<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                         COMMISSION FILE NUMBER 0-22563


                                   PC411, INC.

        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


                   DELAWARE                                     95-4463937
        (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NUMBER)


           9800 S. LA CIENEGA BLVD.
                 INGLEWOOD, CA                                     90301
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

                                 (310) 645-1114

                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

     CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PRECEDING 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 [ ]

     AS OF NOVEMBER 14, 1997, THERE WERE OUTSTANDING 2,972,500 SHARES OF THE
ISSUER'S COMMON STOCK, $.01 PAR VALUE.






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<PAGE>   2

                                   PC411, INC.
                         QUARTERLY REPORT ON FORM 10-QSB
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
       PART I. FINANCIAL INFORMATION

                                                                                         PAGE
<S>                                                                                      <C>
Item 1.            Financial Statements (Unaudited):

                   Balance Sheets as of September 30, 1997 and
                       December 31, 1996 (Audited)...................................    3

                   Statements of Operations for the three months and
                       nine months ended September 30, 1997 and 1996.................    4

                   Statement of Stockholders' Equity for the
                       nine months ended September 30, 1997..........................    5

                   Statements of Cash Flows for the nine months
                       ended September 30, 1997 and 1996.............................    6

                   Notes to the Financial Statements.................................    7

Item 2.            Management's Discussion and Analysis of Financial
                       Condition and Results of Operations...........................    10


       PART  II. OTHER INFORMATION

Item 2             Changes in Securities and Use of Proceeds.........................    15

Item 5.            Other Information.................................................    16

Item 6.            Exhibits and Reports on Form 8-K..................................    16

SIGNATURE...........................................................................     17
</TABLE>







                                       2
<PAGE>   3

                                   PC411, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              --------------  ---------------
                                                               September 30,   December 31,
                                                              --------------  ---------------
                                                                   1997           1996
                                                              --------------  ---------------
                                                               (Unaudited)      (Audited)
                                                              --------------  ---------------
<S>                                                             <C>            <C>        
ASSETS:
Current assets:
    Cash and cash equivalents ...............................   $   228,258    $     8,605
    Short-term investments ..................................     4,748,862           --
    Accounts receivable .....................................          --           10,947
    Prepaid expenses ........................................       148,089        192,865
                                                                -----------    -----------

         Total current assets ...............................     5,125,209        212,417
                                                                -----------    -----------

Property and equipment, net .................................       133,033        132,972
                                                                -----------    -----------

         Total assets .......................................   $ 5,258,242    $   345,389
                                                                ===========    ===========


CURRENT LIABILITIES:
Accrued expenses ............................................   $   133,818    $   192,992
Deferred revenue ............................................        57,254         25,387
Related party demand loan payable ...........................          --          327,065
                                                                -----------    -----------

         Total current liabilities ..........................       191,072        545,444
                                                                -----------    -----------

Commitments and contingencies ...............................          --             --

STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred stock, Series A $.01 par value. Authorized 
    5,000,000 shares; issued and outstanding 0 and 1,820 
    shares at September 30, 1997 and December 31, 1996,
    respectively, liquidation value of $550 per share .......          --               18
  Common Stock, $.01 par value.  Authorized 25,000,000
    shares; issued and outstanding 2,972,500 and 4,240 at
    September 30, 1997 and December 31, 1996,
    respectively ............................................        29,725             42
  Additional paid-in capital ................................     7,409,809      1,406,427
  Accumulated deficit .......................................    (2,372,364)    (1,606,542)
                                                                -----------    -----------

         Net stockholders' equity (deficit) .................     5,067,170       (200,055)
                                                                -----------    -----------

         Total liabilities and stockholders' equity (deficit)   $ 5,258,242    $   345,389
                                                                ===========    ===========
</TABLE>







                 See accompanying Notes to Financial Statements

                                       3
<PAGE>   4


                                   PC411, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                  ----------------------------  ----------------------------
                                         Three Months Ended            Nine Months Ended
                                  ----------------------------  ----------------------------
                                  September 30,  September 30,  September 30,  September 30,
                                       1997          1996           1997           1996
                                  ---------------- -----------  ----------------------------
<S>                                <C>             <C>                <C>                 <C>       
Revenues ......................   $    20,619    $     3,331    $   112,660    $    23,084

Cost and expenses:
     Cost of revenues .........        25,309         29,163         96,833         56,673
     Research and development .       100,690         69,847        125,329        220,372
     Sales and marketing ......        80,076          3,780        146,252         23,085
     General and administrative       237,029         92,502        523,675        305,494
                                  -----------    -----------    -----------    -----------
                                      443,104        195,292        892,089        605,624
                                  -----------    -----------    -----------    -----------

Operating loss ................      (422,484)      (191,961)      (779,428)      (582,540)
                                  -----------    -----------    -----------    -----------

Other income (expense):
     Interest and other income         72,935            484        108,408          4,233
     Interest expense .........          --          (84,656)       (94,002)       (84,656)
                                  -----------    -----------    -----------    -----------

     Other income (expense) ...        72,935        (84,172)        14,406        (80,423)
                                  -----------    -----------    -----------    -----------

Income taxes ..................          --             --              800            800
                                  -----------    -----------    -----------    -----------

Net loss ......................      (349,549)      (276,133)      (765,822)      (663,763)

Dividend requirements .........          --             --         (296,953)          --
                                  -----------    -----------    -----------    -----------

Net loss to common stock ......   $  (349,549)   $  (276,133)   $(1,062,775)   $  (663,763)
                                  ===========    ===========    ===========    ===========

Net loss per common share .....   $      (.12)   $      (.38)   $      (.44)   $      (.91)
                                  ===========    ===========    ===========    ===========

Shares used in computing net
     loss per share ...........     2,972,500        732,390      2,390,217        732,390
                                  ===========    ===========    ===========    ===========
</TABLE>















                 See accompanying Notes to Financial Statements

                                       4
<PAGE>   5


                                   PC411, INC.

                        STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                   Total
                                                                 Additional                    stockholders'
                                        Preferred     Common       paid-in      Accumulated        equity
                                          Stock       Stock        capital        Deficit       (deficiency)
                                          -----       -----        -------        -------       ------------

<S>                                        <C>         <C>        <C>           <C>               <C>       
Balance, December 31, 1996........         $  18       $  42      $1,406,427    $(1,606,542)      $(200,055)

Net loss..........................            --          --              --       (765,822)       (765,822)

Conversion of preferred stock
   to common stock................           (18)         86             (68)            --              --

Stock split.......................           --       22,096         (22,096)            --              --

Contribution of common stock to
   company........................           --       (6,324)          6,324             --              --

Issuance of stock to legal
   counsel........................           --          600            (600)            --              --

Sale of common stock in
   initial public offering........           --       13,225       5,871,775             --       5,885,000

Payment of preferred
   dividend.......................           --          --         (171,953)            --        (171,953)

Sale of warrants to related
   party..........................           --          --          250,000             --         250,000

Interest component of stock
   option granted.................           --           --          70,000             --          70,000
                                         ------      -------     -----------   --------------   -----------


Balance, September 30, 1997.......       $   --      $29,725      $7,409,809    $(2,372,364)     $5,067,170
                                         ======      =======      ==========    ===========      ==========
</TABLE>












                 See accompanying Notes to Financial Statements


                                       5
<PAGE>   6


                                   PC411, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                         ----------------------------------
                                                                                                 Nine Months Ended
                                                                                         ----------------- ----------------
                                                                                          September 30,     September 30,
                                                                                               1997             1996
                                                                                         ----------------- ----------------
<S>                                                                                      <C>               <C>       
Cash flows from operating activities:
   Net loss......................................................................          $  (765,822)    $  (663,763)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Depreciation................................................................               30,011          28,433
     Interest component of stock options granted.................................               70,000              --
     Changes in assets and liabilities:
        Accounts receivable......................................................               10,947          (5,325)
        Prepaid expenses.........................................................               44,776         (48,779)
        Accrued expenses.........................................................              (59,174)         90,877
        Deferred revenues........................................................               31,867          19,602
                                                                                           -----------     -----------

Cash used in operating activities................................................             (637,395)       (578,955)
                                                                                           -----------     -----------

Cash flows from investing activities:
   Purchase of short-term investments............................................           (4,847,779)             --
   Sale of short-term investments................................................               98,917              --
   Acquisition of property and equipment.........................................              (30,072)        (10,284)
                                                                                           -----------     -----------

Cash used in investing activities................................................           (4,778,934)        (10,284)
                                                                                           -----------     -----------

Cash flows from financing activities:
   Increase (decrease) in loan payable...........................................             (327,065)        319,779
   Proceeds from common stock offering...........................................            5,885,000              --
   Payment of preferred dividends................................................             (171,953)             --
   Sale of warrants..............................................................              250,000              --
                                                                                           -----------     -----------

Cash provided from financing activities..........................................            5,635,982         319,779
                                                                                           -----------     -----------

Net increase (decrease) in cash..................................................              219,653        (269,460)
Cash and cash equivalents at beginning of period.................................                8,605         370,827
                                                                                           -----------     -----------

Cash and cash equivalents at end of period.......................................          $   228,258     $   101,367
                                                                                           ===========     ===========
</TABLE>












                 See accompanying Notes to Financial Statements

                                       6
<PAGE>   7


                                   PC411, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)    BUSINESS AND ORGANIZATION

       PC411, Inc. was incorporated in Delaware on December 29, 1993. The
       Company provides an on-line service that transmits name, address,
       telephone number and other related information digitally to users of
       personal computers.

       INITIAL PUBLIC OFFERING

       On May 21, 1997, the Company completed an initial public offering ("IPO")
       of 1,322,500 units (including 172,500 units from the exercise of the
       Underwriter's over allotment option), each unit consisting of one share
       of Common Stock and one Redeemable Class A Warrant to purchase a share of
       Common Stock. The units were sold for $5.75 each and the Company
       received, after expenses of the IPO, approximately $5.9 million in net
       proceeds.

 (2)   PRINCIPLES OF REPORTING

       The financial statements of the Company as of September 30, 1997
       presented herein have been prepared by the Company and are unaudited. In
       the opinion of management, all adjustments, consisting only of normal
       recurring adjustments, necessary to present fairly the financial position
       as of September 30, 1997 and the results of operations and cash flows for
       all periods presented have been made. Results for the interim periods are
       not necessarily indicative of the results for the entire year.

       These financial statements should be read in conjunction with the audited
       financial statements and notes thereto for the year ended December 31,
       1996 included in the Company's Registration Statement on Form SB-2, as
       amended (No. 333-21545).

       USE OF ESTIMATES

       The preparation of the financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities
       and disclosure of contingent assets and liabilities at the date of the
       financial statements and the reported amounts of revenue and expenses
       during the reporting period. Actual results could differ from those
       estimates.

       STOCK OPTIONS

       The Company applies APB Opinion No. 25 and related Interpretations in
       accounting for its stock options. In 1995, the Financial Accounting
       Standards Board issued SFAS No. 123, "Accounting for Stock-Based
       Compensation", which, if fully adopted, changes the methods of
       recognition of cost on certain stock options.





                                        7
<PAGE>   8

                                   PC411, INC.

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

       SHORT-TERM INVESTMENTS

       The Company's short-term investments comprise readily marketable debt
       securities with remaining maturities of more than 90 days at the time of
       purchase. The Company has classified all of its short-term investments as
       available for sale under the provisions of Statement of Financial
       Accounting Standards 115, "Accounting for Certain Investments in Debt and
       Equity Securities". Available for sale securities are stated at fair
       value with unrealized gains and losses included in stockholders' equity.
       The amortized cost of debt securities is adjusted for amortization of
       premiums and accretion of discounts to maturity. Such amortization is
       included in interest income.

       As of September 30, 1997, the Company had approximately $1.9 million in
       U.S. Government Obligations and approximately $2.8 million in commercial
       paper and bonds. The fair value of these short-term investments
       approximated their amortized costs and, accordingly, no unrealized gains
       or losses are included in stockholders' equity.

       New Accounting Pronouncements
     
       In February 1997, the Financial Accounting Standards Board issued
       Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
       (SFAS 128).  SFAS 128 specifies new standards designed to improve the
       earnings per share ("EPS") information provided in financial statements
       by simplifying the existing computational guidelines, revising the
       disclosure requirements, and increasing the comparability of EPS data on
       an international basis.  Some of the changes made to simplify the EPS
       computations include: (a) eliminating the presentation of primary EPS and
       replacing it with basic EPS, with the principal difference being that
       common stock equivalents (CSEs) are not considered in computing basic
       EPS, (b) eliminating the modified treasury stock method and the three
       percent materiality provision, and (c) revising the contingent share
       provisions and the supplemental EPS data requirements.  SAFS 128 also
       makes a number of changes to existing disclosure requirements.  SFAS 128
       is effective for financial statements issued for periods ending after
       December 15, 1997, including interim periods.  The Company has not yet
       determined the impact of the implementation of SFAS 128.

       In June 1997, the Financial Accounting Standards Board issued SFAS No.
       130, "Reporting Comprehensive Income".  SFAS 130 establishes standards
       for reporting and display of comprehensive income.  The purpose of
       reporting comprehensive income is to present a measure of all changes in
       equity that result from recognized transactions and other economic events
       of the period other than transactions with owners in their capacity as
       owners. SFAS 130 requires that an enterprise classify items of other
       comprehensive income by their nature in the financial statement and
       display the accumulated balance of other comprehensive income separately
       from retained earnings and additional paid-in capital in the equity
       section of the balance sheet.  SFAS 130 is effective for fiscal years
       beginning after December 15, 1997, with the earlier application
       permitted.  The Company has not yet determined the impact of the
       implementation of SFAS 130.


(3)    RELATED PARTY TRANSACTIONS

       The Company entered into a Loan and Security Agreement, dated as of June
       27, 1996, as amended (the "Loan Agreement"), with New Valley Corporation
       ("New Valley"), an indirect majority owner of the Company's shares of
       Common Stock, pursuant to which New Valley agreed to provide the Company,
       in its sole and absolute discretion, with up to $750,000 in financing.
       Amounts advanced under the Loan Agreement were due on demand and bore
       interest at 12% per annum. In May 1997, the Company issued to New Valley
       1,000,000 Redeemable Class A Warrants at the IPO price of $.25 per
       warrant in satisfaction of $250,000 of indebtedness under the Loan
       Agreement and the remaining balance due under the Loan Agreement of
       $447,064 was satisfied out of the net proceeds of the IPO.

       In January 1997, the Company granted to Direct Assist Holding Inc., a
       wholly-owned subsidiary of New Valley, options to acquire 500,000 shares
       of Common Stock at $5.75 per share, which fully vested upon the
       completion of the IPO. Such options were issued in connection with
       services provided on behalf of the Company's IPO, for the Preferred Stock
       private placement by New Valley, and for the Loan Agreement provided to
       the Company by New Valley. For financial reporting purposes, the Company
       has recorded $125,000 of the value assigned to these options as a
       dividend on Preferred Stock for the period January 1, 1997 through May
       22, 1997. In addition, the Company has recorded imputed interest expense
       of $70,000 arising from the issuance of such options during the period
       from January 1, 1997 through May 22, 1997.

(4)    STOCK OPTION PLAN

       The Company has a stock option plan, "1997 Stock Option Plan" (the "1997
       Plan"). The 1997 Plan provides for the grant of options to purchase the
       Company's stock to the employees and directors of the Company. Subject to
       certain limitations under the 1997 Plan, the number of awards, the terms
       and conditions of any award granted thereunder (including, but not
       limited to, the exercise price,

                                       8
<PAGE>   9



                                   PC411, INC.

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

       grant price or purchase price) are at the discretion of the Board of
       Directors. The Board of Directors had set aside 750,000 shares of the
       Company's common stock for issuance under the 1997 Plan. In January 1997,
       the Company's Board of Directors authorized the grant of 404,000 stock
       options at an exercise price of $4.40 under the 1997 Plan. One third of
       such options vested upon the completion of the IPO and one third will
       vest at the end of each of the first and second years thereafter. When
       granted, the Company determined the fair market value of each of the
       Company's shares to be $4.40, post-stock split; accordingly, no
       compensation expense was recognized for these options. In April and May
       1997, an aggregate of 102,000 stock options were granted at an exercise
       price of $5.50 per share, of which 15,060 became exercisable on the
       completion of the IPO. All stock options under the 1997 Plan are subject
       to an eighteen month lock-up agreement with the underwriter of the IPO
       which expires November 1998.

       Stock options issued in 1995 and 1996 under a 1994 stock option plan
       which was terminated in 1997, vest over a three-year period and have an
       exercise price of $11.50 per share. At September 30, 1997, 3,455 of the
       granted options were outstanding and exercisable.

       Additionally, in connection with its IPO, the Company granted to the
       underwriter of the offering options to purchase 73,600 units, at the
       exercise price of $9.49 per unit. Each unit consists of one share of
       Common Stock and one warrant to purchase an additional share at the price
       of $6.10.

       In addition to the options issued in connection with the stock option
       plans, the Company has granted other parties certain stock options as
       described in Note 3.

 (5)   PREFERRED STOCK

       The Company has the authority to issue 5,000,000 shares of Preferred
       Stock, which may be issued from time to time in one or more series. In
       May 1995, the Company sold and issued 1,820 shares of Series A
       Cumulative Convertible Preferred Stock, $.01 par value. Dividends at an
       annual rate of $55 per share on the Series A Preferred Stock were
       cumulative from the date of original issue and are payable annually in
       arrears, when and as declared by the Company's Board of Directors.

       On January 29, 1997, all 1,820 outstanding shares of Preferred Stock were
       converted into 8,626 shares (1,490,000 shares after stock split) of
       Common Stock, and the cumulative dividends on the Preferred Stock of
       $171,953 were subsequently declared and paid on May 22, 1997 out of the
       net proceeds of the IPO.

                                       9
<PAGE>   10


                                  PC411, INC.

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

The following discussion and analysis of the Financial Condition and Results of
Operations of the Company should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and the notes thereto included in the
Company's Registration Statement on Form SB-2 (No. 333-21545) relating to its
initial public offering, which was completed in May 1997.

OVERVIEW

The Company currently provides an on-line electronic directory assistance
service that gives its customers access to over 110 million U.S. and Canadian
residence and business telephone numbers, addresses and ZIP codes. The PC411
service is available on a direct-dial basis with a personal computer, a modem,
and either the Company's proprietary, copyrighted software program, PC411 FOR
WINDOWS, or an Internet browser. The PC411 service is available over the
Internet at the address HTTP://WWW.PC411.COM. The Company is scheduled to
release its newest version of software (Release 3.0) in November 1997. Based on
a 32-bit architecture for optimized performance, the Company's software has been
enhanced to provide a quicker, easier to use search tool to find names and phone
numbers, along with street addresses of people and businesses anywhere in North
America.

Given its limited operating history, the Company and its prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the new and rapidly evolving markets for on-line and
internet services. To address these risks, the Company must, among other things,
continue to respond to competitive developments, attract, retain and motivate
qualified personnel, implement and successfully execute its sales and marketing
strategy, create and distribute a version of PC411 FOR WINDOWS for other
operating systems, develop relationships with third parties for purposes of
general distribution and specific industry penetration and upgrade its
technologies and services. There can be no assurance that the Company will be
successful in addressing such risks.

The limited operating history of the Company makes the prediction of future
results of operations difficult or impossible. The Company believes that period
to period comparisons of its operating results for any period should not be
relied upon as an indication of future performance. The Company currently
expects to significantly increase its operating expenses as it builds its sales
and marketing staff, increases product development spending, and invests in
infrastructure. As a result, the Company expects to continue to incur
significant losses on a quarterly and annual basis for the foreseeable future.

In addition, the Company does not have historical financial data for any
significant period of time on which to base planned operating expenses. The
Company's expense levels are based in part on its expectations concerning future
revenue and to a large extent are fixed. Quarterly revenues and operating
results depend substantially upon signing up new customers and retaining such
customers which are difficult to forecast accurately. The Company may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall, and any significant shortfall in revenue in relation to the Company's
expectations would have an immediate adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company
currently expects to increase significantly its operating expenses as it builds
its sales and marketing staff, increases product

                                       10
<PAGE>   11



                                   PC411, INC.

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS - (CONTINUED)

development spending, and invests in infrastructure. To the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially and adversely affected.

The Company licenses its database and pays a percentage of revenues earned from
the display of the listing data, with a minimum annual payment. The Company
charges its customers an annual subscription fee. The Company has entered into
distribution agreements with the following companies: IBM (Aptiva), HP (Vector),
Multimedia Labs (representing 3Com), The Media Form (representing Hayes modems),
3Com/US Robotics and Silicom Multimedia (representing AST). PC411 FOR WINDOWS is
pre-installed on a computer's hard drive or copy of PC411 FOR WINDOWS is
included on a CD with the purchase of a modem. The Company pays distribution
fees to these equipment manufacturers for the distribution of PC411 FOR WINDOWS
either based upon the number of new customers that sign up for the PC411 service
or the revenues that such new customers generate. Although the Company has
experienced revenue growth in recent months due to these distribution
agreements, there can be no assurance that revenues of the Company will continue
to increase, that revenues will continue at their current level, that the
Company will be able to maintain these arrangements, or that the Company will
enter into additional bundling agreements with other third parties.

The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's control.
These factors include the level of usage of the Internet, demand for Internet
advertising, the continued growth of private intranets, the amount and timing of
capital expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new products or services by the Company or its
competitors, pricing changes in the industry, technical difficulties with
respect to the use of the PC411 service, general economic conditions and
economic conditions specific to on-line services and the Internet. As a
strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service or marketing decisions that
could have a material adverse effect on the Company's business, results of
operations and financial condition.

INITIAL PUBLIC OFFERING

On May 21, 1997, the Company completed an initial public offering ("IPO") of
1,322,500 units (including 172,500 units from the exercise of the Underwriter's
over-allotment option), each unit consisting of one share of Common Stock and
one Redeemable Class A Warrant to purchase a share of Common Stock. The units
were sold for $5.75 each and the Company received, after expenses of the IPO,
approximately $5.9 million in net proceeds.

RESULTS OF OPERATIONS

REVENUEs. The Company's revenues have been derived from registration fees and
usage charges for the modem dial-up PC411 service. Revenues are recognized over
the period in which the related services are to be provided. Revenues for the
three months and nine months ended September 30, 1997 were $20,619 and $112,660,
respectively, compared to $3,331 and $23,084 for the same periods in the prior
year. The increase in revenues were due primarily to the bundling arrangements
with IBM and U.S. Robotics.

                                       11
<PAGE>   12



                                   PC411, INC.

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS - (CONTINUED)

COST OF REVENUES. Cost of revenues consists primarily of the cost of data and
the distribution fees paid to IBM and U.S. Robotics. The Company's contract for
the listing data provides for a specified percentage of revenues that the
Company generates from distributing the data, with minimum quarterly payments.
To date, the Company has been only required to pay the minimum quarterly
payments related to the cost of data. Cost of revenues for the three months and
nine months ended September 30, 1997 were $25,309 and $96,833, respectively, as
compared to $29,163 and $56,673 for the same periods in the prior year. The
increase is due primarily to the increase in revenues which increases the
distribution fees related to the distribution arrangements with IBM and U.S.
Robotics.

RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
employee compensation and consulting fees associated with the design,
programming, and testing of the PC411 service and its software upgrade. Research
and development expenses for the three months and nine months ended September
30, 1997 were $100,690 and $125,329, respectively, as compared to $69,847 and
$220,372 for the same periods in the prior year. The increase in research and
development for the three months ended September 30, 1997 was primarily
attributable to an increase in the number of programmer hours as a result of the
completion of the new version of the Company's software program. Research and
development will increase over the next six months as the Windows 95 compatible
version of the software is completed.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist primarily of
public relations, print advertising, and trade shows. Sales and marketing
expenses for the three months and nine months ended September 30, 1997 were
$80,076 and $146,252, respectively, as compared to $3,780 and $23,085 for the
same periods in the prior year. The increase in sales and marketing expenses is
due to the Company's effort in obtaining additional bundling arrangements.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of expenses for administration, office operations, and general
management activities, including legal, accounting, and other professional fees.
General and administrative expenses were $237,029 and $523,675 for the three
months and nine months ended September 30, 1997, respectively, as compared to
$92,502 and $305,494 for the same periods in the prior year. The increase in
general and administrative expenses is due to an increase in payroll and costs
associated with a public company.

OTHER INCOME (EXPENSE). Interest expense was $94,002 for the nine months ended
September 30, 1997. The interest expense was attributed entirely to the loan
from New Valley Corporation ("NVC"), an indirect majority owner of the Company.
Included in interest expense was $70,000 in imputed interest attributable to
stock options granted to Direct Assist Holding Inc. ("DAH"), a wholly-owned
subsidiary of NVC, on January 29, 1997. Interest income for the three months and
nine months ended September 30,1997 was $72,935 and $108,408, respectively,
which related to interest on the funds received on May 22, 1997 for the initial
public offering.






                                       12
<PAGE>   13


                                   PC411, INC.

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS - (CONTINUED)

INCOME TAXES; NET OPERATING LOSS. The Company had no income and therefore made
no provision for federal or state income taxes other than the required
California state minimum tax of $800. At September 30, 1997, the Company had
approximately $1,950,000 of federal net operating loss carryforwards for tax
reporting purposes available to offset future taxable income, if any. The
amounts of and the benefits from net operating loss carryforwards are subject to
certain limitations and these net operating loss carryforwards expire in 2010.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception the Company has financed its operations primarily through
the sale of common stock, the private placement of Preferred Stock, and secured
short-term borrowings from NVC. The Company has not been able to generate
sufficient cash from operations and, as a consequence, additional financing has
been required to fund ongoing operations. Cash used in operations for the nine
months ended September 30, 1997 and 1996 was $637,395 and $578,955,
respectively. The increase in the cash used in operations in 1997 as compared to
1996 was due primarily to the increase in the net loss for the nine months ended
September 30, 1997 as compared to the same period in 1996.

Capital expenditures for the nine months ended September 30, 1997 were $30,072
as compared to $10,284 for the nine months ended September 30, 1996. These
expenditures were primarily for computer equipment.

Cash provided by financing activities for the nine months ended September 30,
1997 was $5,635,982, of which $5,885,000 related to proceeds from the initial
public offering. On May 22, 1997, the Company issued to NVC warrants in
satisfaction of $250,000 of indebtedness under the NVC loan agreement and net
proceeds from the IPO were used to repay NVC the then remaining outstanding
balance of the loan and accrued interest of $447,064. Financing for the cash
used in operations for the nine months ended September 30, 1996 was provided
through the sale of 1,820 shares of Preferred Stock to DAH for $1,001,000 on May
28, 1995 and through the NVC loan agreement. On January 29, 1997, the Company
converted the 1,820 shares of Preferred Stock into 8,626 shares of Common Stock
(1,490,000 shares after stock split) and paid the cumulative dividends thereon
of $171,953 on May 22, 1997 out of net proceeds from the IPO.

As noted above, the Company completed the sale of 1,322,500 units at a price of
$5.75 per unit and received net proceeds after IPO expenses of approximately
$5.9 million. After the repayment of the NVC loan, cumulative Preferred Stock
dividends, and an $80,000 consulting fee to the Underwriter of the IPO, the
Company had approximately $5.4 million to use to complete the introduction of
the PC411 service over the Internet, to expand marketing, sales and advertising,
to develop or acquire new services or databases, and for general corporate
purposes.

                                       13
<PAGE>   14



                                   PC411, INC.

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS - (CONTINUED)

The Company expects that its cash used in operating activities will increase in
the future. The timing of the Company's future capital requirements, however,
cannot be accurately predicted. The Company's capital requirements depend upon
numerous factors, principally the acceptance and use of the PC411 services and
the Company's ability to generate advertising revenue. If capital requirements
vary materially from those currently planned, the Company may require additional
financing, including, but not limited to the sale of equity or debt securities.
The Company has no commitments for any additional financing, and there can be no
assurance that any such commitments can be obtained. Any additional equity
financing may be dilutive to the Company's existing stockholders, and debt
financing, if available, may involve pledging some or all of the Company's
assets and may contain restrictive covenants with respect to raising future
capital and other financial and operational matters.

The Company believes that the net proceeds from the IPO will be sufficient to
meet the Company's operations and capital requirements for the next 12 months,
although there can be no assurance in this regard. Although there can be no
assurance, management believes that the Company will be able to continue as a
going concern for the next 12 months.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Company and its representatives may from time to time make oral or written
"forward-looking statements" within the meaning of the Private Securities Reform
Act of 1995 (the "Reform Act"), including any statements that may be contained
in the foregoing "Management's Discussion and Analysis of Financial Condition
and Results of Operations", in this report and in other filings with the
Securities and Exchange Commission and in its reports to stockholders, which
represent the Company's expectations or beliefs with respect to future events
and financial performance. These forward-looking statements are subject to
certain risks and uncertainties and, in connection with the "safe-harbor"
provisions of the Reform Act, the Company is hereby identifying important
factors that could cause actual results to differ materially from those
contained in any forward-looking statements made by or on behalf of the Company.

The Company's plans and objectives are based, in part, on assumptions involving
the continued growth and expansion of the Internet, the Company's ability to
market successfully the PC411 service and related services to the SOHO (small
office/home office) market and to private intranets as a more convenient and
reliable alternative to current comparable and widely used services and that
there will be no unanticipated material adverse change in the Company's
business. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.

Results actually achieved may differ materially from expected results included
in these statements as a result of these or other factors particularly in light
of the Company's early stage operations. Due to such uncertainties and risks,
readers are cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date on which such statements are made.
The Company does not undertake to update any forward-looking statement that may
be made from time to time on behalf of the Company.

                                       14
<PAGE>   15


                                   PC411, INC.

                           PART II. OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On May 21, 1997, the Company completed an initial public offering
         ("IPO") of 1,322,500 units (including 172,500 units from the exercise
         of the Underwriter's over-allotment option), each unit consisting of
         one share of Common Stock and one Redeemable Class A Warrant to
         purchase a share of Common Stock. The units were sold for $5.75 each
         and the Company received, after expenses of the IPO, approximately $5.9
         million in net proceeds.

         On August 14, 1997, the Company filed its initial report of sales of
         securities and use of proceeds therefrom on Form SR. Form SR has been
         discontinued and the Company will continue to report the following
         information in the Company's quarterly and annual filings until the
         proceeds have been fully used.

         1.   The offering commenced May 14, 1997 and all registered securities
              were sold.

         2.   The managing underwriter was Biltmore Securities, Inc.

         3.   Title of Securities:

              a.  Units - Each Unit consists of one share of common stock and
                  one Redeemable Class A Warrant.
              b.  Common Stock - Common Stock included in Units, Par value $.01.
              c.  Redeemable Class A Warrants ("Warrants") - Each Warrant is
                  convertible into one share of Common Stock at an exercise
                  price of $6.10.
              d.  Common stock issuable upon conversion of the Warrants ("Other
                  Common Stock").
              e.  Underwriter's Options - The Underwriter's Options are
                  convertible into Units at an exercise price of $9.49.

         4.   The Amount and Aggregate Offering Price of Securities Registered
              and Sold to Date For the Account of the Issuer:
<TABLE>
<CAPTION>

                                                       Aggregate Price                          Aggregate
                                       Amount            of Offering          Amount         Offering Price
          Title of Security          Registered       Amount Registered        Sold          of Amount Sold
          -----------------          ----------       -----------------        ----          --------------
<S>                                   <C>                <C>                <C>                <C>       
Units                                 1,322,500          $7,604,375         1,322,500          $7,604,375
Common Stock                          1,322,500                  --                --                  --
Warrants                              1,322,500                  --                --                  --
Other Common Stock                    1,322,500          $8,067,250                --                  --
Underwriter's Options                    73,600          $1,147,424                --                  --
</TABLE>





                                       15
<PAGE>   16


                                   PC411, INC.

                           PART II. OTHER INFORMATION

         5.   Expenses Incurred in Connection with Issuance of Securities:

                 Underwriting discounts and commissions          $760,438
                 Expenses paid to underwriters                   $228,131
                 Other expenses (estimated)                      $730,880
                   (All expenses were direct or indirect to others)

         6.   Net offering proceeds after the total expenses above were
              $5,885,000.

         7.   Amount of net offering proceeds used for each of the purposes
              listed below:

                                                                          
Amounts paid to affiliates of the Company:
      Repayment of Indebtedness                             $  619,016
Amounts paid to others:
  Temporary investments:
      US Government Obligations                             $1,906,352
      Commercial paper                                      $1,969,570
      Bankers acceptance                                    $  873,940
  Purchase of equipment                                     $   27,250
  Employee compensation - estimated                         $  200,000
  Other working capital - estimated                         $  289,872



Item 5.  OTHER INFORMATION

         Effective as of July 31, 1997, the Company's Common Stock (symbol:
         PCFR), Redeemable Class A Warrants (symbol: PCFRW), and Units (symbol:
         PCFRU) began trading on the Nasdaq SmallCap Market. Such securities had
         previously traded on the OTC Bulletin Board.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) EXHIBITS

             10.1  Distribution Agreement between the Company and The Media Farm
             10.2  Distribution Agreement between the Company and Silicon
                   Multimedia Systems, Inc.
             10.3  License Agreement with Acxiom Corporation
             27.   Financial Data Schedule (for SEC use only)

         (b) REPORTS ON FORM 8-K

                None

                                       16
<PAGE>   17


                                   PC411, INC.

                                   SIGNATURE

         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.

                                                  PC411, INC.
                                                  (Registrant)





Date:    November 14, 1997                  By:   /s/ROBERT M. LUNDGREN
                                                  ---------------------
                                                  Robert M. Lundgren
                                                  Vice President, Treasurer
                                                  and Chief Financial Officer
                                                  (Duly Authorized Officer and
                                                     Chief Accounting Officer)


















                                       17