5,783 10,783
Total assets $ 2,741,026 $ 2,817,944
Liabilities and Stockholders Deficit
Current liabilities:
Accounts payable
and accrued expenses $ 657,815 $ 670,742
Other current liabilities 284,772 298,848
Deferred income 341,712 338,404
Total current liabilities 1,284,299 1,307,994
Noncurrent liabilities:
Long terms obligations
under capital leases 9,023 12,212
Total liabilities 1,293,322 1,320,206
Long term portion of
deferred income 430,899 430,899
Redeemable preferred stock
(see footnote) 5,497,236 5,398,908
Stockholders' deficit:
Preferred stock, $1.00 par value,
authorized 10,000,000 shares;
issued and outstanding:
Series A - 452,064 shares at
March 31, 1997 and December 31,
1996 (liquidation value $904,128 -
$2.00 per share) 452,064 452,064
Series B - 1,590,000 shares at
March 31, 1997 (liquidation
value $1,590,000 - $1.00 per
share) and 1,635,000 shares at
December 31, 1996 (liquidation
value $1,635,000 - $1.00 per
share) 1,590,000 1,635,000
Series D - 175,071 shares at
March 31, 1997 (liquidation
value $277,164 - $1.50 per
share plus accrued dividends)
and 179,671 shares at Decem-
ber 31, 1996 (liquidation value
$279,230 - $1.50 per share plus
accrued dividends) 277,164 279,230
Series C, E, F, G and H - redeemable
preferred stock (shown above)
4,846 shares at March 31, 1997 and
December 31, 1996 (liquidation
value $1,000 per share plus
accrued dividends) --- ---
Common Stock, $.01 par value,
authorized 30,000,000 shares;
issued and outstanding;
9,165,741 shares at March 31,
1997 and 8,916,141 shares at
December 31, 1996 91,657 89,161
Warrants and options 444,121 417,500
Additional paid-in capital 12,261,386 11,927,644
Retained (deficit) (19,596,824) (19,132,668)
Total stockholders'
equity (deficiency) (4,480,431) (4,332,069)
Total Liabilities and
Stockholders' Deficit $ 2,741,026 $ 2,817,944
The notes to the financial statements are an integral part of
this statement.
</TABLE>
<TABLE>
Nestor, Inc.
Consolidated Statements of Cash Flows
<CAPTION>
Three Months Ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(464,155) $ (333,134)
Adjustments in reconcile net
(loss) to net cash provided
by operating activities:
Depreciation and amortization 23,891 29,689
Expenses charged to operations
relating to options, warrants
and capital transactions 26,621 ---
Changes in assets and liabilities:
Decrease (increase) in
accounts receivable 128,997 (362,915)
Decrease (increase) in unbilled
contract revenue (495,049) 96,992
Decrease in deferred
development costs 364,405 ---
Decrease in other assets 16,040 ---
(Decrease) in accounts payable,
accrued expenses and other
liabilities (37,460) (483,391)
Increase in deferred income 3,308 151,309
Net cash (used) by operating
activities (433,402) (901,450)
Cash flows from financing activities:
Purchase of property and equipment (17,161) (17,579)
Net cash (used) by investing
activities (17,161) (17,579)
Cash flows from financing activities:
Repayment of obligations under
capital leases (3,189) (2,705)
Proceeds from issuance of common
stock --- 2,175
Proceeds from issuance of preferred
stock --- 1,366,000
Net cash (used) provided by
financing activities (3,189) 1,365,470
Net change in cash and cash
equivalents (453,752) 446,441
Cash and cash equivalents -
beginning of period 774,457 68,780
Cash and cash equivalents -
end of period $ 320,705 $ 515,221
Supplemental cash flows information
Interest paid $ 396 $ 94
Income taxes paid $ --- $ ---
The notes to the financial statements are an integral part of
this statement.
</TABLE>
Notes to Consolidated Financial Statements
Note 1 - Financial statements:
In the opinion of management, all adjustments,
consisting only of normal recurring adjustments
necessary for a fair presentation of (a) the
consolidated results of operations for the three months
ended March 31, 1997 and 1996; (b) the consolidated
statements of cash flows for the three months ended
March 31, 1997 and 1996; and (c) consolidated financial
position at March 31, 1997 have been made. The
accompanying quarterly results of operations and cash
flows are not necessarily indicative of the results
expected for the entire fiscal year.
The accompanying financial statements include the
accounts of Nestor, Inc., Nestor, IS, Inc. ("IS"), and
Nestor Interactive, Inc. ("Interactive"). IS and
Interactive were organized effective January 1, 1997 as
two wholly owned subsidiaries of Nestor, Inc. All
intercompany transactions and balances have been
eliminated.
Note 2 - Redeemable convertible preferred stock:
3/31/97 12/31/96
Series E, par value $1.00 per
share, 1,444 shares
outstanding at March 31, 1997
and December 31, 1996.
$217,975 and $189,226 of
accumulated dividends at March
31, 1997 and December 31,
1996, respectively. $1,661,975 $1,633,226
Series F, par value $1.00 per
share, 599 shares outstanding
at March 31, 1997 and December
31, 1996. $66,055 and $51,313
of accumulated dividends at
March 31, 1997 and December
31, 1996, respectively. 665,055 650,313
Series G, par value $1.00 per
share, 777 shares outstanding
at March 31, 1997 and December
31, 1996. $61,377 and $46,875
of accumulated dividends at
March 31, 1997 and December
31, 1996, respectively. 838,377 823,875
Series H, par value $1.00 per
share, 2,026 shares
outstanding at March 31, 1997
and December 31, 1996.
$305,829 and $265,494 of
accumulated dividends at March
31, 1997 and December 31,
1996, respectively 2,331,829 2,291,494
TOTAL: $5,497,236 $5,398,908
Note 3: Loss per Common Share:
Net loss per common share is based on income (loss)
available for common stock divided by the weighted-
average number of common shares outstanding during each
of the periods. Common equivalent shares from stock
options are excluded as their effect is antidilutive.
In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings Per Share
("FAS 128"), which will be adopted on December 31,
1997. FAS 128 requires companies to change the method
currently used to compute earnings per share and to
restate all prior periods for comparability. The
adoption of FAS 128 is not expected to have any impact
on the Company's previously reported earnings per share
because the Company was in a net loss position and,
consequently, common equivalent shares from stock
options were excluded as their effect was antidilutive.
During the quarter ended December 31, 1996, the Company
modified its method for computing earnings per share to
give effect to dividends accrued on preferred stock.
The effect of this change on earnings per share is as
follows:
As Originally
Period Ended Reported As Adjusted
Qtr. Ended 3/31/96 $(0.04) $(0.05)
Note 4 - Intangible Asset:
On March 31, 1997, the Company purchased from Cyberiad
Software, Inc. ("Cyberiad"), a Rhode Island
corporation, substantially all of Cyberiad's assets.
In this transaction, the Company issued 200,000 shares
of its Common Stock to Cyberiad's owners and agreed to
assume approximately $10,500 of Cyberiad's liabilities.
Accordingly, the Company recorded as an intangible
asset the excess of its acquisition cost over the fair
value of the net liabilities assumed ($394,518) and is
amortizing this asset over 36 months. No amortization
expense was recognized in the quarter ended March 31,
1997. Had the acquisition taken place at the beginning
of each respective period, there would be no
significant difference on a pro-forma basis other than
the amortization of the intangible asset.
Prospective Statements
The following discussion contains prospective statements
regarding Nestor, Inc., its business outlook and results of
operations that are subject to certain risks and uncertainties
and to events that could cause the Company's actual business,
prospects and results of operations to differ materially from
those that may be anticipated by, or inferred from, such
prospective statements. Factors that may affect the Company's
prospects include, without limitation: the Company's ability to
successfully develop new contracts for technology development;
the impact of competition on the Company's revenues or market
share; delays in the Company's introduction of new products; and
failure by the Company to keep pace with emerging technologies.
Readers are cautioned not to place undue reliance on these
prospective statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to
carefully review and consider the various disclosures made by the
Company in this report and in the Company's reports filed with
the Securities and Exchange Commission.
Liquidity and Capital Resources
Cash Position and Working Capital
The Company had cash and short term investments of approximately
$320,000 at March 31, 1997, as compared with $774,000 at December
31, 1996, and $1,363,000 at September 30, 1996. At March 31,
1997, the Company had working capital of $405,000 as compared
with $1,243,000 at December 31, 1996.
The Company had a negative net worth of $4,480,000 at March 31,
1997, as compared with negative net worth of $4,332,000 at
December 31, 1996.
On April 18, 1997, the Company entered into an amendment to the
Prism License Agreement with Applied Communications, Inc. ("ACI")
allowing ACI expanded rights to distribute the Company's PRISM
product line and to share in enhanced future royalty income.
Pursuant to this amendment the Company received in April an
initial, non-refundable royalty of $2,000,000.
Management believes that the Company's revenues will generate
sufficient liquidity, when combined with its liquid assets as at
March 31, 1997, to meet the company's anticipated cash
requirements through the end of its fiscal year ending December
31, 1997.
Deferred Income
Operations of the Company have been partly funded by prepayments
under engineering contracts and licenses of the Company's
technology. Such prepayments are recognized as revenue under the
percentage-of-completion method as engineering is completed or
delivery obligations are fulfilled. The Company bases its
estimate of the percentage of completion on the amount of labor
applied to a given project, compared with the estimated total
amount of labor required. The remainder of such prepaid revenue
is reflected on the Company's balance sheet as deferred income,
and is treated as a liability. Total deferred income was
$772,000 at March 31, 1997, as compared with $769,000 at December
31, 1997.
Future commitments
During the quarter ended March 31, 1997, the Company acquired
additional property and equipment (primarily computing and
related equipment) at a cost of $17,000. The Company has no
material commitments for capital expenditures although management
expects that the Company may make future commitments for the
purchase of additional computing and related equipment, for
development of hardware, for consulting and for promotional and
marketing expenses.
The Company has no material commitments other than a commitment
to purchase from Intel Corporation a supply of Ni1000 Recognition
Accelerator Chips. The Company placed a purchase order in the
amount of $195,000 with Intel Corporation in June 1996, and
expects to take delivery of this order during the second half of
1997.
Results of Operations
On June 11, 1996, the Company entered into an exclusive Licensing
Agreement with National Computer Systems, Inc. ("NCS")
transferring the development, production, and marketing rights of
the Company's Intelligent Character Recognition ("ICR") products
to NCS. Under the License Agreement the Company received an
initial license fee, which was recognized as revenue in the
fiscal year ended June 1996, and will receive royalties on sales
of the products by NCS. Minimum annual royalties range from
$160,000 in the twelve months ending June 1997 to $350,000 in
2001 and beyond.
For the quarter ended March 31, 1997, the Company realized a 27%
increase in revenues compared to the prior year and an 28%
increase in expenses resulting in a 32% increase in the loss from
operations. ICR revenues in the quarter ended March 31, 1996,
accounted for 47% of total revenues while related expenses
accounted for 35% of total expenses.
Revenues
The following table compares revenues for the quarter ended March
31, 1997 with revenues for the comparable fiscal quarter of the
preceding year, including and excluding revenues from ICR
operations transferred to NCS:
Total
Total Total Year-to- Revenues Year-to-
Revenues Revenues year Q/E year
Q/E Q/E Change March 31, Change
March 31, March 31, 1996
1997 1996 Excluding
ICR
$1,240,000 $974,000 +27% $514,000 +141%
The Company's revenues arise from licensing of the Company's
products and technology, from the sale of tangible products, and
from contract engineering services and are discussed separately
below. During the quarter ended March 31, 1997, revenues
increased $266,000 to $1,240,000 from $974,000 in the quarter
ended March 31, 1996. Revenues in the year-earlier period
included $460,000 of revenues associated with the ICR products
that were licensed to NCS in June 1996.
Engineering Services
During the quarter ended March 31, 1997, revenues from
engineering contracts increased $146,000 to $694,000 from
$548,000 in the corresponding quarter of the prior fiscal year.
Prior year revenues included $88,000 of engineering revenues
relating to the ICR products.
Revenues relating to the customer-funded modification of Nestor's
Fraud Detection System totaled $664,000, an increase of $382,000
over year-earlier revenues of $282,000.
The Company's contracts with the Defense Advanced Research
Projects Agency (DARPA) require engineering services rendered by
the Company to develop a generic commercial application of the
Company's technology to high-speed pattern recognition through
the creation of an integrated circuit, associated circuit boards,
and supporting development software. The Company has two
contracts with DARPA. The first contract, which was signed in
April 1990, is in the amount of $1,630,000; as of March 31, 1997,
approximately $1,623,000 had been earned. The second contract,
signed August 26, 1993, is in the amount of $776,000; as of March
31, 1997, approximately $773,000 had been earned.
On September 1, 1995, the Company signed a contract with the Jet
Propulsion Laboratory (JPL) to develop a prototype sensor system
designed for vehicular-traffic surveillance and detection. The
contract was valued at approximately $597,000. On March 31,
1997, the Company extended its contract with JPL to include in-
field evaluation of the prototype system developed under the
original JPL contract. The value of the contract was increased
to $730,000.
The terms of the DARPA and JPL contracts call for delivery of
prototype products, but do not specify any subsequent purchasing
or licensing provisions.
During the quarter ended March 31, 1997, the Company recognized
revenues totaling $30,000 under its government contracts. In the
year-earlier period such revenues totaled $152,000.
Software Licensing
Product-licensing revenues totaled $526,000 in the quarter ended
March 31, 1997, as compared with $375,000 in the same quarter of
the prior year. The increase in software licensing revenues
reflects the growth of licensing revenues in the Company's Prism
product line. Such revenues totaled $519,000 in the quarter
ended March 31, 1997, as compared with none in the year-earlier
period. All of the product-licensing revenues in the quarter
ended March 31, 1996 were attributable to the ICR product line,
which was sold to NCS in June 1996.
Subsequent to the signing of the Licensing Agreement with NCS in
June 1996, the Company will not receive ICR licensing fees but
expects to receive royalties from NCS on future sales of ICR
products by NCS. The minimum annual royalty for the twelve
months ending June 1997 is $160,000; as of March 31, 1997, the
Company had recognized $75,000 of revenue under its Licensing
Agreement with NCS. (See Operating Expenses, below, for a
discussion of the effect on the Company's expenses of this
licensing arrangement.)
Sales of Tangible Products
The tangible products currently sold by the Company are based
upon the Company's Ni1000 Recognition Accelerator Chip, which is
marketed along with development software that enables customers
to develop high-speed recognition applications. Revenues from
the Company's Ni1000 Development System totaled $20,000 in the
quarter ended March 31, 1997, as compared with $50,000 in the
corresponding quarter of the prior fiscal year. The Company is
currently developing its TrafficVision product, which will
incorporate the Ni1000 Recognition Accelerator Chip (see
"Investment in Product Development and Marketing," below).
Operating Expenses
Total operating expenses - consisting of engineering, research
and development, selling and marketing, and general and
administrative expenses - amounted to $1,683,000 in the quarter
ended March 31, 1997, an increase of $374,000 over total
operating costs of $1,309,000 in the corresponding quarter of the
prior fiscal year.
Included in operating expenses for the March 1997 quarter is the
recognition of $364,000 of costs relating to a project to
customize the Company's Prism Fraud Detection System for a
customer. These costs were incurred during the six months ended
December 31, 1996 but were deferred because the terms of the
agreement were not finalized until March 1997. The Company
accounted for the costs in accordance with SOP 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type
Contracts," which provides that costs be deferred until delivery
is made under the terms of an enforceable agreement. The
agreement was completed and required deliveries were made in
March 1997.
Included in expenses for the quarter ended March 1996 are
approximately $458,000 of expenses attributable to the ICR
products, which were licensed to NCS in June 1996. Most of the
expenses associated with the ICR products are no longer incurred
by the Company as NCS hired most of the staff assigned to
development, sales, and support of the ICR products.
Labor costs continue to be the Company's single greatest expense
category. In the quarter ended March 31, 1997, the Company paid
$698,000 for wages and consulting fees, a decrease of $48,000
from total wages and consulting fees of $746,000 paid in the
corresponding quarter of the prior fiscal year. The decrease in
labor costs reflects the decline in staffing primarily
attributable to the transfer of the ICR products group to NCS:
full-time employees totaled 40 at March 31, 1997, as compared
with 42 at March 31, 1996.
Engineering Services
Costs related to engineering services totaled $584,000 in the
quarter ended March 31, 1997, as compared to $508,000 in the
corresponding quarter of the prior fiscal year. As a percentage
of revenues, these costs decreased from 93% last year to 84% this
year reflecting the growth in engineering revenues from the
Company's financial-services customers, where the Company is able
to price its services more aggressively than under its government
contracts.
Research and Development
Research and development expenses totaled $276,000 in the quarter
ended March 31, 1997, as compared with $130,000 in the year-
earlier period. The increase in such costs reflects the net of
increased investment in product development in the Company's
Prism and InterSite product lines and the absence of product
development relating to the ICR products. Product development in
the Company's Prism and InterSite product lines totaled $230,000
in the quarter ended March 31, 1997, as compared with Prism
product development in the year-earlier period of $4,000.
Product development relating to the ICR products in the quarter
ended March 31, 1996, totaled $120,000.
Selling and Marketing
Selling and marketing costs totaled $462,000 in the quarter ended
March 31, 1997, including $79,000 of costs associated with the
Prism development project that had been deferred from the six
months ended December 1996. In the corresponding quarter of the
prior fiscal year, selling and marketing costs totaled $381,000,
including $261,000 of selling costs relating to the ICR products.
Excluding the costs deferred from December 1996, the increase in
selling and marketing costs was spread across all three groups:
Prism selling costs totaled $246,000 during the March 1997
quarter as compared with $97,000 in the prior year; selling costs
relating to the Company's TrafficVision product and Ni1000
Development System totaled $95,000 in 1997 as compared with
$33,000 in the quarter ended March 1996; and selling costs
associated with InterSite, which the Company began to develop in
July 1996, totaled $41,000 in the quarter ended March 31, 1997.
General and Administrative
General and administrative expenses totaled $355,000 in the
quarter ended March 31, 1997, including $76,000 of costs
associated with the Prism development project that had been
deferred from the six months ended December 1996. In the
corresponding quarter of the prior fiscal year general and
administrative costs totaled $255,000.
Investment in Product Development and Marketing
Revenues relating to the Company's PRISM and Fraud Detection
System exceeded expenses by $288,000 in the quarter ended March
31, 1997. The Company has installed its products at Mellon Bank,
GE Consumer Credit Financial Services, Banc One, Europay
International (an association of 700 banks in Europe), and with a
European financial-services company. In September 1996, the
Company signed a license agreement with Applied Communications,
Inc. ("ACI") enabling ACI to integrate Nestor's products with
certain products of ACI. ACI provides authorization and
transaction-processing software to nearly 500 financial
institutions worldwide. This agreement was amended in April 1997
to broaden ACI's rights. In March 1997, the Company signed an
agreement with Total Systems, Inc., which, as one of the world's
largest credit, debit, commercial and private-label card
processing companies, represents more than 84 million cardholder
accounts.
The largest investment made by the Company was in its Intelligent
Sensors Division, which is responsible for the development and
marketing of the TrafficVision products, an outgrowth of work
under the JPL contract. The Company extended its contract with
JPL and made initial commercial deliveries in the first quarter
in 1997. For the quarter ended March 31, 1997, expenses of this
group exceeded revenues by $267,000.
The Company began development in July 1996 of products for use in
internet and intranet environments. Costs associated with this
effort totaled $116,000 in the quarter ended March 31, 1997.
Net Income Per Share
During the quarter ended March 31, 1997, the Company experienced
a loss of $464,000 as compared with a loss of $333,000 in the
corresponding period of the prior fiscal year. After allowance
for preferred stock dividends of $103,000 and $83,000 for the
three months ended March 31, 1997 and 1996, respectively, the net
loss available for common stock was $567,000 and 417,000,
respectively. During the quarter ended March 31, 1997, loss per
share available for common stock was $.06 per share, as compared
with a loss per share of $.05 in the corresponding period of the
prior fiscal year.
During the quarter ended March 31, 1997, there were outstanding a
weighted average of 8,936,610 shares of Common Stock as compared
with 7,909,010 during the corresponding quarter of the previous
year.
NESTOR, INC.
FORM 10-Q - March 31, 1997
Item 6 Exhibits and reports on Form 8-K
(a)Exhibits - None
(b)Reports on Form 8-K: On April 8, 1997, the
Corporation filed with the Securities and Exchange
Commission a current report on Form 8-K dated March
28, 1997.
(c)Reports on Form 8-K: On April 10, 1997, the
Corporation filed with the Securities and Exchange
Commission a current report on Form 8-K dated March
31, 1997.
FORM 10-Q
NESTOR, INC.
SIGNATURE
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 thereunto duly authorized.
NESTOR, INC.
(REGISTRANT)
DATE: May 15, 1997 By:/s/ Nigel P. Hebborn
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 320,705
<SECURITIES> 0
<RECEIVABLES> 880,152
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,689,847
<PP&E> 1,403,413
<DEPRECIATION> 1,152,535
<TOTAL-ASSETS> 2,741,026
<CURRENT-LIABILITIES> 1,284,299
<BONDS> 0
5,497,236
2,319,228
<COMMON> 91,657
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,741,026
<SALES> 20,057
<TOTAL-REVENUES> 1,240,376
<CGS> 0
<TOTAL-COSTS> 1,683,224
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (464,156)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
