**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 ____________________________________________________
 **FORM
        10-KSB**
 
 x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
                  2005.
 
 o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934 FOR THE TRANSITION PERIOD FROM ________ TO ________****
 
 **Commission
        File No. 000-28519**
 
 **ZANN
                  CORP.**(Exact
                  name of issuer as specified in its
                  charter)
 
 **Nevada**
              **76-0510754**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**1549
                  North Leroy Street, Suite D-200**
                **Fenton,
                  Michigan**
              **48430**(Address
                  of principal executive offices)
              (Zip
                  Code)
 Registrant’s
          telephone number, including area code: **(810)
          714-2978**
 
 Securities
                  registered under Section 12(b) of the Exchange Act:
              **None**Securities
                  registered under Section 12(g) of the Exchange Act:
              **Common
                  stock, par value $0.001 per share**(Title
                  of class)
  Check
        whether the issuer is not required to file reports pursuant to Section 13
        or
        15(d) of the Exchange Act. o
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding twelve months (or 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
 
 Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not be contained, to the
        best
        of registrant's knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-KSB or any amendment
        to
        this Form 10-KSB. x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes x No o
 
 State
        issuer’s revenues for its most recent fiscal year: $826.
 
 State
        the
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        last sold, or the average bid and asked price of such common equity, as of
        March
        30, 2006:  $671,367.88
 
 Indicate
        the number of shares outstanding of each of the registrant's classes of common
        stock as of March 30, 2006: 33,945,359 shares of common stock. ****
 
 Documents
        incorporated by reference: None.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes o No x
  
 
  **TABLE
        OF CONTENTS**
 
 **Item
                  1.**
              **Business**
              **3****Item
                  2.**
              **Description
                  of Property**
              **6****Item
                  3.**
              **Legal
                  Proceedings**
              **6****Item
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders**
              **6****Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder Matters**
              **6****Item
                  6.**
              **Management’s
                  Discussion and Analysis or Plan of Operation**
              **8****Item
                  7.**
              **Financial
                  Statements**
              **15****Item
                  8.**
              **Changes
                  in and Disagreements With Accountants on Accounting and Financial
                  Disclosure**
              **15****Item
                  8A.**
              **Controls
                  and Procedures**
              **15****Item
                  8B.**
              **Other
                  Info**
              **16****Item
                  9.**
              **Directors,
                  Executive Officers, Promoters and Control Persons; Compliance With
                  Section
                  16(a) of the Exchange Act**
              **16****Item
                  10.**
              **Executive
                  Compensation**
              **18****Item
                  11.**
              **Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters**
              **19****Item
                  12.**
              **Certain
                  Relationships and Related Transactions**
              **21****Item
                  13.**
              **Exhibits**
              **22****Item
                  14.**
              **Principal
                  Accountant Fees and Services**
              **23**
  -2-
 *Table
            of Contents*
  **PART
        I**
 
 This
        document contains forward-looking statements that are based upon current
        expectations within the meaning of the Private Securities Reform Act of 1995.
        It
        is our intent that such statements be protected by the safe harbor created
        thereby and we disclaim any duty or obligation to update. Forward-looking
        statements involve risks and uncertainties and our actual results and the
        timing
        of events may differ significantly from the results discussed in the
        forward-looking statements. Examples of such forward-looking
        statements include,
        but are not limited to ,
        statements about:
  §
              Our
                  capital requirements and resources;
  §
              Our
                  strategy;
  §
              Development
                  of new products;
 §
                Future
                    revenue generation;
 §
              Future
                  employment of our key employees;
  §
              Future
                  capital requirements;
  §
              Development
                  of strategic relationships;
  §
              Statements
                  about potential future dividends;
  §
              Statements
                  about protection of our intellectual property;
                  and
  §
              Possible
                  changes in legislation.
  Such
        forward-looking statements are inherently subject to risks and uncertainties,
        (including those discussed in “Risk Factors” below and other sections of this
        document) and actual results and outcomes may differ materially from the
        results
        and outcomes discussed in or anticipated by the forward-looking
        statements.
 
 **Item
                  1.**
              **Business**
 
 **Historical
        Overview**
 
 The
        Company was incorporated in Florida on March 4, 1999 as Investra Enterprises
        Inc. On March 6, 2000, we completed a Share Purchase Agreement in which
        Pathobiotek Diagnostics, Inc. a Texas Corporation, acquired all of our issued
        and outstanding shares for $150,000 for the purpose of completing a merger
        of
        Pathobiotek Diagnostics, Inc. and Investra Enterprises. Pathobiotek Diagnostics,
        Inc., a Texas corporation, was the surviving entity.
 
 Effective
        September 7, 2001, we implemented a reverse split of our common stock at
        the
        ratio of one post-consolidation share for each 40 pre-consolidation shares,
        except that no shareholder was reduced to less than 10 shares.
 
 On
        October 16, 2001, we completed the Plan and Agreement of Reorganization by
        and
        between Pathobiotek Diagnostics Inc., ATNG Acquisition, Inc., a Texas
        corporation, and ATNG, Inc., a Nevada corporation under which Pathobiotek
        Diagnostics Inc. issued 27,836,186 shares of its common stock as consideration
        for its wholly owned subsidiary, ATNG Acquisition, Inc. to acquire 100 percent
        of the issued and outstanding stock of ATNG, Inc., a Nevada
        corporation.
 
 Following
        the October 16, 2001 reorganization, ATNG Acquisition, Inc. and ATNG, Inc.
        merged. On October 17, 2001, we changed our name to ATNG, Inc. On September
        6,
        2003 we changed our domicile from Texas to Nevada.
  -3-
 *Table
            of Contents*
  On
        August
        10, 2004, the Company acquired Blue Kiwi, Inc., a Michigan Corporation engaged
        in the marketing and sale of nutritional supplements. Blue Kiwi, Inc. currently
        markets two lines of products: Fatigue Pack and PMS Pack.
 
 In
        November 2004, the shareholders and directors of the Company approved a change
        in the name of the Company from ATNG, Inc. to Zann Corp., amended its Articles
        of Incorporation, increasing the number of authorized shares to 4,000,000,000
        and authorized a reverse stock split effective December 3, 2004 of one post
        consolidation share for every 900 pre-consolidation shares.
 
 Effective
        March 10, 2005, we effected a reverse split of our authorized, issued and
        outstanding common stock on the basis of one post-consolidation share for
        every
        350 pre-consolidation shares.
 
 On
        April
        19, 2005 the Sole Director approved a forward stock split of three shares
        for
        every one share held as of May 3, 2005. On May 9, 2005, the shareholders
        and
        directors of the Company amended its Articles of Incorporation to increase
        the
        authorized Common Stock to 4,000,000,000 and the authorized Preferred Stock
        to
        350,000,000.
 
 The
        accompanying financial statements reflect all of these changes above.
        Accordingly, all historical weighted average share and per share amounts
        have
        been restated to reflect all reverse and forward stock splits described
        above.
 
 On
        June
        27, 2005 the Company entered into an agreement to acquire approximately 42.6%
        of
        the Common and 6.52% of the Convertible Preferred Second Series of Sartam
        Industries, Inc., a Florida Corporation engaged in the manufacturing and
        sale of
        automatic riveting machines and the re-supply of riveting magazines.
        Negotiations of the acquisition were terminated in December and all agreements
        to acquire Sartam Industries, Inc. were terminated as of December 31, 2005.
        The
        Company incurred a loss in the acquisition of $35,090 which has been charged
        to
        operations during the year ended December 31, 2005.
 
 **Recent
        Events**
 
 The
        company executed a Letter of Intent on January 13, 2006 to assign the US
        Patent
        No. 6,225,467 for Human Blood Bacterium and the US Patent No. 6,177,081 for
        Human & Marmoset Activating Viruses to Palmera Holdings, Inc. for a cash
        payment of $15,000 and 100,000 shares of Palmera Holdings, Inc. The LOI provides
        for, among other things, that the Company and Palmera will execute definitive
        contracts to complete the payments and assignments. As of March 30, 2006,
        the
        stock has not been received by Zann Corp., and the Patents have not been
        re-assigned.
 
 Effective
        January 31, 2006, pursuant to the Certificate of Designation of our Series
        B
        Preferred Stock, our board of directors declared a dividend of shares of
        Series
        B Preferred Stock to holders of shares of Series B Preferred Stock outstanding
        as of December 31, 2005. Pursuant to such Certificate of Designation, each
        such
        holder of Series B Preferred Stock received a dividend consisting of such
        number
        of shares of Series B Preferred Stock equal to 10 percent of the aggregate
        number of shares of Series B Preferred Stock held by such holder as of December
        31, 2005. An aggregate of 39,250 shares of Series B Preferred Stock was issued
        by the Company pursuant to the dividend.
 
 On
        February 3, 2006, Robert Simpson and David Weiker entered into a Series C
        Preferred Stock Purchase Agreement pursuant to which Mr. Simpson agreed to
        sell
        10,000,000 shares of the Company’s Series C Preferred Stock (the “Series C
        Shares”) to Mr. Weiker. The Series C Shares represent 100% of the outstanding
        shares of Series C Preferred Stock. As consideration for the Series C Shares,
        Mr. Weiker has agreed to pay $500,000 to Mr. Simpson, $50,000 of which was
        paid
        on February 8, 2006 in cash from Mr. Weiker’s personal accounts and $450,000 of
        which is payable in the form of a Promissory Note (the “Note”) delivered by Mr.
        Weiker to Mr. Simpson. Pursuant to a Security Agreement dated as of February
        3,
        2006 between Mr. Weiker and Mr. Simpson, the obligations of Mr. Weiker under
        the
        Note are secured by the Series C Shares purchased by Mr. Weiker. The unpaid
        principal under the Note shall bear interest at a rate per annum equal to
        5% and
        shall be payable in four consecutive quarterly payments over a period of
        12
        months commencing on the date of issuance of the Note. Accordingly, each
        such
        quarterly payment shall be in the amount of $112,500 plus all accrued and
        unpaid
        interest thereon. Mr. Weiker, after acquisition of the Series C Shares, will
        own
        approximately 99% of the voting securities of the Company.
  -4-
 *Table
            of Contents*
  
 On
        February 9, 2006, the Company entered into an employment agreement with Robert
        Simpson, the Company’s chief executive officer. The employment agreement is
        effective as of October 1, 2005 and provides for an annual base salary of
        U.S.
        $125,000 which is subject to annual review and may be adjusted by the board
        of
        directors, a cash bonus representing back wages in the amount of U.S. $302,000
        to be paid upon execution and a grant of 20,000 shares of Convertible Preferred
        Series A Stock which shall be immediately vested. As of March 30, 2006, no
        salary, stock or bonus has been paid to Robert Simpson.
 
 Effective
        March 6, 2006, Robert Simpson resigned from his positions as President and
        Chief
        Executive Officer of the Company. Mr. Simpson will retain his position as
        a
        member of the board of directors of the Company.
  Effective
        as of March 6, 2006, the following persons were appointed directors of Zann
        Corp.; James F. Marx, Thomas Fogarty, Dan
        Lambdin, and David N. Weiker, Sr.
 
 On
        March
        6, 2006, Mr. Weiker Sr. was also appointed by the board of directors as Chief
        Executive Officer, Treasurer and Chairman of the board of directors of the
        Company.
 
 On
        March
        6, 2006, John J. Laskos was appointed as President of the Company by the
        board
        of directors.
 
 On
        March
        6, 2006, David N. Weiker II was appointed as Chief Operating Officer of the
        Company by the board of directors.
 
 On
        March
        27, 2006, Dan Lambdin resigned as a Director of the Company.
  On
        March 31, 2006, the Company and Sartam Industries
        ("Sartam") terminated the Exclusive Licensing Agreement date August 22, 2005
        (the "Agreement") entered into by and between Sartam and the
        Company.
  The
        Agreement provided the Company an exclusive right
        to manufacture, market, distribute and sell patented Sartam products within
        the
        United States, Europe, and any other countries that fall under the jurisdiction
        of the Patent Cooperation Treaty. Sartam also agreed to transfer specific
        expertise related to the business in order to facilitate production. In
        exchange, Zann agreed to pay certain royalty rates on sales, finance Sartam's
        operations and use utmost efforts to manufacture, market and sell the licensed
        products.
  As
        a result of unexpected costs of the business
        relationship that resulted in the earlier termination of the Stock Purchase
        Agreement between Sartam and the Company, both parties believe there is no
        financial or business justification for continuing the Agreement under its
        current terms. The Company and Sartam mutually determined that it was each
        company's best interest to terminate Agreement.
  The
        Company does not expect to incur material early
        termination penalties as a result of the termination of Agreement.
 
 **Business
        Activities**
 
 Zann
        Corp. currently has no active products or services.
 
 Since
        December 31, 2005 when all agreements to acquire Sartam Industries, Inc.
        were
        terminated, the Company has returned all associated records and properties
        to
        Sartam and has no further plans regarding the semi-automatic riveting
        business.
 
 Our
        wholly owned subsidiary, Blue Kiwi Inc. is not currently operating or marketing
        its products.
 
 The
        Company’s strategic alliance with Statewide Residential Lending to originate
        residential mortgages throughout the State of Michigan has been abandoned in
        view
        of rising interest rates and other factors.
 
 The
        Company is currently considering strategic alternatives and potential
        opportunities for its business and operations.
 
 **Technology
        and Patents**
 
 The
        following patents are currently assigned to Zann Corp:
 ·
              Compression
                  Technology, Patent Number US 6,724,326 B1, original filing date
                  January
                  16, 2003, Date Patent Issued April 20, 2004, patent re-assigned
                  to ZANN
                  Corp. on February 21, 2005, serial number
                  10/345,834;
 ·
              Human
                  Blood Bacterium, Patent Number US 6,255,467 B1, original filing
                  date
                  November 2, 1998, Date Patent Issued July 3, 2001, patent re-assigned
                  to
                  ZANN Corp. on February 21, 2005, serial number 09/187,946;
                  and
 ·
              Human
                  and Marmoset Activating Viruses, Patent Number US 6,177,081 B1,
                  original
                  filing date July 28, 1997, Date Patent Issued January 23, 2001,
                  patent
                  re-assigned to ZANN Corp. on February 21, 2005, serial number
                  08/901,128.
  -5-
 *Table
            of Contents*
 
 Each
        of
        these patents are for a term of 20 years from the original date filed.
        Maintenance fees are due in years 4, 8 and 12 from the original issue date.
 
 The
        company executed a Letter of Intent on January 13, 2006 to assign the US
        Patent
        No. 6,225,467 for Human Blood Bacterium and the US Patent No. 6,177,081 for
        Human & Marmoset Activating Viruses to Palmera Holdings, Inc. for a cash
        payment of $15,000 and 100,000 shares of Palmera Holdings, Inc. The LOI provides
        for, among other things, that the Company and Palmera will execute definitive
        contracts to complete the payments and assignments. As of March 30, 2006,
        the
        stock has not been received by Zann Corp., and the Patents have not been
        re-assigned.
 
 **Employees**
 
 We
        have
        three full-time employees and no part-time employees as of March 10, 2006.
        As we
        grow, we will need to attract an unknown number of additional qualified
        employees. Although we have experienced no work stoppages and believe our
        relationships with our employees are good, we could be unsuccessful in
        attracting and retaining the personnel needed. None of our employees are
        currently represented by a labor union.
 
 **Key
        Personnel**
 
 Our
        future financial success depends to a large degree upon the efforts of our
        key
        personnel; David N. Weiker, Sr., Chairman of the Board and Chief Executive
        Officer, John Laskos, President and David N. Weiker II, Chief Operating Officer.  The loss
        of any of these employees could have an adverse effect on our business and
        our
        chances for profitable operations. While we employ additional management
        and
        marketing personnel in order to minimize the critical dependency upon any
        one
        person, there can be no assurance that we will be successful in attracting
        and
        retaining the persons needed. If we do not succeed in retaining and motivating
        our current employees and attracting new high quality employees, our business
        could be adversely affected.  We
        do not
        maintain key man life insurance on the life of Mr. Weiker, Sr., Mr. Laskos
        or
        Mr. Weiker, II. **** ****
 
 **Item
                  2.**
              **Description
                  of Property**
 
 We
        lease
        office space at 1549 N. Leroy Street, Suite D-200, Fenton, Michigan
        48430.  Our
        lease
        costs $1,071 per month and is scheduled to expire April 30, 2006. We intend
        to
        renew our lease for a one-year period at that time. ****
 
 **Item
                  3.**
              **Legal
                  Proceedings**
 
 None.
 
 **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 
 None.
 
 **PART
        II**
 
 **Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder
                  Matters.**
 
 On
        December 3, 2004, in connection with our name change, our symbol on the OTC
        Bulletin Board changed from "ATNG.OB" to "ZANN.OB." Effective March 10, 2005,
        our symbol was changed from "ZANN.OB." to "ZANC.OB." Effective May 9, 2005,
        our
        symbol was changed from “ZANC.OB” to “ZNNC.OB”. These quotations reflect
        inter-dealer prices, without mark-up, mark-down or commission, and may not
        represent actual transactions.
  **Calendar
                  Year 2004**
              
              **High**
              
              **Low**First
                  Quarter
              
              $
              7,213
              
              $
              2,394Second
                  Quarter
              
              
              4,252
              
              
              1,543Third
                  Quarter
              
              
              2,142
              
              
              661Fourth
                  Quarter
              
              
              598
              
              
              473
  -6-
 *Table
            of Contents*
 **Calendar
                    Year 2005**
                
                **High**
                
                **Low**First
                    Quarter
                
                $
                .1200
                
                $
                .0350Second
                    Quarter
                
                
                .0533
                
                
                .0080Third
                    Quarter
                
                
                .1050
                
                
                .0100Fourth
                    Quarter
                
                
                .0570
                
                
                .0300
  As
        of
        March 30, 2006, we had 33,945,359 shares of our common stock outstanding.
        Our
        shares of common stock are held by approximately 826 stockholders of record.  The
        number of record holders was determined from the records of our transfer
        agent
        and does not include beneficial owners of common stock whose shares are held
        in
        the names of various security brokers, dealers, and registered clearing
        agencies.
 
 **Dividends**
 
 We
        have
        never declared nor paid cash dividends on our capital stock. We currently
        intend
        to retain any earnings for funding growth however these plans may change
        depending upon capital raising requirements. The
        payment of cash dividends in the future will be determined by the Board of
        Directors in light of conditions then existing, including our Company’s
        earnings, financial requirements, and opportunities for reinvesting earnings,
        business conditions, and other factors. There are otherwise no restrictions
        on
        the payment of dividends. However,
        under the terms of our certificate of designation for the Series B preferred
        stock, we are obligated to pay dividends to the holders of our Series B
        preferred stock on a yearly basis. The yearly dividend consists of such number
        of shares of our Series B Preferred Stock which number will equal 10 percent
        of
        the aggregate number of shares of our Series B Preferred Stock shares held
        by
        such holder of our Series B Preferred Stock on December 31 immediately
        preceeding the dividend payment date.
 
 **Section
        15(g) of the Exchange Act**
 
 The
        shares of our common stock are covered by Section 15(g) of the Exchange Act,
        and
        Rules 15g-1 through 15g-6 promulgated thereunder, which impose additional
        sales
        practice requirements on broker-dealers who sell our securities to persons
        other
        than established customers and accredited investors.
 
 Rule
        15g-2 declares unlawful any broker-dealer transactions in "penny stocks"
        unless
        the broker-dealer has first provided to the customer a standardized disclosure
        document.
 
 Rule
        15g-3 provides that it is unlawful for a broker-dealer to engage in a "penny
        stock" transaction unless the broker-dealer first discloses and subsequently
        confirms to the customer the current quotation prices or similar market
        information concerning the penny stock in question.
 
 Rule
        15g-4 prohibits broker-dealers from completing "penny stock" transactions
        for a
        customer unless the broker-dealer first discloses to the customer the amount
        of
        compensation or other remuneration received as a result of the penny stock
        transaction.
 
 Rule
        15g-5 requires that a broker-dealer executing a "penny stock" transaction,
        other
        than one exempt under Rule 15g-1, disclose to its customer, at the time of
        or
        prior to the transaction, information about the sales person's
        compensation.
 
 Our
        common stock may be subject to the foregoing rules. The application of the
        "penny stock" rules may affect our stockholders' ability to sell their shares
        because some broker-dealers may not be willing to make a market in our common
        stock because of the burdens imposed upon them by the "penny stock"
        rules.
 
 The
        following table provides information about purchases by us and our affiliated
        purchasers during the quarter ended December 31, 2005 of equity securities
        that
        are registered by us pursuant to Section 12 of the Exchange
        Act:
  -7-
 *Table
            of Contents*
  **Small
        Business Issuer Purchases of Equity Securities**
 (a)
              (b)
              (c)
              (d)Period
              Total
                  number of shares
                (or
                  units) purchased
              Average
                  price
                paid
                  per
                share
                  (or unit)
              Total
                  number of shares
                (or
                  units) purchased as
                part
                  of publicly
                announced
                  plans or
                programs
              Maximum
                  number (or
                approximate
                  dollar
                value)
                  of shares (or
                units)
                  that may yet be
                purchased
                  under the
                plans
                  or programsOctober
                  2005
              -0-
              -0-
              -0-
              -0-November
                  2005
              -0-
              -0-
              -0-
              -0-December
                  2005
              -0-
              -0-
              -0-
              -0-Total
              -0-
              -0-
              -0-
              -0-
  The
        following table summarizes the securities authorized for issuance under our
        equity compensation plans as of December 31, 2005.
 
 (a)
              
              (b)
              
              (c)Plan
                  Category
              
              Number
                  of securities issued upon
                exercise
                  of outstanding options,
                warrants
                  and rights
              
              Weighted-average
                  exercise price
                of
                  outstanding options, warrants
                and
                  rights
              
              Number
                  of securities remaining
                available
                  for future issuance
                under
                  equity compensation plans
                (excluding
                  securities reflected in
                column
                  (a))Equity
                  compensation plans approved by security holders
              
              
              -0-
              
              
              N/A
              
              
              N/AEquity
                  compensation plans not approved by security holders
              
              
              995,691,713
              
              $
              0.0012
              
              
              N/ATotal
              
              
              995,691,713
              
              $
              0.0012
              
              
              1,300,000
 
 
 **Item
                  6.**
              **Management’s
                  Discussion and Analysis**
 
 **Management’s
        Plan of Operations**
 
 **General**
 
 Since
        the
        appointment of new management in March 2006, the Company has been exploring
        strategic alternatives and potential business opportunities. The Company
        intends
        to comply with all SEC reporting requirements in order to maintain its status
        as
        a public company.
 
 The
        Board
        of Directors feels that the Company does not meet the criteria of a development
        stage company (as defined in SFAS 7 " *Accounting
        and Reporting by Development Stage Enterprises* ").
        However, the Company is currently seeking a business opportunity to merge
        with
        or acquire.
 
 There
        is
        no assurance that the Company will be successful in finding any business
        opportunity to merge with or acquire.
 
 Under
        the
        Standby Equity Distribution Agreement entered into with Cornell Capital
        Partners, LP on December 8, 2005, Cornell has committed to provide to us
        up to
        $5 million in cash to be drawn down over a 24-month period at our discretion,
        subject to certain conditions including without limitation, our filing and
        maintenance of an effective registration statement with the Securities and
        Exchange Commission.
 
 **Financing**
 
 If
        the
        Company fails to raise the necessary funds through an effective registration
        statement with the Securities and Exchange Commission or private placements,
        it
        anticipates that debt financing from related or third parties will be necessary.
        The Company has not investigated the availability, source and terms for external
        financing at this time and it cannot assure that funds will be available
        from
        any source, or, if available, that the Company will be able to obtain the
        funds
        on agreeable terms. Also, the acquisition of funding through the issuance
        of
        debt could result in a substantial portion of any future cash flows from
        operations being dedicated to the payment of principal and interest on the
        indebtedness, and could render the Company more vulnerable to competitive
        and
        economic downturns.
  -8-
 *Table
            of Contents*
 
 We
        cannot
        predict with certainty our revenues and operating results. Further, we believe
        that period-to-period comparisons of our operating results are not necessarily
        a
        meaningful indication of future performance.
 
 **Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations**
 
 ***Twelve
        Months Ended December 31, 2005 compared to the Twelve Months Ended December
        31,
        2004.***
 
 **Revenue**
  Revenue
        for the 12 months ended December 31, 2005 was $826 compared to $1,423 for
        the 12
        months ended December 31, 2004, a decrease of $597 or approximately 41 percent.
        Revenue is not significant and results from the acquisition of Blue Kiwi,
        Inc.
        in August, 2004. Sales of Blue Kiwi products have not been successful and
        as a
        result we wrote off all their inventory and are presently evaluating the
        remaining products for future uses
 
 We
        expect
        to generate additional revenues during the coming 12 months due to consummation
        of the proposed merger between the Company and Platinum Properties of Central
        Florida, Inc. We anticipated that the acquisition of Sartam Industries,
        Inc. would lead to revenues, however the acquisition was terminated and
        therefore no revenue will be generated for us.
 
 **Cost
        of Revenue**
 
 Cost
        of
        revenue was $15,960 for the year ended December 31, 2005, compared to $12,847
        for the year ended December 31, 2004.  ****
 
 **General
        and Administrative Expenses**
  General
        and administrative expenses ("G&A") were $2,724,862 for the 12 months ended
        December 31, 2005, compared to $11,266,274 for the 12 months ended December
        31,
        2004, a decrease of  $8,541,412 or approximately 77 percent. **** **** ****** The
        reduction was due primarily to the decreases in amounts of Common and Preferred
        stock issued to employees and others for services as detailed below: **
 
 Common
                  Stock issued to Employees
              
              $
              2,305,775Preferred
                  Stock issued for services
              
              
              2,842,096Common
                  Stock issued for services
              
              
              3,340,351Total
              
              $
              8,488,222
 
 **Inflation**
 
 In
        our
        opinion, inflation has not had a material effect on our financial condition
        or
        results of our operations.
 
 **Liquidity
        and Capital Resources**
  The
        Company's ability to fund future operations is dependent on the Company
        identifying a suitable acquisition candidate, receipt of proceeds from
        shareholders loans or the sale of its common stock. Without the foregoing,
        the
        Company will be unable to continue as a going concern .
  During
        the 12 months ended December 31, 2005, we generated cash from financing
        activities of $818,749 and used cash in investing activities of $200,000.
        We
        used cash in operating activities of $658,293 resulting
        in a reduction in our cash balance from December 31, 2004 of $39,544. Cash
        and
        cash equivalents at December 31, 2005 were $346.
 
 At
        December 31, 2005 our current liabilities exceeded our current assets by
        $1,522,810 which resulted
        in a deficit in working capital.
 
 The
        Company has no commitments for capital expenditures.
  -9-
 *Table
            of Contents*
  ***Twelve
        Months Ended December 31, 2004 compared to the Twelve Months Ended December
        31,
        2003.***
 
 Revenue
        for the 12 months ended December 31, 2004 was $1,423 compared to $0.00 for
        the
        12 months ended December 31, 2003, an increase of $1,423 or approximately
        100
        percent. Revenue increased as a result of the acquisition of Blue Kiwi, Inc.
        in
        August, 2004.
 
 At
        December 31, 2004, we were expecting to generate additional revenues during
        2005
        due to consummation of planning and execution of our Strategic Business Plans
        for two of our four previously existing business units; nutritional supplements
        and franchising of niche market vehicle dealerships. These plans did not
        materialize as expected. Additionally, we had expected the potential acquisition
        of Sartam Industries, Inc. to generate revenues, however, negotiations of
        the
        acquisition were terminated in December and all agreements to acquire Sartam
        Industries, Inc. were terminated as of December 31, 2005. As a result
        of unexpected costs of the business relationship, both Sartam and Zann
        Corp. determined that there was no financial or business justification for
        continuing the Agreements under the existing terms. Zann Corp. and Sartam
        mutually determined that it was in each company’s best interest to terminate the
        Agreements.
 
 **Cost
        of Revenue**
 
 Cost
        of
        revenue was $12,847 for the year ended December 31, 2004, compared to no
        cost of
        revenue for the year ended December 31, 2003. The cost of revenue was
        exceptionally large in relation to revenue due to product promotions and
        sample
        expense due to the introduction of Blue Kiwi products to the market
        place.
 
 **General
        and Administrative Expenses**
 
 General
        and administrative expenses ("G&A") were $11,266,274 for the 12 months ended
        December 31, 2004, compared to $2,240,797 for the 12 months ended December
        31,
        2003, an increase of $9,025,477 or approximately 403 percent. The increase
        in
        G&A was primarily due to expenses associated principally with equity-based
        compensation to employees and consultants comprised of:
 
 Common
                  Stock issued to Employees for services
              
              $
              2,778,485Preferred
                  Stock issued to Employees for services
              
              
              3,044,650Common
                  Stock issued to Consultants for services
              
              
              3,934,449Total
              
              $
              9,757,584
 
 **Settlement
        of Debts and Liabilities**
 
 During
        the years ended December 31, 2004 and December 31, 2003, a number of debts
        and
        liabilities from the predecessor company were settled by partial payments
        of
        cash or issuance of Common or preferred Stock.
 
 **Liquidity
        and Capital Resources**
 
 During
        the 12 months ended December 31, 2004, we generated cash from financing
        activities of $1,651,499 and investing activities of $159,612. We used cash
        in
        operating activities of $2,128,714 resulting in a reduction in our cash balance
        from December 31, 2003 of $317,603. Cash and cash equivalents at December
        31,
        2004 were $39,890.
 
 At
        December 31, 2004 our current liabilities exceeded our current assets by
        $677,933 which resulted in a capital deficiency.
 
 **Trends,
        risks and uncertainties**
 
 We
        have
        sought to identify what we believe to be the most significant risks to our
        business, but we cannot predict whether, or to what extent, any of such risks
        may be realized nor can we guarantee that we have identified all possible
        risks
        that might arise. Investors should carefully consider all of such risk factors
        before making an investment decision with respect to our common
        stock.
  -10-
 *Table
            of Contents*
  **Risk
        Factors**
 
 **Obstacles**
 
 As
        an
        investor, you should be aware of the difficulties, delays and expenses we
        encounter, many of which are beyond our control, including unanticipated
        market
        trends, employment costs, and administrative expenses. We cannot assure our
        investors that our proposed business plans as described in this report will
        materialize or prove successful, or that we will ever be able to finalize
        development of our products or services or operate profitably. If we cannot
        operate profitably, you could lose your entire investment. As a result of
        the
        nature of our business, initially we expect to sustain substantial operating
        expenses without generating significant revenues.
 
 **Our
        auditors have stated we may not be able to stay in
        business.**
 
 Our
        auditors have issued an opinion, included
        in this Form 10-KSB, that t he
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note S, the Company has
        not
        commenced principal operations, has incurred significant operating losses
        since
        inception and has a significant working capital deficit. These factors, among
        others, raise substantial doubt about the Company's ability to continue as
        a
        going concern. Management's plans in regard to these matters are described
        in
        Note S. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty. See
        "Management's Discussion and Analysis of Financial Condition and Results
        of
        Operations."  ****
 
 **Need
        for ongoing financing**
 
 We
        will
        need additional capital to continue our operations and will endeavor to raise
        funds through the sale of equity shares and revenues from operations. ****
 
 There
        can
        be no assurance that we will generate revenues from operations or obtain
        sufficient capital on acceptable terms, if at all. Failure to obtain such
        capital or generate such operating revenues would have an adverse impact
        on our
        financial position and results of operations and ability to continue as a
        going
        concern. Our operating and capital requirements during the next fiscal year
        and
        thereafter will vary based on a number of factors, including the level of
        sales
        and marketing activities for our services and products. There can be no
        assurance that additional private or public financing, including debt or
        equity
        financing, will be available as needed, or, if available, on terms favorable
        to
        us. Any additional equity financing may be dilutive to stockholders and such
        additional equity securities may have rights, preferences or privileges that
        are
        senior to those of our existing common stock.
 
 Furthermore,
        debt financing, if available, will require payment of interest and may involve
        restrictive covenants that could impose limitations on our operating
        flexibility. Our failure to successfully obtain additional future funding
        may
        jeopardize our ability to continue our business and operations.
 
 If
        we
        raise additional funds by issuing equity securities, existing stockholders
        may
        experience a dilution in their ownership. In addition, as a condition to
        giving
        additional funds to us, future investors may demand, and may be granted,
        rights
        superior to those of existing stockholders.
 
 **Our
        common stock has experienced in the past, and is expected to experience in
        the
        future, significant price and volume volatility, which substantially increases
        the risk that you may not be able to sell your shares at or above the price
        that
        you pay for the shares.**
 
 Because
        of the limited trading market for our common stock, and because of the possible
        price volatility, you may not be able to sell your shares of common stock
        when
        you desire to do so.  During
        2004 and 2005, our common stock was sold and purchased at prices that ranged
        from a high of $0.1050 to a low of $0.0015 per share.  The
        inability to sell your shares in a rapidly declining market may substantially
        increase your risk of loss because of such illiquidity because the price
        for our
        common stock may suffer greater declines due to its price
        volatility.
  -11-
 *Table
            of Contents*
 
 Certain
        factors, some of which are beyond our control, that may cause our share price
        to
        fluctuate significantly include, but are not limited to, the
        following:
 
 ·
              Variations
                  in our quarterly operating results;
 
 ·
              The
                  development of a market in general for our products and
                  services;
 
 ·
              Changes
                  in market valuations of similar
                  companies;
 
 ·
              Announcement
                  by us or our competitors of significant contracts, acquisitions,
                  strategic
                  partnerships, joint ventures or capital
                  commitments;
 
 ·
              Loss
                  of a major customer or failure to complete significant
                  transactions;
 
 ·
              Additions
                  or departures of key personnel; and
 
 ·
              Fluctuations
                  in stock market price and volume.
 
 Additionally,
        in recent years the stock market in general, and the OTC Bulletin Board and
        technology stocks in particular, have experienced extreme price and volume
        fluctuations. In some cases, these fluctuations are unrelated or
        disproportionate to the operating performance of the underlying company.
        These
        market and industry factors may materially and adversely affect our stock
        price,
        regardless of our operating performance.
 
 Over
        the
        past few months, there have been periods of significant increases in trading
        volume of our common stock during which the price of our stock has both
        increased and decreased. The historical trading of our common stock is not
        necessarily an indicator of how it will trade in the future and our trading
        price as of the date of this report does not necessarily portend what the
        trading price of our common stock might be in the future.
 
 In
        the
        past, class action litigation has often been brought against companies following
        periods of volatility in the market price of the common stock of those
        companies. If we become involved in this type of litigation in the future,
        it
        could result in substantial costs and diversion of management attention and
        resources, which could have a further negative effect on your investment
        in our
        stock.
 
 **Our
        directors have the right to authorize the issuance of preferred stock and
        additional shares of our common stock.**
 
 Our
        directors, within the limitations and restrictions contained in our articles
        of
        incorporation and without further action by our stockholders, have the authority
        to issue shares of preferred stock from time to time in one or more series
        and
        to fix the number of shares and the relative rights, conversion rights, voting
        rights, and terms of redemption, liquidation preferences and any other
        preferences, special rights and qualifications of any such series. We have
        no
        intention of issuing preferred stock at the present time. Any issuance of
        preferred stock could adversely affect the rights of holders of our common
        stock.
 
 Should
        we
        issue additional shares of our common stock at a later time, each investor's
        ownership interest in Zann Corp. would be proportionally reduced. No investor
        will have any preemptive right to acquire additional shares of our common
        stock,
        or any of our other securities.
 
 **The
        issuance of shares upon the exercise of outstanding warrants may cause immediate
        and substantial dilution to our existing stockholders.**
  -12-
 *Table
            of Contents*
 
 The
        issuance of shares upon the exercise of warrants may result in substantial
        dilution to the interests of other stockholders since the selling stockholders
        may ultimately convert and sell the full amount issuable on conversion. There
        is
        no upper limit on the number of shares that may be issued which will have
        the
        effect of further diluting the proportionate equity interest and voting power
        of
        holders of our common stock, including investors in this offering. ****
 
 **If
        we fail to remain current on our reporting requirements, we could be removed
        from the OTC Bulletin Board which would limit the ability of broker-dealers
        to
        sell our securities and the ability of stockholders to sell their securities
        in
        the secondary market.**
 
 Companies
        trading on the OTC Bulletin Board, such as Zann Corp., must be reporting
        issuers
        under Section 12 of the Exchange Act, and must be current in their reports
        under
        Section 13, in order to maintain price quotation privileges on the OTC Bulletin
        Board. If we fail to remain current on our reporting requirements, we could
        be
        removed from the OTC Bulletin Board. As a result, the market liquidity for
        our
        securities could be severely adversely affected by limiting the ability of
        broker-dealers to sell our securities and the ability of stockholders to
        sell
        their securities in the secondary market.
 
 **Our
        common stock is subject to the “penny stock” rules of the SEC and the trading
        market in our securities is limited, which makes transactions in our stock
        cumbersome and may reduce the value of an investment in our
        stock.**
 
 The
        Securities and Exchange Commission has adopted Rule 15g-9 which establishes
        the
        definition of a "penny stock," for the purposes relevant to us, as any equity
        security that has a market price of less than $5.00 per share or with an
        exercise price of less than $5.00 per share, subject to certain exceptions.
        Inasmuch as the current bid and ask price of common stock is less than $5.00
        per
        share, our shares are classified as "penny stock" under the rules of the
        SEC.
        For any transaction involving a penny stock, unless exempt, the rules
        require:
 
 ·
              That
                  a broker or dealer approve a person's account for transactions
                  in penny
                  stocks; and
 
 ·
              The
                  broker or dealer receives from the investor a written agreement
                  to the
                  transaction, setting forth the identity and quantity of the penny
                  stock to
                  be purchased.
 
 In
        order
        to approve a person's account for transactions in penny stocks, the broker
        or
        dealer must:
 
 ·
              Obtain
                  financial information and investment experience objectives of the
                  person;
                  and
 
 ·
              Make
                  a reasonable determination that the transactions in penny stocks
                  are
                  suitable for that person and the person has sufficient knowledge
                  and
                  experience in financial matters to be capable of evaluating the
                  risks of
                  transactions in penny stocks.
 
 The
        broker or dealer must also deliver, prior to any transaction in a penny stock,
        a
        disclosure schedule prescribed by the Commission relating to the penny stock
        market, which, in highlight form:
 
 ·
              Sets
                  forth the basis on which the broker or dealer made the suitability
                  determination; and
 
 ·
              That
                  the broker or dealer received a signed, written agreement from
                  the
                  investor prior to the transaction.
 
 Generally,
        brokers may be less willing to execute transactions in securities subject
        to the
        "penny stock" rules. This may make it more difficult for investors to dispose
        of
        our common stock and cause a decline in the market value of our
        stock.
 
 Disclosure
        also has to be made about the risks of investing in penny stocks in both
        public
        offerings and in secondary trading and about the commissions payable to both
        the
        broker-dealer and the registered representative, current quotations for the
        securities and the rights and remedies available to an investor in cases
        of
        fraud in penny stock transactions. Finally, monthly statements have to be
        sent
        disclosing recent price information for the penny stock held in the account
        and
        information on the limited market in penny stocks.
  -13-
 *Table
            of Contents*
 
 We
        currently have no material long-term debt obligations. We do not use financial
        instruments for trading purposes and we are not a party to any leverage
        derivatives.
 
 **Critical
        Accounting Policies**
 
 The
        preparation of our consolidated financial statements in conformity with
        accounting principles generally accepted in the United States requires us
        to
        make estimates and judgments that affect our reported assets, liabilities,
        revenues, and expenses, and the disclosure of contingent assets and liabilities.
        We base our estimates and judgments on historical experience and on various
        other assumptions we believe to be reasonable under the circumstances. Future
        events, however, may differ markedly from our current expectations and
        assumptions. While there are a number of significant accounting policies
        affecting our consolidated financial statements, we believe the following
        critical accounting policy involve the most complex, difficult and subjective
        estimates and judgments.
 
 **Stock-Based
        Compensation**
 
 In
        December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
        Compensation-Transition and Disclosure-an amendment of SFAS 123.” This statement
        amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide
        alternative methods of transition for a voluntary change to the fair value
        based
        method of accounting for stock-based employee compensation. In addition,
        this
        statement amends the disclosure requirements of SFAS No. 123 to require
        prominent disclosures in both annual and interim financial statements about
        the
        method of accounting for stock-based employee compensation and the effect
        of the
        method used on reported results. The Company has chosen to continue to account
        for stock-based compensation using the intrinsic value method prescribed
        in APB
        Opinion No. 25 and related interpretations. Accordingly, compensation expense
        for stock options is measured as the excess, if any, of the fair market value
        of
        the Company’s stock at the date of the grant over the exercise price of the
        related option. The Company has adopted the annual disclosure provisions
        of SFAS
        No. 148 in its financial reports for the year ended December 31, 2005 and
        2004.
        The Company does not have any awards of stock-based employee compensation
        issued
        and outstanding at December 31, 2005. ****
 
 On
        December 16, 2004, the Financial Accounting Standards Board (FASB) issued
        FASB
        Statement No. 123R (revised 2004), “Share-Based Payment” which is a revision of
        FASB Statement No. 123, “Accounting for Stock-Based Compensation”. Statement
        123R supersedes APB opinion No. 25, “Accounting for Stock Issued to Employees”,
        and amends FASB Statement No. 95, “Statement of Cash Flows”. Generally, the
        approach in Statement 123R is similar to the approach described in Statement
        123. However, Statement 123R requires all share-based payments to employees,
        including grants of employee stock options, to be recognized in the income
        statement based on their fair values. Pro-forma disclosure is no longer an
        alternative. On April 14, 2005, the SEC amended the effective date of the
        provisions of this statement. The effect of this amendment by the SEC is
        that
        the Company will have to comply with Statement 123R and use the Fair Value
        based
        method of accounting no later than the first quarter of 2006. Management
        has not
        determined the impact that this statement will have on Company’s consolidated
        financial statements.
 
 **Recent
        Accounting Pronouncements**
 
 In
        March
        2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
        Conditional Asset Retirement Obligations, an interpretation of FASB Statement
        No. 143", which requires an entity to recognize a liability for the fair
        value
        of a conditional asset retirement obligation when incurred if the liability's
        fair value can be reasonably estimated. The Company is required to adopt
        the
        provisions of FIN 47 no later than its last quarter of fiscal 2006. The Company
        does not expect the adoption of this Interpretation to have a material impact
        on
        its consolidated financial position, results of operations or cash flows.
 
 In
        May
        2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
        154,
        "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
        20
        and FASB Statement No. 3." SFAS 154 requires retrospective application to
        prior
        periods’ financial statements for changes in accounting principle, unless it is
        impracticable to determine either the period-specific effects or the cumulative
        effect of the change. SFAS 154 also requires that retrospective application
        of a
        change in accounting principle be limited to the direct effects of the change.
        Indirect effects of a change in accounting principle, such as a change in
        non-discretionary profit-sharing payments resulting from an accounting change,
        should be recognized in the period of the accounting change. SFAS 154 also
        requires that a change in depreciation, amortization, or depletion method
        for
        long-lived, non-financial assets be accounted for as a change in accounting
        estimate effected by a change in accounting principle. SFAS 154 is effective
        for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005. Early adoption is permitted for accounting changes
        and
        corrections of errors made in fiscal years beginning after the date this
        Statement is issued. The Company does not expect the adoption of this SFAS
        to
        have a material impact on its consolidated financial position, results of
        operations or cash flows.
  -14-
 *Table
            of Contents*
 
 On
        February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
        Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
        Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
        Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
        instruments that have embedded derivatives to be accounted for as a whole
        (eliminating the need to bifurcate the derivative from its host) if the holder
        elects to account for the whole instrument on a fair value basis. SFAS 155
        also
        clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
        statement is effective for all financial instruments acquired or issued in
        fiscal years beginning after September 15, 2006. The Company does not
        expect its adoption of this new standard to have a material impact on its
        financial position, results of operations or cash flows.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        do not
        have any off-balance sheet arrangements.
 
 **Item
                  7.**
              **Financial
                  Statements.**
 
 The
        financial statements and related notes are included as part of this report
        as
        indexed in the appendix on page F-1 through F-23. ****
 
 **Item
                  8.**
              **Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure.**
 On
          June
          24, 2004, we dismissed our independent auditor, Russell and Atkins PlC
          (“Russell
          and Atkins”).
 
 Russell
          and Atkins’ reports on our financial statements for the years ended December 31,
          2002 and 2003 did not contain an adverse opinion or a disclaimer of opinion,
          and
          were not qualified or modified as to uncertainty, audit scope, or accounting
          principles, except that Russell and Atkins reports on our Form 10-KSB for
          the
          years ended December 31, 2002 and 2003 raise substantial doubt about our
          ability
          to continue as a going concern.
 
 The
          decision to dismiss Russell and Atkins was recommended by our Board of
          Directors.
 
 During
          the two most recent fiscal years and any subsequent interim period through
          June
          24, 2004 there have not been any disagreements between us and Russell and
          Atkins
          on any matter of accounting principles or practices, financial statement
          disclosure, or auditing scope or procedure, which disagreements, if not
          resolved
          to the satisfaction of Russell and Atkins, would have caused it to make
          reverence to the subject matter of the disagreements in connection with
          its
          reports on our financial statements for such periods.
 
 On
          June
          22, 2004 we engaged Malone & Bailey, P.C., certified public accountants,
          (“Malone & Bailey”) as our independent accountants to report on our balance
          sheet as of December 31, 2004, and the related combined statements of income,
          stockholders’ equity and cash flows for the years then ended. The decision to
          appoint Malone & Bailey was approved by our Board of Directors.
 
 During
          our two most recent fiscal years and any subsequent interim period prior
          to the
          engagement of Malone & Bailey, neither we nor anyone on our behalf consulted
          with Malone & Bailey regarding either (i) the application of accounting
          principles to a specified transaction, either contemplated or proposed,
          or the
          type of audit opinion that might be rendered on our financial statements
          or (ii)
          any matter that was either the subject of a “disagreement” or a “reportable
          event”.
 
 We
          have
          provided Russell and Atkins with a copy of our current report on Form 8-K
          before
          its filing with the Commission on July 22, 2004. We have requested Russell
          and
          Atkins to furnish us with a letter addressed to the Commission stating
          whether
          they agreed with the statements made by us in our report on Form 8-K, and,
          if
          not, stating the respects in which they do not agree. We have filed Russell
          and
          Atkins’ letter as an exhibit to our current report on Form 8-K filed with the
          Commission on July 22, 2004.
 
 On
          January 25, 2005, as reported in our current report on Form 8-K filed with
          the
          Commission, and our Amended Current Report, with the Commission on February
          14,
          2005, on January 18, 2005, we dismissed our independent auditor, Malone
&
Bailey, P.C., Certified Public Accountants (“Malone & Bailey”). The decision
          to dismiss Malone & Bailey was recommended by our Board of Directors. We
          have engaged Malone & Bailey on June 22, 2004 as its independent accountants
          to report on our balance sheet as of December 31, 2004, and the related
          combined
          statements of income, stockholders’ equity and cash flows for the year then
          ended.
 
 There
          were no disagreements with Malone & Bailey on any matter of accounting
          principles or practices, financial statement disclosure, or auditing scope
          or
          procedure, which if not resolved to Malone & Bailey’s satisfaction would
          have caused them to make reference to the subject matter of the disagreement
          in
          connection with their report.
 
 On
          January 18, 2005, we engaged Russell, Bedford, Stefanou, Mirchandani, LLP
          (“Russell Bedford”) as our independent accountants to report on our balance
          sheet as of December 31, 2004, and the related combined statements of income,
          stockholders’ equity and cash flows for the years then ended. The decision to
          appoint Russell Bedford was approved by our Board of Directors.
 
 During
          our two most recent fiscal years in any subsequent interim period prior
          to the
          engagement of Russell Bedford, neither we or anyone on our behalf consulted
          with
          Russell Bedford regarding either (i) the application of accounting principles
          to
          a specified transaction, either contemplated or proposed, or the type of
          audit
          opinion that might be rendered on our financial statements or (ii) any
          matter
          that was either the subject of a “disagreement” or a “reportable
          event”.
 
 We
          have
          provided Malone & Bailey with a copy of our current report and our Amended
          Current Report before their filing with the Commission. We have requested
          Malone
& Bailey to furnish us with a letter addressed to the Commission stating
          whether they agree with the statements made by us in our current report,
          as
          amended, and, if not, stating the respects in which they do not agree.
          We have
          filed Malone & Bailey’s letter as an Exhibit to our Amended Current Report,
          filed with the Commission on February 14, 2005.
  **Item
                  8A.**
              **Controls
                  and Procedures.**
 
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed by us in the reports that
        we
        file or submit under the Exchange Act is recorded, processed, summarized
        and
        reported, within the time periods specified in the Securities and Exchange
        Commission's rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed by us in the reports that we file under the Exchange
        Act is accumulated and communicated to our management, including our principal
        executive officers and principal financial officers, as appropriate to allow
        timely decisions regarding required disclosure.
 
 As
        of the
        end of the period covered by this Quarterly 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 Rules 13a-15(e) of the Exchange Act). Based on 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 reports that we file or submit under the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified in Securities and Exchange Commission rules and communicated
        to the Company’s management, including its principal executive officer and
        principal financial officer, to allow timely decisions regarding required
        disclosure.
 As
          required by Rule 13a-15(d), the Company’s Chairman and Chief Financial Officer,
          also conducted an evaluation of the Company’s internal controls over financial
          reporting to determine whether any changes occurred during the fourth fiscal
          quarter that have materially affected, or are reasonably likely to materially
          affect, the Company’s internal control over financial reporting. There were no
          significant changes in the Company's internal controls or in other factors
          that
          could materially affected or are reasonable likely to materially affect,
          the
          Company's internal controls subsequent to the date of the most recent
          evaluation.




It
          should
          be noted that any system of controls, however well designed and operated,
          can
          provide only reasonable, and not absolute, assurance that the objectives
          of the
          system will be met. In addition, the design of any control system is based
          in
          part upon certain assumptions about the likelihood of future
          events.
  -15-
 *Table
            of Contents*
 **Item
                  8B.**
              **Other
                  Information.**
 
 None.
 
 
 **PART
        III**
 
 **Item
                  9.**
                **Directors,
                    Executive Officers, Promoters and Control Persons; Compliance
                    with Section
                    16(a) of the Exchange
                    Act.**
  As
        of
        March 31, 2006, our directors and executive officer are:
 
 **Name**
              **Age**
              **Position**
              **Position
                  Held Since**David
                  N. Weiker, Sr.
              53
              Chairman
                  of the Board of Directors, Chief Executive Officer,
                  Treasurer
              2006John
                  J. Laskos
              54
              President
              2006David
                  N. Weiker, II
              28
              Chief
                  Operating Officer
              2006George
                  E. Betts
              68
              Chief
                  Financial Officer
              2005Robert
                  C. Simpson
              63
              Director,
                  Vice President
              2003James
                  F. Marx
              71
              Director
              2006Thomas
                  Fogarty
              62
              Director
              2006
 
 Directors
        serve for a term of one year and are re-elected annually at the Annual Meeting
        of Stockholders.
  David
        N.
        Weiker, Sr. was
        appointed Chairman of the Board, Chief Executive Officer and Treasurer of
        Zann
        Corp. on March 6, 2006.  David
        N
        Weiker Sr. is CEO/Chairman/owner and founder of Platinum Properties of Central
        Florida Inc. (2003-2006) He has extensive experience in business management
        and
        financial analysis.  His 21 year career has included CEO/Chairman and
        founder of Financial Planning and Underwriting (1979-1991), a prosperous
        firm
        that dealt with small business and individual clients in the area of financial
        planning. Concurrent with this he developed a personal real estate investment
        portfolio which led him into the land development and home building industry
        in
        Southwest Florida and the Orlando area. He is responsible for several
        communities being created and several hundred homes constructed in the Walt
        Disney area. He has marketed successfully in the industry for the past 15
        years
        in Central Florida. From 1998-1999, he was president and CEO of Hearthstone
        Homes Inc, a Central Florida company which he built from the ground up. He
        also
        formed a partnership that was responsible for five finished communities from
        1999-2002 constructing over 300 units. He teaches real estate and insurance
        classes at the Seminole Community College where he is an alumnus. He has
        become
        a leading marketer in the vacation home area which is targeted to overseas
        buyers. Currently he is the head of Platinum Properties of Central Florida,
        Inc.
        that will build over 700 homes in the next 18-24 months. On February 3, 2006,
        Mr. Weiker entered into a contractual agreement with Robert C. Simpson whereby
        Mr. Weiker purchased 10,000,000 of Zann Corp. Preferred Series C stock from
        Dr.
        Simpson to gain controlling interest in Zann Corp.
 
 David
        N.
        Weiker, II was
        appointed Chief Operating Officer of Zann Corp. on March 6, 2006. He is
        also Chief
        Operating Officer of Platinum Properties of Central Florida, Inc., (2003-2006)
        and is currently sitting for his real estate brokers license. He was
        instrumental in procuring over 700 presales over the last three years for
        Platinum. He has extensive experience in the marketing of real estate products,
        such as residential homes, vacation homes and commercial developments. From
        2001-2002 he was a successful, leading agent with Lando Realty Inc., setting
        many records for individual achievement. He also has spent time in Platinum
        Home
        Construction learning the business from that viewpoint. He currently develops
        the real estate division for Platinum along with his duties as COO. He trains,
        teaches oversees and develops agents for success.
 
 George
        E.
        Betts was
        elected our Chief Financial Officer effective April 14, 2005. He  is
        a
        senior executive with extensive experience in finance and management. His
        twenty-three year career has included working as a partner in Deloitte and
        Touche from 1960 to 1984 with 12 years experience in the Far East as Senior
        Partner of the Hong Kong office. He has extensive knowledge of business
        practices in the Far East. He is responsible for establishing Deloitte and
        Touche in China. He served as Executive Vice President, Chief Operating Officer
        and Chief Financial Officer for Herbalife, Inc. from 1984 to 1990, a direct
        selling company in the health and nutrition industry. There he was responsible
        for the International expansion of the Company, opening operations in over
        15
        countries. He managed growth of the Company from staff of 15 to over 1,500
        in
        two years, and was responsible for taking the Company public. He served on
        the
        Board of Directors of the Direct Selling Association and the Direct Selling
        Foundation. His other business experience includes owning and managing small
        business in the wood products industry from 1990 to 1997 and acting as a
        financial consultant to the organization and management of an Offshore Bank
        from
        1997 to 2002.
  -16-
 *Table
            of Contents*
  John
        Laskos was
        appointed President of Zann Corp. on March 6, 2006.  In
        November of 2005, Mr. Laskos joined Platinum Properties of Central Florida,
        Inc.
        as Vice President of Land Acquisitions, was promoted to President of Land
        Acquisitions, and then to President in December of 2005. He currently
        serves as President of Platinum Properties Prior to working with Platinum Properties,
        Mr.
        Laskos served as Project Director for The Berkley Corporation, a resort
        development corporation, from November 2000 to July of 2004. From 2004 to
        2005,
        he served as Senior Training Director for The Berkley Corporation. For 25
        years
        Mr. Laskos was electrical supervisor for Pennsylvania Power and Light and
        managing director for their nuclear plant facilities, where he oversaw an
        annual
        budget of $70,000,000. He has extensive experience in labor relations, having
        served as both steward and arbitrator for the same company.
 
 Robert
        C.
        Simpson has been a
        Director of Zann Corp. since 2003. He
        was CEO of
        Pathobiotek Diagnostics, Inc, (Texas) from 1993 - 2001. From 2001 to date
        he has
        been president and director of Pathobiotek Inc., et al (of Nevada) which
        was
        engaged in bio tech research. From 1990 - 1993 he was president of R. Simpson
        Associates, Inc., a management consulting firm with several major clients
        including General Electric, Ford, RWD Technologies Inc. and Symbol Technologies
        Inc. Dr. Simpson has extensive leadership, statistical methods, and teamwork
        and
        implementation skills. He was manager at General Motors for 12 years (1978
        -
        1990) in Manufacturing engineering, Projects for Advanced Technologies and
        Organizational Development.
 
 James
        Marx was appointed to the board of directors of Zann Corp. on March 6, 2006.
        Mr.
        Marx was formerly CFO for Platinum Properties, and in December of 2005 he
        retired from a distinguished career in management and resort development.
        He
        spent a total of 32 years in sales and marketing in the resort industry.
        Prior
        to that he was general factory manager for Massey Ferguson of Wisconsin and
        managed three plants. He served as Senior Industrial Engineer for American
        Motors, and he spent time with Johns Mansville as design plan engineer and
        safety engineer.  He is well versed in safety procedures for industrial
        plants. Mr. Marx is a Korean War veteran.
 
 Thomas
        Fogarty was
        appointed Director of Zann Corp. on March 6, 2006. He is
        als o Vice
        President of Purchasing for Platinum Properties of Central Florida, Inc.
        since
        June 2005. Prior to joining Platinum Properties; Mr. Fogarty was in the vacation
        club industry for 14 years, working for Fortune 500 companies such as Marriott
        International and Hilton International. He has extensive experience directing
        and managing sales teams, revising guidelines and implementing training manuals.
        His entrepreneurial years from 1967 to 1990 focused on the development of
        several concepts in the food industry and experienced statewide recognition
        in
        Florida for his success and growth.
 
 We
        do not
        have an Audit Committee Financial Expert serving on the Board of Directors
        as
        this time. Our Board consisted of one person until March 6, 2006, and the
        new
        Board has not yet met to form an Audit Committee and designate an Audit
        Committee Financial Expert.
 
 David
        N.
        Weiker, II, Chief Operating Officer, is the son of David N. Weiker, Sr.,
        Chairman-CEO of Zann Corp. Irene Weiker, Zann Corp. Secretary, is wife of
        David
        N. Weiker, Sr.
  -17-
 *Table
            of Contents*
  
 **Section
        16(a) Beneficial Ownership Reporting Compliance**
 
 Under
        Section 16(a) of the Exchange Act, our directors and certain of our officers,
        and persons holding more than 10 percent of our common stock are required
        to
        file forms reporting their beneficial ownership of our common stock and
        subsequent changes in that ownership with the Securities and Exchange
        Commission. Such persons are also required to furnish us with copies of all
        forms so filed.
 
 Based
        solely upon a review of copies of such forms filed on Forms 3, 4, and 5,
        we are
        aware of two persons who during the year ended December 31, 2005, were an
        director, officer, or beneficial owner of more than ten percent of our common
        stock as follows:
 
 ·
              Robert
                  C. Simpson. Dr. Simpson was an officer and director during the
                  entire year
                  2005
 ·
              George
                  E. Betts. Mr. Betts was elected our Chief Financial Officer effective
                  April 14, 2005.
  Based
        solely upon a review of copies of such forms filed on Forms 3, 4, and 5,
        we are
        not aware of any person who during the year ended December 31, 2005, who
        was a
        director, officer, or beneficial owner of more than ten percent of our common
        stock, and who failed to file, on a timely basis, reports required by Section
        16(a) of the Exchange Act during such fiscal year.
 
 **Code
        of Ethics**
 
 We
        have
        adopted a code of ethics that applies to our principal executive officer,
        principal financial officer, principal accounting officer or controller,
        or
        persons performing similar functions. The code of ethics is designed to deter
        wrongdoing and to promote:
 
 ·
              Honest
                  and ethical conduct, including the ethical handling of actual or
                  apparent
                  conflicts of interest between personal and professional
                  relationships;
 
 ·
              Full,
                  fair, accurate, timely, and understandable disclosure in reports
                  and
                  documents that we file with, or submits to, the SEC and in other
                  public
                  communications made by us;
 
 ·
              Compliance
                  with applicable governmental laws, rules and
                  regulations;
 
 ·
              The
                  prompt internal reporting of violations of the code to an appropriate
                  person or persons identified in the code;
                  and
 
 ·
              Accountability
                  for adherence to the code.
 
 A
        copy of
        our code of ethics that applies to our principal executive officer, principal
        financial officer, principal accounting officer or controller, or persons
        performing similar functions was filed as an exhibit to our Annual report
        for
        the year ended December 31, 2003, and filed with the Commission on March
        30,
        2004. We have posted a copy of the code of ethics on our website at www.zanncorp.com .
 
 We
        will
        provide to any person without charge, upon request, a copy of our code of
        ethics. Any such request should be directed to our corporate secretary at
        1549
        North Leroy Street, Suite D-200, and Fenton, Michigan 48430.
 
 **Item10.**
              **Executive
                  Compensation**
 
 **Summary
        of Cash and Certain Other Compensation**
 
 **Summary
        Compensation Table**
 
 The
        following table provides certain summary information concerning the compensation
        earned by the named executive officers (determined as of the end of the last
        fiscal year) for services rendered in all capacities to Zann Corp. and our
        subsidiaries:
  -18-
 *Table
            of Contents*
 
 **Annual
                  Compensation**
              **Long
                  Term Compensation****Awards**
              **Payouts****Name
                  and Principal Position**
              **Year**
              **Salary**
                **($)**
              **Bonus**
                **($)**
              **Other
                  Annual**
                **Compensation**
                **($)**
              **Restricted**
                **Stock**
                **Award(s)**
                **($)**
              **Securities**
                **Underlying**
                **Options/SARs**
                **(#)**
              **LTIP**
                **Payouts**
                **($)**
              **All
                  Other**
                **Compensation**
                **($)**Robert
                  C. Simpson
                Former
                  President and CEO, current
                Director
              2003
                2004
                2005
              10,800
                77,600
                82,650
              0
                0
                302,000
              0
                0
                0
              1,000
                2,369,000
                0
              0
                0
                0
              0
                0
                0
              0
                0
                0George
                  Betts
                Chief
                  Financial Officer
              2004
                2005
              0
                0
              0
                0
              0
                17,450
              141,000
                8,573
              0
                0
              0
                0
              0
                0
 
 **Employment
        Agreements**
 
 On
        February 9, 2006, the Company entered into an employment agreement with Robert
        Simpson, the Company’s Chief Executive Officer. The employment agreement is
        effective as of October 1, 2005 and provides for an annual base salary of
        U.S.
        $125,000 which is subject to annual review and may be adjusted by the board
        of
        directors, a cash bonus representing back wages in the amount of U.S. $302,000
        to be paid upon execution and a grant of 20,000 shares of Convertible Preferred
        Series A Stock which shall be immediately vested. As of March 30, 2006, no
        salary, stock or bonus has been paid to Robert Simpson.
  On
        March
        6, 2006, Robert Simpson resigned from his positions as President and Chief
        Executive Officer of the Company, while retaining his position as a member
        of
        the board of directors of the Company. David N. Weiker Sr. was appointed
        by the
        board of directors as Chief Executive Officer, Treasurer and Chairman of
        the
        board of directors of the Company. The Employment Agreement between Mr. Simpson
        and the Company effective October 1, 2005 remains in effect as of the date
        of
        this filing.
 
 **Confidentiality
        Agreements**
 
 None.
 
 **Item
                  11.**
              **Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.**
 
 **Equity
        Compensation Plan Information**
 
 **Securities
        Authorized for Issuance under Equity Compensation Plans**
 
 The
        following table provides information as of the end of the most recently
        completed fiscal year with respect to compensation plans (including individual
        compensation arrangements) under which equity securities of the registrant
        are
        authorized for issuance, aggregated as follows:
 
 ·
              All
                  compensation plans previously approved by security holders;
                  and
 
 ·
              All
                  compensation plans not previously approved by security
                  holders.
 
 **Plan
                  Category**
              
              **Number
                  of securities issued**
                **upon
                  exercise of outstanding**
                **options,
                  warrants and rights**
                **(a)**
              
              **Weighted-average
                  exercise**
                **price
                  of outstanding options,**
                **warrants
                  and rights**
                **(b)**
              
              **Number
                  of securities remaining**
                **available
                  for future issuance**
                **under
                  equity compensation**
                **plans
                  (excluding securities**
                **reflected
                  in column (a))**
                **(c)**Equity
                  compensation plans approved by security holders
              
              
              -0-
              
              
              N/A
              
              
              N/AEquity
                  compensation plans not approved by security holders
              
              
              995,691,713
              
              $
              0.0012
              
              
              N/ATotal
              
              
              995,691,713
              
              $
              0.0012
              
              
              1,300,000
  -19-
 *Table
            of Contents*
 
 **Security
        Ownership of Certain Beneficial Owners and Management**
 
 The
        following table sets forth, as of March 27, 2006, information concerning
        ownership of our securities by:
 
 -
              Each
                  person who owns beneficially more than five percent of the outstanding
                  shares of our common stock;
 
 -
              Each
                  person who owns beneficially outstanding shares of our preferred
                  stock;
 
 -
              Each
                  director;
 
 -
              Each
                  named executive officer; and
 
 All
        directors and officers as a group.
  As
        of
        March 30, 2006, there were 33,945,359 shares of common stock outstanding,
        2,647,700 shares of Series A Preferred Stock outstanding, 472,011 shares
        of
        Series B Preferred Stock outstanding, and 10,000,000 shares of Series C
        Preferred Stock outstanding.
 
 **Name
                  and Address of Beneficial Owner (1)**
              
              **Common
                  Stock Beneficially**
                **Owned
                  (2)**
              
              **Preferred
                  Stock Beneficially**
                **Owned****Number**
              
              **Percent**
              
              **Number**
              
              **Percent**Emanuel
                  Suchefort, Rotkehlchenweg 26, D-25421 Pinneberg, Germany
              
              
              2,100,000
              
              
              6Robert
                  C. Simpson, PhD (5)
              
              
              188,580
              
              
              0George
                  E. Betts (6)
              
              
              455,003
              
              
              1All
                  directors and officers as a group (two persons)
              
              
              643,583
              
              
              2Robert
                  C. Simpson, PhD (5)
              
              
              
              
              
              
              
              
              1,700,000
                  (2
              )
              
              69James
                  L. Hopkins, 3271 Shamrock Dr., Venice, FL 34293
              
              
              
              
              
              
              
              
              200,000
                  (2
              )
              
              8George
                  E. Betts (6)
              
              
              
              
              
              
              
              
              37,560
                  (2
              )
              
              0All
                  directors and officers as a group (two persons)
              
              
              
              
              
              
              
              
              1.737,560
                  (2
              )
              
              0Quirino
                  L. Pua, 2118 Wyeth Drive, Guntersville, AL 35976
              
              
              
              
              
              
              
              
              110,000
                  (3
              )
              
              23Pamela
                  Weber, 440 Caleb Place, Fenton, MO 63026
              
              
              
              
              
              
              
              
              57,200
                  (3
              )
              
              12Danton
                  N. DeGuia, 750 N. Manasota Red Rd., Englewood, FL 34223
              
              
              
              
              
              
              
              
              55,000
                  (3
              )
              
              12Marshall
                  Richardson, 369 Edmonds Drive, Grant, AL 35747
              
              
              
              
              
              
              
              
              55,000
                  (3
              )
              
              12Steven
                  L. Baker, 1789 Birch Drive, Venice, FL 34293
              
              
              
              
              
              
              
              
              44,000
                  (3
              )
              
              9Richard
                  F. Sadey Jr. & Daniel B. Sadey Jt Wros, 882 E. 5th Street, Englewood,
                  FL 34223
              
              
              
              
              
              
              
              
              33,000
                  (3
              )
              
              7David
                  N. Weiker, Sr., PO Box 135365, Clermont, FL 34713-5365 (1)
              
              
              
              
              
              
              
              
              10,000,000
                  (4
              )
              
              100All
                  directors and officers as a group (one person)
              
              
              
              
              
              
              
              
              10,000,000
                  (4
              )
              
              100
  
 (1)
              Unless
                  otherwise indicated, the address for each of these stockholders
                  is c/o
                  Zann Corp., 1549 N. Leroy St., Suite D-200, Fenton, Michigan 48430,
                  Telephone (810) 714-2978. Also, unless otherwise indicated, each
                  person
                  named in the table above has the sole voting and investment power
                  with
                  respect to the shares of our common and preferred stock which he
                  beneficially owns. Each share of our common stock is entitled to
                  one vote
                  on all matters brought before the stockholders, each share of our
                  Series A
                  preferred stock outstanding entitles the holder to one vote of
                  the common
                  stock on all matters brought before the stockholders, each share
                  of our
                  outstanding Series B preferred stock entitles the holder to one
                  vote of
                  the common stock on all matters brought before the stockholders,
                  and each
                  share of our Series C preferred stock outstanding entitles the
                  holder to
                  500 votes of the common stock on all matters brought before the
                  stockholders. Therefore, Mr. Weiker Sr. has the power to vote
                  5,000,000,000 shares of the common stock as of March 27, 2006.David
                  N. Weiker Sr. was elected our Chairman, Chief Executive Officer
                  and
                  Treasurer on March 6, 2006.
 (2)
              Series
                  A preferred stock.
 (3)
              Series
                  B preferred stock
 (4)
              Series
                  C preferred stock.
 (5)
              Robert
                  C. Simpson PhD is Director (since April 9, 2003 ) and Vice President
                  (since March 6, 2006).
 (6)
              George
                  Betts was elected our Chief Financial Officer on April 15,
                  2005.
  -20-
 *Table
            of Contents*
 
 There
        are
        no arrangements, known to us, including any pledge by any person of our
        securities, the operation of which may at a subsequent date result in a change
        in control of Zann Corp.
 
 There
        are
        no arrangements or understandings among members of both the former and the
        new
        control groups and their associates with respect to election of directors
        or
        other matters.
  **Item
                    12.**
                **Certain
                    Relationships and Related
                    Transactions**
 
 On
        August
        10, 2004, we entered into an acquisition agreement with Robert C. Simpson, 
our  president,  chief executive officer, and majority shareholder, to
        purchase  all  of  the issued and outstanding capital stock of
        Blue Kiwi Inc., a Michigan corporation, for the sum of $5 million, payable
        in
        monthly installments of  up  to  10 percent of our gross
        profit.  Our obligation to pay $5 million to Dr.  Simpson 
in  connection  with  the  Blue  Kiwi  is 
expressly conditioned  upon  our  generating  profit. 
In  the  absence  of  profits,  our obligation 
to  pay $5 million to Dr. Simpson is without effect.  The obligation
        will  not  bear  any interest.  As a result of the
        Acquisition, Blue Kiwi became our wholly-owned  subsidiary. The term
        of the agreement was from August 2004 to August 2005. Blue Kiwi Inc. is not
        currently operating or marketing its products.
 
 Blue
        Kiwi
        Inc. had transferred funds to Zann-MI Corp to help cover the group health
        insurance bill on 12/30/05 of $1,960. This money is not to be repaid nor
        is
        their interest due on it. There was also a transfer of $200 from Zann Corp
        to
        Blue Kiwi to help pay for bills.
 
 Pathobiotek 
        Inc.  is  owned  and controlled by Dr. Simpson, our former Chief
        Executive Officer. Transfers were made to Pathobiotek Inc. to cover bills.
        The
        total amount of transfers during 2005 was $62,450. There is no agreement
        in
        place and interest does not apply. Zann is not requiring repayment. The
        transfers are expensed as general and administrative.
 
 CarZann 
        Inc.  is  owned  and  controlled  by  Dr. 
Simpson, our former Chief Executive Officer. Transfers were made between
        Carzann
        and Zann Corp to cover bills. The total amount of transfers during 2005 (mostly
        took place in early to mid 2005) was $12,580. There is no agreement in place
        and
        interest does not apply. Zann is not requiring repayment. The transfers are
        expensed as general and administrative.
 
 Future 
        Beverages Inc. is owned and controlled by Dr. Simpson, our former Chief
        Executive Officer. Transfers were made in March and April 2005 to cover bills.
        The total amount of transfers was $3,150. There is no agreement in place
        and
        interest does not apply. Zann is not requiring repayment. The transfers are
        expensed as general and administrative.
 
 ATNG-MI
        Inc.  is  owned  and  controlled by Dr. Simpson, our former
        Chief Executive Officer. Transfers of funds were made to ATNG-MI Inc. to
        cover
        bills. The total amount of transfers during 2005 was $34,528. There is no
        agreement in place and interest does not apply. Zann is not requiring repayment.
        The transfers are expensed as general and administrative.
 
 There
        were other non-material miscellaneous transfers and/or adjustments that amounted
        to a total of $ (10,526.97).
 
 During
        the years ended December 31, 2005 and 2004 the employees of the Company were
        paid through entities owned by the Company's former President. These entities
        are responsible for payroll, all payroll taxes, health insurance plans and
        all
        other employee benefits. During the years ended December 31, 2005 and 2004
        the
        Company paid these entities approximately $503,302 and $314,612 respectively,
        which has been charged to operations. At December 31, 2005, $2,103 was owed
        to
        the related entity (included in accounts payable) for payroll expenses. There
        were no amounts due to these entities as of December 31, 2004.
 
 R. 
        Simpson  Associates,  Inc.  is owed $5,900 for funds loaned to
        pay bills as needed during 2005. Interest does not apply to this note. Repayment
        is based on the available cash flow of Zann.   This amount is currently
        outstanding.  R.  Simpson  Associates,  Inc.  is 
owned  and  controlled  by Dr. Simpson,  our  former
        Chief Executive Officer.
  -21-
 *Table
            of Contents*
  Robert
        C.
        Simpson is owed $71,401 for funds loaned to pay bills as needed during 2005.
        Interest does not apply to this note. Repayment is based on the available
        cash
        flow of Zann.   This amount is currently outstanding.
  Pathobiotek
        Inc. a company controlled by Robert C.
        Simpson is owed $4,901 for funds loaned to pay bill as needed during 2005.
        Interest does not apply to this note. Repayment is based on the available
        cash
        flow of the Company. This amount is currently outstanding.
 
 **Item13.**
              **Exhibits**
 
 **Exhibit
                  No.**
              
              **Identification
                  of Exhibits**2.1
                  (1)
              
              Articles
                  of Merger of Investra Enterprises, Inc. into Pathobiotek Diagnostics,
                  Inc., a Texas corporation dated March 6, 2000.2.2
                  (1)
              
              Agreement
                  and Plan of Reorganization by and among Pathobiotek Diagnostics
                  Inc., a
                  Texas corporation, and ATNG Inc., a Nevada corporation, dated August
                  24,
                  2001.2.2
                  (2)
              
              Plan
                  and Agreement of Merger between ATNG, Inc. (TX) and ATNG of Nevada,
                  Inc.,
                  dated September 6, 2003.2.3
                  (3)
              
              Blue
                  Kiwi Acquisition Agreement between Blue Kiwi, Inc., a Michigan
                  corporation, and the Registrant dated August 10, 2004, as
                  amended.2.7
                  (6)
              
              Settlement
                  Agreement and Release between Robert C. Simpson and the Registrant
                  and
                  Charles Duke and Jonathon Derek Seltzer, the significant stockholders
                  of
                  Sartam Industries, Inc., dated December 31, 2005.2.8
                  (7)
              
              Series
                  C Common Stock Purchase Agreement between David N. Weiker, Sr.
                  and Robert
                  Simpson, an individual, dated February 3, 2006.3.1
                  (4)
              
              Certificate
                  of Amendment to Articles of Incorporation of the Registrant, effective
                  May
                  3, 2005.3.2
                  (8)
              
              Bylaws
                  of the Registrant, as amended September 6, 2003.4.1
                  (1)
              
              Certificate
                  of Designation establishing the Registrant’s Series A Preferred Stock,
                  effective August 24, 2004.4.2
                  (1)
              
              Certificate
                  of Designation establishing the Registrant’s Series B Preferred Stock,
                  effective March 8, 2005.4.3
                  (1)
              
              Certificate
                  of Designation establishing the Registrant’s Series C Preferred Stock,
                  effective March 21, 2005, as amended.10.3
                  (5)
              
              Standby
                  Equity Distribution Agreement between Cornell Capital Partners,
                  LP and the
                  Registrant dated December 8, 2005.10.4
                  (7)
              
              Employment
                  Agr eement between Registrant and Robert Simpson, an individual,
                  dated
                  February 9, 2006.31.1
              
              Certification
                  ofDavid
                  N. Weiker, Sr., Chief Executive Officer,Chairman
                  of the Board of Directorsand
                  Treasurerof
                  Zann Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant
                  to Sec.302
                  of the Sarbanes-Oxley Act of 2002.31.2
              
              Certification
                  of George E. Betts, Chief Financial Officer of Zann Corp., pursuant
                  to 18
                  U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley
                  Act
                  of 2002.32.1
              
              Certification
                  ofDavid
                  N. Weiker, Sr., Chief Executive Officer,Chairman
                  of the Board of Directorsand
                  Treasurerof
                  Zann Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant
                  to Sec.906
                  of the Sarbanes-Oxley Act of 2002.32.2
              
              Certification
                  of George E. Betts, Chief Financial Officer of Zann Corp., pursuant
                  to 18
                  U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley
                  Act
                  of 2002.
 
 
 (1)
              Incorporated
                  by reference to the Registrant’s Form 10-KSB as filed with the SEC on
                  April 18, 2005.
 (2)
              Incorporated
                  by reference to the Registrant’s Form 14-A as filed with the SEC on August
                  18, 2003.
 (3)
              Incorporated
                  by reference to the Registrant’s Form 8-K/A as filed with the SEC on May
                  3, 2005.
 (4)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on June
                  22, 2005.
 (5)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on
                  December 8, 2005.
  -22-
 *Table
            of Contents*
 
 (6)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on March
                  3, 2006.
 (7)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on
                  February 8, 2006.
 (8)
              Incorporated
                  by reference to the Registrant’s Form 10-QSB as filed with the SEC on
                  November 21, 2005.
 
 **Item
                  14.**
              **Principal
                  Accountant Fees and
                  Services**
 
 **Audit
        Fees**
  The
          aggregate fees billed by Russell Bedford Stefanou Mirchandani LLP for
          professional services rendered for the audit of Zann Corp. financial statements
          for the fiscal year 2004 were $34,500.00.
  The
        aggregate fees billed by Russell Bedford Stefanou Mirchandani LLP for
        professional services rendered for the audit of Zann Corp. financial statements
        for the fiscal year 2005 were $58,981.77.
 
 **Audit-Related
        Fees**
 
 The
        aggregate fees billed by Russell and Atkins for assurance and related services
        that are reasonably related to the performance of the audit or review of
        Zann
        Corp. financial statements for fiscal year 2004 were $2,000.00.
 
 The
        aggregate fees billed by Malone & Bailey for assurance and related services
        that are reasonably related to the performance of the audit or review of
        our
        financial statements for fiscal year 2004 were $16,960.00. ****
 
 The
        aggregate fees billed by Russell Bedford Stefanou Mirchandani LLP for assurance
        and related services that are reasonably related to the performance of the
        audit
        or review of our financial statements for fiscal year 2005 were
        $25,373.96.
 
 **All
        Other Fees**
 
 There
        were no other fees billed by Russell Bedford Stefanou Mirchandani LLP, Malone
        & Bailey or Russell and Atkins for professional services rendered, other
        than as stated under the captions Audit Fees, Audit-Related Fees, and Tax
        Fees.
 
 **Policy
        on Audit Committee Pre-Approval of Audit And Permissible Non-Audit Services
        of
        Independent Auditors**
 
 The
        Company currently does not have a designated Audit Committee, and accordingly,
        the Company's Board of Directors' policy is to pre-approve all audit and
        permissible non-audit services provided by the independent auditors. These
        services may include audit services, audit-related services, tax services
        and
        other services. Pre-approval is generally provided for up to one year and
        any
        pre-approval is detailed as to the particular service or category of services
        and is generally subject to a specific budget. The independent auditors and
        management are required to periodically report to the Company's Board of
        Directors regarding the extent of services provided by the independent auditors
        in accordance with this pre-approval, and the fees for the services performed
        to
        date. The Board of Directors may also pre-approve particular services on
        a
        case-by-case basis.
  -23-
 *Table
            of Contents*
  **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
        as
        amended, the Registrant has duly caused this Annual report to be signed on
        its
        behalf by the undersigned, thereunto duly authorized.
 
 Zann
                  Corp.Date:
                  April 7, 2006By:
              /s/
                  David N. Weiker, Sr.David
                  N. Weiker, Sr., Chairman of the Board of Directors, Chief Executive
                  Officer, Treasurer
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, as amended, this
        Annual report has been signed by the following persons on behalf of the
        registrant and in the capacities and on the dates indicated.
 
 **Signature**
              **Title**
              **Date**/s/
                  David N. Weiker, Sr.
                David
                  N. WeikerSr.
              Chairman,
                  CEO, Treasurer
              April
                  7, 2006/s/
                  George E. Betts
                George
                  E. Betts
              Chief
                  Financial Officer
              April
                  7, 2006/s/
                  David N. Weiker II
                David
                  N. Weiker II
              Chief
                  Operating Officer
              April
                  7, 2006/s/
                  Robert C. Simpson
                Robert
                  C. Simpson
              Director
              April
                  7, 2006/s/
                  Thomas L. Fogarty
                Thomas
                  L. Fogarty
              Director
              April
                  7, 2006
 
  -24-
 *Table
            of Contents*
  **S** **ECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 **FINANCIAL
        STATEMENTS AND SCHEDULES**
 **DECEMBER
        31, 2005 AND 2004**
 
 
 **FORMING
        A PART OF ANNUAL REPORT PURSUANT TO THE SECURITIES EXCHANGE ACT OF
        1934**
 
 
 **ZANN
        CORP.**
  *Table
            of Contents*
  **ZANN
        CORP.**
 **INDEX
        TO FINANCIAL STATEMENTS**
 
 **_____________________________________________**
 
 
 Report
                  of Independent Registered Certified Public Accounting Firm
              F-3Consolidated
                  Balance Sheet as of December 31, 2005
              F-4Consolidated
                  Statements of Losses for the Years Ended December 31, 2005 and
                  2004
              F-5Consolidated
                  Statements of (Deficiency in) Stockholders' Equity for the Years
                  Ended December 31, 2005 and 2004
              F-6Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2005
                  and
                  2004
              F-7Notes
                  to Consolidated Financial Statements
              F8
                  - F-22
  F-2
 *Table
            of Contents*
 
 **RUSSELL
        BEDFORD STEFANOU MIRCHANDANI LLP**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
 **________________________________________________________**
 
 **REPORT
        OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM**
 **_____________________________________________________________________**
 
 Board
        of
        Directors
 Zann
        Corp.
 Fenton,
        MI
 We
          have
          audited the accompanying consolidated balance sheet of Zann Corp., as of
          December 31, 2005 and the related consolidated statements of loss, deficiency
          in
          stockholders equity, and cash flows for each of the two years in the period
          ended December 31, 2005. These financial statements are the responsibility
          of
          the company’s management. Our responsibility is to express an opinion on the
          financial statements based upon our audits.
  We
        have
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States of America). Those standards require
        that we plan and perform the audit to obtain reasonable assurance about whether
        the financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the consolidated financial position of Zann Corp. at
          December
          31, 2005 and the results of its operations and its cash flows for each
          of the
          two years in the period ended December 31, 2005, in conformity with accounting
          principles generally accepted in the United States of America.
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note S, the Company has
        not
        commenced principal operations, has incurred significant operating losses
        since
        inception and has a significant working capital deficit. These factors, among
        others, raise substantial doubt about the Company's ability to continue as
        a
        going concern. Management's plans in regard to these matters are described
        in
        Note S. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 /s/
                  RUSSELL BEDFORDSTEFANOU
                  MIRCHANDANI LLPRussell
                  Bedford Stefanou Mirchandani LLPCertified
                  Public AccountantsNew
                  York, New YorkMarch
                  8, 2006
  F-3
 *Table
            of Contents*
  **ZANN
        CORP.**
 **CONSOLIDATED
        BALANCE SHEET**
 **DECEMBER
        31, 2005**
 
 Current
                  AssetsCash
                  and cash equivalents
              
              $
              346Prepaid
                  expenses and other
              
              
              126Total
                  Current Assets
              
              
              472Total
                  Assets
              
              $
              472LIABILITIES
                  AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
                  LiabilitiesAccounts
                  payable and accrued liabilities (Note E)
              
              $
              950,956Accounts
                  payable - related party (Note O)
              
              
              83,202Accrued
                  liability- officer (Note M)
              
              
              333,250Notes
                  payable - others (Note F)
              
              
              155,874Total
                  Current Liabilities
              
              
              1,523,282Total
                  Liabilities
              
              
              1,523,282Deficiency
                  in Stockholders' EquityCommon
                  stock, $.001 par value, 4,000,000,000 shares authorized 32,645,359
                  issued
                  and outstanding
              
              
              32,645Preferred
                  stock,
              
              
              -Series
                  A, 2,447,700 shares issued and outstanding
              
              
              2,448Series
                  B, 392,501 shares issued and outstanding
              
              
              393Series
                  C, 10,000,000 issued and outstanding
              
              
              10,000Subscription
                  payable
              
              
              9,100Additional
                  paid-in-capital
              
              
              37,479,157Accumulated
                  deficit
              
              
              (39,056,552
              )Total
                  Deficiency in Stockholders' Equity
              
              
              (1,522,810
              )Total
                  Liabilities and Deficiency in Stockholders' Equity
              
              $
              472
 
 See
        accompanying notes to consolidated financial statements
  F-4
 *Table
            of Contents*
  **ZANN
        CORP.**
 **CONSOLIDATED
        STATEMENT OF LOSSES**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
 For
                      the year ended December 31,2005
                  
                  2004REVENUESSales,
                      net
                  
                  $
                  826
                  
                  $
                  1,423Cost
                      of goods sold
                  
                  
                  15,960
                  
                  
                  12,847Gross
                      (Loss)
                  
                  
                  (15,134
                  )
                  
                  (11,424
                  )OPERATING
                      EXPENSESSelling,
                      general and administrative
                  
                  
                  2,724,862
                  
                  
                  11,266,274Impairment
                      of goodwill
                  
                  
                  -
                  
                  
                  296,280Total
                      Operating Expenses
                  
                  
                  2,724,862
                  
                  
                  11,562,554LOSS
                      FROM OPERATIONS
                  
                  
                  (2,739,996
                  )
                  
                  (11,573,978
                  )Other
                      Income (Expense)Interest
                      income (Expense)
                  
                  
                  (11,928
                  )
                  
                  (6,354
                  )Sale
                      of patents
                  
                  
                  15,000
                  
                  
                  -Consulting
                      income
                  
                  
                  -
                  
                  
                  150,000Debt
                      forgiveness
                  
                  
                  -
                  
                  
                  865,674Total
                      Other Income (Expenses)
                  
                  
                  3,072
                  
                  
                  1,009,320NET
                      (LOSS) BEFORE PROVISION FOR INCOME TAX AND DISCONTINUANCE OF
                      OPERATIONS
                  
                  
                  (2,736,924
                  )
                  
                  (10,564,658
                  )PROVISION
                      FOR INCOME TAX
                  
                  
                  -
                  
                  
                  -NET
                      (LOSS) BEFORE DISCONTINUED OPERATIONS
                  
                  
                  (2,736,924
                  )
                  
                  (10,564,658
                  )DISCONTINUED
                      OPERATIONS (INCLUDES LOSS ON DISPOSITION OF SUBSIDIARY OF
                      $35,090)
                  
                  
                  (200,000
                  )
                  
                  -NET
                      (LOSS)
                  
                  $
                  (2,936,924
                  )
                  $
                  (10,564,658
                  )Loss
                      per share (basic and fully diluted)
                  
                  $
                  (0.14
                  )
                  $
                  (275.25
                  )Loss
                      per share discontinued operations
                  
                  $
                  (0
                      .01
                  )
                  
                  -Loss
                      per share continuing operations
                  
                  $
                  (0.13
                  )
                  $
                  (275.25
                  )Basic
                      and diluted weighted average number of shares outstanding as
                      restated for
                      reverse and forward stock splits
                  
                  
                  20,569,003
                  
                  
                  38,382
 See
        accompanying notes to consolidated financial statements
  F-5
 *Table
            of Contents*
  **ZANN
        CORP.**
 **STATEMENT
        OF (DEFICIENCY IN) STOCKHOLDERS EQUITY**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
 **Preferred
                    Series A**
                
                **Preferred
                    Series B**
                
                **Preferred
                    Series C**
                
                **Common
                    Stock**
                
                **Additional
                    Paid in**
                
                **Subscription**
                
                **Preferred**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Receivable**
                
                **Series
                    A**
                
                **Deficit**
                
                **Total**BALANCE,
                    DECEMBER 31, 2003
                
                
                1,000,000
                
                $
                400
                
                
                -
                
                $
                -
                
                
                5,000,000
                
                $
                1,000
                
                
                2,300
                
                $
                2
                
                $
                20,783,060
                
                $
                -
                
                $
                -
                
                $
                (25,554,970
                )
                $
                (4,770,508
                )Issuance
                    of preferred stock in exchange for debt
                
                
                154,700
                
                
                155
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                3,022,395
                
                
                -
                
                
                -
                
                
                -
                
                
                3,022,550Issuance
                    of preferred stock in exchange for services rendered at $0.19
                    per
                    share
                
                
                1,283,000
                
                
                1,283
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                243,367
                
                
                -
                
                
                -
                
                
                -
                
                
                244,650Correction
                    of par value amounts
                
                
                -
                
                
                600
                
                
                -
                
                
                -
                
                
                -
                
                
                4,000
                
                
                -
                
                
                -
                
                
                (4,600
                )
                
                -
                
                
                -
                
                
                -Capitalization
                    of debt forgiveness - related party
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                135,600
                
                
                -
                
                
                -
                
                
                -
                
                
                135,600Issuance
                    of preferred stock in exchange for services rendered at $0.56
                    per
                    share
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                5,000,000
                
                
                5,000
                
                
                -
                
                
                -
                
                
                2,795,000
                
                
                -
                
                
                -
                
                
                -
                
                
                2,800,000Issuance
                    of common stock at $13.47 per share, in accordance with employee
                    stock
                    compensation plan
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                338,484
                
                
                339
                
                
                4,559,262
                
                $
                (39,616
                )
                
                -
                
                
                -
                
                
                4,519,985Issuance
                    of common stock in exchange for services rendered at $12.32 per
                    share
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                319,332
                
                
                319
                
                
                3,934,129
                
                
                -
                
                
                -
                
                
                -
                
                
                3,934,448Fractional
                  Shares - 3:1 split May 3, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (116
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    (loss)
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (10,564,658
                )
                
                (10,564,658
                )BALANCE,
                    DECEMBER 31, 2004
                
                
                2,437,700
                
                $
                2,438
                
                
                -
                
                $
                -
                
                
                10,000,000
                
                $
                10,000
                
                
                660,000
                
                $
                660
                
                $
                35,468,213
                
                $
                (39,616
                )
                $
                -
                
                $
                (36,119,628
                )
                $
                (677,933
                )3:1
                    stock split May 3, 2005-fractional shares
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (603
                )
                
                (1
                )
                
                (439
                )
                
                -
                
                
                -
                
                
                -
                
                
                (440
                )Issuance
                      of preferred stock issued for services at $.20.26 per
                      share.
                
                
                10,000
                
                
                10
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                202,544
                
                
                -
                
                
                -
                
                
                -
                
                
                202,554Issuance
                    of preferred stock in exchange for debt at $.726 per
                    share.
                
                
                -
                
                
                -
                
                
                50,000
                
                
                50
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                36,250
                
                
                -
                
                
                -
                
                
                -
                
                
                36,300Preferred
                    A to be issued for services
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                9,100
                
                
                -
                
                
                9,100Preferred
                    B for cash
                
                
                -
                
                
                -
                
                
                267,001
                
                
                267
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                266,734
                
                
                -
                
                
                -
                
                
                -
                
                
                267,001Preferred
                    B for interest
                
                
                -
                
                
                -
                
                
                57,000
                
                
                57
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,055
                
                
                -
                
                
                -
                
                
                -
                
                
                1,112Preferred
                    B for services
                
                
                -
                
                
                -
                
                
                18,500
                
                
                19
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                309
                
                
                -
                
                
                -
                
                
                -
                
                
                327Issuance
                    of common stock at $0.058 per share, in accordance with employee
                    stock
                    compensation plan
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                14,192,328
                
                
                14,192
                
                
                816,424
                
                
                39,616
                
                
                -
                
                
                -
                
                
                870,232Issuance
                    of common stock in exchange for services rendered at $0.033 per
                    share
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                17,793,634
                
                
                17,794
                
                
                576,745
                
                
                -
                
                
                -
                
                
                -
                
                
                594,539Warrants
                    outstanding-4,000,000 issued at $0.0388 per share, exercisable
                    until
                    December 8, 2009
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                111,324
                
                
                -
                
                
                -
                
                
                -
                
                
                111,324Net
                    Loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,936,924
                )
                
                (2,936,924
                )BALANCE,
                    DECEMBER 31, 2005
                
                
                2,447,700
                
                $
                2,448
                
                
                392,501
                
                $
                393
                
                
                10,000,000
                
                $
                10,000
                
                
                32,645,359
                
                $
                32,645
                
                $
                37,479,157
                
                $
                -
                
                $
                9,100
                
                $
                (39,056,552
                )
                $
                (1,522,810
                )
 See
        accompanying notes to consolidated financial statements
  F-6
 *Table
            of Contents*
  **ZANN
        CORP.**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
 For
                    the year ended December 31,2005
                
                2004Cash
                    Flows Used in Operating ActivitiesNet
                    loss
                
                $
                (2,936,924
                )
                $
                (10,564,658
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:
                
                
                -
                
                
                -Discontinued
                    Operations (Includes loss on disposition of subsidiary of
                    $35,090)
                
                
                200,000
                
                
                -Common
                    stock issued for services
                
                
                594,098
                
                
                3,934,449Employee
                    stock option expense
                
                
                472,710
                
                
                2,778,485Preferred
                    series A issued for services
                
                
                202,554
                
                
                3,044,650Preferred
                    series A to be issued for services
                
                
                9,100
                
                
                -Preferred
                    series B issued for services and interest
                
                
                1,438
                
                
                -Warrants
                    Expense
                
                
                111,324
                
                
                -Goodwill
                    write off
                
                
                -
                
                
                296,280Debt
                    forgiven
                
                
                -
                
                
                (865,673
                )Shares
                    of non-related entity received for services
                
                
                -
                
                
                (150,000
                )Changes
                    in:
                
                
                -
                
                
                -Accounts
                    payable and accrued expenses
                
                
                253,970
                
                
                (583,536
                )Inventory
                    and prepaid expenses
                
                
                18,585
                
                
                (18,711
                )Officer
                    salary and bonus
                
                
                333,250
                
                
                -Accounts
                    payable - related
                
                
                81,602
                
                
                -Net
                    Cash (Used) in Operating Activities
                
                
                (658,293
                )
                
                (2,128,714
                )Cash
                    Flows From Investing Activities:Acquisition
                    of subsidiary-cash received
                
                
                -
                
                
                10,612Payment
                    for acquisition
                
                
                (200,000
                )
                
                (1,000
                )Proceeds
                    from sale of shares of non-related entitity received for
                    services
                
                
                -
                
                
                150,000Net
                    Cash (Used) Provided by Investing Activities
                
                
                (200,000
                )
                
                159,612Cash
                    Flows from Financing Activities:Proceeds
                    from sale of common stock
                
                
                397,522
                
                
                1,741,499Proceeds
                    from sale of preferred stock
                
                
                267,001
                
                
                -Proceeds
                    from convertible debenture
                
                
                100,000
                
                
                -Payments
                    on convertible debenture
                
                
                (2,274
                )
                
                -Notes
                    payable
                
                
                225,000
                
                
                -Payments
                    on notes payable
                
                
                (168,500
                )
                
                -Repayment
                    of note payable to related party
                
                
                -
                
                
                (90,000
                )Net
                    Cash Provided by Financing Activities
                
                
                818,749
                
                
                1,651,499Net
                    Change in Cash and cash equivalents
                
                
                (39,544
                )
                
                (317,603
                )Cash
                    and cash equivalent at Beginning of Period
                
                
                39,890
                
                
                357,493Cash
                    and cash equivalent at End of Period
                
                $
                346
                
                $
                39,890Supplemental
                    Disclosures of Cash Flow Information:Cash
                    paid during the period for interest
                
                $
                14,719
                
                $
                6,420Cash
                    paid during the period for income taxes
                
                $
                -
                
                $
                -Non-cash
                    Financing and Investing Activities:Common
                    stock issued in exchange for services rendered
                
                $
                594,098
                
                $
                3,934,449Preferred
                    shares issued for services and interest
                
                $
                203,992
                
                $
                3,044,650Preferred
                    shares issued for debt
                
                $
                36,300
                
                $
                3,022,550Employee
                    stock option expense
                
                $
                472,710
                
                $
                2,778,485Income
                    from liabilities forgiven
                
                $
                -
                
                $
                (865,674
                )Shares
                    of non-related entity received for services
                
                $
                -
                
                $
                (150,000
                )Acquisition:
                
                $
                -
                
                $
                -Assets
                    acquired (including amortization)
                
                $
                5,189,581
                
                $
                13,868Liabilities
                    assumed
                
                $
                509,581
                
                $
                (309,148
                )Cash
                    paid
                
                $
                200,000
                
                $
                (1,000
                )Notes
                    payable
                
                $
                4,480,000
                
                $
                -Goodwill
                
                $
                -
                
                $
                (296,280
                )
  See
        accompanying notes to consolidated financial statements
  F-7
 *Table
            of Contents*
  **ZANN
        CORP.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2005**
  
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES**
  A
        summary
        of the significant accounting policies applied in the preparation of the
        accompanying consolidated financial statements follows.
  Business
        and Basis of Presentation
 
 The
        Company was incorporated in Florida on March 4, 1999 as Investra Enterprises
        Inc. On March 6, 2000, we completed a Share Purchase Agreement in which
        Pathobiotek Diagnostics, Inc. a Texas Corporation, acquired all of our issued
        and outstanding shares for $150,000 for the purpose of completing a merger
        of
        Pathobiotek Diagnostics, Inc. and Investra Enterprises. Pathobiotek Diagnostics,
        Inc., a Texas corporation, was the surviving entity.
 
 Effective
        September 7, 2001, we implemented a reverse split of our common stock at
        the
        ratio of one post-consolidation share for each 40 pre-consolidation shares,
        except that no shareholder was reduced to less than 10 shares.
 
 On
        October 16, 2001, we completed the Plan and Agreement of Reorganization by
        and
        between Pathobiotek Diagnostics Inc., ATNG Acquisition, Inc., a Texas
        corporation, and ATNG, Inc., a Nevada corporation under which Pathobiotek
        Diagnostics Inc. issued 27,836,186 shares of its common stock as consideration
        for its wholly owned subsidiary, ATNG Acquisition, Inc. to acquire 100 percent
        of the issued and outstanding stock of ATNG, Inc., a Nevada
        corporation.
 
 Following
        the October 16, 2001 reorganization, ATNG Acquisition, Inc. and ATNG, Inc.
        merged. On October 17, 2001, we changed our name to ATNG, Inc. On September
        6,
        2003 we changed our domicile from Texas to Nevada.
 
 On
        August
        10, 2004, the Company acquired Blue Kiwi, Inc., a Michigan Corporation engaged
        in the marketing and sale of nutritional supplements. Blue Kiwi, Inc. currently
        markets two lines of products: Fatigue Pack and PMS Pack.
 
 In
        November 2004, the shareholders and directors of the Company approved a change
        in the name of the Company from ATNG, Inc. to Zann Corp., amended its Articles
        of Incorporation, increasing the number of authorized shares to 4,000,000,000
        and authorized a reverse stock split effective December 3, 2004 of one post
        consolidation share for every 900 pre-consolidation shares.
 
 Effective
        March 10, 2005, we effected a reverse split of our authorized, issued and
        outstanding common stock on the basis of one post-consolidation share for
        every
        350 pre-consolidation shares.
 
 On
        April
        19, 2005 the Sole Director approved a forward stock split of three shares
        for
        every one share held as of May 3, 2005. On May 9, 2005, the shareholders
        and
        directors of the Company amended its Articles of Incorporation to increase
        the
        authorized Common Stock to 4,000,000,000 and the authorized Preferred Stock
        to
        350,000,000.
 
 The
        accompanying financial statements reflect all of these changes above.
        Accordingly, all historical weighted average share and per share amounts
        have
        been restated to reflect all reverse and forward stock splits described
        above.
 
 On
        June
        27, 2005 the Company entered into an agreement to acquire approximately 42.6%
        of
        the Common and 6.52% of the Convertible Preferred Second Series of Sartam
        Industries, Inc., a Florida Corporation engaged in the manufacturing and
        sale of
        automatic riveting machines and the re-supply of riveting belts. Negotiations
        of
        the acquisition were terminated in December and all agreements to acquire
        Sartam
        Industries, Inc. were terminated as of December 31, 2005. The Company incurred
        a
        loss in the acquisition of $35,090 which has been charged to operations during
        the year ended December 31, 2005.
 On
          March 31, 2006, the Company and Sartam Industries
          ("Sartam") terminated the Exclusive Licensing Agreement date August 22,
          2005
          (the "Agreement") entered into by and between Sartam and the
          Company.
  The
          Agreement provided the Company an exclusive right
          to manufacture, market, distribute and sell patented Sartam products within
          the
          United States, Europe, and any other countries that fall under the jurisdiction
          of the Patent Cooperation Treaty. Sartam also agreed to transfer specific
          expertise related to the business in order to facilitate production. In
          exchange, Zann agreed to pay certain royalty rates on sales, finance Sartam's
          operations and use utmost efforts to manufacture, market and sell the licensed
          products.
  As
          a result of unexpected costs of the business
          relationship that resulted in the earlier termination of the Stock Purchase
          Agreement between Sartam and the Company, both parties believe there is
          no
          financial or business justification for continuing the Agreement under
          its
          current terms. The Company and Sartam mutually determined that it was each
          company's best interest to terminate Agreement.
  The
          Company does not expect to incur material early
          termination penalties as a result of the termination of
          Agreement.
  F-8
 *Table
            of Contents*
 
 The
        consolidated financial statements include the accounts of the Company, and
        its
        wholly-owned subsidiary, Blue Kiwi, Inc. Significant intercompany transactions
        have been eliminated in consolidation.
 
 Revenue
        Recognition
 
 Revenues
        are recognized in the period that services are provided. For revenue from
        product sales, the Company recognizes revenue in accordance with Staff
        Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which superceded
        Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
        ("SAB101"). SAB 101 requires that four basic criteria must be met before
        revenue
        can be recognized: (1) persuasive evidence of an arrangement exists; (2)
        delivery has occurred; (3) the selling price is fixed and determinable; and
        (4)
        collectibility is reasonably assured. Determination of criteria (3) and (4)
        are
        based on management's judgments regarding the fixed nature of the selling
        prices
        of the products delivered and the collectibility of those amounts. Provisions
        for discounts and rebates to customers, estimated returns and allowances,
        and
        other adjustments are provided for in the same period the related sales are
        recorded. The Company defers any revenue for which the product has not been
        delivered or is subject to refund until such time that the Company and the
        customer jointly determine that the product has been delivered or no refund
        will
        be required. Payments received in advance are deferred until the trusses
        are
        built and shipped to customers. There was no deferred revenue for the years
        ended December 31, 2005 and 2004.
 
 SAB
        104
        incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
        MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting
        for
        arrangements that may involve the delivery or performance of multiple products,
        services and/or rights to use assets. The effect of implementing EITF 00-21
        on
        the Company's consolidated financial position and results of operations was
        not
        significant.
 
 Advertising
 
 The
        Company follows the policy of charging the costs of advertising to expenses
        as
        incurred. The Company incurred $3,637 and $23,305 of advertising costs for
        the
        years ended December 31, 2005 and 2004, respectively.
 
 Cash
        Equivalents
 
 For
        purposes of the Statements of Cash Flows, the Company considers all highly
        liquid debt instruments purchased with a maturity date of three months or
        less
        to be cash equivalents.
  Income
        Taxes
 
 Income
        taxes are provided based on the liability method for financial reporting
        purposes in accordance with the provisions of Statement of Financial Accounting
        Standards No. 109, "Accounting for Income Taxes." Under this method deferred
        tax
        assets and liabilities are recognized for the future tax consequences
        attributable to differences between the financial statement carrying amounts
        of
        existing assets and liabilities and are measured using enacted tax rates
        expected to apply to taxable income in the years in which those temporary
        differences are expected to be removed or settled. The effect on deferred
        tax
        assets and liabilities of a change in tax rates is recognized in the statements
        of operations in the period that includes the enactment date.
  Earnings
        Per Share
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 128,
        "Earnings Per Share," specifying the computation, presentation and disclosure
        requirements of earnings per share information. Basic earnings per share
        have
        been calculated based upon the weighted average number of common shares
        outstanding. Stock options and warrants have been excluded as common stock
        equivalents in the diluted earnings per share because they are either
        antidilutive, or their effect is not material.
  F-9
 *Table
            of Contents*
 
 Property
        and Equipment
 
 Costs
        for
        property and equipment are accumulated in work in progress until assets are
        placed in service at which time the accumulated cost is depreciated or amortized
        over the estimated useful life of the asset. At December 31, 2005 and 2004,
        the
        Company had no Property and Equipment.
 
 Impairment
        of Long-Lived Assets
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 144 ("SFAS
        144"). The Statement requires that long-lived assets and certain identifiable
        intangibles held and used by the Company be reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of an
        asset
        may not be recoverable.
 
 Events
        relating to recoverability may include significant unfavorable changes in
        business conditions, recurring losses, or a forecasted inability to achieve
        break-even operating results over an extended period. The Company evaluates
        the
        recoverability of long-lived assets based upon forecasted undercounted cash
        flows. Should an impairment in value be indicated, the carrying value of
        intangible assets will be adjusted, based on estimates of future discounted
        cash
        flows resulting from the use and ultimate disposition of the asset. SFAS
        No. 144
        also requires assets to be disposed of be reported at the lower of the carrying
        amount or the fair value less costs to sell.
 
 Inventories
 
 Inventories
        consist of pre-packaged goods available for sale to customers. Cost is
        determined by the first-in, first-out method. Inventories are stated at the
        lower of cost or market determined by the first-in, first-out (FIFO) method.
        (Note D).
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect certain reported amounts and disclosures. Accordingly, actual results
        could differ from those estimates.
  Research
        and Development
 
 The
        Company accounts for research and development costs in accordance with the
        Financial Accounting Standards Board's Statement of Financial Accounting
        Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs."
        Under SFAS 2, all research and development costs must be charged to expense
        as
        incurred. Accordingly, internal research and development costs are expensed
        as
        incurred. Third-party research and developments costs are expensed when the
        contracted work has been performed or as milestone results have been achieved.
        Company-sponsored research and development costs related to both present
        and
        future products are expensed in the period incurred. The Company incurred
        no
        research and product development costs for the year ended December 31, 2005
        and
        2004.
 
 Fair
        Value of Financial Instruments
 
 Statement
        of Financial Accounting Standards No. 107, "Disclosures About Fair Value
        of
        Financial Instruments," requires disclosure of the fair value of certain
        financial instruments. The carrying value of cash and cash equivalents and
        short-term borrowings, as reflected in the balance sheet, approximate fair
        value
        because of the short-term maturity of these instruments.
 
 Concentrations
        of Credit Risk
 
 Financial
        instruments and related items which potentially subject the Company to
        concentrations of credit risk consist primarily of cash, cash equivalents
        and
        trade receivables. The Company places its cash and temporary cash investments
        with credit quality institutions. The Company's customers are not concentrated
        in any geographic areas and it periodically reviews its trade receivables
        in
        determining its allowance for doubtful accounts.
  F-10
 *Table
            of Contents*
 
 Stock
        Based Compensation
 
 In
        December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
        Compensation-Transition and Disclosure-an amendment of SFAS 123." This
        statement amends SFAS No. 123, "Accounting for Stock-Based Compensation,"
        to
        provide alternative methods of transition for a voluntary change to the fair
        value based method of accounting for stock-based employee compensation. In
        addition, this statement amends the disclosure requirements of SFAS No. 123
        to require prominent disclosures in both annual and interim financial statements
        about the method of accounting for stock-based employee compensation and
        the
        effect of the method used on reported results. The Company has chosen to
        continue to account for stock-based compensation using the intrinsic value
        method prescribed in APB Opinion No. 25 and related interpretations.
        Accordingly, compensation expense for stock options is measured as the excess,
        if any, of the fair market value of the Company's stock at the date of the
        grant
        over the exercise price of the related option. The Company has adopted the
        annual disclosure provisions of SFAS No. 148 in its financial reports for
        the year ended December 31, 2005 and 2004. The Company does not have any
        awards of stock-based employee compensation issued and outstanding at December
        31, 2005.
 
 On
        December 16, 2004, the Financial Accounting Standards Board (FASB) issued
        FASB
        Statement No. 123R (revised 2004), "Share-Based Payment" which is a revision
        of
        FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
        123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
        and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
        approach in Statement 123R is similar to the approach described in Statement
        123. However, Statement 123R requires all share-based payments to employees,
        including grants of employee stock options, to be recognized in the income
        statement based on their fair values. Pro-forma disclosure is no longer an
        alternative. On April 14, 2005, the SEC amended the effective date of the
        provisions of this statement. The effect of this amendment by the SEC is
        that
        the Company will have to comply with Statement 123R and use the Fair Value
        based
        method of accounting no later than the first quarter of 2006.
 
 Liquidity
 
 As
          shown
          in the accompanying financial statements, the Company incurred net losses
          of
          $2,936,924 and $10,564,658 for the years ended December 31, 2005 and 2004,
          respectively. As of December 31, 2005 the Company's current liabilities
          exceeded
          its current assets by $1,522,810.
 Comprehensive
        Income
 
 Statement
        of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
        Income," establishes standards for reporting and displaying of comprehensive
        income, its components and accumulated balances. Comprehensive income is
        defined
        to include all changes in equity except those resulting from investments
        by
        owners and distributions to owners. Among other disclosures, SFAS 130 requires
        that all items that are required to be recognized under current accounting
        standards as components of comprehensive income be reported in a financial
        statement that is displayed with the same prominence as other financial
        statements. The Company does not have any items of comprehensive income in
        any
        of the periods presented.
 
 Segment
        Information
 
 Statement
        of Financial Accounting Standards No. 131, "Disclosures about Segments of
        an
        Enterprise and Related Information" ("SFAS 131") establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires selected information for those segments to be presented
        in interim financial reports issued to stockholders. SFAS 131 also establishes
        standards for related disclosures about products and services and geographic
        areas. Operating segments are identified as components of an enterprise about
        which separate discrete financial information is available for evaluation
        by the
        chief operating decision maker, or decision-making group, in making decisions
        how to allocate resources and assess performance. The information disclosed
        herein materially represents all of the financial information related to
        the
        Company's principal operating segment.
  F-11
 *Table
            of Contents*
 
 Debt
        and Equity Securities
 
 The
        Company follows the provisions of Statement of Financial Accounting Standards
        No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
        The
        Company classifies debt and equity securities into one of three categories:
        held-to-maturity, available-for-sale, or trading. These security classifications
        may be modified after acquisition only under certain specified conditions.
        Securities may be classified as held-to-maturity only if the Company has
        the
        positive intent and ability to hold them to maturity. Trading securities
        are
        defined as those bought and held principally for the purpose of selling them
        in
        the near term. All other securities must be classified as available-for-sale.
        Held-to-maturity securities are measured at amortized cost in the consolidated
        balance sheets. Unrealized holding gains and losses are not included in earnings
        or in a separate component of capital. They are merely disclosed in the notes
        to
        the consolidated financial statements.
 
 Available-for-sale
        securities are carried at fair value on the consolidated balance sheets.
        Unrealized holding gains and losses are not included in earnings, but are
        reported as a net amount (less expected tax) in a separate component of capital
        until realized. Trading securities are carried at fair value on the consolidated
        balance sheets. Unrealized holding gains and losses for trading securities
        are
        included in earnings. Declines in the fair value of held-to-maturity and
        available-for-sale securities below their cost that are deemed to be other
        than
        temporary are reflected in earnings as realized losses.
 
 New
        Accounting Pronouncements
 
 In
        March
        2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
        Conditional Asset Retirement Obligations, an interpretation of FASB Statement
        No. 143", which requires an entity to recognize a liability for the fair
        value
        of a conditional asset retirement obligation when incurred if the liability's
        fair value can be reasonably estimated. The Company is required to adopt
        the
        provisions of FIN 47 no later than its last quarter of fiscal 2006. The Company
        does not expect the adoption of this Interpretation to have a material impact
        on
        its consolidated financial position, results of operations or cash flows.
 
 In
        May
        2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
        154,
        "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
        20
        and FASB Statement No. 3." SFAS 154 requires retrospective application to
        prior
        periods' financial statements for changes in accounting principle, unless
        it is
        impracticable to determine either the period-specific effects or the cumulative
        effect of the change. SFAS 154 also requires that retrospective application
        of a
        change in accounting principle be limited to the direct effects of the change.
        Indirect effects of a change in accounting principle, such as a change in
        non-discretionary profit-sharing payments resulting from an accounting change,
        should be recognized in the period of the accounting change. SFAS 154 also
        requires that a change in depreciation, amortization, or depletion method
        for
        long-lived, non-financial assets be accounted for as a change in accounting
        estimate effected by a change in accounting principle. SFAS 154 is effective
        for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005. Early adoption is permitted for accounting changes
        and
        corrections of errors made in fiscal years beginning after the date this
        Statement is issued. The Company does not expect the adoption of this SFAS
        to
        have a material impact on its consolidated financial position, results of
        operations or cash flows.
  On
        February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
        Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
        Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
        Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
        instruments that have embedded derivatives to be accounted for as a whole
        (eliminating the need to bifurcate the derivative from its host) if the holder
        elects to account for the whole instrument on a fair value basis. SFAS 155
        also
        clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
        statement is effective for all financial instruments acquired or issued in
        fiscal years beginning after September 15, 2006. The Company does not
        expect its adoption of this new standard to have a material impact on its
        financial position, results of operations or cash flows.
 
 Reclassifications
 
 Certain
        reclassifications have been made in prior year's financial statements to
        conform
        to classifications used in the current year.
  F-12
 *Table
            of Contents*
 
 **NOTE
        B - ACQUISITION**
  Blue
          Kiwi Acquisition:
  On
        August
        10, 2004, the Company acquired Blue Kiwi, Inc., a Michigan Corporation engaged
        in the marketing and sale of nutritional supplements. The Company entered
        into
        an acquisition agreement with Robert C. Simpson, the Company's president,
        chief
        executive officer, and majority shareholder, to purchase all of the issued
        and
        outstanding capital stock of Blue Kiwi Inc., a Michigan corporation, for
        the sum
        of $5 million, payable in monthly installments of up to 10 percent of our
        gross
        profit. The obligation to pay $5 million to Dr. Simpson in connection with
        the
        Blue Kiwi is expressly conditioned upon the Company generating profit. In
        the
        absence of profits, obligation to pay $5 million to Dr. Simpson is without
        effect. The obligation will not bear any interest.
 
 As
        a
        result of the Acquisition, Blue Kiwi became our wholly-owned subsidiary.
        During
        the year ended December 31, 2005 the agreement to pay $5 million to Dr. Simpson
        was terminated because it was determined that Blue Kiwi will never have gross
        profit sufficient to pay the amount The following is the summary of assets
        acquired and liabilities assumed and consideration paid relating to the
        transaction:
 
 
 Assets
                  acquiredCash
              
              $
              10,612Other
                  current assets
              
              
              3,256Total
                  Assets Acquired
              
              
              13,868Liabilities
                  Assumed:Accounts
                  payable
              
              
              9,548Due
                  to related parties
              
              
              229,600Total
                  Liabilities Acquired
              
              
              309,148Cash
                  paid
              
              
              (1,000
              )Goodwill
              
              $
              296,280
  The
        acquisition was accounted for as a purchase in accordance with SFAS 141 and,
        accordingly, the operating results of the acquired company have been included
        in
        the Company’s consolidated financial statements since the date of
        acquisition.
 **Sartam
            Acquisition and Discontinued Operations:**
 
 On
            June
            27, 2005 the Company acquired approximately 42.6% of the Common and 6.52%
            of the
            Convertible Preferred Second Series of Sartam Industries, Inc. for $200,000
            in
            cash and $4,480,000 in Promissory Notes. The acquisition of Sartam was
            accounted
            for using the purchase method in accordance with SFAS 141, "Business
            Combinations".
 
 In
            accordance with Financial Accounting Standard (SFAS) No. 141, Business
            Combinations, the total purchase price was allocated to the estimated
            fair value
            of assets acquired and liabilities assumed. The estimate of fair value
            of the
            assets acquired was based on management's estimates. The total purchase
            price
            was allocated to the assets and liabilities acquired as follows:
  Assets
                      acquiredCash
                  
                  $
                  395Inventory
                  
                  
                  88,757Property
                      and equipments-net
                  
                  
                  2,512,789Intangibles
                  
                  
                  2,587,640Total
                  
                  $
                  5,189,581Liabilities
                      assumed
                  
                  $
                  (509,581
                  )Cash
                      paid
                  
                  
                  (200,000
                  )Notes
                      payable
                  
                  
                  (4,480,000
                  )Total
                  
                  $
                  (5,189,581
                  )
  The
            results of operations for Sartam have been included in the consolidated
            statements of losses for the year ended December 31, 2005, since the
            date of
            acquisition. Sartam had the following operations for the period from
            June
            27,2005 to December 31, 2005:
 
 General
                      and Administrative Expense
                  
                  $
                  29,616Interest
                      Expense
                  
                  
                  2,791Depreciation
                      Expense
                  
                  
                  132,503Total
                  
                  $
                  164,910
 
 Sartam
            has been consolidated based on the significant percentage of ownership
            of common
            shares (42.6%), control of the Board of Directors and management control
            of
            operations in accordance with Financial Accounting Standard (SFAS) No.
            141,
            Business Combinations.
 
 The
            Company elected to not complete the acquisition of Sartam. The Company
            and
            Sartam agreed to rescind the acquisition effective December 31, 2005
            whereby the Company's control was relinquished and $4,480,000 note payable
            was
            extinguished in full. The $164,910 of expenses have been accounted for
            as a
            discontinuance of operations in the consolidated statements of losses
            for the
            year ended December 31, 2005 and the and the consolidated statements
            of losses
            for the year ended December 31, 2005 reflect a loss of $35,090 in connection
            with the acquisition.
  On
            March 31, 2006, the Company and Sartam Industries
            ("Sartam") terminated the Exclusive Licensing Agreement date August 22,
            2005
            (the "Agreement") entered into by and between Sartam and the Company. The Agreement provided the Company an exclusive
            right to
            manufacture, market, distribute and sell patented Sartam products within
            the
            United States, Europe, and any other countries that fall under the jurisdiction
            of the Patent Cooperation Treaty. Sartam also agreed to transfer specific
            expertise related to the business in order to facilitate production.
            In
            exchange, Zann agreed to pay certain royalty rates on sales, finance
            Sartam's
            operations and use utmost efforts to manufacture, market and sell the
            licensed
            products. As a result of unexpected costs of the business
            relationship that resulted in the earlier termination of the Stock Purchase
            Agreement between Sartam and the Company, both parties believe there
            is no
            financial or business justification for continuing the Agreement under
            its
            current terms. The Company and Sartam mutually determined that it was
            each
            company's best interest to terminate Agreement. The
            Company does not expect to incur material early termination penalties
            as a
            result of the termination of Agreement.
  F-13
 *Table
                of Contents*
 
 **NOTE
        C - GOODWILL AND OTHER INTANGIBLE ASSETS**
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 142
        "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142 addresses
        how intangible assets that are acquired individually or with a group of other
        assets should be accounted for in financial statements upon their acquisition.
        This statement requires goodwill amortization to cease and for goodwill to
        be
        periodically reviewed for impairment. Under SFAS No. 142, goodwill impairment
        occurs if the net book value of a reporting unit exceeds its estimated fair
        value. The Company's goodwill asset was with regard to the acquisitions of
        Blue
        Kiwi for $296,280. The test completed in the last quarter ended on December
        31,
        2004 indicated that the recorded book value of reporting unit exceeded its
        fair
        value, as determined by discounted cash flows. The decrease in fair value
        is a
        result of:
 -
                Significant
                    operating losses during the past six
                    months
 -
                Unanticipated
                    decline in revenues and
                    profitability
 -
                Loss
                    of key personnel
 As
        a
        result of these events and circumstances, Company management believes that
        more
        likely than not the fair value of the reporting unit's goodwill has been
        reduced
        below its carrying value. As a result, management performed an evaluation
        of the
        reporting unit's tangible and intangible assets for purposes of determining
        the
        implied fair value of goodwill at December 31, 2004. Upon completion of the
        assessment, management recorded a non-cash impairment charge of $(296,280),
        net
        of tax, or $(23.16) per share, to reduce the carrying value of goodwill in
        this
        reporting unit to its estimated value of $0. Considerable management judgment
        is
        necessary to estimate fair value.
 
 Accordingly,
        actual results could vary significantly from managements' estimates.
 
 **NOTE
          D - INVENTORIES**
  Inventories
          are stated at the lower of cost or market determined by the first-in, first-out
          (FIFO) method. Inventories consist of pre-packaged available for sale to
          customers. There were no inventories as of December 31, 2005.
 
 
 **NOTE
          E - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**
 
 Accounts
          Payable and Accrued Liabilities at December 31, 2005 consists of the
          following:
 Accounts
                    Payable
                
                $
                597,020Accrued
                    Salaries
                
                
                119,006Payroll
                    Taxes
                
                
                234,930Total
                
                $
                950,956
 F-14
 *Table
            of Contents*
  **NOTE
          F - NOTES PAYABLE**
  Notes
          payable at December 31, 2005 are as follows:
 Convertible
                      Debenture, due January 1, 2006, interest 10%, payable $1,000
                      per month,
                      convertible into 15,000 preferred shares-Series A on a basis
                      of $.663
                      cents for each share converted including accrued interest of
                      $814. At
                      December 31, 2005, the Company was in default under the terms
                      of the
                      Convertible Debenture. The Debenture holder has agreed to payment
                      in full
                      by April 12, 2006
                
                $
                98,541Promissory
                    Note, Non-Interest Bearing, due in August 2005, collateralized
                    by 7,000
                    shares of Preferred Series A. At December 31, 2005, the Company
                    was in
                    default under the terms of the Promissory Note. The Note holder
                    was paid
                    in full on February 24, 2006.
                
                
                31,500Promissory
                    Note, interest 10%, due December 31, 2005. Including accrued
                    interest of
                    $833. At December 31, 2005, the Company was in default under
                    the terms of
                    the Promissory Note. The Note holder agreed to a month to month
                    extension
                    until paid
                
                
                25,833Total
                
                $
                155,874
 **NOTE
        G - CAPITAL STOCK**
 
 In
        November, 2004, the Shareholders and Directors of the Company approved a
        change
        in the name of the Company from ATNG, Inc. to Zann Corp., amended its Articles
        of Incorporation, increasing the number of authorized shares to 4,000,000,000,
        and authorized a reverse stock split effective December 3, 2004 of one post
        consolidation share for every 900 pre-consolidation shares.
 
 Effective
        March 10, 2005, we effected a reverse split of our authorized, issued and
        outstanding common stock on the basis of one post-consolidation share for
        each
        350 pre-consolidation shares.
 
 On
        April
        19, 2005 the Sole Director approved a forward stock split of three shares
        for
        every one share held as of May 3, 2005. On May 9, 2005, the shareholders
        and
        directors of the Company amended its Articles of Incorporation to increase
        the
        authorized Common Stock to 4,000,000,000 and the authorized Preferred Stock
        to
        350,000,000.
 
 The
        accompanying financial statements reflect these changes. Accordingly, all
        historical weighted average share and per share amounts have been restated
        to
        reflect the reverse and forward stock splits.
 
  **COMMON
          STOCK**
 
 The
          Company is authorized to issue 4,000,000,000 shares of common stock, with
          $0.001
          par value per share. As of December 31, 2005 the Company has issued and
          outstanding 32,645,359 shares of common stock with par value of $0.001
          per
          share.
 
 During
          the years ended December 31, 2005 and 2004, the Company had the following
          common
          stock transactions:
 Description
                  
                  Shares
                  
                  2005
                  
                  Shares
                  
                  2004Fair
                      Market Value of Stock issued under Employee stock incentive
                      program
                  
                  
                  14,192,327
                  
                  $
                  830,616
                  
                  
                  338,484
                  
                  $
                  4,559,600Stock
                      Subscription Receivable
                  
                  
                  
                  
                  
                  39,616
                  
                  
                  
                  
                  
                  (39,616
                  )Total
                  
                  
                  
                  
                  
                  870,232
                  
                  
                  
                  
                  
                  4,519,984Cash
                      Received
                  
                  
                  
                  
                  
                  (397,522
                  )
                  
                  
                  
                  
                  (1,741,499
                  )Net
                      expense
                  
                  
                  
                  
                  $
                  472,710
                  
                  
                  
                  
                  $
                  2,778,485Common
                      Stock Issued for Services
                  
                  
                  17,793,634
                  
                  $
                  594,098
                  
                  
                  319,332
                  
                  $
                  3,934,449
 F-15
 *Table
              of Contents*
 The
          Company accounts for its employee stock-based compensation plans under
          Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
          Issued
          to Employees. The Company granted 14,192,327 and 338,484 options to purchase
          common stock to employees in the years ended December 31, 2005 and 2004,
          respectively. All options vest immediately, have an exercise price of 90
          percent
          of market value on the date of grant and expire 10 years from the date
          of grant.
          All options are exercised on the day of grant. At December 31, 2005 and
          2004 the
          Company recorded $870,232 and $4,519,984 for the 14,192,327 and 112,613
          shares
          issued to employees. The Company also charged expenses of $472,710 and
          $2,778,485 relating to these issuances.
 All
          of
          the above share information has been adjusted to reflect the post consolidation
          of 900:1 on December 3, 2004 and 350:1 on March 10, 2005 and the forward
          split
          of 3:1 on May 3, 2005.
 
 On
          December 8, 2005 the Company entered into a Standby Equity Distribution
          Agreement (Note M). The agreement provides for, among other things, the
          issuance
          of 4,000,000 warrants to purchase Common stock. The warrants are excercisable
          until December 8, 2009 at a price of $.0388 per share. The warrants were
          valued
          using the Black Scholes formula and the fair value of warrants of $111,324
          has
          been included in Selling, General, and Administrative Expense for the year
          ended
          December 31, 2005.
 
 **PREFERRED
          STOCK**
 
 SERIES
          A
 Series
          A
          shares are convertible into 10 shares of common stock. The Series A preferred
          stock will have one vote per share on all matters submitted to a vote of
          the
          holders of common stock, including, without limitation, the election of
          directors. At December 31, 2005, there were 2,447,700 shares issued and
          outstanding.
 During
        the year ended December 31, 2004, the Company issued an aggregate of 154,700
        shares of series A preferred stock in exchange of debt for $212,726 and
        subscription payable of $2,809,824 .
 
 During
        the year ended December 31, 2004, the Company issued an aggregate of 1,283,000
        shares of series A preferred stock for various professional services valued
        at
        $244,650. The Company valued the shares issued at $0.19 per share, which
        approximated the fair value of the services rendered. The compensation costs
        of
        $244,650 were charged to operations during the year ended December 31,
        2004 **.**
 
 During
        the year ended December 31, 2005, the Company cancelled 983,000 shares valued
        at
        $0.11 previously issued for services by employees and other professionals
        at an
        aggregate of $110,050 and issued 993,000 shares valued at $0.31 to employees
        and
        professionals valued at $312,604. The net increase of 10,000 shares with
        a value
        of $202,554 was charged to operations during the year ended December 31,
        2005.
 
 At
        December 31, 2005 the Company recorded 15,000 shares of Preferred Series
        A at a
        value of $9,100 as shares to be issued in connection with the employment
        agreement of one of the Officers/Director.
 
 SERIES
        B
 Series
        B
        Preferred Stock is convertible into 1 share of common stock. The Series B
        Preferred Stock will have one vote per share on all matters submitted to
        a vote
        of the holders of common stock, including, without limitation, the election
        of
        directors. During the year ended December 31, 2005 the Company issued 392,501
        shares of Series B Preferred Stock as follows:
 
 Description
              
              Shares
              
              AmountIssued
                  for Cash
              
              
              267,001
              
              $
              267,001Issued
                  for Debt
              
              
              107,000
              
              
              37,412Issued
                  for Services
              
              
              18,500
              
              
              327Total
              
              
              392,501
              
              $
              304,740
 
 Effective
        January 31, 2006, pursuant to the Certificate of Designation of our Series
        B
        Preferred Stock, our board of directors declared a dividend of shares of
        Series
        B Preferred Stock to holders of shares of Series B Preferred Stock outstanding
        as of December 31, 2005. Pursuant to such Certificate of Designation, each
        such
        holder of Series B Preferred Stock received a dividend consisting of such
        number
        of shares of Series B Preferred Stock equal to 10 percent of the aggregate
        number of shares of Series B Preferred Stock held by such holder as of December
        31, 2005. An aggregate of 39,251 shares of Series B Preferred Stock was issued
        by the Company pursuant to the dividend.
  F-16
 *Table
            of Contents*
  
 SERIES
        C
 Series
        C
        Preferred Stock is not convertible into shares of common stock. The Series
        C
        preferred stock has voting rights equal to 500 votes per share on all matters
        submitted to a vote of the holders of common stock, including, without
        limitation, the election of directors.
 During
          the year ended December 31, 2004, 5,000,000 shares were issued for services.
          At
          December 31, 2005 and 2004 there were 10,000,000 shares of Series C Preferred
          Stock issued and outstanding respectively.
  **NOTE
        H - NON QUALIFIED STOCK COMPENSATION PLAN**
 
 In
        January 2004, the company authorized the Employee Stock Incentive Plan ("ESIP")
        No. 1 for 2004 and the Non-Employee Director and Consultant's Retainer Plan
        ("NDCRP") No. 1 for 2004. In June 2004, the company authorized the Employee
        Stock Incentive Plan ("ESIP") NO. 2 for 2004 and the Non-Employee Director
        and
        Consultant’s Retainer Plan ("NDCRP") No. 2 for 2004. In September 2004, the
        company authorized Post-Effective Amendment No. 1 to the Employee Stock
        Incentive Plan ("ESIP") NO. 2 for 2004 and the Non-Employee Director and
        Consultant's Retainer Plan ("NDCRP") No. 2 for 2004. In November 2004, the
        company authorized Post-Effective Amendment No. 2 to the Employee Stock
        Incentive Plan ("ESIP") NO. 2 for 2004 and the Non-Employee Director and
        Consultant's Retainer Plan ("NDCRP") No. 2 for 2004. Also in November 2004,
        the
        company authorized Post-Effective Amendment No. 3 to the Employee Stock
        Incentive Plan ("ESIP") NO. 2 for 2004 and the Non-Employee Director and
        Consultant's Retainer Plan ("NDCRP") No. 2 for 2004. In December 2004, the
        company authorized Post-Effective Amendment No. 4 to the Employee Stock
        Incentive Plan ("ESIP") NO. 2 for 2004 and the Non-Employee Director and
        Consultant's Retainer Plan ("NDCRP") No. 2 for 2004.
 
 In
        May
        2005, the Company authorized the Non-Employee Directors and Consultants Retainer
        Plan ("NDCRP") for the Year 2005.
 
 The
        purpose of the NDRCP is to attract non-employee directors and consultants
        who
        are capable of improving the success of the Company by providing a direct
        economic interest to Company performance. Under the terms of the plan,
        non-employee directors or consultants may be compensated through the issuance
        of
        Company stock at Market Value on the date of issuance. The plan is administered
        by the Company's Board of Directors.
  **NOTE
        I - WARRANTS**
 
 The
        following table summarizes the changes in warrants outstanding and the related
        prices for the shares of the Company's common stock issued to non-employees
        of
        the Company. These warrants were granted in lieu of cash compensation for
        services performed:
 
 Warrants
                  Outstanding
              
              Warrants
                  ExercisableExercise
                Price
              
              Number
                Outstanding
              
              Weighted
                  Average
                Remaining
                Contractual
                  Life
                (Years)
              
              Weighted
                Average
                  Price
              
              Number
                Exercisable
              
              Weighted
                  Average
                  Life
                    (Years)$
                  7.20
              
              
              100,000
              
              
              .5
              
              $
              7.20
              
              
              100,000
              
              $
              .5$
                  0.0388
              
              
              4,000,000
              
              
              4.0
              
              $
              0.0388
              
              
              4,000,000
              
              $
              4.0
 
 Transactions
        involving warrants are summarized as follows:
  F-17
 *Table
            of Contents*
  Weighted
                  AverageNumber
                  of Shares
              
              Price
                  Per ShareOutstanding,
                  December 31. 2003
              
              
              100,000
              
              $
              7.20Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -Outstanding,
                  December 31, 2004
              
              
              100,000
              
              $
              7.20Granted
              
              
              4,000,000
              
              $
              0.0388Exercised
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -Outstanding,
                  December 31, 2005
              
              
              4,100,000
              
              $
              0.2135
  In
        2001,
        the Company issued 236,068 warrants to purchase shares of common stock as
        partial consideration for financial services in conjunction with mergers
        and
        reorganizations, 136,068 warrants expired on February 14, 2001, and 100,000
        warrants are exercisable at $7.20 per share until June 14, 2006.
 
 On
        December 8, 2005 the Company issued 4,000,000 warrants in conjunction with
        a
        Standby Equity Distribution Agreement (Note M). The warrants are exercisable
        through December 8, 2009 at an exercise price of $0.0388. The fair
        value of the warrants is
        calculated using the Black Scholes formula. The fair
        value of $111,324 has been included in Selling, General and
        Administrative Expense for the year ended December 31, 2005.
 
  **NOTE
        J - INCOME TAXES**
  The
        Company has adopted Financial Accounting Standard number 109, which requires
        the
        recognition of deferred tax liabilities and assets for the expected future
        tax
        consequences of events that have been included in the financial statement
        or tax
        returns. Under this method, deferred tax liabilities and assets are determined
        based on the difference between financial statements and tax basis of assets
        and
        liabilities using enacted tax rates in effect for the year in which the
        differences are expected to reverse. Temporary differences between taxable
        income reported for financial reporting purposes and income tax purposes
        are
        insignificant.
  For
        income tax reporting purposes, the Company's aggregate unused net operating
        losses approximate $39,000,000, which expires through 2024, subject to
        limitations of Section 382 of the Internal Revenue Code, as amended. The
        deferred tax asset related to the carry forward is approximately $11,200,000.
        The Company has provided a valuation reserve against the full amount of the
        net
        operating loss benefit, since in the opinion of management based upon the
        earning history of the Company, it is more likely than not that the benefits
        will not be realized.
 
 Components
        of deferred tax assets as of December 31, 2005 are as follows:
  Non-Current:Net
                      operating loss carry forward
                  
                  $
                  13,650,000Valuation
                      allowance
                  
                  
                  (13,650,000
                  )Net
                      deferred tax asset
                  
                  $
                  -
 
 **NOTE
        K - EARNINGS (LOSSES) PER COMMON SHARE**
  The
        following table presents the computation of basic and diluted loss per
        share:
 
 2005
                
                2004Net
                    (loss) available for common stockholders
                
                $
                2,936,924
                
                $
                (10,564,658
                )Basic
                    and fully diluted (loss) per share
                
                $
                (0.14
                )
                $
                (275.25
                )Weighted
                    average common shares outstanding
                
                
                20,569,003
                
                
                38,382
 For
          the
          years ended December 31, 2005 and 2004, 4,100,000 potential
          shares and 100,000 potential shares, respectively, were excluded from the
          shares used to calculate diluted earnings per share as their inclusion
          would
          reduce net loss per share.
  F-18
 *Table
            of Contents*
 
 **NOTE
        L - COMMITMENTS AND CONTINGENCIES**
 
 On
        January 21, 2005, plaintiff Investrend Communications, Inc. d/b/a Investrend
        Research commenced an action via Verified Complaint in the Supreme Court
        of the
        State of New York, County of Queens, against the Company. The complaint,
        through
        three causes of action, essentially alleged a breach of contract. The parties
        have executed an agreement to settle the matter for the total amount of $7,500,
        to be paid in six (6) installments. As of March 30, 2006 there have been
        five
        payments made totaling $6,250.00. ****
  On
          March
          31, 2006, Zann Corp. and Sartam Industries terminated the Exclusive Licensing
          Agreement dated August 22, 2005 entered into by and between Sartam and
          Zann
          Corp.  The Agreement provided the Company an exclusive right to
          manufacture, market, distribute and sell patented Sartam products within
          the
          United States, Europe, and any other countries that fall under the jurisdiction
          of the Patent Cooperation Treaty.  Sartam also agreed to transfer specific
          expertise related to the business in order to facilitate production. In
          exchange,  Zann agreed to pay certain royalty rates on sales, finance
          Sartam’s operations and use utmost efforts to manufacture, market and sell the
          licensed products. As a result of unexpected costs of the business relationship
          that resulted in the earlier termination of the Stock Purchase Agreement
          between
          Sartam and Zann Corp., both parties believe there is no financial or business
          justification for continuing the Agreement under its current terms. Zann
          Corp.
          and Sartam mutually determined that it was in each company’s best interest to
          terminate the Agreement.
 Securities
        Act Violations
 During
          the year ended December 31, 2004, the Company filed a series of Registration
          Statements on SEC Form S-8 registering shares of the Company's common stock
          .
          The Company failed to include the required consents from its auditors as
          required under the Securities Act of 1933 in connection with the filings
          resulting in the issuance of approximately 497,000,000 registered shares
          in
          violation of Section 5 of the Securities Act and state securities laws.
          As a
          result, the Company may have violated federal and state securities laws
          in
          connection with the issuance of those shares.
  In
        the
        event that any of the exemptions from registration with respect to the issuance
        of the Company's common stock under federal and applicable state securities
        laws
        were not available, the Company may be subject to claims by federal and state
        regulators for any such violations. In addition, if any purchaser of the
        Company's common stock were to prevail in a suit resulting from a violation
        of
        federal or applicable state securities laws with respect to the unavailability
        of such exemption, the Company could be liable to return the amount paid
        for
        such securities with interest thereon, less the amount of any income received
        thereon, upon tender of such securities, or for damages if the purchaser
        no
        longer owns the securities. As of the date of these financial statements
        , the
        Company is not aware of any alleged specific violation or the likelihood
        of any
        claim. There can be no assurance that litigation asserting such claims will
        not
        be initiated, or that the Company would prevail in any such
        litigation.
 
 The
        Company is unable to predict the extent of its ultimate liability with respect
        to any and all future securities matters. The costs and other effects of
        any
        future litigation, government investigations, legal and administrative cases
        and
        proceedings, settlements, judgments and investigations, claims and changes in
        this matter could have a material adverse effect on the Company's financial
        condition and operating results. On March 31, 2006, the Company and Sartam
        Industries ("Sartam") terminated the Exclusive Licensing Agreement date August
        22, 2005 (the "Agreement") entered into by and between Sartam and the Company.
        The Agreement provided the Company an exclusive right to
        manufacture, market, distribute and sell patented Sartam products within
        the
        United States, Europe, and any other countries that fall under the jurisdiction
        of the Patent Cooperation Treaty. Sartam also agreed to transfer specific
        expertise related to the business in order to facilitate production. In
        exchange, Zann agreed to pay certain royalty rates on sales, finance Sartam's
        operations and use utmost efforts to manufacture, market and sell the licensed
        products.As a result of unexpected costs of the business
        relationship that resulted in the earlier termination of the Stock Purchase
        Agreement between Sartam and the Company, both parties believe there is no
        financial or business justification for continuing the Agreement under its
        current terms. The Company and Sartam mutually determined that it was each
        company's best interest to terminate Agreement.The
        Company does not expect to incur material early termination penalties as
        a
        result of the termination of Agreement.
 
 
 **NOTE
        M- SIGNIFICANT TRANSACTIONS**
 
 On
        December 8, 2005, the Company entered into a Standby Equity Distribution
        Agreement (the "AGREEMENT") with Cornell Capital Partners, LP ("CORNELL").
        Under
        the Agreement, Cornell has committed to provide to us up to $5 million in
        cash
        to be drawn down over a 24-month period at our discretion, subject to certain
        conditions including without limitation, our filing and maintenance of an
        effective registration statement with the Securities and Exchange Commission
        covering the sale of the shares issued to Cornell in connection with the
        transactions contemplated in the Agreement. In connection with the execution
        of
        the Agreement, we also (a) paid a structuring fee of $12,500 in cash to an
        affiliate of Cornell, (b) paid a due diligence fee of $5,000 in cash to Cornell,
        and (c) issued 1,142,857 shares of common stock to Cornell as a commitment
        fee.
        The shares were issued to Cornell on November 30, 2005 and valued at $0.0388
        per
        share. The total value of $44,286 has been included in Selling, General and
        Administrative expense for the year ended December 31, 2005. In addition,
        Robert
        Simpson, our sole officer and director entered into a lock-up agreement pursuant
        to which Mr. Simpson agreed, among other things, not to sell any of the
        Company’s securities without the prior written consent of Cornell during the
        24-month term of the Agreement, except in accordance with Rule 144(e)
        promulgated under the Securities Act of 1933, as amended.
  The
        maximum amount of any drawdown under the Agreement is $250,000, and there
        must
        be at least five (5) trading days between each drawdown. In consideration
        for
        each drawdown, the Company will issue to Cornell such number of shares of
        common
        stock equal to the amount of the drawdown divided by 95% of the 5-day trailing
        average closing bid price per share following the date of each drawdown request.
        In connection with each drawdown, we will also pay (a) a structuring fee
        of $500
        in cash to an affiliate of Cornell, and (b) a commitment fee in cash of 5%
        of
        the amount of each drawdown to Cornell.
  F-19
 *Table
            of Contents*
  Pursuant
        to the Agreement, the Company also issued to Cornell a Warrant to purchase
        up to
        4,000,000 shares of common stock at an exercise price per share equal to
        $0.0388. The warrant is exercisable by Cornell until December 8, 2009.
  Pursuant
        to the Agreement, we also entered into a Registration Rights Agreement with
        Cornell pursuant to which we agreed to prepare and file a registration statement
        covering the shares issued in connection with the Agreement.
  In
        connection with the Agreement, the Company also entered into a Placement
        Agent
        Agreement on December 8, 2005 with Monitor Capital, Inc. ("MONITOR"), a
        registered broker-dealer, pursuant to which among other things, Monitor acted
        as
        placement agent in connection with the transactions contemplated by the
        Agreement. The Company issued to Monitor 285,714 shares of common stock as
        a fee
        under the Placement Agent Agreement. Monitor was granted piggy-back registration
        rights with respect to such shares.
  The
        Company executed an Employment Agreement with the President and Sole Director
        effective October 1, 2005. The agreement provides for an annual salary of
        $125,000 and a cash bonus upon signing of $302,000. The bonus of $302,000
        and
        salary for the months of October through December of $31,250 has been accrued
        and included in accrued salaries in the accompanying financial
        statements .
  **NOTE
        N - BUSINESS CONCENTRATION**
 
 The
        Company does not have any customers which accounted for more than 10% of
        total
        sales. Purchases from the Company's three major suppliers approximated $12,352
        or 100% of total purchases for the year ended December 31, 2004. No purchases
        were made in 2005.
  **NOTE
        O - RELATED PARTY TRANSACTIONS**
 
 The
        Company advances funds to related entities for business development or
        reimbursement of expenses. During the year ended December 31, 2005, the Company
        has reimbursed $102,381 to related parties.
 
 The
        Company provides management and consulting services under agreements with
        entities controlled by the Company's President. The Company's management
        has
        determined that the collectibility and length of time to collect the amount
        due
        from these entities can not be reasonably assured. Accordingly, revenues
        are
        recognized as collected in connection with the services rendered. During
        the
        years ended December 31, 2005 and 2004, the Company did not receive nor
        recognize revenues in connection with providing these services.
 
 At
        December 31, 2005 and 2004 the Company had accounts payable-related party
        outstanding balances of $83,202 and $1,600 respectively. These amounts represent
        funds advanced by an Officer for operating expenses.
 
 During
        the years ended December 31, 2005 and 2004 the employees of the Company were
        paid through entities owned by the Company's President. These entities are
        responsible for payroll, all payroll taxes, health insurance plans and all
        other
        employee benefits. During the years ended December 31, 2005 and 2004 the
        Company
        paid these entities approximately $503,302 and $314,612 respectively, which
        has
        been charged to operations. At December 31, 2005, $2,103 was owed to the
        related
        entity (included in accounts payable) for payroll expenses. There were no
        amounts due to these entities as of December 31, 2004.
  **NOTE
        P - INTELLECTUAL PROPERTY**
 
 During
        the year ended December 31, 2005 the Company acquired the following patents
        by
        assignment. The assignment fees of $120 and legal fees of $3,257 were paid
        by
        the Company and charged to expense.
  F-20
 *Table
            of Contents*
 
 Compression
        Technology, Patent Number US 6,724,326 B1, original filing date January 16,
        2003, Date Patent Issued April 20, 2004, patent re-assigned to ZANN Corp.
        on
        February 21, 2005, serial number 10/345,834;
 
 Human
        Blood Bacterium, Patent Number US 6,255,467 B1, original filing date November
        2,
        1998, Date Patent Issued July 3, 2001, patent re-assigned to ZANN Corp. on
        February 21, 2005, serial number 09/187,946; and
 
 Human
        and
        Marmoset Activating Viruses, Patent Number US 6,177,081 B1, original filing
        date
        July 28, 1997, Date Patent Issued January 23, 2001, patent re-assigned to
        ZANN
        Corp. on February 21, 2005, serial number 08/901,128.
 
 Each
        of
        these patents are for a term of 20 years from the original date filed.
        Maintenance fees are due in years 4, 8 and 12 from the original issue date.
 
 The
        company executed a Letter of Intent on January 13, 2006 to assign the US
        Patent
        No. 6,225,467 for Human Blood Bacterium and the US Patent No. 6,177,081 for
        Human & Marmoset Activating Viruses to Palmera Holdings, Inc. for a cash
        payment of $15,000 and 100,000 shares of Palmera Holdings, Inc. The LOI provides
        for, among other things, that the Company and Palmera will execute definitive
        contracts to complete the payments and assignments. As of March 30, 2006,
        the
        stock has not been received by Zann Corp., and the Patents have not been
        been
        re-assigned
  **NOTE
        Q - CONSULTING INCOME**
 
 On
        June
        30, 2004 the Company received 10,714,286 shares of Series A Preferred Stock
        from
        an unrelated public company for management services rendered during the first
        six months of the year valued at $150,000. On November 29, 2004 the Company
        sold
        the shares to an unrelated entity for cash $150,000. The Company recognized
        $150,000 as miscellaneous income for the year ended December 31,
        2004.
  **NOTE
        R - SUBSEQUENT EVENT**
 
 On
        February 17, 2006 the Chief Executive Officer, Dr. Robert Simpson, executed
        an
        agreement to sell 10,000,000 shares of Class C Preferred Stock for $500,000
        in
        exchange for $50,000 cash and a promissory note bearing interest at 5% per
        annum
        with principal payments of $112,500 due on May 3, 2006, August 3, 2006, November
        3, 2006 and February 3, 2007. This agreement effectively transfers voting
        control to the new Purchaser as the Class C Preferred Stock are entitled
        to vote
        500 shares of common for each share of Class C held.
 
 The
        Agreement provides, among other things, that the Purchaser shall assure that
        the
        Company will discharge the liabilities of the Company existing on February
        3,
        2006 as they mature and not allow the liabilities to become delinquent or
        accrue
        penalties thereon.
 Effective
          January 31, 2006, pursuant to the Certificate of Designation of our Series
          B
          Preferred Stock, our board of directors declared a dividend of shares of
          Series
          B Preferred Stock to holders of shares of Series B Preferred Stock outstanding
          as of December 31, 2005. Pursuant to such Certificate of Designation, each
          such
          holder of Series B Preferred Stock received a dividend consisting of such
          number
          of shares of Series B Preferred Stock equal to 10 percent of the aggregate
          number of shares of Series B Preferred Stock held by such holder as of
          December
          31, 2005. An aggregate of 39,251 shares of Series B Preferred Stock was
          issued
          by the Company pursuant to the dividend.
 
 On
          March
          31, 2006, Zann Corp. and Sartam Industries terminated the Exclusive Licensing
          Agreement dated August 22, 2005 entered into by and between Sartam and
          Zann
          Corp. The Agreement provided the Company an exclusive right to manufacture,
          market, distribute and sell patented Sartam products within the United
          States,
          Europe, and any other countries that fall under the jurisdiction of the
          Patent
          Cooperation Treaty. Sartam also agreed to transfer specific expertise related
          to
          the business in order to facilitate production. In exchange, Zann agreed
          to pay
          certain royalty rates on sales, finance Sartam’s operations and use utmost
          efforts to manufacture, market and sell the licensed products. As a result
          of
          unexpected costs of the business relationship that resulted in the earlier
          termination of the Stock Purchase Agreement between Sartam and Zann Corp.,
          both
          parties believe there is no financial or business justification for continuing
          the Agreement under its current terms. Zann Corp. and Sartam mutually determined
          that it was in each company’s best interest to terminate the
          Agreement.
 
 On
          January 6, 2006 and March 7, 2006 the Company issued 500,000 and 800,000
          shares,
          respectively, of common stock to consultants for services. The value of
          the
          services was calculated using the average of bid and asked price for the
          common
          shares on the date of issuance and such value of $37,650 was charged to
          operations.
  **NOTE
        S- GOING CONCERN**
 
 The
        accompanying statements have been prepared on a going concern basis, which
        contemplates the realization of assets and the satisfaction of liabilities
        in
        the normal course of business. As shown in the consolidated financial statements
        during the years ended December 31, 2005 and 2004 the Company incurred losses
        of
        $2,936,924 and $10,564,658 respectively. The Company’s current liabilities
        exceeded its current assets by $1,522,810 as of December 31, 2005. These
        factors
        among others may indicate that the Company will be unable to continue as
        a going
        concern for a reasonable period of time.
  F-21
 *Table
            of Contents*
 
 The
        Company's existence is dependent upon management's ability to develop profitable
        operations and resolve its liquidity problems. Management anticipates the
        Company will attain profitable status and improve its liquidity through the
        continued developing, marketing and selling of its products and additional
        equity investment in the Company. The accompanying financial statements do
        not
        include any adjustments that might result should the Company be unable to
        continue as a going concern.
 
 In
        order
        to improve the Company's liquidity, the Company is actively pursing additional
        equity financing through discussions with investment bankers and private
        investors. There can be no assurance the Company will be successful in its
        effort to secure additional equity financing.
 
 If
        operations and cash flows continue to improve through these efforts, management
        believes that the Company can continue to operate. However, no assurance
        can be
        given that management's actions will result in profitable operations or the
        resolution of its liquidity problems.
   F-22