UNITED
STATESSECURITIES AND EXCHANGE COMMISSION


Washington,
DC 20549




FORM
10-Q













x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE


SECURITIES
EXCHANGE ACT OF 1934








For
the quarterly period ended September
30, 2008





r TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934





For
the transition period from __________ to __________




Commission
file No. 333-90738




Biomoda,
Inc.


(Exact
name of registrant as specified in its charter)




New
      Mexico
            85-0392345(State of
      incorporation)
            (IRS Employer
      Identification No.)




P.O. Box 11342,Albuquerque,New Mexico87192


(Address
of principal executive offices including zip code)





Registrant'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 Securities Exchange Act of 1934 during the preceding 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
r





Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large accelerated
      filer   ̈
            Accelerated
      filer  rNon-accelerated
      filer   ̈
            Smaller reporting
      company  x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes r No x





The
number of issuer’s shares of Common Stock outstanding as of November 10, 2008
was 76,976,597.








Table of Contents








TABLEOF CONTENTS





PART
I. Financial Information




Item
      1. Financial Statements
              3Item
      2. Management's Discussion and Analysis of Financial
      Conditionand Results of
      Operations
              9Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
              11Item
      4. Controls and Procedures
              11PART
      II. Other InformationItem
      1.Legal Proceedings
              13Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
              13Item
      3. Defaults Upon Senior Securities
              13Item
      4. Submission of Matters to a Vote of Security
      Holders
              13Item
      5. Other Information
              13Item
      6. Exhibits
              13Signatures
              14







Table of Contents





PARTI: FINANCIAL INFORMATION





Forward
- Looking Statements




This Form
10-Q 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. We 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, our actual results may differ materially from those indicated by
the forward-looking statements.





The key
factors that are not within our control and that may have a direct bearing on
operating results include, but are not limited to, the acceptance by customers
of our products, our ability to develop new products cost-effectively, the
ability of us 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-Q, 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
 Table of Contents




BIOMODA,
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)




September
      30, 2008
              
              
              December
      31, 2007ASSETSCURRENT
      ASSETSCash
              
              $
              271,536
              
              
              $
              479,800Reimbursement
      receivable - current portion
              
              
              180,360
              
              
              
              -Prepaid
      expenses
              
              
              3,634
              
              
              
              3,241Total
      current assets
              
              
              455,530
              
              
              
              483,041Reimbursement
      receivable - non-current portion
              
              
              86,757
              
              
              
              -PROPERTY
      AND EQUIPMENT, net of accumulated depreciationof
      $14,882 and $12,642
              
              
              2,554
              
              
              
              4,794PATENTS
      AND TRADEMARKS, net of accumulated amortizationof
      $262,740 and $232,556
              
              
              104,279
              
              
              
              102,546Total
      assets
              
              $
              649,120
              
              
              $
              590,381LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
              
              $
              323,962
              
              
              $
              248,251Advances
      from stockholders
              
              
              199,213
              
              
              
              184,989Short-term
      debt
              
              
              90,873
              
              
              
              111,635Line
      of credit with an affiliated entity
              
              
              1,030,748
              
              
              
              1,070,529Total
      current liabilities
              
              
              1,644,796
              
              
              
              1,615,404Long-Term
      Debt
              
              
              166,557
              
              
              
              -Total
      liabilities
              
              
              1,811,353
              
              
              
              1,615,404STOCKHOLDERS'
      DEFICITClass
      A redeemable preferred stock; no par value; 2,000,000shares
      authorized; cumulative and convertible;liquidation
      and redemption values of $1.50 and $1.80per
      share, respectively; no shares issued or outstanding
              
              
              -
              
              
              
              -Undesignated
      preferred stock; 2,000,000 shares authorized; noshares
      issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, no par value, 100,000,000 share authorized;76,927,401
      and 48,315,983 issued; 76,867,401 and 48,255,983outstanding
              
              
              7,212,593
              
              
              
              6,199,585Treasury
      stock, at cost 60,000 shares
              
              
              (9,000
              )
              
              
              (9,000
              )Deficit
      accumulated during development stage
              
              
              (8,365,826
              )
              
              
              (7,215,608
              )Total
      stockholders' deficit
              
              
              (1,162,233
              )
              
              
              (1,025,023
              )Total
      liabilities and stockholders' deficit
              
              $
              649,120
              
              
              $
              590,381






4
 Table of Contents






BIOMODA,
INC. AND SUBSIDIARY


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)






Three
      months
                Ended
      September 30,
              
              
              Nine
      months
                Ended
      September 30,
              
              
              January
      3, 1990 (Inception) to2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              September
      30, 2008REVENUES
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (23
              )OPERATING
      EXPENSESGeneral
      and administrative
              
              
              219,497
              
              
              
              99,627
              
              
              
              807,252
              
              
              
              1,676,597
              
              
              
              4,175,075Professional
      fees
              
              
              44,972
              
              
              
              50,993
              
              
              
              147,809
              
              
              
              216,708
              
              
              
              954,593Depreciation
      and amortization
              
              
              10,352
              
              
              
              5,255
              
              
              
              32,424
              
              
              
              16,124
              
              
              
              280,237Research
      and development
              
              
              90,745
              
              
              
              15,492
              
              
              
              119,925
              
              
              
              805,689
              
              
              
              2,753,544Total
      operating expenses
              
              
              365,566
              
              
              
              171,367
              
              
              
              1,107,410
              
              
              
              2,715,118
              
              
              
              8,163,449Operating
      loss
              
              
              (365,566
              )
              
              
              (171,367
              )
              
              
              (1,107,410
              )
              
              
              (2,715,118
              )
              
              
              (8,163,426
              )OTHER
      INCOME (EXPENSE)Other
      income
              
              
              -
              
              
              
              33,919
              
              
              
              118
              
              
              
              33,919
              
              
              $
              34,037Gain
      on forgiveness of debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              282,103Interest
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,870Interest
      expense
              
              
              (14,168
              )
              
              
              (25,118
              )
              
              
              (42,926
              )
              
              
              (76,778
              )
              
              
              (522,410
              )Total
      other income (expense)
              
              
              (14,168
              )
              
              
              8,801
              
              
              
              (42,808
              )
              
              
              (42,859
              )
              
              
              (202,400
              )LOSS
      BEFORE PROVISIONFOR
      INCOME TAXES
              
              
              (379,734
              )
              
              
              (162,566
              )
              
              
              (1,150,218
              )
              
              
              (2,757,977
              )
              
              
              (8,365,826
              )PROVISION
      FOR INCOME TAXES
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (379,734
              )
              
              $
              (162,566
              )
              
              $
              (1,150,218
              )
              
              $
              (2,757,977
              )
              
              $
              (8,365,826
              )Basic
      and diluted weighted averagenumber
      of shares outstanding
              
              
              75,804,416
              
              
              
              15,296,882
              
              
              
              70,876,127
              
              
              
              12,053,910Basic
      and diluted loss per common share
              
              $
              (0.01
              )
              
              $
              (0.01
              )
              
              $
              (0.02
              )
              
              $
              (0.23
              )





5
 Table of Contents


BIOMODA,
INC. AND SUBSIDIARY
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)






For
      the Nine Months
              
              
              January
      3, 1990ended
      September 30,
              
              
              (inception)
      to2008
              
              
              2007
              
              
              September
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (1,150,218
              )
              
              $
              (2,757,977
              )
              
              $
              (8,365,826
              )Adjustments
      to reconcile net earnings to netcash
      provided by operating activitiesStock-based
      compensation
              
              
              302,702
              
              
              
              1,504,628
              
              
              
              2,871,088Depreciation
      and amortization
              
              
              32,424
              
              
              
              16,124
              
              
              
              280,734Write
      off of license fee
              
              
              -
              
              
              
              -
              
              
              
              1,250Loss
      on sale of assets
              
              
              -
              
              
              
              -
              
              
              
              358Foreign
      currency translation adjustments
              
              
              -
              
              
              
              -
              
              
              
              3,247Non-cash
      gain on debt settlement
              
              
              -
              
              
              
              -
              
              
              
              (240,239
              )Changes
      in operating assets and liabilitiesAccounts
      receivable
              
              
              (49,630
              )
              
              
              -
              
              
              
              (57,250
              )Other
      assets
              
              
              (393
              )
              
              
              -
              
              
              
              3,986Accounts
      payable and accrued liabilities
              
              
              75,711
              
              
              
              82,386
              
              
              
              903,805Net
      cash used in operating activities
              
              $
              (789,404
              )
              
              $
              (1,154,839
              )
              
              $
              (4,598,847
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of equipment
              
              
              
              
              
              $
              (845
              )
              
              $
              (25,571
              )Sales
      of property and equipment
              
              
              -
              
              
              
              -
              
              
              
              1,139Payment
      for patents, trademarks and licenses
              
              
              (31,917
              )
              
              
              (1,802
              )
              
              
              (384,017
              )Organizational
      costs
              
              
              -
              
              
              
              -
              
              
              
              (560
              )Net
      cash used in investing activities
              
              $
              (31,917
              )
              
              $
              (2,647
              )
              
              $
              (409,009
              )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock for cash
              
              $
              710,306
              
              
              $
              243,446
              
              
              $
              2,897,883Proceeds
      from  line-of-credit from affiliated entity
              
              
              28,703
              
              
              
              1,073,040
              
              
              
              2,680,882Proceeds
      from stockholders' advances
              
              
              14,224
              
              
              
              15,635
              
              
              
              159,803Repayments
      of line-of-credit from affiliated entity
              
              
              (68,484
              )
              
              
              (200,797
              )
              
              
              (340,484
              )Repayments
      of short-term debt
              
              
              (71,692
              )
              
              
              -
              
              
              
              (109,692
              )Acquisition
      of treasury stock
              
              
              -
              
              
              
              -
              
              
              
              (9,000
              )Net
      cash provided by financing activities
              
              $
              613,057
              
              
              $
              1,131,324
              
              
              $
              5,279,392NET
      (DECREASE) INCREASE IN CASH
              
              $
              (208,264
              )
              
              $
              (26,162
              )
              
              $
              271,536Cash
      at beginning of period
              
              
              479,800
              
              
              
              116
              
              
              
              -Cash
      at end of period
              
              $
              271,536
              
              
              $
              (26,046
              )
              
              $
              271,536SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONInterest
      expense paid in cash
              
              $
              -
              
              
              $
              -
              
              
              $
              -Income
      taxes paid in cash
              
              $
              -
              
              
              $
              -
              
              
              $
              -SUPPLEMENTAL
      SCHEDULE OF NON-CASH ACTIVITIESAccrued
      salaries converted to notes payable
              
              $
              -
              
              
              $
              -
              
              
              $
              149,635Interest
      converted to note payable
              
              $
              -
              
              
              $
              -
              
              
              $
              479,484Common
      stock issued to extinguish related party debt
              
              $
              -
              
              
              $
              103,768
              
              
              $
              1,418,768










6
 Table of Contents


_____________________________________________


BIOMODA,
INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


_____________________________________________


1.  BASIS
OF PRESENTATION





The
accompanying unaudited interim financial statements of Biomoda, Inc. have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the
Management's Discussion and Analysis and the audited financial statements and
notes thereto contained in our 2007 Annual Report filed with the Securities and
Exchange Commission on Form 10-KSB. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for 2007
as reported on form 10-KSB have been omitted.





2.  DEVELOPMENT
STAGE





We have
been in the development stage since we began operations on January 3, 1990. We
have a continuing government contract for the next twelve months of $1.17
million dollars in reimbursement of research and development costs and
associated overhead expenses.  As of September 30, 2008, we had an
accumulated deficit of $8,302,089 and a working capital deficit of
$1,401,427.





In
additions, we did not generate any cash from operations.  These
factors create a substantial doubt as to our ability to continue as a going
concern.





We will
require additional funding for continuing research and development and obtaining
regulatory approval and for the commercialization of our products. Management
expects to be able to raise enough funds to meet our working capital
requirements through the sale of our common stock or other means of
financing.





There is
no assurance that we will be able to obtain sufficient additional funds when
needed, or that such funds, if available, will be obtainable on terms
satisfactory to us.





3.  LINE
OF CREDIT FROM AN AFFILIATED ENTITY




We have
disputed the amount due on the line of credit from Advanced Optics Electronics,
Inc. as we believe Advanced Optics Electronics, Inc. has claimed payment for
certain expenses on behalf of Biomoda in error.  The amount of the line of
credit remains on our balance sheet as a liability until the dispute can be
resolved.






7
 Table of Contents




_____________________________________________
 BIOMODA,
INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 _____________________________________________




4.  COMMON
STOCK





During
the three months ended September 30, 2008, we issued 125,000 common shares for
services valued at $5,000.  We also issued 244,000 common shares to
replace shares lost in shipping related to the Regulation S offering and
recognized $12,200 as expense as the initial shares were not cancelled due to
the cost of cancelling the shares.





During
the three months ended June 30, 2008, we issued 262,237 common shares for
services valued at $19,029.  We also sold 1,328,142 common shares for
$123,956, incurring $90,688 in costs related to the Regulation S offering. We
concluded our Regulation S offering on May 9, 2008.





During
the three months ended March 31, 2008, we issued 3,225,860 common shares for
services valued at $266,293.  We also sold 23,426,179 common shares
for $2,535,255, incurring $1,858,037 in costs related to the Regulation S
offering.





During
the first quarter of 2007, Biomoda issued 726,000 common shares for services
valued at $792,500; 2,000 common shares for cash of $1,000; 30,000 common shares
issued for stock payable; and 86,786 common shares in exchange for discharge of
debt of $73,768 to a related party.





During
the second quarter of 2007, Biomoda issued 1,644,062 common shares for services
valued at $661,102 and 343,000 common shares for cash of $41,712. Biomoda also
issued 500,000 common shares in exchange for discharge of debt of $315,000 to
Advanced Optics Electronics to pay down the Line of Credit.





During
the third quarter of 2007, we issued 301,000 common shares for services valued
at $28,500 and 550,000 common shares for cash of $35,000.  We also
sold 4,964,049 common shares for $455,227, incurring $296,794 in costs related
to the offering.





5.  REIMBURSEMENT
OF R&D EXPENSES





During
the quarter ended September 30, 2008, we received a reimbursement of allowable
research and development expenses through a clinical study funded through the
New Mexico Department of Veterans Services and administered by the New Mexico
Institute of Mining and Technology to screen New Mexican Veterans for lung
cancer.  For the three months ended September 30, 2008, we recorded
$129,312 as a reduction of operating expenses related to this clinical study
program. We also recorded $180,360 in current receivables for expenses and
equipment acquired through lease and $86,757 in long term receivables for future
reimbursement of leased equipment.





During
the quarter ended June 30, 2008, we began receiving a reimbursement of allowable
research and development expenses through a clinical study funded through the
New Mexico Department of Veterans Services and administered by the New Mexico
Institute of Mining and Technology to screen New Mexican Veterans for lung
cancer. For the three months ended June 30, 2008, we recorded $201,516 as a
reduction of operating expenses related to this clinical study program. We also
received $96,602 as reimbursement for payments made on leased
equipment.






8
 Table of Contents




Item2: MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF
OPERATIONS





COMPANY
OVERVIEW





Biomoda,
Inc. is a development stage company incorporated in the state of New Mexico on
January 3, 1990. Our general focus is on discovery, development,
manufacture and marketing of proprietary medical diagnostic and treatment
products used to treat life threatening and other serious
diseases.  Our primary focus is creating diagnostic solutions for
early detection and clinical management of cancer.





PLAN OF
OPERATION





Our plan
of operation for the next fifteen months is to complete our Phase I/II/ and III
Clinical Trials for our lung cancer assay.  We are currently
conducting a program to screen veterans for lung cancer in New
Mexico.  This program is being partially funded by the state of New
Mexico Department of Veterna Services.





Our
initial product is a diagnostic test for lung cancer that will be performed out
of body by using a sputum 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 or precancerous cells.  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,
bladder, and colorectal.  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 has instituted a nationwide
lung cancer-screening program.  We also intend to sell our product in
additional markets throughout the world such as India, Brazil and South America,
Asia and Russia.  We will market different product formats based on
the region of the world.





In
addition to augmenting laboratory research and development, management plans to
further strengthen our corporate infrastructure 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.





Our
research and development laboratories are located at the Lovelace Respiratory
Research Institute in Albuquerque, New Mexico.





Over the
next eighteen months, management and the Board of Directors 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 and all risks associated with our
business plan.





PATENTS
AND TRADEMARKS





In
January 2005, the U.S. Patent Office awarded a Patent to 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 our patent portfolio and expands
our intellectual property to include cancer screening as a compliment to our
existing technology. We filed for a continuation for this Patent based on
research currently underway by researchers at Biomoda.





In April,
2008, the U.S. Patent Office awarded a Divisional Patent to Biomoda researchers
entitled “Method of Prognosing Response to Cancer Therapy with 5,10,15,20 -
Tetrakis (Carboxyphenyl) Porphine”.  We are planning to file new
patents next quarter related to the making of TCPP and the proprietary
innovations based on flow cytometry and dark-field microscopy as
platforms.





U.S.
Patent and Trademark Office has issued a notice of allowance for the marks
CyPath® and CyDx®.  Biomoda expects registration of the marks
shortly.




9
 Table of Contents





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
months ended September 30, 2008 and 2007





REVENUE.  As
of September 30, 2008, there have been no significant revenues since
inception.





RESEARCH
AND DEVELOPMENT.  Product development expenses consist primarily of
personnel expenses and consulting fees. Research and development, including
payroll costs and other technical costs increased to $123,573 in the three
months ended September 30, 2008 from $15,492 in the three months ended September
30, 2007. We believe that continued investment in product development is
critical to attaining our strategic objectives and, as a result, we expect
expenses such as clinical studies and collaborations to increase significantly
in the next year. We expense product development costs as they are
incurred.  During the quarter ended September 30, 2008, we began
receiving a reimbursement of allowable research and development expenses through
a clinical study funded through the New Mexico Department of Veterans Services
and administered by the New Mexico Institute of Mining and Technology New
Mexican Veterans for lung cancer.  For the three months ended
September 30, 2008, we recorded $129,312 as a reduction of operating expenses
related to this clinical study program.





GENERAL
AND ADMINISTRATIVE.  General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services, travel and general corporate activities.  General and
administrative costs, taken together with professional fees, increased to
$219,497 in the three months ended September 30, 2008 from $55,242 in the three
months ended September 30, 2007.  The increase was primarily related
to the company issuing stock for consulting and investor relation services in
2008.  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) in these periods consists of
interest expense, which decreased to $14,168 in the three months ended September
30, 2008 from $25,118 in the three months ended September 30, 2007 due to lower
balance in related party debt.





Comparison of the nine
months ended September 30, 2008 and 2007




REVENUE.  As
of September 30, 2008, there have been no significant revenues since
inception.





RESEARCH
AND DEVELOPMENT.  Product development expenses consist primarily of
personnel expenses and consulting fees. Research and development, including
payroll costs and other technical costs decreased to $450,753 in the nine months
ended September 30, 2008 from $805,689 in the nine months ended September 30,
2007. We believe that continued investment in product development is critical to
attaining our strategic objectives and, as a result, we expect expenses such as
clinical studies and collaborations to increase significantly in the next year.
We expense product development costs as they are incurred.  During the
nine months ended September 30, 2008, we began receiving a reimbursement of
allowable research and development expenses through a clinical study funded
through the New Mexico Department of Veterans Services and administered by the
New Mexico Institute of Mining and Technology New Mexican Veterans for lung
cancer.   For the nine months ended September 30, 2008, we
recorded $330,828 as a reduction of operating expenses related to this clinical
study program.





GENERAL
AND ADMINISTRATIVE.  General and administrative expenses consist of
expenses for executive and administrative personnel, facilities, professional
services, travel and general corporate activities.  General and
administrative costs, taken together with professional fees, decreased to
$955,060 in the nine months ended September 30, 2008 from $1,876,305 in the nine
months ended September 30, 2007.  The decrease was primarily related
to the company issuing stock for consulting and investor relation services in
2007.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) in these periods consists of
interest expense, which decreased to $42,926 in the nine months ended September
30, 2008 from $76,459 in the
nine months ended September 30, 2007 due to lower balance in related party
debt.






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LIQUIDITY
AND CAPITAL RESOURCES





We have
funded our operations with sales of equity for cash, issuance of equity for
services in lieu of cash and government funding.  In the next 18 months, it
is our intent to generate revenues from product sales and to begin partially
funding operations from revenues which will be subject to clinical trials and
FDA approval.





Product
development expenditures, including personnel expense, and general and
administrative expense was $355,332 for the three months ended September 30,
2008.  Funds for operations, product development and capital
expenditures were provided from the sale of restricted company stock and the
reimbursement grant we received.  We will require substantial
additional funding for continuing research and development, obtaining regulatory
approval and for the commercialization of our products.





Management
believes that sales of securities will provide adequate liquidity and capital
resources to meet the anticipated development stage requirements through the end
of 2008.  In addition, it is anticipated that sales of our initial
screening product will begin pending FDA approval 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 we will be able to obtain sufficient additional funds when
needed, or that such funds, if available, will be obtainable on terms
satisfactory to us.  The consolidated financial statements do not
include any adjustments that might be necessary should we be unable to continue
as a going concern.





INFLATION





Management
believes that inflation has not had a material effect on our results of
operations.





Item3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





There has
been no material change in our market risks since the end of the fiscal year
2007.





Item4: CONTROLS AND PROCEDURES





Under the
supervision and with the participation of our management, 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
the end of the period covered by this report, September 30,
2008).  Based upon that evaluation, we concluded that our disclosure
controls and procedures were effective.





We are in
the development stages of our business operations and have 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 our 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 our periodic reports filed
under the Exchange Act is accumulated and communicated to management to allow
timely decisions regarding required disclosure.  Further, as reported
in our Current Report on Form 8-K filed on August 14, 2007, we are currently
investigating (i) what appears to be the unauthorized issuance of shares of our
common stock in violation of the Securities Act of 1933, and (ii) the improper
diversion of cash from the Company to a former officer and director and/or his
affiliates.





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We are
re-evaluating and revising our existing control policies and procedures. As part
of such plan and implementation, we are 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





Significant
changes have been made to improve our internal controls over financial reporting
during the three months ended September 30, 2008.  We have employed
additional accounting personnel which has helped us increase our segregation of
duties.  We are implementing a review process over significant
business transactions.





LIMITATIONS
ON THE EFFECTIVENESS OF INTERNAL CONTROL





Our
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.








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PART
II. OTHER INFORMATION





Item1.  LEGAL PROCEEDINGS





On August
29, 2007, Biomoda, Inc and Advanced Optics Electronics, Inc. jointly filed a
Complaint in Federal Court, case number 1:07-cv-00855 against Leslie Robins,
Alvin Robins and John Kearns for Common Law Fraud, Violation of Federal and New
Mexico Securities Laws, Conversion, Breach of Fiduciary Duty and
Racketeering.





Upon
procuring and reviewing Biomoda records obtained through auction that had been
abandoned by former employee Leslie Robins, Biomoda's lawyers have ascertained
that the "line of credit" or "loan" for $3 million dated in 2002 and allegedly
from Advanced Optics Electronics, Inc. was in fact a fraud perpetrated by Mr.
Robins and that no loan exists.  There is no record of a transfer of
any significant sum to Biomoda from ADOT in the historical record of either
company.





Biomoda
previously conducted an offering of up to 6,000,000 shares of its common stock
pursuant to a registration statement on Form SB-2.  This registration
statement became stale on November 4, 2005, prior to selling any shares under
this registered offering.  The Board is currently investigating the
issuance of the following shares of common stock purportedly under the SB-2
registration statement pursuant to Mr. Robins’ sole and unauthorized direction:
343,000 shares on or about June 5, 2007, 230,000 shares on or about June 8,
2007, 500,000 shares on or about June 25, 2007, 90,000 shares on or about July
11, 2007, 50,000 shares on or about July 11, 2007, and 555,000 shares on or
about July 13, 2007.  Based upon the Board’s initial investigation,
all of such shares were issued without registration under the Securities Act of
1933, as amended, or any exemption therefrom.  As a result, such
shares were issued in violation of the Securities Act of 1933, as
amended.





Item2.  CHANGES IN SECURITIES - None




Item
3.  DEFAULTS UPON SENIOR SECURITIES - None




Item
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None




Item
5.  OTHER INFORMATION - None




Item
6.  EXHIBITS





31  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.





32  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.











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SIGNATURES








Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








Dated:
November 10, 2008





BIOMODA,
INC.





By: /s/ John J.
Cousins


John J.
Cousins


President


(Principal
Executive and Accounting Officer)











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