The native Koobits format is strictly paginated. It's basically a PDF, only without a reflow option. The base font size in most of the samples was too small to read comfortably. When I zoomed in to the point that I could read the ebook the page was bigger than my 14" laptop screen. For annotation it has highlighting and bookmarks.
Koobits also has an enhanced ebook format (and you can make ebooks for it, too). I'm not impressed with the demo ebook they included, but it does show some interesting possibilities for embedded audio and video.
Since it won't work as an Epub reader I'm going to give it a pass. But you might want to look at it yourself.