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**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 JUNE 30, 2006





o
            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 incorporation or organization)
            
            (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


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 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 August 17, 2006, the issuer had 13,176,436 outstanding shares of Common Stock.





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





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TABLE
      OF CONTENTS





**Page****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial Statements
            1Consolidated
                Balance Sheet
            1Consolidated
                Statements of Operations
            2Consolidated
                Statements of Cash Flows
            3Notes
                to Consolidated Financial
                Statements
            5Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            9Item
                3. Controls and Procedures
            12**PART
                II - OTHER INFORMATION**Item
                1. Legal Proceedings
            13Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            13Item
                3. Defaults Upon Senior Securities
            13Item
                4. Submission of Matters to a Vote of Security
                Holders
            13Item
                5. Other Information
            13Item
                6. Exhibits and Reports on Form 8-K
            13**SIGNATURES**
            14




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**PART
      I - FINANCIAL INFORMATION**


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





**ROO
      GROUP, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEET AS OF JUNE 30, 2006**





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


**(Unaudited)**


***Assets:*****Current
                assets:**Cash
                and cash equivalents
            
            $
            735Accounts
                receivable, net
            
            
            1,725Other
                current assets
            
            
            1,167**Total
                current assets**
            
            
            3,627Property
                and equipment, net
            
            
            491Deferred
                tax assets
            
            
            22Content,
                net
            
            
            206Software,
                net
            
            
            987Customer
                list, net
            
            
            316Domain
                names, net
            
            
            46Goodwill
            
            
            1,123**Total
                assets**
            
            $
            6,818***Liabilities
                and Stockholders' Equity:*****Current
                liabilities:**Bank
                overdraft
            
            $
            204Accounts
                payable
            
            
            1,636Accrued
                expenses
            
            
            663Income
                tax payable
            
            
            122Other
                current liabilities
            
            
            742**Total
                current liabilities**
            
            
            3,367**Non-current
                liabilities**
            
            
            38**Total
                liabilities**
            
            
            3,405**Commitments**
            
            
            —**Minority
                interest**
            
            
            125**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 13,176,436
            
            
            1Additional
                paid-in capital
            
            
            23,560Accumulated
                deficit
            
            
            (20,229
            )Accumulated
                other comprehensive loss
            
            
            (45
            )**Total
                stockholders' equity**
            
            
            3,288**Total
                liabilities and stockholders' equity**
            
            $
            6,818


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


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            Contents**




**ROO
      GROUP, INC. AND SUBSIDIARIES**




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


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


**(Unaudited)**


**Three
                months**
            
            **Three
                months**
            
            **Six
                months**
            
            **Six
                months****ended**
            
            **ended**
            
            **ended**
            
            **ended****June
                30, 2006**
            
            **June
                30, 2005**
            
            **June
                30, 2006**
            
            **June
                30, 2005**Revenue
            
            $
            2,014
            
            $
            1,549
            
            $
            3,794
            
            $
            3,137Expenses:Operations
            
            
            1,916
            
            
            1,088
            
            
            3,725
            
            
            2,022Research
                and development
            
            
            287
            
            
            162
            
            
            517
            
            
            306Sales
                and marketing
            
            
            1,037
            
            
            477
            
            
            1,949
            
            
            913General
                and administrative
            
            
            1,315
            
            
            763
            
            
            2,314
            
            
            1,501General
                and administrative (non-cash)
            
            
            719
            
            
            
            
            
            1,156
            
            
            1,140Total
                expenses
            
            
            5,274
            
            
            2,490
            
            
            9,661
            
            
            5,882(Loss)
                from operations
            
            
            (3,260
            )
            
            (941
            )
            
            (5,867
            )
            
            (2,745
            )Commission
                on Loan Procurement
            
            
            —
            
            
            (60
            )
            
            —
            
            
            (60
            )Redemption
                premium on convertible note
            
            
            —
            
            
            (57
            )
            
            —
            
            
            (57
            )Interest
                income
            
            
            26
            
            
            4
            
            
            55
            
            
            4Interest
                expense - related party
            
            
            —
            
            
            (20
            )
            
            —
            
            
            (32
            )Interest
                expense - other
            
            
            (15
            )
            
            (133
            )
            
            (21
            )
            
            (222
            )Interest
                expense - other (non-cash)
            
            
            --
            
            
            —
            
            
            —
            
            
            (351
            )Net
                (loss) before income taxes
            
            
            (3,249
            )
            
            (1,207
            )
            
            (5,833
            )
            
            (3,463
            )Income
                taxes
            
            
            —
            
            
            (12
            )
            
            (29
            )
            
            (40
            )Net
                (loss) before minority interest
            
            
            (3,249
            )
            
            (1,219
            )
            
            (5,862
            )
            
            (3,503
            )Minority
                interest
            
            
            2
            
            
            (4
            )
            
            (32
            )
            
            (17
            )Net
                (loss)
            
            $
            (3,247
            )
            $
            (1,223
            )
            $
            (5,894
            )
            $
            (3,520
            )Basic
                and diluted net (loss) per common share
            
            $
            (0.25
            )
            $
            (0.29
            )
            $
            (0.45
            )
            $
            (0.84
            )Weighted
                average common shares outstanding
            
            
            13,176,436
            
            
            4,208,745
            
            
            13,176,436
            
            
            4,184,745Comprehensive
                (loss):Net
                (loss)
            
            $
            (3,247
            )
            $
            (1,223
            )
            $
            (5,894
            )
            $
            (3,520
            )Foreign
                currency translation
            
            
            4
            
            
            (3
            )
            
            (10
            )
            
            (9
            )Fair
                market value adjustment for available for sale securities
            
            
            —
            
            
            1
            
            
            —
            
            
            (3
            )Comprehensive
                (loss)
            
            $
            (3,243
            )
            $
            (1,225
            )
            $
            (5,904
            )
            $
            (3,532
            )


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


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**ROO
      GROUP, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**


**Six
                months ended****June
                30,****2
                0 0 6**
            
            **2
                0 0 5****Operating
                Activities:**Net
                (loss)
            
            $
            (5,894
            )
            $
            (3,520
            )Adjustments
                to reconcile net (loss) to net cash (used) by operating activities:Provision
                for doubtful accounts
            
            
            —
            
            
            12Depreciation
            
            
            80
            
            
            64Amortization
                of intangible assets
            
            
            283
            
            
            319Non
                cash stock based compensation
            
            
            1,092
            
            
            —Non
                cash stock/options for services
            
            
            —
            
            
            391Non
                cash preferred stock issued as performance bonuses
            
            
            64
            
            
            750Amortization
                of debt discount and beneficial conversion features
            
            
            —
            
            
            440Minority
                interest in subsidiaries
            
            
            32
            
            
            17Changes
                in assets and liabilities:(Increase)
                decrease in:Accounts
                receivable
            
            
            (230
            )
            
            (253
            )Other
                assets
            
            
            (842
            )
            
            (85
            )Increase
                (decrease) in:Accounts
                payable
            
            
            539
            
            
            618Accrued
                expenses
            
            
            272
            
            
            (170
            )Income
                tax payable
            
            
            (8
            )
            
            (11
            )Other
                liabilities
            
            
            263
            
            
            30Total
                adjustments
            
            
            1,545
            
            
            2,122**Net
                Cash (Used) By Operating Activities**
            
            
            (4,349
            )
            
            (1,398
            )**Investing
                Activities:**Investment
                in VideoDome
            
            
            (20
            )
            
            (100
            )Investment
                in ROO Media Europe
            
            
            (90
            )
            
            —Capitalization
                of software
            
            
            (85
            )
            
            —Capitalization
                of content
            
            
            (102
            )
            
            (102
            )Purchase
                of equipment
            
            
            (96
            )
            
            (149
            )**Net
                Cash (Used) By Investing Activities**
            
            
            (393
            )
            
            (351
            )**Financing
                Activities:**Bank
                overdraft
            
            
            204
            
            
            195(Decrease)
                in related party loans
            
            
            —
            
            
            (40
            )Increase
                in stockholder loan
            
            
            —
            
            
            600Convertible
                note
            
            
            —
            
            
            965Repayment
                of convertible note
            
            
            —
            
            
            (143
            )Repayment
                of capital leases
            
            
            (9
            )
            
            (13
            )**Net
                Cash Provided By Financing Activities**
            
            
            195
            
            
            1,564**Effect
                of Exchange Rate Changes on Cash**
            
            
            8
            
            
            (16
            )**Net
                (Decrease) in Cash**
            
            
            (4,539
            )
            
            (201
            )**Cash
                and Cash Equivalents - Beginning of Period**
            
            
            5,274
            
            
            322**Cash
                and Cash Equivalents - End of Period**
            
            $
            735
            
            $
            121


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**ROO
      GROUP, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Amounts
      in Thousands)**


**(Unaudited)**


**Six
                months ended****June
                30,****2
                0 0 6**
            
            **2
                0 0 5****Supplemental
                Disclosures of Cash Flow Information:**Cash
                paid during the periods for:Income
                taxes
            
            $
            49
            
            $
            66Interest
            
            $
            21
            
            $
            112Supplemental
                disclosure of non-cash investing and financing activitiesPurchase
                agreement of VideoDome.com Networks, Inc
            
            $
            —
            
            $
            44Conversions
                of convertible notes
            
            $
            —
            
            $
            422


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


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**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 six months ended June 30, 2006 are not
      necessarily indicative of the results that may be expected for the year ending
      December 31, 2006. 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, 2005.





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





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





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





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





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


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**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)***




***(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.




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





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





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





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





Concentrations
      of credit risk with respect to trade accounts receivable are limited due to
      the
      wide variety of customers who are dispersed across many geographic regions.
      Management believes that accounts receivable credit risk exposure beyond such
      allowance is limited. The allowance as of June 30, 2006 was $37.





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.


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            Contents**




**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)***




***(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.





***(L)
      Stock-Based Compensation -*** 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. On January 1, 2006, the Company
      adopted SFAS 123R. The provisions of SFAS 123R became effective the first annual
      reporting period beginning after December 15, 2005. SFAS 123R requires companies
      to adopt its requirements using a "modified prospective" method. Under the
      "modified prospective" method, compensation cost is recognized in the financial
      statements beginning with the effective date, based on the requirements of
      SFAS
      123R for all share-based payments granted after that date, and based on the
      requirements of SFAS 123 for all unvested awards granted prior to the effective
      date of SFAS 123R.





Beginning
      in the 2006 calendar year, with the adoption of SFAS 123R, we included stock
      based compensation in general and administrative for the cost of stock options.
      Stock based compensation expense for the three and six months ended June 30,
      2006 was $655 and $1,092, 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 $2.40 to $3.00 to
      purchase 855,000 shares of its common stock during the six months ended June
      30,
      2006.





During
      the three months ended March 31, 2006, a total of 350,000 employee stock options
      had vested. During the three months ended June 30, 2006, a total of 376,400
      employee stock options had vested with the remaining 1,401,000 employee stock
      options still unvested pending the achievement of certain milestones. Management
      is unable to estimate when such milestones will be reached by the employees
      and
      no expense has been recorded as yet in relation to these stock
      options.





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


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            Contents**




**ROO
      GROUP, INC. AND SUBSIDIARIES**




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**




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





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





***(O)
      Reclassification***





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





***(3)
      Acquisitions***





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





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





***(4)
      Goodwill***





Goodwill
      of $1,123 represents the excess of acquisition costs over the fair value of
      net
      assets of the Reality acquisition of $1,033 and ROO Media Europe Limited of
      $90.
      The exercise of the Reality Group buy-back option led to a reduction of goodwill
      of $957 during the six months ended June 30, 2006 (Note 3).





***(5)
      Preferred Shares***





On
      June
      30, 2006, ROO Group, Inc. (the “Company”) issued 500,000 shares of Series A
      Preferred Stock to an employee. These shares were valued at the equivalent
      number (1:25) of common shares based upon the fair market value as at the issue
      date at $64. Such amount is expensed in “General and administrative (non-cash)”
for the three and six months ended June 30, 2006. These shares were issued
      as a
      performance bonus for, among other things, the employee’s role in helping expand
      and grow the Company’s business operations. These shares were issued pursuant to
      the exemption from registration provided by Rule 506 under the Securities Act
      of
      1933.




***(6)
      Subsequent
      Events***




On
        August
        18, 2006, the Company entered into a Common Stock Purchase Agreement pursuant
        to
        which the Company sold an aggregate of $4,675,000 of shares of common stock
        and
        warrants to accredited investors. The shares of common stock were sold at
        a
        price of $1.25 per share. Each investor will be issued warrants to purchase
        a
        number of shares of common stock equal to 50% of the number of shares of
        common
        stock purchased. The warrants have an exercise price of $2.00 per share and
        a
        term of five years. At any time at which the market price of the Company's
        Common Stock exceeds $5.00, the Company may elect to call the warrants provided
        that the shares underlying such warrants are registered pursuant to a
        registration statement. 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
        1% of the dollar amount of their investment for each calendar month or portion
        thereof that the registration statement is not filed or declared
        effective.
 
 Savvian
        LLC (“Savvian”), Burnham Hill Partners, a division of Pali Capital, Inc.
        ("Burnham Hill") and Brimberg & Co. financial advisors ("Brimberg"),
        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 6% of the gross proceeds. In addition,
        the
        Company is required to issue the placement agents warrants to purchase shares
        of
        common stock with an exercise price of $1.25 per share exercisable for a
        period
        of five years.




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**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**




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 six months ended June 30, 2006 and 2005. The
      consolidated financial statements include the accounts of ROO Group, Inc.,
      its
      wholly owned subsidiary ROO Media Corporation, its wholly owned subsidiary
      Bickhams and its 51% owned subsidiary Reality Group. Included in the
      consolidation with ROO Media Corporation are ROO Media Corporation's wholly
      owned subsidiary ROO Media (Australia) Pty Ltd. and ROO Media (Australia) Pty
      Ltd.'s wholly owned subsidiary Undercover Media, its wholly owned subsidiary
      ROO
      Media Europe Pty Ltd, its wholly owned subsidiary ROO Broadcasting Limited,
      its
      51% owned subsidiary Factory212 Pty. Ltd. and its wholly owned subsidiary ROO
      TV
      Pty Ltd. Included in the consolidation with Bickhams is Bickhams' wholly owned
      subsidiary VideoDome.com Networks, Inc. ROO Media Europe Pty Ltd. was 76% owned
      by ROO Media Corporation until January 27, 2006 when ROO Media Corporation
      purchased the remaining 24% of ROO Media Europe Pty Ltd. for $90,000. The
      following discussion should be read in conjunction with the information set
      forth in the consolidated financial statements and the related notes thereto
      appearing elsewhere in this quarterly report.




We
      provide topical video content, including news, business, entertainment, fashion,
      video games, movies, music, sport and travel video, and associated services
      for
      broadcasting video over the Internet to a global base of clients. ROO Media's
      delivery platform supports worldwide syndication and television-style
      advertising. During 2001 and 2002, ROO Media focused on developing and refining
      its products and solutions, and commenced the commercial selling of its
      solutions in late 2003. ROO Media developed a technology platform specifically
      designed to provide a cost effective, robust, and scaleable solution to manage
      and syndicate video content over the Internet.





RESULTS
      OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE THREE
      AND SIX MONTHS ENDED JUNE 30, 2005





NET
      REVENUE





Total
      net
      revenue increased by $465,000 from $1,549,000 for the three months ended June
      30, 2005 to $2,014,000 for the three months ended June 30, 2006, an increase
      of
      30% and by $657,000 from $3,137,000 for the six months ended June 30, 2005
      to
      $3,794,000 for the six months ended June 30, 2006, an increase of 21%. The
      increases are principally from the increasing sales revenue from
      operations.





EXPENSES





OPERATIONS.
      Operating expenses increased by $828,000 from $1,088,000 for the three months
      ended June 30, 2005 to $1,916,000 for the three months ended June 30, 2006,
      an
      increase of 76% and increased by $1,703,000 from $2,022,000 for the six months
      ended June 30, 2005 to $3,725,000 for the six months ended June 30, 2006, an
      increase of 84%. The increases were due to the increasing costs associated
      with
      increased revenue generation. These costs include content costs, salaries,
      web
      hosting and content delivery.  -9-
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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 $125,000 from
      $162,000 for the three months ended June 30, 2005 to $287,000 for the three
      months ended June 30, 2006, an increase of 77%. Research and development
      expenses increased by $211,000 from $306,000 for the six months ended June
      30,
      2005 to $517,000 for the six months ended June 30, 2006, an increase of 69%.
      The
      increases were due primarily 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 sales
      and marketing personnel, expenditures for advertising, and promotional
      activities and expenses to bring our products to market. These expenses
      increased by $560,000 from $477,000 for the three months ended June 30, 2005
      to
      $1,037,000 for the three months ended June 30, 2006, an increase of 117% and
      by
      $1,036,000 from $913,000 for the six months ended June 30, 2005 to $1,949,000
      for the six months ended June 30, 2006, an increase of 113%. These increases
      were primarily due to an increase in sales and marketing personnel.





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
      $1,271,000 from $763,000 for the three months ended June 30, 2005 to $2,034,000
      for the three months ended June 30, 2006, an increase of 167%. The increase
      was
      due to the increase in non-cash costs of $719,000 which consists of stock based
      compensation expense on stock options of $655,000 and preference shares of
      $62,000 plus $552,000 that is primarily due to an increase in salaries providing
      administrative support to the increased activity of operations. General and
      administrative expenses increased by $829,000 from $2,641,000 for the six months
      ended June 30, 2005 to $3,470,000 for the six months ended June 30, 2006, an
      increase of 31%. This increase is primarily due to an increase in salaries
      providing administrative support to the increased activity of
      operations.





INTEREST
      INCOME. Interest income increased by $22,000 from $4,000 for the three months
      ended June 30, 2005 to $26,000 for the three months ended June 30, 2006 and
      by
      $51,000 from $4,000 for the six months ended June 30, 2005 to $55,000 for the
      six months ended June 30, 2006. This increase was primarily due to an increase
      in our cash and cash equivalents.




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 decreased from $20,000 for the three months ended June
      30,
      2005 to $0 for the three months ended June 30, 2006 and decreased from $32,000
      for the six months ended June 30, 2005 to $0 for the six months ended June
      30,
      2006. The outstanding balance from loans from Mr. Petty as of December 31,
      2005
      was $0.





INTEREST
      EXPENSE, OTHER. Interest expense, other, decreased by $118,000 from $133,000
      for
      the three months ended June 30, 2005 to $15,000 for the three months ended
      June
      30, 2006 and decreased by $201,000 from $222,000 for the six months ended June
      30, 2005 to $21,000 for the six months ended June 30, 2006. Interest expense,
      other, primarily included the interest payable to callable secured convertible
      note holders in 2005. On August 23, 2005 we repaid all outstanding amounts
      due
      pursuant to the callable secured convertible notes.




NET
      LOSS
      BEFORE INCOME TAXES. As a result of the factors described above, we reported
      a
      net loss before income taxes of $3,249,000 for the three months ended June
      30,
      2006, compared to $1,207,000 for the three months ended June 30, 2005, an
      increase of $2,042,000 or 169% and we reported a net loss before income taxes
      of
      $5,833,000 for the six months ended June 30, 2006, compared to $3,463,000 for
      the six months ended June 30, 2005, an increase of $2,370,000 or
      68%.


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LIQUIDITY
      AND CAPITAL RESOURCES




As
      of
      June 30, 2006, we had working capital of approximately $260,000 with a cash
      balance of $735,000. Management believes that there will be an increase in
      overall expenses to expand the Company’s operations on a global basis during
      2006. Although revenues are expected to increase, additional cash resources
      will be required during the next twelve months. We expect to undertake
      additional debt or equity financings when 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.
      On
      August 18, 2006 the Company entered intro a common stock purchase agreement
      pursuant to which the Company sold an aggregate of $4,675,000 of shares of
      common stock and warrants to accredited investors (see Note 6 Subsequent Events
      in financial statements).





Net
      cash
      used in operating activities was $4,349,000 for the six months ended June 30,
      2006, compared to $1,398,000 for the six months ended June 30, 2005, an increase
      of $2,951,000 or 211%. 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 $393,000 for the six months ended June 30,
      2006, compared to net cash used in investing activities for the six months
      ended
      June 30, 2005 of $351,000, an increase of $42,000 or 12%. The net cash used
      in
      investing activities increased primarily due to the investment in ROO Media
      Europe of approximately $90,000, the capitalization of software of $85,000
      offset by the decrease in purchase of equipment of $53,000 and the decrease
      in
      investment in VideoDome of $80,000. On January 27, 2006 ROO Media Corporation
      purchased 24% of ROO Media Europe Limited for $90,000. ROO Media Europe is
      now a
      wholly owned subsidiary of ROO Media Corporation.




Net
      cash
      provided by financing activities was $195,000 for the six months ended June
      30,
      2006 compared to net cash provided by financing activities of $1,564,000 for
      the
      six months ended June 30, 2005, a decrease in net cash provided by financing
      activities of $1,369,000 or 88%. The decrease in net cash provided by financing
      activities was primarily due to the net amount received from convertible notes
      of $822,000 and an increase in stockholder loan of $600,000 in the six months
      ended June 30, 2005.




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 six months ended June 30, 2006 and 2005.




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 June 30, 2006, one customer accounted for approximately 10% of our trade
      accounts receivable portfolio. We routinely assess the financial strength
      of


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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.




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 $5,867,000 for the six
      months ended June 30, 2006, compared to $2,745,000 for the six months ended
      June
      30, 2005. Additionally,
      as of June 30, 2006, we had negative cash flows from operating activities of
      approximately $4,349,000. 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 2006, primarily as a result
      of an increase in sales, 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. On
      August
      18, 2006 the Company entered intro a common stock purchase agreement pursuant
      to
      which the Company sold an aggregate of $4,675,000 of shares of common stock
      and
      warrants to accredited investors (see Note 6 subsequent events in financial
      statements).




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.  -12-
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**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 a party to any pending legal proceeding, nor is our property the subject
      of
      a pending legal proceeding, that is not in the ordinary course of business
      or
      otherwise material to the financial condition of our business. None of our
      directors, officers or affiliates is involved in a proceeding adverse to our
      business or has a material interest adverse to our business.





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




On
        August
        18, 2006, the Company entered into a Common Stock Purchase Agreement pursuant
        to
        which the Company sold an aggregate of $4,675,000 of shares of common stock
        and
        warrants to accredited investors. The shares of common stock were sold at
        a
        price of $1.25 per share. Each investor will be issued warrants to purchase
        a
        number of shares of common stock equal to 50% of the number of shares of
        common
        stock purchased. The warrants have an exercise price of $2.00 per share and
        a
        term of five years. At any time at which the market price of the Company's
        Common Stock exceeds $5.00, the Company may elect to call the warrants provided
        that the shares underlying such warrants are registered pursuant to a
        registration statement. 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
        1% of the dollar amount of their investment for each calendar month or portion
        thereof that the registration statement is not filed or declared
        effective.
 
 Savvian
        LLC (“Savvian”), Burnham Hill Partners, a division of Pali Capital, Inc.
        ("Burnham Hill") and Brimberg & Co. financial advisors ("Brimberg"),
        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 6% of the gross proceeds. In addition,
        the
        Company is required to issue the placement agents warrants to
        purchase shares of common stock with an exercise price of $1.25 per share
        exercisable for a period of five years.


**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.





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**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:  August
      21, 2006


By: 
      /s/ Robert Petty


Robert
      Petty


Chief
      Executive Officer




Dated:  August
      21, 2006


By: 
      /s/ Robin Smyth


Robin
      Smyth


Chief
      Financial Officer


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