**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-QSB**





(Mark
      One)





[X] QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2007





[_] TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD
      FROM __________ TO __________





COMMISSION
      FILE NUMBER ________________________________





**ROO
      GROUP, INC.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
              (State
                or other jurisdiction of incorporation or organization)
            
            **11-3447894**
              (IRS
                Employer Identification No.)


****


**228
      East 45th Street 8th Floor New York, NY 10017** ****


(Address
      of principal executive offices)





**(212)
      661-4111**


(Issuer’s
      telephone number)





**WITH
      COPIES TO:**





Richard
      A. Friedman, Esq.


Sichenzia
      Ross Friedman Ference LLP


61
      Broadway, 32 nd Floor


New
      York,
      New York 10006


(212)
      930-9700





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes [X] No [_]





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of May 21, 2007, the issuer had _____ outstanding shares of Common Stock.





Transitional
      Small Business Disclosure Format (check one): Yes [_] No [X]










**TABLE
      OF CONTENTS**





**Page****PART
                I - FINANCIAL INFORMATION**Item
                1.
            Financial Statements
            3Consolidated
                Balance Sheet
            3Consolidated
                Statements of Operations
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            7Item
                2.
            Management’s Discussion and Analysis or Plan
              of Operation
            12Item
                3.
            Controls and Procedures
            14**PART
                II - OTHER INFORMATION**Item
                1.
            Legal Proceedings
            15Item
                2.
            Unregistered Sales of Equity Securities
              and
              Use of Proceeds
            15Item
                3.
            Defaults Upon Senior
              Securities
            15Item
                4.
            Submission of Matters to a Vote of Security
              Holders
            15Item
                5.
            Other Information
            15Item
                6.
            Exhibits and Reports on Form
              8-K
            15**SIGNATURES**
            16




2





**PART
      I - FINANCIAL INFORMATION**


**Item
      1.**  **Financial
      Statements.**





**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET AS OF MARCH 31, 2007**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







***Assets:*****Current
                assets:**Cash
                and cash equivalents
            
            $
            6,498Accounts
                receivable, net
            
            
            3,619Notes
                receivable
            
            
            800Other
                current assets
            
            
            1,323**Total
                current assets**
            
            
            12,240Property
                and equipment, net
            
            
            975Deferred
                tax assets
            
            
            198Content,
                net
            
            
            414Software,
                net
            
            
            704Customer
                list, net
            
            
            506Domain
                names, net
            
            
            38Goodwill
            
            
            1,373**Total
                assets**
            
            $
            16,448***Liabilities
                and Stockholders' Equity:*****Current
                liabilities:**Bank
                overdraft and other obligations
            
            $
            605Accounts
                payable
            
            
            2,902Accrued
                expenses
            
            
            564Income
                tax payable
            
            
            63Other
                current liabilities
            
            
            1,653**Total
                current liabilities**
            
            
            5,787**Capital
                lease obligations**
            
            
            235**Total
                liabilities**
            
            
            6,022**Commitments**
            
            
            --**Minority
                interest**
            
            
            (95
            )**Stockholders'
                Equity:**Series
                A preferred shares, $0.0001 par value: authorized 10,000,000 shares;
                issued and outstanding 10,000,000
            
            
            1Common
                stock, $0.0001 par value: authorized 500,000,000 shares; issued and
                outstanding 28,074,813
            
            
            3Less:
                subscription receivable, $0.0001 par value: 2,000,000
                shares
            
            
            --Additional
                paid-in capital
            
            
            45,980Accumulated
                deficit
            
            
            (35,490
            )Accumulated
                other comprehensive income
            
            
            27**Total
                stockholders' equity**
            
            
            10,521**Total
                liabilities and stockholders' equity**
            
            $
            16,448




The
      Accompanying Notes are an Integral Part of these Consolidated Financial
      Statements.




3





**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







**Three
                months ended**
              **March
                31,****2007**
            
            **2006****Revenue**
            
            $
            3,002
            
            $
            1,780**Expenses:**Operations
            
            
            3,197
            
            
            1,809Research
                and development
            
            
            1,339
            
            
            230Sales
                and marketing
            
            
            1,613
            
            
            912General
                and administrative (exclusive of non-cash compensation)
            
            
            2,262
            
            
            999Non-cash
                compensation
            
            
            1,242
            
            
            437**Total
                expenses**
            
            
            9,653
            
            
            4,387**(Loss)
                from operations**
            
            
            (6,651
            )
            
            (2,607
            )Interest
                income
            
            
            119
            
            
            29Interest
                expense - other
            
            
            (7
            )
            
            (6
            )**Net
                (loss) before income taxes**
            
            
            (6,539
            )
            
            (2,584
            )**Income
                tax benefit (expense)**
            
            
            5
            
            
            (29
            )**Net
                (loss) before minority interest**
            
            
            (6,534
            )
            
            (2,613
            )**Minority
                interest**
            
            
            5
            
            
            (34
            )**Net
                (loss) available to common shareholders**
            
            $
            (6,529
            )
            $
            (2,647
            )**Basic
                and diluted net (loss) per common share**
            
            $
            (0.24
            )
            $
            (0.20
            )**Weighted
                average common shares outstanding**
            
            
            27,541,480
            
            
            13,176,436**Comprehensive
                (loss):**Net
                (loss)
            
            $
            (6,529
            )
            $
            (2,647
            )Foreign
                currency translation
            
            
            19
            
            
            (14
            )**Comprehensive
                (loss)**
            
            $
            (6,510
            )
            $
            (2,661
            )




The
      Accompanying Notes are an Integral Part of these Consolidated Financial
      Statements.




4





**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**







**Three
                Months ended March 31,****2007**
            
            **2006****Operating
                Activities:**Net
                (loss)
            
            $
            (6,529
            )
            $
            (2,647
            )Adjustments
                to reconcile net (loss) to net cash (used) by operating
                activities:Provision
                for doubtful accounts
            
            
            9
            
            
            --Depreciation
            
            
            71
            
            
            39Amortization
                of intangible assets
            
            
            230
            
            
            141Non
                cash stock based compensation
            
            
            1,242
            
            
            437Minority
                interest in subsidiaries
            
            
            (5
            )
            
            34Changes
                in assets and liabilities:(Increase)
                decrease in:Accounts
                receivable
            
            
            (220
            )
            
            (214
            )Other
                assets
            
            
            (174
            )
            
            (436
            )Increase
                (decrease) in:Accounts
                payable
            
            
            1,129
            
            
            426Accrued
                expenses
            
            
            (313
            )
            
            199Income
                tax payable
            
            
            (45
            )
            
            5Other
                liabilities
            
            
            314
            
            
            232Total
                adjustments
            
            
            2,238
            
            
            863**Net
                Cash (Used) By Operating Activities - Forward**
            
            
            (4,291
            )
            
            (1,784
            )**Investing
                Activities:**Issuance
                of notes receivable
            
            
            (800
            )
            
            --Cash
                paid in MyVideoDaily acquisition
            
            
            (250
            )
            
            --Investment
                in ROO Media Europe
            
            
            --
            
            
            (90
            )Capitalization
                of content
            
            
            (18
            )
            
            (51
            )Purchase
                of equipment
            
            
            (82
            )
            
            (39
            )**Net
                Cash (Used) By Investing Activities - Forward**
            
            $
            (1,150
            )
            $
            (180
            )




The
      Accompanying Notes are an Integral Part of these Consolidated Financial
      Statements.




5




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**







**Three
                Months ended March 31,****2007**
            
            **2006****Net
                Cash (Used) By Operating Activities - Forwarded**
            
            $
            (4,291
            )
            $
            (1,784
            )**Net
                Cash (Used) By Investing Activities - Forwarded**
            
            
            (1,150
            )
            
            (180
            )**Financing
                Activities:**Bank
                overdraft and other obligations
            
            
            (7
            )
            
            --(Decrease)
                in capital leases
            
            
            (5
            )
            
            (5
            )**Net
                Cash (Used) By Financing Activities**
            
            
            (12
            )
            
            (5
            )**Effect
                of Exchange Rate Changes on Cash**
            
            
            14
            
            
            1**Net
                Decrease in Cash**
            
            
            (5,439
            )
            
            (1,968
            )**Cash
                - Beginning of Period**
            
            
            11,937
            
            
            5,274**Cash
                - End of Period**
            
            $
            6,498
            
            $
            3,306**Supplemental
                Disclosures of Cash Flow Information:**Cash
                paid during the period for:Income
                taxes
            
            $
            --
            
            $
            28Interest
            
            $
            4
            
            $
            6




The
      Accompanying Notes are an Integral Part of these Consolidated Financial
      Statements.




6




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







***(1)
      Basis of Presentation***





The
      accompanying unaudited consolidated financial statements of ROO Group, Inc.
      ("ROO" or the "Company") have been prepared in accordance with generally
      accepted accounting principles for interim financial information and the
      instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
      they
      do not include all information and footnotes required by general accounting
      principles for complete financial statements. In the opinion of management,
      all
      adjustments (consisting of normal recurring accruals) considered necessary
      in
      order to make the interim financial statements not misleading have been
      included. Results for the three months ended March 31, 2007, are not necessarily
      indicative of the results that may be expected for the year ending December 31,
      2007. These interim consolidated financial statements should be read in
      conjunction with the consolidated financial statements and footnotes thereto
      of
      the Company and management's discussion and analysis of financial condition
      and
      results of operations included in the Company's annual report on Form 10-KSB
      for
      the year ended December 31, 2006.





***(2)
      Summary of Significant Accounting Policies***





***(A)
      Principles of Consolidation -*** The
      consolidated financial statements include the accounts of ROO Group, Inc.,
      its
      wholly owned subsidiary ROO Media Corporation, its wholly owned subsidiary
      Bickhams and its 51% owned subsidiary Reality Group (Note 3). Included in the
      consolidation with ROO Media Corporation are ROO Media Corporation's wholly
      owned subsidiary ROO Media (Australia) Pty Ltd. and ROO Media (Australia) Pty
      Ltd.'s wholly owned subsidiary Undercover Media, its wholly owned subsidiary
      ROO
      Media Europe Pty Ltd (Note 3), its wholly owned subsidiary ROO Broadcasting
      Limited, its 51% owned subsidiary Sputnik Agency Pty. Ltd. and its wholly
      owned subsidiary ROO TV Pty Ltd. Included in the consolidation with Bickhams
      is
      Bickhams' wholly owned subsidiary VideoDome.com Networks, Inc.





***(B)
      Management Estimates -*** The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, disclosure of contingent
      assets and liabilities at the date of the financial statements, and the reported
      amounts of revenues and expenses during the reporting period. Certain amounts
      included in the financial statements are estimated based on currently available
      information and management's judgment as to the outcome of future conditions
      and
      circumstances. Changes in the status of certain facts or circumstances could
      result in material changes to the estimates used in the preparation of financial
      statements and actual results could differ from the estimates and assumptions.
      Every effort is made to ensure the integrity of such estimates.





***(C)
      Foreign Currency Translation -*** Assets
      and liabilities of ROO Group's foreign subsidiaries are translated at current
      exchange rates and related revenues and expenses are translated at average
      exchange rates in effect during the period. Resulting translation adjustments
      are recorded as a component of accumulated comprehensive income (loss) in
      stockholders' equity.





***(D)
      Fair Value of Financial Instruments -*** The
      carrying amounts reported in the balance sheet for cash and cash equivalents,
      accounts receivable, accounts payable and accrued liabilities approximate their
      fair values because of the immediate or short-term maturity of these financial
      instruments.





***(E)
      Impairment of Long-Lived Assets -*** We
      review
      our long-lived assets and identifiable intangibles for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      may not be recoverable. When such factors and circumstances exist, we compare
      the projected undiscounted future cash flows associated with the future use
      and
      disposal of the related asset or group of assets to their respective carrying
      amounts. Impairment, if any, is measured as the excess of the carrying amount
      over the fair value based on market value (when available) or discounted
      expected cash flows of those assets, and is recorded in the period in which
      the
      determination is made.




7




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







***(2)
      Summary of Significant Accounting Policies (Continued)***





***(F)
      Cash and Cash Equivalents -*** ROO
      considers all highly liquid investments with original maturities of ninety
      days
      or less to be cash and cash equivalents. Such investments are valued at quoted
      market prices.





***(G)
      Property and Equipment -*** Property
      and equipment are stated at cost. Depreciation is provided for using the
      straight-line and declining balance methods of accounting over the estimated
      useful lives of the assets.





***(H)
      Intangible Assets -*** Intangible
      assets of the Company are recorded at cost less accumulated amortization.
      Amortization is computed using the straight-line method over the estimated
      useful lives of the assets, with periods of up to five years. All intangible
      assets are reviewed for impairment annually or more frequently if deemed
      necessary, and no impairment write-offs were recorded.





***(I)
      Risk Concentrations -*** Financial
      instruments which potentially subject us to concentrations of credit risk
      consist principally of cash and cash equivalents and trade accounts receivable.
      We place our cash and cash equivalents with high credit quality institutions
      to
      limit credit exposure. We believe no significant concentration of credit risk
      exists with respect to these investments.





Concentrations
      of credit risk with respect to trade accounts receivable are limited due to
      the
      wide variety of customers who are dispersed across many geographic regions.
      Management believes that accounts receivable credit risk exposure beyond such
      allowance is limited. The allowance as of March 31, 2007 was $234.   As of
      March 31, 2007, one customer accounted for approximately 14% of our trade
      accounts receivable portfolio.





We
      generally do not require collateral for our financial instruments.





***(J)
      Revenue Recognition -*** Revenues
      are derived principally from professional services, digital media management
      and
      advertising. Revenue is recognized when service has been provided.





***(K)
      Earnings (Loss) Per Share Calculation -*** Net
      loss
      per share is based on the weighted average number of shares outstanding





Earnings
      (loss) per common share are calculated under the provisions of Statement of
      Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which
      establishes standards for computing and presenting earnings per share. SFAS
      No.
      128 requires ROO Group to report both basic earnings (loss) per share, which
      is
      based on the weighted average number of common shares outstanding during the
      period, and diluted earnings (loss) per share, which is based on the weighted
      average number of common shares outstanding plus all potential dilutive common
      shares outstanding. Options and warrants are not considered in calculating
      diluted earnings (loss) per share since considering such items would have an
      anti-dilutive effect. Potential shares from the conversion of Series A Preferred
      Stock are excluded as these are not convertible for two years from the date
      of
      issuance, though any conversion thereof would also have an anti-dilutive effect.




8




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







***(2)
      Summary of Significant Accounting Policies (Continued)***





***(L)
      Stock-Based Compensation -*** In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123R, "Share-Based Payment". SFAS No. 123R is a revision of SFAS No. 123,
      "Accounting for Stock Based Compensation", and supersedes APB 25. Among other
      items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method
      of
      accounting, and requires companies to recognize the cost of employee services
      received in exchange for awards of equity instruments, based on the grant date
      fair value of those awards, in the financial statements. On January 1, 2006,
      the
      Company adopted SFAS 123R. The provisions of SFAS 123R became effective the
      first annual reporting period beginning after December 15, 2005. SFAS 123R
      requires companies to adopt its requirements using a "modified prospective"
      method. Under the "modified prospective" method, compensation cost is recognized
      in the financial statements beginning with the effective date, based on the
      requirements of SFAS 123R for all share-based payments granted after that date,
      and based on the requirements of SFAS 123 for all unvested awards granted prior
      to the effective date of SFAS 123R.





Beginning
      in the 2006 calendar year, with the adoption of SFAS 123R, we included stock
      based compensation in general and administrative for the cost of stock options.
      Stock based compensation expense for the three months ended March 31, 2007
      was
      $1,242.





The
      fair
      value of each employee option grant is estimated on the date of grant using
      the
      Black-Scholes-Merton option pricing model.





The
      Company granted options with exercise prices ranging from $2.75 to $4.50 to
      purchase 3,760,000 shares of its common stock during the three months ended
      March 31, 2007.





During
      the three months ended March 31, 2007, a total of 841,347 employee stock options
      had vested, with 6,697,000 employee stock options still unvested as of March
      31,
      2007.





***(M)
      Reverse Stock Split -*** Effective
      October 3, 2005, the Company amended its Certificate of Incorporation to effect
      a one-for-fifty reverse split of the Company's issued and outstanding shares
      of
      common stock. All references to numbers or values of the Company’s shares have
      been adjusted to reflect this one-for-fifty reverse split. All option amounts
      and exercise prices have been adjusted to reflect the stock split.





***(N)
      Financing Fees-Convertible Notes***





Financing
      fees-convertible notes reclassifies non-cash expenses relating to the issuance
      of various convertible notes to investors in the Company. All such convertible
      securities were retired prior to September 30, 2005.





***(3)
      Acquisitions***





On
      October 28, 2005, the Company entered into an amendment (the "Amendment") to
      the
      Stock Purchase Agreement (the "Reality Purchase Agreement") dated as of March
      11, 2004 among the Company and the shareholders of Reality Group Pty Ltd.
      ("Reality Group"). Pursuant to the Amendment, the Reality Group shareholders
      agreed to exercise their buyback option effective January 1, 2006 at which
      date
      the Company returned 29% of the shares in Reality Group to Reality Group
      shareholders reducing the Company's ownership of Reality Group to 51% in
      exchange for 66,200 shares of the common stock of the Company (the “exchange
      shares”). This buyback of shares was recorded as a reduction of goodwill of
      $957.





On
      January 27, 2006 ROO Media Corporation purchased 24% of ROO Media Europe Limited
      for $90. ROO Media Europe is now a wholly owned subsidiary of ROO Media
      Corporation.





On
      January 22, 2007, we entered into an Asset Purchase Agreement with RJM Price
      & Company, Inc. (“RJM”) and Robertson Price. Pursuant to the Agreement, we
      acquired all of the properties, rights and assets constituting the business
      of
      RJM, which operates under the name MyVideoDaily (“MVD”). The Agreement provides
      for a consideration of up to an aggregate of $1,350 payable as follows: (i)
      $250
      paid upon the execution of the Agreement, (ii) $1,000 in shares of our common
      stock will be paid to Mr. Price in equal quarterly installments upon the
      achievement of certain milestones at a price per share which will be equal
      to
      the average closing price of our common stock over the final 20 trading days
      of
      the quarterly period in which the milestone is achieved; (iii) $100 payable
      upon
      the second anniversary of the closing of the acquisition.




9




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**







***(4)
      Notes Receivable***





On
      February 16, 2007, Wurld Media, Inc. issued a promissory note to the Company
      in
      the principal amount of $1,500. Pursuant to the promissory note the Company
      advanced to Wurld Media the sum of $800 and in its sole discretion may make
      additional advances of up to, but not exceeding $1,500. The promissory note
      accrues interest at the rate of 8% and in the event of a default will accrue
      interest at the rate of 10%. The promissory note is secured by all of the assets
      of Wurld Media. The promissory note is due and payable upon the earlier of
      (i)
      the closing of the acquisition of the assets of Wurld Media, in which event,
      the
      loan amount will be credited against the purchase price of the assets or (ii)
      November 26, 2007.





The
      Company has entered into a Letter of Intent for the acquisition of the assets
      of
      Wurld Media and is currently conducting due diligence. In addition, pursuant
      to
      the letter of intent Wurld Media agreed to grant to the Company a perpetual
      worldwide, royalty-free license for all components of the Peer Impact store
      front and P2P platform which it owns and developed.





On
      March
      6, 2007, Reality Group Pty. Ltd. issued a promissory note to the Company in
      the
      principal amount of $380. Pursuant to the promissory note the Company advanced
      to Reality Group the sum of $190 on March 6, 2007, and $190 on March 13, 2007.
      Interest on the promissory note accrues at the rate of 8% per annum. The
      promissory note is due on June 30, 2008 and is secured by all the assets of
      Reality Group. In addition, Grant Lee and Mike Bollan agreed to pledge 20%
      of
      the ordinary shares of Reality Group which they own as security for Reality
      Group’s obligations under the promissory note.





***(5)
      Goodwill***





Goodwill
      of $1,373 represents the excess of acquisition costs over the fair value of
      net
      assets of the Reality acquisition of $1,033, ROO Media Europe Limited of $90
      and
      the acquisition of RJM of $250. The exercise of the Reality Group buy-back
      option led to a reduction of goodwill of $957 during the three months ended
      March 31, 2006 (Note 3).





***(6)
      Stock Issuances***





On
      January 25, 2007, we entered into an agreement with News Corporation (“News
      Corp”). The Agreement provides for the issuance of 2,000 shares of our common
      stock upon execution of the Agreement, which shall be held in escrow and
      released to News Corp on January 1, 2008, upon the achievement of certain
      milestones. The Agreement provides that if the milestones are not met, we shall
      issue to News Corp warrants to purchase 2,000 shares of our common stock which
      shall be exercisable for a term of two years at a price of $3.00 per share
      or
      such lesser price per share that is the closing price per share of our common
      stock on any date that is within ten days prior to the date of the Agreement.
      The Agreement provides for the release of the shares to News Corp upon a change
      of control as defined in the Agreement, if certain conditions exist.





We
      also
      agreed to issue an additional 2,000 shares of our common stock to News Corp
      upon
      the achievement of certain milestones. Further, we agreed that if the milestones
      are not timely achieved, we shall issue to News Corp warrants to purchase 2,000
      shares of our common stock which shall be exercisable for a term of two years
      at
      a price of $3.00 per share or such lesser price per share that is the closing
      per share of our common stock on any date that is within ten days prior to
      the
      date of the Agreement.





We
      have
      granted News Corp piggy back registration rights in connection with shares
      issuable to News Corp pursuant to the Agreement.




10




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Amounts
      in Thousands, Except Share and Per Share Data)**


**(Unaudited)**








***(7)
      Subsequent Events***





On
      May 4,
      2007, we entered into a securities purchase agreement pursuant to which we
      sold an aggregate of 10,000 shares of our common stock and warrants to purchase
      an additional 3,000 shares of our common stock to accredited investors resulting
      in gross proceeds of $25,000. The offering closed on May 10, 2007. The unit
      price of the common stock and corresponding warrant was $2.50. The warrants
      have
      an exercise price of $4.50 per share and a term of five years. At any time
      at
      which the market price of the Company's Common Stock exceeds $6.00 for 10
      trading days during any 20 consecutive trading days, the Company may elect
      to
      call the warrants, provided that, the shares underlying such warrants are
      registered pursuant to a registration statement. The Company agreed to prepare
      and file a registration statement with the Securities and Exchange Commission
      registering the resale of the shares of common stock sold in the private
      placement on or prior to 30 days following the closing date. If the registration
      statement is not filed within such time, the Company must pay liquidated damages
      to the investors equal to 1% of the dollar amount of their investment for each
      calendar month or portion thereof that the registration statement is not filed,
      up to a maximum of 10%. Also, if the registration statement is not declared
      effective within 120 days following the closing date, the Company must pay
      liquidated damages to the investors equal to 1% of the dollar amount of their
      investment for each calendar month or portion thereof that the registration
      statement is declared effective, up to a maximum of 10%, which increases to
      18%
      if the registration statement is not declared effective within 2 years following
      the closing date.





Merriman
      Curhan Ford & Co. and Brimberg & Co, registered broker-dealers, acted as
      placement agents for the sale of the Company’s common stock The offering was
      made pursuant to an exemption from securities registration afforded by Section
      4(2) the Securities Act of 1933, as amended and/or Regulation D promulgated
      thereunder.





On
      May
      11, 2007, Reality Group Pty. Ltd. issued a promissory note to the Company in
      the
      principal amount of $400. Pursuant to the promissory note the Company advanced
      to Reality Group the sum of $400 on May 11, 2007. Interest on the promissory
      note accrues at the rate of 8% per annum. The promissory note is due on May
      11,
      2008.




***(8)
        GOING CONCERN***
 
 Our
        consolidated financial statements have been prepared assuming that we will
        continue as a going concern, which contemplates the realization of assets
        and
        the satisfaction of liabilities in the normal course of business. Since our
        inception, we have incurred losses, had an accumulated deficit, and have
        experienced negative cash flows from operations. We expect this trend to
        continue. The expansion and development of our business will likely require
        additional capital. This condition raises substantial doubt about our ability
        to
        continue as a going concern. We expect cash flows from operating activities
        to
        improve, primarily as a result of an increase in revenues, although there
        can be
        no assurance thereof. The accompanying consolidated financial statements
        do not
        include any adjustments that might be necessary should we be unable to continue
        as a going concern. If we fail to generate positive cash flows or obtain
        additional financing when required, we may have to modify, delay or abandon
        some
        or all of our business and expansion plans.




11


**Item
      2.** **Management’s
      Discussion and Analysis or Plan of Operation.**




Certain
      statements contained herein constitute forward-looking statements. In some
      cases, you can identify forward-looking statements by terminology such as "may,"
      "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
      "predict," "potential" or "continue," the negative of such terms, or other
      comparable terminology. All statements other than statements of historical
      fact
      made in this report are forward looking. In particular, the statements herein
      regarding industry prospects and future results of operations or financial
      position are forward-looking statements. Because such statements include risks
      and uncertainties, actual results may differ materially from those expressed
      or
      implied by such forward-looking statements as a result of certain factors,
      including, but not limited to, risks associated with the integration of
      businesses following an acquisition, competitors with broader product lines
      and
      greater resources, emergence into new markets, the termination of any of our
      significant contracts, our inability to maintain working capital requirements
      to
      fund future operations, or our inability to attract and retain highly qualified
      management, technical and sales personnel.




**OVERVIEW**





We,
      through our operating subsidiaries, are a digital media company in the business
      of providing products and solutions that enable the broadcast of topical video
      content from our customers' Internet websites. This includes providing the
      technology and content required for video to be played on computers via the
      Internet as well as emerging broadcasting platforms such as set top boxes and
      wireless devices (i.e., mobile phones and PDAs). Our core activities include
      the
      aggregation of video content, media management, traditional and online
      advertising, hosting, and content delivery. We also operate a global network
      of
      individual destination portals under the brand ROO TV that enables end users
      in
      different regions around the world to view video content over the Internet
      that
      is topical, informative, up to date, and specific to the region in which they
      live. In conjunction with our subsidiaries, we currently provide the video
      solution for over 150 web sites in the United States, United Kingdom, and
      Australia. Comscore, an independent research company that tracks the video
      streams sent to users per month placed us as the 9th largest broadcaster of
      video in the world in its most recent December 2006 report.





Set
      forth below is a discussion of the financial condition and results of operations
      of ROO Group, Inc. and its consolidated subsidiaries (the "Company," "we,"
      "us,"
      or "our") for the three months ended March 31, 2007 and 2006. The consolidated
      financial statements include the accounts of ROO Group, Inc., its wholly owned
      subsidiary ROO Media Corporation, its wholly owned subsidiary Bickhams and
      its
      51% owned subsidiary Reality Group. Included in the consolidation with ROO
      Media
      Corporation are ROO Media Corporation's wholly owned subsidiary ROO Media
      (Australia) Pty Ltd. and ROO Media (Australia) Pty Ltd.'s wholly owned
      subsidiary Undercover, its wholly owned subsidiary ROO Media Europe Pty Ltd,
      its
      wholly owned subsidiary ROO Broadcasting Limited, its 51% owned subsidiary
      Factory212 Pty. Ltd. and its wholly owned subsidiary ROO TV Pty Ltd. Included
      in
      the consolidation with Bickhams is Bickhams' wholly owned subsidiary
      VideoDome.com Networks, Inc. ROO Media Europe Pty Ltd. was 76% owned by ROO
      Media Corporation until January 27, 2006 when ROO Media Corporation purchased
      the remaining 24% of ROO Media Europe Pty Ltd. for $90,000. The following
      discussion should be read in conjunction with the information set forth in
      the
      consolidated financial statements and the related notes thereto appearing
      elsewhere in this quarterly report.





RESULTS
      OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THE THREE MONTHS
      ENDED MARCH 31, 2006





NET
      REVENUE





Total
      net
      revenue increased by $1,222,000 from $1,780,000 for the three months ended
      March
      31, 2006 to $3,002,000 for the three months ended March 31, 2007, an
      increase of 69%. The increase is principally from the increasing sales revenue
      from operations.





EXPENSES





OPERATIONS.
      Operating expenses increased by $1,388,000 from $1,809,000 for the three months
      ended March 31, 2006 to $3,197,000 for the three months ended March 31, 2007,
      an
      increase of 77%. The increases were due to the increasing costs associated
      with
      increased revenue generation. These costs include content costs, salaries,
      web
      hosting and content delivery.




RESEARCH
      AND DEVELOPMENT. Research and development expenses consist primarily of salaries
      and related personnel costs, and consulting fees associated with product
      development. Research and development expenses increased by $1,109,000 from
      $230,000 for the three months ended March 31, 2006 to $1,339,000 for the three
      months ended March 31, 2007, an increase of 482%. The increases were due
      primarily to the increase in development activities associated with enhancements
      to our technology platform.





SALES
      AND
      MARKETING. Sales and marketing expenses consist primarily of expenses for sales
      and marketing personnel, expenditures for advertising, and promotional
      activities and expenses to bring our products to market. These expenses
      increased by $701,000 from $912,000 for the three months ended March 31, 2006
      to
      $1,613,000 for the three months ended March 31, 2007, an increase of 77%. These
      increases were primarily due to an increase in sales and marketing personnel.




12





We
      believe that additional sales and marketing personnel and programs are required
      to remain competitive. Therefore, we expect that our sales and marketing
      expenses will continue to increase for the foreseeable future.





GENERAL
      AND ADMINISTRATIVE. General and administrative expenses consist primarily of
      expenses for management, finance and administrative personnel, legal,
      accounting, consulting fees, and facilities costs. These expenses increased
      by
      $2,068,000 from $1,436,000 for the three months ended March 31, 2006 to
      $3,504,000 for the three months ended March 31, 2007, an increase of 144%.
      The
      increase was due in part to the increase in non-cash costs of $805,000 which
      consists of stock based compensation expense on stock options, plus $1,263,000
      that is primarily due to an increase in salaries for administrative support
      related to our increased operations.





INTEREST
      INCOME. Interest income increased by $90,000 from $29,000 for the three months
      ended March 31, 2006 to $119,000 for the three months ended March 31, 2007,
      an
      increase of 310%. This increase was primarily due to an increase in our cash
      and
      cash equivalents.





INTEREST
      EXPENSE, OTHER. Interest expense, other, was $6,000 for the three months ended
      March 31, 2006 and $7,000 for the three months ended March 31, 2007,
      respectively.




NET
      LOSS
      BEFORE INCOME TAXES. As a result of the factors described above, we reported
      a
      net loss before income taxes of $6,539,000 for the three months ended March
      31,
      2007 compared to $2,584,000 for the three months ended March 31, 2006, an
      increase of $3,955,000 or 153%.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      March 31, 2007 we had working capital of approximately $6,453,000 with a cash
      balance of $6,498,000. Management believes that there will be an increase in
      overall expenses to expand the Company’s operations on a global basis during
      2007. Although revenues are expected to increase, it is unclear whether
      additional cash resources will be required during the next twelve months. On
      May
      4, 2007, the Company entered into a common stock purchase agreement pursuant
      to
      which the Company sold an aggregate of $25,000,000 of shares of common stock
      and
      warrants to accredited investors (See Note 7 Subsequent Events in financial
      statements). We may undertake additional debt or equity financings if needed
      to
      better enable us to grow and meet our future operating and capital requirements.
      However, we cannot guarantee that any additional equity or debt financing will
      be available in sufficient amounts or on acceptable terms when needed. If such
      financing is not available in sufficient amounts or on acceptable terms, our
      results of operations and financial condition may be adversely affected. In
      addition, equity financing may result in dilution to existing stockholders
      and
      may involve securities that have rights, preferences, or privileges that are
      senior to our common stock, and any debt financing obtained must be repaid
      regardless of whether or not we generate profits or cash flows from our business
      activities.





Net
      cash
      used in operating activities was $4,291,000 for the three months ended March
      31,
      2007, compared to $1,784,000 for the three months ended September 30, 2006,
      an
      increase of $2,507,000 or 141%. The increase in net cash used in operating
      activities is primarily the result of our increased expenses with our expanded
      operations.





Net
      cash
      used in investing activities was $1,150,000 for the three months ended March
      31,
      2007 compared to net cash used in investing activities for the three months
      ended March 31, 2007 of $180,000 an increase of $970,000 or 539%. The net cash
      used in investing activities increased primarily due to the issuance of $800,000
      in notes and the cash investment in RJM of $250,000, the capitalization of
      software of $432,000 offset by the decrease in investment in ROO Media Europe of
      $90,000. On January 27, 2006 ROO Media Corporation purchased 24% of ROO Media
      Europe Limited for $90,000. ROO Media Europe is now a wholly owned subsidiary
      of
      ROO Media Corporation.





Net
      cash
      used in financing activities was $12,000 for the three months ended March 31,
      2007 compared to net cash used in financing activities of $5,000 for the three
      months ended March 31, 2006, an increase in net cash provided by financing
      activities of $7,000 or 140%.





**MARKET
      RISKS**





We
      conduct our operations in primary functional currencies: the United States
      dollar, the British pound and the Australian dollar. Historically, neither
      fluctuations in foreign exchange rates nor changes in foreign economic
      conditions have had a significant impact on our financial condition or results
      of operations. We currently do not hedge any of our foreign currency exposures
      and are therefore subject to the risk of exchange rate fluctuations. We invoice
      our international customers primarily in U.S. dollars, except in the United
      Kingdom and Australia, where we invoice our customers primarily in British
      pounds and Australian dollars, respectively. In the future we anticipate billing
      certain European customers in Euros, though we have not done so to date.





We
      are exposed to foreign exchange rate fluctuations as the financial results
      of
      foreign subsidiaries are translated into U.S. dollars in consolidation and
      as
      our foreign currency consumer receipts are converted into U.S. dollars. Our
      exposure to foreign exchange rate fluctuations also
      arises from payables and receivables to and from our foreign subsidiaries,
      vendors and customers. Foreign exchange rate fluctuations did not have a
      material impact on our financial results in the three months ended March
      31, 2007 and 2006.




13





Financial
      instruments which potentially subject us to concentrations of credit risk
      consist principally of cash and cash equivalents and trade accounts receivable.
      We place our cash and cash equivalents with high credit quality institutions
      to
      limit credit exposure. We believe no significant concentration of credit risk
      exists with respect to these investments.





Concentrations
      of credit risk with respect to trade accounts receivable are limited due to
      the
      wide variety of customers who are dispersed across many geographic regions.
      As
      of March 31, 2007, one customer accounted for approximately 14% of our trade
      accounts receivable portfolio. We routinely assess the financial strength of
      customers and, based upon factors concerning credit risk, we establish an
      allowance for uncollectible accounts. Management believes that accounts
      receivable credit risk exposure beyond such allowance is limited.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not have any off balance sheet arrangements that are reasonably likely to
      have a current or future effect on our financial condition, revenues, results
      of
      operations, liquidity or capital expenditures.





**Item
      3.** **Controls
      and Procedures.**





(a)
        Evaluation of Disclosure Controls and Procedures. As of the end of the
      period covered by this report, we conducted an evaluation, under the supervision
      and with the participation of our chief executive officer and chief financial
      officer of our disclosure controls and procedures (as defined in Rule 13a-15(e)
      and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief
      executive officer and chief financial officer concluded that our disclosure
      controls and procedures are effective to ensure that the information required
      to
      be disclosed by us in the reports that we file or submit under the Exchange
      Act
      is (i) recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s rules and forms, and (ii)
      is accumulated and communicated to our management, including our chief executive
      officer and chief financial officer, to allow timely decisions regarding
      required disclosure.





(b)
        Changes in internal controls.   There was no change in our internal
      controls or in other factors that could affect these controls during our last
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.




14





**PART
      II - OTHER INFORMATION**





**Item
      1.** **Legal
      Proceedings.**





We
      are not a party to any pending legal proceeding, nor is our property the subject
      of a pending legal proceeding, that is not in the ordinary course of business
      or
      otherwise material to the financial condition of our business. None of our
      directors, officers or affiliates is involved in a proceeding adverse to our
      business or has a material interest adverse to our business.





**Item
      2.** **Unregistered
      Sales of Equity Securities and Use of Proceeds.**




On
      May 4, 2007, we sold an aggregate of 10,000,000 shares of common stock and
      3,000,000 warrants to purchase shares of our common stock to accredited
      investors. The shares of common stock were sold at a price of $2.50 per share.
      Each investor will be issued warrants to purchase a number of shares of common
      stock equal to 30% of the number of shares of common stock purchased. The
      warrants have an exercise price of $4.50 per share and a term of five years.




These
      securities were issued pursuant to the exemption from registration requirements
      provided by Section 4(2) of the Securities Act and Rule 506 promulgated
      thereunder.





**Item
      3.** **Defaults
      Upon Senior Securities.**





None.





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





There
      were no matters submitted to a vote of security holders during the period
      covered by this report.





**Item
      5.** **Other
      Information.**





None.





**Item6.** **Exhibits.**





**Exhibit
                Number**
            
            **Description**31.1
            
            Certification
                by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act.31.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act.32.1
            
            Certification
                by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code.32.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code.




15


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**ROO
              GROUP,
              INC.**Dated:May
              21, 2007
            By:
            */s/
              Robert Petty*Robert
              PettyChief
              Executive Officer





Dated:May
              21, 2007
            By:
            */s/
              Lou Kerner*Lou
              KernerChief
              Financial Officer





16