================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                   FORM 10-KSB

                                   ----------

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
    1934

                   For the fiscal year ended December 31, 2006


[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF
    1934

                                   ----------

                          COMMUNICATIONS RESEARCH, INC.
                          -----------------------------
                 (Name of small business issuer in its charter)

                                   ----------


            NEVADA                      0-50069              22-2991753
            ------                      -------              ----------
  (State or other jurisdiction         Commission         (I.R.S. Employer
of incorporation or organization)      File Number        Identification No.)


                   400C Lake Street, Ramsey, New Jersey 07446
                   ------------------------------------------
                (Address of Principal Executive Office)(Zip Code)


                                 (201) 825-9100
                                 --------------
              (Registrant's telephone number, including Area Code)


        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                    COMMON STOCK, PAR VALUE $.001 PER SHARE
                    ---------------------------------------
                                (Title of Class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
                                                                [X] Yes  [ ] No

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes  [X] No

The issuer's revenues for the fiscal year ended December 31, 2006 were $44,340.

Number of shares outstanding of registrant's Common Stock, as of December 31,
2006 was 159,398,444 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE

Registrants SB2, AMENDMENT 4, dated May, 1, 2002, is herein incorporated by
reference throughout PART I, II and III of this report.

Transitional Small Business Disclosure Format (check one)        [X] Yes [ ] No

================================================================================

<PAGE>

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements as defined in Safe Harbor
under the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may involve known and unknown risks, uncertainties and other factors
that may cause actual results and performance in future periods to be materially
different from any future results or performance suggested by these statements.
The company cautions investors not to place undue reliance on forward-looking
statements, which speak only to management's expectations on this date. The
Company does not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

This discussion in this Annual Report regarding Communications Research and our
business and operations contains "forward-looking statements." These
forward-looking statements use words such as "believes," "intends," "expects,"
"may," "will," "should," "plan," "projected," "contemplates," "anticipates," or
similar statements. These statements are based on our beliefs, as well as
assumptions we have used based upon information currently available to us.
Because these statements reflect our current views concerning future events,
these statements involve risks, uncertainties and assumptions. Actual future
results may differ significantly from the results discussed in the
forward-looking statements. A reader, whether investing in our common stock or
not, should not place undue reliance on these forward-looking statements, which
apply only as of the date of this report.

When used in this Annual Report on Form 10-KSB, "Communications Research," "we,"
"our," and "us" refers to Communications Research, Inc., a Nevada corporation,
and our subsidiaries.
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

         Our Company was incorporated in New Jersey on August 11, 1989. From our
inception until 1992, we had acted as consultants and engineers providing
research and development for manufacturers and clients using RF Broadband
technology for video and data products. In 1992, with data and video networking
migrating away from RF and CATV equipment to twisted pair cable and fiber
optics, we began to design and install Local Area Networked video and data
communication systems, primarily for the Health Care market. In 1994, we began
to design and install video conference and video presentation systems as well.
It was during that period, to meet the requirements of a military location, the
company developed a desktop video conference and distant learning system to meet
their anticipated training needs.

         We became a wholly owned subsidiary of Visual Telephone of New Jersey,
Inc., a publicly traded Delaware corporation ("Visual of New Jersey") on July
17, 1996. With the merger, Visual of New Jersey changed its name to Visual
Telephone International, Inc. ("Visual Telephone") in September of 1996. We
operated as a wholly owned subsidiary of Visual Telephone until May 21, 1999,
when our shares were distributed to the shareholders of Visual Telephone
pursuant to an Agreement and Plan of Reorganization dated May 14, 1999 (the
"Reorganization Agreement") by and among us, to the shareholders of record as of
close of business on May 21, 1999. Since May 21, 1999, we have operated as a
separate and autonomous entity. On July 15, 1999, we completed a change of
domicile pursuant with merger agreement which changed our state of domicile from
New Jersey to Nevada. In November 1999 the company purchased a non-exclusive
license to the Tele-Writer-AGS (Advanced Graphics System) software. The company
incorporated Tele-Writer Corporation, Inc. to continue the product development
and planned marketing of the software system. On or about November 22, 2006 the
company board voted to discontinue further funding for the program and withdrew
its ownership position in TeleWRITER Corporation, resending the funding
agreement and ownership position, directing its accounts to write off the debt
as uncollectible.

         We have two autonomous internal divisions. The Special Systems
Consulting Group provides clients with design, development, bid specifications,
cost consulting and project management of audio, video, data, security and
communications systems. Our Systems Integration Division is a boutique
design-build operation, for special clients, to provide turnkey design, develop
and act as general contractor to install sophisticated data, audio, video and
communications systems.

                                       2
<PAGE>

         The diversity of technology we span lends itself to several
applications, both within a particular business and throughout an enterprise or
institution. Our ability spans the gamut of electronic communications. Our
customers need to communicate within their organization and/or reach a diverse
audience at many remote locations. Very often we begin working with a client to
provide a specific system or technology solution and find our scope of work
expand to include other technology systems.

         The following sets forth a breakdown, by industry, segment of our sales
revenues to unaffiliated entities, sales to related entities, operating profit
or loss and identifiable assets.

DESCRIPTION OF OUR BUSINESS SEGMENTS

SPECIAL SYSTEMS CONSULTING DIVISION.

         We offer an array of consulting services as; full system
design/specification service, configuration, program development, cost
consulting, system certification testing, installation management and technical
support. Our Communications Consulting operations begins with a discussion with
the client's management team to review the client's current requirements and
assess their current and future needs. Existing systems are tested, documented
and mapped to aid in the diagnosis of problems, potential problem areas and to
determine what part of existing systems, if any, can be recovered and
incorporated into a client's new and improved design. A programming review is
conducted with the client to determine actual requirements and budget
constraints. A functional design and implementation plan is established based
upon the budget, current and projected needs, of the client. Upon approval of
our preliminary plans, a full design is prepared with construction details and
specifications for the client to bid the project. After award to successful
bidder, our engineers and project managers; coordinate, manage and test the
system through completion, as part of the second phase support program.

         We are qualified and registered to do business with all branches of the
federal government. Our location provides us with a strategic advantage when
bidding on projects for federal, state and local governments in the Middle
Atlantic region

         In June 1999, we were approved as a New Jersey State DPMC (Department
of Property Management and Construction) Communications Consultant. This is a
contract renewed every two years, and will be renewable on or before expiration
by January 31, 2008, upon review of performance and scope of projects completed.
We have been awarded projects for engineering and consulting services under New
Jersey DPMC status as a state qualified consulting firm. No assurances can be
given that any additional projects will be awarded to us pursuant to this
contract.

SYSTEMS INTEGRATION DIVISION.

         We, through our Systems Integration Division, provide our clients with
sophisticated communications solutions designed to fulfill their strategic
needs. We have been providing the development, design, integration and support
of large scale security, surveillance, audio/visual, professional video and
computer/network systems since 1989. This division has no foreign operations and
no material foreign sales.

         Capital equipment, supplies, materials and installation labor used by
our System Integration Division are supplied by various manufacturers, vendors
and sources. We believe that the various components, parts and equipment used by
our Systems Integration Division are readily available from a diverse assortment
of suppliers. The elimination of any one supplier would not have a material
effect on our ability to design and install systems.

MARKETING AND SALES STRATEGY.

         We focus our sales and marketing efforts on developing strategic
alliances with equipment manufacturers ("OEMs"), Architects and service
providers. This permits us to act as a vendor for the OEM, Architectural Firm or
service provider, sub-contracting our engineering, and project management into
the OEM's products, Architects Specifications or other service provider's scope
of work. The company has become a boutique consulting engineering firm and
engineering contractor with its diverse understanding and competency, providing
a broad range of technology solutions.

        While our Systems Integration Division employs pricing and payment terms
that our management considers competitive, we do not employ extended payment
terms or liberal return policies that could have a materially

                                       3
<PAGE>

adverse effect on our operations. This division's sales varies with the timing
and scope of the projects booked. In most cases, backlog varies between two
weeks and four months.

RESEARCH AND DEVELOPMENT.

         It is not anticipated that the Consulting Division or Systems
Integration Division will incur material research and development expenses and
we have not made any budgeting provisions for research and development. The
company will continue to be required to partake in advanced technology and
product training seminars, by manufacturers we represent, and certification
agencies requiring continuing education and re-certification. The company will
continue to support these programs and re-certifications out of operating
revenues.

VISUAL PRODUCTS DIVISION.

         The company has totally phased out their line of PC Based desktop video
conferencing products and Visual Products Division. Our proprietary Visual-EZ
and Communicator products have been frozen with only the intellectual property,
trademarks and copyrights retained if required in the future.

TELEWRITER CORPORATION

         The TeleWRITER product has evolved since its inception by Optel in
1982. TeleWRITER was the first audio graphic collaboration software system and
in the mid 1990's captured almost 60% of the collaboration market. We acquired a
license to use and develop the TeleWRITER-AGS (Advanced Graphics System) system
software in 1999. This software was assigned by us, to a subsidiary, TeleWRITER
CORPORATION, INC., in exchange for 49% of the common stock in the subsidiary as
well as a license to use the software as we deem appropriate.

PRODUCT DEVELOPMENT.

         After a number of years of development and testing, TeleWRITER
Corporation released Version 3.0 of the TeleWRITER-AGS operating system in 2004
the first version to operate on the PC XP operating system by Microsoft, the
first major revision and update to the software in five years since the former
release of Version 2.15 in late 1998. The company had been funding TeleWRITER
Corporation throughout the development and marketing of the product.

         We focused our efforts in 2005 to update the operating system and
further enhance its features by building an internal software development team
of programmers directly engaged by the company with the knowledge and ability to
revise the software to meet current operating system compatibility requirements.

         Based on the T.120 Transport Protocol standard, used in the
TeleWRITER-AGS, being at the end of its usable life expectancy, the failure of
the product to run on the Vista by Microsoft operating system to be released in
the winter of 2007, with TeleWRITER Corporation unable to pay on overdue notes
to the company, while yet another round of funding was required to rewrite the
product again, the Company Directors voted to divest itself of ownership in
TeleWRITER completely on or about November 22, 2006 rescinding the transaction
and ownership position, directing its accountants to write off the debt as
uncollectible.

EMPLOYEES

         As of December 31, 2006, we had 2 full-time employees, none of whom are
employed pursuant to the terms of an employment agreement. None of our employees
or independent contractors are covered by a collective bargaining agreement. We
believe that our relationship with our employees is satisfactory.

ADDITIONAL INFORMATION

         The Company filed our the SEC a registration statement on Form SB-2
under the Securities Act of 1933 with respect to the common stock that we are
registering. Our SEC registration became effective May 8, 2002. The company was
cleared by NASD and assigned the trading symbol CRHI. The company was cleared to
commence trading on or about May 5, 2003. The Company posted a Bid/Ask on the
Over the Counter Pink Sheets on or about October 21, 2003 and on or about
November 6, 2003, was authorized to trade on the Over the Counter Bulletin
Board. On or about November 29, 2004 the company was approved to increase its
Class A shares authorized to 160,000,000 and Class B Convertible shares
authorized to 2,000,000.

                                       4
<PAGE>

         The Company is a fully reporting company and all filings and
accompanying exhibits, may be inspected and copied at the principal offices of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, and at any of the 12
regional offices of the SEC around the country. Copies of all or any part of
this registration statement may be obtained at prescribed rates from the SEC's
Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20545 or by
calling the SEC at 1-800 SEC-0330. The SEC also maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.

         When we qualify statements in this document with the word "believe",
unless otherwise indicated, we are basing our belief on the knowledge and
experience of our personnel and advisors. Statistical information included in
this prospectus has been obtained by us from publications we deem reliable and
with which we have no relationship.

ITEM 2. DESCRIPTION OF PROPERTY

         Communications Research currently occupies approximately 900 square
feet of space at 400C Lake Street, Ramsey, New Jersey 07446 for our corporate
and administrative offices under a lease expiring on May 31, 2008, and requiring
$2,325 monthly rent subject to annual escalations and special additional fees
such as property tax increases.

         The lease requires the Company to bear, in addition to the basic rent,
the costs of utilities, insurance, and other maintenance costs.

ITEM 3. LEGAL PROCEEDINGS

         There are no pending or threatened legal or governmental claims,
actions or proceedings against or relating to us which could, individually or in
the aggregate, have a materially adverse effect on us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NOT APPLICABLE

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information:

         On March 19, 2003 the company was given approval to trade its
securities on the National Association of Securities Dealers in the National
Quotations Bureau Pink Sheets under the symbol CRHI. Our Class A shares have
been recognized and traded on the NASD Over the Counter Bulletin Board since
October 21, 2003. We hope to establish a market for said shares. Our securities
have traded recently in a range of . 14 (high)-.005 (low) cents per share since
trading commenced.

HOLDERS.

         As of December 31, 2006, there were approximately 1373 shareholders of
record of our common stock.

DIVIDENDS.

         We have not declared any cash dividends on our common stock since our
inception and do not anticipate paying such dividends in the foreseeable future.
We plan to retain any future earnings for use in our business. Any decisions as
to future payment of dividends will depend on our earnings and financial
position and such other factors, as the Board of Directors deems relevant.

                                       5
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

         We have been principally focused upon our core business of
communications consulting and the systems integration. Management believes the
release of the TeleWRITER subsidiary will be instrumental to increasing our long
term revenues. We believe that we are on the right path profitability
conditional on our revenues increasing. However, we cannot be certain that we
will be able to do so. To the extent that we cannot achieve and maintain
profitability, we will require additional financing to continue our operations.

RESULTS OF OPERATIONS.

         Revenues We booked total revenues of $44,340 for the year ending
December 31, 2006, as compared to revenues $$77,251 for the prior year.
Resources normally used productively for income producing work continue to be
redirected to launch TeleWRITER sales and marketing to reintroduce the product
into the marketplace.

         Operating Expenses For Communications Research individually, our
revenues were significantly down from 2005 continuing the downward spiral of the
past years. Our operating expenses have increased from $428,091 for the year
ending December 31, 2005, to $1,424,472 for the year ending December 31, 2006.
The increase in total operating expenses for 2006 reflects our efforts to revive
and market the TeleWRITER product.

         Operating Loss We have not shown a net profit for a calendar year as an
independent company to date. Our net operating losses have increased from
$411,389 as of December 31, 2005 to $1,407,636 as of December 31, 2006, due
largely to the expenses incurred by TeleWRITER Corporation. Over the past years,
our executive officers have been loaning us funds to finance our losses over the
last several years.

         Cash and cash Equivalents Total cash as of December 31, 2006 fell to an
all time low of $1,303 Total current assets increased to $660,827 as of December
31, 2006 largely as a result of notes from TeleWRITER Corporation that have been
determined to be uncollectible.

         Current Liabilities Our current liabilities have increased from
$142,228 as of December 31, 2005 to $193,726 as of December 31, 2006. The
increase is attributable to an increase in accrued expenses.

         Until we are successful in locating a suitable merger partner, we are
reliant upon the ongoing loans from our executive officers or the proceeds of
any stock offerings to remain in business.

Future Expenditures

         Our future capital expenditures will depend upon our ability to
generate revenues or additional investment capital if our revenues are not
sufficient. If, and to the extent that we are successful in generating net
revenues or raising investment capital, our future expenditures will be applied
towards salaries and general working capital purposes.

         The company will need to replace aging office and data processing
equipment. Additionally we require additional technical testing equipment to
install and maintain state of the art electronic systems and equipment. If the
company is unable to purchase this equipment it will be unable to effectively
compete in the markets it has defined.

LIQUIDITY AND CAPITAL RESOURCES

         We have incurred cumulative losses since being spun off as an
independent corporation. At December 31, 2006 we have an accumulated deficit of
$3,731,256, compared to $$2,322,051 at December 31, 2005 and the report from of
our independent auditor on our audited financial statements at December 31, 2006
contained a going concern statement. We will continue to incur losses during the
foreseeable future and have yet to achieve revenues sufficient to offset direct
expenses and corporate overhead. We do not have any present commitments for
capital expenditures. While we are taking measures to expand our revenues,
improve our liquidity and trim our expenses, we cannot guaranty that we will be
successful in our efforts.

         We do not have adequate working capital for the near term. We will
continue to be reliant on loans from our officers or proceeds of sale of stock
to provide additional working capital. If our officers are unable to continue to
loan us working capital, or we do not raise working capital through our public
offering, we cannot guarantee that we will be successful in obtaining capital
upon terms acceptable to us, if at all. Our failure to secure necessary capital
when needed could have a material adverse effect on our financial condition and
results of operations in future periods.

                                       6
<PAGE>

ITEM 7. FINANCIAL STATEMENTS.

                          COMMUNICATIONS RESEARCH, INC.
                        CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2006 AND 2005


                                    CONTENTS


Report of Independent Registered Public Accounting Firm.................... 8

Consolidated Balance Sheet................................................. 9

Consolidated Statements of Operations...................................... 10

Consolidated Statements of Stockholders' Equity (Deficit).................. 11

Consolidated Statements of Cash Flows.......................................12

Notes to the Consolidated Financial Statements............................. 13



                                       7
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Directors of
Communications Research, Inc.

We have audited the accompanying consolidated balance sheet of Communications
Research, Inc. as of December 31, 2006 and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the years
ended December 31, 2006 and 2005. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the PCAOB (United
States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Communication
Research, Inc. as December 31, 2006 and the results of its operations and its
cash flows for the years ended December 31, 2006 and 2005, which is in
conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that Communications Research, Inc. will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, Communications
Research, Inc. has suffered recurring losses from operations and has a net
capital deficiency that raises substantial doubt about the company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
March 9, 2007



                                       8
<PAGE>


                          COMMUNICATIONS RESEARCH, INC.
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                     ASSETS
                                                                                  December 31,
                                                                                     2006
                                                                                  -----------
CURRENT ASSETS
<S>                                  <C>                                          <C>
     Cash and cash equivalents (Note 1)                                           $         8
     Accounts receivable, net (Note 1)                                                  1,260
     Prepaid expenses                                                                      35
                                                                                  -----------
         Total Current Assets                                                           1,303
                                                                                  -----------
PROPERTY AND EQUIPMENT, NET (Notes 1 and 3)                                                --
                                                                                  -----------
         TOTAL ASSETS                                                             $     1,303
                                                                                  ===========

                        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

     Accounts payable                                                             $    12,654
     Accounts payable - related parties (Note 4)                                       59,918
     Accrued expenses                                                                  71,038
     Notes payable (Note 5)                                                            50,116
                                                                                  -----------
          Total Current Liabilities                                                   193,726
                                                                                  -----------
          Total Liabilities                                                           193,726
                                                                                  -----------
STOCKHOLDERS' EQUITY (DEFICIT)

     Common stock Class A, par value $0.001 per share; authorized 160,000,000
      shares; 159,398,444 shares issued and outstanding                               159,398
     Common stock Class B, par value $0.0001 per share; authorized 2,000,000
      shares; 2,000,000 shares issued and outstanding                                      --
     Additional paid-in capital                                                     3,399,400
     Subscriptions receivable                                                         (19,965)
     Accumulated deficit                                                           (3,731,256)
                                                                                  -----------
          Total Stockholders' Equity (Deficit)                                       (192,423)
                                                                                  -----------
          TOTAL LIABILITIES AND STOCKHOLDERS'
          EQUITY (DEFICIT)                                                        $     1,303
                                                                                  ===========
</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements


                                       9
<PAGE>


                     COMMUNICATIONS RESEARCH, INC.
                 Consolidated Statements of Operations

                                                        For the
                                                      Years Ended
                                                      December 31,
                                          --------------------------------
                                               2006               2005
                                          -------------      -------------
REVENUES                                  $      44,340      $      77,251

COST OF SALES                                        --             27,342
                                          -------------      -------------
GROSS PROFIT                                     44,340             49,909
                                          -------------      -------------
OPERATING EXPENSES

     General and administrative                 786,713            445,178
     Bad debt expense (Note 6)                  651,097                 --
     Depreciation and amortization               31,002             32,822
                                          -------------      -------------
         Total Operating Expenses             1,468,812            478,000
                                          -------------      -------------
NET OPERATING LOSS                           (1,424,472)          (428,091)
                                          -------------      -------------
OTHER INCOME (EXPENSE)

     Interest income                             17,006             17,340
     Interest expense                              (170)              (638)
                                          -------------      -------------
         Total Other Income (Expense)            16,836             16,702
                                          -------------      -------------
NET LOSS                                  $  (1,407,636)     $    (411,389)
                                          =============      =============
BASIC LOSS PER COMMON SHARE (Note 1)      $       (0.01)     $       (0.00)
                                          =============      =============
WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING                  152,504,570        113,016,157
                                          =============      =============

                 The accompanying notes are an integral part of
                     these consolidated financial statements


                                       10
<PAGE>


                          COMMUNICATIONS RESEARCH, INC.
                  Statements of Stockholders' Equity (Deficit)
                 For the Years Ended December 31, 2006 and 2005
<TABLE>
<CAPTION>
                                                            Common Stock
                                        -----------------------------------------------
                                                 Class A                    Class B      Additional
                                        -------------------------     -----------------   paid-in      Subscription    Accumulated
                                          Shares         Amount         Shares   Amount   capital       Receivable      Deficit
                                        -----------   -----------     ---------  ------ -----------    ------------   ------------
<S>                                     <C>           <C>             <C>         <C>   <C>            <C>            <C>
Balances, January 1, 2005               104,081,670   $   104,081     2,000,000   $--   $ 2,431,713    $  (147,547)   $(1,912,231)

Common stock issued for cash pursuant
  to a Regulation S offering at
  prices ranging from $0.01 to $0.02
  per share                              16,652,774        16,653            --    --       322,651             --             --

Costs of issuance                                --            --            --    --      (318,483)            --             --

Common stock issued for services
  rendered valued at $0.06 per share      5,000,000         5,000            --    --       295,000             --             --

Common stock issued for services
  rendered at $0.02 per share               200,000           200            --    --         3,800             --             --

Subscriptions received                           --            --            --    --            --        127,582             --

Net loss for 2005                                --            --            --    --            --             --       (411,389)
                                        -----------   -----------     ---------  ------ -----------    ------------   ------------
Balances, December 31, 2005             125,934,444       125,934     2,000,000    --     2,734,681        (19,965)    (2,323,620)

Common stock issued for cash at
  $0.018 per share                          464,000           464            --    --         7,719             --             --

Common stock issued for services
  rendered valued at $0.021 per share    30,000,000        30,000            --    --       600,000             --             --

Common stock issued for services
  rendered valued at $0.021 per share     2,000,000         2,000            --    --        40,000             --             --

Common stock issued for services
  rendered valued at $0.018 per share     1,000,000         1,000            --    --        17,000             --             --

Net loss for 2006                                --            --            --    --            --             --     (1,407,636)
                                        -----------   -----------     ---------  ------ -----------    ------------   -----------
Balances, December 31, 2006             159,398,444   $   159,398     2,000,000   $--   $ 3,399,400    $   (19,965)   $(3,731,256)
                                        ===========   ===========     =========  ====== ===========    ============   ===========
</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements


                                       11
<PAGE>


                          COMMUNICATIONS RESEARCH, INC.
                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                             For the Years Ended
                                                                December 31,
                                                       ----------------------------
                                                          2006              2005
                                                       -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                    <C>              <C>
Net loss                                               $(1,407,636)     $  (411,389)
Adjustments to reconcile net loss to net cash
 used in operating activities:
     Depreciation and amortization                          31,002           32,822
     Bad debt expense                                      651,097               --
     Common stock issued for services rendered             690,000          304,000
Changes in operating assets and liabilities:
     Accounts receivable                                     3,669           43,673
     Accounts receivable - related party                   (21,243)              --
     Prepaid expenses                                           --            4,778
     Interest receivable                                   (17,006)         (17,000)
     Deposits and other assets                               4,988               --
     Accounts payable - related parties                     59,918               --
     Accounts payable and accrued expenses                 (13,561)          15,093
                                                       -----------      -----------
         Net Cash Used in Operating Activities             (18,772)         (28,023)
                                                       -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

     Advances to related company                                --         (291,676)
     Purchases of property and equipment                        --          (23,367)
                                                       -----------      -----------
         Net Cash Used in Investing Activities                  --         (315,043)
                                                       -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds on notes payable                              12,969               --
     Payments on notes payable                              (4,490)          (7,296)
     Proceeds on notes payable - related parties                --           16,000
     Payments on notes payable - related parties                --          (23,623)
     Proceeds from issuance of common stock                  8,183          431,656
     Stock offering costs paid                                  --         (318,483)
     Stock deposits received                                    --            8,182
     Cash received on subscriptions receivable                  --           35,229
                                                       -----------      -----------
         Net Cash Provided by Financing Activities          16,662          141,665
                                                       -----------      -----------
NET DECREASE IN CASH                                        (2,110)        (201,401)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               2,118          203,519
                                                       -----------      -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR               $         8      $     2,118
                                                       ===========      ===========
SUPPLEMENTAL CASH FLOW INFORMATION

CASH PAID FOR:

         Interest                                      $        94      $    10,358
         Income taxes                                  $        --      $        --

NON-CASH FINANCING ACTIVITIES

         Common stock issued for services rendered     $   690,000      $   304,000
</TABLE>
                 The accompanying notes are an integral part of
                     these consolidated financial statements


                                       12
<PAGE>


                         COMMUNICATIONS RESEARCH, INC.
                 Notes to the Consolidated Financial Statements
                           December 31, 2006 and 2005

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.       Organization

         The consolidated financial statements presented are those of
         Communications Research, Inc. (the "Company"). The Company was
         organized on August 11, 1989 in the State of New Jersey. On July 17,
         1996, the Company became a wholly-owned subsidiary of Visual Telephone
         International (VTI), a publicly traded Delaware corporation. On May 21,
         1999, shares of the Company were distributed to the shareholders of VTI
         pursuant to an agreement and Plan of Reorganization spin off. The
         Company has operated as a separate entity since that date. Effective
         July 15, 1999, the Company changed its domicile to the State of Nevada
         through the spin off reorganization. These financial statements are
         therefore unconsolidated with the Company's parent for all dates
         presented.

         The Company is engaged in the design and installation of sophisticated
         communications systems for data and audio visual systems integration.

         b.       Accounting Methods

         The Company's consolidated financial statements are prepared using the
         accrual method of accounting. The Company has elected a December 31
         year end.

         c. Cash and Cash Equivalents

         Cash equivalents include short-term, highly liquid investments with
         maturities of three months or less at the time of acquisition.

         d.       Estimates

         The preparation of consolidated financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect reported amounts of assets and
         liabilities, disclosure of contingent assets and liabilities at the
         date of the consolidated financial statements and expenses during the
         reporting period. In these consolidated financial statements, assets,
         liabilities and expenses involve extensive reliance on management's
         estimates. Actual results could differ from those estimates.

         e.       Basic (Loss) Per Share

         The computations of basic (loss) per share of common stock are based on
         the weighted average number of common shares outstanding during the
         period of the consolidated financial statements.

                                                       December 31,
                                             ------------------------------
                                                 2006              2005
                                             ------------      ------------
Numerator - (loss)                           $ (1,407,636)     $   (411,389)
Denominator - weighted average number of
 shares outstanding                           152,504,570       113,016,157
                                             ------------      ------------
Loss per share                               $      (0.01)     $       (0.00)
                                             ============      ============

                                       13
<PAGE>


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

         f.       Property and Equipment

         Property and equipment is recorded at cost. Major additions and
         improvement are capitalized. The cost and related accumulated
         depreciation of equipment retired or sold are removed from the accounts
         and any differences between the undepreciated amount and the proceeds
         from the sale are recorded as gain or loss on sale. Depreciation is
         computed using the straight-line method over the estimated useful life
         of the assets as follows:

                      Description                 Estimated Useful Life
                      -----------                 ---------------------
                Furniture and fixtures                  5 years
                Lab and test equipment                  5 years
                Software                                3 years
                Vehicles                                5 years

         Depreciation expense for the years ended December 31, 2006 and 2005 was
         $31,002 and $32,822, respectively.

         In accordance with Financial Accounting Standards Board Statement No.
         144, the Company records impairment of long-lived assets to be held and
         used or to be disposed of when indicators of impairment are present and
         the undiscounted cash flows estimated to be generated by those assets
         are less than the carrying amount. At December 31, 2006, no impairments
         were recognized.

         g.       Accounts Receivable

         The Company in the normal course of business extends credit to its
         customers on a short-term basis. Although the credit risk associated
         with these customers is minimal, the Company routinely reviews its
         accounts receivable balances and makes provisions for doubtful
         accounts. The Company ages its receivables by date of invoice.
         Management reviews bad debt reserves quarterly and reserves specific
         accounts as warranted or sets up a general reserve based on amounts
         over 90 days past due. When an account is deemed uncollectible, the
         Company charges off the receivable against the bad debt reserve.
         Accounts receivable are shown net of an allowance for doubtful accounts
         of $0 at December 31, 2006. (See also Note 6).


                                       14
<PAGE>


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         h.       Revenue Recognition

         The Company applies the provisions of SEC Staff Accounting Bulletin
         ("SAB") No. 104, Revenue Recognition in Financial Statements ("SAB
         104"), which provides guidance on the recognition, presentation and
         disclosure of revenue in financial statements filed with the SEC. The
         SAB 104 outlines the basic criteria that must be met to recognize the
         revenue and provides guidance for disclosure related to revenue
         recognition policies. In general, the Company recognizes revenue
         related to monthly contracted amounts for services provided when (i)
         persuasive evidence of an arrangement exists, (ii) delivery has
         occurred or services have been rendered, (iii) the fee is fixed or
         determinable and (iv) collectibility is reasonably assured.

         i.       Provision for Income Taxes

         No provision for income taxes has been recorded due to the net
         operating losses (NOL) of the Company of approximately $3,415,000. The
         NOL carryforward will begin to expire in the year 2011. No tax benefit
         has been reported in the consolidated financial statements because the
         Company has yet to generate taxable income from operations, or show
         probability of taxable income. Some of the losses will be limited due
         to the acquisition and change of control.

         The deferred tax asset and the valuation account is as follows at
         December 31, 2006 and 2005:

                                           December 31,
                                  ----------------------------
                                     2006             2005
                                  -----------      -----------
Deferred tax asset:
Deferred noncurrent tax asset     $ 1,297,700      $   763,800

Valuation allowance                (1,297,700)        (763,800)
                                  -----------      -----------

Total                             $        --      $        --
                                  ===========      ===========

         The components of income tax expense are as follows:

                                           December 31,
                                  ----------------------------
                                     2006             2005
                                  -----------      -----------
Current federal tax               $        --      $        --
Current state tax                          --               --
Change in NOL benefit                (533,900)        (134,803)
Change in allowance                   533,900          134,803
                                  -----------      -----------
Total                             $        --      $        --
                                  ===========      ===========


                                       15
<PAGE>


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         j.       Newly Adopted Pronouncements

         In March 2005, the SEC released Staff Accounting Bulletin No. 107,
         "Share-Based Payment" ("SAB 107"), which provides interpretive guidance
         related to the interaction between SFAS 123(R) and certain SEC rules
         and regulations. It also provides the SEC staff's views regarding
         valuation of share-based payment arrangements. In April 2005, the SEC
         amended the compliance dates for SFAS 123(R), to allow companies to
         implement the standard at the beginning of their next fiscal year,
         instead of the next reporting period beginning after June 15, 2005.
         This statement had no impact on the Company's operations for the years
         ended December 31, 2006 or 2005.

         In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
         Corrections, a Replacement of APB Opinion No. 20 and SFAS No. 3. SFAS
         No. 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No 3,
         Reporting Accounting Changes in Interim Financial Statements and
         changes the requirement for the accounting for and reporting of a
         change in accounting principles. SFAS No. 154 applies to all voluntary
         changes in accounting principles. It also applies to changes required
         by an accounting pronouncement in the unusual instance that the
         pronouncement does not include specific transition provisions. When a
         pronouncement includes specific transition provisions, those provisions
         should be followed. The provisions of SFAS No. 154 are effective for
         accounting changes made in fiscal year beginning after December 15,
         2005. This statement had no impact on the Company's operations for the
         years ended December 31, 2006 or 2005.

         In February of 2006, the FASB issued SFAS No. 155, "Accounting for
         Certain Hybrid Financial Instruments", which is intended to simplify
         the accounting and improve the financial reporting of certain hybrid
         financial instruments (i.e., derivatives embedded in other financial
         instruments). The statement amends SFAS No. 133, "Accounting for
         Derivative Instruments and Hedging Activities", and SFAS No. 140,
         "Accounting for Transfers and Servicing of Financial Assets and
         Extinguishments of Liabilities--a replacement of FASB Statement No.
         125." SFAS No. 155 is effective for all financial instruments issued or
         acquired after the beginning of an entity's first fiscal year that
         begins after September 15, 2006. The Company is currently evaluating
         the impact SFAS No. 155 will have on its consolidated financial
         statements, if any.

                                       16
<PAGE>


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         j.       Newly Adopted Pronouncements (Continued)

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
         of Financial Assets", which provides an approach to simplify efforts to
         obtain hedge-like (offset) accounting. This Statement amends FASB
         Statement No. 140, "Accounting for Transfers and Servicing of Financial
         Assets and Extinguishments of Liabilities", with respect to the
         accounting for separately recognized servicing assets and servicing
         liabilities. The Statement (1) requires an entity to recognize a
         servicing asset or servicing liability each time it undertakes an
         obligation to service a financial asset by entering into a servicing
         contract in certain situations; (2) requires that a separately
         recognized servicing asset or servicing liability be initially measured
         at fair value, if practicable; (3) permits an entity to choose either
         the amortization method or the fair value method for subsequent
         measurement for each class of separately recognized servicing assets or
         servicing liabilities; (4) permits at initial adoption a one-time
         reclassification of available-for-sale securities to trading securities
         by an entity with recognized servicing rights, provided the securities
         reclassified offset the entity's exposure to changes in the fair value
         of the servicing assets or liabilities; and (5) requires separate
         presentation of servicing assets and servicing liabilities subsequently
         measured at fair value in the balance sheet and additional disclosures
         for all separately recognized servicing assets and servicing
         liabilities. SFAS No. 156 is effective for all separately recognized
         servicing assets and liabilities as of the beginning of an entity's
         fiscal year that begins after September 15, 2006, with earlier adoption
         permitted in certain circumstances. The Statement also describes the
         manner in which it should be initially applied. The Company does not
         believe that SFAS No. 156 will have a material impact on its
         consolidated financial statements.

         In July 2006, the FASB issued Financial Interpretation No. (FIN) 48,
         Accounting for Uncertainty in Income Taxes, which applies to all tax
         positions related to income taxes subject to No. 109 (SFAS 109),
         Accounting for Income Taxes. This includes tax positions considered to
         be "routine" as well as those with a high degree of uncertainty. FIN 48
         utilizes a two-step approach for evaluating tax positions. Recognition
         (step one) occurs when an enterprise concludes that a tax position,
         based solely on its technical merits, is more-likely-than-not to be
         sustained upon examination. Measurement (step two) is only addressed if
         step one has been satisfied (i.e., the position is more-likely-than-not
         to be sustained). Under step two, the tax benefit is measured as the
         largest amount of benefit, determined on a cumulative probability basis
         that is more-likely-than-not to be realized upon ultimate settlement.
         FIN 48's use of the term "more-likely-than-not" in steps one and two is
         consistent with how that term is used in SFAS 109 (i.e., a likelihood
         of occurrence greater than 50 percent). Those tax positions failing to
         qualify for initial recognition are recognized in the first subsequent
         interim period they meet the more-likely-than-not standard, or are
         resolved through negotiation or litigation with the taxing authority,
         or upon expiration of the statute of limitations. Derecognition of a
         tax position that was previously recognized would occur when a company
         subsequently determines that a tax position no longer meets the
         more-likely-than-not threshold of being sustained. FIN 48 specifically
         prohibits the use of a valuation allowance as a substitute for
         derecognition of tax positions.

                                       17
<PAGE>


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         j.       Newly Adopted Pronouncements (Continued)

         Additionally, FIN 48 requires expanded disclosure requirements, which
         include a tabular rollforward of the beginning and ending aggregate
         unrecognized tax benefits as well as specific detail related to tax
         uncertainties for which it is reasonably possible the amount of
         unrecognized tax benefit will significantly increase or decrease within
         twelve months. These disclosures are required at each annual reporting
         period unless a significant change occurs in an interim period. FIN 48
         is effective for fiscal years beginning after December 15, 2006. The
         Company does not believe the adoption will have material impact on its
         results of operation.

         In September 2006, the FASB issued SFAS No. 157, "Fair Value
         Measurements." SFAS No. 157 enhances existing guidance for measuring
         assets and liabilities using fair value. Prior to the issuance of SFAS
         No. 157, guidance for applying fair value was incorporated in several
         accounting pronouncements. SFAS No. 157 provides a single definition of
         fair value, together with a framework for measuring it, and requires
         additional disclosure about the use of fair value to measure assets and
         liabilities. SFAS No. 157 also emphasizes that fair value is a
         market-based measurement, not an entity-specific measurement, and sets
         out a fair value hierarchy with the highest priority being quoted
         prices in active markets. Under SFAS No. 157, fair value measurements
         are disclosed by level within that hierarchy. While SFAS No. 157 does
         not add any new fair value measurements, it does change current
         practice. Changes to practice include: (1) a requirement for an entity
         to include its own credit standing in the measurement of its
         liabilities; (2) a modification of the transaction price presumption;
         (3) a prohibition on the use of block discounts when valuing large
         blocks of securities for broker-dealers and investment companies; and
         (4) a requirement to adjust the value of restricted stock for the
         effect of the restriction even if the restriction lapses within one
         year. SFAS No. 157 is effective for financial statements issued for
         fiscal years beginning after November 15, 2007, and interim periods
         within those fiscal years. The Company is currently evaluating the
         impact SFAS No. 157 will have on its consolidated financial statements,
         if any.

         On September 29, 2006, the FASB issued SFAS No. 158, "Employers'
         Accounting for Defined Benefit Pension and Other Postretirement Plans."
         SFAS No. 158 requires an employer to recognize the overfunded or
         underfunded status of a defined benefit postretirement plan (other than
         a multiemployer plan) as an asset or liability in its statement of
         financial position, and to recognize changes in that funded status in
         the year in which the changes occur through comprehensive income. SFAS
         No. 158 also requires an employer to measure the funded status of a
         plan as of the date of its year-end statement of financial position and
         revises certain disclosure requirements. The benefit obligation is
         defined as the projected benefit obligation for pension plans and as
         the accumulated postretirement benefit obligation for any other
         postretirement benefit plan, such as a retiree healthcare plan. The
         Company is currently evaluating the impact SFAS No. 158 will have on
         its consolidated financial statements, if any.

         k.       Fair Value of Financial Instruments

         The fair value of the Company's cash and cash equivalents, receivables,
         accounts payable and accrued liabilities approximate carrying value
         based on their effective interest rates compared to current market
         prices.

                                       18
<PAGE>


NOTE 2 - GOING CONCERN

         The accompanying consolidated financial statements have been prepared
         assuming that the Company will continue as a going concern. The Company
         has had recurring operating losses for the past several years and is
         dependent upon financing to continue operations. The consolidated
         financial statements do not include any adjustments that might result
         from the outcome of uncertainty. It is management's plan to continue to
         implement their marketing strategy to generate the necessary revenue to
         support operations. The Company's revenues continue to increase, and
         management expects to report net income in the coming year. Officers
         will continue to advance funds as needed for any shortfalls in cash
         flows.

NOTE 3 - PROPERTY AND EQUIPMENT

         Property and equipment consists of the following at December 31, 2006:

        Furniture and fixtures                                        $  6,806
        Lab and test equipment                                          17,874
        Software                                                         8,867
        Vehicles                                                        51,711
        Accumulated depreciation                                       (85,258)
                                                                      --------
        Total property and equipment                                  $     --
                                                                      ========

NOTE 4 - RELATED PARTY TRANSACTIONS

         At December 31, 2006, the Company was indebted to certain officers of
         the Company for a total of $59,918. The amount is non-interest bearing,
         unsecured, and due on demand.

         At December 31, 2006, the Company was indebted to two separate
         shareholders for a total of $47,137 (Note 5). The amounts are
         non-interest bearing, unsecured, and due on demand.

NOTE 5 - NOTES PAYABLE

         Notes payable consisted of the following at December 31, 2006:

     Note payable to a corporation, principal and interest of $608 due
      monthly at 1.90% per annum interest rate, matured
      in October 2006, secured by a vehicle, currently past due       $  2,979

     Note payable to related individual, non-interest
       bearing, due on demand, unsecured                                 5,000

     Note payable to a director and shareholder, non-interest
       bearing, due on demand, unsecured                                42,137
                                                                      --------

     Total Notes Payable                                                50,116
     Less: Current Portion                                             (50,116)
                                                                      --------
     Long-Term Notes Payable                                          $     --
                                                                      ========

                                       19
<PAGE>


NOTE 6 - DUE FROM RELATED ENTITIES

         During the year ended December 31, 2006, the Company's board of
         directors determined that $414,967 advanced to a related company,
         accrued interest on the advances of $36,130, and a $200,000 note held
         by the Company from the related company were deemed to be
         uncollectible. Therefore, these amounts totaling $651,097 were expensed
         to bad debts during the year ended December 31, 2006.

NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)

         During the year ended December 31, 2005, the Company issued a total of
         16,652,774 shares of common stock at per share prices from $0.01 to
         $0.02 per share, pursuant to a regulation S offering. Accordingly,
         common stock and additional paid-in-capital have been charged $16,653
         and $322,651 respectively. Additional paid-in-capital has been
         presented net of costs of acquisition in the amount of $318,483. The
         Company also received a total of $127,582 related to the subscriptions
         receivable recorded during the year ended December 31, 2004. Remaining
         subscriptions receivable at December 31, 2005 totaled $19,965.

         On October 7, 2005, the Company issued 5,000,000 shares of common stock
         at $0.06 per share, for services rendered totaling $300,000 on behalf
         of the Company.

         On April 29, 2005, the Company issued 200,000 shares of common stock
         for services rendered to the Company valued at $4,000, or $0.02 per
         share.

         During 2005, the Company also increased the authorized amount of Class
         B common shares to 2,000,000 and issued an additional 1,600,000 to the
         Company's founder and President. These additional 1,600,000 Class B
         common shares have no determinable value and no value was assigned to
         these shares on the date of issuance. The Class B common shares do not
         have dividend rights and no funds shall be paid on the Class B shares
         upon liquidation.

         During 2006, the Company issued a total of 464,000 shares of common
         stock for cash at a price of $0.018 per share or $8,183.

         On March 16, 2006, the Company issued 30,000,000 shares of common stock
         to the Company's President for services rendered valued at $0.021 per
         share, or $630,000.

         On March 16, 2006, the Company issued 2,000,000 shares of common stock
         to a Company employee for services rendered valued at $0.021 per share,
         or $42,000.

         On March 21, 2006, the Company issued 1,000,000 shares of common stock
         to a Company employee for services rendered valued at $0.018 per share,
         or $18,000.

NOTE 8 - SUBSEQUENT EVENTS

         On February 2, 2007, the Company entered into a preliminary "Agreement
         and Plan of Merger" with a California corporation. The details on this
         transaction have not been finalized as of the date of this report.

         On March 13, 2007, the Board of Directors of the Company and its
         shareholders approved four amendments to the Company's Articles of
         Incorporation, as follows:

         1)     change the name of the Company to Stratus Entertainment, Inc.

         2)     change the capital structure to eliminate the Class B common
                stock and provide for one class of common stock with 400,000,000
                shares authorized for issuance,

         3)     create a class of preferred stock with 5,000,000 shares
                authorized for issuance but unissued, and

         4)     effect a 1 for 3,000 reverse split of the Company's common
                shares outstanding.

                                       20
<PAGE>


ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES.

NONE

ITEM 8A CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time periods. Our management, President and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls,
procedures and internal control over financial reporting (as defined in Rule
13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended)
and we have concluded these were effective as of Dec 31, 2006 (the "Evaluation
Date"). Based on the evaluation, which disclosed no significant deficiencies or
material weaknesses, our Chief Executive Officer/Chief Financial Officer
concluded that our disclosure controls and procedures and internal controls over
financial reporting have been designed and are being operated in a manner that
provides reasonable assurance that the information required to be disclosed by
us in reports filed under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. There were no changes in our disclosure controls
and procedures or internal control over financial reporting that occurred during
the quarter covered by this Report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The following table sets forth information regarding the executive
officers, directors and our control persons.

NAME                              AGE         POSITIONS HELD
-------------------------         ---         ---------------------------------
Carl R. Ceragno                   60          Director, President and Treasurer
Lawrence S. Hartman, Esq.         41          Director and Vice President
Almajean O'Connor                 57          Secretary


         The directors named above will serve until the next annual meeting of
our shareholders to be held within six (6) months of the close of our fiscal
year or until their successors shall have been elected and accepted their
positions. Directors are elected for one year terms. Mr. Ceragno and Ms.
O'Connor are our executive officers.

         Carl R. Ceragno. Carl R. Ceragno, who is our founder, has served as our
president and chief executive officer since our inception. His principal
responsibilities include system design engineering, project management, sales
and technical proposal preparation since 1992.

         Mr. Ceragno received a bachelor of sciences degree in June of 1968 from
Emerson College, Boston, MA. At graduation, he was honored by receiving the
departmental award for excellence and service to the Emerson College
Broadcasting Department.

         Mr. Ceragno has given numerous network, audiovisual and video
conferencing design lectures, authored technology white papers and has authored
numerous lectures regarding telecommunications technology and integration.

         From 1998 to 2001, Mr. Ceragno has served as trustee and president of
the New York Susquehanna & Western Technical and Historical Society. He
currently serves is a delegate to the United Railroad Historical Society of New
Jersey (custodian of historic railroad equipment owned by the State of New
jersey and destined for



                                       21
<PAGE>


the State railroad and transportation to be built in Phillipsburg, New Jersey),
Director of North East RailCar Association (NERCA) and is active in railroad
equipment restoration and preservation.

         Lawrence S. Hartman. Lawrence S. Hartman has served as Vice
President-Corporate Counsel since May of 1999. Mr. Hartman does not devote his
full time efforts to our affairs. Rather, he provides his time on an "as needed"
basis. From June of 1999 to the present, Mr. Hartman has served as Director,
President and Secretary of Omega Ventures, Inc., which provides on-line
marketing services. From May of 1998 to June of 1999, Mr. Hartman had served as
a senior manager of the Ocwen Federal Bank, where his responsibilities were
devoted towards real estate asset management. From January 1996 to May of 1998,
Mr. Hartman served as Vice President, secretary and general counsel with
Terragon Realty Advisors, a real estate investment trust. From January of 1994
until January of 1996, Mr. Hartman was employed as an associate attorney with
the law firm of Coudert Brothers, where his area of practice was limited to real
estate law. Mr. Hartman earned a Bachelor of Arts degree from Albany University
in May of 1987. He earned his Juris Doctor degree from Columbia Law School in
May of 1990. Mr. Hartman is currently licensed to practice law in the State of
New York.

         Almajean M. O'Connor Almajean M. O'Connor has served as our corporate
secretary since May of 1999. She has been employed by us as our office manager
since November of 1996. From November of 1987 to November of 1996, Ms. O.'Connor
had been employed as a legal secretary and legal assistant with the law firm of
Hannoch Weisman, Roseland, New Jersey. While Ms. O'Connor has not earned a four
year degree, she has attended Atlantic County Community College, Mays Landing,
New Jersey, where she had taken computer science classes.

ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth the compensation of our three (3)
officers for the last five (5) fiscal years:
<TABLE>
<CAPTION>
                                              ANNUAL COMPENSATION                LONG TERM COMPENSATION
   NAME AND                           ------------------------------     -----------------------------------
PRINCIPAL POSITION           YEAR       SALARY       BONUS     OTHER     STOCK     SAR's     LTIP      OTHER
------------------           ----     ----------     -----     -----     -----     -----     -----     -----
<S>                          <C>            <C>      <C>       <C>       <C>       <C>       <C>       <C>
Carl R. Ceragno              2002           0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
President & Treasurer        2003     $     0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2004     $     0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2005     $13,653.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2006     $     0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00

Lawrence S. Hartman          2002     $     NONE     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
Vice President               2003     $     NONE     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2004     $     NONE     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2005     $     NONE     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2006     $     NONE     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00

Almajean O'Connor            2002         800.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
Secretary                    2003     $     0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2004     $50,000.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2005     $51,715.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
                             2006     $     0.00     $0.00     $0.00     $0.00     $0.00     $0.00     $0.00
</TABLE>
TERMS OF OFFICE.

         Our directors hold office until the next annual meeting of our
stockholders or until their successors are elected and duly qualified. All
officers serve at the discretion of the directors.

DIRECTORS' COMPENSATION

         No compensation has been paid to any directors for service in such
capacity in the past. Directors may be reimbursed for expenses incurred while
attending Board and committee meetings. Board of Directors intends to adopt an
appropriate policy to compensate non-employee directors, in order to attract and
retain the services of qualified non-employee directors. Out of pocket expenses
shall continue to be paid to all independent directors to travel to Board and
committee meetings.



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<PAGE>


STOCK OPTIONS

         NONE

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following tables set forth the ownership, as of December 31, 2000,
of our common stock (i) by each person known by us to be the beneficial owner of
more than 5% of our outstanding common stock, (ii) by each of our directors,
(iii) by stockholders owning more than five percent (5%) of our shares, and (iv)
by all executive officers and our directors as a group. All persons named have
sole voting and investment power with respect to such shares, subject to
community property laws, and except as otherwise noted.

PERCENTAGE OF TOTAL SHARES

   TITLE OF                                           NO. OF      PERCENTAGE OF
    CLASS                      NAME & ADDRESS         SHARES       OWNERSHIP
--------------              -------------------     ----------    -------------
Class A Common              Lawrence S. Hartman      1,050,000       1.25%

Class A Common              Almajean O'Connor        2,000,000       1.4%

Class A Common              Carl R. Ceragno         35,500,000       5.5%
                                                    ----------       ----
All Officers and                                    38,500,000       8.25%
Directors as                                        ==========       ====
a Group (3 Individuals)

Class B Common              Carl R. Ceragno          2,000,000      100.0%

         As our Class B shares are entitled to 100 votes per share at all
meetings at which shareholders are entitled to vote, Mr. Ceragno possesses
voting control over all matters that may come to a vote of our shareholders.

CHANGES IN CONTROL.

         There are currently no arrangements which would result in a change in
control of our management.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Carl R. Ceragno founded the company in 1989 and served as our President
from inception and was a director, executive officer and control person of
Visual Telephone, our former parent company. Pursuant to the Reorganization
Agreement, we changed the state in which we had been incorporated from New
Jersey to Nevada and we were to issue two classes of common stock and vest
voting control of our shares with Mr. Ceragno.

         Carl R. Ceragno, our president, and Alma Jean O'Connor, our secretary,
have been funding our ongoing losses. The loans from Mr. Ceragno and Ms.
O'Conner have been used to pay salaries and other operating expenses. These
loans are demand loans and are not evidenced by promissory notes and may be
called by Mr. Ceragno and Ms. O'Connor, as the case may be, at any time. Ms.
O'Connor's and Mr. Ceragno's loan accrue interest at the rate of 7% per annum.

RECENT DEVELOPMENTS

         The company is seeking a merger candidate to continue as a going
concern and potential to increase asset and revenues.

         On or about March 13, 2007, the company filed a definitive 14C
information statement defining a restructuring of the company believed by the
company to be in the best interest of its shareholders. The plan has been
approved and the company will commence immediately on implementation.



                                       23
<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits

         31.1     Certification of Chief Executive Officer

         31.2     Certification of Principle Financial Officer

         32.1     Certification of Chief Executive Officer and Chief Financial
                  Officer Pursuant To 18 U.S.C. Section 1350, As Adopted
                  Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

         99.1     Risk Factors

(b)      Reports on Form 8-K

         None



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<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: March 30, 2007
                                            COMMUNICATIONS RESEARCH, INC.

                                            By:  /s/ Carl R. Ceragno
                                                 -------------------
                                                 Carl R. Ceragno


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