U. S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-QSB

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE

                        SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended: September 30, 2004


                         Commission file No.333-90738

                                 BIOMODA, INC.
         (Name of small business issuer as specified in its charter)

              NEW MEXICO                         85-0392345
      (State of incorporation)          (IRS Employer Identification No.)

         8301 WASHINGTON NE, SUITE 6, ALBUQUERQUE, NEW MEXICO 87113
         (Address of principal executive offices including zip code)

       Issuer's telephone number:                    (505) 821-0875

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____

The number of issuer's shares of Common Stock outstanding as of October 31, 2004
was 7,117,282.

Transitional Small Business Disclosure Format (check one): Yes ___ No X

<PAGE>

                                TABLE OF CONTENTS

PART I. Financial Information

   Item 1. Condensed Consolidated Financial Statements...............F-1 to F-9

   Item 2. Management's Discussion and Analysis or Plan of Operation..........4

   Item 3. Controls and Procedures............................................9

PART II. Other Information

   Item 1. Legal Proceedings.................................................10

   Item 2. Changes in Securities.............................................11

   Item 3. Defaults Upon Senior Securities...................................11

   Item 4. Submission of Matters to a Vote of Security Holders...............11

   Item 5. Other Information.................................................11

   Item 6. Exhibits..........................................................11

SIGNATURES

                                       2

<PAGE>

                          PART I: FINANCIAL INFORMATION

FORWARD - LOOKING STATEMENTS

This  Form  10-QSB  contains  forward-looking  statements  about  the  business,
financial  condition and prospects of the Company that reflect  assumptions made
by management and management's beliefs based on information  currently available
to it. The Company can give no assurance that the expectations indicated by such
forward-looking  statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties underlying such
expectations  should  materialize,  the  Company's  actual  results  may  differ
materially from those indicated by the forward-looking statements.

The key factors  that are not within the  Company's  control and that may have a
direct  bearing  on  operating  results  include,  but are not  limited  to, the
acceptance by customers of the  Company's  products,  the  Company's  ability to
develop  new  products  cost-effectively,  the  ability of the  Company to raise
capital in the future, the development by competitors of products using improved
or alternative  technology,  the retention of key employees and general economic
conditions.

There may be other risks and circumstances that management is unable to predict.
When used in this Form 10-QSB, words such as, "believes,"  "expects," "intends,"
"plans,"  "anticipates"  "estimates"  and similar  expressions  are  intended to
identify   forward-looking   statements,   although   there   may   be   certain
forward-looking   statements   not   accompanied   by  such   expressions.   All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.

                                       3
<PAGE>

ITEM 1:  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          BIOMODA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                               September 30, 2004
                                    UNAUDITED

                                     ASSETS
Current Assets
       Cash                                               $       232
       Prepaid expenses                                         9,689
                                                          -----------
       Total Current Assets                                     9,921

Patents, net                                                  210,169

Property and Equipment, net                                    14,630
                                                          -----------

                                                          $   234,720
                                                          ===========

                  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
       Accounts payable and accrued liabilities           $   219,281
       Advances from stockholders                             122,717
       Line of credit from an affiliated entity               792,426
                                                          -----------
       Total Current Liabilities                            1,134,424

Commitments and Contingencies

Stockholders' Deficit
       Class A redeemable preferred stock; no par value            --
         2,000,000 shares authorized; cumulative and
         convertible; liquidation and redemption values
         of $1.50 and $1.80 per share; no shares issued
         and outstanding
       Undesignated preferred stock; 2,000,000 shares              --
         authorized; no shares issued and outstanding
       Common stock, no par value, 100,000,000 shares
         authorized; 7,117,282 issued and outstanding       1,365,513
       Deficit accumulated during development stage        (2,265,217)
                                                          -----------

       Total Stockholders' Deficit                           (899,704)
                                                          -----------

                                                          $   234,720
                                                          ===========

See accompanying notes to these condensed consolidated financial statements.

Page F-1
<PAGE>

                          BIOMODA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE NINE-MONTHS AND THREE-MONTHS PERIODS ENDED SEPTEMBER 30, 2004 AND 2003
    AND FOR THE PERIOD FROM JANUARY 3, 1990 (INCEPTION) TO SEPTEMBER 30, 2004
                                    UNAUDITED

<TABLE>
<CAPTION>
                                          Nine Months Ended September 30    Three Months Ended September 30       January 3, 1990
                                          ------------------------------    -------------------------------         (Inception)
                                                2004           2003                2004           2003        to September 30, 2004
                                            -----------    -----------         -----------    -----------     ---------------------
<S>                                         <C>            <C>                 <C>            <C>                  <C>
Revenue                                     $        --    $        --         $        --    $        --          $        23
                                            -----------    -----------         -----------    -----------          -----------
Operating expenses
Professional fees                                68,915             --              16,923             --              367,835
General and administrative                       63,133        205,830              20,789          65576            1,146,082
Licensing fees                                   15,000         24,000                   0           1944               88,017
Research and development                        367,411            900             111,996            250              495,051
Depreciation and amortization                    11,318          6,928               4,031           2250               56,728
                                            -----------    -----------         -----------    -----------          -----------
Total Operating Expenses                        525,777        237,658             153,739         70,020            2,153,713
                                            -----------    -----------         -----------    -----------          -----------

Loss from operations                          (525,777)       (237,658)           (153,739)       (70,020)          (2,153,690)
Other Income (Expenses)
Gain on forgivness of debt                           --             --                  --             --               24,721
Interest income                                      --             --                  --             --                3,870
Interest expense                                (21,897)       (20,010)             (8,919)             `             (140,118)
Foreign currency transaction loss                    --           (551)                 --         (2,856)                  --
                                            -----------    -----------         -----------    -----------          -----------
Total Other Expenses                            (21,897)       (20,561)             (8,919)        (2,856)            (111,527)
                                            -----------    -----------         -----------    -----------          -----------

Loss Before Provision For Income Taxes         (547,674)      (258,219)           (162,658)       (72,876)          (2,265,217)

Provision for income taxes                           --             --                  --             --                   --
                                            -----------    -----------         -----------    -----------          -----------
Net Loss and Losses Accumulated
During Development Stage                    $  (547,674)   $  (258,219)        $  (162,658)   $   (72,876)         $(2,265,217)
                                            ===========    ===========         ===========    ===========          ===========

Basic and diluted weighted average number
    of common shares outstanding              6,863,463      5,837,875           6,892,117      5,864,171
                                            ===========    ===========         ===========    ===========

Basic and diluted loss per common share     $     (0.08)   $     (0.04)        $     (0.02)   $     (0.01)
                                            ===========    ===========         ===========    ===========
</TABLE>

Page F-2
<PAGE>

                          BIOMODA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003
    AND FOR THE PERIOD FROM JANUARY 3, 1990 (INCEPTION) TO SEPTEMBER 30, 2004
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                                                 January 3, 1990
                                                      Nine-Months Ended    Nine-Months Ended     (Inception) to
                                                      September 30, 2004   September 30, 2003  September 30, 2004
                                                      ------------------------------------------------------------
<S>                                                      <C>               <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                 $  (547,674)       $  (258,219)           (2,265,217)
Adjustments to reconcile net loss to
     net cash used in operating activities:
  Stock options expense                                           --            147,000               147,000
  Issuance of common stock for services                       17,500                 --                17,500
  Issuance of common stock for bonuses to employees           10,710                 --                10,710
  Loss on sale of assets                                          --                 --                   358
  Foreign currency transactions                                   --                551                 3,247
  Deprecation and amortization                                11,318              6,928                56,729
Changes in operating assets and liabilities:
  Accounts receivable                                             --                 --                (4,425)
  Other Assets                                                (6,448)             4,425                (5,264)
  Accounts payable and accrued liabilities                    82,029            (65,866)              323,463
Advances from stockholders                                      --                 --                   9,564
                                                         -----------        -----------           -----------
Net cash flows used in operating activities                 (432,565)          (165,181)           (1,706,335)

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                         (14,178)                --               (24,177)
  Sale of property and equipment                                  --                 --                 1,139
  Organizational costs                                            --                 --                  (560)
  Patent, trademark and license fee                          (63,743)           (28,711)             (262,371)
                                                         -----------        -----------           -----------
Net cash flows used in investing activities                  (77,921)           (28,711)             (285,969)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from stockholders' advances                            --              6,050                86,014
  Proceeds from line of credit from an affiliated entity     505,971            189,880               822,426
  Issuance of common stock for cash                               --                 --             1,084,096
                                                         -----------        -----------           -----------
Net cash flows provided by financing activities              505,971            195,930             1,992,536

Net (decrease) increase in cash                               (4,515)             2,038                   232

Cash, beginning of period                                      4,747                155                    --
                                                         -----------        -----------           -----------

Cash, end of period                                      $       232        $     2,193           $       232
                                                         ===========        ===========           ===========
Supplemental disclosure of cash flow information:
Cash paid for :
      Interest                                           $        --        $        --           $        --
                                                         ===========        ===========           ===========
      Income Taxes                                       $        --        $        --           $        --
                                                         ===========        ===========           ===========
</TABLE>

See accompanying notes to consolidated financial statements for more information
on  non-cash  investing  and  financing  activities  during  the  periods  ended
September 30, 2004 and 2003, and for the period from January 3, 1990 (Inception)
through September 30, 2004.

Page F-3
<PAGE>

--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------

1.  NATURE OF BUSINESS AND BASIS OF PRESENTATION

FORMATION AND NATURE OF BUSINESS

Biomoda,  Inc.  ("Biomoda") is a development  stage company  incorporated in the
state of New Mexico on January 3, 1990 (Inception). In 2002, the Chief Executive
Officer  ("CEO") and the Chief  Financial  Officer  ("CFO") of  Advanced  Optics
Electronics,  Inc.  ("ADOT")  replaced  Biomoda's  management team,  affecting a
change in control.  ADOT also owns approximately 15.9% of Biomoda's  outstanding
common  stock.  In  2003,  the  CEO  and  the CFO  each  acquired  7.27%  of the
outstanding  common stock of Biomoda.  On August 13, 2003, Biomoda formed a 100%
owned subsidiary known as Biomoda Holdings, Inc., a Nevada corporation,  for the
purpose of  research,  development,  production  and  marketing  of medical  and
biomedical  products.   Biomoda  and  Biomoda  Holdings,  Inc.  are  hereinafter
collectively referred to as the "Company".

The  Company's  primary  focus  is on early  cancer  detection  technology.  The
Company's novel cell-targeting technology is globally patented for the detection
of pre-cancerous and cancerous  conditions in all human tissue. This technology,
based  on a  compound  called  Tetrakis  Carboxy  Phenyl  Porphine  (TCPP),  was
developed at St. Mary hospital in Colorado and Los Alamos National Laboratories.
The Company obtained a worldwide  exclusive  license to the TCPP technology from
the University of California in late 1995, and began new research broadening the
scope of the original patent and technology. In November 2000, the Company filed
a new U.S.  provisional patent application defining the ability of the Company's
version of the TCPP to detect  pre-cancerous  and  cancerous  conditions  in all
human tissue.  The Company began the  commercialization  process by trademarking
the technology as Porvidx (TM).  Management expects to start pre-clinical trials
in the  fall of 2004 and  clinical  trials  in 2005,  which  will  culminate  in
applying for the United States Food and Drug Administration ("FDA") approval.

Pursuant to a registration statement on Form SB-2 (the "Registration Statement")
under the Securities  Act of 1933, as amended,  the Company is offering for sale
up to  5,000,000  shares of its  common  stock at a price of $6 per  Share.  The
Registration  Statement  was declared  effective on July 11, 2003.  The Offering
will  terminate on the earlier of July 11, 2005 or the date on which the maximum
number of shares have been sold.  The Company has not sold any shares under such
Registration  Statement as of September 30, 2004.  The Company is in the process
of revising the SB-2 to offer 10,000,000 shares at $3 per share. On May 11, 2004
the  Company's  board of  directors  has  approved the increase in the number of
shares of common stock authorized from 15,000,000 to 100,000,000.


--------------------------------------------------------------------------------
Page F-4

<PAGE>

--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------

1.  NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)

DEVELOPMENT STAGE AND GOING CONCERN

The  Company has been in the  development  stage  since it began  operations  on
January 3, 1990 and has not generated any revenues from  operations and there is
no assurance of any future  revenues.  As of September 30, 2004, the Company had
an accumulated deficit of approximately $2,265,000 and a working capital deficit
of approximately $1,125,000.

In addition,  the Company did not generate any cash from  operations  and had no
cash reserve dedicated to fund expenditures.  These factors create a substantial
doubt as to the Company's ability to continue as a going concern.

The Company will require substantial  additional funding for continuing research
and development,  obtaining regulatory approval and for the commercialization of
its  products.  Management  expects to be able to raise enough funds to meet its
working  capital  requirements  through the sale of the  Company's  common stock
offered in its  Registration  Statement.  ADOT  continues to provide the Company
with bridge financing needed to fund the day-to-day operations until the Company
has raised sufficient capital to fund its operations (See Note 4).

There  is no  assurance  that  the  Company  will be able to  obtain  sufficient
additional  funds  when  needed,  or that  such  funds,  if  available,  will be
obtainable on terms  satisfactory  to the Company.  The  consolidated  financial
statements  do not include any  adjustments  that might be necessary  should the
Company be unable to continue as a going concern.

BASIS OF PRESENTATION

The  management  of  the  Company,   without   audit,   prepared  the  condensed
consolidated  financial  statements  for the three and nine months periods ended
September  30, 2004 and 2003.  The  information  furnished  has been prepared in
accordance with accounting principles generally accepted in the United States of
America  ("GAAP")  for  interim  financial   reporting.   Accordingly,   certain
information and disclosures  normally included in financial  statements prepared
in  accordance  with GAAP have been  condensed  or  omitted.  In the  opinion of
management,  all adjustments  considered  necessary for the fair presentation of
the Company's financial position, results of operations and cash flows have been
included and are only of a normal  recurring  nature.  The results of operations
for the quarter ended September 30, 2004 are not  necessarily  indicative of the
results of operations for the year ending December 31, 2004.


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Page F-5

<PAGE>

--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------

1.  NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)

BASIS OF PRESENTATION (continued)

These condensed  consolidated financial statements should be read in conjunction
with the Company's audited consolidated  financial statements as of December 31,
2003, which are included in the Company's Form 10-KSB,  which was filed with the
Securities and Exchange Commission ("SEC") on March 30, 2004.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for stock-based  compensation issued to employees using the
intrinsic value method as prescribed by Accounting  Principles Board Opinion No.
25 "Accounting  for Stock Issued to Employees"  ("APB 25").  Under the intrinsic
value method, compensation is the excess, if any, of the fair value of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock.  Compensation,  if any, is recognized  over the applicable
service period,  which is usually the vesting period.  The Financial  Accounting
Standards Board ("FASB") has issued Statement of Financial  Accounting Standards
("SFAS") No. 123 "Accounting for Stock-Based  Compensation",  as amended by SFAS
No. 148,  "Accounting for Stock-Based  Compensation - Transition and Disclosure,
an amendment of FASB Statement No. 123" and  interpreted by FASB  Interpretation
No. 44, "Accounting for Certain  Transactions  Involving Stock Compensation,  an
Interpretation of APB 25." This standard,  if fully adopted,  changes the method
of accounting for all  stock-based  compensation  to the fair value method.  For
stock options and warrants,  fair value is  determined  using an option  pricing
model that takes into  account the stock price at the grant date,  the  exercise
price,  the  expected  life of the  option or  warrant  and the  annual  rate of
quarterly  dividends.  Compensation  expense,  if any,  is  recognized  over the
applicable service period, which is usually the vesting period.

The  adoption of the  accounting  methodology  of SFAS No. 123 for  employees is
optional  and the Company has elected to  continue  accounting  for  stock-based
compensation  issued to employees using APB 25; however,  pro forma disclosures,
as if the Company adopted the cost recognition  requirements under SFAS No. 123,
are required to be presented.  The proforma effect on losses and loss per common
share if the Company had applied the fair value  recognition  provisions of SFAS
No. 123 is insignificant.

In December 2002, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 148 ("SFAS 148"),  "Accounting for Stock-Based Compensation - Transition and
Disclosure - an Amendment of FASB  Statement  No. 123." SFAS 148 amends SFAS 123
to provide  alternative  methods of  transition  for an entity that  voluntarily
changes to the  fair-value-based  method of accounting for stock-based  employee
compensation.

--------------------------------------------------------------------------------
Page F-6

<PAGE>

--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ACCOUNTING FOR STOCK-BASED COMPENSATION (continued)

It also amends the disclosure  provisions of that statement to require prominent
disclosure  about the effects on reported  net income and earnings per share and
the entity's  accounting  policy decisions with respect to stock-based  employee
compensation.  Certain  of the  disclosure  requirements  are  required  for all
companies, regardless of whether the fair value method or intrinsic value method
is used to account  for  stock-based  employee  compensation  arrangements.  The
Company continues to account for its employee incentive stock option plans using
the intrinsic  value method in accordance  with the  recognition and measurement
principles of APB 25. SFAS 148 is effective for financial  statements for fiscal
years ended after  December  15, 2002 and for interim  periods  beginning  after
December 15, 2002. As of September 30, 2004,  the Company has not  established a
formal stock option plan.

EARNINGS PER SHARE

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 128
("SFAS 128"),  "Earnings Per Share" Under SFAS 128,  basic earnings per share is
computed by dividing  income  available to common  stockholders  by the weighted
average  number  of  shares  assumed  to be  outstanding  during  the  period of
computation.  Diluted  earnings per share is computed  similar to basic earnings
per share  except that the  denominator  is  increased  to include the number of
additional  common  shares  that would have been  outstanding  if the  potential
common shares had been issued and if the additional common shares were dilutive.
Because the Company has incurred a net loss in the three and nine months periods
ended September 30, 2004 and 2003, basic and diluted loss per share are the same
as additional potential common shares would be anti-dilutive.

PATENT

Costs incurred in connection with securing a patent,  as well as attorneys fees,
have been  capitalized  and amortized  over  seventeen  years using the straight
line-method and are included in other assets on the accompanying  balance sheet.
Costs related to patents  pending are amortized  beginning  upon issuance of the
related patents.

RESEARCH AND DEVELOPMENT

Research  and  development  costs are charged to  operations  as  incurred.  The
Company  incurred  approximately  $367,000,  $1,000 and $495,000 of research and
development  expenses for the nine months ended  September 30, 2004 and 2003 and
for the period from Inception through September 30, 2004.

--------------------------------------------------------------------------------
Page F-7

<PAGE>

--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

Neither the Financial  Accounting Standards Board (including its Emerging Issues
Task Force),  the American Institute of Certified Public Accountants nor the SEC
have issued any significant  accounting  pronouncements  since the Company filed
its June 30, 2004 Form 10-Q that are believed by  management  to have a material
impact on the Company's present or future consolidated financial statements.

3.  ADVANCES FROM STOCKHOLDERS

As of September  30, 2004,  the Company had advances of  approximately  $123,000
payable to two of its stockholders.  Such advances historically bore interest at
10% per annum and are due on demand.  The Company is negotiating  the pay off of
such advances with these  stockholders  and no interest  expense related to such
advances  for the  nine-month  period  ended  September  30, 2004 was  recorded.
Interest expense related to such advances for the period from Inception  through
September  30,  2004  was  approximately  $41,000.  Such  interest  expense  was
approximately  $3,000,  $9,000 and $41,000 for the three and nine months periods
ended September 30, 2003 and for the period from inception through September 30,
2003, respectively.

4.  LINE OF CREDIT FROM AN AFFILIATED ENTITY

On May 1, 2002,  the Company  entered into a one-year  line of credit  agreement
(the  "Agreement")  with ADOT with an annual interest rate of 5%. On May 1, 2003
the Agreement was amended to be payable on demand.  Interest  expense related to
such a line of credit for the three and nine months periods ended  September 30,
2004,  2003 and for the period from  Inception  through  September  30, 2004 was
approximately $9,000, $22,000 and $29,000,  respectively.  Such interest expense
was approximately $3,000 and $14,000 for the three and nine months periods ended
September 30, 2003, respectively.

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Page F-8

<PAGE>


--------------------------------------------------------------------------------
                                  BIOMODA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2004 AND 2003
--------------------------------------------------------------------------------


5.  OTHER RELATED PARTY TRANSACTIONS

On May 1, 2002,  the  Company  entered  into a sublease  agreement  with ADOT to
sublease  an  office  space for $300 a month.  The lease is on a  month-to-month
basis and the  Company is to abide  with all  relevant  covenants  of the master
lease.

On December 1, 2003,  the Company  entered into a lease  agreement  with ADOT to
lease certain lab equipment for $500 a month.  The lease is on a  month-to-month
basis and the  Company is to abide  with all  relevant  covenants  of the master
lease.

Rental expense  related to the above leases for the three and nine month periods
ended September 30, 2004 and for the period from Inception through September 30,
2004 was approximately  $2,400,  $7,200 and $13,700,  respectively.  Such rental
expense  was  $900 and  $2,700  for the  three  and nine  months  periods  ended
September 30, 2003, respectively.

6.  EQUITY TRANSACTIONS

On August 5, 2004, the Company  issued 85,000 shares of restricted  common stock
to three of its employees  for bonuses at  approximately  $10,710  (estimated by
management to be the fair value on the date of grant).

On September 29, 2004, one of the stockholders of the Company  exercised 200,000
stock options to issue 200,000 shares of common stock.  Advances payable to that
stockholder as of that date in the amount of approximately  $25,000 were applied
against the exercise price of such stock options.

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Page F-9

<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

COMPANY OVERVIEW

Biomoda, Inc. (the "Company") is a development stage company incorporated in the
state of New  Mexico on  January  3, 1990.  The  Company's  primary  focus is on
discovery,  development,   manufacture  and  marketing  of  proprietary  medical
diagnostic  and  treatment  products  used to treat life  threatening  and other
serious diseases.

Pursuant to a registration statement on Form SB-2 (the "Registration Statement")
under the Securities  Act of 1933, as amended,  the Company is offering for sale
up to  5,000,000  shares of its  common  stock at a price of $6 per  share.  The
Registration  Statement  was declared  effective on July 11, 2003.  The Offering
will  terminate on the earlier of July 11, 2005 or the date on which the maximum
number of shares  have been  sold.  The  Company  has not sold any  shares as of
September 30, 2004.  The Company is in the process of amending the  registration
statement in order to sell 10,000,000 shares for $3 per share.

On May 19, 2004 the Company's  Board of Directors voted to amend the articles of
incorporation to increase the number of common shares authorized from 15,000,000
to 100,000,000 without par value.

PLAN OF OPERATION

Our plan of  operation  for the next  twelve  months is to verify and refine our
assay, design our kit, prepare for clinical trials, and initiate a dialogue with
the FDA relative to our approval submission.  The Company is relying on a bridge
financing  arrangement  with Advanced  Optics  Electronics,  Inc., an affiliated
public company,  and also intends to raise  additional  funds from its effective
Form SB-2 Registration  Statement during the next twelve months.  The Company is
currently leasing Laboratory equipment from Advanced Optics Electronics, Inc. on
a month to month  basis and  intends  to  purchase  this  equipment  if and when
adequate funds are raised.

Our initial  product is a diagnostic test for lung cancer that will be preformed
out of the  body by using a spit  sample  from the  patient.  Our test  does not
require any invasive  sample  taking.  The sample will be sent to a clinical lab
where the procedure will be performed to determine the presence, or not, of lung
cancer.  Our diagnostic test can be used for other cell samples and we intend to
create and market  products to diagnose and screen for other  prevalent  cancers
such as breast,  cervical and colon-rectal.  We have determined that our initial
markets will be the developed  nations of Europe,  North America and Japan. This
has been  determined  on the basis of  available  healthcare  delivery and payer
infrastructure. Japan is leading the world, and has instituted a nationwide lung
cancer-screening program.

                                       4
<PAGE>

In addition to augmenting laboratory research and development,  management plans
to further strengthen the corporate  infrastructure of the Company to adequately
manage the future growth and success of our  operations.  Management  expects to
hire  additional   personnel  and  enter  into   consulting  and   collaborative
arrangements over the next twelve months as needed to continue to strengthen and
enhance the effectiveness of implementing our plan as we grow.

The Company's  Research and  Development  facilities are located on Kirtland Air
Force Base in  Albuquerque,  New  Mexico.  R&D is housed in  approximately  2500
square  feet that  includes  two  state-of-the-art  laboratories  where  primary
research, assay validation and pre-clinical work is being conducted.

Over the next twelve months  management will  continuously  evaluate and develop
our business plan which  includes  assessing  the  technology we utilize and the
markets  we  intend to serve and  evaluating  the  prospect  of  expanding  into
additional  products and markets as business  conditions  warrant. In connection
with this  continual  evaluation,  management  will also look at taking  actions
designed to mitigate any risks associated with our business plan.

The U.S.  Patent  Office  issued its  Formal  Notice of  Allowance  for a Patent
developed  by  Biomoda  researchers  entitled   "Compositions  and  Methods  for
Detecting  Precancerous  Conditions in Cells and Tissue Samples using 5, 10, 15,
20 Tetrakis (Carboxyphenyl) Porphine". This Patent brings a significant addition
to Biomoda's Patent portfolio and expands the Company's intellectual property to
include cancer screening as a compliment to Biomoda's existing technology.

Biomoda is completing the formal filing for a continuation for this Patent based
on research currently  underway by researchers at Biomoda.  The Company believes
its goal to further  strengthen and expand its intellectual  property  portfolio
will be significantly enhanced by these developments.

CONTRACTS

In the past 9 months,  the Company has entered into  numerous  relationships  in
order to expedite and further perfect its patented and proprietary  developments
for regulatory approval,  accelerated  commercialization  and market acceptance.
Among  these  organizations  with  whom  Biomoda  is  working:  Esocor  LLC,  JR
Associates,  Majestic  Sarl  and  D.  Lescasse-Laurent,   Triangulum  Consulting
Services,  Inc.,  TriCore Reference  Laboratories,  and PhenoPath  Laboratories,
PLLC. The following is a brief desription of some of these contracts:

Tricore Reference Laboratories
------------------------------

On  April   7,   2004   the   Company   and   TriCore   Reference   Laboratories
(HTTP://TRICORE.ORG),  both headquartered in Albuquerque  entered into a written
agreement for TriCore to

                                       5
<PAGE>

handle sputum sample  processing  and  management for Biomoda and for TriCore to
employ  its  expertise  in  cytopathology  to  greatly  enhance  and  accelerate
Biomoda's diagnostic development activities.

TriCore  Reference  Laboratories  (Albq. NM) is a  not-for-profit,  full service
medical reference  laboratory  serving  physicians and hospitals  throughout New
Mexico and the Southwest. In addition to clinical and anatomic pathology testing
and consultative  services,  TriCore participates in medical scientific research
through collaborations with local and national biotech firms. Founded in 1998 as
a regional laboratory  consolidation,  TriCore's sponsors include the University
of New Mexico Hospital and Presbyterian  Healthcare  Services in Albuquerque and
St. Vincent Hospital in Santa Fe.

Biomoda's  patented  products,  primarily  involved  with  early  detection  and
targeted  treatment of specific  cancers  will be supported by its  relationship
with TriCore.

By teaming with TriCore, Biomoda is continuing to lessen the "time to market" by
outsourcing strategic areas of its research, development and marketing effort to
world class professional  medical  organizations both at home in Albuquerque and
around the world.

Triangulum Consulting Services, Inc.
------------------------------------

On January 26, 2004 the Company entered into a written  contract with Triangulum
Consulting Services, Inc. ("Tiangulum") (www.trianguluminc.com) headquartered in
Raleigh,  NC to provide  guidance  with  regulatory  approvals and to accelerate
"time to market" for Biomoda's  patented products  primarily involved with early
detection and targeted treatment of specific cancers.

Triangulum,  formerly JASA Consulting Services,  LLC., is widely recognized as a
leading provider of consulting services in biopharmaceutical and related fields.
After a  review  of the  technologies  employed  and  patents  held by  Biomoda,
Triangulum  is prepared to commit  significant  resources  to enable  Biomoda to
efficiently  and cost  effectively  complete  the  regulatory  steps  and  bring
Biomoda's critically needed products to market quickly.

Madame Lescasse-laurent/Majestic Sarl
-------------------------------------

On  June  8,  2004  the  Company  entered  into a  written  contract  with  Mme.
Lescasse-Laurent  , based in  Vaugrigneuse,  France.  D.  Lescasse-Laurent  will
support the evaluation of Biomoda's cancer diagnostic products and systems. Mme.
Lescasse-Laurent  has  agreed  to  file  Biomoda's  application  of a CE Mark in
France. Upon approval by the Ministry of Health of France, and more specifically
at AFSSAPS  (Agence  Francaise  de  Securite  Sanitaire  de  Produits de Sante),
Biomoda's  patents and systems will be  processed  for other  European  markets.
AFSSAPS  combines  approvals  for both In Vivo and In  Vitro  products  into the
French market.

                                       6
<PAGE>

Mme. Lescasse-Laurent provides medical product commercialization, consultation
and management assistance to many of the world's leading bio-medical
organizations.

Jr Associates
-------------

In June 2004,  the Company  entered into a written  contract  with JR Associates
WWW.1JRA.COM to help advance the Company's patented products, primarily involved
with early detection and targeted  treatment of specific cancers,  potential for
securing  positive  coverage,  coding,  and payment by Medicare  and  commercial
insurers.  Ultimately,  these activities will assure patient access to Biomoda's
products and systems. JR Associates,  located in Reseda, CA, is prominent in the
field of reimbursement strategies and has provided services to many major makers
of medical products and systems. Reimbursement and coding are critical issues to
medical reference laboratories, Biomoda's anticipated primary market.

Esocor LLC
----------

As of April 19,  2004,  the  Company  has  announced  the  addition of a leading
clinical pathology consulting firm, Esocor LLC, WWW.ESOCOR.COM, located in White
Plains,  NY, to the group of world class  professionals who have contracted with
Biomoda to assist and assure  that  Biomoda's  patented  and  critically  needed
products,  primarily  involved with early  detection  and targeted  treatment of
specific cancers are brought to market in an orderly and expedited manner.

Esocor's managing director,  Dr. Wolfgang  Hofgartner,  a world recognized board
certified  clinical  pathologist,  will support Biomoda's product entry to offer
the Company's patented systems and treatments.  Dr. Hofgartner, a medical doctor
and doctor of  sciences,  has built and  cultivated a  multinational  network of
academic  opinion leaders in clinical  pathology.  Dr.  Hofgartner has conducted
clinical research in conjunction with world class  institutions  including Sloan
Kettering  Cancer Center and Baylor College of Medicine,  and served as European
medical director for Becton Dickinson (Fortune 500 healthcare).

Dr. Hofgartner will be part of the Company's carefully assembled team of leading
outside medical  professionals.  The Company looks to his  significant  European
experience to provide a head start for global marketing.

Phenopath Laboratories, PLLC
----------------------------

On March 1, 2004,  the Company  entered into a written  contract with  PhenoPath
Laboratories,  PLLC,  WWW.PHENOPATH.COM  a research  and  development  pathology
laboratory in Seattle,  Washington.  PhenoPath will support Biomoda's diagnostic
development program for early detection and treatment of cancers, primarily lung
cancer.  Phenopath  is a widely  respected  and  highly  experienced  laboratory
organization

                                       7
<PAGE>

with particular skills and expertise in pathology and biomarker development and
applications.

RESULTS OF OPERATIONS

Due  to  our  limited  operating  history,  we  believe  that   period-to-period
comparisons of our results of operations are not fully meaningful and should not
be relied upon as an indication of future performance.

Comparison of the Three-month Periods Ended September 30, 2004 and 2003
-----------------------------------------------------------------------

REVENUE.  As of September 30, 2004, there have been no revenues since inception.

PRODUCT DEVELOPMENT. Product development expenses consist primarily of personnel
expenses,  consulting  fees,  licensing fees and  depreciation  of the equipment
associated with the  development and enhancement of our disease  screening tool.
Research   development  and  other   operating   technical  costs  increased  to
approximately  $112,000  in the  three  months  ended  September  30,  2004 from
approximately  $500 in the three months ended  September  30, 2003.  The Company
believes  that  continued  investment  in product  development  is  critical  to
attaining  our  strategic  objectives  and,  as  a  result,  we  expect  product
development  expenses to increase  significantly  in future periods.  We expense
product development costs as they are incurred.

GENERAL  AND  ADMINISTRATIVE  General  and  administrative  expenses  consist of
expenses for executive and administrative  personnel,  facilities,  professional
services,  travel,  general  corporate  activities,  and  the  depreciation  and
amortization  of  office  furniture  and  leasehold  improvements.  General  and
administrative  costs,  including  professional fees, decreased to approximately
$38,000 in the three months ended  September  30, 2004 from $65,576 in the three
months ended September 30, 2003. We expect general and  administrative  costs to
increase in the future as our  business  prospects  develop and we will  require
more staff. The costs associated with being a publicly traded company and future
strategic  acquisitions will also be a contributing  factor to increases in this
expense.

OTHER INCOME  (EXPENSE)  Other income  (expense)  consists of interest and other
income and  expense.  Other  (expense)  increased  to $8,919 in the three months
ended  September  30, 2004 from $2,856 in the three months ended  September  30,
2003.

LIQUIDITY AND CAPITAL RESOURCES

Since  inception,  we have  funded  our  operations  primarily  through  private
placement of equity securities and loans from Advanced Optics  Electronics,  Inc
("ADOT").  As of September 30, 2004 we have raised net proceeds of approximately
$1,330,000.

                                       8
<PAGE>

Product  development  expenditures  approximated  $112,000 for the quarter ended
September  30,  2004.  Funds for  operations,  product  development  and capital
expenditures  were  provided  from a line of credit  agreement  with  ADOT.  The
Company will require substantial  additional funding for continuing research and
development,  obtaining regulatory approval and for the commercialization of its
products. The Company's cash was $232 as of September 30, 2004.

Management believes that sales of securities will provide adequate liquidity and
capital resources to meet the anticipated development stage requirements through
the end of the second  quarter 2005. In addition,  ADOT will continue to provide
the Company with bridge financing needed to fund the day-to-day operations until
the Company has raised sufficient  capital to fund its operations.  At that time
it is  anticipated  that sales of our initial  screening  product will begin and
contribute  to  operating  revenues.  It is  anticipated  that these  sales will
provide the  additional  capital  resources to fund the  proportionately  higher
working capital  requirements of production and sales  initiatives and continued
product development for second-generation diagnostic and therapeutic products.

There  is no  assurance  that  the  Company  will be able to  obtain  sufficient
additional  funds  when  needed,  or that  such  funds,  if  available,  will be
obtainable on terms  satisfactory  to the Company.  The  consolidated  financial
statements  do not include any  adjustments  that might be necessary  should the
Company be unable to continue as a going concern.

INFLATION

Management  believes  that  inflation  has  not  had a  material  effect  on the
Company's results of operations.

ITEM 3.    CONTROLS AND PROCEDURES

Under the supervision and with the  participation  of our management,  including
our Chief  Executive  Officer ("CEO") and Chief Financial  Officer  ("CFO"),  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls  and  procedures  (as defined in Rule  13a-15(e)  and  15d-15(e) of the
Exchange Act as of a date (the "Evaluation Date") within 90 days prior to filing
the Company's  September 30, 2004 Form 10-QSB.  Based upon that evaluation,  the
CEO and CFO concluded  that, as of September 30, 2004, our  disclosure  controls
and procedures were of limited effectiveness.

The Company was in the infancy stages of its business operations and had limited
resources  available to plan,  develop,  and implement  disclosure and procedure
controls  and other  procedures  that are  designed to ensure  that  information
required to be disclosed in the  Company's  periodic  reports filed or submitted
under the Exchange Act is recorded,  processed,  summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,  controls
and procedures  designed to ensure that information  required to be disclosed in
the Company's  periodic  reports filed under the

                                       9
<PAGE>

Exchange Act is  accumulated  and  communicated  to  management,  including  the
Company's CEO and CFO, to allow timely decisions regarding required disclosure.

In March 2004,  the Company has hired an independent  third party  consultant to
re-evaluate  and revise its  existing  control  policies and  procedures  and to
implement  new  disclosure  controls  and  procedures.  As part of such plan and
implementation,  the  Company is  re-evaluating,  re-designing  and  documenting
policies and procedures,  putting such  procedures in operation,  and monitoring
the effectiveness of the procedures.

CHANGES IN CONTROLS AND PROCEDURES

There were no significant  changes made in our internal  controls over financial
reporting  during the quarter  ended  September  30,  2004 that have  materially
affected or are reasonably likely to materially affect these controls.  Thus, no
corrective   actions  with  regard  to  significant   deficiencies  or  material
weaknesses were necessary.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROL

The Company's management, including the CEO, does not expect that our disclosure
controls and procedures or our internal  control over  financial  reporting will
necessarily  prevent all fraud and material errors.  An internal control system,
no matter how well  conceived and  operated,  can provide only  reasonable,  not
absolute,  assurance that the objectives of the control system are met. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
costs.  Because of the inherent  limitations on all internal control systems, no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud,  if any,  within the Company have been  detected.  These
inherent limitations include the realities that judgments in decision-making can
be faulty,  and that  breakdowns  can occur  because of simple error or mistake.
Additionally,  controls  can be  circumvented  by the  individual  acts  of some
persons, by collusion of two or more people,  and/or by management's override of
the controls. The design of any system of internal control is also based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance  that any design will  succeed in achieving  its stated goals under
all  potential  future  conditions.  Over time,  controls may become  inadequate
because of changes in  circumstances,  and/or the degree of compliance  with the
policies and procedures may deteriorate.  Because of the inherent limitations in
a cost-effective internal control system,  financial reporting misstatements due
to error or fraud may occur and not be detected on a timely basis.

                                       10
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

The  Company may on occasion  be a party to  litigation  involving  claims by or
against the Company arising in the ordinary course of business. The officers and
directors know of no legal  proceedings  pending or  contemplated by any person,
entity or governmental  authority which would have a material  adverse effect on
the Company.

Item 2. CHANGES IN  SECURITIES  - 285,000  shares of common stock were issued in
the third quarter of 2004.  This represents approximately  $36,000 in value to 4
shareholders.

Item 3.  DEFAULTS UPON SENIOR SECURITIES - None

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted  to a vote of the  Company's  security  holders
during the third quarter of fiscal year 2004.

Item 5.  OTHER INFORMATION - none.

Item 6.  EXHIBITS

(a)      Exhibits

31.1  Certification of Principal Executive Officer pursuant to Securities
      Exchange Act rules 13a-15 and 15d-15(c) as adopted pursuant to section 302
      of the Sarbanes-Oxley act of 2002.

31.2  Certification of Principal Financial Officer pursuant to Securities
      Exchange Act rules 13a-15 and 15d-15(c) as adopted pursuant to section 302
      of the Sarbanes-Oxley act of 2002.

32.1  Certification of Principal Executive and Accounting Officer pursuant to 18
      U.S.C.   section  1350,  as  adopted   pursuant  to  section  906  of  the
      Sarbanes-Oxley act of 2002.

                                       11
<PAGE>

SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report on Form 10QSB to be signed on its behalf by the  undersigned,
thereunto duly authorized.

Dated: November 15, 2004

BIOMODA, INC. AND SUBSIDIARY

                                    BY:/s/John J. Cousins
                                      ------------------------------------------
                                    John J. Cousins
                                    President
                                    (Principal Executive and Accounting Officer)



                                       12