**U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-QSB**
  
 x
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        quarterly period ended March 31, 2006
 
 o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 **COMMISSION
        FILE NUMBER: 000-28519**
 
 **ZANN
        CORP.**
 (Name
        of
        small business issuer in its charter)
 
 **Nevada**
              **76-0510754**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**1403
                  US Highway 27 South, Clermont, Florida**
              **34714**(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 **(352)
        394-6629**
 (Issuer’s
        telephone number)
 
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes x No o
  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
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date:  As
        of May
        1, 2006, the issuer had 33,945,359 shares of its common stock issued and
        outstanding.
 
 Transitional
        Small Business Disclosure Format (check one): Yes o No x
  
 
  **TABLE
        OF CONTENTS**
 
  PART
                  I - FINANCIAL INFORMATION
              1Item
                  1.
              Financial
                  Statements (Unaudited)
              1Condensed
                  Consolidated Balance Sheets
              1Condensed
                  Consolidated Statement of Losses
              2Condensed
                  Consolidated Statements of Cash
                  Flow
              3Notes
                  for Condensed Consolidated Financial
                  Statements
              4Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of
                  Operation
              14Item
                  3
              Controls
                  and Procedures
              19PART
                  II - OTHER INFORMATION
              19Item
                  1.
              Legal
                  Proceedings
              19Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              19Item
                  3.
              Defaults
                  Upon Senior Securities
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              20Item
                  5.
              Other
                  Information
              20Item
                  6.
              Exhibits
              20SIGNATURES
              22CERTIFICATION
                  PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION
                  PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION
                  PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION
                  PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
  *Table
            of Contents*
  **PART
        I - FINANCIAL INFORMATION**
 
 **ITEM
                  1.**
              **FINANCIAL
                  STATEMENTS.**
 
 ZANN
        CORP.
 CONDENSED
        CONSOLIDATEDBALANCE SHEET
 (UNAUDITED)
 
 March
                  31, 2006ASSETSCurrent
                  AssetsTotal
                  Current Assets
              
              $
              -Total
                  Assets
              
              $
              -LIABILITIES
                  AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
                  LiabilitiesAccounts
                  payable and accrued liabilities (Note D)
              
              $
              1,070,926Accounts
                  payable - related party (Note K)
              
              
              258,634Accrued
                  liability- officer
              
              
              333,250Notes
                  payable - others (Note E)
              
              
              125,456Total
                  Current Liabilities
              
              
              1,788,266Total
                  Liabilities
              
              
              1,788,266Deficiency
                  in Stockholders' Equity (Note F)Common
                  stock, $.001 par value, 4,000,000,000 shares authorized 33,945,359
                  issued
                  and outstanding
              
              
              33,945Preferred
                  stock,Series
                  A, 2,647,700 shares issued and outstanding
              
              
              2,648Series
                  B, 472,011 shares issued and outstanding
              
              
              472Series
                  C, 10,000,000 issued and outstanding
              
              
              10,000Series
                  A to be issued for Services
              
              
              9,100Additional
                  paid-in-capital
              
              
              37,606,709Accumulated
                  deficit
              
              
              (39,451,140
              )Total
                  Deficiency in Stockholders' Equity
              
              
              (1,788,266
              )Total
                  Liabilities and Deficiency in Stockholders' Equity
              
              $
              -
 
 See
        accompanying notes to unaudited condensed consolidated financial
        statements
  -
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            -
 *Table
            of Contents*
  ZANN
        CORP.
 CONDENSED
        CONSOLIDATED STATEMENTS OF LOSSES
 (UNAUDITED)
 
 
 For
                  the three months ended March 31,2006
              
              2005REVENUESSales,
                  net
              
              $
              -
              
              $
              345Cost
                  of goods sold
              
              
              
              
              
              (439
              )Gross
                  (Loss)
              
              
              -
              
              
              (94
              )OPERATING
                  EXPENSESSelling,
                  general and administrative
              
              
              328,507
              
              
              941,086LOSS
                  FROM OPERATIONS
              
              
              328,507
              
              
              941,180OTHER
                  INCOME (EXPENSES)Interest
                  (expense)
              
              
              (3,081
              )
              
              (1,945
              )Total
                  Other (expenses)
              
              
              (3,081
              )
              
              (1,945
              )NET
                  (LOSS) BEFORE PROVISION FOR INCOME TAX AND DISCONTINUANCE OF
                  OPERATIONS
              
              
              (331,588
              )
              
              (943,125
              )PROVISION
                  FOR INCOME TAX
              
              
              -
              
              
              -NET
                  (LOSS) BEFORE PROVISION FOR DISCONTINUANCE OF OPERATIONS
              
              
              (331,588
              )
              
              (943,125
              )DISCONTINUANCE
                  OF OPERATIONS (Note B)
              
              
              (63,000
              )
              
              -NET
                  (LOSS)
              
              $
              (394,588
              )
              $
              (943,125
              )Loss
                  per share (basic and fully diluted)
              
              $
              (0.01
              )
              $
              (0.15
              )Loss
                  per share -discontinued operations (basic and fully
                  diluted)
              
              $
              -
              
              $
              -Loss
                  per share -continued operations (basic and fully diluted)
              
              $
              (0.01
              )
              $
              (0.15
              )Basic
                  and diluted weighted average number of shares outstanding as restated
                  for
                  reverse and forward stock splits
              
              
              33,330,915
              
              
              6,333,018
 
 See
        accompanying notes to unaudited condensed consolidated financial
        statements
  -
            2
            -
 *Table
            of Contents*
  ZANN
        CORP.
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOW
 (UNAUDITED)
 
 
 For
                  the three months ended March 31,2006
              
              2005Cash
                  Flows Used in Operating ActivitiesNet
                  loss
              
              $
              (394,588
              )
              $
              (943,125
              )Adjustments
                  to reconcile net loss to net cash provided by (used in) operating
                  activities:Discontinued
                  operations
              
              
              63,000
              
              
              -Common
                  stock issued for services
              
              
              37,650
              
              
              196,300Preferred
                  series A issued for services
              
              
              60,000
              
              
              900Preferred
                  series B issued for dividend
              
              
              981
              
              
              -Employee
                  stock option expense
              
              
              -
              
              
              385,664Changes
                  in:Accounts
                  payable and accrued expenses
              
              
              58,418
              
              
              11,684Prepaid
                  expenses
              
              
              126
              
              
              2,058Accounts
                  payable - related
              
              
              175,432
              
              
              -Net
                  Cash provided by (used in) Operating Activities
              
              
              1,019
              
              
              (346,519
              )Cash
                  Flows from Financing Activities:Proceeds
                  from sale of preferred stock
              
              
              30,500
              
              
              -Proceeds
                  from convertible debenture
              
              
              -
              
              
              100,000Payments
                  for convertible debenture
              
              
              (365
              )
              
              (1,055
              )Payments
                  for notes payable
              
              
              (31,500
              )
              
              -Proceeds
                  from sale of common stock
              
              
              -
              
              
              289,652Net
                  Cash provided by (used) in Financing Activities
              
              
              (1,365
              )
              
              388,597Net
                  change in cash
              
              
              (346
              )
              
              42,078Cash
                  at beginning of period
              
              
              346
              
              
              39,890Cash
                  at end of period
              
              $
              -
              
              $
              81,968Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid during the period for interest
              
              $
              3,081
              
              $
              1,345Cash
                  paid during the period for taxes
              
              $
              -
              
              $
              -Common
                  stock issued in exchange for services rendered
              
              $
              37,650
              
              $
              196,300Non-Cash
                  Investing and Financing Activities:Preferred
                  shares issued for services
              
              $
              60,000
              
              $
              900Preferred
                  shares issued for dividends
              
              $
              981
              
              $
              -Employee
                  stock option expense
              
              $
              -
              
              $
              385,644Write
                  off of related party accounts
              
              $
              30,500
              
              $
              87,198
 
 See
        accompanying notes to unaudited condensed consolidated Financial
        Statements
  -
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            -
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            of Contents*
  **ZANN
        CORP.**
 **NOTES
        TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006**
 
 
 **NOTE
        A - SUMMARY OF ACCOUNTING POLICIES**
 
 GENERAL
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America for interim financial information and with the
        instructions to Form 10-QSB. Accordingly, they do not include all of the
        information and footnotes required by generally accepted accounting principles
        for complete financial statements.
 
 In
        the
        opinion of management, all adjustments (consisting of normal recurring accruals)
        considered necessary for a fair presentation have been included. Accordingly,
        the results from operations for the three-month period ended March 31, 2006
        are
        not necessarily indicative of the results that may be expected for the year
        ending December 31, 2006. The unaudited condensed consolidated financial
        statements should be read in conjunction with the consolidated December 31,
        2005
        financial statements and footnotes thereto included in the Company's SEC
        Form
        10-KSB.
 
 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. is
        not
        currently marketing any products.
 
 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.
  -
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            -
 *Table
            of Contents*
  The
        accompanying financial statements reflect all of these changes. 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 dated 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 in each
        company’s best interest to terminate the Agreement. The Company does not expect
        to incur material early termination penalties as a result of the termination
        of
        the Agreement.
 
 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 superseded
        Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN UNAUDITED 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.
 
 USE
        OF
        ESTIMATES
 
 The
        preparation of unaudited 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.
  -
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            of Contents*
  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.
 
 STOCK
        BASED COMPENSATION
 
 On
        December 16, 2004, the Financial Accounting Standards Board (FASB) issued
        FASB
        Statement No. 123(R) (revised 2004), "Share-Based Payment" which is a revision
        of FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
        123(R) 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 123(R) is similar to the approach described
        in Statement 123. However, Statement 123(R) 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. This statement does not change the accounting guidance for
        share
        based payment transactions with parties other than employees provided in
        Statement of Financial Accounting Standards No. 123(R). This statement does
        not
        address the accounting for employee share ownership plans, which are subject
        to
        AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock
        Ownership Plans.” 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 had to comply with Statement 123(R) and use the Fair Value based
        method of accounting no later than the first quarter of 2006. The Company
        implemented SFAS No. 123(R) on January 1, 2006 using the modified
        prospective method. The fair value of each option grant issued after January
        1,
        2006 will be determined as of grant date, utilizing the Black-Scholes option
        pricing model. The amortization of each option grant will be over the remainder
        of the vesting period of each option grant.
  As
        more
        fully described in finacial statements in included in Form 10-KB for the
        year ended December 31, 2005, the Company did not grant stock options to
        employees of the Company and as of December 31, 2005, no stock options were
        outstanding and exercisable. The Company did not grant any stock options
        to
        employees during the quarter ended March 31, 2006 and 2005. The Company did
        not
        recognize any compensation expense related to employees stock options in
        the
        quarter ended March 31, 2006 and 2005. The impact on earnings for the
        remainder of Fiscal 2006 for stock based compensation will depend on future
        stock option issuances.
  In
        prior
        years, the Company applied the intrinsic-value method prescribed in Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees,” to account for the issuance of stock options to employees and
        accordingly compensation expense related to employees’ stock options were
        recognized in the prior year financial statements to the extent options granted
        under stock incentive plans had an exercise price less than the market value
        of
        the underlying common stock on the date of grant.
 
 Had
        compensation costs for the Company's stock options been determined based
        on the
        fair value at the grant dates for the awards, the Company's net loss and
        loss
        per share would have been as follows:
  For
                  the three months ended March 31, 2005Net
                  loss attributable to common stockholders -as reported
              
              $
              (943,125
              )Add.
                  Total stock based employee compensation expense as reported under
                  intrinsic value method (APB No. 25)
              
              
              -Deduct
                  Total stock based employee compensation expense as reported under
                  fair
                  value based method (SFAS No. 123)
              
              
              -Net
                  loss -Pro Forma
              
              $
              (943,125
              )Net
                  loss attributable to common stockholders - Pro forma
              
              $
              (943,125
              )Basic
                  (and assuming dilution) loss per share -as reported
              
              $
              (0.15
              )Basic
                  (and assuming dilution) loss per share - Pro forma
              
              $
              (0.15
              )
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  In
        determining the compensation cost of stock options granted to employees during
        the three months ended March 31, 2005, as specified by SFAS No. 123,
        the fair value of each option grant has been estimated on the date of grant
        using the Black-Scholes option pricing model and the weighted average
        assumptions used in these calculations are summarized as follows:
 
 Three
                  Months Ended
                March 31,
                  2005Risk-free
                  interest rate
              n/aExpected
                  life of options Granted
              n/aExpected
                  Volatility
              n/a
                  %Expected
                  dividend yield
              0%
 
 (a)
              The
                  expected option life is based on contractual expiration
                  dates.
 
 LIQUIDITY
 
 As
        shown
        in the accompanying unaudited financial statements, the Company incurred
        net
        losses of $394,588 and $943,125 for the three months ended March 31, 2006
        and
        2005, respectively. As of March 31, 2006 the Company's current liabilities
        exceeded its current assets by $1,788,267.
 
 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' unaudited 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 affected 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.
 
 In
        March
        2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
        Financial Assets - an amendment to FASB Statement No. 140. Statement 156
        requires that an entity recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        service contract under certain situations. The new standard is effective
        for
        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.
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  RECLASSIFICATIONS
 
 Certain
        reclassifications have been made in prior year's unaudited financial statements
        to conform to classifications used in the current year.
 
 
 **NOTE
        B - ACQUISITIONS**
 
 **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".
 
 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.
 
 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. During
        the
        period ended March 31, 2006 the Company incurred $63,000 of costs in terminating
        the Agreement. Such costs have been included in operations for the period
        ended
        March 31, 2006.
 
 
 **NOTE
        C - 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 March 31, 2006.
 
 
 **NOTE
        D - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**
 
 Accounts
        Payable and Accrued Liabilities at March 31, 2006 consists of the following:
 
 Accounts
                  payable
              
              $
              713,042Accrued
                  salaries
              
              
              122,955Payroll
                  taxes
              
              
              234,930Total
              
              $
              1,070,927
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            8
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 *Table
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  **NOTE
        E - NOTES PAYABLE**
 
 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 $1,271.
                  At
                  March 31, 2006, 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
              
              $
              98,998Promissory
                  Note, interest 10%, due December 31, 2005. Including accrued interest
                  of
                  $1,483. At March 31, 2006, the Company was in default under the
                  terms of
                  the Promissory Note. The Note holder agreed to a month to month
                  extension
                  until paid
              
              
              26,458125,456Less:
                  current portion
              
              
              (125,456
              )Note
                  payable-long -term
              
              $
              -
 
 During
        the period ended March 31, 2006 the Company paid a previously issued and
        outstanding promissory note of $31,500.
 
 
 **NOTE
        F - 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 unaudited 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 March 31, 2006 the Company has issued and outstanding
        33,945,359 and shares of common stock with par value of $0.001 per share.
 
 During
        the period ended March 31, 2006 the Company had the following common stock
        transactions:
  Description
              
              Shares
              
              AmountIssued
                  for Services
              
              
              1,300,000
              
              $
              37,650
  The
        Company valued the shares issued at approximately $0.03 per share for a total
        of
        $ 37,650, which represents the fair value of the services received which
        did not
        differ materially from the value of the stock issued.
 
 On
        December 8, 2005 the Company entered into a Standby Equity Distribution
        Agreement (Note K). The agreement provides for, among other things, the issuance
        of 4,000,000 warrants to purchase Common stock. The warrants are exercisable
        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
        was
        included in Selling, General, and Administrative Expense for the year ended
        December 31, 2005.
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  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 March 31, 2006, there were 2,647,700 shares issued and
        outstanding.
 
 During
        the period ended March 31, 2006, the Company issued an aggregate of 200,000
        shares of series A preferred stock in exchange services valued at $60,000. The
        Company valued the shares issued at approximately $0.15 per share for a total
        of
        $ 60,000, which represents the fair value of the services received which
        did not
        differ materially from the value of the common stock underlying the shares
        of
        preferred stock issued.
 
 At
        March
        31, 2006 the Company is obligated to issue an additional 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. At March 31, 2006 there were 472,011 shares issued and outstanding.
        During the period ended March 31, 2006 the Company issued 79,510 shares of
        Series B Preferred Stock as follows:
 
 Description
              
              Shares
              
              AmountShares
                  for cash
              
              
              40,260
              
              $
              30,500Shares
                  as dividend
              
              
              39,250
              
              
              981Total
              
              
              79,510
              
              $
              31,481
 
 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.
 
 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. At March 31, 2006 there were 10,000,000
        shares issued and outstanding.
 
 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
        payable $50,000 in cash and a promissory note bearing interest at 5% per
        annum
        with four equal principal payments of $112,500 due on May 3, 2006, August
        3,
        2006, November 3, 2006 and February 3, 2007 to David N. Weiker Sr.
        (“Purchaser”). This agreement effectively transfers voting control to the
        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.
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            10
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 *Table
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  **NOTE
        G - NON-QUALIFIED STOCK COMPENSATION PLAN**
 
 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
        H - 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
                  ExercisableExercisePrice
              
              NumberOutstanding
              
              WeightedAverageRemainingContractual
                  Life(Years)
              
              WeightedAveragePrice
              
              NumberExercisable
              
              WeightedAverageLife
                  (Years)$
              7.20
              
              
              100,000
              
              
              0.5
              
              $
              7.20
              
              
              100,000
              
              
              0.25**$**
              0.0388
              
              
              4,000,000
              
              
              4.0
              
              $
              0.0388
              
              
              4,000,000
              
              
              3.75
 
 Transactions
        involving warrants are summarized as follows:
 
 Weighted
                  AverageNumber
                  ofShares
              
              Price
                  PerShareOutstanding,
                  December 31, 2005
              
              
              4,100,000
              
              $
              0.2135Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Outstanding,
                  March 31, 2006
              
              
              4,100,000
              
              $
              0.2135
 
 
 
 **NOTE
        I - 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 and the balance due is included in accounts
        payable at March 31, 2006.. ****
 
 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.
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            11
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 *Table
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  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 unaudited 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.
 
 The
        Company is subject to other legal proceedings and claims, which arise in
        the
        ordinary course of its business. Although occasional adverse decisions or
        settlements may occur, the Company believes that the final disposition of
        such
        matters should not have a material adverse effect on its financial position,
        results of operations or liquidity.
  
 **NOTE
        J- 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.
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            12
            -
 *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.
 
 
 **NOTE
        K - RELATED PARTY TRANSACTIONS**
 
 The
        Company advances funds to related entities for business development or
        reimbursement of expenses. During the periods ended March 31, 2006 and 2005,
        the
        Company has reimbursed $30,500 and $87,198 to related parties respectively.
 
 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
        three months ended March 31, 2006 and 2005, the Company did not receive nor
        recognize revenues in connection with providing these services.
 
 At
        March
        31, 2006 the Company had accounts payable to the following related parties:
 
 Advances
                  from Officer/ Director for expenses
              
              $
              147,434Advances
                  from Series C shareholder for expenses
              
              
              111,200Total
              
              $
              258,634
 
 During
        the three months ended March 31, 2006 and 2005 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 periods ended March 31, 2006 and 2005 the Company
        paid these entities approximately $51,166 and $185,936 respectively, which
        has
        been charged to operations.
 
 
 **NOTE
        L - 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.
 
 §
              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.
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            13
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 *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
        been
        re-assigned.
 
 
 **NOTE
        M- SUBSEQUENT EVENTS**
 
 On
        April
        10, 2006, the Board appointed David N. Weiker II and John J. Laskos as
        Directors. On April 10, 2006, Robert C. Simpson resigned as Director and
        Vice
        President of the Company. On April 21, 2006 the Company signed a Separation
        and
        Release Agreement with Robert Simpson. The Agreement provides for, among
        other
        things, that Mr. Simpson will forego all salary and bonus arrangements provided
        by his employment contract and will receive his normal salary and COBRA payments
        for four months from April 10, 2006 the effective date of the
        Agreement.
 
 
 **NOTE
        N- 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 unaudited condensed consolidated
        financial statements during the periods ended March 31, 2006 and 2005 the
        Company incurred losses of $394,588 and $943,125 respectively. The Company’s
        current liabilities exceeded its current assets by $1,788,267 as of March
        31,
        2006. These factors among others may indicate that the Company will be unable
        to
        continue as a going concern for a reasonable period of time.
 
 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 unaudited 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.
 
 
 **ITEM
                  2.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATIONS.**
 
 FORWARD-LOOKING
        INFORMATION
 
 Much
        of
        the discussion in this Item is “forward looking” as that term is used in Section
        27A of the Securities Act and Section 21E of the Securities Exchange Act
        of
        1934. Actual operations and results may materially differ from present plans
        and
        projections due to changes in economic conditions, new business opportunities,
        changed business conditions, and other developments. Other factors that could
        cause results to differ materially are described in our filings with the
        Securities and Exchange Commission.
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            14
            -
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            of Contents*
  There
        are
        several factors that could cause actual results or events to differ materially
        from those anticipated, and include, but are not limited to general economic,
        financial and business conditions, changes in and compliance
 with
        governmental laws and regulations, including various state and federal
        environmental regulations, our ability to obtain additional financing from
        outside investors and/or bank and mezzanine lenders and our ability to generate
        sufficient revenues to cover operating losses and position us to achieve
        positive cash flow.
 
 Readers
        are cautioned not to place undue reliance on the forward-looking statements
        contained herein, which speak only as of the date hereof. We believe the
        information contained in this Form 10-QSB to be accurate as of the date hereof.
        Changes may occur after that date. We will not update that information except
        as
        required by law in the normal course of its public disclosure
        practices.
 
 Additionally,
        the following discussion regarding our financial condition and results of
        operations should be read in conjunction with the financial statements and
        related notes contained in Item 1 of Part I of this Form 10-QSB, as well
        as the
        financial statements in Item 7 of Part II of our Form 10-KSB for the fiscal
        year
        ended, December 31, 2005.
 
 MANAGEMENT’S
        PLAN OF OPERATIONS
 
 GENERAL
        OVERVIEW
 
 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.
 
 RECENT
        CHANGES IN OUR CORPORATE STRUCTURE
 
 Effective
        March 10, 2005, we implemented a one-for-350 reverse split of our authorized,
        issued and outstanding shares of common stock by filing a Certificate of
        Change
        with the Secretary of State of Nevada (the “Reverse Split”). Following the
        Reverse Split, the number of authorized shares of our common stock was reduced
        to 11,428,572 in accordance with the one for 350 split ratio. The number
        of our
        authorized preferred shares remained at 350,000,000, and the par value of
        our
        common and preferred stock remained at $0.001 per share following the Reverse
        Split.
 
 All
        fractional shares which would otherwise be held by our stockholders following
        the Reverse Split were rounded up to one whole share. We issued one new share
        of
        common stock for up to each 350 shares of common stock held as of March 9,
        2005.
 
 Effective
        May 3, 2005, we implemented a three for one forward split of authorized,
        issued
        and outstanding shares of common stock by filing a Certificate of Change
        with
        the Secretary of State of Nevada (the “Forward Split”). Following the Forward
        Split, the number of authorized shares of common stock was increased to
        34,285,716 in accordance with the three for one split ratio. The number of
        authorized preferred shares remained at 350,000,000, and the par value of
        common
        and preferred stock remained at $0.001 per share following the Forward
        Split.
  -
            15
            -
 *Table
            of Contents*
  The
        Forward Split was a mandatory exchange. Our stockholders were required to
        surrender stock certificates representing their shares of our common stock
        in
        order to receive stock certificates representing their post-Forward Split
        shares
        of the Registrant’s common stock.
 
 Effective
        May 9, 2005, we increased the number of authorized common shares from 34,285,716
        to 4,000,000,000 by filing Articles of Amendment to our Articles of
        Incorporation with the Secretary of State of Nevada. The number of authorized
        preferred shares remained at 350,000,000, and the par value of common and
        preferred stock remained at $0.001 per share following the increase in the
        number of authorized common shares.
 
 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.
 
 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.
 
 OVERVIEW
 
 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.
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  RESULTS
        OF OPERATIONS
 
 REVENUE
 
 THREE
        MONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
        2005.
 
 Total
        net
        sales and revenues were $0 for the three months ended March 31, 2006 compared
        to
        $345 for the period ended March 31, 2005, a decrease of 100
        percent.
 
 Our
        gross
        profit (loss) for the three months ended March 31, 2006 compared to 2005
        decreased to  $0
        from
        $(94).  Gross
        (loss) as a percentage of sales  increased  to
        (0)  percent
        in 2006 from (27) percent in 2005.
 
 Total
        operating expenses for the three months ended March 31, 2006 compared to
        2005  decreased
        by $612,579  to
        $328,507 from $941,086 in the prior period.
 
 Operating
        loss decreased from a loss of $941,180 to a loss of $328,507 for the three
        months ended March 31, 2006 compared to the period ended March 31,
        2005.
 
 Interest
        expense, net for the three months ended March 31, 2006 was $3,081 as compared
        to
        $1,945 for the same period of 2005.
 
 Net
        loss
        from continuing operations for the three months ended March 31, 2006 decreased
        to a loss of $331,588 from  a
        loss of
        $943,125 compared to the same period 2005.
 
 LIQUIDITY
        AND CAPITAL RESOURCES
 
 As
        of
        March 31, 2006, we had a deficiency in working capital of $1,788,267.
 
 During
        the three months ended March 31, 2006 we raised the following amounts for
        working capital:
 ·
              sold
                  30,500 shares of Preferred Series B for $30,500
 
 While
        we
        have raised capital to meet our working capital and financing needs in the
        past,
        additional financing is required within the next 12 months in order to meet
        our
        current and projected cash flow deficits from operations and development.
        We
        have sufficient funds to conduct our operations for several months, but not
        for
        12 months or more. There can be no assurance that financing will be available
        in
        amounts or on terms acceptable to us, if at all.
 
 By
        adjusting our operations and development to the level of capitalization,
        we
        believe we have sufficient capital resources to meet projected cash flow
        deficits. However, if during that period or thereafter, we are not successful
        in
        generating sufficient liquidity from operations or in raising sufficient
        capital
        resources, on terms acceptable to us, this could have a material adverse
        effect
        on our business, results of operations liquidity and financial
        condition.
 
 AUDITOR’S
        OPINION EXPRESSES DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A "GOING
        CONCERN"
 
 The
        independent auditors report on our December 31, 2005 financial statements
        included in the Company’s Annual Report states that the Company’s historical
        losses and the lack of revenues raise substantial doubts about the Company’s
        ability to continue as a going concern. If we are unable to develop our
        business, we have to discontinue operations or cease to exist, which would
        be
        detrimental to the value of the Company’s common stock. We can make no
        assurances that our business operations will develop and provide us with
        significant cash to continue operations.
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  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
 
 On
        December 16, 2004, the Financial Accounting Standards Board (FASB) issued
        FASB
        Statement No. 123(R) (revised 2004), "Share-Based Payment" which is a revision
        of FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
        123(R) 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 123(R) is similar to the approach described
        in Statement 123. However, Statement 123(R) 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. This statement does not change the accounting guidance for
        share
        based payment transactions with parties other than employees provided in
        Statement of Financial Accounting Standards No. 123(R). This statement does
        not
        address the accounting for employee share ownership plans, which are subject
        to
        AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock
        Ownership Plans.” 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 had to comply with Statement 123(R) and use the Fair Value based
        method of accounting no later than the first quarter of 2006. The Company
        implemented SFAS No. 123(R) on January 1, 2006 using the modified
        prospective method. The fair value of each option grant issued after January
        1,
        2006 will be determined as of grant date, utilizing the Black-Scholes option
        pricing model. The amortization of each option grant will be over the remainder
        of the vesting period of each option grant.
  As
        more
        fully described in finacial statements in included in Form 10-KB for the
        year ended December 31, 2005, the Company did not grant stock options to
        employees of the Company and as of December 31, 2005, no stock options were
        outstanding and exercisable. The Company did not grant any stock options
        to
        employees during the quarter ended March 31, 2006 and 2005. The Company did
        not
        recognize any compensation expense related to employees stock options in
        the
        quarter ended March 31, 2006 and 2005. The impact on earnings for the
        remainder of Fiscal 2006 for stock based compensation will depend on future
        stock option issuances.
  In
        prior
        years, the Company applied the intrinsic-value method prescribed in Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees,” to account for the issuance of stock options to employees and
        accordingly compensation expense related to employees’ stock options were
        recognized in the prior year financial statements to the extent options granted
        under stock incentive plans had an exercise price less than the market value
        of
        the underlying common stock on the date of grant.
 
 OFF-BALANCE
        SHEET ARRANGEMENTS
 
 We
        do not
        have any off-balance sheet arrangements.
 
 INFLATION
 
 In
        the
        opinion of management, inflation has not had a material effect on the operations
        of the Company.
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  **ITEM3.**
              **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 first 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.
 
 
 **PART
        II - OTHER INFORMATION**
 
 
 **ITEM
                  1.**
              **LEGAL
                  PROCEEDINGS.**
 
 None.
 
 
 **ITEM2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS.**
 
 Between
        January 1, 2006 and March 31, 2006, the Company executed Subscription Agreements
        pursuant to which several private investors received a total of 40,260 shares
        of
        Zann Corp. Preferred Series B stock in exchange for $30,500. The $30,500
        was loaned
        to
        AutoFast Inc., a related Company to the former Chairman and CEO.  The
        amount has been included in expense for the period ended March 31,
        2006.
 
 Each
        share of the Series B preferred stock is convertible into one share of our
        common stock. On all matters submitted to a vote of the holders of our common
        stock, including, without limitation, the election of directors, a holder
        of
        shares of the Series B preferred stock is entitled to the number of votes
        on
        such matters equal to the number of shares of the Series B preferred stock
        held
        by such holder. The shares of the Series B preferred stock rank superior
        to the
        shares of our common stock, and to the shares of all other series of our
        preferred stock. The shares of the Series B Preferred stock were issued in
        reliance upon an exemption from registration pursuant to Section 4(2) of
        the
        Securities Act. All of the investors took their securities for investment
        purposes without a view to distribution and had access to information concerning
        Zann Corp. and our business prospects, as required by the Securities
        Act.
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            19
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  In
        addition, there was no general solicitation or advertising for the purchase
        of
        our shares. Our securities were sold only to persons with whom we had a direct
        personal preexisting relationship, and after a thorough discussion. Finally,
        our
        stock transfer agent has been instructed not to transfer any of such shares,
        unless such shares are registered for resale or there is an exemption with
        respect to their transfer.
 
 
 **ITEM3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES**
 
 None.
 
 
 **ITEM4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS.**
 
 None
 
 
 **ITEM
                  5.**
              **OTHER
                  INFORMATION.**
 
 None.
 
 
 **ITEM
                  6.**
              **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.2.4
                  (4)
              Series
                  C Common Stock Purchase Agreement between David N. Weiker, Sr.
                  and Robert
                  Simpson, an individual, dated February 3, 2006.3.1
                  (5)
              Certificate
                  of Amendment to Articles of Incorporation of the Registrant, effective
                  May
                  3, 2005.3.2
                  (6)
              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.10.1
                  (7)
              Standby
                  Equity Distribution Agreement between Cornell Capital Partners,
                  LP and the
                  Registrant dated December 8, 2005.10.2
                  (8)
              Form
                  of Indemnification Agreement10.3
                  (9)
              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, 2005.31.1
              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 ExecutiveOfficer,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.
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            20
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  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
                  February 8, 2006.
 (5)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on June
                  22, 2005.
 (6)
              Incorporated
                  by reference to the Registrant’s Form 10-QSB as filed with the SEC on
                  November 21, 2005.
 (7)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on
                  December 8, 2005.
 (8)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on March
                  10, 2006.
 (9)
              Incorporated
                  by reference to the Registrant’s Form 8-K as filed with the SEC on March
                  3, 2006.
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  SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the Registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 Zann
                  Corp.Dated:
                  May 11, 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.
              Chairman,
                  CEO, Treasurer
              May
                  11, 2006David
                  N. Weiker Sr./s/
                  George E. Betts
              Chief
                  Financial Officer
              May
                  11, 2006George
                  E. Betts/s/
                  David N. Weiker II
              Chief
                  Operating Officer
              May
                  11, 2006David
                  N. Weiker II/s/
                  Thomas L. Fogarty
              Director
              May
                  11, 2006Thomas
                  L. Fogarty




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