<PAGE>   1
                                   FORM 10-Q/A
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                       OR

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

          FOR THE TRANSITION PERIOD FROM ____________ TO ______________

                         COMMISSION FILE NUMBER 0-24773

                             PINNACLE HOLDINGS INC.

     INCORPORATED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION NO. 65-0652634

             301 NORTH CATTLEMEN ROAD, SARASOTA, FLORIDA 34232-6427

                            TELEPHONE: (941) 364-8886

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]

At November 10, 2000, Registrant had outstanding 48,430,593 shares of $.001 par
value Common Stock.

<PAGE>   2

<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION                                                                                     PAGE
                                                                                                                  -----
<S>           <C>                                                                                                 <C>
Item 1.       Financial Statements
              Unaudited Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000         1
              Unaudited Condensed Consolidated Statements of Operations for the nine months ended
                September 30, 1999 and 2000                                                                          2
              Unaudited Condensed Consolidated Statements of Operations for the three months ended
                September 30, 1999 and 2000                                                                          3
              Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity for the
               nine months ended September 30, 2000                                                                  4
              Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended
                September 30, 1999 and 2000                                                                          5
              Notes to Unaudited Condensed Consolidated Financial Statements                                      6-12

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations              13-23

Item 3.       Quantitative and Qualitative Disclosures About Market Risk                                            23

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings                                                                                     24

Item 2        Not Applicable                                                                                        24

Item 3        Not Applicable                                                                                        24

Item 4        Not Applicable                                                                                        24

Item 5        Other Information                                                                                  24-26

Item 6.       Exhibits and Reports on Form 8-K                                                                      26

SIGNATURES                                                                                                          27

EXHIBIT INDEX                                                                                                       28
</TABLE>

<PAGE>   3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

                             PINNACLE HOLDINGS INC.

                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     December 30,         September 30,
                                                                         1999                  2000
                                                                    ---------------      ---------------
                                                                                          Restated-Note 1
                                                                                            (unaudited)
<S>                                                                 <C>                   <C>
                                  Assets
Current assets:
  Cash and cash equivalents                                         $    94,862,918      $    70,170,748
  Accounts receivable, net                                               11,774,689           20,891,126
  Prepaid expenses and other current assets                               5,235,972           11,332,045
                                                                    ---------------      ---------------
    Total current assets                                                111,873,579          102,393,919
Fixed assets, net                                                       930,620,414        1,283,649,277
Leasehold interests, net                                                 70,478,129           70,292,202
Deferred debt issue costs, net                                           14,299,519           18,732,165
Other assets                                                              3,232,248            6,499,447
                                                                    ---------------      ---------------
                                                                    $ 1,130,503,889      $ 1,481,567,010
                                                                    ===============      ===============

                    Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                                  $     7,297,498      $     9,705,252
  Accrued expenses                                                       25,195,483           16,068,243
  Deferred revenue                                                        3,910,551            7,249,279
  Current portion of long-term debt                                       6,705,578            9,678,738
                                                                    ---------------      ---------------
    Total current liabilities                                            43,109,110           42,701,512
Long-term debt                                                          712,659,042          861,616,231
Other liabilities                                                           510,090              876,090
                                                                    ---------------      ---------------
                                                                        756,278,242          905,193,833

Minority Interest                                                                                439,703

Stockholders' equity:
  Preferred stock, $.001 par value, 5,000,000 shares authorized;
    0 shares issued and outstanding at December 31, 1999 and
    September 30, 2000, respectively
  Common stock, $.001 par value, 150,000,000 shares authorized;
    41,094,471 and 48,430,593 shares issued and outstanding at
    December 31, 1999, and September 30, 2000 respectively                   41,094               48,431
  Additional paid-in capital                                            489,090,451          773,244,966
  Foreign currency translation                                             (418,488)             228,977
  Accumulated deficit                                                  (114,487,410)        (197,588,900)
                                                                    ---------------      ---------------
                                                                        374,225,647          575,933,474
                                                                    ---------------      ---------------
                                                                    $ 1,130,503,889      $ 1,481,567,010
                                                                    ===============      ===============
</TABLE>

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements
         are an integral part of these condensed financial statements.


                                       1
<PAGE>   4

                             PINNACLE HOLDINGS INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                               ---------------------------------
                                                                                   1999                 2000
                                                                               ------------         ------------
                                                                               (unaudited)         Restated-Note 1
                                                                                                     (unaudited)
<S>                                                                            <C>                  <C>
Revenues                                                                       $ 48,514,143         $129,595,725

Direct operating expenses, excluding depreciation and amortization               11,813,418           46,260,874
                                                                               ------------         ------------
Gross margin, excluding depreciation and amortization                            36,700,725           83,334,851
                                                                               ------------         ------------
Other expenses:
  General and administrative                                                      2,855,760            8,230,272
  Corporate development                                                           6,191,851           27,709,691
  State franchise, excise and minimum taxes                                         699,836              843,298
  Depreciation and amortization                                                  34,398,375           82,400,112
                                                                               ------------         ------------
                                                                                 44,145,822          119,183,373
                                                                               ------------         ------------
Loss from operations                                                             (7,445,097)         (35,848,522)
Interest expense                                                                 14,439,470           27,102,582
Amortization of original issue discount and debt issuance costs                  17,334,738           20,210,683
Minority interest                                                                        --              (60,297)
                                                                               ------------         ------------
Net loss                                                                        (39,219,305)         (83,101,490)
Payable-in-kind preferred dividends and accretion                                 2,930,338                   --
Net loss attributable to common stockholders                                   $(42,149,643)        $(83,101,490)
                                                                               ============         ============

Basic and diluted loss attributable to common stockholders per share           $      (1.42)        $      (1.74)
                                                                               ============         ============
Weighted average number of common shares outstanding                             29,721,466           47,746,133
                                                                               ============         ============
</TABLE>

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements
         are an integral part of these condensed financial statements.


                                       2
<PAGE>   5

                             PINNACLE HOLDINGS INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                         September 30,
                                                                               ---------------------------------
                                                                                   1999                 2000
                                                                               ------------         ------------
                                                                              Restated-Note 1      Restated-Note 1
                                                                                (unaudited)          (unaudited)
<S>                                                                            <C>                  <C>
Revenues                                                                       $ 22,757,176         $ 45,313,138

Direct operating expenses, excluding depreciation and amortization                6,986,011           16,958,003
                                                                               ------------         ------------
Gross margin, excluding depreciation and amortization                            15,771,165           28,355,135
Other expenses:
  General and administrative                                                      1,243,505            4,030,682
  Corporate development                                                           2,920,787           14,187,345
  State franchise, excise and minimum taxes                                         295,502              100,944
  Depreciation and amortization                                                  14,749,704           30,634,215
                                                                               ------------         ------------
                                                                                 19,209,498           48,953,186
                                                                               ------------         ------------
Loss from operations                                                             (3,438,333)         (20,598,051)
Interest expense                                                                  6,199,411           10,791,905
Amortization of original issue discount and debt issuance costs                   6,107,045            6,961,131
Minority Interest                                                                        --              (60,297)
                                                                               ------------         ------------
Net loss                                                                        (15,744,789)         (38,290,790)
Payable-in-kind preferred dividends and accretion                                        --                   --
                                                                               ------------         ------------
Net loss attributable to common stockholders                                   $(15,744,789)        $(38,290,790)
                                                                               ============         ============

Basic and diluted loss attributable to common stockholders per share           $      (0.41)        $      (0.79)
                                                                               ============         ============
Weighted average number of common shares outstanding                             38,842,567           48,408,148
                                                                               ============         ============
</TABLE>

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements
         are an integral part of these condensed financial statements.


                                       3
<PAGE>   6

                             PINNACLE HOLDINGS INC.

  UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                         COMPREHENSIVE           COMMON STOCK             ADDITIONAL
                                                            INCOME          -----------------------        PAID-IN
                                                            (LOSS)            SHARES        AMOUNT         CAPITAL
                                                         -------------      ----------      -------      ------------
<S>                                                      <C>                <C>             <C>          <C>
Balance at December 31, 1999                                                41,094,471      $41,094      $489,090,451

Unaudited:

Issuance of common stock, net of issuance costs....                          7,336,122        7,337       284,154,515

Foreign currency translation gain..................      $    647,465

Net loss (Restated-Note 1)                                (83,101,490)
                                                         ------------       ----------      -------      ------------

Balance at September 30, 2000 (Restated-Note 1) ...      $(82,454,025)      48,430,593      $48,431      $773,244,966
                                                         ============       ==========      =======      ============

<CAPTION>
                                                                              FOREIGN
                                                          ACCUMULATED        CURRENCY       STOCKHOLDERS'
                                                            DEFICIT         TRANSLATION        EQUITY
                                                         -------------      -----------     -------------
<S>                                                      <C>                <C>             <C>
Balance at December 31, 1999                             $(114,487,410)      $(418,488)     $ 374,225,647

Unaudited:

Issuance of common stock, net of issuance costs....                                           284,161,852

Foreign currency translation gain..................                            647,465            647,465

Net loss (Restated-Note 1)                                 (83,101,490)                       (83,101,490)
                                                         -------------       ---------      -------------

Balance at September 30, 2000 (Restated-Note 1) ...      $(197,588,900)      $ 288,977      $ 575,933,474
                                                         =============       =========      =============
</TABLE>
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements
         are an integral part of these condensed financial statements.


                                       4
<PAGE>   7

                             PINNACLE HOLDINGS INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                                                               -----------------------------------
                                                                                   1999                   2000
                                                                               -------------         -------------
                                                                                                    RESTATED-NOTE 1
                                                                                (UNAUDITED)           (UNAUDITED)
<S>                                                                            <C>                   <C>
Cash flows from operating activities:
  Net loss                                                                     $ (39,219,305)        $ (83,101,490)
    Adjustments to reconcile net loss to net cash provided
      by (used in) operating activities:
        Depreciation and amortization                                             34,398,375            82,400,112
        Amortization of original issue discount and debt issuance costs           17,334,738            20,210,682
        Provision for doubtful accounts                                              568,000               432,272
        Impairment of capitalized acquisition and construction costs                      --             8,684,012
        Minority share of net loss of subsidiary                                          --               (60,297)
      (Increase) decrease in:
        Accounts receivable, gross                                                (2,775,230)           (7,961,227)
        Prepaid expenses and other current assets                                   (758,769)           (6,085,436)
        Other assets                                                              (1,096,531)           (3,267,199)
      Increase (decrease) in:
        Accounts payable                                                            (430,522)            2,371,943
        Accrued expenses                                                           9,664,172            (9,127,240)
        Deferred revenue                                                             296,130             3,252,884
        Other liabilities                                                            233,993               127,416
                                                                               -------------         -------------
              Total adjustments                                                   57,434,356            90,977,922
                                                                               -------------         -------------
Net cash provided by (used in) and used in operating activities                   18,215,051             7,876,432
                                                                               -------------         -------------
Cash flows from investing activities:
    Payments made in connection with acquisitions:
      Fixed assets                                                              (372,137,699)         (392,297,441)
      Leasehold interests                                                        (77,621,307)          (18,085,439)
      Net current liabilities acquired                                            (2,714,622)              176,573
    Capital expenditures:
      Fixed assets                                                               (29,540,167)          (23,871,994)
                                                                               -------------         -------------
Net cash used in investing activities                                           (482,013,795)         (434,078,301)
                                                                               -------------         -------------
Cash flows from financing activities:
    Borrowings under long-term debt, net                                         556,080,721           319,501,206
    Repayment of long-term debt                                                 (317,963,299)         (202,037,597)
    Proceeds from issuance of common stock, net                                  501,237,846           284,161,853
    Liquidation of PIK preferred stock and warrants                              (93,741,617)                   --
    Distribution of contributed capital and payment of
      accretion on various classes of common stock                               (43,747,734)                   --
    Minority interest in subsidiary                                                       --               500,000
                                                                               -------------         -------------
Net cash provided by financing activities                                        601,865,917           402,125,462
Effect of exchange rate changes on cash                                                   --              (615,763)
                                                                               -------------         -------------
Net increase (decrease) in cash and cash equivalents                             138,067,173           (24,692,170)
Cash and cash equivalents, beginning of period                                    13,801,190            94,862,918
                                                                               -------------         -------------
Cash and cash equivalents, end of period                                       $ 151,868,363         $  70,170,748
                                                                               =============         =============
Supplemental disclosure of cash flows:
    Cash paid for interest                                                     $  16,498,833         $  24,157,013
                                                                               =============         =============

Non-Cash Transactions:
    Seller debt issued in connection with acquisitions                         $   8,998,250         $   9,929,355
    Payable-in-kind preferred dividends and accretion                          $   2,930,338         $          --
    Stock issued for acquisitions                                              $   8,804,163         $          --
</TABLE>

The accompanying notes to Unaudited Condensed Consolidated Financial Statements
         are an integral part of these condensed financial statements.


                                       5
<PAGE>   8

                             PINNACLE HOLDINGS INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

         As used in this Quarterly Report on Form 10-Q/A for the period ending
September 30, 2000, unless the context otherwise requires, "we," "us," "our,"
"Company," or "Pinnacle" refers to Pinnacle Holdings Inc. and its consolidated
subsidiaries including Pinnacle Towers III Inc. ("PT III"), Pinnacle Towers IV
Inc. ("PT IV"), and Pinnacle Towers UK, Ltd.

1. RESTATEMENT

         We restated our audited financial statements for the year ended
December 31, 1999, and our unaudited financial statements for the quarters ended
September 30, 1999, March 31, 2000, June 30, 2000, and September 30, 2000, to
expense certain costs previously capitalized as direct costs of the acquisition
of the Motorola Antenna Site Acquisition ("Motorola Antenna Site Acquisition")
and to accrue direct costs of the acquisition only as the related services are
performed. Direct costs incurred in connection with a purchased business are
required to be capitalized and indirect costs are required to be expensed.
Determining under available accounting guidance which costs or portions thereof
are direct, as opposed to indirect, requires the exercise of a certain amount of
judgment. Upon completion of the Motorola Antenna Site Acquisition, we
determined to capitalize all pre- and post-closing costs directly related to the
acquisition. Following an inquiry by the Securities and Exchange Commission and,
after consulting with our new independent auditors, Ernst & Young LLP, we
reconsidered our previous accounting judgment and concluded it was appropriate
to capitalize all costs that relate directly to the acquisition except those
post-closing costs that are deemed to more than incidentally reduce our need to
incur ongoing business expenses necessary to integrate those assets into our
operations. Additionally, we had previously, at the date of the acquisition,
accrued estimated direct costs of acquisitions regardless of whether the costs
had been incurred as of that date. We have now concluded that such costs should
be accrued as the services are incurred.

A summary of the effects of the restatements is set forth in Note 7.

2. FINANCIAL STATEMENTS

         The accompanying unaudited condensed consolidated financial statements
reflect the financial position and results of operations and cash flows of
Pinnacle Holdings Inc. and its wholly owned subsidiaries: Pinnacle Towers Inc.,
Pinnacle Towers Canada Inc., Coverage Plus Antenna Systems, Inc., and Tower
Systems, Inc. In addition, beginning in 1999 Pinnacle Holdings Inc. authorized
the contribution of capital to PT III to establish a preferred stock interest.
PT III utilized the capital contributed during 1999 and 2000 to purchase certain
communications site assets and the stock of corporations that own and/or manage
communications sites. Also, during the third quarter of 2000, Pinnacle Holdings
Inc. authorized the contribution of capital to PT IV to establish a preferred
stock interest. PT IV utilized the capital contributed to purchase the stock of
a corporation that manages communications sites. Pinnacle Towers Inc. and
certain members of management of Pinnacle Holdings Inc. own the common stock of
PT III and PT IV. As a result of Pinnacle Holdings Inc.'s ability to direct the
policies and management that guide the ongoing activities of PT III and PT IV,
the financial position and results of operations and cash flows of PT III and PT
IV are consolidated in the financial statements of Pinnacle. In July 2000,
Pinnacle Towers Inc. contributed $1.5 million in capital to a newly created
entity, Pinnacle Towers UK, Ltd., to establish a 75% interest in the entity.
Pinnacle Towers UK, Ltd. will utilize the capital to purchase telecommunication
sites throughout the United Kingdom and continental Europe. The financial
position and results of operations and cash flows of Pinnacle Towers UK, Ltd.
are consolidated in the financial statements of Pinnacle and the minority
interest disclosed. All significant intercompany balances and transactions have
been eliminated.

         The preparation of financial statements in conformity with Generally
Accepted Accounting Principles ("GAAP") requires management to make estimates
and use assumptions that affect the reported amounts of assets and liabilities
and the disclosure for contingent assets and liabilities at the date of the


                                       6
<PAGE>   9

financial statements as well as the reported amounts of revenues and expenses
during the reporting period. Actual results may vary from estimates used.

         Results of operations for any interim period are not necessarily
indicative of results of any other periods or for the year. The condensed
consolidated statements as of September 30, 2000 and for the nine month and
three month periods ended September 30, 2000 and 1999 are unaudited, but in the
opinion of management include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of results for such periods.
These unaudited condensed consolidated financial statements should be read in
conjunction with Pinnacle's restated consolidated financial statements and notes
thereto for the year ended December 31, 1999.

3. ACQUISITIONS

         We actively acquire communications sites and related real estate
assets.

         On August 31, 1999, the Company consummated the Motorola Antenna Site
Acquisition pursuant to which the Company acquired approximately 1,858
communications sites and related assets from Motorola, Inc. ("Motorola") for
$254 million, comprised of $245 million in cash and $9 million in the Company's
common stock, plus fees and expenses of approximately $2.2 million. The purchase
price allocations related to this transaction are preliminary. However, we do
not expect that the final allocation of the purchase price will be materially
different from its preliminary allocation. This acquisition results in the
Company having sites in all 50 States and nine Canadian Provinces. We
transferred certain of the rooftop communication sites we acquired from Motorola
to PT III.

         Included in the total purchase price recorded on the Motorola Antenna
Site Acquisition as of September 30, 2000 were incurred and accrued costs of
approximately $18 million. These incurred and accrued deal costs were comprised
primarily of employee severance and relocation costs ($0.5 million), contract
and title work related to telecommunications sites, due diligence and closing
costs ($17.5 million).

         During the past year we have only had to make severance payments to
four former Motorola employees totaling $0.5 million. Although the term of our
obligation related to severance payments under the Motorola agreement runs
through August 31, 2001, we do not anticipate significant further activity of
this kind. The accrual for severance and relocation costs has therefore been
reduced by $1.2 million to reflect this lower level of experience.

         There is a working capital adjustment component of the Motorola Antenna
Site Acquisition. As of September 30, 2000, Pinnacle recorded a net receivable
due from Motorola as a result of this working capital adjustment component of
$0.2 million in prepaid expenses and other current assets. As this adjustment
has not been agreed upon and settled, in finalizing this adjustment with
Motorola we may settle on a different amount. Any significant adjustments to
this estimated working capital adjustment component upon settlement will be
reflected as an adjustment to the purchase accounting and disclosed accordingly.

         Also in conjunction with the Motorola Antenna Site Acquisition,
Motorola performed certain services on our behalf under a Transition Services
Agreement, receipt of cash payments from tenants for a one month period and
payment of vendor invoices for a two month period subsequent to closing.
Accordingly, there is an amount of cash settlement, net of the fees charged by
Motorola for this service, due us of $4.2 million recorded as prepaid expenses
and other current assets as of September 30, 2000. These amounts have been
recorded based on information provided to us by Motorola in connection with
their receipt of cash and payment of vendors.

         In addition to the Motorola Antenna Site Acquisition, during the year
ended December 31, 1999 we completed 129 acquisitions of 442 communications
sites and related assets, each of which was individually insignificant to
Pinnacle, from various sellers for an aggregate purchase price of $238 million
consisting of $228 million in cash and $10 million of notes payable to the
former communications site owners.

         During the nine months ended September 30, 2000, we completed 194
acquisitions of 1,444 communications sites and related assets, each of which was
individually insignificant to Pinnacle, from


                                       7
<PAGE>   10

various sellers for an aggregate purchase price of $412.7 million consisting of
$402.7 million in cash and $10 million of notes payable to the former
communications site owners.

         We account for our acquisitions using the purchase method of
accounting. The results of operations of the acquired assets are included with
those of Pinnacle from the dates of the respective acquisitions. The pro forma
results of operations listed below reflect purchase accounting and pro forma
adjustments as if the transactions occurred as of January 1, 1999. The unaudited
pro forma consolidated financial statements are not necessarily indicative of
the results that would have occurred if the assumed transactions had occurred on
the dates indicated and are not necessarily indicative of the expected financial
position or results of operations in the future.

<TABLE>
<CAPTION>
                                                                               Pro Forma Nine Months Ended
                                                                             -------------------------------
                                                                         (in thousands, except per share amounts)
                                                                             September 30,     September 30,
                                                                                 1999               2000
                                                                             -------------     -------------
                                                                              (unaudited)       (unaudited)
<S>                                                                          <C>               <C>
Revenues                                                                       $ 134,825         $ 140,808
Gross margin, excluding depreciation and amortization                             87,882            92,440
Net loss                                                                        (105,294)          (94,464)
Net loss attributable to common stockholders                                    (108,224)          (94,464)
Basic and diluted loss attributable to common stockholders per share               (3.64)            (1.98)
</TABLE>

         Included in corporate development expense for the three month period
ended September 30, 2000 are non-recurring charges of $8.7 million. These
non-recurring charges are comprised of non-cash charges related to the
impairment of capitalized costs on pending acquisitions ($7.0 million) and
communications site construction project ($1.7 million) tower assets which the
company has chosen not to pursue at this time. Non-recurring charges associated
with an equity offering discontinued during the quarter ($1.3 million) and costs
incurred as a result of a non-public informal inquiry by the Securities and
Exchange Commission ("the SEC") ($0.3 million) are included in general and
administrative expenses for the three month period ended September 30, 2000 (see
Note 5).

4. LONG-TERM DEBT

         As of June 25, 1999, we amended our Senior Credit Facility to provide
$520 million of financing, of which $470 million was committed. Advances under
the Senior Credit Facility accrue interest at our option of either LIBOR plus a
margin of up to 3.00%, as defined in the related agreement, or at the greater of
the Federal Funds Effective Rate plus 0.50% or the prime rate, plus a margin of
up to 1.75%. Additionally, certain financial covenants were modified.

         As of September 17, 1999, we again amended our Senior Credit Facility
to provide $670 million of financing, of which $520 million was committed and
$419 million was utilized at September 30, 2000.

         The Senior Credit Facility is secured by a lien on substantially all of
our assets and a pledge of substantially all of the capital stock of our
subsidiaries. The Senior Credit Facility contains customary covenants such as
limitations on our ability to incur indebtedness, to incur liens or encumbrances
on assets, to make certain investments, to make distributions to stockholders,
or prepay subordinated debt. Under the Senior Credit Facility, we may not permit
the ratio of senior debt to annualized EBITDA as defined in the agreement to
exceed certain amounts.

         On March 22, 2000, we completed a private placement of $200 million of
5.5% Convertible Subordinated Notes Due 2007 (the "Convertible Notes") to
certain institutional purchasers pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act. We repaid outstanding revolving
debt under our Senior Credit Facility with the net proceeds of $193.5 million
from this private placement. We will pay interest on the Convertible Notes on
March 15 and September 15 of each year. The Convertible Notes will mature on
September 15, 2007 unless previously redeemed or repurchased. The Convertible
Notes are convertible into Pinnacle's common stock at the option of the
Convertible Note holders at an


                                       8
<PAGE>   11

initial price of $78.375 per share, which conversion price is subject to
adjustment under the terms of the Convertible Notes. We may redeem the
Convertible Notes on or after March 21, 2003. Pursuant to a Registration Rights
Agreement dated March 22, 2000, we filed a registration statement on May 23,
2000, to cover resales of the Convertible Notes and the shares of Common Stock
issuable upon conversion of the Convertible Notes.

         Under the terms of the Registration Rights Agreement, if the
registration statement was not declared effective by the SEC by September 18,
2000, the interest rate on the Convertible Notes increases by 0.5% until the
registration statement is declared effective. We are currently actively pursuing
the effectiveness of that registration statement. If it is not declared
effective by December 17, 2000, the rate on the notes will increase by an
additional 0.5%. The rate on the notes will not increase to greater than 6.5%
under the terms of the Registration Rights Agreement.

5. PUBLIC OFFERINGS AND STOCKHOLDERS' EQUITY

         Initial Public Offering

         On February 19, 1999, we completed our initial public offering of our
common stock ("the Offering") whereby we sold 20,000,000 shares of a new class
of common stock (the "Common Stock"). In addition, on March 19, 1999, the
Underwriters over-allotment options were exercised to the extent that an
additional 2,026,000 shares were sold. The initial price per share was $14,
resulting in net proceeds from the Offering of approximately $288 million.

         In connection with the Offering, pursuant to a recapitalization
agreement between Pinnacle, our largest stockholder, ABRY Broadcast Partners II,
L.P. ("ABRY II"), and certain members of our management that are stockholders of
Pinnacle, we converted all outstanding shares of each class of Pinnacle's five
classes of common stock into shares of the Common Stock sold in the Offering and
paid to the holders of certain of such classes of common stock preferential
amounts and yields. Pinnacle's certificate of incorporation was amended
immediately prior to the consummation of the Offering to eliminate the multiple
classes of Pinnacle's common stock and create the now single class of Common
Stock, and all of the outstanding shares of all the classes of common stock of
Pinnacle other than Class D Common stock were converted into approximately
8,571,309 shares of Common Stock and all shares of Class D common stock were
converted into approximately 1,428,691 shares of Common Stock. All unvested
shares of Class D Common stock held by employees at the date of the Offering
became vested shares.

         The holders of Pinnacle's outstanding (prior to the above described
conversion) shares of Class A Common stock, Class B Common stock and Class E
Common stock were collectively paid approximately $38.9 million by Pinnacle from
proceeds of the Offering, which amount equaled the amount of preferences such
shares were entitled to over the other classes of Pinnacle's common stock
pursuant to our certificate of incorporation before giving effect to the
amendment relative to the conversion of those shares as described above. In
addition, the holders of Pinnacle's outstanding (prior to the above described
conversion) shares of Class A Common stock were collectively paid approximately
$4.8 million by Pinnacle from proceeds of the Offering, which amount equaled the
amount of yield such shares had accrued from the date of their issuance through
June 30, 1997 pursuant to Pinnacle's certificate of incorporation before giving
effect to the amendment relative to the conversion of those shares as described
above.

         Other uses of proceeds from the Offering were: (1) approximately $32.0
redeemed the outstanding shares of Pinnacle's Series A Senior Preferred Stock
(the "Senior Preferred Stock"); (2) approximately $61.7 million redeemed the
outstanding shares of Pinnacle's Series B Junior Preferred Stock (the "Junior
Preferred Stock"); (3) approximately $15.7 million repaid in full and retired
loan from ABRY II; (4) approximately $123.8 million repaid outstanding
borrowings under Pinnacle's Senior Credit Facility; and, (5) $11.4 was used to
fund the closing of pending acquisitions proximate to the date the funds were
available from the Offering.


                                       9
<PAGE>   12

         Secondary Offerings

         On July 27, 1999, we completed a secondary offering of common stock
(the "July Offering") whereby we sold 8,650,000 shares of our common stock. The
price per share was $25, resulting in net proceeds from the July Offering of
approximately $206 million. Certain stockholders of Pinnacle also sold 2,350,000
shares of common stock, the net proceeds of which are not available to us. The
proceeds from the July Offering were invested initially in short-term liquid
securities and were used in conjunction with Pinnacle's availability of senior
debt under our amended Senior Credit Facility to fund acquisitions, the
construction of new communications sites and improvements to existing
communications sites.

         On January 24, 2000, we completed another secondary offering of common
stock (the "January Offering") whereby we sold 7,200,000 shares of our common
stock. The price per share was $41, resulting in net proceeds from the January
Offering of approximately $283 million. Certain stockholders of Pinnacle also
sold 3,150,000 shares of common stock, the net proceeds of which are not
available to us. The proceeds from the January Offering were invested initially
in short-term liquid securities and will be used to reduce our debt or be used
with borrowings made under the Senior Credit Facility to fund acquisitions, the
construction of new communications sites and improvements to existing
communications sites (approximately $264 million used through September 30,
2000). The total shares sold included a concurrent exercise of the underwriters'
over-allotment option whereby 1,350,000 shares were sold (including 450,000
shares sold by certain of our stockholders).

         Other Issuances of Stock

         In conjunction with the Motorola Antenna Site Acquisition, we issued
418,520 shares of common stock to Motorola as part of the consideration given
for the acquisition. These shares were recorded at the fair value of the
securities when the terms of the acquisition were agreed to and announced.

         During the nine months ended September 30, 2000, we issued 136,122
shares of our common stock upon exercise of various stock options granted to our
employees.

         Unsuccessful Offering Costs and SEC Investigation

         During August 2000, we discontinued a secondary offering of common
stock due to market conditions relative to our stock price. We believe those
market conditions primarily resulted from our disclosure of a nonpublic informal
inquiry (which later evolved into a formal investigation) undertaken by the SEC
during July 2000 that is discussed elsewhere herein and our expansion of our
business into the carrier neutral colocation facility business. As a result, we
believed we had to discontinue that capital raising effort. We believe that the
pending SEC investigation currently effectively precludes us from accessing the
equity and debt markets on attractive terms. Accordingly, we have written off as
an expense for the three month period ended September 30, 2000 $1.3 million in
non-recurring costs incurred related to this unsuccessful equity offering
process, which costs would have been recorded as a reduction of additional paid
in capital from the offering had the offering been completed.

         We continue to cooperate fully with the SEC in their investigation. We
incurred $0.3 million of expenses, predominantly legal fees, during the three
month period ended September 30, 2000 in relation to the to SEC's investigation.
We anticipate that further reasonable legal costs incurred in connection with
the SEC investigation will be covered by our directors and officers liability
insurance policy. Accordingly, the $0.3 million of expenses for the three month
period ended September 30, 2000 are expected to be non-recurring.

         We can not predict the outcome of this investigation and what effect,
if any, it might have on us.

6. COMMITMENTS

         Since September 30, 2000, we have completed 20 acquisitions of 14
communications sites and 10 previously leased land sites under owned towers, for
an aggregate purchase price of $13.0 million. Included


                                       10
<PAGE>   13

in the acquisitions was 1 carrier neutral colocation facility located in San
Antonio, Texas we acquired for $8.7 million pursuant to an agreement we entered
into as of May 22, 2000. In addition, as of and subsequent to September 30,
2000, we entered into several agreements or letters of intent with various third
parties to purchase 71 communications sites that we currently believe are
probable to close, reflecting an aggregate commitment to pay approximately $22.8
million. All of these probable acquisitions are subject to conditions of a
closing and consummation of a transaction pending completion of due diligence
efforts and any further negotiation that may result therefrom.

7. RESTATEMENT

         As described in Note 1, the unaudited quarterly financial information
for the nine months ended September 30, 2000 and the three months ended
September 30, 2000 have been restated.

            Unaudited Condensed Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                        As Previously                          As Previously
                                                          Reported                               Reported
                                                        Three Months         Three Months       Nine Months       Nine Months
                                                            Ended                Ended             Ended             Ended
                                                        September 30,        September 30,     September 30,     September 30,
                                                            2000                 2000              2000              2000
                                                        -----------------------------------    ---------------------------------
                                                                          (Restated-Note 1)                    (Restated-Note 1)
                                                        (unaudited)          (unaudited)        (unaudited)       (unaudited)
<S>                                                     <C>               <C>                  <C>             <C>
Revenues                                                $ 45,313,138         $ 45,313,138      $ 129,595,725     $ 129,595,725

Direct operating expenses, excluding
  Depreciation and amortization                           16,958,003           16,958,003         46,255,673        46,260,874
                                                        ---------------------------------      -------------------------------
Gross margin, excluding
  Depreciation and amortization                           28,355,135           28,355,135         83,340,052        83,334,851
Other expenses:
  General and administrative                               4,030,682            4,030,682          8,043,809         8,230,272
  Corporate development                                   13,619,585           14,187,345         21,767,449        27,709,691
  State franchise, excise and minimum taxes                  100,944              100,944            843,298           843,298
  Depreciation and amortization                           31,875,795           30,634,215         86,790,825        82,400,112
                                                        ---------------------------------      -------------------------------
                                                          49,627,006           48,953,186        117,445,381       119,183,373
                                                        ---------------------------------      -------------------------------
Loss from operations                                     (21,271,871)         (20,598,051)       (34,105,329)      (35,848,522)
Interest expense                                          10,791,905           10,791,905         27,102,582        27,102,582
Amortization of original issue discount                           --                   --                 --                --
  and debt issuance costs                                  6,961,131            6,961,131         20,210,683        20,210,683
Foreign currency transaction loss                                 --                   --                 --                --
Minority interest in subsidiary                              (60,297)             (60,297)           (60,297)          (60,297)
                                                        ---------------------------------      -------------------------------
Loss before income tax benefit                           (38,964,610)         (38,290,790)       (81,358,297)      (83,101,490)
Income tax benefit                                                --                   --                 --                --
Net loss attributable to common stockholders            $(38,964,610)        $(38,290,790)     $ (81,358,297)    $ (83,101,490)
                                                        =================================      ===============================

Basic and diluted loss attributable to common
  stockholders per share                                $      (0.80)        $      (0.79)     $       (1.70)    $       (1.74)
                                                        =================================      ===============================
Weighted average number
  of common shares outstanding                            48,408,148           48,408,148         47,746,133        47,746,133
                                                        =================================      ===============================
</TABLE>


                                       11
<PAGE>   14

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                             As Previously
                                                                               Reported
                                                                             September 30,           September 30,
                                                                                 2000                    2000
                                                                            ---------------------------------------
                                                                              (unaudited)           Restated-Note 1
                                                                                                      (unaudited)
<S>                                                                         <C>                     <C>
                                 Assets
Current assets:
  Cash and cash equivalents                                                 $    70,170,748         $    70,170,748
  Accounts receivable, net                                                       20,182,157              20,891,126
  Prepaid expenses and other current assets                                      10,142,351              11,332,045
                                                                            ---------------------------------------
              Total current assets                                              100,495,256             102,393,919
Fixed assets, net                                                             1,298,139,083           1,283,649,277
Leasehold interests, net                                                         72,313,300              70,292,202
Deferred debt issue costs, net                                                   18,732,165              18,732,165
Other assets                                                                      6,499,447               6,499,447
                                                                            ---------------------------------------
                                                                            $ 1,496,179,251         $ 1,481,567,010
                                                                            =======================================

                   Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                                          $     9,705,252         $     9,705,252
  Accrued expenses                                                               28,664,716              16,068,243
  Deferred revenue                                                                7,249,279               7,249,279
  Current portion of long-term debt                                               9,678,738               9,678,738
                                                                            ---------------------------------------
              Total current liabilities                                          55,297,985              42,701,512
Long-term debt                                                                  861,616,231             861,616,231
Other liabilities                                                                   876,090                 876,090
                                                                            ---------------------------------------
                                                                                917,790,306             905,193,833

Minority interest                                                                   439,703                 439,703

Commitments and contingencies                                                            --                      --

Stockholders' equity:
  Preferred stock, $.001 par value, 5,000,000 shares authorized;
    0 shares issued and outstanding at September 30, 2000
  Common stock, $.001 par value, 150,000,000
  shares authorized 48,430,593 shares issued and
  outstanding at September 30, 2000                                                  48,431                  48,431
  Additional paid-in capital                                                    773,244,966             773,244,966
  Foreign currency translation                                                      228,977                 228,977
  Accumulated deficit                                                          (195,573,132)           (197,588,900)
                                                                            ---------------------------------------
                                                                                577,949,242             575,933,474
                                                                            ---------------------------------------
                                                                            $ 1,496,179,251         $ 1,481,567,010
                                                                            =======================================
</TABLE>


                                       12
<PAGE>   15


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

         The following discussion of the consolidated financial condition and
results of operations of Pinnacle should be read in conjunction with the
consolidated financial statements and related notes thereto. This discussion
contains forward-looking statements within the meaning of the federal securities
laws. The words "believe," "estimate," "expect," "intend," "anticipate," "plan,"
and similar expressions and variations of such expressions identify certain of
such forward-looking statements that speak only as of the dates on which they
were made. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Actual events or results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including, without limitation, the forward-looking statements and associated
considerations set forth in Pinnacle's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1999.

         We restated our audited financial statements for the year ended
December 31, 1999, and our unaudited financial statements for the quarters ended
September 30, 1999, March 31, 2000, June 30, 2000, and September 30, 2000, to
expense certain costs previously capitalized as direct costs of the acquisition
of the Motorola Antenna Site Acquisition and to accrue direct costs of the
acquisition only as the related services are performed. Direct costs incurred in
connection with a purchased business are required to be capitalized and indirect
costs are required to be expensed. Determining under available accounting
guidance which costs or portions thereof are direct, as opposed to indirect,
requires the exercise of a certain amount of judgment. Upon completion of the
Motorola Antenna Site Acquisition, we determined to capitalize all pre- and
post-closing costs directly related to the acquisition. Following an inquiry by
the Securities and Exchange Commission and, after consulting with our new
independent auditors, Ernst & Young LLP, we reconsidered our previous accounting
judgment and concluded it was appropriate to capitalize all costs that relate
directly to the acquisition except those post-closing costs that are deemed to
more than incidentally reduce our need to incur ongoing business expenses
necessary to integrate those assets into our operations. Additionally, we had
previously, at the date of the acquisition, accrued estimated direct costs of
acquisitions regardless of whether the costs had been incurred as of that date.
We have now concluded that such costs should be accrued as the services are
incurred.

OVERVIEW

         We acquire communications sites and construct rental towers and lease
space on these communications sites to a broad base of wireless communications
providers, operators of private networks, government agencies and other
customers. Our objective is to acquire or construct clusters of rental
communications sites in areas where there is significant existing and expected
continued growth in the demand for rental communications sites by wireless
communications providers. We seek to obtain a significant ownership position of
communications site assets in our targeted markets in order to offer "one-stop
shopping" to wireless communications providers who are deploying or expanding
wireless communications networks.

         Since our formation in May 1995, we have focused on creating a
portfolio of wireless communications site clusters in high growth markets such
as Atlanta, Birmingham, Boston, Chicago, Dallas, Houston, Los Angeles, New
Orleans, New York, Orlando and Tampa.

         As of September 30, 2000, we have acquired 4 carrier neutral colocation
facilities located in Texas and St. Louis, Missouri for an aggregate purchase
price of $59.8 million. Subsequent to September 30, 2000, we acquired 1 more
carrier neutral colocation facilities in San Antonio, Texas that we contracted
to purchase on May 22, 2000 for an aggregate purchase price of $8.7 million.

         Colocation facilities are buildings that provide telecommunications
service providers, such as incumbent local exchange carriers ("ILECs"),
competitive local exchange carriers ("CLECs"), fiber optic network carriers,
Internet backbone providers, application service providers ("ASPs"), and
Internet data centers ("IDCs"), square footage space to house their equipment
(i.e. switches, servers, routers) and access to


                                       13
<PAGE>   16

an interexchange carrier (typically known as long distance carriers).
Independently owned carrier neutral colocation facilities provide
interconnectivity to multiple communications carriers versus carrier-owned
facilities that offer interconnectivity to just their own network.

         Though we believe carrier neutral colocation facilities are
characterized by high growth driven by continuing demand for voice, data and
internet services and can provide a stable and recurring cash flow from a
diversified customer base, on August 17, 2000 we announced our intent not to
pursue additional colocation facility opportunities, due to, among other things,
our limited ability to currently access additional capital in light of the SEC's
inquiry discussed elsewhere herein. After further analysis we have decided not
to pursue other colocation facility business opportunities and we are currently
considering our options with respect to the facilities we purchased or have
contracted to purchase. Such options include continuing to operate the
facilities, selling such assets outright, or transferring the properties and
contracts to a new entity that would have other equity holders in consideration
for debt, equity, cash or a combination thereof.

         The table below outlines the number of acquisitions we have completed
and the corresponding wireless communication sites and carrier neutral
colocation facilities as of September 30, 2000. The table includes a
reclassification of sites to reflect a new category of non-revenue producing
sites and to classify sites based on findings pursuant to due diligence efforts
on closed sites previously reported:

<TABLE>
<CAPTION>
                                           Revenue Producing Sites                            Non-Revenue            Acquisitions
                      --------------------------------------------------------------------
                      Owned      Managed      Leased      Built    Co-Location    Subtotal       Sites      Total      Completed
                      -----      -------      ------      -----    -----------    --------    -----------   ------   ------------
<S>                   <C>        <C>          <C>         <C>      <C>            <C>         <C>           <C>      <C>
1995                     29          --          --          4           -            33            --          33        13
1996                    119          --          --          4           -           123            --         123        49
1997                    134          --          --         22           -           156            --         156        72
1998                    517          --          --         47           -           564            --         564        82
1999                    858         584         858         23           -         2,323         1,569       3,892       130
YTD 9/30/2000           728         697          10          5           4         1,444            --       1,444       194
                      -----       -----         ---        ---         ---         -----         -----      ------       ---
Subtotal              2,385       1,281         868        105           4         4,643         1,569       6,212       540

Q3 reclass             (117)       (632)        111         --           -          (638)          434        (204)
                      -----       -----         ---        ---         ---         -----         -----      ------

YTD 9/30/2000         2,268         649         979        105           4         4,005         2,003       6,008
</TABLE>

         Since September 30, 2000, we have completed 20 acquisitions of 14
communications sites and 10 previously leased land sites under owned towers, for
an aggregate purchase price of $13.0 million. Included in the acquisitions was
the one carrier neutral colocation facility located in San Antonio, Texas we
acquired for $8.7 million pursuant to an agreement we entered into as of May 22,
2000. In addition, as of and subsequent to September 30, 2000, we entered into
several agreements or letters of intent with various third parties to purchase
71 communications sites that we currently believe are probable to close,
reflecting an aggregate commitment to pay approximately $22.8 million. All of
these probable acquisitions are subject to conditions of a closing and
consummation of a transaction pending completion of due diligence efforts and
any further negotiation which may result therefrom. We have identified
additional acquisition sites to pursue that we are not currently actively
pursuing. However, should we become able to access additional capital on
desirous terms, we would likely resume efforts to evaluate acquiring those and
other sites. We expect that internal growth related to completed acquisitions
and the business potential of pending acquisitions will have a material impact
on our future revenues and EBITDA.

         We believe that significant opportunities for growth exist by
maximizing the use of our existing and future communications sites. Because the
costs of operating a communications site are primarily fixed on


                                       14
<PAGE>   17

owned sites, increasing tower utilization significantly improves tower level
operating margins on these sites. We believe that "same site" organic revenue
growth on owned communications sites is a meaningful indicator of the quality of
these sites and our ability to generate incremental revenue on such sites. It is
measured by comparing the run rate revenue of our owned communications sites at
the end of a period to the run rate revenue for the same owned communications
sites at the end of the prior period.

         "Same-site" organic growth is a result of expanded marketing efforts to
increase the number of customers per site, renegotiating leases that are subject
to renewal, and contractual price escalations for existing customers. Taking
into consideration new leases written as of December 31, 1999, we experienced
"same site" revenue growth of approximately 19.0% for the year ended December
31, 1999 on the base of communications sites we owned as of December 31, 1998.
For the twelve month period ended September 30, 2000, we experienced "same site"
organic revenue growth on those communications sites we owned as of September
30, 1999 at the following rates:

<TABLE>
<CAPTION>
                                            Owned              All
                                            Sites             Sites
                                            -----             -----
         <S>                                <C>               <C>
         Gross new revenues                 16.5%             15.2%
         Net of cancellations                9.5%              6.5%
</TABLE>

         Owned sites as depicted in this table are those where we own either the
land, the tower or both on a tower site, or have a permanent easement on a
rooftop. This would contrast to other sites in our portfolio where we have: 1)
contractual rights to manage towers or rooftops, either exclusively or
non-exclusively; 2) have a non-permanent easement right on a rooftop site; or,
3) lease a space on a tower owned by another tower owner for the purpose of
sub-leasing to one of our tenants who needed space on a site in an area where we
had no site inventory in existence.

         The new revenues rates remain strong compared to our 1999 results,
especially when taking into consideration a significantly larger base of sites
and revenues as of September 30, 1999 as compared to December 31, 1998. We have
experienced strong new lease activity with respect to our telephony customers,
which includes PCS, cellular and digital SMR (specialized mobile radio). In
addition, we experienced rapid growth in our new business from the new
technology market segments, which include data, LMDS, wireless internet,
satellite radio and 911 location customers, during the three month period ended
September 30, 2000. We expect that strong new lease activity with respect to our
telephony customers will continue as they continue their aggressive build outs,
and we also look for the new technology customers to provide increasingly more
significant contributions to our new revenues as they become a larger part of
our overall business. These new technology customers are attracted to Pinnacle
sites because they deploy at higher elevations and our portfolio of sites
accommodate these elevations.

         The "net of cancellations" rates above reflect churn at rates
significantly greater than those Pinnacle has previously experienced. These
greater churn rates result primarily from Nextel's deconstruction of its analog
SMR network and the effects of many of the smaller private land mobile tenants
shifting to utilizing one of the many commercial wireless services now
available.

         Nextel recently received a ruling from the Federal Communications
Commission ("FCC") allowing Nextel to accelerate the deconstruction of its
analog network. This resulted in more churn from their planned deconstruction
occurring during our second and third quarters 2000 than was originally
anticipated. We are currently negotiating with Nextel to limit our loss of
revenue on any further deconstruction of their analog network. In addition,
Nextel has indicated to us that they have completed their major push to
deconstruct analog sites more rapidly than was originally contemplated, and that
the deconstruction of further analog sites now will be undertaken by them at a
much slower rate than was originally contemplated.

         We further expect that the churn from the smaller land mobile tenants
will level out soon and that churn from paging customers will remain relatively
stable. We have already experienced the churn from some of the larger land
mobile customers that have switched to commercial services or discontinued the
use


                                       15
<PAGE>   18

of older wireless technologies. We believe going forward the churn will
primarily be from the smaller user base. Most of the smaller paging companies
have either already consolidated or removed the majority of their excess
transmitters in an effort to cut costs. Although we do anticipate some
additional churn going forward due to the consolidation factor, we are
optimistic that growth from this sector will more than offset the churn. We are
hopeful the ongoing impact of the consolidation of this industry will result in
fewer but larger profitable companies that will require infrastructure upgrades
and expansions in order to compete in the data world.

         In addition to the tenant lease churn we have discussed above, we are
also experiencing a level of pressure on our revenue base from competitors for
the rooftop management business. As these contracts come up for renewal with the
property owners, we are experiencing instances where certain other companies,
who compete with us for the right to manage these rooftops, are offering to
manage these sites for a significantly lower gross margin after rent expense
only, frequently in the 15% range, than we feel it is appropriate for us to
compete with. Our strategy is to own and manage sites where we can make
substantial operating margins, as indicated by our results of operations, and we
do not desire to dilute our operating margins for the sake of competing against
companies aggressively pricing this service to rooftop owners. Therefore, we
have made decisions to not renew a number of these contracts over the past year.
As a result, our revenue base has been impacted as of September 30, 2000 as
compared to September 30, 1999 by approximately $4.6 million on an annualized
run rate basis by these decisions. The historical gross margins before
depreciation and amortization on these sites has typically run in the 50% range.
To compete with these competitors offering this service at a 15% gross margin
after rent expense only of 15% is clearly not consistent with both our operating
and growth strategies. As of September 30, 2000, we operated 357 rooftop sites
under management rights agreements, which represented 8.9% of our total
portfolio of revenue producing sites at that date. Our annualized run rate
revenues from these sites as of September 30, 2000 was $7.2 million, or 3.9% of
total annualized run rate revenues from all sites as of September 30, 2000. Run
rate gross margins, estimated based on historical results for the nine months
ended September 30, 2000, on these sites average 51.1%, so these sites represent
3.1% of our total run rate gross margins as of September 30, 2000. In light of
these recent competitive pressures, it is difficult to ascertain at this time
the effects, if any, this competition will have on our revenues from rooftops we
manage under management rights agreements and resulting gross margins before
depreciation and amortization in the future.

         We have generated net losses since inception and at September 30, 2000,
had an accumulated deficit totaling approximately $197.6 million. Due to our
plans to continue to grow the business predominantly through acquisitions, it is
expected that charges relating to depreciation of existing and future assets and
interest expense associated with related debt balances will be substantial.
Also, corporate development expenses will remain as a direct variable of
acquisition growth. Accordingly, we expect to continue to generate losses for
the foreseeable future.

         Our annualized run rate revenue is calculated as of a given date by
annualizing the monthly rental rates then in effect for customer lease contracts
as of such date. We believe that growth in our annualized run rate revenue is a
meaningful indicator of our performance. As of September 30, 2000, our
annualized run rate revenue was approximately $184.4 million.

         On August 31, 1999, we acquired approximately 1,858 communications
sites from Motorola, Inc. ("Motorola"), consisting of approximately 499 owned
sites, 526 managed sites and 833 leased sites, for $254 million in cash and
stock, plus fees and expenses ("the Motorola Antenna Site Acquisition"). For the
year ended December 31, 1999 on a pro forma basis, the Motorola sites generated
$55.7 million in revenue, $25.6 million in tower level cash flow and $17.7
million in EBITDA for the eight months ended prior to closing on August 30,
1999. Prior to the Motorola Antenna Site Acquisition we did not have a
significant number of managed or leased sites in our portfolio. Generally,
managed and leased sites have higher operating costs than owned towers,
primarily as a result of higher rental costs related to revenue sharing with
site owners. In addition, on leased sites, we generally have a right to lease
only a limited portion of a site, which limits total revenue potential. Higher
relative operating costs and limited revenue growth results in substantially
lower tower cash flow and EBITDA margin performance on managed and leased sites.
Accordingly, the acquisition of managed and leased sites in the Motorola Antenna
Site Acquisition or any potential future acquisitions will substantially
decrease our site level operating margins.


                                       16
<PAGE>   19

         Following the closing of the Motorola Antenna Site Acquisition we
transferred a portion of the rooftop communication sites we acquired from
Motorola to PT III, a corporation in which we own substantially all of the
equity interests, in exchange for $9.8 million of convertible preferred stock
and a $39.2 million Convertible Promissory note, in order to minimize the risk
that the ownership of or income from such assets might negatively affect our
qualification as a REIT. We also agreed to make our personnel, facilities and
general and administrative overhead available to PT III, the cost thereof to be
reimbursed to us by PT III. During the nine months ended September 30, 2000, we
purchased approximately $2.5 million of additional convertible preferred stock
of PT III and approximately $10.0 million of additional convertible promissory
notes. PT III used such funds to acquire all of the stock of a corporation that
owns and manages communications sites, and to acquire certain assets used in
communications site management and related activities.

         On July 18, 2000, the Internal Revenue Service issued a private letter
ruling to PT III confirming that the ownership of, and receipt of income from,
its rooftop sites and related equipment will be considered qualifying assets and
income for REIT purposes. However, PT III did not elect to be taxed as a REIT
for the short period year of 1999. PT III has determined that it will not be
able to make a REIT election for the 2000 calendar year because of non-REIT
qualifying income which it has recognized in 2000. The level of non-REIT
qualifying income causes PT III to fail to meet at least one of the REIT income
tests for 2000. PT III currently anticipates transferring certain assets that do
not conform to REIT standards to a wholly-owned PTI subsidiary in early 2001,
then acquiring the shares of PT III owned by others so that PT III will become a
qualified REIT subsidiary through which the remaining PT III assets will fall
under Pinnacle's REIT election. We expect that we and such wholly-owned PTI
subsidiary will jointly elect for such wholly-owned PTI subsidiary to become a
Taxable REIT Subsidiary ("TRS") as permitted under legislative changes which
take effect on January 1, 2001. In addition, we expect that we and PT IV will
elect to be treated as a TRS for Federal tax purposes effective January 1, 2001.
See PART II, Item 5, Other Information.

         In July 2000 Pinnacle Towers Inc. invested $1.5 million in a newly
created entity, Pinnacle Towers UK Ltd., resulting in a 75% interest in the
entity. The Company was acquired to purchase, develop and operate communication
site assets in the United Kingdom and continental Europe. The results of
operations are reported on a consolidated basis with the minority interest
disclosed.

         We have never completed a transaction as large as the Motorola Antenna
Site Acquisition. Due to the magnitude, timing, logistical and other constraints
of the Motorola Acquisition, we were unable prior to closing the transaction to
access, analyze and verify all information needed to (1) ascertain the physical
inventory and condition of the assets acquired (including thorough engineering
surveys of the assets); (2) estimate the fair value of the assets acquired and
liabilities assumed for purposes of purchase price allocation in our financial
statements; (3) identify, evaluate and record the assets acquired and
liabilities assumed for purposes of determining the final purchase price; and
(4) properly evaluate all record title and mortgage documents for acquired real
estate assets.

         We estimate that the total of our Motorola Acquisition pre and
post-closing transaction related due diligence and related efforts will cost
approximately $17.5 million. To date, such efforts have cost us approximately
$18.0 million, approximately $15.8 million of which has been incurred
post-closing. Such efforts have thus far not revealed any unanticipated
information regarding matters that would have a material adverse effect on our
operations and liquidity. However, we cannot assure you that our continued due
diligence efforts will not reveal unanticipated information that would have a
material adverse effect on our operations and liquidity.

         Motorola's representations and warranties in the definitive purchase
agreement between us and Motorola (the "Motorola Purchase Agreement") did not
survive the closing of the acquisition. Therefore, our ability to obtain
compensation from Motorola for defects in title, the need for third party
consents (and the need to make payments to obtain such consents) or other
site-related and other unanticipated issues is limited. We may be able to seek
redress under certain other provisions of the Motorola Purchase Agreement,
including through the purchase price adjustment based on changes in working
capital and the covenant requiring Motorola to provide further assurances as
needed to convey the acquired assets. The


                                       17
<PAGE>   20

nature and magnitude of these issues will not be fully determined until our
post-closing investigation is substantially completed, but the issues could have
an impact on our operations and liquidity, which impact could be significant.

RESULTS OF OPERATIONS

         The following table sets forth, for the nine month periods indicated,
each statement of operations item as a percentage of revenue. The results of
operations are not necessarily indicative of results for any future period. The
following data should be read in conjunction with our consolidated financial
statements and notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                      For the nine months ended:         For the three months ended:
                                                      --------------------------         ---------------------------
                                                      September        September         September         September
                                                         30,               30,               30,               30,
                                                        1999              2000              1999              2000
                                                      ---------        ---------         ---------         ---------
<S>                                                   <C>              <C>               <C>               <C>
Statement of operations data:
  Revenues                                              100.0%            100.0%            100.0%            100.0%
  Direct operating expenses, excluding
    Depreciation and amortization                        24.4              35.7              30.7              37.4
                                                       ------            ------            ------            ------
  Gross margin, excluding
    Depreciation and amortization                        75.6              64.3              69.3              62.6
  Other expenses:
    General and administrative                            5.9               6.3               5.5               8.9
    Corporate development                                12.8              21.4              12.8              31.3
    State franchise, excise and minimum taxes             1.4               0.7               1.3               0.2
    Depreciation and amortization                        70.9              63.6              64.8              67.7
                                                       ------            ------            ------            ------
  Loss from operations                                  (15.4)            (27.7)            (15.1)            (45.5)
  Interest expense                                       29.8              20.9              27.2              23.8
  Amortization of original issue discount and
    debt issuance costs                                  35.7              15.6              26.8              15.4
    Minority interest in subsidiary                        --                --                --              (0.1)
                                                       ------            ------            ------            ------
  Net loss                                              (80.9)            (64.2)            (69.1)            (84.6)
                                                       ======            ======            ======            ======
</TABLE>

RESTATED NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

         Revenues increased by $81.1 million, or 167.1%, to $129.6 million for
the nine month period ended September 30, 2000 from $48.5 million for the nine
month period ended September 30, 1999. This additional revenue is mainly
attributable to the acquisition and construction of 1,614 wireless communication
sites since September 30, 1999 - 170 sites during the second quarter of 1999 and
1,444 sites during the first nine months of 2000. Also, the 1999 results
included only one month of revenue from the Motorola Antenna Site Acquisition
versus three months in the nine months ending September 30, 2000. A final
portion of the revenue increase is related to "same-site" organic growth.

         Direct operating expenses, excluding depreciation and amortization,
increased by $34.4 million or 291.6% to $46.3 million for the nine month period
ended September 30, 2000 from $11.8 million for the nine month period ended
September 30, 1999. This increase is consistent with the acquisition and
construction of the 1,614 sites discussed above. Also, the 1999 results included
only one month of operating expenses from the Motorola Antenna Site Acquisition
versus three months in the nine months ending September 30, 2000. Direct
operating expenses as a percentage of revenue increased to 35.7% for the nine
month period ended September 30, 2000 from 24.4% for the nine month period ended
September 30, 1999. The percentage increase is primarily a result of the change
in mix of sites. Both managed and leased sites produce lower margins than owned
sites because of their variable rent expense. Notwithstanding, these sites are
financially and strategically consistent with our objective of providing
wireless service providers a large selection of antenna site locations.

         General and administrative expenses increased 188.2% for the nine month
period ended September 30, 2000 to $8.2 million from $2.9 million for the nine
month period ended September 30, 1999. The increase


                                       18
<PAGE>   21

in expenses is from additional staffing required for the increased work volume,
increased levels of advertising and marketing expenditures, costs associated
with growth, as well as significant non-recurring charges in the third quarter
totaling $1.6 million. As a percentage of revenue, general and administrative
expenses increased to 6.3% of revenue for the nine month period ended September
30, 2000 from 5.9% for the nine month period ended September 30, 1999. This
increase is the result of non-recurring charges in the third quarter totaling
$1.6 million. These non-recurring charges are associated with an equity offering
discontinued during the quarter ($1.3 million) and costs incurred as a result of
a non-public informal inquiry by the SEC ($0.3 million).

         Corporate development expenses increased by $21.5 million or 347.5% to
$27.7 million for the nine month period ended September 30, 2000 from $6.2
million for the nine month period ended September 30, 1999. Corporate
development expenses increased as a percentage of revenue to 21.4% for the nine
month period ended September 30, 2000 compared to 12.8% for the nine month
period ended September 30, 1999. The increase in expense is related to the
overall growth in the business and related activity during this same period as
well as significant, non-recurring charges in the third quarter totaling $8.7
million. These non-recurring charges are comprised of non-cash charges related
to the impairment of capitalized costs on pending acquisitions ($7.0 million)
and communications site construction project ($1.7 million) tower assets which
the company has chosen not to pursue at this time.

         State franchise, excise and minimum taxes, which represent taxes
assessed in connection with our operations in various state jurisdictions,
increased to $0.8 million for the nine month period ended September 30, 2000
from $0.7 for the nine month period ended September 30, 1999. Such taxes are
calculated using various methods such as a portion of our property within a
given state, our capital structure or based upon a minimum tax in lieu of income
taxes. The increase in expense is related to the overall growth in the business
and related activity during this same period.

         Interest expense, net of amortization of original issue discount,
increased $12.7 million, or 87.7%, to $27.1 million for the nine month period
ended September 30, 2000 from $14.4 million for the nine month period ended
September 30, 1999. The increase in interest expense was attributable to
increased senior borrowings outstanding associated with our acquisitions
activity, partially offset by some favorable interest rate protection agreements
affecting the nine months ended September 30, 2000, plus the interest on our
5.5% Convertible Subordinated Notes Due 2007 issued March 14, 2000. The weighted
average balance of senior debt outstanding increased by $165.4 million to $372.7
million for the nine months ended September 30, 2000 from $207.3 million for the
nine months ended September 30, 1999.

         Amortization of original issue discount and debt issuance cost
increased $2.9 million, or 16.6%, to $20.2 million for the nine month period
ended September 30, 2000 from $17.3 million for the nine month period ended
September 30, 1999. The increase resulted from increased amortization of
original issue discount of $1.8 million because of the semi-annual compounding
of the amortization under the indenture agreement, and increased amortization of
debt issuance costs of $1.1 million, $0.6 million attributable to the issuance
costs for the September 17, 1999 amendment to our senior credit facility and
$0.5 million attributable to the issuance costs for our 5.5% Convertible
Subordinated Notes Due 2007 issued March 14, 2000.

RESTATED THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999

         Revenues increased by $22.6 million, or 99.1%, to $45.3 million for the
three month period ended September 30, 2000 from $22.8 million for the three
month period ended September 30, 1999. This additional revenue is mainly
attributable to the acquisition and construction of 1,614 wireless communication
sites since September 30, 1999 - 170 sites during the fourth quarter of 1999 and
1,444 sites during the first nine months of 2000. Also, the 1999 results
included only one month of revenue from the Motorola Antenna Site Acquisition
versus three months in the three months ending September 30, 2000. A final
portion of the revenue increase is related to same-site organic growth.


                                       19
<PAGE>   22

         Direct operating expenses, excluding depreciation and amortization,
increased by $10.0 million or 142.7% to $17.0 million for the three month period
ended September 30, 2000 from $7.0 million for the three month period ended
September 30, 1999. This increase is consistent with the acquisition and
construction of the 1,614 sites discussed above. Also, the 1999 results included
only one month of operating expenses from the Motorola Antenna Site Acquisition
versus three months in the three months ending September 30, 2000. Direct
operating expenses as a percentage of revenue increased to 37.4% for the
three-month period ended September 30, 2000 from 30.7% for the three month
period ended September 30, 1999. The percentage increase is primarily a result
of the change in mix of sites. Both managed and leased sites produce lower
margins than owned sites because of their variable rent expense.
Notwithstanding, these sites are financially and strategically consistent with
our objective of providing wireless service providers a large selection of
antenna site locations.

         General and administrative expenses increased 224.1% for the three
month period ended September 30, 2000 to $4.0 million from $1.2 million for the
three month period ended September 30, 1999. The increase in expenses is from
additional staffing required for the increased work volume, increased levels of
advertising and marketing expenditures, costs associated with growth, as well as
significant non-recurring charges in the third quarter totaling $1.6 million. As
a percentage of revenue, general and administrative expenses increased to 8.9%
of revenue for the three month period ended September 30, 2000 from 5.5% for the
three month period ended September 30, 1999. This increase is the result of
non-recurring charges in the third quarter totaling $1.6 million. These
non-recurring charges are associated with an equity offering discontinued during
the quarter ($1.3 million) and costs incurred as a result of a non-public
informal inquiry by the SEC ($0.3 million).

         Corporate development expenses increased by $11.3 million or 385.7% to
$14.2 million for the three month period ended September 30, 2000 from $2.9
million for the three month period ended September 30, 1999. Corporate
development expenses increased as a percentage of revenue to 31.3% for the three
month period ended September 30, 2000 compared to 12.8% for the three month
period ended September 30, 1999. The increase in expense is related to the
overall growth in the business and related activity during this same period, as
well as significant, nonrecurring charges in the third quarter totaling $8.7
million. These non-recurring charges are comprised of non-cash charges related
to the impairment of capitalized costs on pending acquisitions ($7.0 million)
and communications site construction project ($1.7 million) tower assets which
the company has chosen not to pursue at this time.

         State franchise, excise and minimum taxes, which represent taxes
assessed in connection with our operations in various state jurisdictions,
decreased to $0.1 million for the three month period ended September 30, 2000
from $0.3 for the three month period ended September 30, 1999. Such taxes are
calculated using various methods such as a portion of our property within a
given state, our capital structure or based upon a minimum tax in lieu of income
taxes. The decrease in expense is related to revised accruals subsequent to the
finalization of our 1999 tax filings during the three month period ended
September 30, 2000.

         Interest expense, net of amortization of original issue discount,
increased $4.6 million, or 74.1%, to $10.8 million for the three month period
ended September 30, 2000 from $6.2 million for the three month period ended
September 30, 1999. The increase in interest expense was attributable to the
increase in senior borrowings outstanding under our senior credit facility
associated with our acquisitions activity, partially offset by some favorable
interest rate protection agreements affecting the three months ended September
30, 2000, plus the interest on our 5.5% Convertible Subordinated Notes Due 2007
issued March 14, 2000. The weighted average balance of senior debt outstanding
increased by $52.5 million to $371.0 million for the three months ended
September 30, 2000 from $318.5 million for the three months ended September 30,
1999.

         Amortization of original issue discount and debt issuance cost
increased $0.9 million, or 14.0%, to $7.0 million for the three month period
ended September 30, 2000 from $6.1 million for the three month period ended
September 30, 1999. The increase resulted from increased amortization of
original issue discount of $0.6 million because of the semi-annual compounding
of the amortization under the indenture


                                       20
<PAGE>   23

agreement, and increased amortization of debt issuance costs of $0.3 million,
attributable to the issuance costs for our 5.5% Convertible Subordinated Notes
Due 2007 issued March 14, 2000.

LIQUIDITY AND CAPITAL RESOURCES

         Our liquidity needs arise from our acquisition-related activities, debt
service obligations, working capital needs and capital expenditures. We have
historically funded our liquidity needs with proceeds from equity contributions,
public equity offerings, bank borrowings, debt offerings, and cash flow from
operations. We had net working capital of $59.7 million and $68.8 million as of
September 30, 2000 and December 31, 1999, respectively. Our ratio of total debt
to stockholders' equity was 1.5 to 1.0 at September 30, 2000 and 1.9 to 1.0 at
December 31, 1999.

         Our Senior Credit Facility provides us with a $235 million revolving
line of credit, with an uncommitted increase option which could increase the
revolving line of credit to $435 million, a $125 million term loan and a $110
million term loan, for a total availability of up to $670 million, of which $520
million (including letters of credit) is currently committed. Under our
revolving line of credit, we may make borrowings and repayments until June 30,
2006. Under one term loan, advances must be repaid in full by June 30, 2006.
Under the other term loan, advances must be repaid in full by June 30, 2007.
Once repaid, amounts under the term loans may not be reborrowed. Advances under
the term loans may be used for refinancing certain existing indebtedness,
acquisitions, working capital, and other general corporate purposes. Advances
under our revolving line of credit are limited to acquisitions. Advances under
our Senior Credit Facility have been used primarily to fund acquisitions,
construction of new communications sites and improvements to existing
communications sites.

         Beginning September 30, 2001, the availability under our revolving line
of credit and one term loan starts reducing by specified amounts on a quarterly
basis until June 30, 2006, when the availability under such credits will be
reduced to zero. Beginning June 30, 2001, the availability under the other term
loan starts reducing by specified amounts on a quarterly basis until June 30,
2007, when the term loan must be repaid in full. As of September 30, 2000 we had
$142.9 million available under our Senior Credit Facility, after giving effect
to approximately $35.7 million of outstanding letters of credit, which reduced
availability under our Senior Credit Facility.

         We also use seller financing to fund certain of our communications site
acquisitions. As of September 30, 2000, we had outstanding, in the aggregate
amount, $31.3 million of seller notes bearing interest at rates ranging from
8.5% to 13.0% per annum.

         On February 19, 1999, we completed the Offering where we sold
20,000,000 shares of our common stock and on March 19, 1999, the over-allotment
options were exercised and an additional 2,026,000 shares were sold. The initial
price per share was $14, resulting in net proceeds of approximately $290 million
before deducting the costs of the Offering. The proceeds were used to acquire
communications sites.

         On July 27, 1999, we completed a secondary offering of common stock
(the "July Offering") whereby we sold 8,650,000 shares of our common stock. The
price per share was $25, resulting in net proceeds from the July Offering of
approximately $206 million. Certain stockholders of Pinnacle also sold 2,350,000
shares of common stock, the net proceeds of which are not available to us. The
proceeds from the July Offering were invested initially in short-term liquid
securities and were used in conjunction with Pinnacle's availability of senior
debt under our amended Senior Credit Facility to fund acquisitions, the
construction of new communications sites and improvements to existing
communications sites.

         On January 24, 2000, we completed another secondary offering of common
stock (the "January Offering") whereby we sold 7,200,000 shares of our common
stock. The price per share was $41, resulting in net proceeds from the January
Offering of approximately $283 million. Certain stockholders of Pinnacle also
sold 3,150,000 shares of common stock, the net proceeds of which are not
available to us. The proceeds from the January Offering were invested initially
in short-term liquid securities and will be used to reduce our debt or be used
with borrowings made under the Senior Credit Facility to fund acquisitions, the
construction of new communications sites and improvements to existing
communications sites (approximately $264 million used through September 30,
2000). The total shares sold included a concurrent


                                       21
<PAGE>   24

exercise of the underwriters' over-allotment option whereby 1,350,000 shares
were sold (including 450,000 shares sold by certain of our stockholders).

         On March 22, 2000 we completed a private placement of $200 million of
5.5% Convertible Subordinated Notes Due 2007 (the "Convertible Notes") to
certain institutional purchasers pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act. We repaid outstanding revolving
debt under our Senior Credit Facility with the net proceeds of $193.5 million
from this private placement. We will pay interest on the Convertible Notes on
March 15 and September 15 of each year, with the first interest payment made on
September 15, 2000. The Convertible Notes will mature on September 15, 2007
unless previously redeemed or repurchased. The Convertible Notes are convertible
into Pinnacle's common stock at the option of the Convertible Note holders at an
initial price of $78.375 per share, which conversion price is subject to
adjustment under the terms of the Convertible Notes. We may redeem the
Convertible Notes on or after March 21, 2003. Pursuant to a Registration Rights
Agreement dated March 22, 2000, we filed a registration statement on May 23,
2000, to cover resales of the Convertible Notes and the shares of Common Stock
issuable upon conversion of the Convertible Notes.

         Under the terms of the Registration Rights Agreement, if the
registration statement was not declared effective by the SEC by September 18,
2000, the interest rate on the Convertible Notes increases by 0.5% until the
registration statement is declared effective. We are currently actively pursuing
the effectiveness of that registration statement. If it is not declared
effective by December 17, 2000, the rate on the notes will increase by an
additional 0.5%. The rate on the notes will not increase to greater than 6.5%
under the terms of the Registration Rights Agreement.

         Capital investments, including acquisitions, for the nine month period
ended September 30, 2000 were $434.1 million, compared to $482.0 million in the
comparable 1999 period. Depending on availability of additional capital, we
expect that we may make substantial additional capital investments for
acquisitions, construction and upgrading of additional towers in 2000. We expect
to incur total capital expenditures of $22 million to $24 million during the
three months ended December 31, 2000. These planned capital expenditures include
communications site acquisition costs of $12 million to $14 million, relating to
the closing of previously announced acquisitions, and communications site
construction and improvements costs of approximately $10 million. To the extent
we commit to complete additional significant acquisitions beyond those we have
identified and currently believe are probable that we will complete, that amount
may increase materially.

         We believe that the availability under our Senior Credit Facility, cash
flow from operations and existing cash balances will be sufficient to meet
working capital requirements for existing properties. Among the factors
affecting our ability to complete all probable acquisitions are the availability
of financing from our lenders and other sources of public or private debt and
equity. Since the SEC inquiry discussed elsewhere herein began we have found
accessing capital on attractive terms to be a challenge. We had to discontinue
an equity offering during the third quarter. Additionally, we have had to
significantly scale back our previous communications site acquisition plans, and
have had to discontinue our efforts to actively enter the colocation facilities
business.

         As of September 30, 2000, we estimate that we had cash on hand,
borrowings available under our senior credit facility and excess cash flow from
operations to pursue approximately $37.0 million of additional acquisition
opportunities over the next six months. We are currently actively pursuing the
disposition of the carrier neutral colocation facilities we acquired on terms we
believe to be reasonable. We paid approximately $68.8 million for such assets.
Our disposition efforts thus far have not given us reason to believe that we
will not recover at least that amount on the deposition of those assets.
However, our disposition efforts are still at a preliminary stage and we can not
be certain at this time of the net amount of funds we will realize from the
disposition of those assets, nor the timing of any such disposition.
Accordingly, we will continue to operate these assets until such time as they
may be disposed of under terms reasonable to us.

         Our Senior Credit Facility does not require any portion of proceeds
from the sale of the colocation facilities business to be used to repay debt, so
long as such proceeds are reinvested in permitted acquisitions


                                       22
<PAGE>   25

or capital expenditures within 180 days of the sale transaction. However, we may
consider applying some portion of the proceeds from such sale (potentially at
least the initial amount borrowed to purchase such facilities) to repay debt
under our Senior Credit Facility to maintain appropriate post-sale leverage
ratios. To the extent that we pursue additional acquisitions, construction
activity and other capital expenditures requiring funding in excess of those
sources, we will be required to obtain additional financing. There can be no
assurance that such financing will be commercially available or be permitted by
the terms of Pinnacle's existing indebtedness. To the extent that we are unable
to finance future capital expenditures, we may not be able to achieve our
current revised business strategy. Should we become able to access additional
capital on attractive terms, we would revise our business strategy to increase
the rate that we acquire communication sites.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

         We are exposed to certain market risks inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business and, in some cases, relate to our acquisitions of
related businesses. We are subject to interest rate risk on our Senior Credit
Facility and any future financing requirements. Our fixed rate debt consists
primarily of outstanding balances on the Notes, the Convertible Notes, and notes
payable to former tower owners and our variable rate debt relates to borrowings
under our Senior Credit Facility. See "--Liquidity and Capital Resources."

         The following table presents the future principal payment obligations
and weighted-average interest rates associated with our existing long-term debt
instruments assuming our actual level of long-term indebtedness of $325,000,000
under the Notes, $200,000,000 under the Convertible Notes, and $383,288,953
under our Senior Credit Facility as of September 30, 2000:

<TABLE>
<CAPTION>
                                                                              EXPECTED MATURITY DATE
                                               ------------------------------------------------------------------------------------
                                               2000        2001            2002            2003            2004         THEREAFTER
                                               ----     -----------     -----------     -----------     -----------    ------------
<S>                                            <C>      <C>             <C>             <C>             <C>            <C>
Liabilities
Long-term Debt
  Fixed Rate (8.03%).........................    --              --              --              --              --    $525,000,000
  Variable Rate (Weighted Average Interest
    Rate of 8.39%)...........................    --     $13,600,000     $19,850,000     $23,600,000     $77,138,953    $249,099,999
</TABLE>

         Our primary market risk exposure relates to the following:

         -        the interest rate risk on long-term and short-term borrowings;

         -        our ability to refinance the Notes and the Convertible Notes
                  at maturity at market rates;

         -        the impact of interest rate movements on our ability to meet
                  interest expense requirements and exceed financial covenants;
                  and

         -        the impact of interest rate movements on our ability to obtain
                  adequate financing to fund future acquisitions.

         We manage interest rate risk on our outstanding long-term and
short-term debt through our use of fixed and variable rate debt. While we cannot
predict or manage our ability to refinance existing debt or the impact interest
rate movements will have on our existing debt, we continue to evaluate our
financial position on an ongoing basis.

INFLATION

         Because of the relatively low levels of inflation experienced in 1999
and 2000, inflation did not have a significant effect on our results in such
years.


                                       23
<PAGE>   26

PART II.

ITEM 1.  LEGAL PROCEEDINGS.

         SEC Investigation

         As previously disclosed, we are involved in an SEC investigation and
the SEC Staff has requested information from us and our former independent
accountants, PricewaterhouseCoopers ("PWC"), as part of its inquiry. The SEC's
investigation appears to be focused primarily on the Motorola Antenna Site
Acquisition and on the independence of PWC as Pinnacle's auditor. We have
cooperated and intend to continue to cooperate with the SEC in its
investigation.

         We cannot predict the outcome of the SEC's investigation. Regardless of
the outcome, however, it is likely that we will incur substantial costs and that
the investigation will cause a diversion of our management's time and attention.

         Recently, we announced that in order to remove uncertainty with respect
to the independence issues, the Audit Committee of Pinnacle's Board of Directors
authorized the engagement of the accounting firm of Ernst & Young LLP to audit
our financial statements for the year ended December 31, 2000 and reaudit our
financial statements for the year ended December 31, 1999. As a result of the
reaudit of 1999 and the audit of 2000, we revised our accounting for certain
costs capitalized in connection with the Motorola Antenna Site Acquisition. In
our revised financial statements, we have determined to capitalize all costs
that relate directly to the acquisition except those post-closing costs that are
deemed to more than incidentally reduce our need to incur ongoing business
expenses necessary to integrate those assets into our operations.

         Others

         We are also from time to time involved in ordinary litigation
incidental to the conduct of our business. We believe that none of such pending
litigation will have a material adverse effect on our business, financial
condition or results of operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION.

         Pinnacle Towers III Inc. and Pinnacle Towers IV Inc..

         We are taxed as a Real Estate Investment Trust ("REIT") for federal
income tax purposes. The federal tax laws and regulations relating to REITs
limit our ability to own and derive income from certain types of assets. In
order to minimize the risk that our ownership of or income from certain assets
might negatively affect our qualification as a REIT, we previously transferred
certain potentially non-REIT qualifying assets to PT III, a corporation in which
Pinnacle owns substantially all of the equity interests in the form of
nonvoting, convertible preferred stock, as well as approximately 9% of the
voting common stock. Certain officers of Pinnacle own the remaining outstanding
shares of voting common stock of PT III. During


                                       24
<PAGE>   27

the nine months ended September 30, 2000, Pinnacle purchased approximately $2.5
million of additional convertible preferred stock of PT III and approximately
$10.0 million of additional convertible promissory notes. PT III used such funds
to acquire all of the stock of a corporation that owns and manages
communications sites, which may not be REIT qualifying assets or which may
generate income from assets that are non-REIT qualifying, and to acquire certain
assets used in communication tower consulting and management activities, which
assets and the income generated thereby may not be REIT qualifying.

         In addition, we formed PT IV during the third quarter ended September
30, 2000, to acquire the stock of an entity which owned a number of non-REIT
qualifying assets for a purchase price of approximately $12 million. PT IV is
capitalized in a manner similar to that of PT III, in that Pinnacle owns
substantially all of the equity interests in the form of nonvoting, convertible
preferred stock, as well as approximately 9% of the voting common stock, and
certain officers of Pinnacle own the remaining outstanding shares of voting
common stock of PT IV.

         PT III and PT IV have guaranteed the Senior Credit Facility and have
pledged all of their assets to secure such guarantee. The Board of Directors of
Pinnacle, excluding the officers of Pinnacle owning PT III and PT IV common
stock, who abstained, approved the transactions with PT III and PT IV, and
determined that such transactions were on terms no less favorable to Pinnacle
than those that would be obtained in comparable arms-length transactions with
parties that were not affiliated with Pinnacle, and that such transactions were
in the best interests of Pinnacle.

         As a result of the acts referenced in the preceding paragraph and prior
transactions between PT III and a subsidiary of Pinnacle, a subsidiary of
Pinnacle currently owns $48.7 million of convertible promissory notes issued by
PT III that accrues interest at the rate of 13%, with interest payable quarterly
and all principal and accrued interest due and payable within 30 days upon
demand, and $12.2 million of PT III convertible preferred stock that accrues
dividends at 18% per annum. In addition, a subsidiary of Pinnacle currently owns
$9.6 of convertible promissory notes issued by PT IV that accrues interest at
the rate of 13% with interest payable quarterly and all principal and accrued
interest due and payable within 30 days upon demand, and $2.4 of PT IV
convertible preferred stock that accrues dividends at 18% per annum. The terms
of PT III's and PT IV's certificates of incorporation limit PT III's and PT IV's
ability to borrow money, pledge their assets, issue additional securities, make
distributions to their stockholders, purchase and sell assets, enter into
transactions with affiliates and take certain actions without seeking approval
from their common stockholders, and their ability to issue or redeem certain
securities, make certain distributions, enter into certain transactions with
their affiliates or to sell, lease or dispose of a majority of their assets
without the approval of the holders of the convertible preferred stock are also
limited by such certificates of incorporation. Should all of the PT III or PT IV
convertible preferred stock and the convertible promissory notes be fully
converted to common stock of PT III or PT IV, respectively, a subsidiary of
Pinnacle would own in excess of 99.9% of the outstanding common stock of PT III
or PT IV, as the case may be. We currently anticipate that the officers of
Pinnacle who own PT III and/or PT IV common stock will derive only such benefits
as are consistent with, and not greater than, the very small interest in the
overall equity of Pinnacle represented by their common stock and as such that
such officers will not receive significant benefits from such stock ownership.
PT III and PT IV may issue limited amounts of nonvoting common stock in the
future in order for them to independently qualify as a REIT, although this
action is not currently anticipated.

         The foregoing is merely a summary description of PT III and PT IV and
the transactions between them and Pinnacle. The description does not purport to
be a complete description of such matters and is subject to the provisions of,
and is qualified in its entirety by reference to, the material agreements
relating to those matters, copies of which were filed as exhibits to this
Quarterly Report on Form 10-Q/A.

         On July 18, 2000, the Internal Revenue Service issued a private letter
ruling to PT III confirming that the ownership of, and receipt of income from,
its rooftop sites and related equipment will be considered qualifying assets and
income for REIT purposes. However, PT III did not elect to be taxed as a REIT
for the short period year of 1999. PT III has determined that it will not be
able to make a REIT election for the 2000 calendar year because of non-REIT
qualifying income which it has recognized in 2000. The level of non-REIT
qualifying income causes PT III to fail to meet at least one of the REIT income
tests for 2000. PT


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<PAGE>   28

III currently anticipates transferring certain assets that do not conform to
REIT standards to a wholly-owned PTI subsidiary in early 2001, then acquiring
the shares of PT III owned by others so that PT III will become a qualified REIT
subsidiary through which the remaining PT III assets will fall under Pinnacle's
REIT election. We expect that we and such wholly-owned PTI subsidiary will
jointly elect for such wholly-owned PTI subsidiary to become a Taxable REIT
Subsidiary ("TRS") as permitted under legislative changes which take effect on
January 1, 2001. In addition, we expect that we and PT IV will elect to be
treated as a TRS for Federal tax purposes effective January 1, 2001.

         However, as additional acquisition opportunities become available to us
in our existing line of business or in complementary non-real estate based
communication site or services activities, we may determine that it is in our
best interests to acquire, operate or derive income from assets, businesses or
entities that would cause us to no longer qualify as a REIT.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      The Exhibits listed in the "Exhibit Index" are filed as part of this
         report.

(b)      Reports on Form 8-K. Pinnacle filed an amended Form 8-K with the
         Commission on September 19, 2000 containing the financial statements
         and the unaudited proforma consolidated financial data of the following
         respective businesses acquired, or then anticipated to be acquired by
         the Company: (1) Microcell Management, Inc., (2) Tucker-Valley
         Communications, (3) Tower Ventures II and (4) Beverly Hills Center,
         LLC.


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<PAGE>   29

                                   SIGNATURES

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

                                             Pinnacle Holdings Inc.



Date:  May 3, 2001                           By:  /s/ Steven R. Day
                                                 -------------------------------
                                                 Steven R. Day,
                                                 Chief Operating Officer,
                                                 Chief Financial Officer,
                                                 Vice President and Secretary

                        Duly Authorized Officer and Principal Financial Officer.


                                       27
<PAGE>   30

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.                                                DESCRIPTION
-----------                                                -----------
<S>                 <C>
3.1                 Amended and Restated Certificate of Incorporation of the Company(1)
3.2                 Bylaws of the Company(1)
4.1                 Indenture dated as of March 22, 2000 among the Company and The Bank
                    of New York, as Trustee, including the form of 5.5% Note(3)
4.2                 Form of 5.5% Note (included in Exhibit 4.1)
4.3                 Registration Rights Agreement dated as of March 22, 2000 by and among
                    the Company and each of the Purchasers referred to therein(3)
4.4                 Specimen Stock Certificate(2)
10.1                Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
                    Towers III Inc., dated as of January 13, 2000(3)
10.2                Convertible Promissory Note of Pinnacle Towers III Inc., dated
                    January 13, 2000(3)
10.3                Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
                    Towers III Inc., dated as of January 27, 2000(3)
10.4                Convertible Promissory Note of Pinnacle Towers III Inc., dated
                    January 27, 2000(3)
10.5                Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
                    Towers IV Inc., dated August 17, 2000(4)
10.6                Convertible Promissory Note of Pinnacle Towers IV Inc., dated
                    August 17, 2000(4)
27.1                Financial Data Schedule(4) (for SEC use only)
27.2                Revised Financial Data Schedule (for SEC use only)
</TABLE>

         (1)      Incorporated by reference to the Company's Registration
                  Statement on Form S-4 filed with the Commission on April 1,
                  1998 (SEC file no. 333-49147).

         (2)      Incorporated by reference to the Company's Registration
                  Statement on Form S-11 filed with the Commission on July 17,
                  1998, as amended, (SEC file no. 333-59297).

         (3)      Incorporated by reference to the Company's Quarterly Report on
                  Form 10-Q filed with the Commission on May 15, 2000.

         (4)      Incorporated by reference to the Company's Quarterly Report on
                  Form 10-Q filed with the Commission on November 14, 2000.


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