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 SEPTEMBER 30, 2005

[_]    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                                      11-3447894
--------------------------------                     -------------------
(State or other jurisdiction of                       (IRS Employer
incorporation or organization)                       Identification No.)

                228 East 45th Street 8th Floor New York, NY 10017
              ----------------------------------------------------
                    (Address of principal executive offices)

                                 (646) 352-0260
                         -----------------------------
                           (Issuer's telephone number)

                                 WITH COPIES TO:

                            Richard A. Friedman, Esq.
                       Sichenzia Ross Friedman Ference LLP
                           1065 Avenue of the Americas
                            New York, New York 10018
                                 (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 [_]

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

                      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 November 17, 2005,
the issuer had 11,232,448 outstanding shares of Common Stock.

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




<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              Page
<S>                                                                                             <C>
                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements ...........................................................      1
                   Consolidated Balance Sheet ............................................      1
                   Consolidated Statements of Operations and Comprehensive Income (Loss)..      2
                   Consolidated Statements of Stockholders' Equity (Deficit) .............      3
                   Consolidated Statements of Cash Flows .................................      4
                   Notes to Consolidated Financial Statements ............................      6
Item 2.   Management's Discussion and Analysis or Plan of Operation ......................     20
Item 3.   Controls and Procedures ........................................................     27

                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings ..............................................................     27
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds ....................     27
Item 3.   Defaults Upon Senior Securities ................................................     28
Item 4.   Submission of Matters to a Vote of Security Holders ............................     28
Item 5.   Other Information ..............................................................     28
Item 6.   Exhibits .......................................................................     28

SIGNATURES ...............................................................................     30
</TABLE>



<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.
ROO GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2005.
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Assets:
Current Assets:
<S>                                                                        <C>
   Cash and Cash Equivalents                                               $    740,172
   Accounts Receivable                                                        1,478,093
   Related Party Loans                                                          252,032
   Other Current Assets                                                         300,516
                                                                           ------------
   Total Current Assets                                                       2,770,813
                                                                           ------------
Marketable Equity Securities - Available for Sale                                10,575
Property and Equipment - Net                                                    477,847
Deferred Tax Assets                                                              18,182
Content - Net                                                                   177,379
Software - Net                                                                1,061,471
Customer List - Net                                                             419,830
Goodwill                                                                      1,990,413
                                                                           ------------
   Total Assets                                                            $  6,926,510
                                                                           ============
Liabilities and Stockholders' Equity:
Current Liabilities:
   Bank Overdraft                                                          $    443,476
   Accounts Payable                                                           1,024,922
   Capital Leases                                                                33,780
   Accrued Expenses                                                             199,863
   Stockholder Loans Payable                                                    950,000
   Income Tax Payable                                                            72,783
   Accrued Employee Benefits                                                    117,501
   Other Current Liabilities                                                    638,650
                                                                           ------------
   Total Current Liabilities                                                  3,480,975
                                                                           ------------
Non Current Liabilities:
   Capital Leases                                                                69,492
                                                                           ------------
   Total Non-Current Liabilities                                                 69,492
                                                                           ------------
Commitments                                                                          --
                                                                           ------------
Minority Interest                                                                50,052
                                                                           ------------
Stockholders' Equity:
   Series A Preferred Shares, $0.0001 Par Value: Authorized 10,000,000
     Shares; Issued and Outstanding 9,500,000                                       950
   Common Stock, $.0001 Par Value: Authorized 500,000,000 shares;
     Issued and Outstanding 8,963,155                                               896
   Paid-in Capital                                                           15,809,773
   Accumulated Deficit                                                      (12,457,203)
   Accumulated Other Comprehensive Loss                                         (28,425)
                                                                           ------------
   Total Stockholders' Equity                                                 3,325,991
                                                                           ------------
   Total Liabilities and Stockholders' Equity                              $  6,926,510
                                                                           ============
</TABLE>

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




                                       1
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    Three months ended               Nine months ended
                                                      September 30                      September 30
                                              ----------------------------      ----------------------------
                                                 2005             2004             2005              2004
                                              -----------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>
Revenues                                      $ 1,605,263      $   968,691      $ 4,742,317      $ 2,118,165
                                              -----------      -----------      -----------      -----------
Expenses:
  Operations                                      980,184          583,729        3,002,160        1,373,483
  Research and Development                        206,907           86,234          512,879          232,235
  Sales and Marketing                             726,787          266,288        1,639,474          434,349
  General and Administration                      913,258          762,975        2,414,090        1,354,135
  General and Administration (Non Cash)                --               --        1,140,456               --
                                              -----------      -----------      -----------      -----------
  Total Expenses                                2,827,136        1,699,226        8,709,059        3,394,202
                                              -----------      -----------      -----------      -----------
  (Loss) from Operations                       (1,221,873)        (730,535)      (3,966,742)      (1,276,037)
Non Cash Cost of Capital                         (498,291)         (78,483)        (498,291)        (512,230)
Cost of Capital                                  (525,378)              --         (525,378)         (72,530)
Commission on Loan Procurement                         --               --          (60,000)              --
Cost of Omnibus Consent and Waiver
     Agreement                                    (77,993)              --          (77,993)              --
Redemption Premium on Convertible Notes          (743,948)              --         (801,091)              --
Agreement Termination Costs                            --         (210,000)              --         (210,000)
Interest Income                                       284               76            4,329              850
Interest Expense - Related Party                  (32,385)         (12,853)         (64,767)         (38,378)
Non Cash Interest Expense - Related Party         (62,395)              --          (62,395)              --
Interest Expense - Other                          (31,070)         (10,476)        (163,287)         (39,974)
Financing Fees - Convertible Notes               (319,220)        (587,558)        (759,252)        (587,558)
                                              -----------      -----------      -----------      -----------
  Net (Loss) before Income Taxes               (3,512,269)      (1,629,829)      (6,974,867)      (2,735,857)

Income Taxes                                       32,525            7,518           72,978           10,612
                                              -----------      -----------      -----------      -----------
  Net (Loss) before Minority Interest          (3,544,794)      (1,637,347)      (7,047,845)      (2,746,469)

Minority Interest                                  14,181            2,724           30,949            4,101
                                              -----------      -----------      -----------      -----------
  Net (Loss)                                  $(3,558,975)     $(1,640,071)     $(7,078,794)     $(2,750,570)
                                              ===========      ===========      ===========      ===========
Net (loss) per Common Share,
Basic and Diluted                             $     (0.54)     $     (0.45)     $     (1.44)     $     (0.80)
                                              ===========      ===========      ===========      ===========
Average Common Shares outstanding               6,549,460        3,629,292        4,920,512        3,418,128
                                              ===========      ===========      ===========      ===========
Comprehensive (Loss):
  Net (Loss)                                  $(3,558,975)     $(1,640,071)     $(7,078,794)     $(2,750,570)
  Foreign Currency Translation                     (7,286)           5,533          (16,680)          (5,637)
  Fair Market Value Adjustment for
   available for sale securities                   (1,790)          (9,148)          (4,448)          (9,148)
                                              -----------      -----------      -----------      -----------
  Comprehensive (Loss)                        $(3,568,051)     $(1,643,686)     $(7,099,922)     $(2,765,355)
                                              ===========      ===========      ===========      ===========
</TABLE>



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



                                       2
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF STOCKHOLDES' EQUITY (DEFICIT)
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                           Preference                    Common
                                                        Series A             Shares      Common           Stock
                                                   Preference Shares       Par Value     Stock          Par Value
                                              --------------------------------------------------------------------
<S>                                                   <C>                   <C>        <C>               <C>
Balance December 31, 2003                                                              3,153,383             315
Issue of stock for services                                                              110,330              11
Issue of options for services
Issue of stock in private placements                                                     166,234              17
Issue of stock for acquision of Reality Group                                            167,200              17
Issue of stock for acquision of Undercover Media                                          20,000               2
Issue of stock for acquision of Bickhams Media                                            80,000               8
Issue of stock for investments                                                             8,807               1
Issue of stock for termination of agreement                                               60,000               6
Computed discount on convertible debt
Beneficial conversion feature of
   convertible debt
Foreign currency translation adjustment
Fair market value adjustment for
   available for sale securities
Profit (Loss) for nine months September 30, 2004
                                              --------------------------------------------------------------------
Balance September 30, 2004                                     0               0       3,765,954             377
                                              ====================================================================

Balance December 31, 2004                                      0               0       3,911,667             391
Issue of options for services
Issue of Preference Shares for services                2,000,000             200
Issue of Preference Shares as
   Performance Bonuses                                 7,500,000             750
Computed discount on convertible debt
Beneficial conversion feature of
   convertible debt
Issue of stock conversion of convertible debt                                          1,178,154             117
Computed discount on convertible debt
Issue of warrants for Omnibus Consent and
Waiver agreement
Issue of stock Videodome Share Purchase                                                   40,000               4
Issue of stock in private placements                                                   3,833,334             384
Issue of warrants for R Petty Funding
Issue of warrants for private placement
Foreign currency translation adjustment
Fair market value adjustment for
   available for sale securities
Profit (Loss) for nine months September 30, 2005
                                              --------------------------------------------------------------------
Balance September 30, 2005                             9,500,000             950       8,963,155             896
                                              ====================================================================


<CAPTION>
                                                                                   Accumulated
                                                      Other                           Other            Total
                                                    Additional     Accumulated    Comprehensive    Stockholders'
                                                     Paid-in        (Deficit)         Income           Equity
                                                     Capital                          (Loss)         (Deficit)
                                              -------------------------------------------------------------------
<S>                                                 <C>           <C>                <C>             <C>
Balance December 31, 2003                             408,793      (1,152,642)         (12,938)        (756,472)
Issue of stock for services                           349,408                                           349,419
Issue of options for services                         425,715                                           425,715
Issue of stock in private placements                  871,798                                           871,815
Issue of stock for acquision of Reality Group       2,507,983                                         2,508,000
Issue of stock for acquision of Undercover Media      149,998                                           150,000
Issue of stock for acquision of Bickhams Media        279,992                                           280,000
Issue of stock for investments                         25,339                                            25,340
Issue of stock for termination of agreement           209,994                                           210,000
Computed discount on convertible debt                  46,578                                            46,578
Beneficial conversion feature of                      585,040                                           585,040
   convertible debt
Foreign currency translation adjustment                                                 (5,637)          (5,637)
Fair market value adjustment for
   available for sale securities                                                        (9,148)          (9,148)
Profit (Loss) for nine months September 30, 2004                   (2,750,570)                       (2,750,570)
                                              -------------------------------------------------------------------
Balance September 30, 2004                          5,860,638      (3,903,212)         (27,723)       1,930,080
                                              ===================================================================

Balance December 31, 2004                           6,930,157      (5,378,409)          (7,297)       1,544,842
Issue of options for services                         190,456                                           190,456
Issue of Preference Shares for services               199,800                                           200,000
Issue of Preference Shares as
   Performance Bonuses                                749,250                                           750,000
Computed discount on convertible debt                  32,338                                            32,338
Beneficial conversion feature of
   convertible debt                                   351,020                                           351,020
Issue of stock conversion of convertible debt         807,263                                           807,380
Computed discount on convertible debt                 117,198                                           117,198
Issue of warrants for Omnibus Consent and
Waiver agreement                                       77,993                                            77,993
Issue of stock Videodome Share Purchase                43,996                                            44,000
Issue of stock in private placements                5,749,616                                         5,750,000
Issue of warrants for R Petty Funding                  62,395                                            62,395
Issue of warrants for private placement               498,291                                           498,291
Foreign currency translation adjustment                                                (16,680)         (16,680)
Fair market value adjustment for
   available for sale securities                                                        (4,448)          (4,448)
Profit (Loss) for nine months September 30, 2005                   (7,078,794)                       (7,078,794)
                                              -------------------------------------------------------------------
Balance September 30, 2005                         15,809,773     (12,457,203)         (28,425)       3,325,991
                                              ===================================================================
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       3
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Nine months ended
                                                                          September 30,
                                                                 ----------------------------
                                                                     2005            2004
                                                                 -----------      -----------
<S>                                                              <C>              <C>
Operating activities:
   Net (Loss)                                                    $(7,078,794)     $(2,750,570)
                                                                 -----------      -----------
   Adjustments to reconcile net (loss) to net cash
     (used) by operating activities:
     Depreciation                                                    104,424           42,935
     Amortization of client lists                                    121,883           67,713
     Amortization of content                                         133,703            6,710
     Amortization of Software                                        199,766               --
     Non cash cost of capital                                        498,291          512,230
     Non cash cost of omnibus consent and waiver agreement            77,993               --
     Non cash agreement termination costs                                 --          210,000
     Non cash stock for services                                     190,456          334,599
     Non cash preference stock for consulting services               200,000               --
     Non cash preference stock issued as performance bonuses         750,000               --
     Non cash interest expense related party                          62,395               --
     Non cash Financing Fees on convertible note                     759,252          587,558
     Minority Interest in Reality                                     30,949               --
   Changes in assets and liabilities:
     (Increase) decrease in:
       Accounts receivable                                          (529,820)         105,409
       Other assets                                                  (52,620)        (106,339)
     Increase (decrease) in:
       Accounts payable                                              608,875         (304,329)
       Accrued Expenses                                             (223,518)          89,186
       Income Tax payable                                                979          (18,378)
       Accrued Employee Benefits                                     (37,454)           4,919
       Other liabilities                                              49,701          366,542
                                                                 -----------      -----------
   Total adjustments                                               2,945,255        1,898,755
                                                                 -----------      -----------
   Net cash (used) by operating activities - Forward              (4,133,539)        (851,815)
                                                                 -----------      -----------
Investing activities:
   Capitalization of Content                                        (154,898)         (43,217)
   Proceeds from sale of equipment                                        --           30,955
   Purchase of equipment                                            (188,340)         (48,648)
   (Increase) in related party loans                                 (79,735)        (125,778)
   Investment in VideoDome                                          (100,000)        (250,000)
   Investment in Reality                                                  --         (144,456)
   Net cash received in acquisition of Reality & VideoDome                --           30,374
                                                                 -----------      -----------
   Net cash (used) by investing activities - Forward             $  (522,973)     $  (550,770)
</TABLE>


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




                                       4
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                          Nine months ended
                                                                                            September 30,
                                                                                    ----------------------------
                                                                                        2005             2004
                                                                                    -----------      -----------
<S>                                                                                 <C>              <C>
   Net cash (used) by operating activities - Forwarded                              $(4,133,539)     $  (851,815)
                                                                                    -----------      -----------
   Net cash (used) by investing activities - Forwarded                                 (522,973)        (550,770)
                                                                                    -----------      -----------
Financing activities:
   Capital contribution                                                               5,750,000          800,120
   Bank Overdraft                                                                       192,092           33,113
   Increase in stockholder loan                                                         600,000           87,983
   (Decrease) in stockholder loan                                                      (150,000)        (102,087)
   Convertible Note                                                                   1,465,000          950,021
   Repayment of Convertible Note                                                     (2,742,620)              --
   Note payable                                                                              --          (62,500)
   (Decrease) in capital leases                                                         (19,857)         (45,496)
                                                                                    -----------      -----------
   Net cash provided by financing activities                                          5,094,615        1,661,154
                                                                                    -----------      -----------
Effect of exchange rate changes on cash                                                 (19,533)         (10,060)
                                                                                    -----------      -----------
   Net increase in cash                                                                 418,570          248,509
Cash at beginning of periods                                                            321,602           26,371
                                                                                    -----------      -----------
   Cash at end of periods                                                           $   740,172      $   274,880
                                                                                    ===========      ===========

Supplemental Cash Flow Information:
Cash paid during the periods for:
Interest                                                                            $   228,054      $    78,352
Income taxes                                                                        $    97,600      $    24,925
Supplemental disclosure of non-cash financing and investing activities
Stock issued for achievement of second milestone as per share
Purchase agreement of Videodome Networks.com Inc.(see note 9)                       $    44,000      $        --
Conversions of Convertible Notes (see note 11)                                      $   807,381      $        --
</TABLE>


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


                                       5
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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  nine  months  ended  September  30,  2005  are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2005. 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, 2004.

(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 80% subsidiary Reality
Group  Pty.  Ltd.  ("Reality").  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 Pty Ltd.  ("Undercover"),  its 76%-owned subsidiary
ROO Media Europe Pty Ltd, its wholly owned subsidiary ROO  Broadcasting  Limited
and its wholly owned  subsidiary ROO TV Pty Ltd.  Included in the  consolidation
with Bickhams is Bickhams' wholly owned subsidiary VideoDome, 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 affect 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.



                                       6
<PAGE>


ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 [See Note
5].

(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.  As of September 30, 2005,  three  customers  accounted for
approximately 23%, 15% and 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. The allowance as of September 30, 2005 was $52,494.

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.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition," which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements  filed with the SEC. SAB 101 outlines the basic criteria that must be
met to recognize revenue and provide guidance for disclosures related to revenue
recognition  policies.  Management believes that ROO Group's revenue recognition
practices  are in  conformity  with the  guidelines of SAB 101 as amended by SAB
104.

(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.



                                       7
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(2) Summary of Significant Accounting Policies (Continued)

(L) Stock-Based Compensation - We account for stock-based compensation utilizing
the  intrinsic  value method in  accordance  with the  provisions  of Accounting
Principles  Board  Opinion  No. 25 (APB  25),  "Accounting  for Stock  Issued to
Employees" and related Interpretations.  Accordingly, no compensation expense is
recognized  because the exercise prices of these employee stock options equal or
exceed the estimated fair market value of the  underlying  stock on the dates of
grant.

In December  2004, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of Financial  Accounting  Standards  ("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.  The effective date of SFAS 123R is
the first reporting  period  beginning  after December 15, 2005,  although early
adoption is allowed.  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.  The
"modified  retrospective"  method also  permits  entities  to restate  financial
statements of previous periods based on proforma  disclosures made in accordance
with SFAS 123.

We currently  utilize a standard option pricing model (i.e.,  Black-Scholes)  to
measure  the fair value of stock  options  granted  to  employees  for  proforma
purposes.  While SFAS 123R permits entities to continue to use such a model, the
standard also permits the use of a "lattice"  model.  We have not yet determined
which model we will use to measure the fair value of employee stock options upon
the adoption of SFAS 123R.

SFAS 123R also requires that the benefits  associated with the tax deductions in
excess of  recognized  compensation  cost be reported as a financing  cash flow,
rather than as an operating cash flow as required under current  literature.  We
have not yet  determined  what effect,  if any,  this change will have on future
periods.

We currently expect to adopt SFAS 123R effective  January 1, 2006;  however,  we
have not yet determined  which of the  aforementioned  adoption  methods we will
use.

(M) Non Cash Cost of Capital - During the nine month periods ended September 30,
2005 and 2004,  non cash cost of capital  included  options  issued for  capital
raising services and options attached to stock issued for cash which were valued
using the Black-Scholes method totaling $498,291 and $512,230, respectively.

(N)  Advertising  Expense  - Our  policy  is to  expense  advertising  costs  as
incurred.  We incurred no significant  advertising expense in the three and nine
month periods ended September 30, 2005 and 2004.



                                       8
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(2) Summary of Significant Accounting Policies (Continued)

(O) Restatement of Shares - Effective  October 3,  2005, the Company amended its
Certificate  of  Incorporation  to  effect  a  one-for-50  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-50  reverse  split.  All option  amounts and  exercise  prices have been
adjusted to reflect the stock split.

(P) 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.

(Q) Reclassification

Certain prior period amounts have been  reclassified to conform with the current
presentation.

 (3) Marketable Securities - At Fair Value

The Company has classified its investments in marketable securities as available
for sale in conformity with generally accepted accounting principles.

Cost and fair value of marketable  securities available for sale as of September
30, 2005 are as follows:

<TABLE>
<CAPTION>
                                           Unrealized          Unrealized
                             Cost             Gain               Losses            Fair Value
                         ------------    --------------      -------------        ------------
<S>                      <C>             <C>                 <C>                  <C>
Common Stock             $     25,338    $           --      $      14,763        $     10,575
                         ============    ==============      =============        ============
</TABLE>

Available for sale securities are valued at fair value,  with  unrealized  gains
and losses shown as a separate  component of stockholders'  equity. For the nine
months ended September 30, 2005, comprehensive income/(loss) includes unrealized
holding losses of $4,448.

Realized gains and losses are determined on the basis of sales price compared to
original  cost.  Cost is determined  under the specific  identification  method.
During the nine months  ended  September  30,  2005,  sales  proceeds  and gross
realized gains and losses on securities classified as available for sale were:

                                                                      2005
                                                                    --------
Sales Proceeds                                                     $      NIL
                                                                   ==========
Gross Realized Losses                                              $      NIL
                                                                   ==========
Gross Realized Gains                                               $      NIL
                                                                   ==========

The unrealized loss on marketable  securities,  which is included as a component
of  accumulated  other  comprehensive  loss in the  accompanying  balance sheet,
totaled $14,763 at September 30, 2005.



                                       9
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(4) Leases

The Company is a party to a number of noncancelable  lease agreements  primarily
involving office premises and computer equipment.  Computer equipment leases are
generally for 3-year periods and there are two leases of office  premises one in
Australia is for a 4-year period ending April 2006 with a renewal  option for an
additional  3-year term and one in our New York office  lease is for 3 years and
10 months ending November 2008 with no renewal options

The following is a schedule of future minimum  payments under capital leases and
operating  leases and obligations  under capital leases (present value of future
minimum rentals) as of September 30, 2005.


Periods January to December                             Operating
unless stated otherwise                     Capital     Property       Total
---------------------------                --------     --------     --------
2005 October-December                      $ 21,974     $ 71,621     $ 93,595
2006                                         23,274      168,185      191,459
2007                                         32,196      127,308      159,504
2008                                         32,487      120,197      152,684
2009 and Thereafter                              --           --           --
                                           --------     --------     --------
Total Minimum Lease Payments                109,931     $487,311     $597,242
                                                        ========     ========
Less Amount Representing Interest             6,659
                                           --------
Total Obligations Under Capital Leases     $103,272
                                           ========

Rent  expense  amounted  to  $84.958  and  $34,086  for the three  months  ended
September 30, 2005 and 2004,  respectively and $223,305 and $63,357 for the nine
months ended September 30, 2005 and 2004, respectively.

(5) Property and Equipment

Property and equipment at September 30, 2005 consists of the following:

<TABLE>
<CAPTION>
                                       Plant and                   Motor
                                       Equipment                  Vehicles
                         Plant and      Capital      Motor         Capital      Computer     Leasehold       Office
                         Equipment       Lease      Vehicles        Lease       Software    Improvements    Equipment       Total
                         ---------     ---------    ---------     ---------     ---------     ---------     ---------     ---------
<S>                      <C>           <C>          <C>           <C>           <C>           <C>           <C>           <C>
Cost                     $ 174,905     $   8,793    $   3,972     $ 105,250     $  35,739     $  41,566     $ 270,416     $ 640,641

Accumulated
Depreciation               (47,476)       (2,112)      (1,223)      (19,863)      (16,833)       (4,136)      (71,161)     (162,804)
                         ---------     ---------    ---------     ---------     ---------     ---------     ---------     ---------
Net                      $ 127,429     $   6,681    $   2,749     $  85,387     $  18,906     $  37,430     $ 199,255     $ 477,837
                         =========     =========    =========     =========     =========     =========     =========     =========
Estimated Useful Life     10 years       3 years      6 years       7 years       2 years       5 years       4 years
</TABLE>


Depreciation  expense  (including  amortization of capital lease assets) totaled
$35,109 and  $22,247 for the three  months  ended  September  30, 2005 and 2004,
respectively,  and $104,424 and $42,935 for the nine months ended  September 30,
2005 and 2004, respectively.



                                       10
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(6) Income Taxes

The provision (benefit) for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                            Three Months Ended       Nine Months Ended
                                               September 30            September 30,
                                          ---------------------    --------------------
                                            2005         2004        2005        2004
                                          --------     --------    --------    --------
<S>                                       <C>          <C>         <C>         <C>
Current:
  Australian Federal Tax Expense          $ 34,204     $  7,380    $ 49,849    $ 12,969
Non Current:
  Australian Federal Tax Expense            (1,679)         138      23,129      (2,357)
                                          --------     --------    --------    --------
  Totals                                  $ 32,525     $  7,518    $ 72,978    $ 10,612
                                          ========     ========    ========    ========
</TABLE>

Reported  income tax expense  differs from the amount of income tax expense that
would  result  from  applying  federal  tax  rates  due  to the  application  of
Australian tax law.



                                       11
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(6) Income Taxes (Continued)

The components of deferred tax assets and liabilities were as follows:

                                                           September 30
                                                   ----------------------------
                                                     2005                2004
                                                   --------            --------
Deferred Tax Assets:
  Provision Accounts                               $ 17,648            $ 14,886
  Depreciation                                          933               7,287
  Other Liabilities                                    (399)             (4,977)
                                                   --------            --------
  Totals                                           $ 18,182            $ 17,196
                                                   ========            ========

(7) Goodwill and Intangible Assets

Goodwill  represents cost in excess of net assets acquired.  The company adopted
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets" (FAS 142) effective January 1, 2002. Under FAS 142, goodwill
and  intangible  assets with  indefinite  lives are no longer  amortized but are
reviewed annually (or more frequently if impairment  indicators are present) for
impairment.  Pursuant to the provisions of FAS 142, the goodwill  resulting from
the Company's  acquisition  of Reality,  which totals  $1,990,413,  is not being
amortized  for book  purposes  and is subject to the annual  impairment  testing
provisions of FAS 142, which testing indicated no impairment for goodwill.

At September 30, 2005 intangible assets include the following:

                             Customer List         Software           Content
                             -------------       -----------        -----------
Cost                          $   650,054        $ 1,299,761        $   396,671
Less Amortization                (230,224)          (238,290)          (219,292)
                              -----------        -----------        -----------
  Totals                      $   419,830        $ 1,061,471        $   177,379
                              ===========        ===========        ===========

The customer lists were acquired as a component of the Reality  acquisition  and
are  being  amortized  over a 4 year  period on a  straight  line  basis.  It is
estimated that the aggregate annual amortization  expense for each of the next 3
years will be $162,510 for customer lists.  The software is being amortized over
a 5 year  period on a straight  line  basis.  It is  estimated  that the minimum
aggregate  annual  amortization  expense  for each of the  next 4 years  will be
$259,952  for  software.  Content  is  made  up of  digital  videos,  audio  and
photographs  and is capitalized at the cost of production.  Content is amortized
over a 2 year period on a straight line basis.  It is estimated that the minimum
amortization  of content  costs will total  $126,978  and  $33,473 for the years
ending December 31, 2006 and 2005, respectively.

Amortization  for the three and nine months  ended  September  30, 2005 and 2004
related to these  assets  amounted to $136,113  and  $47,338  and  $455,352  and
$74,423, respectively.

The Company's  policy is to regularly review  intangible  assets to determine if
they have been permanently  impaired by adverse conditions.  As at September 30,
2005 management does not believe the intangible assets to be impaired



                                       12
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(8) Shareholder Loan Payable

The Company has  periodically  received cash  advances from its Chief  Executive
Officer.  These  amounts are  recorded  as a loan  payable by the  Company.  The
interest  on the  loan  is 10%  per  annum  and the  outstanding  balance  as of
September  30, 2005 was  $950,000.  Interest  expense  for this loan  amounts to
$32,385 and  $12,853 for the three  months  ended  September  30, 2005 and 2004,
respectively  and $64,767 and $38,378 for the nine months  ended  September  30,
2005 and 2004, respectively.

On August 23, 2005 the Company  assumed the liability  for warrants  issuable to
the  funding  agents  for the  $600,000  loan made to the  company  by the Chief
Executive  Officer on May 23, 2005.  This resulted in the company issuing 48,000
warrants. The warrants were valued at $62,395 under the Black-Scholes method and
the amount was expensed as a non cash interest expense - related party.

(9)Preferred  Stock

On September 30, 2005,  the Company  amended the terms of its Series A Preferred
Stock to provide that: (1) the holders  thereof may not convert shares of Series
A  Preferred  Stock if the market  price of the Common  Stock is below $3.00 per
share;  and (2) removing the following  restriction on the holders  thereof from
converting  shares of Series A Preferred Stock  immediately prior to a change in
control of the Company:

"if at the time of a  conversion  under this Section 5.2 the market price of the
Common  Stock is below  $0.40 per share,  then each share of Series A  Preferred
Stock shall  convert into such number of shares of Common Stock equal to (x) two
(2),  multiplied by (y) the closing price of the Common Stock on the date of the
event  triggering  an  automatic  conversion  under this  Section 5.2 divided by
$0.20."

(10) Stock Issuances

On July 19, 2005 the Company  issued  216,000  shares of common stock  converted
under the callable secured  convertible  notes  agreement.  The stock issued was
valued at $0.65 per share to reduce the amount owing on the convertible notes by
a total of $140,400.

On July 22, 2005 the Company  issued  228,000  shares of common stock  converted
under the callable secured  convertible  notes  agreement.  The stock issued was
valued at $0.57 per share to reduce the amount owing on the convertible notes by
a total of $129,960.

On July 29, 2005 the Company  issued  228,000  shares of common stock  converted
under the callable secured  convertible  notes  agreement.  The stock issued was
valued at $0.505 per share to reduce the amount owing on the  convertible  notes
by a total of $115,140.



                                       13
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

On August 23, 2005, the Company  entered into a Common Stock Purchase  Agreement
and sold 3,833,333 shares of the Company's common stock to accredited  investors
in a private placement pursuant to Rule 506 promulgated under the Securities Act
of 1933,  as  amended.  The common  stock was sold at a price of $1.50 per share
resulting in gross proceeds of  $5,750,000.  $3,400,000 of the proceeds was used
to prepay all of the Company's  outstanding  callable secured convertible notes.
In  connection  with the sale of the common  stock,  the Company was required to
perform 1-for-50 reverse split of its outstanding  shares of common stock within
45 days  following  the  closing  date  (Note 2).  In  addition,  the  investors
acknowledged and agreed that the Company may sell up to an additional $2,250,000
of shares of common  stock on  substantially  identical  terms or on terms  more
favorable to the Company within 45 days of the closing, which the investors have
a right of first refusal to  participate  in. The  Company's  Chairman and Chief
Executive  Officer also agreed to convert at least $600,000 of a promissory note
issued to him by the Company on May 18, 2005 in the aggregate  principal  amount
of $1,100,000 into shares of the Company's  common stock at a price of $1.50 per
share within five business days of the reverse stock split.  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 45 days  following  the closing  date.  If the
registration  statement  is not filed  within  such time or 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 2% of the
dollar amount of their  investment  for each calendar  month or portion  thereof
that the  registration  statement  is not  filed  or  declared  effective.  Pali
Capital,  Inc.  and Brimberg & Co.,  both  registered  broker-dealers,  acted as
placement  agents for the sale of the Company's common stock. In connection with
the closing,  the Company paid the  placement  agents a cash fee equal to 10% of
the gross  proceeds up to $3,000,000  and 8% of the gross  proceeds in excess of
$3,000,000.  In addition,  the Company is required to issue the placement agents
warrants  to  purchase  a number of shares of common  stock  equal to 10% of the
shares of common stock sold in the private  placement  with an exercise price of
$1.50 per share  exercisable  for a period of five years.  The placement  agents
have  piggyback  registration  rights with respect to the shares of common stock
issuable upon exercise of the placement  agent  warrants.  The placement  agents
warrants  totaling 383,333 were issued on August 23, 2005 with an exercise price
of $1.50 and were valued under the Black-Scoles method as $498,291.

On August 23, 2005 the Company  issued  48,000  warrants in relation to assuming
the liability  for warrants due issuable to the funding  agents for the $600,000
loan the Chief Executive Officer made to the Company on May 23, 2005.



                                       14
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(11) Callable Secured Convertible Notes

On July 18, 2005, the Company entered into a Securities  Purchase Agreement with
AJW Offshore,  Ltd.,  AJW  Qualified  Partners,  LLC, AJW Partners,  LLC and New
Millennium  Capital Partners II, LLC for the sale of: (i) $2,500,000 in callable
secured  convertible  notes; and (ii) warrants to purchase 100,000 shares of the
Company's common stock. The callable secured  convertible notes and the warrants
will be issued to the  investors  pursuant to the  exemption  from  registration
under  Section  4(2) of the  Securities  Act of 1933,  as amended,  and Rule 506
promulgated thereunder.  The warrants were valued under the Black Scholes method
of $117,198.

The investors are  obligated to provide the Company  initially  with $550,000 of
funds which was disbursed on July 19, 2005.

On August 18,  2005,  the  Company  entered  into an Omnibus  Consent and Waiver
agreement  with  the  holders  of the  Company's  outstanding  callable  secured
convertible notes. Under the agreement,  the Noteholders  consented to a private
placement of up to 5,333,333  shares of the Company's common stock at a purchase
price of $1.50 per share in one or more closings. The Noteholders also agreed to
amend the  amount of  consideration  required  to prepay  the  callable  secured
convertible  notes in full to: (a)  payment of  $3,400,000  in cash  within five
business  days  of the  date of the  agreement;  and (b)  issuance  of  warrants
entitling the  Noteholders  to purchase  60,000  shares of the Company's  common
stock with a fixed exercise price of $1.50 per share exercisable for a period of
five years from the issue date. The warrants were valued under the Black-Scholes
method of $77,993. In addition,  the Noteholders waived certain notice and other
requirements  in order to  facilitate  prepayment  of the  outstanding  callable
secured  convertible  notes.  The warrants were issued by the Company on October
11, 2005.

On August 23, 2005 the Company  repaid the holders of the Company's  outstanding
callable secured  convertible notes $3,400,000 which repaid the callable secured
convertible  notes in full. This  negotiated  settlement was considered to be in
the best  interest of the  Company  and  included  $2,599,763  callable  secured
convertible notes principal outstanding,  $56,289 interest due and payable and a
$743,948 premium on the redemption.

(12) Stock Option Plan

On August 23,2005 the Board of Directors of ROO Group, Inc. increased the number
of incentive stock options or non-qualified  options to purchase an aggregate of
2,500,000  shares of common stock may be issued Stock Option Plan (the  "Plan").
Pursuant to the Plan, which expires on April 1, 2014, incentive stock options or
non-qualified options to purchase an aggregate of 274,000 shares of common stock
had been issued to officers, directors, employees and consultants of ROO Group.

The Board of  Directors  have also  determined  that the current  outstanding  ,
incentive  stock options or  non-qualified  options be reissued on terms in line
with the Company's  current  position to reinstate  the incentive  nature of the
Plan for officers, directors,  employees and consultants. On August 23, 2005 the
Board of Directors reissued the 274,000 outstanding stock options under the Plan
for 2 years and at an exercise price of $2.00 per share.



                                       15
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

The Plan is administered by the Board of Directors of ROO Group (the "Board") or
by a committee to which  administration of the Plan, or of part of the Plan, may
be delegated by the Board (in either case, the "Administrator"). Options granted
under the Plan are not generally  transferable  by the optionee  except by will,
the laws of  descent  and  distribution  or  pursuant  to a  qualified  domestic
relations order, and are exercisable during the lifetime of the optionee only by
such  optionee.  Options  granted  under the Plan vest in such  increments as is
determined  by the  Administrator.  To the extent that options are vested,  they
must be  exercised  within a maximum  of three  months of the end of  optionee's
status as an employee,  director or consultant, or within a maximum of 12 months
after such optionee's termination by death or disability,  but in no event later
than the  expiration of the option term. The exercise price of all stock options
granted under the Plan shall be determined by the Administrator. With respect to
any participant  who owns stock  possessing more than 10% of the voting power of
all classes of ROO Group's  outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date.

If the compensation  cost for the stock-based  employee  compensation  plans had
been  determined  based on fair  values of awards on the grant  date,  estimated
using the Black-Scholes option pricing model, which would be consistent with the
method  described in SFAS No. 123, the Company's  reported net (loss) and (loss)
per share would have been reduced to the pro forma amounts shown below:

<TABLE>
<CAPTION>
                                                            Nine months Ended     Nine months Ended
                                                           September 30, 2005    September 30, 2004
                                                           ------------------    ------------------
<S>                                                        <C>                   <C>
Net (Loss) as reported                                          (7,078,794)           (2,750,570)
Deduct: Amount by which stock-based employee
       compensation as determined under fair value
       based method for all awards exceeds the
       compensation as determined under the intrinsic
       value method                                               (350,660)           (1,026,876)
Pro Forma Net (Loss)                                            (7,429,454)           (3,777,446)
Basic and Diluted (Loss) Per Share as Reported                       (1.44)                (0.80)
Pro Forma Basic and Diluted (Loss) Per Share                         (1.51)                (1.11)
</TABLE>

In December 2002, the Financial  Accounting Standards Board issued SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  - Transaction  and  Disclosure - An
Amendment of SFAS No. 123." This Statement provides  alternative  accounting for
stock-based  employee  compensation and requires  prominent  disclosures in both
annual and  interim  financial  statements  about the method  used in  reporting
results.  The Company has elected not to adopt the  recognition  and measurement
provisions of SFAS No. 123 and continues to account for its stock-based employee
compensation  plans under APB Opinion  No. 25 and related  interpretations  and,
therefore,  the transaction  provisions will not have an impact on the Company's
financial  position or results of  operations.  The  required  expanded  interim
disclosures are provided above.



                                       16
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

(12) Subsequent Events

Effective  October 3, 2005, the Company amended its Certificate of Incorporation
to effect a one-for-50  reverse  split of the Company's  issued and  outstanding
shares of common  stock.  As of that date,  every  fifty  outstanding  shares of
common stock were changed into one shares of common stock.  Any  shareholder who
beneficially  owns a fractional  share of common  stock after the reverse  stock
split  will  receive  one  additional  share  of  common  stock  in lieu of such
fractional share.

On October 20, 2005, the Company entered into a Common Stock Purchase  Agreement
pursuant  to which the  Company  sold  1,500,000  shares of its common  stock to
accredited  investors.  The shares of common stock were sold at a price of $1.50
per share resulting in gross proceeds of $2,250,000.  The transaction was exempt
from registration  requirements pursuant to Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended.  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 or 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 2% of the dollar  amount of
their   investment  for  each  calendar  month  or  portion   thereof  that  the
registration statement is not filed or declared effective.

Pali Capital, Inc. and Brimberg & Co., both registered broker-dealers,  acted as
placement  agents for the sale of the Company's common stock. In connection with
the closing, the Company paid the placement agents a cash fee equal to 8% of the
gross  proceeds.  In  addition,  the Company is required to issue the  placement
agents  warrants to purchase a number of shares of common  stock equal to 10% of
the shares of common stock sold in the private  placement with an exercise price
of $1.50 per share  exercisable for a period of five years. The placement agents
have  piggyback  registration  rights with respect to the shares of common stock
issuable upon exercise of the placement agent warrants.

On October 21, 2005 Robert Petty the Company's Chief Executive Officer converted
$600,000  of the  amount  owing to him as  Shareholder  Loan  Payable to 400,000
shares which were issued at a price of $1.50 per share.

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 must sell to the Reality Group shareholders such number of shares of
Reality Group's common stock so as to reduce the Company's  ownership of Reality
Group to 51%.  The  Reality  Group  shareholders  further  agreed that the Share
Variance  (as defined in the Reality  Purchase  Agreement  and as described in a
Form 8-K filed by the Company on May 17, 2004) shall be calculated  based upon a
closing sale price of $2.50 and the Share Variance equals $1,263,500.



                                       17
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

The Company paid $200,000 of the  $1,263,500  Share  Variance in cash and issued
425,400 shares (the "Variance  Shares") of the Company's common stock as payment
of the  remaining  $1,063,500  based on a stock  price of $2.50 per  share.  The
Company  guaranteed (the "Variance  Guarantee")  the Reality Group  shareholders
that they will be able to sell their Exchange  Shares (as defined in the Reality
Purchase  Agreement  and as  described in a Form 8-K filed by the Company on May
17,  2004) and  Variance  Shares for a price equal to or greater  than $2.50 per
share for a period of 14 days after the  earliest  date that the  Reality  Group
shareholders  can publicly sell their shares of the Company's  common stock (the
"Variance  Guarantee  Period").  In the event the Reality Group shareholders are
unable to sell any of the  Exchange  Shares or the  Variance  Shares for a price
equal to or greater than $2.50 per share during the Variance  Guarantee  Period,
then the Company must issue them such number of shares of common stock equal to:
(x) the  applicable  number of Variance  and/or  Exchange  Shares  multiplied by
$2.50,  less (y) the  applicable  number  of  Variance  and/or  Exchange  Shares
multiplied by the average  closing sale price of the  Company's  common stock on
the OTC Bulletin Board during the Variance Guarantee Period,  divided by (z) the
average  closing  sale price of the  Company's  common stock on the OTC Bulletin
Board  during  the  Variance   Guarantee  Period.   Notwithstanding   the  above
agreements,  if at any time  during the  Variance  Guarantee  Period an offer is
presented to a Reality Group shareholder to purchase their Variance Shares for a
price  equal to or greater  than $2.50 per share and such  shareholder  does not
accept  the offer,  then the  Company's  obligations  pursuant  to the  Variance
Guarantee shall be  automatically  terminated with respect to such  shareholder.
The Company  agreed to prepare and file a registration  statement  providing for
the resale of 359,280 of the Variance Shares by November 27, 2005.

The above  transactions were exempt from registration  requirements  pursuant to
Regulation S, promulgated pursuant to the Securities Act of 1933, as amended.

 On  October  28,  2005,  the  Company   entered  into  an  agreement  with  ROO
Broadcasting   Limited,   a  wholly  owned   subsidiary  of  the  Company  ("ROO
Broadcasting"),  and the  shareholders  of Factory 212 Pty Ltd.  ("Factory212"),
pursuant to which Roo  Broadcasting  acquired  51% of the  outstanding  ordinary
shares of Factory212.  Factory212 is an Australian based  interactive  marketing
agency.

 As  consideration  for the ordinary  shares of  Factory212,  the Company issued
10,000  shares (the  "Initial  Shares")  of the  Company's  common  stock to the
Factory212 shareholders.  Subject to the conditions described below, the Company
may  issue  additional  shares  ("Additional  Shares")  of  common  stock to the
Factory212  shareholders,  issuable  after  December  31,  2007,  calculated  as
follows:

          51% of [(1 * Factory212 Revenue) + (4 * Factory212 Earnings)]
          -------------------------------------------------------------
                             Average ROO Share Price

where:  "Factory212  Revenue"  means the billings less all media and third party
supplier  costs of Factory212  for the twelve month period  ending  December 31,
2007;  "Factory212  Earnings"  means the earnings of  Factory212  before tax and
after  deduction of interest and all other  expenses for the twelve month period
ending  December 31, 2007; and "Average ROO Share Price" means the average price
of the  Company's  common  stock  during the final five trading days of December
2007.



                                       18
<PAGE>

ROO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

If the  Company  does not issue the maximum  number of  Additional  Shares,  ROO
Media's 51% ownership of  Factory212  will be reduced on a pro rata basis by the
difference between the maximum number of Additional Shares and the actual number
of  Additional  Shares  issued.  If the  Company  does not issue any  Additional
Shares,  ROO Media  will  relinquish  all of its 51%  ownership  of  Factory212.
However,  if the  Factory212  Earnings  are greater  than 15% of the  Factory212
Revenue and the number of  Additional  Shares to be issued are less than 4.9% of
the then current outstanding shares of common stock of the Company,  the Company
must proceed with issuing the maximum number of Additional  Shares in accordance
with the above formula.

The acquisition of Factory212 was conditioned upon the parties entering into the
Amendment described above under "Amendment to Reality Group Purchase Agreement."
If the Company  fails to meet its  material  obligations  under the terms of the
Amendment,   then  the  Company  and  ROO  Media  agreed  that  the   Factory212
shareholders  may in their sole  discretion  require the ROO Media to relinquish
all of its ownership of Factory212.  In such event,  the Company agreed that the
Factory 212 shareholders  shall be entitled to retain ownership of their Initial
Shares.

The above  transactions were exempt from registration  requirements  pursuant to
Regulation S, promulgated pursuant to the Securities Act of 1933, as amended.



                                       19
<PAGE>

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

OVERVIEW

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 and nine months ended September 30, 2005 and
2004. The consolidated financial statements include the accounts of the Company,
the  Company's  wholly owned  subsidiary  ROO Media  Corporation,  the Company's
wholly  owned  subsidiary  Bickhams  Media,  Inc.  and the  Company's  80% owned
subsidiary  Reality Group Pty. Ltd. 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 Pty Ltd., ROO Media (Australia) Pty Ltd.'s 76% owned
subsidiary  ROO Media Europe Pty Ltd, ROO Media  (Australia)  Pty Ltd.'s  wholly
owned subsidiary ROO Broadcasting  Limited and ROO Media  (Australia) Pty Ltd.'s
wholly  owned  subsidiary  ROO TV Pty Ltd.  Included in the  consolidation  with
Bickhams  Media,  Inc.  is its  wholly  owned  subsidiary  VideoDome,  Inc.  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.

Effective  October 3, 2005, the Company amended its Certificate of Incorporation
to effect a one-for-50  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-50  reverse split.  All option
amounts and exercise prices have been adjusted to reflect the stock split.

Certain statements  contained herein may constitute  forward-looking  statements
within the meaning of the Private  Securities  Litigation Reform Act of 1995. 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.

We operate as a digital media company in the business of providing  products and
solutions to a global base of clients  enabling the  broadcast of topical  video
content from their Internet websites.  We specialize in 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.

RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED  SEPTEMBER 30, 2005 COMPARED
TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004

REVENUES

Total  revenues  increased by $636,572  from $968,691 for the three months ended
September 30, 2004 to $1,605,263 for the three months ended  September 30, 2005,
an increase of 66%. This increase  reflects the increase sales from  operations.
The revenues  increased from  $2,118,165 for the nine months ended September 30,
2004 to $4,742,317 for the nine months ended  September 30, 2005, an increase of
124% or $2,624,152.  The increase is inclusion of revenues of  acquisitions  not
included  for the full prior year  financial  results and the  increasing  sales
revenue from operations.

EXPENSES

OPERATIONS. Operating expenses increased by $396,455 from $583,729 for the three
months ended September 30, 2004 to $980,184 for the three months ended September
30, 2005, an increase of 68%, and by  $1,628,677  from  $1,373,483  for the nine
months  ended  September  30,  2004 to  $3,002,160  for the  nine  months  ended
September 30, 2005, an increase of 119%. The increase over the periods  reflects
the inclusion of operating  expenses of  acquisitions  not fully included in the
prior year results and the increasing  costs  associated with increased  revenue
generation.  These expenses are primarily the costs directly associated with the
generation of revenues.  They include content costs,  photography and production
costs and printing of finished materials.



                                       20
<PAGE>

RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
salaries and related  personnel  costs,  consulting fees associated with product
development.  Research  and  development  expenses  increased  by $120,673  from
$86,234 for the three months ended  September 30, 2004 to $206,907 for the three
months ended  September 30, 2005, an increase of 140%.  Research and development
expenses increased by $280,644 from $232,235 for the nine months ended September
30, 2004 to $512,879 for the nine months ended  September  30, 2005, an increase
of 121%. The increase in research and development expenses was due primarily due
to the increase in development  activities  associated with  enhancements to our
management platform which was acquired in the acquisition of Videodome Networks,
Inc.

SALES AND MARKETING.  Sales and marketing expenses consist primarily of expenses
for advertising,  sales and marketing  personnel,  expenditures for advertising,
and  promotional  activities  and expenses to bring our products and services to
market.  These expenses increased by $460,499 from $266,288 for the three months
ended  September  30, 2004 to $726,787 for the three months ended  September 30,
2005, an increase of 173%,  and by $1,205,125  from $434,349 for the nine months
ended  September 30, 2004 to $1,639,474 for the nine months ended  September 30,
2005,  an increase of 277%.  This increase was due primarily to the inclusion of
the sales and  marketing  expenses  of Reality  Group Pty Ltd. in the nine month
period not included for the full year in the prior period and increased costs in
the sales and marketing of our products.

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 $150,283  from  $762,975 for the three months ended  September  30,
2004 to $913,258 for the three months ended  September  30, 2005, an increase of
20%, and by $2,200,411  from  $1,354,135 for the nine months ended September 30,
2004 to $3,554,546 for the nine months ended  September 30, 2005, an increase of
162%. This increase was due primarily to providing administrative support to the
increased activity of operations and the issuance of stock and options valued at
$1,140,456 of which  $750,000  were to our  directors  and  executive  officers,
Robert Petty and Robin Smyth, as performance bonuses.

REDEMPTION PREMIUM ON CONVERTIBLE NOTE

On May 19, 2005, we applied  $200,000 of the $600,000 gross proceeds from a loan
from Mr. Petty to redeem $142,857 principal amount of the Company's  outstanding
$3,000,000   principal  amount  of  callable  secured   convertible  notes.  The
difference  between the amount paid and the principal amount redeemed of $57,143
was expensed as a redemption premium on the callable secured  convertible notes.
On August 23, 2005 the Company  repaid all  outstanding  amounts of the callable
secured  convertible  notes. As part of the payment to the noteholders  $743,948
was paid as a redemption  premium.  The total amount of redemption  premium paid
for the nine months ended September 30, 2005 was $801,091.

INTEREST INCOME

Interest Income  increased by $208 from $76 for the three months ended September
30, 2004 to $284 for the three months ended  September  30, 2005, an increase of
274%,  and by $3,479 from $850 for the nine months ended  September  30, 2004 to
$4,329 for the nine months ended September 30, 2005, an increase of 409%.

INTEREST EXPENSE, RELATED PARTY

Interest expense,  related party,  includes interest charges on our indebtedness
to Robert Petty, our Chairman and Chief Executive Officer. The expense increased
by $19,532 from $12,853 for the three months ended September 30, 2004 to $32,385
for the three  months ended  September  30,  2005,  an increase of 152%,  and by
$26,389 from $38,378 for the nine months ended September 30, 2004 to $64,767 for
the nine months ended  September  30, 2005,  an increase of 69%. The increase is
due to the increase in the principal amount of loan outstanding.



                                       21
<PAGE>

INTEREST EXPENSE, OTHER

Interest  expense,  other,  includes  the interest  payable to callable  secured
convertible note holders.  The expense increased by $20,594 from $10,476 for the
three  months  ended  September  30, 2004 to $31,070 for the three  months ended
September  30, 2005,  an increase of 197%,  and by $123,313 from $39,974 for the
nine months  ended  September  30, 2004 to  $163,287  for the nine months  ended
September 30, 2005, an increase of 308%.  The increase is due to the  increasing
in the principal amount of callable secured convertible notes outstanding.

FINANCING FEES CONVERTIBLE NOTES

Interest expense, other non cash is the amount the Company computed as the value
of the beneficial  conversion feature on the callable secured  convertible notes
which was charged to interest  expense.  It also  includes  the discount for the
value of warrants  issued in connection  with the callable  secured  convertible
notes  together with the placement  fees payable on the drawdown of the callable
secured convertible notes.

NET LOSS BEFORE INCOME TAXES

Net loss before income taxes was $3,512,269 for the three months ended September
30,  2005,  compared  to a net loss of  $1,629,829  for the three  months  ended
September 30, 2004, an increase of $1,882,440 or 115%,  and  $6,974,867  for the
nine months ended  September 30, 2005,  compared to a net loss of $2,735,837 for
the nine months ended September 30, 2004, an increase of $4,239,030 or 155%. The
increase  in our net  loss  is due to the  increase  in  activities  to  develop
products for revenue  generation,  sales and  marketing  expenses in  generating
revenue and the increase in administrative expenses to support these activities,
which are described  above. The increase also includes the costs associated with
the  repayment  of the  callable  secured  convertible  notes and the  Company's
private equity placements.

LIQUIDITY AND CAPITAL RESOURCES

From ROO Media  Corporation's  inception  through  September  30, 2005,  we have
financed our activities from a loan facility from Robert Petty, our Chairman and
Chief  Executive   Officer,   and  through  private  placements  of  equity  and
convertible debt with detachable warrants.

As of September 30, 2005, we had a working capital  deficiency of  approximately
$710,162.  Our  cash  balance  as of  September  30,  2005 of  $740,172  is,  in
management's  opinion,  not sufficient to ensure our continued operation and the
payment of debts until our business is profitable and generating sufficient cash
flow to meet our liquidity requirements,  of which there can be no assurance. We
do not expect  additions  to property  and  equipment to be material in the near
future.

To meet current liquidity requirements a private equity placement was undertaken
and completed on October 20, 2005 for $2,250,000  which is described below under
"SUBSEQUENT  EVENTS." We anticipate  that our  liquidity  needs over the next 12
months will require additional financings.  If cash generated from operations is
insufficient  to  satisfy  our  liquidity  requirements,  we may  seek  to  sell
additional  equity or debt securities or obtain a credit  facility.  The further
sale of  additional  equity  or  convertible  debt  securities  could  result in
additional  dilution to our stockholders.  The incurrence of indebtedness  would
result in increased fixed  obligations  and could result in operating  covenants
that would restrict our operations.  We cannot assure you that financing will be
available in amounts or on terms acceptable to us, if at all.

Net cash used in operating  activities  was $4,133,539 for the nine months ended
September 30, 2005, compared to $851,815 for the nine months ended September 30,
2004, an increase of 385%. The increase in net cash used in operating activities
is primarily the result of our net operating losses.

Net cash used in  investing  activities  was  $522,973 for the nine months ended
September 30, 2005,  compared to net cash used in investing  activities  for the
nine months ended  September  30, 2004 of $550,770,  a decrease in net cash used
investing  activities of $27,797.  The net cash used in investing  activities is
primarily the cost of acquisitions, purchase of equipment and the capitalization
of content costs.



                                       22
<PAGE>

Net cash provided by financing  activities  was  $5,094,615  for the nine months
ended  September  30, 2005  compared  to  $1,661,154  for the nine months  ended
September 30, 2004, an increase of $3,433,461 or 207%.  The increase in net cash
provided by financing  activities  was  primarily due to an increase in the loan
from Robert Petty,  our Chairman and Chief Executive  Officer and the net amount
received  from private  equity  placements  offset  against the net received and
repaid from our callable secured convertible notes.

May 2005 Loan from Robert Petty

On May 18, 2005,  we entered into a Note Purchase  Agreement  with Robert Petty,
our Chairman and Chief Executive Officer. In consideration for gross proceeds of
$600,000,  we incurred a debt payable to Mr. Petty in the amount of $600,000. We
paid transaction fees totaling $92,500, which includes a $60,000 placement agent
fee in  connection  with the sale by Mr. Petty of $600,000  principal  amount of
secured convertible promissory notes (described below) and $32,500 in legal fees
in connection with the below transactions.  As evidence of the $600,000 debt and
a prior  existing  $500,000  debt  payable to Mr.  Petty,  we issued Mr. Petty a
promissory  note in the  principal  amount of  $1,100,000.  The principal sum of
$1,100,000  plus  interest  at the rate of 10% per  annum  calculated  beginning
September  1, 2005 is due to be re-paid on December 31,  2005.  Our  obligations
under the  promissory  note are  secured  by a security  interest  in all of our
assets.

As further described above under "REDEMPTION PREMIUM ON CONVERTIBLE NOTE" On May
19, 2005, we applied  $200,000 of the $600,000  gross  proceeds from Mr. Petty's
loan to  redeem  $142,857  principal  amount  of  outstanding  callable  secured
convertible  notes.  As  consideration  for the  redemption,  the holders of the
callable  secured  convertible  notes agreed not to convert any amount due under
the callable secured convertible notes at a conversion price less than $5.00 per
share for a 60-day period ending July 18, 2005.

In  connection  with the above loan from Mr.  Petty to the  Company,  Mr.  Petty
personally sold an aggregate of $600,000 principal amount of secured convertible
promissory notes to certain investors.  The secured convertible promissory notes
are  convertible  into  common  stock held by Mr.  Petty at a price of $1.25 per
share. Mr. Petty's  obligations under the secured  convertible  promissory notes
are secured by the $1,100,000  principal  amount  promissory note payable by the
Company to Mr. Petty. The secured convertible  promissory notes bear interest at
a rate of 8% per annum.

As  partial  consideration  for the  loan  from Mr.  Petty,  we  entered  into a
registration rights agreement, pursuant to which we agreed to prepare and file a
registration  statement  providing  for the resale of the shares of common stock
issuable upon conversion of the secured convertible  promissory notes, including
shares of common stock that may be issued as interest payments under the secured
convertible  promissory  notes.  If the  registration  statement is not filed by
November 25, 2005 or declared effective by December 25, 2005, Mr. Petty must pay
liquidated  damages  equal  to 2% per  calendar  month  or  portion  thereof  of
aggregate  $600,000  aggregate  principal  amount  of  the  secured  convertible
promissory  notes.  Any liquidated  damages may be paid in Mr. Petty's option in
cash or shares of common stock of the Company which are owned by Mr. Petty.

July 2005 Financing

On July 18,  2005,  we entered into a Securities  Purchase  Agreement  with four
accredited  investors for the sale of: (i) up to $2,500,000 in callable  secured
convertible  notes;  and (ii)  warrants to purchase  up to  5,000,000  shares of
common  stock.  On July 19, 2005,  the  investors  provided us $550,000 of gross
proceeds  from the sale of $550,000  in  principal  amount of  callable  secured
convertible notes and warrants to purchase 1,100,000 shares of our common stock.

The callable secured  convertible  notes allowed us to prepay them in full if we
paid the investors an amount in cash equal to either:  (i) 125% for  prepayments
occurring within 30 days of the issue date; (ii) 135% for prepayments  occurring
between  31 and 60 days  of the  issue  date;  or  (iii)  150%  for  prepayments
occurring  after the 60th day following the issue date. As described  below,  on
August 23, 2005, we prepaid all outstanding amounts under the $550,000 principal
amount  callable  secured  convertible  notes and  under  the other  outstanding
callable secured convertible notes.



                                       23
<PAGE>

The  warrants  are  exercisable  until five years from the date of issuance at a
purchase price of $10.00 per share. The investors may exercise the warrants on a
cashless  basis if the shares of common  stock  underlying  the warrants are not
then registered pursuant to an effective  registration  statement.  In the event
the  investors  exercise  the  warrants  on a cashless  basis,  then we will not
receive any proceeds.  In addition,  the exercise  price of the warrants will be
adjusted in the event we issue  common stock at a price below  market,  with the
exception of: (i) any securities issued as of the date of the warrants; (ii) any
stock or options  which may be granted or exercised  under any employee  benefit
plan; or (iii) any shares of common stock issued in connection with the callable
secured convertible notes issued pursuant to the Securities Purchase Agreement.

The exercise price of the warrants may also be adjusted in certain circumstances
such as if we pay a stock dividend,  subdivide or combine  outstanding shares of
common  stock  into a greater  or lesser  number of  shares,  or take such other
actions as would otherwise  result in dilution of the investors'  position.  The
investors  have agreed to restrict  their ability to exercise their warrants and
receive  shares of our  common  stock  such that the  number of shares of common
stock held by them in the  aggregate  and their  affiliates  after such exercise
does not exceed 4.9% of the then issued and outstanding shares of common stock.

We are  required  to file a  registration  statement  with  the  Securities  and
Exchange  Commission,  which  will  include  the  common  stock  underlying  the
warrants, within 30 days from receipt of a written demand from the investors for
us to do so.

August 2005 Equity Financing

On August 23,  2005,  we sold  3,833,333  shares of common  stock to  accredited
investors  in a private  placement  pursuant to Rule 506  promulgated  under the
Securities  Act of 1933,  as  amended.  The common  stock was sold at a price of
$1.50 per share  resulting in gross  proceeds of  $5,750,000.  $3,400,000 of the
proceeds was used to prepay all of our outstanding  callable secured convertible
notes.  In  connection  with the sale of the common  stock,  we were required to
effect a 1-for-50 reverse split of our outstanding shares of common stock, which
was completed on October 3, 2005.

We 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 45 days following the closing date. If the
registration  statement  is not filed  within  such time or if the  registration
statement is not declared  effective within 120 days following the closing date,
we must pay liquidated damages to the investors equal to 2% of the dollar amount
of  their  investment  for  each  calendar  month or  portion  thereof  that the
registration statement is not filed or declared effective.

Pali  Capital,  Inc. and Brimberg & Co. acted as placement  agents in connection
with the above private  placement.  In connection with the closing,  we paid the
placement  agents a cash fee equal to 10% of the gross proceeds up to $3,000,000
and 8% of the gross proceeds in excess of $3,000,000. In addition, we issued the
placement  agents  warrants to purchase a number of shares of common stock equal
to 10% of the  shares of common  stock  sold in the  private  placement  with an
exercise price of $1.50 per share  exercisable  for a period of five years.  The
placement agents have piggyback  registration  rights with respect to the shares
of common stock issuable upon exercise of the placement agent warrants.

SUBSEQUENT EVENTS

Reverse Stock Split

Effective October 3, 2005, we amended our Certificate of Incorporation to effect
a one-for-50 reverse split of our issued and outstanding shares of common stock.
As of that date,  every fifty  outstanding  shares of common  stock were changed
into one  shares of common  stock.  Any  shareholder  who  beneficially  owned a
fractional  share of common  stock after the reverse  stock split  received  one
additional  share of common stock in lieu of such  fractional  share.  Effective
October 5, 2005, our common stock began quoting on the OTC Bulletin Board with a
new ticker symbol: "RGRP."



                                       24
<PAGE>

October 2005 Equity Financing

On October 20, 2005,  we sold  1,500,000  shares of common  stock to  accredited
investors  in a private  placement  pursuant to Rule 506  promulgated  under the
Securities  Act of 1933,  as amended.  The shares of common stock were sold at a
price of $1.50 per share resulting in gross proceeds of $2,250,000.

We 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 or if the  registration
statement is not declared  effective within 120 days following the closing date,
we must pay liquidated damages to the investors equal to 2% of the dollar amount
of  their  investment  for  each  calendar  month or  portion  thereof  that the
registration statement is not filed or declared effective.

Pali  Capital,  Inc. and Brimberg & Co. acted as placement  agents in connection
with  this  private  placement.  In  connection  with the  closing,  we paid the
placement agents a cash fee equal to 8% of the gross proceeds.  In addition,  we
are  required  to issue the  placement  agents  warrants to purchase a number of
shares of common  stock  equal to 10% of the shares of common  stock sold in the
private  placement with an exercise price of $1.50 per share  exercisable  for a
period of five years.  The placement agents have piggyback  registration  rights
with  respect  to the  shares of common  stock  issuable  upon  exercise  of the
placement agent warrants.

Amendment to Reality Group Purchase Agreement

On October 28, 2005, we 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 we must
sell to the Reality Group  shareholders such number of shares of Reality Group's
common stock so as to reduce our  ownership of Reality Group to 51%. The Reality
Group  shareholders  further  agreed that the Share  Variance (as defined in the
Reality  Purchase  Agreement and as described in a Form 8-K filed by the Company
on May 17,  2004) shall be  calculated  based upon a closing sale price of $2.50
and the Share Variance equals $1,263,500.

We paid $200,000 of the  $1,263,500  Share  Variance in cash and issued  425,400
shares  (the  "Variance  Shares")  of common  stock as payment of the  remaining
$1,063,500  based on a stock  price of  $2.50  per  share.  We  guaranteed  (the
"Variance  Guarantee") the Reality Group  shareholders that they will be able to
sell their Exchange Shares (as defined in the Reality Purchase  Agreement and as
described  in a Form 8-K filed by the  Company  on May 17,  2004)  and  Variance
Shares for a price  equal to or greater  than $2.50 per share for a period of 14
days after the earliest  date that the Reality Group  shareholders  can publicly
sell their shares of our common stock (the "Variance Guarantee Period").  In the
event the  Reality  Group  shareholders  are unable to sell any of the  Exchange
Shares or the  Variance  Shares for a price  equal to or greater  than $2.50 per
share during the Variance Guarantee Period,  then we must issue them such number
of shares of common stock equal to: (x) the applicable number of Variance and/or
Exchange Shares  multiplied by $2.50, less (y) the applicable number of Variance
and/or  Exchange  Shares  multiplied  by the average  closing  sale price of our
common stock on the OTC Bulletin  Board  during the Variance  Guarantee  Period,
divided by (z) the  average  closing  sale price of our common  stock on the OTC
Bulletin Board during the Variance Guarantee Period.  Notwithstanding  the above
agreements,  if at any time  during the  Variance  Guarantee  Period an offer is
presented to a Reality Group shareholder to purchase their Variance Shares for a
price  equal to or greater  than $2.50 per share and such  shareholder  does not
accept the offer, then our obligations  pursuant to the Variance Guarantee shall
be  automatically  terminated  with  respect to such  shareholder.  We agreed to
prepare and file a registration statement providing for the resale of 359,280 of
the Variance Shares by November 27, 2005.

Purchase of 51% Interest in Factory 212 Pty Ltd.

On October 28, 2005, we entered into an agreement with Roo Broadcasting Limited,
a  wholly  owned  subsidiary  of  the  Company  ("Roo  Broadcasting"),  and  the
shareholders  of  Factory  212 Pty Ltd.  ("Factory212"),  pursuant  to which Roo
Broadcasting  acquired 51% of the  outstanding  ordinary  shares of  Factory212.
Factory212 is an Australian based interactive marketing agency.



                                       25
<PAGE>

As consideration for the ordinary shares of Factory212,  we issued 10,000 shares
(the "Initial Shares") of common stock to the Factory212  shareholders.  Subject
to the conditions  described below, we may issue additional shares  ("Additional
Shares") of common stock to the Factory212 shareholders, issuable after December
31, 2007, calculated as follows:

          51% of [(1 * Factory212 Revenue) + (4 * Factory212 Earnings)]
       -----------------------------------------------------------------
                             Average ROO Share Price

where:  "Factory212  Revenue"  means the billings less all media and third party
supplier  costs of Factory212  for the twelve month period  ending  December 31,
2007;  "Factory212  Earnings"  means the earnings of  Factory212  before tax and
after  deduction of interest and all other  expenses for the twelve month period
ending  December 31, 2007; and "Average ROO Share Price" means the average price
of our common stock during the final five trading days of December 2007.

If we do not issue the  maximum  number of  Additional  Shares,  Roo Media's 51%
ownership of  Factory212  will be reduced on a pro rata basis by the  difference
between  the  maximum  number of  Additional  Shares  and the  actual  number of
Additional  Shares issued. If we do not issue any Additional  Shares,  Roo Media
will  relinquish  all  of its  51%  ownership  of  Factory212.  However,  if the
Factory212  Earnings  are  greater  than 15% of the  Factory212  Revenue and the
number of Additional  Shares to be issued are less than 4.9% of the then current
outstanding  shares of our  common,  we must  proceed  with  issuing the maximum
number of Additional Shares in accordance with the above formula.

The acquisition of Factory212 was conditioned upon the parties entering into the
Amendment described above under "Amendment to Reality Group Purchase Agreement."
If we fail to meet our material  obligations  under the terms of the  Amendment,
then together with Roo Media, we agreed that the Factory212  shareholders may in
their sole  discretion  require Roo Media to relinquish  all of its ownership of
Factory212.  In such event, we agreed that the Factory 212 shareholders shall be
entitled to retain ownership of their Initial Shares.

EXCHANGE RATE RISK

We conduct our operations in primary  functional  currencies:  the United States
dollar,  the British pound,  the Euro 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 Europe,  the
United Kingdom and Australia, where we invoice our customers primarily in euros,
pounds and Australian dollars,  respectively. 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 September 30, 2005 and 2004.

GOING CONCERN

The accompanying  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.  We
have incurred net operating  losses of  approximately  $1,222,000  for the three
months ended September 30, 2005, compared to $731,000 for the three months ended
September 30, 2004 and $3,967,000 for the nine months ended  September 30, 2005,
compared  to  $1,276,000   for  the  nine  months  ended   September  30,  2004.
Additionally,  as of September 30, 2005, we had a net working capital deficiency
of approximately  $710,000 and negative cash flows from operating  activities of
approximately  $4,134,000.  Since ROO  Media  Corporation's  inception,  we have
incurred losses, had an accumulated  deficit, and have experienced negative cash
flows from operations. The expansion and development of our business may require
additional capital. This condition raises substantial doubt about our ability to
continue as a going concern.  Our  management  expects cash flows from operating
activities  to improve in the second half of fiscal 2005,  primarily as a result
of an increase in sales, and plans to raise financing through various methods to
achieve their business plans,  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.



                                       26
<PAGE>

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.

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  information  required to be disclosed by us in the reports that we file or
submit  under the  Exchange  Act is: (1)  accumulated  and  communicated  to our
management,  including our chief executive officer and chief financial  officer,
as appropriate to allow timely decisions regarding required disclosure;  and (2)
recorded, processed,  summarized and reported, within the time periods specified
in the  Commission's  rules and  forms.  There  was no  change  to 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.

                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings.

We are not  currently  a party  to,  nor is any of our  property  currently  the
subject of, any pending legal  proceeding.  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 July 19, 2005, we sold an aggregate  principal amount of $550,000 of callable
secured  convertible  notes and  warrants to purchase an  aggregate of 1,100,000
shares  of  common  stock to four  accredited  investors  in  consideration  for
$550,000 of gross proceeds.  The callable secured  convertible notes were repaid
on August 23, 2005. The warrants are exercisable  until five years from the date
of issuance at a purchase price of $10.00 per share.  The investors may exercise
the warrants on a cashless  basis if the shares of common stock  underlying  the
warrants  are  not  then  registered  pursuant  to  an  effective   registration
statement. In the event the investors exercise the warrants on a cashless basis,
then we will not receive any proceeds.  In addition,  the exercise  price of the
warrants  will be adjusted in the event we issue  common  stock at a price below
market,  with the exception of: (i) any securities  issued as of the date of the
warrants;  (ii) any stock or options which may be granted or exercised under any
employee  benefit plan; or (iii) any shares of common stock issued in connection
with the  callable  secured  convertible  notes  issued  pursuant to the related
securities  purchase  agreement.  These  securities  were sold  pursuant  to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and Rule 506 promulgated thereunder.

On August 23,  2005,  we sold  3,833,333  shares of common  stock to  accredited
investors.  The common stock was sold at a price of $1.50 per share resulting in
gross  proceeds of  $5,750,000.  Also on August 23,  2005,  we issued  five-year
warrants to  purchase an  aggregate  of 383,333  shares of common  stock with an
exercise price of $1.50 per share to various  accredited  investors who acted as
placement  agent for the  sales of  common  stock.  These  securities  were sold
pursuant to the exemption from registration under Section 4(2) of the Securities
Act and Rule 506 promulgated thereunder.

On August 23,  2005,  we issued  five-year  warrants to purchase an aggregate of
48,000  shares  of common  stock  with an  exercise  price of $1.25 per share to
various  accredited  investors who acted as placement agent in connection with a
$600,000 debt financing on May 18, 2005.  These  securities were issued pursuant
to the exemption from registration  under Section 4(2) of the Securities Act and
Rule 506 promulgated thereunder.



                                       27
<PAGE>

For each of the  above  sales of  unregistered  securities,  no  advertising  or
general solicitation was employed in offering the securities.  The offerings and
sales  were made to a limited  number of  persons,  all of whom were  accredited
investors and transfer was restricted by us in accordance with the  requirements
of the  Securities  Act. Each of the investors  represented to us that they were
accredited or sophisticated  investors,  that they were capable of analyzing the
merits and risks of their  investment,  and that they understood the speculative
nature of their investment. Furthermore, all of the above-referenced persons had
access to our Securities and Exchange Commission filings.

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.

Item 6.           Exhibits.

References to "the Company" in the following exhibit list mean ROO Group, Inc.,
a Delaware corporation

<TABLE>
<CAPTION>
Exhibit
Number                                                           Description
------    --------------------------------------------------------------------------------------------------------------------------
<S>       <C>
3.1       Certificate of Designation,  Powers,  Preferences and Rights of Series A Preferred Stock, filed with the State of Delaware
          on March 9, 2005 (Incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on
          March 14, 2005)
3.2       Amendment to the Certificate of Designation,  Powers,  Preferences and Rights of Series A Preferred Stock,  filed with the
          State of Delaware on September 30, 2005 (Incorporated by reference to the Company's Form 8-K filed with the Securities and
          Exchange Commission on October 4, 2005)
4.1       Stock Purchase Warrant issued to to AJW Offshore,  Ltd.,  dated July 18, 2005  (Incorporated by reference to the Company's
          Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
4.2       Stock  Purchase  Warrant issued to AJW Qualified  Partners,  LLC,  dated July 18, 2005  (Incorporated  by reference to the
          Company's Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
4.3       Stock Purchase Warrant issued to AJW Partners,  LLC, dated July 18, 2005  (Incorporated by reference to the Company's Form
          8-K filed with the Securities and Exchange Commission on July 22, 2005)
4.4       Stock Purchase Warrant issued to New Millennium  Capital Partners II, LLC, dated July 18, 2005  (Incorporated by reference
          to the Company's Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
10.1      Securities  Purchase  Agreement,  dated July 18, 2005, by and among ROO Group, Inc. and AJW Offshore,  Ltd., AJW Qualified
          Partners,  LLC, AJW Partners,  LLC and New Millennium Capital Partners II, LLC (Incorporated by reference to the Company's
          Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
10.2      Registration  Rights  Agreement,  dated as of July 18, 2005,  by and among ROO Group,  Inc. and AJW  Offshore,  Ltd.,  AJW
          Qualified Partners,  LLC, AJW Partners,  LLC and New Millennium Capital Partners II, LLC (Incorporated by reference to the
          Company's Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
10.3      Security  Agreement,  dated as of July 18,  2005,  by and among ROO Group,  Inc. and AJW  Offshore,  Ltd.,  AJW  Qualified
          Partners,  LLC, AJW Partners,  LLC and New Millennium Capital Partners II, LLC (Incorporated by reference to the Company's
          Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
</TABLE>


                                       28
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                                           Description
------    --------------------------------------------------------------------------------------------------------------------------
<S>       <C>
10.4      Intellectual  Property Security Agreement,  dated July 18, 2005, by and among ROO Group, Inc. and AJW Offshore,  Ltd., AJW
          Qualified Partners,  LLC, AJW Partners,  LLC and New Millennium Capital Partners II, LLC (Incorporated by reference to the
          Company's Form 8-K filed with the Securities and Exchange Commission on July 22, 2005)
10.5      Omnibus Consent and Waiver dated August 18, 2005 between ROO Group, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC,
          AJW Partners,  LLC and New Millennium  Capital Partners II, LLC (Incorporated by reference to the Company's Form 8-K filed
          with the Securities and Exchange Commission on August 24, 2005)
10.6      Common Stock Purchase Agreement dated August 19, 2005 among ROO Group, Inc. and the purchasers listed on Exhibit A thereto
          (Incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on August 25, 2005)
10.7      Registration  Rights Agreement dated August 19, 2005 among ROO Group, Inc. and the purchasers listed on Schedule 1 thereto
          (Incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on August 25, 2005)
10.8      Escrow Agreement dated August 19, 2005 among ROO Group, Inc., the purchasers signatory thereto and Kramer Levin Naftalis &
          Frankel LLP  (Incorporated  by reference to the Company's Form 8-K filed with the  Securities  and Exchange  Commission on
          August 25, 2005)
10.9      Form of  placement  agent  warrant in  connection  with August 2005 Equity  Financing  (Incorporated  by  reference to the
          Company's Form 8-K filed with the Securities and Exchange Commission on August 25, 2005)
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
</TABLE>



                                       29
<PAGE>

                                   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:   November 18, 2005       By:  /s/ Robert Petty
                                              --------------------------------
                                              Robert Petty
                                              Chief Executive Officer

         Dated:   November 18, 2005       By:  /s/ Robin Smyth
                                              --------------------------------
                                              Robin Smyth
                                              Chief Financial Officer



                                       30