Vianet, the vending machine technology specialist, said that losses had narrowed in the latest year and renewed claims that better times lay ahead.

The Fife-based firm said there was a "real prospect" that it would achieve break even on a monthly basis in the fourth quarter of 2007.

Shareholders in the Alternative Investment Market-listed firm have heard claims in previous announcements that it has been making progress, without seeing the company manage to make a move into high volume sales.

However, Ian Orrock, chairman and chief executive, said Vianet was confident that a "strategic repositioning" had put the firm on the cusp of a big improvement in its fortunes.

Vianet has focused its efforts on selling systems which allow companies to monitor vending machines via a website operated by the firm.

In the year ended December 31, Vianet won increased business from significant operators such as GSK Healthcare.

However, Orrock said the company continued to grapple with the consequences of the fact many firms on the continent exhausted their vending machine budgets in 2001 preparing for the adaptation of the euro.

In September, Vianet said with the vending machine market remaining tough it was running around 12 months behind plan.

Orrock's confidence is based on the prospect of developing a significant income stream from selling technology which allows machines to communicate with other machines without the use of expensive landlines, or M2M services.

This could be a huge market for Vianet, whose products might one day allow taxi drivers to use chip-and-pin terminals mounted in their cabs to allow customers to pay with cards.

Vianet has already won M2M accounts from operations including Tesco and the Saudi Prison service.

"Currently we are stretched to process sales enquiries and have a wide range and scale of proposals as work and progress," said Orrock.

He said after raising £1.8m through share placings in the last year Vianet currently has £600,000 cash. Directors expect this should be sufficient to take the group to cash break even "assuming few delays in sales growth".

Orrock said staff had shown their faith in Vianet by having pay rises deferred for part of last year. That helped the firm cut pre-tax losses from £2,315,125 to £1,726,849.

Sales slipped from £679,746 to £576,984. However, Orrock said the 2005 figure included £307,000 fees from discontinued hosting activity.

Vianet is one of the few survivors of the clutch of Scottish technology firms which listed before the dot.com bubble burst.

The firm was valued at £24m when it listed on AIM in March 2000.

Yesterday shares closed up 0.5p at 4.25p, giving the firm a capitalisation of around £9m.