Tut secures $7 million from convertible notes deal; DSL.net wraps $15 million private placement of notes

By Sheri Kasprzak

New York, Aug. 23 - As stocks dropped and oil prices fell Wednesday, Tut Systems, Inc. headed up light PIPE activity, announcing the pending completion of a $7 million private placement of convertible notes.

The 8% notes are due August 2009 and are convertible at $1.24 each. If fully converted, the company will issue a total of 5,631,536 common shares.

The investors also received warrants for 2,815,768 shares, exercisable at $1.36 each through August 2011.

The deal is scheduled to close Thursday.

Proceeds will be used for working capital.

"We analyzed the timing and structure of a number of strategic financing alternatives," said Tut's chief executive officer Sal D'Auria, in a statement. "This transaction strengthens our balance sheet and provides Tut Systems the working capital to continue to expand our market leadership in our core markets. It also allows us to pursue both direct and partner opportunities with various top-tier telcos."

The stock fell by 21.64%, or 29 cents, to close at $1.05 (Nasdaq: TUTS) on Wednesday after the offering was announced in the morning.

Tut Systems, based in Lake Oswego, Ore., develops content processing and distribution products, as well as system integration services for data and video services over broadband networks.

One market source said he's not surprised at a recent influx of technology offerings in the PIPE market.

"Tech is one of the few bright spots these days," he said. "For a long time, tech was sinking, but the past week or so, it's really made a comeback and I'd expect to see more and more tech companies [with PIPE offerings]."

Among the tech offerings so far this week, Foldera, Inc. settled a $4.3 million stock offering on Tuesday. That company provides e-mail and instant messaging over web browsers. Herndon, Va.'s GigaBeam Corp. wrapped a $10 million offering of convertible preferreds on Monday. That company provides wireless point-to-point communications.

DSL.net raises $15 million

Elsewhere in the tech sector, DSL.net, Inc. closed a private placement of $15,002,000 in principal of notes for proceeds of $13 million. Of those notes, $2 million are convertible.

In the offering, MegaPath Inc. and its subsidiary MDS Acquisition, Inc. agreed to buy a $13,002,000 non-convertible note, priced at 84, for proceeds of $11 million. The 8% non-convertible note is due Dec. 31, 2007.

The investors also received four convertible notes totaling $2 million.

The first convertible note, for principal of $30,000, is due Dec. 31, 2007 and bears interest at 8% annually.

The second note, for $300,000, also bears interest at 8% annually and matures the earlier of Dec. 31, 2008 and 30 days after the first note becomes convertible.

The third 8% note for $150,000 is due the earlier of Dec. 31, 2008 and 30 days after the first and second notes are convertible.

The fourth note, for $1.52 million, becomes due the earlier of Dec. 31, 2008 and 30 days after the first through third notes become convertible.

The first note is convertible into 9.9% of the company's outstanding stock, with the price being set accordingly. The second notes will bring MegaPath's holding of the company's stock to 49.9%, the third to 51% and the fourth to 91%.

Proceeds will be used for the repayment of debt held by DunKnight Telecom Partners LLC and for working capital.

The stock closed unchanged at $0.032 Wednesday (OTCBB: DSLN).

Based in Wallingford, Conn., DSL.net provides high-speed internet services to small- to mid-sized companies.

Canext to raise C$9 million

Looking to Canadian offerings Wednesday, Canext Energy Ltd. negotiated a C$9,084,000 private placement of 4.5 million common shares and 1.77 million flow-through shares.

The non flow-through shares are priced at C$1.35 each and the flow-through shares at C$1.70 each.

The deal is being placed through a syndicate of agents led by Tristone Capital Inc.

Separately, the company plans to conduct a non-brokered offering of 590,000 flow-through shares at C$1.70 each.

Both deals are slated to close Sept. 14.

Proceeds from the two deals will be used for a proposed acquisition and for exploration and development of the company's oil and natural gas properties.

On Wednesday, the company's stock lost 4 cents, or 2.67%, to close at C$1.46 (TSX Venture: CXT).

Calgary, Alta.-based Canext is an oil and natural gas exploration, development and production company.

In other Canadian PIPE news, Biorem Inc. announced its plans to settle a C$3.4 million private placement with Clean Technology Fund II, LP.

The investor, through its partners Expansion Capital Partners II, LP and Expansion Capital Partners II - General Partners, LLC, agreed to buy 1.7 million shares.

When the deal is closed, Clean Technology Fund I, LP and Clean Technology Fund II, LP will hold 3.1 million shares of Biorem, or 25.9% of the company's outstanding stock.

"Each year, we review up to 1,000 companies and select less than 1% for investment," said Bernardo Llovera, managing partner of Expansion Capital, in a statement. "Biorem represents a match with Expansion Capital's investment criteria for clean technology and we are pleased to move our position to the 25% range."

The deal is scheduled to close within 30 days.

Proceeds from the offering will be used to install larger projects, support ongoing technology development for new products and finance the continued international expansion program. The rest will be used for working capital.

The stock closed unchanged at C$1.75 Wednesday (TSX Venture: BRM).

Biorem, based in Guelph, Ont., manufactures technologies used to filter air in municipal and industrial applications.

Advanced Cell's stock leaps 357%

Advanced Cell Technology, Inc. watched its stock skyrocket by 357.5% on Wednesday after successfully generating human embryonic stem cells using an approach that does not harm embryos.

The stock jumped by $1.43 to close a $1.83 (OTCBB: ACTC).

The technique derives stem cells from human blastomeres with a single-cell biopsy technique, according to an Advanced Cell statement from Wednesday morning.

Separately, the company announced its plans to close an $11,295,000 private placement of convertible debentures on Tuesday.

When that offering was announced, the stock gained 53.26%, or 14 cents, to close at $0.40.

Volume of the company's stock traded also climbed with 8,756,230 shares traded, compared to the average 95,460.

On Tuesday morning, the company announced its plans to sell three-year debentures, which will be convertible into common shares at a price that will be based upon market conditions.

Based in Alameda, Calif., Advanced Cell uses stem cell technology in the field of regenerative medicine.

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