<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 MARCH 31, 1998

                        COMMISSION FILE NUMBER 0001-22563

                                   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. LACIENEGA 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 MAY 15, 1998, THERE WERE OUTSTANDING 3,120,000 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 MARCH 31, 1998


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
       PART I. FINANCIAL INFORMATION

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

                   Condensed Balance Sheets as of March 31, 1998
                       and December 31, 1997....................................    3

                   Condensed Statements of Operations for the
                       three months ended March 31, 1998 and 1997...............    4

                   Condensed Statements of Cash Flows for the
                       three months ended March 31, 1998 and 1997...............    5

                   Condensed Notes to the Quarterly Consolidated
                       Financial Statements.....................................    6

Item 2.            Management's Discussion and Analysis of Financial
                       Condition and Results of Operations......................    8


       PART  II. OTHER INFORMATION

Item 6.            Exhibits and Reports on Form 8-K.............................    14

SIGNATURE.......................................................................    16
</TABLE>



<PAGE>   3


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            CONDENSED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       ----------------------------------
                                                                          March 31,        December 31,
                                                                       ----------------------------------
                                                                             1998              1997
                                                                       ----------------------------------
<S>                                                                    <C>                <C>
ASSETS:
Current assets:
    Cash and cash equivalents.....................................      $    471,513      $    949,157
    Investments...................................................         3,597,970         3,598,116
    Accounts receivable...........................................             1,809             8,963
    Accrued interest receivable...................................           113,711            70,233
    Prepaid expenses and other current assets.....................            62,945           103,232
                                                                        ------------        ----------

         Total current assets.....................................         4,247,948         4,729,701

Property and equipment, net.......................................           122,398           128,959
                                                                         -----------       -----------

         Total assets.............................................       $ 4,370,346       $ 4,858,660
                                                                          ==========        ==========


CURRENT LIABILITIES:
Accounts payable and accrued expenses.............................      $    227,857      $    178,789
Deferred revenue..................................................            23,776            54,035
                                                                        ------------      ------------

         Total current liabilities................................           251,633           232,824
                                                                         -----------       -----------

STOCKHOLDERS' EQUITY:
    Preferred stock, Series A $.01 par value.  Authorized
       5,000,000 shares; no shares issued and outstanding.........                --                --
    Common Stock, $.01 par value.  Authorized 25,000,000
       shares; 2,972,500 shares issued and outstanding............            29,725            29,725
    Additional paid-in capital....................................         7,409,809         7,409,809
    Deficit accumulated during the development stage..............        (3,320,821)       (2,813,698)
                                                                          ----------        ----------

         Total stockholders' equity...............................         4,118,713         4,625,836
                                                                          ----------        ----------

         Total liabilities and stockholders' equity (deficit).....       $ 4,370,346       $ 4,858,660
                                                                          ==========        ==========
</TABLE>


            See accompanying Notes to Condensed Financial Statements


                                       3

<PAGE>   4


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                  --------------------------------------------------------------
                                                                                                     
                                                                                                Period from
                                                  Three Months Ended March 31,               December 29, 1993  
                                                 -------------------------------           (Date of Inception) to
                                                      1998              1997                   March 31, 1998
                                                 ---------------------------------------------------------------
<S>                                              <C>               <C>                           <C>
Revenues ..................................      $    48,469       $    41,550                   $   260,012 
                                                                                                             
Cost and expenses:                                                                                           
     Cost of revenues .....................           93,572            30,659                       410,871 
     Research and development .............           69,485             7,843                       784,577 
     Sales and marketing ..................          211,543            15,855                       547,198 
     General and administrative ...........          239,291           129,858                     1,845,471 
                                                 -----------       -----------                   ----------- 
                                                     613,891           184,215                     3,588,117 
                                                 -----------       -----------                   ----------- 
                                                                                                             
Operating loss ............................         (565,422)         (142,665)                   (3,328,105)
                                                 -----------       -----------                   ----------- 
                                                                                                             
Other income (expense):                                                                                      
     Other income .........................               --                --                        22,862 
     Interest income ......................           58,299                --                       255,683 
     Interest expense .....................               --           (57,746)                     (268,861)
                                                 -----------       -----------                   ----------- 
                                                      58,299           (57,746)                        9,684 
                                                 -----------       -----------                   ----------- 
                                                                                                             
Loss before income taxes ..................         (507,123)         (200,411)                   (3,318,421)
                                                                                                             
Income taxes ..............................               --               800                         2,400 
                                                 -----------       -----------                   ----------- 
                                                                                                             
Net loss ..................................         (507,123)         (201,211)                  $(3,320,821)
                                                                                                 =========== 

Dividends on preferred shares .............               --          (104,250)
                                                 -----------       -----------

Net loss applicable to common stock .......      $  (507,123)      $  (305,461)
                                                 ===========       ===========

Net loss per share (basic and diluted) ....      $     (0.17)      $     (0.18)
                                                 ===========       ===========

Shares used in computing net loss per share        2,972,500         1,725,724
                                                 ===========       ===========
</TABLE>


            See accompanying Notes to Condensed Financial Statements


                                       4
<PAGE>   5


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         ---------------------------------------------------------
                                                                                                  
                                                                                                 Period from
                                                           Three Months Ended March 31,        December 29, 1993
                                                           ----------------------------     (Date of Inception) to
                                                              1998           1997               March 31, 1998
                                                           -------------------------------------------------------
<S>                                                        <C>            <C>                <C>
Cash flows from operating activities:
   Net loss ...........................................    $(507,123)     $(201,211)               $(3,320,821)
   Adjustments to reconcile net loss to net cash                                                               
    used in operating activities:                                                                              
     Depreciation .....................................       10,290          9,968                    117,081 
     Interest component of stock options granted ......           --         44,366                    160,940 
     Amortization of discount on loan payable .........           --             --                     70,000 
     Changes in assets and liabilities:                                                                        
        Accounts receivable ...........................        7,154            124                     (1,809)
        Prepaid expenses and other current assets .....       (3,191)       (90,473)                  (176,656)
        Accounts payable and accrued expenses .........       49,068          6,284                    227,857 
        Deferred revenue ..............................      (30,259)        10,500                     23,776 
                                                           ---------      ---------                ----------- 
                                                                                                               
Net cash used in operating activities .................     (474,061)      (220,442)                (2,899,632)
                                                           ---------      ---------                ----------- 
                                                                                                               
Cash flows from investing activities:                                                                          
   Acquisition of property and equipment ..............       (3,729)        (2,822)                  (239,479)
   Sale of investments ................................      500,000             --                  3,118,468 
   Purchase of investments ............................     (499,854)            --                 (6,716,438)
                                                           ---------      ---------                ----------- 
                                                                                                               
Net cash used in investing activities .................       (3,583)        (2,822)                (3,837,449)
                                                           ---------      ---------                ----------- 
                                                                                                               
                                                                                                               
Cash flows from financing activities:                                                                          
   Proceeds from loan payable .........................           --        250,558                    697,063 
   Repayment of loan to related party, net ............           --             --                   (619,016)
   Issuance of preferred stock ........................           --             --                  1,001,000 
   Shareholder cash contribution ......................           --             --                     92,047 
   Issuance of common stock ...........................           --             --                  6,037,500 
                                                           ---------      ---------                ----------- 
                                                                                                               
Net cash provided by financing activities .............           --        250,558                  7,208,594 
                                                           ---------      ---------                ----------- 
                                                                                                               
Net (decrease) increase in cash and cash                                                                       
   equivalents ........................................     (477,644)        27,294                    471,513 
Cash and cash equivalents at beginning of period ......      949,157          8,605                         -- 
                                                           ---------      ---------                ----------- 
                                                                                                               
Cash and cash equivalents at end of period ............    $ 471,513      $  35,899                $   471,513 
                                                           =========      =========                =========== 
</TABLE>


            See accompanying Notes to Condensed Financial Statements


                                       5

<PAGE>   6


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO CONDENSED 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. At March 31, 1998, the Company was a majority owned
       subsidiary of New Valley Corporation ("New Valley"), a publicly held
       company.

       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. In connection with the IPO, the Company effected a
       172.7336-for-1 stock split of the Company's Common Stock. All shares and
       share amounts have been restated to reflect the stock split.



(2)    PRINCIPLES OF REPORTING

       The financial statements of the Company as of March 31, 1998 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 March 31, 1998 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,
       1997 included in the Company's Form 10-KSB (Commission File No.
       0001-22563).

       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.


                                       6
<PAGE>   7
                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)

              NOTES TO CONDENSED 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.

       NEW ACCOUNTING PRONOUNCEMENTS

       For transactions entered into in fiscal years beginning after December
       15, 1997, the Company adopted and is reporting in accordance with SOP
       97-2, "Software Revenue Recognition". The adoption of SOP 97-2 did not
       have a material impact on the Company's financial statements. In March
       1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
       Software Developed or Obtained for Internal Use." SOP 98-1 provides
       guidance that the carrying value of software developed or obtained for
       internal use is assessed based upon an analysis of estimated future cash
       flows on an undiscounted basis and before interest charges. SOP 98-1 is
       effective for transactions entered into in fiscal years beginning after
       December 15, 1998. The Company believes that adoption of SOP 98-1 will
       not have a material impact on the Company's financial statements.

(3)    RELATED PARTY TRANSACTIONS

       Certain accounting and related finance functions are performed on behalf
       of the Company by employees of New Valley Corporation. Expenses incurred
       relating to these functions are allocated to the Company and paid as
       incurred to New Valley based on management's best estimate of the cost
       involved. The amounts allocated were immaterial for all periods presented
       herein.

(4)    NET LOSS PER SHARE

       Basic loss per share of common stock is computed by dividing net loss
       applicable to common shareholders by the weighted average shares of
       common stock outstanding during the period (2,972,500 shares and
       1,725,724 shares for the three months ended March 31, 1998 and 1997,
       respectively). Diluted per share results reflect the potential dilution
       from the exercise or conversion of securities into common stock.

       Stock options, warrants and contingent shares totaling 3,267,015 and
       904,000 shares at March 31, 1998 and 1997, respectively, were excluded
       from the calculation of diluted per share results presented because their
       effect was antidilutive.

(5)    STOCK OPTION PLAN

       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. Had compensation cost for
       the Company's stock options been determined based on the fair value at
       the date of grant consistent with SFAS 123, the Company's basic and
       diluted net loss per share for the three months ended March 31, 1998 and
       1997 would have been $(644,700) and $(0.22) and $(558,634) and $(0.32),
       respectively.

(6)    CONTINGENCIES

       The Company is not a defendant in any lawsuits; however, it is aware of a
       potential severance claim which may be asserted by a former employee in
       the amount of $150,000. The Company believes the claim is without merit
       and will vigorously contest any such action; however, no assurance can be
       given that the Company will prevail in such action.


(7)    SUBSEQUENT EVENT

       On May 8, 1998, the Company acquired Coinexx Corporation ("Coinexx"), a
       development stage company engaged in the manufacturing and marketing of
       an inventory control system for tobacco products. Under the terms of the
       acquisition, the Coinexx stockholders received 147,500 shares of the
       Company's Common Stock at closing. In addition, the Company will issue an
       additional 147,500 shares to Coinexx stockholders on each of the first,
       second and third anniversaries of the closing provided that on each such
       delivery date Coinexx was actively engaged in the business it is now
       engaged. The schedule for the deferred deliveries of stock is subject to
       a delay of 12 months if the President of Coinexx (the "Executive") is not
       employed by Coinexx on any of the three anniversary dates and is subject
       to acceleration if the Company's Common Stock trades at $15 per share for
       60 consecutive trading days. In connection with this acquisition, the
       Company entered into a three year employment agreement, subject to
       certain termination provisions, with the Executive. The Executive was
       also granted options to purchase 110,000 shares of Common Stock of the
       Company at $1.50 per share.

                                       7
<PAGE>   8


                                   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 Form 10-KSB (Commission File No. 0001-22563) relating to the year
ended December 31, 1997.

OVERVIEW

The Company currently provides an on-line electronic directory information
service (the "PC411 Service"). The Company licenses a database with over 110
million U.S. and Canadian residence and business telephone numbers, addresses
and ZIP codes. A customer can access the PC411 Service using a computer by
either dialing directly into the Company's server in which the database is
housed or indirectly via the Internet. Either method requires the use of the
Company's copyrighted, Windows-based software program, PC411 for Windows 3.0.
Though the Company's expenditures for marketing were significant in the first
quarter of 1998, the Company has not developed any significant customer base or
revenue. In addition, a limited version of the PC411 Service is available at no
charge via the Internet at the address http://www.pc411.com. In November 1997
the Company released the current version of its software product, PC411 for
Windows 3.0 in CD-ROM format. Designed to operate in a Windows 95 environment,
PC411 for Windows 3.0 is Internet compatible and has been enhanced to provide a
quicker, easier to use search tool.

To date, the Company has limited revenue and significant operating losses. In
view of the Company's operating results to date, the Company is reevaluating its
commitment to the PC411 Service business. In connection with such reevaluation
and based, in part, on the Company's performance during the first half of 1998
and the Company's assessment of the future prospects for the PC411 Service
business, the Company may decide to sell all or a portion of, or terminate, the
PC411 Service business. In addition, the Company will also seek to acquire other
businesses and/or properties, which may or may not be related to its core
businesses. Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations and products or services of the acquired
companies, the expenses incurred in connection with the acquisition and
subsequent assimilation of operations and products or services, the diversion of
management's attention from other business concerns and the potential loss of
key employees of the acquired company. The Company may also face increased
competition for acquisition opportunities which may inhibit its ability to
consummate suitable acquisitions on terms favorable to the Company. There can be
no assurance that the Company will successfully identify, complete or integrate
any future acquisitions, or that acquisitions, if completed, will contribute
favorably to the Company's operations and future financial condition.

On May 8, 1998, the Company acquired Coinexx Corporation ("Coinexx"), a
development stage company engaged in the manufacturing and marketing of an
inventory control system for tobacco products. Under the terms of the
acquisition, the Coinexx stockholders received 147,500 shares of the Company's
Common Stock at closing. In addition, the Company will issue an additional
147,500 shares to Coinexx stockholders on each of the first, second and third
anniversaries of the closing provided that on each such delivery date Coinnex
was actively engaged in the business it is now engaged. The schedule for the
deferred deliveries of stock is subject to a delay of 12 months if the President
of Coinexx (the "Executive") is not employed by Coinexx on any of the three
anniversary dates and is subject to acceleration if the Company's Common Stock
trades at $15 per share for 60 consecutive trading days. In connection with this
acquisition, the Company entered into a three year employment agreement, subject
to certain termination provisions, with the Executive. The Executive was also
granted options to purchase 110,000 shares of Common Stock of the Company at
$1.50 per share.




                                       8
<PAGE>   9


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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


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 3.0 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 continued development of
the PC411 Service business will require the Company to significantly increase
its operating expenses in order to build its sales and marketing staff, increase
product development spending, and invest in infrastructure. The Company expects
to continue to incur significant losses for the foreseeable future.

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.

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


                                       9
<PAGE>   10



                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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


In September 1997 the Company entered into a license agreement with Acxiom, Inc.
("Acxiom") pursuant to which it licenses the database consisting of the
residential and business listings which are part of the PC411 Service. This
license agreement supersedes a previous license agreement between the Company
and Pro CD, Inc. ("Pro CD") which was acquired by Acxiom. Under the license
agreement, Acxiom is entitled to a royalty payment equal to 12% of the Company's
revenue generated from the PC411 Service. The minimum royalty payments for the
first, second and third years under this agreement are $75,000, $125,000 and
$175,000, respectively, and is payable upon the commencement of each such year.
In addition, the Company agreed to pay and paid to Acxiom $15,000 in the first
quarter of 1998 as a final payment due under the prior license agreement with
Pro CD. Further, the parties agreed that the minimum royalty payments and terms
of payment for the second and third years of the agreement will be reviewed
during the ninth month of the initial year of the agreement.

The Company generates revenue by charging its customers an annual subscription
fee. To become a subscriber, a user must install PC411 for Windows 3.0 on his
computer's hard drive. PC411 for Windows 3.0 can either be downloaded from the
Company's Web site or can be obtained by purchasing equipment or software from
one of the Company's bundling partners. The Company has entered into
distribution agreements with IBM (Aptiva), Multimedia Labs (representing 3Com),
The Media Farm (representing Hayes modems), 3Com/US Robotics and Silicom
Multimedia (representing AST). Pursuant to these distribution agreements, PC411
for Windows 3.0 is preinstalled on a computer's hard drive or copy of PC411 for
Windows 3.0 is included with the purchase of a modem. The Company pays
distribution fees to these equipment manufacturers for the distribution of PC411
for Windows 3.0 either based upon the number of new customers that subscribe to
the PC411 Service or the revenue that such new customers generate. The agreement
with IBM will expire on June 1, 1998. To date, there have been no discussions
between the Company and IBM concerning renewing or extending that agreement and
there can be no assurance that such agreement will be renewed or extended.

Recent Accounting Developments. In October 1997, the AICPA issued SOP 97-2,
"Software Revenue Recognition". SOP 97-2 provides guidance in recognizing
revenue on software transactions when persuasive evidence of an arrangement
exists, delivery has occurred, the vendor's fee is fixed or determinable and
collectibility is probable. SOP 97-2 is effective for transactions entered into
in fiscal years beginning after December 15, 1997. The adoption of SOP 97-2 did
not have a material impact on the Company's financial statements.

Year 2000 Costs. The Company has evaluated the costs to implement century date
change compliant systems conversions and is in the process of executing a
planned conversion of its systems prior to the year 2000. Although such costs
may be a factor in describing changes in operating profit for given reporting
period, the Company currently does not believe that the anticipated costs of
year 2000 systems conversions will have a material impact on its future
condensed results of operations.

However, due to the interdependent nature of computer systems, the Company may
be adversely impacted in the year 2000 depending on whether it or entities not
affiliated with the Company have addressed this issue successfully.


                                       10
<PAGE>   11


                                   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 ended March 31, 1998 were $48,469 compared to $41,550 for the same
period in the prior year. The increase in revenues was due primarily to the
recognition of revenues deferred in 1997, which were initially deferred and
recognized over the contract life. The Company's accounting policy is recognize
revenues over the period that services are provided. Had the Company's policy
been to recognize revenue upon the initiation of the customer's subscription,
revenues would have declined by approximately 48% from 1997. The decline was
attributable to the cancellation of a bundling agreement with an OEM partner.

Cost of Revenues. Cost of revenues consists primarily of the cost of data and
the distribution fees paid to OEM Partners in 1997 and 1998. Cost of revenues in
1998 also includes employee compensation and depreciation associated with the
maintenance of the PC411 system. 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 ended March 31, 1998 were $93,572 as compared to $30,659
for the same period in the prior year. The increase is due primarily to
increased costs in the maintenance of the PC411 system.

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 were $69,485 and $7,843 for
the three months ended March 31, 1998 and 1997, respectively. The increase in
research and development was primarily attributable to the development of PC411
for Windows version 3.0, the re-engineering of the PC411 system and the
development of American Webstation.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of
public relations, direct mail, print advertising, and trade shows. Sales and
marketing expenses for the three months ended March 31, 1998 and 1997 were
$211,543 and $15,855, respectively. The increase was primarily due increased
efforts to expand distribution of PC411 for Windows version 3.0 and the
initiation of a renewal program for current subscribers of PC411.

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 $239,291 and $129,858 for the three
months ended March 31, 1998 and 1997, respectively. The increase was primarily
due to an increase in payroll and attempts to expand the Company's business.


                                       11
<PAGE>   12


                                   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 income was $58,299 for the three months ended
March 31, 1998 as compared to interest expense of $57,746 for the same period in
the prior year. The interest income in 1998 was attributable to the net proceeds
of an initial public offering completed in 1997 (the "IPO"). The interest
expense in 1997 was attributed entirely to the loan from New Valley Corporation
("NVC"), which was the indirect majority owner of the Company. Included in
interest expense in 1997 was $35,000 in imputed interest attributable to stock
options granted to Direct Assist Holding Inc. ("DAH"), a wholly-owned subsidiary
of NVC, on January 29, 1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company has not been able to generate sufficient cash from operations and,
as a consequence, financing has been required to fund ongoing operations. The
Company has financed its operations to date primarily through the sale of its
Preferred Stock to DAH, secured short-term borrowings from NVC and the proceeds
of the IPO. Two of the Company's directors and its Chief Financial Officer are
or have been executive officers of NVC.

On May 21, 1997, the Company sold 1,322,500 units (including 172,500 units from
the exercise of the underwriter's over-allotment option) in the IPO, each unit
consisting of one share of Common Stock and one Redeemable Class A Common Stock
Purchase Warrant to purchase one share of Common Stock. The units were sold for
$5.75 each and the Company received, after expenses of the IPO, approximately
$5,885,000 in net proceeds. After the repayment of the indebtedness to NVC,
cumulative Preferred Stock dividends in the amount of $172,000 and an $80,000
consulting fee to the underwriter of the IPO, approximately $5.4 million
remained for the completion of 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. Cash used in
operations for the three months ended March 31, 1998 and 1997 was $474,061 and
$220,442, respectively.

Cash provided by financing activities for the three months ended March 31, 1998
and 1997 was $ 0 and $250,558, respectively.

Cash used in investing activities for the three months ended March 31, 1998 and
1997 was $3,583 and $2,822, respectively. Included in the 1998 amount is $146
from the net sales of investments. Capital expenditures for the three months
ended March 31, 1998 and 1997 were $3,729 and $2,822, respectively. These
expenditures were primarily for computer equipment.

The Company expects that its cash used in operating activities could 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 Service and
the Company's ability to generate 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.


                                       12
<PAGE>   13


                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


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


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.


                                       13
<PAGE>   14
                                   PC411, INC.
                          (A DEVELOPMENT STAGE COMPANY)


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         Reference is made to information entitled "Contingencies" in Note 6 to
         the Financial Statements of PC411, Inc. included elsewhere in this
         report on Form 10-Q.

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 Warrant. 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 Warrant.
                        b. Common Stock - Common Stock included in Units, par
                           value $.01.
                        c. 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
                           per Unit.

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

<TABLE>
<CAPTION>
   TITLE OF SECURITY                 AMOUNT      AGGREGATE PRICE OF      AMOUNT
                                   REGISTERED     OFFERING AMOUNT         SOLD
                                                    REGISTERED
------------------------           ----------    ------------------   -----------
<S>                                <C>           <C>                  <C>
Units                               1,322,500       $ 7,604,375        1,322,000
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>


                                       14
<PAGE>   15
         5.       Expenses Incurred in Connection with Issuance of Securities:

<TABLE>
<S>                                                                     <C>
Underwriting discounts and commissions                                  $760,438
Expenses paid to underwriters                                           $228,131
Other expenses (estimated)                                              $730,880
</TABLE>

                (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:

<TABLE>
<S>                                                                  <C>
Amounts paid to affiliates of the Company:
      Repayment of Indebtedness; preferred stock dividends           $   619,016

Amounts paid to others:
      Temporary investments:
           US Government Obligations                                 $ 1,620,399
           Commercial paper                                          $   510,111
           Bankers acceptance                                        $ 1,467,460
      Purchase of equipment                                          $    38,628
      Employee compensation - estimated                              $   568,372
      Other working capital - estimated                              $ 1,061,014
</TABLE>


Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits

                27       Financial Data Schedule (for SEC use only).

         (b) Reports on Form 8-K

                The Company filed the following report on Form 8-K during the
                first quarter of 1998:

<TABLE>
<CAPTION>
                  Date               Item             Financial Statements
                  ----               ----             --------------------
                  <S>                <C>              <C>
                  March 11, 1998     4, 7             None
</TABLE>




                                       15
<PAGE>   16
                                   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.




                                             PC 411, INC.
                                             (Registrant)



Date: May 15, 1998                  By:      /s/J. Bryant Kirkland III
                                             -----------------------------------
                                             J. Bryant Kirkland III
                                             Vice President, Treasurer
                                             and Chief Financial Officer
                                             (Duly Authorized Officer and
                                             Chief Accounting Officer)




                                       16