Montreal textiles manufacturing company SRTX has raised roughly US$40 million from key investors in a deal that would see founder Katherine Homuth step down as CEO, The Logic has learned, as the company works to stave off an insolvency that some expect could otherwise come as soon as next month.

The company, which makes Sheertex rip-resistant tights out of materials used in bulletproof vests, has signed a term sheet for a fundraising round that would see it receive roughly US$40 million from investors, three sources with knowledge of the matter told The Logic. The full round has yet to close. The deal is contingent on Homuth stepping down as chief executive, the sources said. A fourth source—an investor who participated in a previous funding round—said they received the term sheet on Wednesday and are deciding whether to invest in the current raise. The Logic agreed not to name the sources as they were not authorized to speak on the matter.

If SRTX closes the deal it will dodge insolvency, which four sources said the company was anticipating as soon as the beginning of April if it could not secure financing. Three sources said it was understood that the company could go bankrupt by April, and another saw financial projections that showed SRTX would run out of financial runway sometime that month.

In a statement to The Logic Thursday, Homuth confirmed SRTX had signed a term sheet to secure funding. She said she notified shareholders and employees earlier this week, in addition to giving them the news that she was stepping down as chief executive. “I will be stepping down as CEO [as] part of the close which was the right decision for me and the business at this time,” she said. The Information first reported news of Homuth’s departure this week.

Homuth will remain chief executive until the financing round closes, the company’s chief financial officer Tim Leyne wrote in a statement emailed to The Logic Friday. “SRTX is finalizing a financing round with key financial partners,” Leyne wrote. He declined to comment on the details of the round or whether the company was at risk of bankruptcy.

The funding round and Homuth’s departure follow deep cuts at the company. On February 5, Homuth announced that SRTX had temporarily laid off 40 per cent of its 350-person workforce, blaming looming tariffs from the U.S. and delays in raising money. 

But the company was cash strapped well before the trade war began. 

In a series of online posts, Homuth has been candid about the company’s financial challenges. In a December Substack post, she revealed that SRTX is “not even close” to being profitable. Days earlier, the company announced it secured a US$25-million loan from Investissement Québec, bringing the total amount of equity and debt it had raised by then to US$250 million. Among the company’s previous backers are EDC, H&M, and Serena Williams’ venture capital firm, according to Pitchbook.

Homuth said at the time that the company needed at least another US$32 million in funding to scale its fibre production, which she said was key to becoming profitable. “What we need is a big injection of capital. Someone with a lot of willingness to take a moonshot,” Homuth said in an interview with The Logic in December.

In a LinkedIn post two months ago, she published the company’s financials, which showed SRTX ended December 2024 with a net loss of US$32 million. It had a positive gross profit, at US$1.9 million, but high expenses dragged down its bottom line. One of its largest operating expenses was advertising–-at US$12.3 million in 2024—which it plans to cut by a third this year, down to US$4.4 million.

Two sources said the company had been investing in areas that didn’t bring adequate returns, with one saying the spend on advertising was high compared to the industry standard.

Meanwhile, Homuth had been focused on expanding the company’s manufacturing footprint in Quebec. A former investor in SRTX told The Logic those plans may not have sat well with early backers who expect the eight-year-old company to be focused on profitability at this stage rather than burning cash on capital-intensive expansion plans. 

Homuth said at The Logic Summit last October she wants to eventually build “all the world’s clothes out of Canada.”