<PAGE>   1
===============================================================================

                       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 JUNE 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 AUGUST 8, 1997, THERE WERE OUTSTANDING 2,972,500 SHARES OF THE
ISSUER'S COMMON STOCK, $.01 PAR VALUE.



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

<PAGE>   2

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


                               TABLE OF CONTENTS
                               -----------------


PART I. FINANCIAL INFORMATION

                                                                          PAGE
                                                                          ----

Item 1.    Financial Statements (Unaudited):

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

           Statements of Operations for the six months
               ended June 30, 1997 and 1996...........................     4

           Statement of Stockholders' Equity for the
               six months ended June 30, 1997.........................     5

           Statements of Cash Flows for the six months
               ended June 30, 1997 and 1996...........................     6

           Notes to the Quarterly Consolidated Financial Statements...     7

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


PART  II. OTHER INFORMATION

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

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

SIGNATURE.............................................................    17



                                       2
<PAGE>   3


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           June 30,        December 31,
                                                                             1997              1996
                                                                       ----------------- -----------------
                                                                         (Unaudited)        (Audited)

<S>                                                                      <C>             <C>          
ASSETS:
Current assets:
    Cash and cash equivalents.....................................       $   779,744       $     8,605
    Short-term investments........................................         4,847,779                --
    Accounts receivable...........................................                --            10,947
    Prepaid expenses..............................................            42,995           192,865
                                                                         -----------       -----------

         Total current assets.....................................         5,670,518           212,417
                                                                         -----------       -----------

Property and equipment, net.......................................           119,031           132,972
                                                                         -----------       -----------

         Total assets.............................................       $ 5,789,549       $   345,389
                                                                         ===========       ===========


CURRENT LIABILITIES:
Accrued expenses..................................................       $   319,700      $    192,992
Deferred revenue..................................................            53,130            25,387
Related party demand loan payable ...............................                 --           327,065
                                                                         -----------       -----------

         Total current liabilities................................           372,830           545,444
                                                                         -----------       -----------

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

STOCKHOLDERS' EQUITY (DEFICIT):
   Preferred stock, Series A $.01 par value.  Authorized 10,000
       shares; issued and outstanding 0 and 1,820 shares at
       June 30, 1997 and December 31, 1996, respectively,
       liquidation value of $550 per share........................                --                18
   Common Stock, $.01 par value.  Authorized 10,000 shares;
       issued and outstanding 2,972,500 and 4,240 at June 30, 1997
       and December 31, 1996, respectively........................            29,725                42
    Additional paid-in capital....................................         7,409,809         1,406,427
    Deficit accumulated during the development stage..............        (2,022,815)       (1,606,542)
                                                                         -----------       -----------

         Net stockholders' equity (deficit).......................         5,416,719          (200,055)
                                                                         -----------       -----------

         Total liabilities and stockholders' equity (deficit).....       $ 5,789,549       $   345,839
                                                                         ===========       ===========
</TABLE>





                 See accompanying Notes to Financial Statements


                                       3
<PAGE>   4


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                     
                                                    Three Months Ended                Six Months Ended               Period From   
                                             --------------------------------- --------------------------------   December 29, 1993
                                                June 30,         June 30,         June 30,        June 30,       (Date of Inception)
                                                  1997             1996             1997            1996          to June 30, 1997
                                             ---------------- ---------------- --------------- ---------------- --------------------
<S>                                            <C>             <C>               <C>             <C>                 <C>         
Revenues...................................... $  50,491       $    8,197        $  92,041       $  19,753           $    160,452

Cost and expenses:
     Cost of revenues.........................    40,865           14,268           71,524          27,510                269,064
     Research and development.................    16,796           74,366           24,639         150,525                570,772
     Sales and marketing......................    50,321            5,870           66,176          19,305                209,518
     General and administrative...............   156,788           87,411          286,646         212,992                948,943
                                               ---------       ----------        ---------       ---------           ------------
                                                 264,770          181,915          448,985         410,332              1,998,297
                                               ---------       ----------        ---------       ---------           ------------

Operating loss................................  (214,279)        (173,718)        (356,944)       (390,579)            (1,837,845)
                                               ---------       ----------        ---------       ---------           ------------

Other income (expense):
     Interest and other income................    35,473              804           35,473           3,749                 86,291
     Interest expense.........................   (36,256)              --          (94,002)             --               (268,861)
                                               ---------       ----------        ---------       ---------           ------------

     Other income (expense)...................      (783)             804          (58,529)          3,749               (182,570)
                                               ---------       ----------        ---------       ---------           ------------

Loss before income taxes......................  (215,062)        (172,914)        (415,473)       (386,830)            (2,020,415)

Income taxes..................................        --               --              800             800                  2,400
                                               ---------       ----------        ---------       ---------           ------------

Net loss......................................  (215,062)        (172,914)        (416,273)       (387,630)          $ (2,022,815)
                                                                                                                     ============

Dividends on preferred shares -
     undeclared...............................  (192,703)              --         (296,953)             --
                                               ---------       ----------        ---------       ---------                       

Net loss applicable to common stock........... $(407,765)      $ (172,914)       $(713,226)      $(387,630)
                                               =========       ==========        =========       =========

Net loss per share............................ $    (.16)      $     (.24)       $    (.34)      $    (.53)
                                               =========       ==========        =========       =========

Shares used in computing net loss per
     share.................................... 2,472,427          732,390        2,099,075         732,390
                                               =========       ==========        =========       =========

</TABLE>


                 See accompanying Notes to Financial Statements


                                       4
<PAGE>   5

                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                        STATEMENT OF STOCKHOLDERS' EQUITY
                     FOR THE SIX MONTHS ENDED JUNE 30, 1997
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                  Deficit
                                                                                accumulated        Total
                                                                 Additional      during the    stockholders'
                                        Preferred     Common       paid-in      development        equity
                                          Stock       Stock        capital         stage        (deficiency)
                                        ---------     ------     -----------    -----------    -------------
<S>                                      <C>         <C>         <C>           <C>               <C>       
Balance, December 31, 1996........       $   18      $    42     $ 1,406,427    $ (1,606,542)    $  (200,055)

Net loss..........................           --           --              --        (416,273)       (416,273)

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, June 30, 1997............       $   --      $29,725     $ 7,409,809    $ (2,022,815)    $ 5,416,719
                                         ======      =======     ===========    ============     ===========

</TABLE>








                 See accompanying Notes to Financial Statements


                                       5
<PAGE>   6


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                Six Months Ended               Period From   
                                                                        --------------------------------    December 29, 1993
                                                                           June 30,          June 30,      (Date of Inception)
                                                                             1997              1996          to June 30, 1997
                                                                        --------------    --------------   ------------------- 
<S>                                                                     <C>               <C>                 <C>         
Cash flows from operating activities:
   Net loss........................................................     $ (416,273)       $ (387,630)         $ (2,022,815)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Depreciation..................................................         19,919            19,002                86,392
     Interest component of stock options granted...................         70,000                --                70,000
     Amortization of discount on loan payable......................             --                --               160,940
     Changes in assets and liabilities:
        Accounts receivable........................................         10,947                --
        Prepaid expenses...........................................        149,870            13,000               (42,995)
        Accrued expenses...........................................        126,708                --               319,700
        Deferred revenues..........................................         27,743        $       --                53,130
                                                                        ----------        ----------          ------------

Cash used in operating activities..................................        (11,086)         (355,628)           (1,375,648)
                                                                        ----------        ----------          ------------

Cash flows from investing activities:
   Purchase of short-term investments..............................     (4,847,779)               --            (4,847,779)
   Acquisition of property and equipment...........................         (5,978)           (7,569)             (205,423)
                                                                        ----------        ----------          ------------

Cash flows used in investing activities.............................    (4,853,757)           (7,569)           (5,053,202)
                                                                        ----------        ----------          ------------

Cash flows from financing activities:
   Increase in (repayment of) loan payable.........................       (327,065)           37,500                    --
   Issuance of preferred stock.....................................             --                --             1,001,000
   Shareholder cash contribution...................................             --                --                92,047
   Issuance of common stock........................................      5,885,000                --             6,037,500
   Payment of preferred dividends..................................       (171,953)               --              (171,953)
   Sale of warrants................................................        250,000                --               250,000
                                                                        ----------        ----------          ------------

Cash flows provided from financing activities......................      5,635,982            37,500             7,208,594
                                                                        ----------        ----------          ------------

Net increase (decrease) in cash....................................        771,139          (325,697)              779,744
Cash and cash equivalents at beginning of period...................          8,605           370,827                    --
                                                                        ----------        ----------          ------------

Cash and cash equivalents at end of period.........................     $  779,744        $   45,130          $    779,744
                                                                        ==========        ==========          ============
</TABLE>








                 See accompanying Notes to Financial Statements


                                       6
<PAGE>   7


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          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 $6 million in net
       proceeds. Immediately prior to the IPO, the then outstanding 12,866
       shares of Common Stock were converted into 2,222,390 shares of Common
       Stock pursuant to a 172.7336-for-1 stock split. Certain stockholders
       contributed 632,390 shares to the Company resulting in 1,590,000 shares
       outstanding. In addition, the Company issued an additional 60,000 shares
       to its legal counsel in connection with services rendered for the IPO. As
       a result of the foregoing, at June 30, 1997 the Company had 2,972,500
       shares outstanding.


 (2)   PRINCIPLES OF REPORTING

       The financial statements of the Company as of June 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 June 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.



                                       7
<PAGE>   8



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


       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.

       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 June 30, 1997, the Company had approximately $1.9 million in U.S.
       Government Obligations and approximately $2.9 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.


(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 Preferred Stock
       equity 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.


                                       8
<PAGE>   9



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)




(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 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, 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 June 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 10,000 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.
                          (A DEVELOPMENT STAGE COMPANY)


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 was a development
stage enterprise through June 30, 1997. Effective July 1, 1997, the Company is
no longer considered a development stage enterprise as significant revenues are
being generated and the raising of capital has been completed. Since its
inception in December 1993, the Company has devoted substantially all of its
expenditures (approximately $2 million through June 30, 1997) to the development
of the PC411 service. The Company introduced the first version of the PC411
service in December 1994.

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.
                          (A DEVELOPMENT STAGE COMPANY)


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 minimum quarterly payments. The Company
typically charges its customers a registration fee and then on a per use basis,
or an annual subscription fee. The Company has entered into distribution
agreements with three computer equipment manufacturers and one modem
manufacturer, pursuant to which PC411 FOR WINDOWS will be installed on a
computer's hard drive or a copy of PC411 FOR WINDOWS will be included with the
purchase of a modem. The Company pays a distribution fee to the three computer
equipment manufacturers and one modem manufacturer 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 bundling
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
has recently been notified by Sony that as of June 1997 it will no longer
include in its new releases products, such as PC411 FOR WINDOWS, which require
users to pay for services. Sony accounted for less than 10% of the Company's
customers during the six months ended June 30, 1997.

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 $6.1 million in net proceeds. Immediately prior to the IPO, the
then outstanding 12,866 shares of Common Stock were converted into 2,222,390
shares of Common Stock pursuant to a 172.7336-for-1 stock split. Certain
stockholders contributed 632,390 shares to the Company resulting in 1,590,000
shares outstanding. In addition, the Company issued an additional 60,000 shares
to its legal counsel in connection with services rendered for the IPO. As a
result of the foregoing, at May 23, 1997 the Company had 2,972,500 shares
outstanding.

                                       11
<PAGE>   12



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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



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 six months ended June 30, 1997 were $50,491 and $92,041,
respectively, compared to $8,197 and $19,753 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.

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 the distributing the data, with minimum quarterly
payments. To date, the Company has been only required to pay the minimum
quarterly payments. Cost of revenues for the three months and six months ended
June 30, 1997 were $40,865 and $71,524, respectively, as compared to $14,268 and
$27,510 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
bundling arrangements with IBM and U.S. Robotics.

RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of
employee compensation associated with the design, programming, and testing of
the PC411 service. Research and development expenses for the three months and
six months ended June 30, 1997 were $16,796 and $24,639, respectively, as
compared to $74,366 and $150,525 for the same periods in the prior year. The
decrease in research and development was primarily attributable to a decrease in
the number of programmer hours as a result of the completion of the initial
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 six months ended June 30, 1997 were $50,321
and $66,176, respectively, as compared to $5,870 and $19,305 for the same
periods in the prior year. The increase in sales and marketing expenses is due
to the Company's effort to obtain 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 $156,788 and $286,646 for the three
months and six months ended June 30, 1997, respectively, as compared to $87,411
and $212,992 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.


                                       12
<PAGE>   13


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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



OTHER INCOME (EXPENSE). Interest expense was $36,256 and $94,002 for the three
months and six months ended June 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 six months ended June 30, 1997 was $35,473 which
related to interest on the funds received on May 22, 1997 for the initial public
offering.

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 June 30, 1997, the Company had
approximately $1,600,000 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 six
months ended June 30, 1997 and 1996 was $11,086 and $355,628, respectively. The
decrease in the cash used in operations in 1997 as compared to 1996 was due
primarily to the increase in accrued expenses of $126,708 and the decrease in
prepaid expenses of $149,870 which were primarily related to IPO costs.

Capital expenditures for the six months ended June 30, 1997 were $5,978 as
compared to $7,569 for the six months ended June 30, 1996. These expenditures
were primarily for computer equipment.

Cash provided by financing activities for the six months ended June 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 six months ended June 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.


                                       13
<PAGE>   14



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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


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.

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.


                                       14
<PAGE>   15



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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



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.


                                       15
<PAGE>   16


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


                           PART II. OTHER INFORMATION



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     Employment Agreement dated May 14, 1997 between the 
                         Company and Dean R. Eaker.

                10.2     Employment Agreement dated May 14, 1997 between the 
                         Company and Edward A. Fleiss.

                27.      Financial Data Schedule (for SEC use only)

         (b) REPORTS ON FORM 8-K

                None








                                       16
<PAGE>   17


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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:    August 13, 1997                By: /s/ ROBERT M. LUNDGREN
                                            ----------------------------
                                            Robert M. Lundgren
                                            Vice President, Treasurer
                                            and Chief Financial Officer
                                            (Duly Authorized Officer and
                                               Chief Accounting Officer)







                                       17