The Statement The board of Heart of Midlothian plc today outlines the club's current financial position and hopes that all supporters become fully informed of the situation the club is facing.

Due to recent unexpected circumstances away from Tynecastle, the club is now experiencing a shortfall in funding.This shortfall, due to recent uncertainty, has created a significant noticeable blockage in projected revenue streams for the club.

Hearts' credit lines have long since dried up but the ongoing uncertainty affecting UBIG, the club's parent company which is claiming insolvency, has made matters more difficult. "There are cashflow issues because of the concerns regarding developments in Lithuania," explains Neil Patey, a football finance expert with Ernst & Young. "Hearts are not going to be able to get any external financing but they may be finding it harder with their day-to-day operating expenditure. If you're dealing with Hearts as a business you're probably looking to receive cash up front rather than offering credit. There's a strong possibility that Hearts could run out of cash before the beginning of the season and that could bring about administration."

The Statement While this hesitation is understandable it is unwittingly damaging the club's current efforts to improve its financial situation including current payments to HMRC and raising doubts over future payments to players and staff.

The revelation from a club source that Hearts need to find a"significant six-figure sum" to pay players and staff this weekend strongly suggests salaries will not be honoured in full. That could lead to further sanctions from the SPL for"remuneration default", including an additional transfer embargo.

The Statement It is now crucial to the football club we find a solution to bring in enough finance to allow us to trade into the new season when normal trading can resume with the benefit of SPL and game-related income streams. The payments to HMRC and players/staff salaries are the most important issues in our focus these days where very limited time remains available to the club.

Hearts claim to have paid the majority of a £100,000 bill for PAYE but HMRC will likely still proceed with a petition for a winding-up order."They will almost certainly be the first people to get paid from any cash raised," adds Patey.

The Statement However, given that the revenue from season tickets has dried up . . .

Income from season-ticket sales usually sustains most clubs throughout the summer months. Hearts have already spent that on paying players, some of their tax liabilities and interest on debt.

The Statement . . . and no other realistic income is available quickly enough, the club will consider offers for the players of the current squad, including the most promising talent in order for the most necessary and important payments to be made. The board had planned to bring income in through the sale of players while considering the financial forecast for next season but now this will need to happen much earlier in order to preserve the business. We understand that this will lead to significant on-field pressure but at all times we must consider the health of the club and preserve it for future generations.

Hearts' problem is that they have scaled their squad down so dramatically in recent seasons that they have very few assets on the books who would fetch the sort of transfer fee needed to help ease their financial pain. Most of their experienced players have either been released or are out of contract, while their younger players are unlikely to go for vast sums. "If you're a football club that's offered a Hearts player for sale, then you're in a very strong negotiating position," adds Patey.

The Statement We will adjust our expectations for the new season accordingly but will still be focused on the playing side of the business. Our financial deficit can, in part, be attributed to our worst league finish in over 30 years last season. This had a significant impact on the business.

As part of a concerted effort to drive down their wage budget, Hearts lost several key players last summer when David Templeton, Ryan McGowan and Andy Driver moved on. Unsurprisingly an increasingly youthful team struggled but still managed to reach the Scottish Communities League Cup final.

The Statement Other factors that hit revenues include the absence of Rangers from the SPL and significantly increased stadium costs particularly in relation to the Main Stand.

Rangers fans will presumably enjoy the irony of being held up as one of the reasons for Hearts' financial difficulties given Vladimir Romanov's comments ahead of the vote last summer on whether to allow the Ibrox newco into the top division. "The football mafia represented by former owners of Rangers FC . . . are to blame for some of the worst problems to hit Scottish football and must not be allowed back in under any circumstances," he said.

The Statement The biggest threat to the club . . . is hesitation and inaction. We hope those supporters who have purposely held off will reconsider and make the decision to back the club in the best way possible in order that we can meet our targets.

If there is one group completely free of blame for Hearts' perilous position it is their supporters. The speed and manner in which they rallied round last winter after the club claimed the end was nigh was hugely impressive, with many handing over thousands of pounds for a share issue, while also selling out home matches, holding fundraising events, and buying club merchandise. "The club could go into liquidation and the administrators or a new owner would not be required to honour the season tickets." explains Patey. "You can understand any hesitancy on the part of the fans."

The Statement Provided we can achieve security for the club, it is the view of the board that there is a viable strategy for the change of ownership to a willing buyer or investor. The most difficult part in this is finding an agreement with the creditors. However, we know that there is goodwill with Ukio Bankas, as demonstrated by the statement from the Ukio Bankas administrator yesterday. We also believe that UBIG remains supportive of Hearts.

The Foundation of Hearts, an umbrella group encompassing supporters groups, Supporters Direct Scotland, and other business figures, will meet fans this evening to discuss a proposed takeover bid. A Scandinavian consortium is reportedly expected to make an offer within the next fortnight but events in Lithuania make any deal complicated. "It's difficult right now as you're dealing with at least three different parties if you want to get into negotiatons to buy the club," adds Patey. "I can't envisage a situation where there could be a quick sale."