The money will come from an underwritten pounds 1.2m rights issue, announced yesterday by the producer of animated cartoons. The remaining pounds 300,000 of the rights will provide additional working capital.
Sleepy Kids bought licensing rights for Budgie in June last year, and is in the final stages of negotiation for Fred Wolf Films to produce the cartoons.
The company plans to spend pounds 840,000 initially on producing 13 cartoon episodes, ready for screening on ITV next April.
Martin Powell, chairman of Sleepy Kids, said: 'The directors believe Budgie will have a significant impact on the company's prospects.'
However, he added: 'The potential of Budgie should be regarded as speculative, as successful exploitation is primarily dependent upon television, video and merchandising sales in North America and in Europe.'
The directors, who collectively own 58 per cent of the shares, are only taking up part of their entitlement in the one-for-three rights, pitched at 18p a share. Their total shareholding will fall to less than 50 per cent.
The company also announced losses for the second year running. The pre-tax loss to 31 October of pounds 356,000 was more than double the previous year's pounds 156,000.
Losses were after pounds 170,000 of exceptional costs. Some pounds 84,000 of that was a provision for income previously accrued but not received from Hanna- Barbera, the US film company.
Mr Powell said the company was trying to recover the money. 'We are taking advice. But there is no legal action yet,' he said.
The dispute with Hanna-Barbera is over a co-production agreement for the syndicate television screening of Potsworth & Co/Midnight Patrol in the US in 1990 and 1991.
Shares in Sleepy Kids, floated in August 1989 at 20p, eased 1p to 26p.