UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549







FORM
10-Q







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


SECURITIES
EXCHANGE ACT OF 1934




For
the quarterly period ended: June 30,
2008




Commission
file No. 333-90738




Biomoda,
Inc.


(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)





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




Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the 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
                   
 ̈


Non-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 August 14, 2008 was
76,694,401.








Table of Contents








TABLEOF CONTENTS




PART I.
            Financial
      InformationItem
      1.
            Financial Statements
            3Item
      2.
            Management's Discussion and Analysis of Financial Condition and
      Results of Operations
            8Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            11Item
      4.
            Controls and Procedures
            11PART
      II.
            Other
      InformationItem
      1.
            Legal Proceedings
            12Item
      2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            12Item
      3.
            Defaults Upon Senior Securities
            12Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            12Item
      5.
            Other Information
            12Item
      6.
            Exhibits
            12Signatures
            
            13










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)






ASSETS


June
      30,
              
              
              December
      31,2008
              
              
              2007CURRENT
      ASSETSCash
              
              $
              281,394
              
              
              $
              479,800Reimbursement
      receivable
              
              
              298,148
              
              
              
              -Prepaid
      expenses
              
              
              3,928
              
              
              
              3,241Total
      current assets
              
              
              583,470
              
              
              
              483,041PROPERTY
      AND EQUIPMENT, net of accumulated depreciation $17,732 and
      $12,642
              
              
              95,506
              
              
              
              4,794PATENTS
      AND TRADEMARKS, net of accumulated amortization $249,537 and
      $232,556
              
              
              109,396
              
              
              
              102,546Total
      assets
              
              $
              788,372
              
              
              $
              590,381LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
              
              $
              321,724
              
              
              $
              248,251Advances
      from stockholders
              
              
              194,354
              
              
              
              184,989Short-term
      debt
              
              
              47,375
              
              
              
              111,635Line-of-credit
      with an affiliated entity
              
              
              1,024,618
              
              
              
              1,070,529Total
      current liabilities
              
              
              1,588,071
              
              
              
              1,615,404COMMITMENTS
              
              
              -
              
              
              
              -STOCKHOLDERS'
      DEFICITClass
      A redeemable preferred stock; no par value; 2,000,000share
      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;no
      shares issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, no par value, 100,000,000 share authorized;76,558,401
      and 48,315,983 issued and outstanding
              
              
              7,195,393
              
              
              
              6,199,585Treasury
      stock, at cost 60,000 shares
              
              
              (9,000
              )
              
              
              (9,000
              )Deficit
      accumulated during development stage
              
              
              (7,986,092
              )
              
              
              (7,215,608
              )Total stockholders'
      deficit
              
              
              (799,699
              )
              
              
              (1,025,023
              )Total
      liabilities and stocholders'deficit
              
              $
              788,372
              
              
              $
              590,381




See notes to consolidated
financial statements.




4
 Table of Contents




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




For
      the Three Months
              
              
              For
      the Six Months
              
              
              January
      3, 1990Ended
      June 30,
              
              
              Ended
      June 30,
              
              
              (Inception)
      to2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              June
      30, 2008REVENUES
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              23OPERATING
      EXPENSESProfessional
      fees
              
              
              13,062
              
              
              
              16,750
              
              
              
              102,839
              
              
              
              106,050
              
              
              
              909,623General
      and administrative
              
              
              187,958
              
              
              
              496,747
              
              
              
              587,754
              
              
              
              1,606,685
              
              
              
              3,955,577Research
      and development
              
              
              178,958
              
              
              
              320,009
              
              
              
              327,180
              
              
              
              791,816
              
              
              
              2,960,799Reimbursement
      of R&D expenses
              
              
              (298,118
              )
              
              
              -
              
              
              
              (298,118
              )
              
              
              -
              
              
              
              (298,118
              )Depreciation
      and amortization
              
              
              8,953
              
              
              
              5,680
              
              
              
              22,071
              
              
              
              10,869
              
              
              
              269,884Operating
      loss
              
              
              90,813
              
              
              
              839,186
              
              
              
              741,726
              
              
              
              2,515,420
              
              
              
              7,797,742OTHER
      INCOME (EXPENSE)Gain
      on forgiveness of debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              282,103Other
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              33,919Interest
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,870Interest
      expense
              
              
              (14,306
              )
              
              
              (32,464
              )
              
              
              (28,758
              )
              
              
              (51,660
              )
              
              
              (508,242
              )Total
      other income (expense)
              
              
              (14,306
              )
              
              
              (32,464
              )
              
              
              (28,758
              )
              
              
              (51,660
              )
              
              
              (188,350
              )LOSS
      BEFORE PROVISION FORINCOME
      TAXES
              
              
              (105,119
              )
              
              
              (871,650
              )
              
              
              (770,484
              )
              
              
              (2,567,080
              )
              
              
              (7,986,092
              )PROVISION
      FOR INCOME TAXES
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (105,119
              )
              
              $
              (871,650
              )
              
              $
              (770,484
              )
              
              $
              (2,567,080
              )
              
              $
              (7,986,092
              )Basic
      and diluted loss per common share
              
              $
              (0.00
              )
              
              $
              (0.08
              )
              
              $
              (0.01
              )
              
              $
              (0.25
              )Weighted
      average shares outstanding - Basicand
      Diluted
              
              
              76,253,405
              
              
              
              11,324,759
              
              
              
              67,886,082
              
              
              
              10,405,550






See notes to consolidated
financial statements.




5
 Table of Contents




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


For
      the Six Months
              
              
              January
      3, 1990Ended
      June 30,
              
              
              (Inception)
      to2008
              
              
              2007
              
              
              June
      30, 2008CASH
      FLOW FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (770,484
              )
              
              $
              (2,567,080
              )
              
              $
              (7,986,092
              )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Stock-based
      compensation
              
              
              285,322
              
              
              
              1,456,584
              
              
              
              2,853,708Write
      off of license fee
              
              
              -
              
              
              
              -
              
              
              
              1,250Loss
      on sale of assets
              
              
              -
              
              
              
              -
              
              
              
              358Foreign
      currency translation adjustment
              
              
              -
              
              
              
              -
              
              
              
              3,247Non-cash
      gain on debt settlement
              
              
              -
              
              
              
              -
              
              
              
              (240,239
              )Depreciation
      and amortization
              
              
              22,071
              
              
              
              10,869
              
              
              
              270,381Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (298,148
              )
              
              
              -
              
              
              
              (305,768
              )Other
      assets
              
              
              (687
              )
              
              
              -
              
              
              
              3,692Accounts
      payable and accrued liabilities
              
              
              73,473
              
              
              
              88,853
              
              
              
              901,567Net
      cash used in operating activities
              
              
              (688,453
              )
              
              
              (1,010,774
              )
              
              
              (4,497,896
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of equipment
              
              
              (95,802
              )
              
              
              -
              
              
              
              (121,373
              )Sales
      of property and equipment
              
              
              -
              
              
              
              -
              
              
              
              1,139Organizational
      costs
              
              
              -
              
              
              
              -
              
              
              
              (560
              )Payments
      for patents, trademarks and licenses
              
              
              (23,831
              )
              
              
              (1,801
              )
              
              
              (375,931
              )Net
      cash used in investing activities
              
              
              (119,633
              )
              
              
              (1,801
              )
              
              
              (496,725
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from advances from stockholders
              
              
              9,365
              
              
              
              11,233
              
              
              
              154,944Proceeds
      from line-of-credit from affiliated entity
              
              
              19,393
              
              
              
              1,052,465
              
              
              
              2,671,572Repayments
      of line-of-credit from affiliated entity
              
              
              (65,304
              )
              
              
              (86,515
              )
              
              
              (337,304
              )Repayments
      of short-term debt
              
              
              (64,260
              )
              
              
              -
              
              
              
              (102,260
              )Acquisition
      of treasury stock
              
              
              -
              
              
              
              -
              
              
              
              (9,000
              )Issuance
      of common stock for cash
              
              
              710,486
              
              
              
              76,631
              
              
              
              2,898,063New
      cash provided by financing activities
              
              
              609,680
              
              
              
              1,053,814
              
              
              
              5,276,015NET
      (DECREASE) INCREASE IN CASH
              
              
              (198,406
              )
              
              
              41,241
              
              
              
              281,394Cash
      at beginning of year
              
              
              479,800
              
              
              
              116Cash
      at end of year
              
              $
              281,394
              
              
              $
              41,357
              
              
              $
              281,394SUPPLEMENTAL
      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
              
              $
              -
              
              
              $
              -
              
              
              $
              479,484Interest
      converted to note payable
              
              $
              19,393
              
              
              $
              -
              
              
              $
              169,028Stock
      issued for stock payable
              
              $
              -
              
              
              $
              30,000
              
              
              $
              -Common
      stock issued to extinguish related party debt
              
              $
              -
              
              
              $
              388,768
              
              
              $
              1,418,768




See notes to 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 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 in the 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 June 30, 2008, we had an
accumulated deficit of $7,986,092 and a working capital deficit of
$1,004,601.





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 may
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.




4.  COMMON
STOCK





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.





For the
three months ended March 31, 2007, we issued 726,000 shares of restricted common
stock 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, we issued 1,644,062 shares of common stock for
services valued at $661,102 and 343,000 common shares for cash of
$41,712.  We 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.





5.  REIMBURSEMENT
OF R&D EXPENSES





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
$298,118 as a reduction of operating expenses related to this clinical study
program.





7
 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 funded by the state of New
Mexico.





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.  In this quarter, we
have augmented our laboratories with the following major equipment
purchases:





·
            Beckman
      Coulter Quanta Flow Cytometer


·
            Cytyc
      Slide Prep 2000, slide preparation
machine


·
            Analysis
      image acquisition system





We have
instituted a cell culture laboratory and are maintaining and cultivating
approximately twenty cell lines for various research and assay optimization
projects and initiatives.





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.








8
 Table of Contents





RECENT
PROGRESS





We have
made significant progress in the processes relating to preparing and reading the
microscope slides from the collected samples with the ultimate goal of
developing a method to quickly and economically read slide samples with high
accuracy.  Work in the past year has focused on producing a lung
cancer screening assay that will be available for large-scale screening of
populations at risk.





Currently,
cytology is used to “read” a cell sample to determine if cancer is
present.  Cytology, which is the study of cell, their shape, size,
parts and characteristics, has become a standard diagnostic technique only for
cervical cancer.  The reading of the sample is done by enhancing the
outline of the cells with a staining procedure called PAP.  This is
approximately 65% accurate, but this works for cervical cancer because that
cancer usually develops slowly and as such annual testing can afford a miss or
two.   Lung cancer has a similar dynamic.  In the past
decade, there have been advances in the equipment and attendant processes for
cervical screening that we have adapted for sputum cytology.





TCPP is a
breakthrough in cell labeling and analysis because it fluoresces cancer cells in
a sample and allows an easier “read.”  But there must be equipment to
read the sample.  The main advance in the area of sample reading
techniques for the study has been in an equipment platform for preparing
microscope slides that removes mucus and cell fragments from the sample and lays
out the cells in a mono-layer on the slide.  The leading manufacturer
of this equipment is Cytyc, now Hologic, who has captured more than 79% of the
cervical screening market with its installed base of machines in clinical
labs.   Their machine not only creates a beautiful slide but
automates and makes consistent a process that used to be done by
hand.  We have purchased a Cytyc Thin Prep 2000 machine
to take advantage of these advances.  We have developed a protocol for
slide preparation around this platform that will be implemented through our
clinical lab partner, TriCore, in our study.  We have spent
considerable time in the lab optimizing the procedures around this slide
preparation platform and sample fixative system.  We have developed an
accurate, rapid, reproducible protocol that is being transferred to
TriCore.   This step in technology transfer to a clinical lab
setting is very important for independent verification and reproducible test
processes and results.   TriCore has several of these machines
and have been using them in the clinical lab environment for several
years.





The
staining and labeling process is the core of our assay and where our
revolutionary technology really exists.  The labeling compound TCPP is
a chemical developed and originally patented at Los Alamos National
Labs.    Our central technical work has been conducted in
our labs optimizing the formulation and labeling procedures for TCPP on
cancerous cells.  We are constantly improving our abilities to
differentiate lung cancer from normal cells with high accuracy.  We
have been using samples collected at the Mayo Clinic and from commercial
providers on Cape Cod and from St.  Petersburg, Russia.  We
are also working with lung cancer cell lines that we cultivate, grow, and
harvest in our lab.





We have
purchased another piece of equipment to assist us to understand and quantify the
nature and characteristics of sputum samples.   The machine is a
Flow
Cytometer.  It is essentially a cell analysis
machine.  It counts the number and indentifies the complexity of cells
in a sample.  It also provides an analytic and quantitative check to
the results provided by the microscope.  This is an important adjunct
to microscopy and ultimately may represent the platform of choice for automating
our screening assay.  The flow cytometer is a powerful analytic tool
in the lab for analyzing the sputum samples we will be collecting from
veterans.  New Mexico Tech is conducting a study under the auspices of
the New Mexico Veterans lung cancer screening program looking at the correlation
of information provided by microscopy and flow cytometry of this
assay.





We have
made a breakthrough in the collection of the sputum sample.  Using a
new device that has just received FDA approval called the Lung Flute for
collecting sputum samples, the collection process  is very easy and
non-invasive.  One of the reasons sputum cytology has not caught on as
a source of diagnostic samples is that the prior procedures were, in retrospect,
a bit too cumbersome and uncomfortable.  Biomoda has created a
strategic alliance with Medical Acoustics, the company that manufactures the
Lung Flute and they are providing us with Lung Flutes for our veterans’
screening program.





Our
protocol and study design has been submitted to the FDA for their review and
comments.  This FDA review submittal is called a pre-IDE
document.  The FDA will be back to us by mid September with their
comments.  This is a very important step, to engage the FDA in
constructive dialogue at the earliest juncture and receive the benefit of their
review and comments.  We intend to incorporate their comments and
advice into our study design and protocol and then submit the revised protocol
for Institutional Review Board (IRB) approval.    An IRB is
a panel of doctors who review the study documents with an eye towards patient
safety.




PRELIMINARY
DATA SHOWS 100% ACCURACY




We have
just concluded an internal study of the analytical performance of our lung
cancer diagnostic assay. Biomoda’s internal studies included 28 samples. Biomoda
performed this in-house validation study using sputum samples from thirteen
normal patients and 15 lung cancer patients. The preliminary data shows 100%
specificity (13/13) and 100% sensitivity (15/15).




Internal
data testing results show






Sample
            
            Number
      of Patients
            
            Number
      positive for red Fluorescent cellsNormals
            
            13
            
            0Lung
      Cancer
            
            15
            
            15




We are
currently interviewing candidates for Principal Investigator and Research
Investigators for our clinical trials.






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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 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.





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 June 30, 2008 and 2007





REVENUE.  As
of June 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 $178,958 in the three
months ended June 30, 2008 from $320,009 in the three months ended June 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 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 New Mexican Veterans for lung
cancer.  For the three months ended June 30, 2008, we recorded
$298,118 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
$201,020 in the three months ended June 30, 2008 from $513,497 in the three
months ended June 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 $14,306 in the three months ended June 30,
2008 from $32,464 in the three months ended June 30, 2007 due to lower balance
in related party debt.





Comparison of the six months
ended June 30, 2008 and 2007





REVENUE.  As
of June 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 $327,180 in the six months
ended June 30, 2008 from $791,816 in the six months ended June 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
six months 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 New Mexican Veterans for lung cancer.  For
the six months ended June 30, 2008, we recorded $298,118 as a reduction of
operating expenses related to this clinical study program.






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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
$690,593 in the six months ended June 30, 2008 from $1,712,735in
the six months ended June 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 $28,758 in the six months ended June 30,
2008 from $51,660 in the six months ended June 30, 2007 due to lower balance in
related party debt.





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 $68,798 for the three months ended June 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.





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
2007.





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, June 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.





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 June 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.




11
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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.  Such violations may subject Biomoda to enforcement action by
the Securities and Exchange Commission.




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 - On May
1, 2008, the Board of Directors elected the following to the Board of
Directors:





·
            Lewis
      White of Omaha, Nebraska


·
            Maria
      Zannes of Albuquerque, New Mexico


·
            David
      Arthur Lambros of Berea, Ohio





Item 6. EXHIBITS





31  Certification of Principal Executive and
Accounting 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:
August 14, 2008





BIOMODA,
INC.





By: /s/ John J.
Cousins


John J.
Cousins


President


(Principal
Executive and Accounting Officer)







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