Investors said tut-tut Wednesday to a financing transaction at

Tut Systems



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The Lake Oswego, Ore., networking company placed $7 million of 8% three-year convertible notes with private investors.

The notes are convertible at $1.24 a share into 5.6 million shares. Tut also issued warrants to buy 2.8 million shares of common stock at $1.36 each. The warrants will expire in August 2011.

Tut Systems expects to close the transaction Thursday. It will use the proceeds from this transaction for general working capital.

"We analyzed the timing and structure of a number of strategic financing alternatives," the company said. "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."

Shares plunged 33 cents to $1.01.