UNITED
STATES


SECURITIES
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,
2009





oTRANSITION 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 Mexico 87192


(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
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this Chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o




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 o
            Accelerated
      filer  oNon-accelerated
      filero
            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 o No x





The
number of issuer’s shares of Common Stock outstanding as of November 16, 2009
was 76,923,012.




Table of Contents




TABLE OF CONTENTS





PART
I. Financial Information




PageItem 1. Financial
      Statements (Unaudited)
            3Item 2. Management's Discussion and
      Analysis of Financial Condition and Results of
      Operations
            12Item 3. Quantitative and Qualitative
      Disclosures About Market Risk
            16Item 4. Controls and
      Procedures
            17PART
      II. Other InformationItem 1. Legal
      Proceedings
            18Item 2. Unregistered Sales of
      Equity Securities and Use of Proceeds
            18Item 3. Defaults Upon Senior
      Securities
            18Item 4. Submission of Matters to a
      Vote of Security Holders
            18Item 5. Other
      Information
            18Item 6.
      Exhibits
            18Signatures
            19




Table of Contents




PART I: 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, our
ability 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, 2009
                  
                  
                  December
      31, 2008ASSETSCURRENT
      ASSETSCash
                  
                  $
                  70,004
                  
                  
                  $
                  36,854Grants
      receivable
                  
                  
                  15,000
                  
                  
                  
                  184,124Deferred
      charges
                  
                  
                  9,573
                  
                  
                  
                  -Total
      current assets
                  
                  
                  94,577
                  
                  
                  
                  220,978Accounts
      receivable
                  
                  
                  -
                  
                  
                  
                  81,797Property
      and equipment, net of accumulated depreciationof  $17,436
      and $15,452
                  
                  
                  -
                  
                  
                  
                  1,984Deferred
      Charges
                  
                  
                  28,718
                  
                  
                  
                  -Patents
      and trademarks, net of accumulated amortizationof  $309,334
      and $281,952
                  
                  
                  119,031
                  
                  
                  
                  114,576Total
      assets
                  
                  $
                  242,326
                  
                  
                  $
                  419,335LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
                  
                  $
                  382,387
                  
                  
                  $
                  289,199Advances
      from stockholders
                  
                  
                  211,767
                  
                  
                  
                  201,643Short-term
      debt
                  
                  
                  92,057
                  
                  
                  
                  90,873Advances
      from research grants
                  
                  
                  141,993
                  
                  
                  
                  -Total
      current liabilities
                  
                  
                  828,204
                  
                  
                  
                  581,715LONG-TERM
      DEBT
                  
                  
                  131,346
                  
                  
                  
                  162,110Total
      liabilities
                  
                  
                  959,550
                  
                  
                  
                  743,825STOCKHOLDERS'
      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;77,514,587
      and 77,004,589 issued; and76,423,014
      and 77,004,589 outstanding
                  
                  
                  7,451,281
                  
                  
                  
                  7,206,381Treasury
      stock, at cost 1,091,575 shares and 0 shares,respectively
                  
                  
                  (4,617
                  )
                  
                  
                  -Deficit
      accumulated during development stage
                  
                  
                  (8,163,888
                  )
                  
                  
                  (7,530,871
                  )Total
      stockholders' deficit
                  
                  
                  (717,224
                  )
                  
                  
                  (324,490
                  )Total
      liabilities and stockholders' deficit
                  
                  $
                  242,326
                  
                  
                  $
                  419,335
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 Table of Contents
  BIOMODA,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF OPERATIONS(UNAUDITED)
  3
      Months Ended September 30
                                                                                  
                                                                                  9
      Months Ended September 30
                                                                                  
                                                                                  
                                                                                  January
      3, 1990 (Inception) to2009
                                                                                  
                                                                                  
                                                                                  2008
                                                                                  
                                                                                  
                                                                                  2009
                                                                                  
                                                                                  
                                                                                  2008
                                                                                  
                                                                                  
                                                                                  September
      30, 2009Revenue
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  23Operating
      ExpensesProfessional
      fees
                                                                                  
                                                                                  
                                                                                  26,899
                                                                                  
                                                                                  
                                                                                  
                                                                                  44,972
                                                                                  
                                                                                  
                                                                                  
                                                                                  95,279
                                                                                  
                                                                                  
                                                                                  
                                                                                  147,809
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,095,781General
      and administrative
                                                                                  
                                                                                  
                                                                                  346,213
                                                                                  
                                                                                  
                                                                                  
                                                                                  219,497
                                                                                  
                                                                                  
                                                                                  
                                                                                  441,219
                                                                                  
                                                                                  
                                                                                  
                                                                                  807,252
                                                                                  
                                                                                  
                                                                                  
                                                                                  4,793,946Research
      and development, net ofgrants
      received
                                                                                  
                                                                                  
                                                                                  44,489
                                                                                  
                                                                                  
                                                                                  
                                                                                  90,745
                                                                                  
                                                                                  
                                                                                  
                                                                                  55,819
                                                                                  
                                                                                  
                                                                                  
                                                                                  119,925
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,772,542Depreciation
      and amortization
                                                                                  
                                                                                  
                                                                                  6,085
                                                                                  
                                                                                  
                                                                                  
                                                                                  10,352
                                                                                  
                                                                                  
                                                                                  
                                                                                  29,367
                                                                                  
                                                                                  
                                                                                  
                                                                                  32,424
                                                                                  
                                                                                  
                                                                                  
                                                                                  329,385Total
      operating expenses
                                                                                  
                                                                                  
                                                                                  423,686
                                                                                  
                                                                                  
                                                                                  
                                                                                  365,566
                                                                                  
                                                                                  
                                                                                  
                                                                                  621,684
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,107,410
                                                                                  
                                                                                  
                                                                                  
                                                                                  8,991,654Loss
      from operations
                                                                                  
                                                                                  
                                                                                  (423,686
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (365,566
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (621,684
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,107,410
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (8,991,631
                                                                                  )Other
      Income (Expense)Gain
      on extinguishment of debt
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  118
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,326,028Other
      income
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  34,037Interest
      income
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  3,870Interest
      expense
                                                                                  
                                                                                  
                                                                                  (3,967
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (14,168
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (11,333
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (42,926
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (536,192
                                                                                  )Total
      other income (expense)
                                                                                  
                                                                                  
                                                                                  (3,967
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (14,168
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (11,333
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (42,808
                                                                                  )
                                                                                  
                                                                                  
                                                                                  827,743Loss
      before provision for income taxes
                                                                                  
                                                                                  
                                                                                  (427,653
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (379,734
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (633,017
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,150,218
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (8,163,888
                                                                                  )Provision
      for income taxes
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -Net
      Loss
                                                                                  
                                                                                  
                                                                                  (427,653
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (379,734
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (633,017
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,150,218
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (8,163,888
                                                                                  )Basic
      and diluted loss per common share
                                                                                  $
                                                                                  (0.01
                                                                                  )
                                                                                  $
                                                                                  (0.01
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  (0.01
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  (0.02
                                                                                  )Basic
      and diluted weighted average number ofcommon
      shares outstanding
                                                                                  
                                                                                  
                                                                                  75,917,329
                                                                                  
                                                                                  
                                                                                  
                                                                                  75,804,416
                                                                                  
                                                                                  
                                                                                  
                                                                                  77,037,116
                                                                                  
                                                                                  
                                                                                  
                                                                                  70,876,127
 The
accompanying notes are an integral part of these consolidated financial
statements.


5
 Table of Contents
  BIOMODA,
      INC. AND SUBSIDIARY(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS(UNAUDITED)
 Nine
      Months
                
                
                January
      3, 1990ended
      September 30,
                
                
                (inception)
      to2009
                
                
                2008
                
                
                September
      30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (633,017
                )
                
                $
                (1,150,218
                )
                
                $
                (8,163,888
                )Adjustments
      to reconcile net earnings to netcash
      used in operating activities:Stock
      based compensation
                
                
                244,900
                
                
                
                302,702
                
                
                
                3,118,776Depreciation
      and amortization
                
                
                29,367
                
                
                
                32,424
                
                
                
                329,385Write
      off of license fee
                
                
                -
                
                
                
                -
                
                
                
                1,250Loss
      on sale of assets
                
                
                -
                
                
                
                -
                
                
                
                358Foreign
      currency translation adjustments
                
                
                -
                
                
                
                -
                
                
                
                3,247Gain
      on extinguishment of debt
                
                
                -
                
                
                
                -
                
                
                
                (1,283,964
                )Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                207,841
                
                
                
                (49,630
                )
                
                
                159,220Other
      assets
                
                
                4,786
                
                
                
                (393
                )
                
                
                12,406Advances
      from research grants
                
                
                141,994
                
                
                
                -
                
                
                
                141,994Accounts
      payable and accrued liabilities
                
                
                82,321
                
                
                
                75,711
                
                
                
                965,460Net
      cash provided by (used in) operating activities
                
                
                78,192
                
                
                
                (789,404
                )
                
                
                (4,715,756
                )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of equipment
                
                
                -
                
                
                
                -
                
                
                
                (25,571
                )Sales
      of property and equipment
                
                
                -
                
                
                
                -
                
                
                
                1,139Costs
      of patents, trademarks and licenses
                
                
                (31,837
                )
                
                
                (31,917
                )
                
                
                (445,363
                )Organizational
      costs
                
                
                -
                
                
                
                -
                
                
                
                (560
                )Net
      cash used in investing activities
                
                
                (31,837
                )
                
                
                (31,917
                )
                
                
                (470,355
                )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of common stock for cash
                
                
                -
                
                
                
                710,306
                
                
                
                2,897,883Proceeds
      from  line-of-credit from affiliated entity
                
                
                -
                
                
                
                28,703
                
                
                
                2,680,882Proceeds
      from stockholders' advances
                
                
                10,125
                
                
                
                14,224
                
                
                
                172,358Repayments
      of line-of-credit from affiliated entity
                
                
                -
                
                
                
                (68,484
                )
                
                
                (341,107
                )Proceeds
      from/repayments of short-term debt, net
                
                
                1,184
                
                
                
                (71,692
                )
                
                
                (108,508
                )Repayments
      of long-term debt
                
                
                (19,897
                )
                
                
                -
                
                
                
                (31,776
                )Acquisition
      of treasury stock
                
                
                (4,617
                )
                
                
                -
                
                
                
                (13,617
                )Net
      cash (used in) provided by financing activities
                
                
                (13,205
                )
                
                
                613,057
                
                
                
                5,256,115NET
      (DECREASE) INCREASE IN CASH
                
                
                33,150
                
                
                
                (208,264
                )
                
                
                70,004Cash
      at beginning of year
                
                
                36,854
                
                
                
                479,800
                
                
                
                -Cash
      at end of year
                
                $
                70,004
                
                
                $
                271,536
                
                
                $
                70,004Supplemental
      cash flow information:Interest
      expense paid in cash
                
                $
                -
                
                
                $
                -
                
                
                $
                -Income
      taxes paid in cash
                
                $
                -
                
                
                $
                -
                
                
                $
                -Non-cash
      investing and financing activities:Accrued
      salaries converted to notes payable
                
                $
                -
                
                
                $
                -
                
                
                $
                479,484Interest
      converted to note payable
                
                $
                -
                
                
                $
                -
                
                
                $
                159,462Common
      stock issued to extinguish related party debt
                
                $
                -
                
                
                $
                -
                
                
                $
                1,418,768
 The
accompanying notes are an integral part of these consolidated financial
statements.
 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 2008 Annual Report filed with the Securities and
Exchange Commission on Form 10-K. 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 2008 as
reported on Form 10-K have been omitted.




The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, as well as certain financial statement
disclosures.  While management believes that the estimates and
assumptions used in the preparation of the financial statements are appropriate,
actual results could differ from these estimates.




2.  DEVELOPMENT
STAGE





We have
been in the development stage since we began operations on January 3, 1990. We
had a continuing government contract for fiscal year ended June 30, 2009, of
$1.3 million of which approximately $1,276,678 has been already reimbursed,
leaving approximately $23,332 that can be reimbursed as of the end of September
2009.  As of September 30, 2009, we had an accumulated deficit of
$8,163,888 and a working capital deficit of $733,627.





In
addition, we have historically not generated 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, obtaining
regulatory approval and 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.  RECENT
ACCOUNTING PRONOUNCEMENTS





In June
2009, the FASB issued Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(“SFAS 168”), which amends SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS 168 will become the source of authoritative U.S.
GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under the authority of federal securities laws
are also sources of authoritative GAAP for SEC registrants. On the effective
date, SFAS 168 will supersede all then existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in SFAS 168 will become non-authoritative. SFAS 168 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The adoption of SFAS 168 did not impact our results of
operations or financial condition.




Other
recently issued or adopted accounting pronouncements are not expected to have,
or did not have, a material effect on our financial position or results from
operations.




7
 Table of Contents




_____________________________________________


BIOMODA,
INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


_____________________________________________








4.  EARNINGS
PER SHARE




Basic
earnings per share excludes dilution and is computed by dividing net income
(loss) by the weighted-average common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.  Potentially dilutive securities have
been excluded from the net loss per common share calculation as the effects
would be anti-dilutive.





5.  COMMON
AND TREASURY STOCK





Treasury
Stock





We
account for treasury stock as a reduction in capital stock based upon the cost
of the shares acquired. During the third quarter ending September 30, 2009, we
acquired the following treasury shares:





·
            1,998,575
      shares of our common stock pursuant to our April 2009 Settlement Agreement
      and Release entered into between the Company and Advanced Optics
      Electronics, Inc. and Leslie S. Robins (see Note 8).  These
      shares were acquired at zero cost.


·
            93,000
      shares of our common stock in a series of transactions on the open market
      at a cost of $4,617.





During
the quarter ending September 30, 2009, we reissued 1,000,000 treasury shares as
further discussed below.





At
September 30, 2009, we have 1,151,575 treasury shares acquired at a cost of
$13,617.





Common
Stock





During
the three months ended September 30, 2009, we issued 250,000 restricted common
shares with immediate vesting to a consultant for services valued at $12,500
based upon the price of our common stock on the date of agreement.





During
the three months ended September 30, 2009, we issued 1,000,000 common shares
from our Treasury stock for services valued at $220,000 based upon the price of
our common stock on the date of agreement.





During
the three months ended September 30, 2009, we issued 100,000 of our restricted
shares valued at $5,000 based upon the market price of our common stock on the
date of grant to an employee in lieu of cash wages







8
 Table of Contents




_____________________________________________


BIOMODA,
INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


_____________________________________________





5.  COMMON
AND TREASURY STOCK (Continued)





In July,
2009, we entered into agreements with two members of our board of directors to
sell each director up to 2,000,000 shares of our common stock at $0.05 per share
for total cash consideration of $100,000 per agreement or $200,000 total. 
The agreements allow the purchasers until December 31, 2009, to remit the full
purchase price to us.  In the event the purchasers are unable to pay the
full amount by December 31, 2009, we will issue common stock in an amount equal
to the cash actually received, divided by $0.05 per share. In August, 2009, we
issued 100,000 shares of our common stock pursuant to this agreement and
received net proceeds of $5,000.





During
the three months ended June 30, 2009, we issued 30,000 common shares to a
consultant for services valued at $1,200.





During
the three months ended March 31, 2009, we issued 30,000 common shares to a
consultant for services valued at $1,200.





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.





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.





6.  STOCK
OPTIONS





No
options were granted during the nine months ended September 30, 2009 or 2008
respectively.





A summary
of the changes in options outstanding during the nine months ended September 30,
2009, is as follows:





Number
      of Shares
                            
                            
                            Weighted
      Average Exercise PriceOutstanding
      at 12/31/08
                            
                            
                            1,586,768
                            
                            
                            $
                            0.45Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled/Expired
                            
                            
                            (448,000
                            )
                            
                            
                            0.66Outstanding
      at 9/30/09
                            
                            
                            1,138,768
                            
                            
                            $
                            0.36




9
 Table of Contents


_____________________________________________


BIOMODA,
INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


_____________________________________________





6.  STOCK
OPTIONS (Continued)





As of
September 30, 2009, all compensation expense related to outstanding options had
been recognized and all options were fully vested and exercisable.  As
of September 30, 2009, outstanding options had an intrinsic value of $113,300
and a weighted average remaining contractual term of 1.05 years.





7.  REIMBURSEMENT
OF R&D EXPENSES AND ADVANCES FROM RESEARCH GRANTS





During
the nine months ended September 30, 2009, we were entitled to receive a
reimbursement of allowable research and development expenses through a clinical
program 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 and nine months ended
September 30, 2009, we recorded $91,666 and $547,712, respectively, as a
reduction of operating expenses related to this Clinical Study
program.





Pursuant
to the clinical program, the Company billed reimbursable amounts for tasks and
milestones in progress as of September 30, 2009.  These billings totaled
$141,993 at September 30, 2009, and are shown as Advances from research grants
in the accompanying balance sheet. Activities under the clinical program are
expected to be completed in the next three months.





8. LEGAL
UPDATE





On April
22, 2009, Biomoda, Advanced Optics Electronics, Inc. (“ADOT”), and Leslie S.
Robins (“Robins”) entered into a Settlement Agreement and Release (“Settlement”)
to resolve all claims in the pending federal lawsuit entitled Advanced Optics Electronics, Inc.,
et al. v. Leslie S. Robins, et al. No. CIV-2007-00855, JB/DJS, U.S.
District Court for the District of New Mexico and two related suits. As
described below, the Settlement effectively separates Biomoda from ADOT and
Robins and cedes control of ADOT to Robins.





Pursuant
to the Settlement, in addition to executing a release in favor of Biomoda,
Robins took the following action:





(a)
            paid
      $10,000 to Biomoda and delivered to Biomoda all Biomoda documents within
      his possession or control;


(b)
            resigned
      from any position he may claim to hold or claim he should hold as an
      officer or director of Biomoda;


(c)
            transferred
      all shares to the Company of Biomoda stock currently held by Robins or by
      any family member or other person, corporation or entity in which he has
      any control, which consisted of 747,000 shares;
  and


(d)
            agreed
      not to acquire any Biomoda shares in the
future.





In
addition, on April 22, 2009, our President and current board member, John J.
Cousins, resigned as a director and officer of ADOT, and Robins was appointed
Chairman, Chief Executive Officer and President of ADOT. Pursuant to the
Settlement, ADOT also transferred 1,231,575 Biomoda shares to the Company and
released Biomoda from all ADOT claims, including claims related to an alleged
promissory note dated May 1, 2002, in the amount of $1,030,748, which was
disputed and previously written off by Biomoda as of the year ended December 31,
2008.




10
 Table of Contents


_____________________________________________


BIOMODA,
INC.


(A
Development Stage Company)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


_____________________________________________





8. LEGAL
UPDATE (Continued)





As the
result of a federal lawsuit entitled Advanced Optics Electronics, Inc.,
et al. v. Leslie S. Robins, et al.No. CIV-2007-00855, JB/DJS, U.S.
District Court for the District of New Mexico and two related suits, Biomoda has
won default judgments against two Defendants, Alvin Robins and John Kearns on
all counts alleged and in favor of Biomoda.  Biomoda will submit a
final statement of damages to the Court in November, 2009, and the Court will
determine the final damage amount owed by the Defendants to
Biomoda.  The two Defendants have yet to file a responsive pleading
regarding any matter before the Court. Upon award of damages, Biomoda intends to
aggressively pursue collection of damages against the Defendants.





9.
SUBSEQUENT EVENTS





On
October 27, 2009, we issued 500,000 treasury shares for services to a consultant
valued at $75,000.




11
 Table of Contents


Item 2. 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 the 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 the
early detection and clinical management of cancer.  Our research and
development laboratories are located at 609 Broadway NE in Albuquerque, New
Mexico, in a LEEDS-certified building.





PLAN OF
OPERATION





Our plan
of operation for the next 18 months is to complete the Phase II and III Clinical
Trials for our lung cancer assay and submit Clinical Study results to the Food
and Drug Administration for a PMA approval of our CyPath Diagnostic assay for
the early detection of lung cancer.  We are currently conducting our
Phase II Clinical Study to screen veterans for lung cancer in New
Mexico.  This program has been partially funded by the State of New
Mexico Department of Veteran Services, is focused on screening military veterans
for lung cancer.




Our
initial product is an In Vitro diagnostic test for lung cancer that will be used
to evaluate a sputum sample obtained non-invasively from patients.  
The samples will be sent to a clinical lab where they will be analyzed with the
the CyPath® assay labeling solution to determine the presence, or not, of lung
cancer or precancerous cells.  Our diagnostic test can be used for
other tissue or body fluid samples, and we intend to create and market products
to diagnose and screen for other prevalent cancers, including breast, cervical,
bladder and colorectal.  We have determined that our initial markets
will build upon established relationships with prominent hospitals, laboratories
and the U.S. Veterans Administration hospitals.  Such relationships
will ensure timely initial commercial sales.  This initial commercial
acceptance within the VA system can be efficiently leveraged through the VA
infrastructure.  The VA also is the product approval channel for the
U.S. Agency for International Development (AID), conditional on FDA
approval.  Ongoing published results of test data and Clinical Studies
and presentations at appropriate medical symposia will help accelerate sales
growth.




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 12 months as needed to continue to strengthen and enhance the
growth of the Company.





CLINICAL
STUDY UPDATE




On March
5, 2009, we received approval from an independent Institutional Review Board
(IRB) to begin Phase II clinical trials of our cytology-based screening
technology for early detection of cancer. Biomoda’s proprietary technology had
previously shown 100 percent sensitivity and 100 percent specificity during
internal testing on a small sample of patients. The Company currently is
seeking to publish the results of internal testing in a peer-reviewed
journal.




Funded by
the Legislature and administered by the New Mexico Department of Veterans
Services and the New Mexico Institute of Mining and Technology, the veterans
screening program is the first large-scale study of Biomoda’s CyPath®
investigational use (not yet FDA-approved) diagnostic, which is based on a
patented molecular marker that binds to cancer cells and fluoresces red under
ultraviolet light.  Biomoda recruited approximately 500 at-risk
veterans for the clinical trial, and results are expected by the end of January
2010.





Study
volunteers provide deep-lung sputum samples to be screened for cancer with Pap
stain analysis performed by cytopathologists at the VA Medical Center in Denver,
and CT scans read by independent radiologists under the International Early Lung
Cancer Action Program (I-ELCAP) Enrollment and Screening
Protocol.  Results determined on the sputum samples with the
investigational CyPath® assay in the Biomoda lab are then compared to these
diagnostic results.  Such results will be utilized by Biomoda to help
plan a large clinical study that will lead to FDA approval of the CyPath®
assay.




12
 Table of Contents


Dr.
Thomas L. Bauer, Chief Thoracic Surgeon and cancer researcher with the
Christiana Care Health System in Delaware, is the national Principal
Investigator (PI) overseeing the Phase II Clinical Study currently
underway.  Dr. Bauer has led several lung and esophageal cancer
studies and heads up Christiana’s participation in the International Early Lung
Cancer Action Program (I-ELCAP).  Dr. Bauer is working with Dr. Lara
Patriquin, a diagnostic radiologist in Albuquerque, who serves as the local PI
for the Phase II Clinical Study.




The Phase
II Clinical Study is focused on veterans because they may be at least 25 percent
more likely to develop lung cancer and die from the disease than the general
population.  As of September 30, 2009, we had recruited more than 500
veterans for the Phase II study and completed screening on 134
individuals.  We are currently collecting a positive cohort of twenty
diagnosed lung cancer patients at Christiana Care Health System, the teaching
hospital associated with the University of Delaware, under the direction of Dr.
Bauer.  Results will be published at the end of the study period after
all patient data has been recorded and analyzed. We anticipate the completion of
the Phase II Clinical Study in the first quarter of 2010.





The
Company has conducted several outreach campaigns to New Mexico veterans and
local media to raise awareness of the Phase II Clinical Study and the benefits
of early detection for lung cancer.





Response
to the screening program has been positive.  Interested veterans
living in New Mexico may still sign up online at our website, www.biomoda.com, by
clicking “sign up for the study” at the bottom of the Home page.  The
non-invasive in-vitro test requires volunteers to provide a deep-lung sputum
sample under the guidance of a respiratory therapist.  The sample is
processed and screened for cancer cells in the Biomoda lab.





We had a
continuing government contract for fiscal year ended June 30, 2009, of $1.3
million, of which approximately $1,276,678 has been already reimbursed, leaving
approximately $23,332 remaining to be reimbursed as of September 30,
2009.





Our Phase
II clinical trial to screen military veterans for early-stage lung cancer has
been enhanced to include a longitudinal component, which will provide additional
data on the efficacy of the Biomoda diagnostic. Study participants whose initial
results indicated areas of concern – the presence of nodules on the lungs or a
positive read for cancer cells – have been asked to return for follow-up
screening. We believe the ability to monitor study participants over the longer
term will result in a better medical outcome for the patient as well as provide
additional data for Biomoda in preparation for the Phase III pivotal trials and
FDA approval.





It is
expected that continued contact with study participants that allows for
monitoring of their lung health will assist the Company in expansion of the use
of the CyPath® assay beyond early diagnosis to measuring the success of
treatment.





In
September, Biomoda undertook preliminary steps necessary to conduct the
multi-site Phase III Clinical Study of the CyPath® diagnostic for early-stage
lung cancer, trademarked under the name CyPath®.





Dr.
Thomas Bauer has begun coordinating site selection for the Phase III Clinical
trial for the testing of the CyPath® assay.  Dr. Bauer’s work with
Biomoda follows the I-ELCAP Enrollment and Screening Protocol, and the multi
sites selected for the Phase III Clinical trials will be I-ELCAP
approved.





We are
developing the protocol of the Phase III trials for submission to an
Institutional Review Board (IRB) in the first quarter of 2010.  IRB
review protects research subjects by making sure the study protocol adheres to
U.S. FDA and U.S. Department of Health and Human Services regulations, that
risks to participants are minimized and acceptable in light of the possible
benefits, that the informed consent document is accurate, and that the research
is conducted in an ethical manner.





Biomoda
is seeking FDA approval of its cytology-based screening technology as a Class
III medical device under the Pre-Market Approval (PMA) process.  When
Phase II Clinical Trial results are complete,  the Company intends to
file a report with the FDA informing the agency of study findings and submit a
pre-IDE (Investigational Device Exemption) filing.




13
 Table of Contents


OTHER
INITIATIVES





Sales


Management
plans to implement an “Investigational Use Only” (IUO) program to allow
interested parties to be screened for lung cancer and for the company to recoup
product development costs.





Sputum
Bank


Through
our Phase II Clinical Trial, Biomoda has developed a bio-bank based on surplus
sputum from the participant collections.  Each sample has
comprehensive data related to demographics, cytology and radiology
results.  This sputum bank represents potential sales and/or leverage
to gain other samples to expedite, in time and cost savings, the completion of
our upcoming Phase III Clinical Trial.





Government
Contracts


In July,
2009, Biomoda President John Cousins testified before the New Mexico State
Legislature on the progress of the ongoing Clinical Study for the early
detection of lung cancer in New Mexico veterans.  Management believes
the legislators’ response to the report was positive.





Grants


We have
engaged Corporate Capital Team, Inc. to seek grant funding for our early
detection of cancer assay.





Scientific
Presentation


The New
Mexico Institute of Mining and Technology (“NM Tech”) presented data on the
Biomoda technology at the 13th World Conference on Lung
Cancer in San Francisco, California, on August 2, 2009.  Titled
“Non-Intrusive and Extremely Early Detection of Lung Cancer Using TCPP (Biomoda
Lab Cultured Lung Cancer Data),” the NM Tech abstract was presented in poster
format to the 7,000 lung cancer professionals who attended the
conference.  TCPP, or meso-tetra (4 carboxyphenyl) porphine, is the
chemical compound underlying Biomoda’s patented diagnostic assay.  A
copy of the abstract is available on the Biomoda website,
http://www.biomoda.com/lungcancerinformationposter.htm.




Additional
Diagnostic Assay Development


We intend
to start development of our cervical cancer diagnostic assay upon receipt of
adequate funding for development.





Additional
Equity Capital


In July
2009, the Company entered into two agreements, each to sell 2,000,000 shares of
Biomoda’s common stock to two members of Biomoda’s board of directors for total
cash consideration of $100,000 per agreement or $200,000 total,
at  $0.05 per share.  The agreements allow the purchasers until
December 31, 2009, to remit the full purchase price to Biomoda.  One
purchaser agreed to remit $5,000 at the date the agreement was executed as a
down payment for the common stock.  In the event the purchasers are unable
to pay the full amount by December 31, 2009, Biomoda will issue common stock in
an amount equal to the cash actually received, divided by $0.05 per share. In
August, 2009, Biomoda issued 100,000 shares of its common stock pursuant to this
agreement.





Online
Networking


Biomoda
provides public updates through both Twitter and Facebook.  Interested
parties may also register on the Biomoda website at www.biomoda.com to
receive updates about the Company.





PATENTS
AND TRADEMARKS





In
January 2005, the U.S. Patent Office awarded a Patent to Biomoda entitled
"Compositions and Methods for Detecting Precancerous Conditions in Cells and
Tissue Samples using 5, 10, 15, 20 Tetrakis (Carboxyphenyl) Porphine." This
Patent represented a significant addition to our patent portfolio and expanded
our intellectual property to include cancer screening as a compliment to the
existing technology. We filed for a continuation of this Patent based on
research currently underway by researchers at Biomoda.


14
 Table of Contents


In April
2008, the U.S. Patent Office awarded a Divisional Patent to Biomoda entitled
“Method of Prognosing Response to Cancer Therapy with 5, 10, 15, 20 - Tetrakis
(Carboxyphenyl) Porphine.”  Subsequently, Biomoda has filed two
additional patent applications, “Compositions and Methods for Making 5, 10, 15,
20 Tetrakis (4-Carboxyphenyl) Porphine” related to the making of TCPP and
“System and Method for Analyzing Samples Labeled with 5, 10, 15, 20 Tetrakis
(4-Carboxyphenyl) Porphine (TCPP)” which provides a quantitative method for
reading tissue samples for signs of malignant cells based on flow cytometry and
dark-field microscopy





On
October 22, 2009, Biomoda received a Notice of Allowance from the US Patent and
Trademark Office for the patent “Method for Making 5, 10, 15, 20- Tetrakis
(Carboxyphenyl) Porphine (TCPP) Solution and Composition Comprising
TCPP.





The U.S.
Patent and Trademark Office has registered the marks CyPath® and
CyDx®.





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, 2009 and 2008





REVENUE.  As
of September 30, 2009, 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 $44,489 for the three
months ended September 30, 2009, from $90,745 in the three months ended
September 30, 2008. 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 quarters ended September 30, 2009 and 2008, we
accrued 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, 2009, we recorded $91,666 as a reduction of research and
development expenses related to this Clinical Study program. 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
$373,112 in the three months ended September 30, 2009, from $264,469 in the
three months ended September 30, 2008.  The increase was primarily
related to increased wages due to additional employees added in
2009.  We expect general and administrative costs to increase in the
future as our business prospects develop and we 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 is composed
of interest expense, which decreased to $3,967 in the three months ended
September 30, 2009 from $14,168 in the three months ended September 30, 2008,
due to extinguishment in related party debt as of December 31,
2008.





Comparison of the nine
months ended September 30, 2009 and 2008





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 $55,819 in the nine months
ended September 30, 2009, from $119,925 in the nine months ended September 30,
2008. 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, 2009, we accrued 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 nine months ended September 30, 2009, we recorded
$547,712 as a reduction of research and development expenses related to this
Clinical Study program.For the nine
months ended September 30, 2008, we recorded $330,828 as a reduction of
operating expenses related to this clinical study program.


15
 Table of Contents


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
$536,498 in the nine months ended September 30, 2009, from $955,061 in the nine
months ended September 30, 2008.  The decrease was primarily related
to reduced overhead costs in 2009.  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 is
comprised of interest expense, which decreased to $11,333 in the nine months
ended September 30, 2009, from $42,926 in the nine months ended September 30,
2008, due to extinguishment in related party debt as of December 31,
2008.





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 the outcome of
Clinical Studies and FDA approval.





Product
development expenditures, including personnel expense and general and
administrative expense, was $592,317 for the nine months ended September 30,
2009.  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 the commercialization of our products.





Management
believes that sales of securities and government contracts will provide adequate
liquidity and capital resources to meet the anticipated development-stage
requirements through the end of 2010.  In addition, it is anticipated
that sales of our initial screening product will begin in 2011, pending FDA
approval, and generate 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.





Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





There has
been no material change in our market risks since the end of the fiscal year
2008.


16
 Table of Contents


Item 4. 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,
2009.  Based upon that evaluation, we concluded that our disclosure
controls and procedures were not 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.




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 into 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 nine months ended September 30, 2009.  We have employed
additional accounting personnel, including a CPA, which has helped us increase
the segregation of duties.  We have completed an accounting manual and
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.


17
 Table of Contents


PART
II. OTHER INFORMATION





Item 1.  LEGAL PROCEEDINGS





As the
result of a federal lawsuit entitled Advanced Optics Electronics, Inc.,
et al. v. Leslie S. Robins, et al.No. CIV-2007-00855, JB/DJS, U.S.
District Court for the District of New Mexico and two related suits, Biomoda has
won default judgments against two Defendants, Alvin Robins and John Kearns on
all counts alleged and in favor of Biomoda.  Biomoda will submit a
final statement of damages to the Court in November, 2009, and the Court will
determine the final damage amount owed by the Defendants to
Biomoda.  The two Defendants have yet to file a responsive pleading
regarding any matter before the Court. Upon award of damages, Biomoda intends to
aggressively pursue collection of damages against the Defendants.




Item
2.  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 CEO PURSUANT TO 15 U.S.C. SECTION 10A, AS
ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002





32CERTIFICATION
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 16, 2009





BIOMODA,
INC.





By: /s/ John J.
Cousins


John J.
Cousins


President


(Principal
Executive and Accounting Officer)


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