<PAGE>
 
                                   FORM 10-Q
              
                      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 June 30, 1998

                                       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 ________

                             PINNACLE HOLDINGS INC.

   Incorporated in Delaware     I.R.S. Employer Identification No. 65-0652634

            1549 Ringling Blvd., 3rd Floor, Sarasota, Florida  34236

                           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           No   X   (The Company
                                               --------    ------             
has not been subject to such filing requirements for the past 90 days.).

At June 30, 1998, Registrant had outstanding 202,500 shares of $.001 par value
Class A Common Stock; 12,000 shares of $.001 par value Class B Common Stock;
40,000 shares of $.001 par value Class D Common Stock; and 174,766 shares of
$.001 par value Class E Common Stock


<PAGE>
 
INDEX
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION                                                                        Page
                                                                                                     ----
<S>                                                                                                  <C>
Item 1.      Financial Statements
             Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998                   1
             Consolidated Statements of Operations for the six months ended
              June 30, 1998 and 1997                                                                 2
             Consolidated Statement of Changes in Stockholders' Equity                               3
             Consolidated Statements of Cash Flows for the six months ended
              June 30, 1998 and 1997                                                                 4
             Notes to Consolidated Financial Statements                                              5

Item 2.      Management's Discussion and Analysis of Financial Condition and                         
              Results of Operations                                                                  6-8

Item 3.      Not applicable

PART II.     OTHER INFORMATION                                                                      

Item 1.      Legal Proceedings                                                                       9

Items
2-5.         Not Applicable

Item 6.      Exhibit and Reports on Form 8-K                                                         9


SIGNATURES

EXHIBIT INDEX                                                                                        10 
</TABLE> 
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

                            PINNACLE HOLDINGS INC.

                          CONSOLIDATED BALANCE SHEETS


<TABLE> 
<CAPTION> 
 
                                                                                 DECEMBER 31,             JUNE 30,           
                                                                                    1997                   1998              
                                                                                                         (UNAUDITED)         
                                                                                              
<S>                                                                         <C>                         <C> 
             ASSETS                                                                           
Current assets:                                                                               
     Cash and cash equivalents                                                     $ 1,693,923          $  2,715,465   
     Accounts receivable, less allowance for doubtful accounts of $70,000 and                                                   
       $195,000, respectively                                                        1,577,575             2,139,752         
     Prepaid expenses and other current assets                                       1,037,447             1,115,142         
                                                                                   -----------          -------------        
         Total current assets                                                        4,308,945             5,970,359         
Restricted cash                                                                         59,822                60,976         
Tower assets, net of accumulated depreciation of $8,278,524 and                                                          
 $15,223,593, respectively                                                         127,946,070           279,785,438       
Fixed assets, net                                                                    1,495,121             1,838,776         
Land                                                                                 6,850,951            12,152,758         
Deferred debt issue costs, net of accumulated amortization of                                                            
 $346,618 and $425,429, respectively                                                 1,871,242            11,336,531         
Other assets                                                                           645,752               854,676           
                                                                                  ------------         -------------          
                                                                                $  143,177,903          $311,999,514         
                                                                                  ------------         -------------          
             Liabilities and Stockholders' Equity                                                                          
Current liabilities:                                                                                                       
     Accounts payable                                                            $   2,242,397          $  2,793,562        
     Accrued expenses                                                                3,095,049             3,429,557           
     Deferred revenue                                                                  639,460             1,334,677           
     Current portion of long-term debt                                              11,122,077             2,943,986           
                                                                                  ------------         -------------          
           Total current liabilities                                                17,098,983            10,501,782           
Long-term debt                                                                     109,459,790           287,226,872           
Other liabilities                                                                      105,012               541,082           
                                                                                  ------------         -------------          
                                                                                   126,663,785           298,269,736           
                                                                                  ------------         -------------          
Commitments (Note 3)                                                                                                           
Redeemable stock:                                                                                                              
     Class B common stock, 12,000 shares issued and outstanding at                                                             
      December 31, 1997 and June 30, 1998                                            1,761,000             1,761,000           
     Class D common stock, 39,000 shares issued and outstanding at                                                             
      December 31, 1997 and 40,000 shares issued and outstanding at June 30, 1998           39                    40           
                                                                                  ------------         -------------          
                                                                                     1,761,039             1,761,040           
                                                                                  ------------         -------------          
Stockholders' equity:                                                                                                          
     Class A common stock -- 202,500 shares issued and outstanding                                                             
       at December 31, 1997 and June 30, 1998                                              203                   203           
     Class E common stock --  67,089 and 174,766 shares issued and outstanding                                       
       at December 31, 1997 and June 30, 1998, respectively                                 67                   175           
     Additional paid-in capital                                                     25,875,752            36,230,464           
     Accumulated deficit                                                           (11,122,943)          (24,262,104)          
                                                                                  ------------         -------------          
                                                                                    14,753,079            11,968,738           
                                                                                  ------------         -------------          
                                                                                 $ 143,177,903        $  311,999,514         
                                                                                  ------------         -------------          
</TABLE> 


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


                                       1
<PAGE>
 
                            PINNACLE HOLDINGS INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE> 
<CAPTION> 
                                                                                    SIX MONTHS ENDED
                                                                                        JUNE 30,
                                                                                  1997            1998
                                                                               (UNAUDITED)     (UNAUDITED)

<S>                                                                          <C>              <C> 

Tower rental revenue                                                           $4,848,314      12,544,096
Tower operating expenses, excluding depreciation and amortization                 846,655       2,530,987
     Gross margin                                                               4,001,659      10,013,109
Other expenses:                                                                                          
     General and administrative                                                   607,986       1,494,861
     Corporate development                                                      1,655,551       3,475,619
     Depreciation and amortization                                              2,483,489       7,970,717
                                                                                4,747,026      12,941,197
Loss from operations                                                             (745,367)     (2,928,088)
Interest expense                                                                2,243,495       4,550,342
Amortization of original issue discount                                                 -       5,660,731
Net loss                                                                       (2,988,862)    (13,139,161)
                                                                                                         
                                                                                                         
Loss per common share                                                              $(9.76)         (34.24)
Weighted average number of common shares outstanding                              306,300         383,685 

</TABLE> 


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


                                       2
<PAGE>

                            PINNACLE HOLDINGS INC.

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE> 
<CAPTION> 
                             Redeemable Stock                                              
                         -------------------------                                              Additional     Accumu-     Stock- 
                        Class B                 Class D          Class A          Class E        paid-in       lated      holders'
                      common stock           common stock    common stock      common stock      capital       deficit     equity
                    ----------------      -------------------------------    --------------     ----------    ---------  ---------
                      Shares     Amount   Shares   Amount  Shares     Amount   Shares   Amount                                
<S>                <C>         <C>      <C>     <C>       <C>      <C>       <C>      <C>      <C>         <C>           <C> 
Balance at

  December 31, 1997  12,000   $1,761,00   39,000    $39     202,500   $203   67,089   $67     $25,875,752  $(11,122,943) $14,753,079

Unaudited:

Issuance of common

  stock, net of issuance

  costs:

     Class D                               1,000      1

     Class E                                                               107,677    108    10,767,600                  10,767,708

Distribution to Class B

  common stockholders                                                                          (412,888)                   (412,888)

Net loss                                                                                                   (13,139,161) (13,139,161)

Balance at
                     ------   ---------    ------   ----    -------  ----  -------  ------  -----------   ------------  -----------
  June 30, 1998      12,000   $1,761,00    40,000   $ 40    202,500  $203  174,766  $  175  $36,230,464   $(24,262,104) $11,968,738
                     ======   =========    ======   ====    =======  ====  =======  ======  ===========   ============  ===========
</TABLE> 


The accompanying Notes to Consolidated Financial Statements are integral part
                  of these financial statements.


                                       3
<PAGE>

                            PINNACLE HOLDINGS INC. 

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE> 
<CAPTION> 
                                                                                    SIX MONTHS ENDED
                                                                                        JUNE 30,
                                                                                 1997              1998
                                                                              (UNAUDITED)      (UNAUDITED)

<S>                                                                          <C>              <C> 
Cash flows from operating activities:
     Net loss                                                                 $ (2,988,862)    $(13,139,161)
     Adjustments to reconcile net loss to net cash provided                                                
       by operating activities:                                                                            
     Depreciation and amortization                                               2,483,489        7,970,717
     Amortization of original issue discount                                             -        5,660,731
     Provision for doubtful accounts                                               (15,000)         125,000
     (Increase) decrease in:                                                                               
       Accounts receivable, gross                                                  (82,636)        (687,177)
       Notes receivable                                                                  -                -
       Prepaid expenses and other current assets                                    (2,005)         (77,695)
       Other assets                                                               (669,601)      (5,121,565)
     Increase (decrease) in:                                                                               
       Accounts payable                                                            668,389          551,165
       Accrued expenses                                                                             334,508
       Deferred revenue                                                             78,679          695,217
       Other current liabilities                                                         -                -
       Other liabilities                                                             1,105          436,070
                                                                             --------------    -------------
       Total adjustments                                                         2,462,420        9,886,971
                                                                             --------------    -------------
Net cash provided by operating activities:                                        (526,442)      (3,252,190)
                                                                             --------------    -------------
                                                                                                           
Cash flows from investing activities:                                                                      
     Payments made in connection with acquisitions:                                                        
       Tower assets                                                            (32,189,173)    (134,121,682)
       Land                                                                       (663,458)      (5,313,807)
     Capital expenditures:                                                                                 
       Tower assets                                                             (6,471,101)     (20,692,616)
       Fixed assets                                                               (481,043)        (630,374)
     (Increase) decrease in restricted cash                                     (1,521,810)          (1,154)
                                                                             --------------    -------------
Net cash used in investing activities                                          (41,326,585)    (160,759,633)
                                                                             --------------    -------------
Cash flows from financing activities:                                                                      
     Borrowings under long-term debt, net of deferred loan costs                47,000,000      360,913,785
     Repayment of long-term debt                                                (4,966,282)    (206,235,241)
     Proceeds from issuance of common stock, net of issuance                                               
       costs                                                                       246,300       10,767,709
     Payment of accretion in Class B common stock                                        -         (412,888)
                                                                             --------------    -------------
Net cash provided by financing activities                                       42,280,018      165,033,365
                                                                             --------------    -------------
Net increase in cash and cash equivalents                                          426,991        1,021,542
                                                                             --------------    -------------
Cash and cash equivalents, beginning of year                                        47,419        1,693,923
                                                                             --------------    -------------
Cash and cash equivalents, end of year                                       $     474,410     $  2,715,465
                                                                             ==============    =============
Supplemental disclosure of cash flows:                                                                     
     Cash paid for interest                                                  $   2,028,345     $  5,462,202 
                                                                             ==============    =============

</TABLE> 

The accompanying notes Consolidated Financial Statements are an integral part of
                          these financial statements.



                                       4
<PAGE>
 
                             Pinnacle Holdings Inc.

                   Notes to Consolidated Financial Statements

1.   Financial Statements

  The accompanying 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., Coverage Plus Antenna
  Systems, Inc. and Tower Systems, Inc., collectively referred as the "Company".
  All significant intercompany balances and transactions have been eliminated.
  Preparation of the consolidated financial statements in accordance with
  generally accepted accounting principles requires management to make estimates
  and assumptions that affect the amounts reported in the consolidated financial
  statements.  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 consolidated statements as
  of June 30, 1998 and for the six-month periods ended June 30, 1998 and 1997
  are unaudited, but in the opinion of management include all adjustments
  necessary for a fair presentation of results for such periods.  These
  consolidated financial statements should be read in conjunction with the
  Company's financial statements and notes thereto for the year ended December
  31, 1997.

2.   Acquisitions

  The Company actively acquires towers and assumes the sellers' related customer
  activity on an ongoing basis.

  The Company completed 63 acquisitions during the year ended December 31, 1997,
  all of which were individually insignificant to the Company.  The aggregate
  purchase price for acquisitions for the year ended December 31, 1997 was
  $73,591,373, which consisted of $54,339,523 in cash and $19,251,850 of notes
  payable to the former tower owners.

  On March 4, 1998, the Company completed the acquisition of 201 towers from
  Southern Communications Services, Inc. ("Southern Communications"), a
  subsidiary of Southern Company.  The Company paid $83,500,000 for these
  towers, located in Georgia, Alabama, Mississippi, and Florida. In addition to
  the Southern Communications transaction, subsequent to December 31, 1997, the
  Company purchased a total of 115 towers for an aggregate consideration of
  approximately $56,865,000.

  The Company accounts for its acquisitions using the purchase method of
  accounting.  The results of operations of the acquired assets are included
  with those of the Company 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, 1997.
  The unaudited pro forma consolidated financial statements are not necessarily
  indicative of the results that would have occurred if the assumed transaction
  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> 
                                                                DECEMBER 31,      JUNE 30,
                                                                    1997            1998
                                                                 (UNAUDITED)     (UNAUDITED)

<S>                                                      <C>                   <C>  
Tower rental revenue                                         $     19,478,425    $ 13,234,011
Gross profit, excluding depreciation and amortization              15,526,592      10,132,041
Net loss                                                          (18,787,322)    (15,597,380)
Net loss per common share                                              (60.58)         (40.65)
</TABLE> 

3.   Commitments

     On July 7, 1998, the Company signed a definitive purchase and sale
     agreement, subject to certain conditions, to acquire 163 communications
     towers from MobileMedia Communications Inc. ("MobileMedia") and several of
     its affiliates for $170 million plus fees and expenses (the "MobileMedia
     Acquisition"). In connection with the acquisition, the company entered into
     a 15 year lease arrangement to provide rental tower space to MobileMedia
     for 683 sites generating initial annual aggregate rent of approximately
     $10,655,000 (excluding third party rent), the lease provides for one five
     year renewal option exercisable at the customer's option. The U.S.
     Bankruptcy Court for the District of Delaware entered an order approving
     the MobileMedia Acquisition on August 10, 1998, and such order may be
     appealed until August 20, 1998. The MobileMedia Acquisition is also subject
     to certain closing conditions, including the completion of due diligence.

     Also subsequent to December 31, 1997 the Company entered into several
     letters of intent with various third parties to purchase 33 towers,
     reflecting an aggregate commitment to pay approximately $16,353,000.


                                       5
<PAGE>
 

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 the Company 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 risk factors set forth in the Company's
Registration Statement on Form S-11 (No. 353-59297) filed on July 17, 1998, as 
amended (the "Registration Statement"), and the matters set forth in the
Registration Statement generally.

The Company

The Company is the leading provider of wireless communications rental tower
space in the Southeastern United States.  Since commencing operations in May
1995, the Company has completed 181 acquisitions through which it has acquired
597 towers and has constructed an additional 48 towers in such high growth
markets as Atlanta, Birmingham, New Orleans, Orlando and Tampa.  The Company
also has agreements or letters of intent to acquire 196 additional towers.  As a
result of its extensive existing tower base, the Company believes it is well-
positioned to continue to capitalize on the growth opportunities available in
the rapidly consolidating and highly fragmented tower rental industry.

The Company has a diversified base of over 680 customers consisting of wireless
communications providers, operators of private networks and government agencies
that include Southern Communications, Nextel, Sprint PCS, PageNet, Motorola,
BellSouth Mobility, MobileMedia, Teletouch, Skytel, Pagemart, Federal Bureau of
Investigation and Bureau of Alcohol, Tobacco & Firearms. The Company's leases
generally range in duration from three to five years and many provide for
scheduled minimum rent increases of the greater of a specified percentage (which
typically ranges from 3-5%) or the change for the relevant period in the
Consumer Price Index. Unlike a number of other participants in the tower
rental industry, the Company focuses exclusively on the rental of wireless
communications tower space.

The Company has designed and implemented a three-tiered growth strategy of:  (i)
aggressively marketing available rental space on its towers to capitalize on the
operating leverage of its business; (ii) rapidly acquiring towers in key
markets; and (iii) implementing a selective tower construction program designed
to complement its acquisition strategy.  In order to effect its strategy, the
Company has created a highly focused, structured organization in which
significant resources are devoted to acquiring or constructing towers on
strategically located sites supported by customer demand.  The Company uses its
proprietary information systems and other systems to rapidly integrate new
towers and initiate sales and marketing efforts immediately following their
acquisition or construction.


                                       6
<PAGE>

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
 
Tower rental revenue increased 158.7% to $12.5 million for the six month period
ended June 30, 1998 from $4.8 million for the six month period ended June 30,
1997.  This increase is attributable to the acquisition and construction of 333
towers during the six month period ended June 30, 1998, the results of which are
reflected in the six month period ended June 30, 1998.  In addition, the
increase is due to growth in per tower revenue as a result of expanded marketing
efforts to increase the number of customers per tower, as well as regular,
contractual price escalations for existing customers.

Tower operating expenses, excluding depreciation and amortization, which consist
primarily of costs relating to the ongoing maintenance of properties such as air
conditioning and grounds maintenance, ground lease expenses, utilities, property
taxes and other direct costs of tower operation, increased 198.8% to $2.5
million for the six month period ended June 30, 1998 from $.8 million for the
six months ended June 30, 1997.  This increase is consistent with the purchase
and construction of towers as discussed above.  During the period, tower
operating expenses (as a percentage of tower rental revenue) remained consistent
with the Company's historical percentage of approximately 20%.

General and administrative expenses, which are expenses associated with
supporting the Company's day-to-day management of its existing properties and
primarily consist of employee compensation and related benefits costs,
advertising, professional and consulting fees, office rent and related expenses
and travel costs, remained relatively constant for the six month period ended
June 30, 1998 and 1997 at approximately 12% of tower revenue.

Corporate development expenses, which represent costs incurred in connection
with acquisitions and construction of new towers, increased 109.9% to $3.5
million for the six month period ended June 30, 1998 from $1.7 million for the
six month period ended June 30, 1997.  The increase in corporate development
expenses reflects the higher costs associated with the Company's expansion of
its acquisition and construction strategies.  Corporate development expenses
decreased as a percentage of tower rental revenue from 34.2% for the six months
ended June 30, 1997 to 27.7% for the six months ended June 30, 1998 because of
the incremental increase in tower rental revenue from the comparative period in
1997 and economics resulting from such growth.

Interest expense, net of amortization of original issue discount, increased
102.9% to $4.6 million for the six months ended June 30, 1998 from $2.2 million
for the six months ended June 30, 1997.  The increase in interest expenses was
attributable to increased borrowing associated with the Company's acquisitions
during the period.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs arise from its acquisition-related activities,
debt service, working capital and capital expenditures.  The Company has
historically funded its liquidity needs with proceeds from equity contributions,
bank borrowings, cash flow from operations and the offering of its 10% Senior
Discount Notes (the "Senior Notes Offering").  The Company had a working capital
deficit of $4.5 million and $12.8 million as of June 30, 1998 and December 31,
1997, respectively.  The Company's ratio of total debt to stockholders' equity
(excluding redeemable stock) was 24.2 to 1 at June 30, 1998 and 8.2 to 1 at
December 31, 1997.

The Company has entered into a senior secured credit agreement (the "Senior
Credit Facility") with NationsBank, N.A. and certain other lenders that provides
a revolving line of credit for borrowings of up to $250 million, of which $150
million is currently committed.  The Company intends to obtain commitments that
would increase the total commitment to $250 million.  The Company may make
borrowings and repayments until December 31, 2005.  Beginning March 31, 2000,
the availability under the revolving line of credit starts reducing by specified
amounts on a quarterly basis until December 31, 2005 when the availability will
be reduced to zero.  Loans under the Senior Credit Facility bear interest at a
rate per annum, at the borrower's request, equal to the agent bank's prime rate
plus a margin of up to 1.75% or the 90-day London Interbank Offered Rate
("LIBOR") plus a margin of up to 2.875%.  Outstanding borrowings under the
Senior Credit Facility have been used primarily to fund acquisitions and
construction of towers.

The principal stockholders of the Company (ABRY Broadcast Partners II, L.P.
("ABRY II"), and Messrs. Robert J. Wolsey, James M. Dell'Apa and Steven R. Day)
are parties to a Subscription and Stockholders Agreement, dated as of May 16,
1996, as amended (the "Stockholders Agreement"). Pursuant to the Stockholders
Agreement, ABRY II agreed to make capital contributions to the Company, up to an
aggregate capital contribution of $50.0 million. As of June 30, 1998, ABRY II
had contributed $39.7 million (including $2.5 million outstanding under a bridge
loan by ABRY II) and had guaranteed an additional $3.9 million of
other debt of the aggregate $50.0 million capital contribution commitment. Such
capital contribution commitment would terminate upon the closing of the Offering
(as defined below).

The Company also uses seller financing to fund certain of its tower
acquisitions.  The Company had outstanding notes that it issued to sellers
bearing interest at rates ranging from 8.5% to 13.0% per annum in the aggregate


                                       7
<PAGE>
 
amount of $18.7 million at June 30, 1998.

In March 1998, the Company completed its Senior Notes Offering.  The Company
received net proceeds of approximately $192.8 million from the Senior Notes
Offering.  The proceeds were used to repay outstanding borrowings under the
Senior Credit Facility, to repay in full and retire a $12.5 million bridge loan
from ABRY II and accrued interest thereon and a $20 million subordinated term
loan and accrued interest thereon and to pay a distribution preference to
holders of Class B Common Stock.  The Senior Discount Notes were issued under
an Indenture dated as of March 20, 1998 and will mature on March 15, 2008. Until
March 15, 2003, the Company's interest-expense on the Senior Discount Notes will
consist solely of the accretion of original issue discount. Thereafter, the
Senior Discount Notes will require annual cash interest payments of $32.5
million.

On July 17, 1998, the Company filed the Registration Statement with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, with respect to the offering and sale by the Company of shares of its
Common Stock (the "Offering").

Capital expenditures, including acquisitions, for the six months ended June 30,
1998 were $160.8 million, compared to $39.8 million in the comparable 1997
period. The Company anticipates that it will spend approximately $229 million on
capital expenditures in the second half of 1998, including $170 million for the
MobileMedia Acquisition and $59 million for the acquisition, construction and
upgrading of additional towers. The Company estimates capital expenditures in
1999 and 2000 to be approximately $150 million during each year.

The Company will require additional financing to enable it to complete the 
MobileMedia Acquisition and other pending acquisitions, pursue future 
acquisitions, fund capital expenditures on existing and acquired towers and 
meet the Company's additional working capital requirements.  The timing and 
amount of the Company's additional financing needs will depend upon, among other
things, the timing of closings of pending and future acquisitions (which are
dependent upon the satisfaction of closing conditions, some of which are beyond
the Company's control). The Company is pursuing additional sources of
financing, including the Offering, borrowings under the Senior Credit Facility
and private sales of debt or equity, to satisfy its ongoing capital needs. The
mix and source of capital used by the Company will depend upon market
conditions, the limitations imposed by the terms of the Company's existing
indebtedness and other factors. There can be no assurance that such financing
will be available on terms acceptable to the Company. To the extent that the
Company is unable to secure sufficient additional capital, it may not be able to
achieve its current business strategy.

                                       8

<PAGE>
 
Inflation

     Because of the relatively low levels of inflation experienced in 1995,
1996, 1997 and as of June 30, 1998, inflation did not have a significant effect
on the Company's results in such years.

Year 2000

     The Year 2000 is not expected to have a material impact on the Company's 
current information systems because its software is either already Year 2000 
compliant or required changes are not expected to be material. Based on the 
nature of the Company's business, the Company anticipates it is not likely to 
experience material business interruption due to the impact of Year 2000 
compliance on its customers and vendors. As a result, the Company does not 
anticipate that incremental expenditures to address Year 2000 compliance will be
material to the Company's liquidity, financial position or results of operations
over the next few years.

Recent Accounting Pronouncements

     In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise 
and Related Information," was issued, establishing standards for public 
enterprises to disclose certain information about operating segments and related
disclosures about products and services, geographic areas and significant 
customers. The Company will adopt this pronouncement in 1998 in accordance with 
the implementation requirements. Management believes that the adoption of SFAS 
No. 131 will not have a material impact on the Company's financial statements.

Item 3.  Not applicable.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings.

The Company is from time to time involved in ordinary litigation incidental to
the conduct of its business.  The Company believes that none of its pending
litigation will have a material adverse effect on the Company's business,
financial condition or results of operations.

Items 2, 3, 4 and 5.

Not applicable.

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.  The Company filed a report on form 8-K on June 12,
1998, with respect to a press release regarding the engagement of Morgan Stanley
& Co. Incorporated to assist the Company in consideration of strategic
alternatives.

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<PAGE>
 
                                   SIGNATURES

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

                           Pinnacle Holdings Inc.

Date  August 14, 1998      By  /s/ Steven R. Day
                               -----------------
                               Steven R. Day
                               Chief Financial Officer
                               Vice President
 
                        Duly Authorized Officer and Principal Financial Officer.



                                 EXHIBIT INDEX

Designation     Description
-----------     -----------
 
10.1            Amended Capital Contribution Agreement dated May 29, 1998*

10.2            Third Amended and Restated Credit Agreement dated May 29, 1998*

27.1            Financial Data Schedule


__________________

*  Previously filed on June 11, 1998 with Amendment No. 1 to the Company's
Registration Statement on form S-4 (S.E.C. File No. 333-49147).


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