Phase imaging company, Iatia Limited (ASX:IAT) has signed a letter of agreement with an international ophthalmology and optometry manufacturer following a recent visit to their head office (identity subject to confidentiality agreements).

The agreement is to collaborate on developing an autorefractor, for the ophthalmology markets. Autorefractors are used to determine the quality of vision.

The manufacturer has built a prototype to Iatia's design. Iatia is now testing it for suitability with Quantitative Phase Imaging (QPI) processing and expects to complete testing by mid-September.

Iatia expects a positive result as the prototype is a modular version of Iatia's original optical test bed design. The design is also only a slight modification to the manufacturer's own preferred product design.

Once testing is completed Iatia will again meet with the manufacturer where they anticipate entering into a heads of agreement for the production of the autorefractor.

Iatia's remuneration will be a royalty agreement based on sales of the product. According to the manufacturer, this new product is expected to acquire 15% of the global market for autorefractors which equates to sales in the vicinity of $14,400,000 annually.

The manufacturer plans to launch the product in the second half of 2007.

Mr Charles Laycock, CEO of Iatia stated, "As reported in previous announcements this project is progressing very well and is on schedule.

"What's even more exciting is that the autorefractor is one of up to five products that we have discussed as co-development projects with the manufacturer.

"This agreement also opens a new use for Iatia's QPI platform technology. In these ophthalmic and optometry products our technology is an integral part of the end product and not simply an add-on." added Mr Laycock.