The boss of Hornby has promised "fundamental change" after annual losses at the troubled model railway firm ballooned to £13.5m from £0.2m in 2015.
Steve Cooke said the company will raise £8m through a share sale, reduce costs and renegotiate its loans as part of a wide-ranging turnaround plan following a strategic review.
He said: "Last year was difficult and disappointing as we faced significant challenges during the continued turnaround and improvement of the business. Much of the change last year resulted in substantial unplanned disruption which had a significant adverse impact on trading performance.
"The review has also identified areas that require fundamental change. The turnaround plan is intended to return the business to sustainable profitability and cash generation."
Revenue for the year fell by 4% to £55.8m after poor trading at the Kent-based company dragged on the balance sheet.
Hornby has also suffered major disruption from new computer and stock management systems, while European trading has also been impacted by problems with suppliers in China.
The group - whose brands also include Scalextric, Airfix and Corgi - has seen its shares plummet over the past year after a string of profit warnings.