**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,
                2007





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





COMMISSION
      FILE NUMBER: 000-25659





**ROO
      GROUP, INC.**


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





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


****


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


(Address
      of principal executive offices)





**(212)
      661-4111**


(Issuer’s
      telephone number)





**WITH
      COPIES TO:**





Richard
      A. Friedman, Esq.


Sichenzia
      Ross Friedman Ference LLP


61
      Broadway, 32 nd Floor


New
      York,
      New York 10006


(212)
      930-9700





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





**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 16 2007, the issuer had 39,028,418
      outstanding shares of Common Stock.





Transitional
      Small Business Disclosure Format (check one): Yes o No x









**TABLE
      OF CONTENTS**





**Page****PART
                I - FINANCIAL INFORMATION**Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheet
            3Consolidated
                Statements of Operations
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            7Item
                2.
            Management’s
                Discussion and Analysis or Plan of Operation
            14Item
                3.
            Controls
                and Procedures
            17**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            18Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            18Item
                3.
            Defaults
                Upon Senior Securities
            18Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            18Item
                5.
            Other
                Information
            18Item
                6.
            Exhibits
                and Reports on Form 8-K
            18**SIGNATURES**
            19









**PART
      I - FINANCIAL INFORMATION**





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


**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET AS OF SEPTEMBER 30, 2007**


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


**(Unaudited)**




***Assets:*****Current
                assets:**Cash
                and cash equivalents
            
            $
            16,278Accounts
                receivable, net
            
            
            3,204Other
                current assets
            
            
            1,369**Total
                current assets**
            
            
            20,851Property
                and equipment, net
            
            
            2,281Restricted
                cash
            
            
            102Content,
                net
            
            
            307Software,
                net
            
            
            3,555Customer
                list, net
            
            
            310Domain
                names, net
            
            
            33Goodwill
            
            
            1,623Deferred
                tax assets
            
            
            218**Total
                assets**
            
            $
            29,280***Liabilities
                and Stockholders' Equity:*****Current
                liabilities:**Bank
                overdraft and other obligations
            
            $
            230Accounts
                payable
            
            
            3,312Accrued
                expenses
            
            
            967Income
                tax payable
            
            
            68Other
                current liabilities
            
            
            1,892**Total
                current liabilities**
            
            
            6,469Capital
                lease obligations
            
            
            217**Total
                liabilities**
            
            
            6,686**Commitments**
            
            
            -**Minority
                interest**
            
            
            (77
            )**Stockholders'
                Equity:**Series
                A preferred shares, $0.0001 par value: authorized 10,000,000 shares;
                issued and outstanding 10,000,000
            
            
            1Common
                stock, $0.0001 par value: authorized 500,000,000 shares; issued and
                outstanding 39,028,418
            
            
            4Less:
                subscription receivable, $0.0001 par value: 2,000,000
                shares
            
            
            -Additional
                paid-in capital
            
            
            73,639Accumulated
                deficit
            
            
            (51,061
            )Accumulated
                other comprehensive income
            
            
            88**Total
                stockholders' equity**
            
            
            22,671**Total
                liabilities and stockholders' equity**
            
            $
            29,280




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





3





**ROO
      GROUP, INC. AND SUBSIDIARIES**


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


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


**(Unaudited)**


**Three
                      months ended****September
                      30,**
              
              
              **Nine
                      months ended****September
                      30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006****Revenue**
              
              $
              3,434
              
              $
              2,230
              
              $
              10,020
              
              $
              6,024**Expenses:**Operations
              
              
              3,461
              
              
              2,138
              
              
              10,247
              
              
              5,864Research
                  and development
              
              
              2,093
              
              
              382
              
              
              4,989
              
              
              899Sales
                  and marketing
              
              
              2,095
              
              
              1,415
              
              
              5,565
              
              
              3,364General
                  and administrative (exclusive of non-cash compensation)
              
              
              3,090
              
              
              1,455
              
              
              8,230
              
              
              3,769Non-cash
                  compensation
              
              
              1,177
              
              
              581
              
              
              3,656
              
              
              1,737**Total
                  expenses**
              
              
              11,916
              
              
              5,971
              
              
              32,687
              
              
              15,633**(Loss)
                  from operations**
              
              
              (8,482
              )
              
              (3,741
              )
              
              (22,667
              )
              
              (9,609
              )Interest
                  income
              
              
              262
              
              
              17
              
              
              594
              
              
              72Interest
                  expense - other
              
              
              (18
              )
              
              (21
              )
              
              (51
              )
              
              (42
              )Other
                  income (expense)
              
              
              9
              
              
              -
              
              
              29
              
              
              -**Net
                  (loss) before income taxes**
              
              
              (8,229
              )
              
              (3,745
              )
              
              (22,095
              )
              
              (9,579
              )Income
                  tax benefit (expense)
              
              
              -
              
              
              3
              
              
              5
              
              
              (26
              )**Net
                  (loss) before minority interest**
              
              
              (8,229
              )
              
              (3,742
              )
              
              (22,090
              )
              
              (9,605
              )Minority
                  interest
              
              
              17
              
              
              3
              
              
              (11
              )
              
              (29
              )**Net
                  (loss) available to common shareholders**
              
              $
              (8,212
              )
              $
              (3,739
              )
              $
              (22,101
              )
              $
              (9,634
              )**Basic
                  and diluted net (loss) per common share**
              
              $
              (0.21
              )
              $
              (0.24
              )
              $
              (0.66
              )
              $
              (0.65
              )**Weighted
                  average common shares outstanding**
              
              
              38,907,293
              
              
              15,290,349
              
              
              33,388,117
              
              
              14,811,231**Comprehensive
                  (loss):**Net
                  (loss)
              
              $
              (8,212
              )
              $
              (3,739
              )
              $
              (22,101
              )
              $
              (9,634
              )Foreign
                  currency translation
              
              
              61
              
              
              2
              
              
              80
              
              
              (8
              )**Comprehensive
                  (loss)**
              
              $
              (8,151
              )
              $
              (3,737
              )
              $
              (22,021
              )
              $
              (9,642
              )




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




4




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**




**Nine
                months ended September 30,****2007**
            
            **2006****Operating
                Activities:**Net
                (loss)
            
            $
            (22,101
            )
            $
            (9,634
            )Adjustments
                to reconcile net (loss) to net cash (used) by operating
                activities:Provision
                for doubtful accounts
            
            
            48
            
            
            8Depreciation
            
            
            403
            
            
            106Amortization
                of intangible assets
            
            
            957
            
            
            444Non
                cash stock based compensation
            
            
            3,656
            
            
            1,544Non
                cash warrants and options for services
            
            
            -
            
            
            129Non
                cash preferred stock issued as performance bonus
            
            
            -
            
            
            64Minority
                interest in subsidiaries
            
            
            11
            
            
            29Changes
                in assets and liabilities:(Increase)
                decrease in:Accounts
                receivable
            
            
            155
            
            
            (537
            )Other
                assets
            
            
            (219
            )
            
            (1,121
            )Increase
                (decrease) in:Accounts
                payable
            
            
            1,539
            
            
            933Accrued
                expenses
            
            
            53
            
            
            336Income
                tax payable
            
            
            (60
            )
            
            (23
            )Other
                liabilities
            
            
            554
            
            
            462Total
                adjustments
            
            
            7,097
            
            
            2,374**Net
                Cash (Used) By Operating Activities - Forward**
            
            
            (15,004
            )
            
            (7,260
            )**Investing
                Activities:**Investment
                in restricted cash
            
            
            (102
            )
            
            -Cash
                paid in MyVideoDaily acquisition
            
            
            (250
            )
            
            -Investment
                in assets acquired from Wurld Media
            
            
            (3,174
            )
            
            -Investment
                in ROO Media Europe
            
            
            -
            
            
            (90
            )Investment
                in VideoDome
            
            
            -
            
            
            (20
            )Capitalization
                of software
            
            
            -
            
            
            (432
            )Capitalization
                of content
            
            
            (89
            )
            
            (132
            )Purchase
                of equipment
            
            
            (448
            )
            
            (178
            )**Net
                Cash (Used) By Investing Activities - Forward**
            
            $
            (4,063
            )
            $
            (852
            )




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




5




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**




**Nine
                months ended September 30,****2007**
            
            
            **2006****Net
                Cash (Used) By Operating Activities - Forwarded**
            
            $
            (15,004
            )
            $
            (7,260
            )**Net
                Cash (Used) By Investing Activities - Forwarded**
            
            
            (4,063
            )
            
            (852
            )**Financing
                Activities:**Proceeds
                from private placements, net
            
            
            23,875
            
            
            4,985Proceeds
                from exercise of warrants
            
            
            13
            
            
            -Bank
                overdrafts and other obligations, net
            
            
            (373
            )
            
            144Repayment
                of capital leases
            
            
            (45
            )
            
            (14
            )**Net
                Cash Provided By Financing Activities**
            
            
            23,470
            
            
            5,115**Effect
                of Exchange Rate Changes on Cash**
            
            
            (62
            )
            
            (8
            )**Net
                Increase (Decrease) in Cash**
            
            
            4,341
            
            
            (3,005
            )**Cash
                and Cash Equivalents - Beginning of Periods**
            
            
            11,937
            
            
            5,274**Cash
                and Cash Equivalents - End of Periods**
            
            $
            16,278
            
            $
            2,269**Supplemental
                Disclosures of Cash Flow Information:**Cash
                paid during the periods for:Income
                taxes
            
            $
            -
            
            $
            -Interest
            
            $
            50
            
            $
            42




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




6




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




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





The
      accompanying unaudited consolidated financial statements of ROO Group, Inc.
      ("ROO" or the "Company") have been prepared in accordance with generally
      accepted accounting principles for interim financial information and the
      instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
      they
      do not include all information and footnotes required by general accounting
      principles for complete financial statements. In the opinion of management,
      all
      adjustments (consisting of normal recurring accruals) considered necessary
      in
      order to make the interim financial statements not misleading have been
      included. Results for the three and nine months ended September 30, 2007 are
      not
      necessarily indicative of the results that may be expected for the year ending
      December 31, 2007. These interim consolidated financial statements should be
      read in conjunction with the consolidated financial statements and footnotes
      thereto of the Company and management's discussion and analysis of financial
      condition and results of operations included in the Company's annual report
      on
      Form 10-KSB for the year ended December 31, 2006.





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





***(A)
      Principles of Consolidation -*** The
      consolidated financial statements include the accounts of ROO Group, Inc.,
      its
      wholly owned subsidiary ROO Media Corporation, its wholly owned subsidiary
      Bickhams Media, Inc., its 51% owned subsidiary Reality Group Pty. Ltd. and
      its
      wholly owned subsidiary ROO HD, Inc. Included in the consolidation with ROO
      Media Corporation are its wholly owned subsidiary ROO Media (Australia) Pty.
      Ltd. and ROO Media (Australia) Pty. Ltd.'s wholly owned subsidiary Undercover
      Media Pty. Ltd., its wholly owned subsidiary ROO Media Europe Limited (Note
      3),
      its wholly owned subsidiary ROO Broadcasting Limited, ROO Broadcasting Limited’s
      51% owned subsidiary Sputnik Agency Pty. Ltd. (formerly Factory212 Pty. Ltd.)
      and its wholly owned subsidiary ROO TV Pty. Ltd. Included in the consolidation
      with Bickhams Media, Inc. is its wholly owned subsidiary VideoDome.com Networks,
      Inc.





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





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





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





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





7




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




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





***(F)
      Cash and Cash Equivalents -*** ROO
      considers all highly liquid investments with original maturities of 90 days
      or
      less to be cash and cash equivalents.





***(F)
      Restricted Cash -*** As of
      September 30, 2007, ROO has pledged approximately $102 as collateral for standby
      letters of credit that guarantee its contractual obligations relating to its
      real estate lease agreement in Los Angeles, California.





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





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





***(I)
      Risk Concentrations -*** Financial
      instruments which potentially subject us to concentrations of credit risk
      consist principally of cash and cash equivalents and trade accounts receivable.
      We place our cash and cash equivalents with high credit quality institutions
      to
      limit credit exposure, which invest primarily in commercial paper, high quality
      corporate obligations, and high quality asset and loan backed securities. We
      believe no significant concentration of credit risk exists with respect to
      these
      investments.





Concentrations
      of credit risk with respect to trade accounts receivable are limited due to
      the
      wide variety of customers who are dispersed across many geographic regions.
      Management believes that accounts receivable credit risk exposure beyond such
      allowance is limited. The allowance as of September 30, 2007 was $236.





We
      generally do not require collateral for our financial instruments.





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





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





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





8




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




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





***(L)
      Stock-Based Compensation -*** The
      company accounts for stock-based compensation using the guidance of SFAS No.
      123R, "Share-Based Payment" which was adopted on January 1, 2006, using a
      "modified prospective" method. Under the "modified prospective" method,
      compensation cost is recognized in the financial statements beginning with
      the
      effective date, based on the requirements of SFAS 123R for all share-based
      payments granted after that date, and based on the requirements of SFAS 123
      for
      all unvested awards granted prior to the effective date of SFAS 123R.





Beginning
      in the 2006 calendar year, with the adoption of SFAS 123R, we included stock
      based compensation in general and administrative expenses for the cost of stock
      options. Stock based compensation expense for the three and nine months ended
      September 30, 2007 was $1,177 and $3,656, respectively.





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





The
      Company granted options with exercise prices ranging from $2.15 to $4.50 to
      purchase 4,110,000 shares of its common stock during the nine months ended
      September 30, 2007.





During
      the nine months ended September 30, 2007, a total of 2,106,808 stock options
      vested, a total of 1,607,069 stock options were cancelled or expired, a total
      of
      872,929 stock options were forfeited, with 4,952,151 stock options unvested
      as
      of September 30, 2007. A total of 7,277,857 stock options were outstanding
      on
      September 30, 2007.





On
      April
      3, 2007 our Board of Directors of ROO Group, Inc. increased the number of shares
      which may be issued under the 2004 Stock Option Plan to an aggregate of
      12,000,000 shares of common stock.





***(3)
      Acquisitions***





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





On
      January 22, 2007, we entered into an Asset Purchase Agreement with RJM Price
      & Company, Inc. (“RJM”) and Robertson Price. Pursuant to the Agreement, we
      acquired all of the properties, rights and assets constituting the business
      of
      RJM, which operates under the name MyVideoDaily (“MVD”). The Agreement provides
      for a consideration of up to an aggregate of $1,350 payable as follows: (i)
      $250
      paid upon the execution of the Agreement, (ii) $1,000 in shares of our common
      stock will be paid to Mr. Price in equal quarterly installments upon the
      achievement of certain milestones at a price per share which will be equal
      to
      the average closing price of our common stock over the final 20 trading days
      of
      the quarterly period in which the milestone is achieved; (iii) $100 payable
      upon
      the second anniversary of the closing of the acquisition. On May 17, 2007,
      RJM
      was issued 92,379 shares of our common stock valued at $250 for achieving the
      first quarter milestone. The cost of this acquisition to date of $500 has been
      recorded as goodwill. See subsequent events (Note 9).





On
      July
      12, 2007, ROO HD, Inc. (“ROO HD”), a wholly owned subsidiary of ROO, entered
      into an Asset Purchase Agreement with Wurld Media, Inc. (“Wurld Media”), Gregory
      Kerber and Kirk Feathers. Wurld Media specializes in the peer-to-peer
      distribution of music, movies, games, TV shows and other audio, video, and
      audio/video content.





The
      acquisition was completed and closed on July 17, 2007. The assets acquired
      by
      ROO HD, Inc. pursuant to the Agreement, include: (i) certain fixed assets,
      equipment, fixtures, and leasehold improvements located at Wurld Media’s office
      in Saratoga Springs, New York; (ii) certain intellectual property of Wurld
      Media; (iii) the customer logs, location files and records of Wurld Media,
      (iv)
      all claims, entitlements, rebates, refunds, settlements, awards or other rights
      related to the assets acquired by ROO HD.





The
      consideration for the assets acquired by ROO HD was an aggregate of $4,320,
      consisting of $3,212 in cash and the issuance of 655,500 shares of common stock
      of ROO valued on July 17, 2007 at $1.69 per share or $1,108. The
      total
      purchase consideration was allocated to the assets acquired at their estimated
      fair values as of the date of acquisition, as determined by ROO’s management, at
      $3,180 of software and $1,140 of fixed assets.




9




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




***(4)
      Notes Receivable***





On
      February 16, 2007, Wurld Media issued a promissory note to the Company in the
      principal amount of $1,500. Pursuant to the promissory note the Company advanced
      to Wurld Media the sum of $800, and in its sole discretion may make additional
      advances of up to, but not exceeding $1,500. The promissory note accrues
      interest at the rate of 8% and in the event of a default will accrue interest
      at
      the rate of 10%. The promissory note is secured by all of the assets of Wurld
      Media. The promissory note is due and payable upon the earlier of (i) the
      closing of the acquisition of the assets of Wurld Media (Note 3), in which
      event, the loan amount will be credited against the purchase price of the assets
      or (ii) November 26, 2007. This promissory note has been paid in full and is
      included in the assets of Wurld Media acquired (Note 3).





On
      June
      15, 2005, Greg Kerber issued a promissory note to the Company in the principal
      amount of $400. Pursuant to the promissory note, the Company advanced to Greg
      Kerber the sum of $394. The promissory note accrues interest at the rate of
      8%
      and in the event of a default will accrue interest at the rate of 10%. The
      promissory note is secured by certain of his shares in Wurld Media. The
      promissory note is due and payable upon demand by the Company. This promissory
      note has been paid in full and is included in the assets of Wurld Media acquired
      (Note 3).





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





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





***(5)
      Goodwill***





Goodwill
      of $1,623 represents the excess of acquisition costs over the fair value of
      net
      assets of the Reality acquisition of $1,033, ROO Media Europe Ltd. of $90 and
      the acquisition of RJM of $500.





***(6)
      Stock Issuances***





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





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




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




10




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





***(6)
      Stock Issuances (Continued)***





On
      May 4,
      2007, we entered into a securities purchase agreement pursuant to which the
      Company sold an aggregate of 10,000,000 shares of our common stock and warrants
      to purchase an additional 3,000,000 shares of our common stock to accredited
      investors resulting in gross proceeds of $25,000. The offering closed on May
      10,
      2007. The unit price of the common stock and corresponding warrant was $2.50.
      The warrants have an exercise price of $4.50 per share and a term of five years.
      The warrants were valued under the Black-Scholes method as $5,117. At any time
      at which the market price of our Common Stock exceeds $6.00 for 10 trading
      days
      during any 20 consecutive trading days, we may elect to call the warrants,
      provided that, the shares underlying such warrants are registered pursuant
      to a
      registration statement. 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,
      the Company must pay liquidated damages to the investors equal to 1% of the
      dollar amount of their investment for each calendar month or portion thereof
      that the registration statement is not filed, up to a maximum of 10%. Also,
      if
      the registration statement is not declared effective within 120 days following
      the closing date, the Company must pay liquidated damages to the investors
      equal
      to 1% of the dollar amount of their investment for each calendar month or
      portion thereof that the registration statement is declared effective, up to
      a
      maximum of 10%, which increases to 18% if the registration statement is not
      declared effective within two years following the closing date. The
      registration statement was declared effective on August 14, 2007. Merriman
      Curhan Ford & Co. and Brimberg & Co., registered broker-dealers, acted
      as placement agents for the sale of the Company’s common stock. In connection
      with the May 2007 Financing, we received net proceeds of $23,875 after payment
      of placement agent fees of $1,000, legal fees and expenses of $120, and escrow
      agent fees of $5.





***(7)
      Commitments and Contingencies***





A
      contingent liability has been calculated based on the agreement between ROO
      Broadcasting Limited, a wholly owned subsidiary of the Company and Sputnik
      Agency Pty. Ltd. (“Sputnik”) on October 28, 2005. Subject to the conditions
      described below, the Company may issue additional shares ("Additional Shares")
      of common stock to the Sputnik shareholders, issuable after December 31, 2007,
      calculated as follows:





51%
      of
      [(1 * Sputnik Revenue) + (4 * Sputnik Earnings)]





Average
      ROO Share Price





where:
      "Sputnik Revenue" means the billings less all media and third party supplier
      costs of Sputnik for the twelve month period ending December 31, 2007; "Sputnik
      Earnings" means the earnings of Sputnik 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.





If
      the
      Company does not issue the computed number of Additional Shares, ROO
      Broadcasting Limited’s 51% ownership of Sputnik will be reduced on a pro rata
      basis by the difference between the computed number of Additional Shares and
      the
      actual number of Additional Shares issued. If the Company does not issue any
      Additional Shares, ROO Broadcasting will relinquish all of its 51% ownership
      of
      Sputnik. However, if the Sputnik Earnings are greater than 15% of the Sputnik
      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
      contingent liability calculated is $2,285 as of September 30, 2007 based on
      actual results for the nine months ended September 30, 2007. This contingent
      liability was consideration in the purchase and therefore will be recorded
      as
      customer lists and amortized over four years upon its completion. This
      contingent liability is expected to increase by approximately a third, based
      on
      the full year results upon completion.





11




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





***(8)
      Segment Reporting***





We
      derive
      our revenue from two operating segments. These operating segments are presented
      on a worldwide basis and include: Online Digital Media and Advertising
      Agency.




Online
      Digital Media operations span all aspects from website creation and supply
      of
      technology, to content and delivery of static and video assets, online property
      development and management as well as monetizing video through advertising
      sales.





Advertising
      Agency operations represent varied forms of media and services which comprise
      and support client campaigns. These operations include direct marketing,
      incentive programs, internal communications, customer relationship management,
      brand planning, sales promotion, creative, brand identity, sponsorships, on-line
      marketing, new media, media planning, media buying and packaging.





As
      a
      result of the continued growth and the changing nature of our business, we
      believe it is now necessary to disclose our operations on a segment by segment
      basis. Although the Advertising Agency segment operations are greater than
      just
      traditional media, it has been decided that its activities are significantly
      different from the pure online activities of our Online Digital Media segment.
      As our operations continue to evolve, we will continue to regularly review
      the
      business to determine if there is a need to make changes to the reported
      segments.





In
      accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and
      Related Information”, all prior period information has been reported to conform
      to the new segment presentation. The following table provides revenue and
      segment income (loss) from operations for each of the segments. Segment income
      (loss) from operations, as shown below, is the performance measure used by
      management to assess segment performance and excludes the effects of:
      stock-based compensation, amortization of intangible assets and corporate
      expenses. Corporate expenses consist of those costs not directly attributable
      to
      a segment, and include: salaries and benefits for the Company’s corporate
      executives, corporate governance costs, fees for professional service providers
      including audit, legal, tax, insurance, and, other corporate
      expenses.




**Three
                    months ended****September
                    30,**
            
            **Nine
                    months ended****September
                    30,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Revenue:**Online
                Digital Media
            
            $
            2,417
            
            $
            1,084
            
            $
            6,834
            
            $
            2,695Advertising
                Agency Business
            
            
            1,017
            
            
            1,146
            
            
            3,186
            
            
            3,329Corporate
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Total
                revenue**
            
            $
            3,434
            
            $
            2,230
            
            $
            10,020
            
            $
            6,024**Operating
                (loss) income:**Online
                Digital Media
            
            $
            (6,101
            )
            $
            (2,680
            )
            $
            (16,467
            )
            $
            (6,588
            )Advertising
                Agency Business
            
            
            116
            
            
            (61
            )
            
            (176
            )
            
            (107
            )Corporate
            
            
            (2,497
            )
            
            (1,000
            )
            
            (6,024
            )
            
            (2,914
            )**Total
                operating (loss) income**
            
            $
            (8,482
            )
            $
            (3,741
            )
            $
            (22,667
            )
            $
            (9,609
            )




****September 
                30,**2007****Assets:**Online
                Digital Media
            
            $
            9,399Advertising
                Agency Business
            
            
            2,055Corporate
            
            
            17,826**Total
                assets**
            
            $
            29,280





12




**ROO
      GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




***(9)
      Subsequent Events***





On
      October 18, 2007, we entered into a settlement agreement (the “Agreement”) with
      RJM Price & Company, Inc. (“RJM”) and Robertson Price, resolving all payment
      and other obligations between the parties arising out of the Asset Purchase
      Agreement dated as of January 22, 2007. Pursuant to the Agreement, ROO paid
      RJM
      $500 on October 23, 2007, and RJM delivered to ROO 92,379 shares of ROO common
      stock, which had been previously issued by ROO. This agreement is the full
      and
      final settlement of any outstanding items or amounts related to the Asset
      Purchase Agreement




13




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




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




**OVERVIEW**





We,
      through our operating subsidiaries, are a service provider that enables
      businesses to leverage digital media assets and provide an enhanced end user
      experience. Our business is divided into two segments: Online Digital Media
      and
      Advertising Agency.





Online
      Digital Media provides products and solutions that enable the broadcast of
      topical video content from our customers’ Internet web sites as well as
      monetizing that video through advertising sales. This includes providing the
      technology and content required for video to be played on computers via the
      Internet as well as emerging broadcast platforms such as set top boxes and
      wireless devices (mobile phones and PDAs). We are also in the process of
      expanding our product solutions to provide customers with a hybrid distribution
      and delivery solution with our P2P technology and products.




In
      light
      of our acquisition of additional technological assets and development of a
      suite of advanced digital media services, our business model and strategic
      direction have evolved. We are now even more focused on the global
      business-to-business market and less aggressively pursuing business-to-consumer
      advertising sales.  Our revenue sources have shifted accordingly, with
      a greater percentage than before coming from the business-to-business sector.





When
      we
      were more focused on business-to-consumer advertising sales, we placed more
      emphasis on the generation of advertising revenues through the monetization
      of video streams on websites we own, and we utilized various external marketing
      tools that were dedicated to driving increased traffic across those websites.
      The decrease in traffic on those sites beginning in early 2007
      resulted from our decision to terminate the use of these marketing tools, which
      generated a high quantity, but not necessarily high quality, of traffic and
      were
      costly to implement.  This in turn affected our ComScore ranking (127th as
      of August, 2007). (ComScore measures videos served on both owned and hosted
      client sites but is limited to the United States and does not include hosted
      client sites that have their own ComScore accounts.)





Advertising
      Agency provides varied forms of media and services which support our client
      campaigns. Our competencies span from creative, account service and media
      planning and buying to technical web development, direct marketing, incentive
      programs, CRM, and sales promotion. Our Advertising Agency segment represents
      a
      range of clients in the automotive, consumer package goods and lifestyle product
      categories.





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, 2007 and 2006. The
      consolidated financial statements include the accounts of ROO Group, Inc.,
      its
      wholly owned subsidiary ROO Media Corporation, its wholly owned subsidiary
      Bickhams Media, Inc. and its 51% owned subsidiary Reality Group Pty. Ltd.
      Included in the consolidation with ROO Media Corporation are its wholly owned
      subsidiary ROO Media (Australia) Pty. Ltd. and ROO Media (Australia) Pty Ltd.'s
      wholly owned subsidiary Undercover Media Pty. Ltd., its wholly owned subsidiary
      ROO Media Europe Limited, its wholly owned subsidiary ROO Broadcasting Limited,
      its 51% owned subsidiary Sputnik Agency Pty. Ltd. (formerly Factory212 Pty.
      Ltd.) and its wholly owned subsidiary ROO TV. Pty. Ltd. Included in the
      consolidation with Bickhams Media, Inc. is its wholly owned subsidiary
      VideoDome.com Networks, Inc. ROO Media Europe Limited was 76% owned by ROO
      Media
      Corporation until January 27, 2006 when ROO Media Corporation purchased the
      remaining 24% of ROO Media Europe Limited for $90,000. The following discussion
      should be read in conjunction with the information set forth in the consolidated
      financial statements and the related notes thereto appearing elsewhere in this
      quarterly report.





**RESULTS
      OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE THREE
      MONTHS ENDED SEPTEMBER 30, 2006**





REVENUE.
      Consolidated revenue increased by $1,204,000 from $2,230,000 for the three
      months ended September 30, 2006 to $3,434,000 for the three months
      ended September 30, 2007, an increase of 54%.





Online
      Digital Media segment revenue increased by $1,333,000 from $1,084,000 for the
      three months ended September 30, 2006 to $2,417,000 for the three months ended
      September 30, 2007, an increase of 123%. The increase is principally from the
      increase in customers and the inclusion of revenue from the acquisition of
      Sputnik in October 2006 not included for prior period results.




14




Advertising
      Agency segment revenue decreased by $129,000 from $1,146,000 for the three
      months ended September 30, 2006 to $1,017,000 for the three months ended
      September 30, 2007, an decrease of 11%. The revenue has decreased but it varies
      quarter to quarter and has remained static for the nine months ended September
      30, 2007 compared to the nine months ended September 30, 2006.





EXPENSES





OPERATIONS.
      Operating expenses consist primarily of content costs, salaries and related
      personnel costs, web hosting, content delivery and costs directly related to
      revenue generation. Operating expenses increased by $1,323,000 from $2,138,000
      for the three months ended September 30, 2006 to $3,461,000 for the three months
      ended September 30, 2007, an increase of 62%. This increase was primarily due
      to
      the increase in operations personnel, content costs and content delivery costs
      due to increased revenue generation, and the inclusion of operating costs
      related to the acquisition of Sputnik in October 2006 not included in prior
      period results.




RESEARCH
      AND DEVELOPMENT. Research and development expenses consist primarily of salaries
      and related personnel costs, and consulting fees associated with product
      development. Research and development expenses increased by $1,711,000 from
      $382,000 for the three months ended September 30, 2006 to $2,093,000 for the
      three months ended September 30, 2007, an increase of 448%. The increases were
      due primarily to the increase in development activities associated with
      enhancements to our technology platform in our Online Digital Media segment.





SALES
      AND
      MARKETING. Sales and marketing expenses consist primarily of expenses for sales
      and marketing personnel, expenditures for advertising, and promotional
      activities and expenses to bring our products to market. These expenses
      increased by $680,000 from $1,415,000 for the three months ended September
      30,
      2006 to $2,095,000 for the three months ended September 30, 2007, an increase
      of
      48%. These increases were primarily due to an increase in sales and marketing
      personnel, and the inclusion of sales and marketing costs related to the
      acquisition of Sputnik in October 2006 not included in prior period results.




GENERAL
      AND ADMINISTRATIVE. General and administrative expenses consist primarily of
      expenses for management, finance and administrative personnel, legal,
      accounting, consulting fees, and facilities costs. These expenses increased
      by
      $2,231,000 from $2,036,000 for the three months ended September 30, 2006 to
      $4,267,000 for the three months ended September 30, 2007, an increase of 110%.
      The increase of $2,231,000 was due to the increase in non-cash costs of
      $596,000, which consists of an increase in stock based compensation expense
      on
      stock options, plus $1,635,000 that is primarily due to an increase in salaries
      for administrative support, an increase in office space, an increase in
      depreciation and amortization on assets, and the inclusion of general and
      administrative costs related to the acquisition of Sputnik in October 2006
      not
      included in prior period results.





INTEREST
      INCOME. Interest income increased by $245,000 from $17,000 for the three months
      ended September 30, 2006 to $262,000 for the three months ended September 30,
      2007, an increase of 1441%. This increase was primarily due to an increase
      in
      our cash and cash equivalents from the proceeds of the private placements in
      May
      2007 and November 2006.




INTEREST
      EXPENSE, OTHER. Interest expense, other, was $21,000 for the three months ended
      September 30, 2006 and $18,000 for the three months ended September 30, 2007,
      respectively.




NET
      LOSS
      BEFORE INCOME TAXES. As a result of the factors described above, we reported
      a
      net loss before income taxes of $8,229,000 for the three months ended September
      30, 2007 compared to $3,745,000 for the three months ended September 30, 2006,
      an increase of $4,484,000 or 120%.




**RESULTS
      OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS
      ENDED SEPTEMBER 30, 2006**





REVENUE.
      Consolidated revenue increased by $3,996,000 from $6,024,000 for the nine months
      ended September 30, 2006 to $10,020,000 for the nine months ended September
      30,
      2007, an increase of 66%.





Online
      Digital Media segment revenue increased by $4,139,000 from $2,695,000 for the
      nine months ended September 30, 2006 to $6,834,000 for the nine months ended
      September 30, 2007, an increase of 154%. The increase is principally from the
      increase in customers and the inclusion of revenue of the acquisition of Sputnik
      in October 2006 not included for prior period results.





Advertising
      Agency segment revenue decreased by $143,000 from $3,329,000 for the nine months
      ended September 30, 2006 to $3,186,000 for the nine months ended September
      30,
      2007, a decrease of 4%. The revenue has decreased but it varies quarter to
      quarter and has remained static for the nine months ended September 30, 2007
      compared to the nine months ended September 30, 2006.





EXPENSES





OPERATIONS.
      Operating expenses consist primarily of content costs, salaries and related
      personnel costs, web hosting, content delivery and costs directly related to
      revenue generation. Operating expenses increased by $4,383,000 from $5,864,000
      for the nine months ended September 30, 2006 to $10,247,000 for the nine months
      ended September 30, 2007, an increase of 75%. This increase was primarily due
      to
      the increase in operations personnel, content costs and content delivery costs
      due to increased revenue generation, and the inclusion of operating costs
      related to the acquisition of Sputnik in October 2006 not included in prior
      period results.





15




RESEARCH
      AND DEVELOPMENT. Research and development expenses consist primarily of salaries
      and related personnel costs, and consulting fees associated with product
      development. Research and development expenses increased by $4,090,000 from
      $899,000 for the nine months ended September 30, 2006 to $4,989,000 for the
      nine
      months ended September 30, 2007, an increase of 455%. The increases were due
      primarily to the increase in development activities associated with enhancements
      to our technology platform in our Online Digital Media segment.





SALES
      AND
      MARKETING. Sales and marketing expenses consist primarily of expenses for sales
      and marketing personnel, expenditures for advertising, and promotional
      activities and expenses to bring our products to market. These expenses
      increased $2,201,000 from $3,364,000 for the nine months ended September 30,
      2006 to $5,565,000 for the nine months ended September 30, 2007, an increase
      of
      65%. These increases were primarily due to an increase in sales and marketing
      personnel, and the inclusion of sales and marketing costs related to the
      acquisition of Sputnik in October 2006 not included in prior period results.





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
      $6,380,000 from $5,506,000 for the nine months ended September 30, 2006 to
      $11,886,000 for the nine months ended September 30, 2007, an increase of 116%.
      The increase of $6,380,000 was due to the increase in non-cash costs of
      $1,919,000, which consists of an increase in stock based compensation expense
      on
      stock options of $1,983,000 less $64,000 in preferred shares issued as a
      performance bonus in 2006, plus $4,461,000 that is primarily due to an increase
      in salaries for administrative support, an increase in office space, an increase
      in depreciation and amortization on assets, and the inclusion of general and
      administrative costs related to the acquisition of Sputnik in October 2006
      not
      included in prior period results.





INTEREST
      INCOME. Interest income increased by $522,000 from $72,000 for the nine months
      ended September 30, 2006 to $594,000 for the nine months ended September 30,
      2007, an increase of 725%. This increase was primarily due to an increase in
      our
      cash and cash equivalents from the proceeds of the private placements in May
      2007 and November 2006.





INTEREST
      EXPENSE, OTHER. Interest expense, other, was $42,000 for the nine months ended
      September 30, 2006 and $51,000 for the nine months ended September 30, 2007,
      respectively.




NET
      LOSS
      BEFORE INCOME TAXES. As a result of the factors described above, we reported
      a
      net loss before income taxes of $22,095,000 for the nine months ended September
      30, 2007 compared to $9,579,000 for the nine months ended September 30, 2006,
      an
      increase of $12,516,000 or 131%.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      September 30, 2007 we had working capital of approximately $14,382,000 and
      a
      cash and cash equivalents balance of $16,278,000. Although revenues are expected
      to increase, it is unclear whether additional cash resources will be required
      during the next twelve months. On May 4, 2007, the Company entered into a common
      stock purchase agreement pursuant to which the Company sold an aggregate of
      $25,000,000 of shares of common stock and warrants to accredited investors
      (See
      Note 6 Stock Issuances in financial statements). We may undertake additional
      debt or equity financings if needed to better enable us to grow and meet our
      future operating and capital requirements. However, we cannot guarantee that
      any
      additional equity or debt financing will be available in sufficient amounts
      or
      on acceptable terms when needed. If such financing is not available in
      sufficient amounts or on acceptable terms, our results of operations and
      financial condition may be adversely affected. In addition, equity financing
      may
      result in dilution to existing stockholders and may involve securities that
      have
      rights, preferences, or privileges that are senior to our common stock, and
      any
      debt financing obtained must be repaid regardless of whether or not we generate
      profits or cash flows from our business activities.





Net
      cash
      used in operating activities was $15,004,000 for the nine months ended September
      30, 2007, compared to $7,260,000 for the nine months ended September 30, 2006,
      an increase of $7,744,000 or 107%. The increase in net cash used in operating
      activities is primarily the result of our increased expenses with our expanded
      operations.





Net
      cash
      used in investing activities was $4,063,000 for the nine months ended September
      30, 2007 compared to net cash used in investing activities for the nine months
      ended September 30, 2006 of $852,000 an increase of $3,211,000 or 377%. The
      net
      cash used in investing activities increased primarily due to the acquisition
      of
      assets from Wurld Media of $3,174 and the cash investment in RJM of
      $250,000.




16




Net
      cash
      provided by financing activities was $23,470,000 for the nine months ended
      September 30, 2007 compared to net cash provided by financing activities of
      $5,115,000 for the nine months ended September 30, 2006, an increase in net
      cash
      provided by financing activities of $18,355,000. The increase is primarily
      the
      result of the proceeds from the May 2007 private placement of $23,875,000 less
      the proceeds form the August 2006 private placement of $4,985.




**MARKET
      RISKS**





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




We
      are
      exposed to foreign exchange rate fluctuations as the financial results of
      foreign subsidiaries are translated into U.S. dollars in consolidation and
      as
      our foreign currency consumer receipts are converted into U.S. dollars. Our
      exposure to foreign exchange rate fluctuations also arises from payables and
      receivables to and from our foreign subsidiaries, vendors and customers. Foreign
      exchange rate fluctuations did not have a material impact on our financial
      results in the three and nine months ended September 30, 2007 and
      2006.




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.
      We
      routinely assess the financial strength of customers and, based upon factors
      concerning credit risk, we establish an allowance for uncollectible accounts.
      Management believes that accounts receivable credit risk exposure beyond such
      allowance is limited.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





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




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





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





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




17




**PART
      II - OTHER INFORMATION**


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





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




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





During
      the quarter covered by this report, we issued 600,000 shares of common stock
      to
      Wurld Media, Inc. pursuant to the Asset Purchase Agreement dated as of July
      12,
      2007. The shares are being held in escrow.




The
      Company relied upon an exemption under rule 506 of Regulation D and Section
      4(2)
      of the Securities Act of 1933, as amended.




**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.**




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




18




**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 19, 2007
            By:
            */s/
                Robert Petty*Robert
                PettyChief
                Executive Officer


Dated:November 19, 2007
            By:
            */s/
                Robin Smyth*Robin
                SmythInterim
                Chief Financial Officer




19