<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 March 31, 1999

                                      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

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



At March 31, 1999, Registrant had outstanding 32,026,000 shares of $.001 par
value Common Stock.
<PAGE>
 
<TABLE>
<CAPTION>
PART I.   FINANCIAL INFORMATION                                                                      Page
                                                                                                     ---- 
<S>       <C>                                                                                        <C>  
Item 1.     Financial Statements
            Condensed Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999         1
            Condensed Consolidated Statements of Operations for the three months ended
             March 31, 1998 and 1999                                                                 2
            Condensed Consolidated Statement of Changes in Stockholders' Equity 
            for the three months ended March 31, 1999                                                3
            Condensed Consolidated Statements of Cash Flows for the three months ended
             March 31, 1998 and 1999                                                                 4
            Notes to Condensed Consolidated Financial Statements                                     5-7
 
Item 2.     Management's Discussion and Analysis of Financial Condition and
             Results of Operations                                                                   8-13
 
Item 3.     Quantitative and Qualitative Disclosures about Market Risk                               13
 
PART II.  OTHER INFORMATION
 
Item 1.     Legal Proceedings                                                                        14
 
Item 2      Changes in Securities and Use of Proceeds                                                14
 
Items 3     Not Applicable

Item  4     Submission of Matters to a Vote of Security Holders.                                     14 

Item  5     Not Applicable                                                                           14                           

Item 6.     Exhibits and Reports on Form 8-K                                                         14
 
SIGNATURES                                                                                           15

EXHIBIT INDEX                                                                                        16
</TABLE> 
<PAGE>
 
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:
        -------------------- 

                            PINNACLE HOLDINGS INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                  December 31,     March 31,
                                                                                                      1998           1999
                                                                                                  -------------  -------------
                                                                                                                  (Unaudited)
<S>                                                                                               <C>            <C>
Assets
Current assets:
Cash and cash equivalents                                                                         $ 13,801,190   $  1,276,209
Accounts receivable, net                                                                             1,679,390      2,176,233
Prepaid expenses and other current assets                                                            1,432,428      1,374,081
                                                                                                  ------------   ------------
 Total current assets                                                                               16,913,008      4,826,523

Tower assets, net                                                                                  473,942,309    553,888,537
Fixed assets, net                                                                                    2,476,666      2,591,363
Land                                                                                                14,613,365     15,765,504
Deferred debt issue costs, net                                                                       6,686,683      6,501,787
Other assets                                                                                         1,516,070        953,542
                                                                                                  ------------   ------------
                                                                                                  $516,148,101   $584,527,256
                                                                                                  ============   ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                                                                  $  3,280,809   $  4,209,825
Accrued expenses                                                                                     5,761,016     11,443,695
Deferred revenue                                                                                     1,448,432      2,911,099
Current portion of long-term debt                                                                   15,692,912      1,002,136
                                                                                                  ------------   ------------
 Total current liabilities                                                                          26,183,169     19,566,755

Long-term debt                                                                                     417,524,802    352,876,045
Other liabilities                                                                                      125,152        183,627
                                                                                                  ------------   ------------
                                                                                                   443,833,123    372,626,427
                                                                                                  ------------   ------------
Redeemable stock:
  Series A senior preferred stock, Class B common stock, and Class D common stock                   31,643,338             --
                                                                                                  ------------   ------------
 
Stockholders' equity:
   Series B junior preferred stock                                                                  59,928,980             --
Common stock:
  Class A common stock, 202,500  and 0 shares issued and outstanding at December 31, 1998 and
    March 31, 1999, respectively                                                                           203             --
  Class E common stock, 174,766 and 0 shares issued and outstanding at December 31, 1998 and
    March 31, 1999, respectively                                                                           175             --
  Common Stock , $.001 par value, 100,000,000 shares authorized;  0 and 32,026,000 shares           
    issued and outstanding at December 31, 1998 and March 31, 1999, respectively                            --         32,026
  Warrants                                                                                           1,000,000             --
  Additional paid-in capital                                                                        33,136,302    276,565,895
  Accumulated deficit                                                                              (53,394,020)   (64,697,092)
                                                                                                  ------------   ------------
                                                                                                    40,671,640    211,900,829
                                                                                                  ------------   ------------
                                                                                                  $516,148,101   $584,527,256
                                                                                                  ============   ============
 
</TABLE>

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

                                       1
<PAGE>
 
                            PINNACLE HOLDINGS INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                March 31,
                                                                   ----------------------------------
                                                                         1998              1999
                                                                   ----------------  ----------------
                                                                     (unaudited)       (unaudited)
<S>                                                                <C>               <C>
Revenue                                                               $  5,372,833    $   12,008,208
Operating expenses, excluding depreciation and amortization                851,371         2,232,651
                                                                     -------------    --------------
          Gross margin, excluding depreciation and amortization          4,521,462         9,775,557
Other expenses:
           General and administrative                                      419,809           843,464
           Corporate development                                         1,288,807         1,711,283
           State franchise, excise and minimum taxes                        70,424           200,975
           Depreciation                                                  2,950,850         8,994,211
                                                                     -------------    --------------
                                                                         4,729,890        11,749,933
                                                                     -------------    --------------
Loss from operations                                                 (     208,428)   (    1,974,376)
Interest expense                                                         3,102,826         3,900,192
Amortization of original issue discount and debt issuance costs            610,471         5,428,504
                                                                     -------------    --------------
Net loss                                                             ($  3,921,725)   ($  11,303,072)
                                                                     =============    ==============  
Payable-in-kind preferred dividends and accretion                                -         2,930,338  
                                                                     =============    ============== 
Net loss attributable to common shareholders                         ($  3,921,725)   ($  14,233,410)
                                                                     =============    ============== 
Basic and diluted loss per common share/(a)/                         ($       0.43)   ($        0.79)
                                                                     =============    ============== 
Weighted average number of common shares outstanding                     9,115,653        18,067,533
                                                                     =============    ============== 
</TABLE>

(a)  Basic loss per common share in 1999 and 1998 have been computed based on
the weighted average number of common shares outstanding during the periods,
after giving retroactive effect for the conversion of the Company's common stock
outstanding prior to the Company's initial public offering in accordance with
the recapitalization effected contemporaneously with the completion of the
initial public offering (Note 3).


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

                                       2
<PAGE>
 
                             PNNACLE HOLDINGS INC 

      CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                        Series B                                                                             
                                         Junior                                          Class A                 Class E        
                                     preferred Stock             Common stock          common stock            common stock      
                                -------------------------     ------------------   -------------------      -----------------  
                                  Shares       Amount           Shares   Amount     Shares      Amount        Shares   Amount  
                                ----------  -------------     ---------  -------   --------   --------      ---------  ------      
<S>                             <C>         <C>               <C>        <C>       <C>        <C>           <C>        <C>
Balance at December 31, 1998      60.40     $  59,928,980             -        -    202,500    $  203        174,766   $ 175       
                                                                                                                              
Unaudited:                                                                                                                    
Dividends and accretion on                                                                                                    
  Preferred Stock                  1.27         1,767,106             -        -                                              
                                                                                                                             
Issuance of common stock,                                                                                                     
 net of issuance costs, and                                                                                                   
 conversion (Note 2)                                         32,026,000  $32,026   (202,500)     (203)      (174,766)   (175)       

                                                                                                                               
Liquidation of Series A                                                                                                       
 Senior Preferred Stock                                                                                                       
                                                                                                                              
Liquidation of Series B                                                                                                       
 Junior Preferred Stock          (61.67)     ( 61,696,086)                                                                    
                                                                                                                              
Distribution of contributed                                                                                                   
 capital and yield on various                                                                                                 
 classes of common stock                                                                                                      
                                                                                                                              
Net Loss                         ------     -------------    ----------  -------   --------   -------       --------   ----- 
                                                                                                                              
Balance at March 31, 1999             -     $           -    32,026,000  $32,026          -   $     -              -   $     
                                 ======     =============    ==========  =======   ========   =======       ========   =====  
 

<CAPTION> 
                                                      Additional                                           
                                                       paid-in           Accumulated      Stockholders'        
                                      Warrants         capital             deficit           equity         
                                    ------------     ------------       ------------      --------------    
                                    <C>              <C>                <C>               <C>               
Balance at December 31, 1998        $  1,000,000      $ 33,136,302      ($53,394,020)      $  40,671,640    
                                                                                                             
Unaudited:                                                                                                   
Dividends and accretion on                                                                                   
  Preferred Stock                                     (  2,930,338)                        (   1,163,232)   
                                                                                                             
Issuance of common stock,                                                                                    
 net of issuance costs, and                                                                                  
 conversion (Note 2)                                   290,064,403                           290,096,051    
                                                                                                             
Liquidation of Series A                                                                                      
 Senior Preferred Stock             (  1,000,000)                                          (   1,000,000)   
                                                                                                             
Liquidation of Series B                                                                                     
 Junior Preferred Stock                                                                    (  61,696,086)                 
                                                                                                            
Distribution of contributed                                                                                 
 capital and yield on various                                                                                
 classes of common stock                              ( 43,704,472)                        (  43,704,472)                
                                                                                                            
Net Loss                                                                                                     
                                                                                                            
Balance at March 31, 1999                                               ( 11,303,072)      (  11,303,072)    
                                    ------------      ------------      ------------       -------------     
                                                                                                             
                                    $          _      $276,565,895      ($64,697,092)      $ 211,900,829    
                                    ============      ============      ============       =============     
</TABLE> 

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

                                       3

<PAGE>
 
                            PINNACLE HOLDINGS INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                           March 31,
                                                                            -------------------------------------
                                                                                   1998               1999
                                                                            ---------------       ---------------
                                                                               (unaudited)         (unaudited)
<S>                                                                         <C>                   <C>
Cash flows from operating activities:
 Net loss                                                                       ($  3,921,725)    ($  11,303,072)
                                                                                 ------------      -------------
    Adjustments to reconcile net loss to net cash provided
      by operating activities:
         Depreciation                                                               2,950,850          8,994,211
         Amortization of original issue discount and debt issuance costs              610,471          5,428,504
         Provision for doubtful accounts                                               30,000                  -
         (Increase) decrease in:
            Accounts receivable, gross                                          (     408,193)    (      487,059)
            Prepaid expenses and other current assets                           (   1,589,765)            58,347
            Other assets                                                               60,736            562,528
         Increase (decrease) in:
            Accounts payable                                                        2,307,159            929,016
            Accrued expenses                                                    (     203,553)         5,682,679
            Deferred revenue                                                          698,038          1,462,667
            Other liabilities                                                   (      21,721)            58,475
                                                                                -------------     --------------
               Total adjustments                                                    4,434,022         22,689,368
                                                                                -------------     --------------
Net cash provided by operating activities                                             512,297         11,386,296
                                                                                -------------     -------------- 
Cash flows from investing activities:
          Payments made in connection with acquisitions:
             Tower assets                                                       (  96,440,006)    (   71,020,067)
             Land                                                               (   4,268,873)    (    1,152,139)
          Capital expenditures:
            Tower assets                                                        (  10,122,475)    (   13,134,730)
             Fixed assets                                                       (     216,188)    (      350,473)
                                                                                -------------     -------------- 
Net cash used in investing activities                                           ( 111,047,542)    (   85,657,409)
                                                                                -------------     -------------- 
Cash flows from financing activities:
          Borrowings under long-term debt, net                                    307,028,824         50,000,000
          Repayment of long-term debt                                           ( 204,023,448)    (  139,142,790)
          Proceeds from issuance of common stock, net                               9,567,709        288,335,011
          Liquidation of PIK preferred stock and warrants                                   -     (   93,741,617)
          Distribution of contributed capital and payment of
           accretion on various classes of common stock                         (     412,888)    (   43,704,472)
                                                                                -------------     -------------- 
Net cash provided by financing activities                                         112,160,197         61,746,132
                                                                                -------------     --------------
Net increase (decrease) in cash and cash equivalents                                1,624,952     (   12,524,981)
Cash and cash equivalents, beginning of period                                      1,693,923         13,801,190
                                                                                -------------     --------------
Cash and cash equivalents, end of period                                         $  3,318,875      $   1,276,209
                                                                                =============     ==============
Supplemental disclosure of cash flows:
         Cash paid for interest                                                  $  4,416,557      $   4,702,341
                                                                                =============     ==============
 
Non-Cash Transactions:
         Seller debt issued in connection with acquisitions                      $          _      $   4,559,650
</TABLE>

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

                                       4
<PAGE>
 
                            Pinnacle Holdings Inc.
             Notes to Condensed 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 to 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
March 31, 1999 and for the three month periods ended March 31, 1999 and 1998 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 consolidated financial statements should be read in
conjunction with the Company's financial statements and notes thereto for the
year ended December 31, 1998.

The Company's Consolidated Statements of Operations for the three month period
ended March 31, 1999, reflect all components of Comprehensive Income as defined
by SFAS No. 130, "Reporting Comprehensive Income."  Accordingly, no separate
Consolidated Statement of Comprehensive Income is presented as would otherwise
be required.

2. Acquisitions

The Company actively acquires communications towers and related real estate
assets.

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.

On September 3, 1998, the Company acquired from MobileMedia Corporation
("MobileMedia") and several of its affiliates 166 towers for an aggregate
purchase price of approximately $170 million (the "MobileMedia Acquisition").
MobileMedia assigned its existing tenant leases on the towers to the Company.
The Company entered into a lease (the "Lease") with MobileMedia Communications,
Inc., an affiliate of MobileMedia, providing such affiliate of MobileMedia the
non-exclusive right to install a certain amount of its equipment on the acquired
towers for aggregate rent of $10.7 million per year. The Lease has an initial
term of 15 years and one five-year renewal term exercisable at the option of the
lessee. Prior to this acquisition, space on the towers was primarily for the
exclusive use of MobileMedia and its affiliates. The Company has integrated
these towers into its rental tower business and is leasing space on these towers
to other third party wireless communications providers. The towers are located
in the Southeastern United States, Southern California and New England.

In addition to the Southern Communications and MobileMedia transactions
described above, the Company completed 80 acquisitions of 526 towers and related
assets, all of which were individually insignificant to the Company, from
various sellers during the year ended December 31, 1998 for an aggregate
purchase price of $331,204,262, consisting of $328,789,297 in cash and
$2,414,965 of notes payable to the former tower owners.

                                       5
<PAGE>
 
During the three months ended March 31, 1999, the Company completed 27
acquisitions of 109 towers and related assets, all of which were individually
insignificant to the Company, from various sellers for an aggregate purchase
price of $58,513,409 consisting of $53,953,759 in cash and $4,559,650 of notes
payable to the former tower owners.

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, 1998. 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
                                                -----------------------------------------
                                                     March 31,            March 31,
                                                       1998                  1999
                                                -------------------  --------------------
                                                    (unaudited)          (unaudited)
<S>                                             <C>                  <C>
Revenue                                              $   9,061,275         $  12,854,268
Gross margin, excluding depreciation                     7,305,093            10,442,837
Net loss                                             (  14,458,152)        (  12,355,972)
Net loss attributable to common shareholders         (  14,458,152)        (  15,286,310)
Net loss per common share                            (        1.59)        (        0.85)
</TABLE>

3. Initial Public Offering and Stockholders' Equity

On February 19, 1999, the Company completed its initial public offering of
common stock ("the Offering") whereby the Company 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 the Company, its largest stockholder, ABRY Broadcast Partners II, L.P.
("ABRY II"), and certain members of the Company's management that are
stockholders of the Company, the Company converted all outstanding shares of
each class of the Company'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. The certificate of
incorporation of the Company was amended immediately prior to the consummation
of the Offering to eliminate the multiple classes of the Company'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 the Company 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.

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

                                       6
<PAGE>
 
through June 30, 1997 pursuant to the Company'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 the Company's Series A Senior Preferred Stock (the
"Senior Preferred Stock"); (2) approximately $61.7 million redeemed the
outstanding shares of the Company'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 the Company's Senior Credit Facility (as defined herein); and,
(5) $11.4 was used to fund the closing of pending acquisitions proximate to the
date the funds were available from the Offering.

4. Commitments

As of and subsequent to March 31, 1999,  the Company entered into several
letters of intent with various third parties to purchase 35 towers, reflecting
an aggregate commitment to pay approximately $54,345,000, all of which are
subject to consummation of a transaction pending completion of due diligence
efforts and any further negotiation which may result therefrom.

                                       7
<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
Amendment No. 6 to Registration Statement on Form S-11 (No. 333-59297) filed on
February 17, 1999 (the "Registration Statement").

The Company

The Company acquires and constructs communications towers and leases space on
such towers to a broad base of wireless communications providers, operators of
private networks, government agencies and other customers. The Company's
objective is to own and operate clusters of rental towers in areas where there
is significant existing and expected continued growth in the demand for rental
towers by wireless communications providers. The Company seeks to obtain a
significant ownership position of tower assets in its targeted markets in order
to offer "one-stop shopping" to wireless communications providers who are
deploying or expanding wireless communications networks.

The Company's growth has come primarily from aggressively pursuing tower
acquisitions in areas that complement the Company's existing base of rental
towers and the expansion into additional high growth wireless communications
markets. The Company also selectively constructs new towers to further augment
its tower portfolio.  The Company is the leading provider of wireless
communications rental tower space in the Southeastern United States.  Recently,
the Company has expanded its tower operations to new markets in New England and
Southern California, and continues to consider attractive tower acquisition
opportunities in other areas with high wireless communications growth.

Since commencing operations in May 1995, through March 31, 1999, the Company has
completed 237 acquisitions through which it has acquired 908 towers and has
constructed an additional 93 towers in such high growth markets as Atlanta,
Birmingham, New Orleans, Orlando and Tampa. As of March 31, 1999, the Company
also has agreements or letters of intent to acquire 35 additional towers. As a
result of its extensive existing and growing 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 800 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 that
focuses on: (i) increasing revenue yield per tower through aggressive marketing
and development; (ii) continuing to acquire towers in key markets; and (iii)
selective new tower construction. In order to effect its strategy, the Company
has created a

                                       8
<PAGE>
 
highly focused, structured organization in which significant resources are
devoted to acquiring or constructing towers on strategically located sites
supported by customer demand. In addition to supporting the buy/don't buy
decision regarding potential acquisitions, 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.

Results of Operations

Three months ended March 31, 1999 compared to three months ended March 31, 1998

Tower revenues increased 123.5% to $12.0 million for the three month period
ended March 31, 1999 from $5.4 million for the three month period ended March
31, 1998. This increase is attributable to additional revenue resulting from the
acquisition and construction of 125 towers during the three month period ended
March 31, 1999, the results of which are reflected from the time of acquisition
or construction in the three month period ended March 31, 1999, the inclusion of
results from 308 towers acquired or constructed during the period from April 1,
1998 through December 31, 1998 for the entire three month period ended March 31,
1999, and the inclusion of results from 201 towers acquired in March 1998 for
the full three month period ended March 31, 1999. 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.

Operating expenses, excluding depreciation and amortization, increased 162.2% to
$2.2 million for the three month period ended March 31, 1999 from $0.9 million
for the three month period ended March 31, 1998. This increase is consistent
with the purchase and construction of towers and the related increases in
revenue as discussed above. Operating expenses as a percentage of revenue
increased to 18.6% for the three month period ended March 31, 1999 from 15.9%
for the three month period ended March 31, 1998. The change primarily results
from the continuing change in the mix of tower assets due to ongoing acquisition
and build activity occurring since March 31, 1998. The portfolio of tower assets
owned by the Company during the three months ended March 31, 1999 have slightly
higher expenses as a percentage of tower revenue than the substantially smaller
portfolio of tower assets owned during the three months ended March 31, 1998.
The specific areas of expenses effected include ground rents, property taxes and
certain maintenance costs related to the Company's site improvement program,
which is designed to enhance marketability of sites to the Company's customers.

General and administrative expenses, as a percentage of revenue, decreased to
7.0% of revenue for the three month period ended March 31, 1999 from 7.8% for
the three month period ended March 31, 1998 reflecting the growth in revenues
resulting from the Company's continued success in implementing its growth
strategy over the past year. These expenses decreased $0.4 million as a result
of economies of scale realized from increases in tower revenues as a result of
the Company's acquisitions and construction of towers, offset partially by the
effect of increases in expenses from additional staffing due to the Company
becoming a public registrant and related increases in professional fees,
increased levels of advertising and marketing expenditures and increases in rent
and related costs associated with the Company's growth.

Corporate development expenses increased 32.8% to $1.7 million for the three
month period ended March 31, 1999 from $1.3 million for the three month period
ended March 31, 1998. The increase in corporate development expenses reflects
the higher costs associated with the Company's expansion of its acquisition and
construction strategies and related tower development efforts.  Corporate
development expenses decreased as a percentage of revenue from 24.0% for the
three month period ended March 31, 1998 to 14.2% for the three month period
ended March 31, 1999 because of the incremental increase in revenue from the
comparative period in 1998 and economies of scale resulting from such growth.

                                       9
<PAGE>
 
State franchise, excise and minimum taxes, which represent taxes assessed in
connection with the Company's operations in various state jurisdictions
increased to $0.20 million for the three month period ended March 31, 1999 from
$0.01 million for the three month period ended March 31, 1998. Such taxes are
calculated using various methods such as a portion of the Company's property
within a given state, the Company's capital structure or based upon a minimum
tax in lieu of income taxes. The increase in 1999 is primarily attributable to
the Company's significant expansion of its geographic region primarily through
acquisitions.

Depreciation expense increased 204.8% to $9.0 million for the three month period
ended March 31, 1999 from $3.0 million for the three month period ended March
31, 1998 as a result of the increase in tower assets through the acquisition
activities of the Company as described above.

Interest expense, net of amortization of original issue discount and debt
issuance costs, increased 25.6% to $3.9 million for the three month period ended
March 31, 1999 from $3.1 million for the three month period ended March 31,
1998. The increase in interest expenses was attributable to increased average
borrowings associated with the Company's acquisitions during the three period
ended March 31, 1999 as compared to the three month period ended March 31, 1998,
offset by the Company being subject to lower average interest rates on its
average borrowings for the three month period ended March 31, 1999 as compared
to the three month period ended March 31, 1998.

Amortization of original issue discount and debt issuance cost increased to $5.4
million for the three month period ended March 31, 1999 from $0.6 million for
the three month period ended March 31, 1998.  The prior year period included
amortization of original issue discount for only a partial month as the sale of
the Senior Discount Notes was consummated on March 20, 1998, compared to a full
quarter of amortization for the 1999 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 Discount Notes"). The Company had a working capital
deficit of $14.7 million and $9.3 million (inclusive of a $15.0 million bridge
loan owed to ABRY II repaid on February 24, 1999) as of March 31, 1999 and
December 31, 1998, respectively. The Company's ratio of total debt to
stockholders' equity was 1.7 to 1.0 at March 31, 1999 and 10.7 to 1.0 at
December 31, 1998.

The Company has 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 $200 million is
currently committed. The Company is seeking 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 2.00% or the 90-day London Interbank Offered Rate plus a
margin of up to 3.00%. Outstanding borrowings under the Senior Credit Facility
have been used primarily to fund acquisitions and construction of towers. As of
March 31, 1999, there was approximately $120.3 million available under the
Senior Credit Facility (assuming an increased commitment of $250 million), after
giving effect to approximately $21.2 million of outstanding letters of credit,
which reduce availability under the Senior Credit Facility.

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
amount of $24.2 million at March 31, 1999.

                                       10
<PAGE>
 
In March 1998, the Company completed its offering of its Senior Discount Notes.
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, to repay in full and
retire 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.

In September 1998, in order to finance the MobileMedia Acquisition, the Company
sold two newly issued series of Preferred Stock, the Senior Preferred Stock with
a liquidation preference of $30.0 million and the Junior Preferred Stock with a
liquidation preference of $32.5 million. Included in the sale of the Senior
Preferred Stock were warrants to purchase approximately .75% of the Company's
outstanding common stock. The warrants were cancelled upon the redemption of the
Senior Preferred Stock. ABRY/Pinnacle, Inc., an affiliate of ABRY II, purchased
the Junior Preferred Stock. In addition to the proceeds from the above sales,
the MobileMedia Acquisition was funded with the ABRY Bridge Loan and borrowings
under the Senior Credit Facility. In December 1998, the Company issued $26.2
million of additional Junior Preferred Stock to ABRY/Pinnacle, Inc. The proceeds
from the sale of the Junior Preferred Stock were used to fund tower acquisitions
and pay operating costs. The Senior Preferred Stock and the Junior Preferred
Stock were entitled to receive dividends, payable quarterly, at a current rate
of 14% per annum. The Senior Preferred Stock and the Junior Preferred Stock were
redeemable, at the option of the Company, in whole (but not in part), at any
time at a redemption price equal to the aggregate liquidation preference
thereof, plus all accumulated but unpaid dividends to the date of redemption.

The principal stockholders of the Company (ABRY II, and Messrs. Wolsey, Dell'Apa
and Day) were 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
December 31, 1998, ABRY II had contributed $37.2 million and had guaranteed an
additional $3.9 million of other debt under the aggregate $50.0 million capital
contribution commitment. Such capital contribution commitment terminated upon
the closing of the Offering. Additionally, as of December 31, 1998, ABRY II or
an affiliate had contributed separately $73.7 million to the Company, including
$15.0 million outstanding under the ABRY Bridge Loan and $58.7 million of Junior
Preferred Stock. The Stockholders Agreement was terminated upon completion of
the Offering.

On February 19, 1999, the Company completed its initial public offering of
Common Stock whereby the Company sold 20,000,000 shares of 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 $290 million before deducting costs of the Offering.

In connection with the Offering, pursuant to a recapitalization agreement
between the Company, its largest stockholder, ABRY II, and certain members of
the Company's management that are stockholders of the Company, the Company
converted all outstanding shares of each class of the Company'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. The certificate of incorporation of the Company was amended immediately
prior to the consummation of the Offering to eliminate the multiple classes of
the Company'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 the Company
other than Class D Common Stock were converted into

                                       11
<PAGE>
 
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.

The holders of the Company'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 the Company
from proceeds of the Offering, which amount equaled the amount of preferences
such shares were entitled to over the other classes of the Company's common
stock pursuant to the Company's certificate of incorporation before giving
effect to the amendment relative to the conversion of those shares as described
above. In addition, the holders of the Company's outstanding (prior to the above
described conversion) shares of Class A Common Stock were collectively paid
approximately $4.8 million by the Company from proceeds of the Offering, which
amount equaled the amount of yield such shares had accrued from the date of
their issuances through June 30, 1997 pursuant to the Company'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 the Company's Senior Preferred Stock; (2)
approximately $61.7 million redeemed the outstanding shares of the Company's
Junior Preferred Stock; (3) approximately $15.7 million repaid in full and
retired a loan from ABRY II; (4) approximately $123.8 million repaid outstanding
borrowings under the Company'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.

Capital expenditures, including acquisitions, for the three months ended March
31, 1999 were $85.7 million, compared to $111.0 million in the comparable 1998
period. The Company anticipates that it will spend approximately $182.1 million
on capital expenditures during the period from April 1, 1999 through December
31, 1999, including various individually immaterial acquisitions in the
Company's current targeted acquisitions pipeline, construction and upgrading of
additional towers. Depending on availability of additional capital, the Company
expects that it may make substantial capital expenditures for acquisitions,
construction and upgrading of additional towers in 1999 and 2000.

The Company believes that cash flow from operations and existing cash balances
will be sufficient to meet working capital requirements for existing properties.
The Company currently anticipates that it will seek additional financing in
order to pursue additional acquisitions, construction activity and other capital
expenditures that will require funding in excess of available Offering proceeds
and funds available under its Senior Credit Facility. Such additional financing
may be obtained by the Company through public or private debt and equity
offerings or increasing availability under its Senior Credit Facility. There can
be no assurance that such financing will be commercially available through an
increased commitment under the Senior Credit Facility or otherwise or be
permitted by the terms of the Company's existing indebtedness. The Company
currently could not incur significant additional indebtedness by increasing its
availability under the Senior Credit Facility or issuing additional private or
public debt without first modifying certain of its covenants contained in the
indenture governing the Senior Discount Notes. To the extent that the Company is
unable to finance future capital expenditures, it may not be able to achieve its
current business strategy.

Inflation

Because of the relatively low levels of inflation experienced in 1995, 1996,
1997, 1998 and as of March 31, 1999, inflation did not have a significant effect
on the Company's results in such years.

Year 2000

The Company utilizes management information systems and software technology that
may be affected by Year 2000 issues throughout its businesses.  During fiscal
1996, the Company began to implement plans to ensure 

                                       12
<PAGE>

those systems continue to meet its internal and external requirements. During
fiscal 1998, the Company completed the modifications and testing of its
information systems and believes that it is substantially Year 2000 compliant.
The Company has developed questionnaires and contacted key suppliers and
customers regarding their Year 2000 compliance to determine any impact on its
operations. In general, the suppliers and customers have developed or are in the
process of developing plans to address Year 2000 issues. The Company will
continue to monitor and evaluate the progress of its suppliers and customers on
this critical matter.

The Year 2000 is not expected to have a material impact on the Company's current
information systems as a result of the steps already completed to make the
Company's systems Year 2000 compliant. 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.

Recent Accounting Pronouncements

Not applicable.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
         ---------------------------------------------------------- 

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

The following table represents the future principal payment obligations and
weighted-average interest rates associated with the Company's existing long-term
debt instruments assuming the Company's actual level of long-term indebtedness
of $329,651,613 under the Senior Discount Notes and the Senior Credit Facility
as of March 31, 1999:

<TABLE>
<CAPTION>
Expected Maturity Date
                            1999         2000         2001         2002          2003   Thereafter
<S>                        <C>    <C>          <C>          <C>           <C>          <C>
Liabilities
Long-term Debt
Fixed Rate
(10.00%)                      --           --           --           --            --  $325,000,000
Variable Rate
(Weighted Average
Interest Rate of 8.58%)    $  --  $10,845,000  $16,267,500  $21,690,000   $59,647,500  $         --
</TABLE>

The Company's primary market risk exposure relates to (i) the interest rate risk
on long-term and short-term borrowings, (ii) its ability to refinance its Senior
Discount Notes at maturity at market rates, (iii) the impact of interest rate
movements on its ability to meet interest expense requirements and exceed
financial covenants and (iv) the impact of interest rate movements on the
Company's ability to obtain adequate financing to fund future acquisitions. The
Company manages interest rate risk on its outstanding long-term and short-term
debt through its use of fixed and variable rate debt. While the Company can not
predict or manage its ability to refinance existing debt or the impact interest
rate movements will have on its existing debt, management continues to evaluate
its financial position on an ongoing basis.

                                       13
<PAGE>
 
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.

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

The Company completed the Offering of Common Stock on February 19, 1999. The
proceeds were used to redeem outstanding preferred stock, repay debt, and to
make distributions to certain stockholders in accordance with the Company's
recapitalization agreement. The shares outstanding of various classes of common
stock of the Company were also converted into shares of Common Stock made
available through the Offering, the only class of common stock which remains
authorized subsequent to the Offering. See Note 3 to the financial statements at
Item I, Part 1 above for further details.

Item 3.  Defaults Upon Senior Securities.
         ------------------------------- 

Not applicable.

Item 4   Submission of Matters to a Vote of Security Holders.
         --------------------------------------------------- 

     On February 5, 1999, the stockholders of the Company representing a 
majority of the shares of the Company's common stock approved the following 
matters by written consent in lieu of a special meeting; (i) adoption of the 
Company's Amended and Restated Certificate of Incorporation, (ii) the adoption 
of the Pinnacle Holdings Inc. Stock Incentive Plan, and (iii) adoption of 
indemnification agreements with its officers and directors.

     On February 16, 1999, at their annual meeting, the stockholders of the 
Company unanimously approved the re-election of the seven existing members of 
the Company's Board of Directors.

Item 5.  Other Information.
         ----------------- 

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 no reports on form 8-K during the
three month period ended March 31, 1999.

                                      14
<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 May 17, 1999                      By: /s/ Steven R. Day
                                           -----------------
                                           Steven R. Day
                                           Chief Financial Officer
                                           Vice President
                  
                                       Duly Authorized Officer and Principal 
                                       Financial Officer.

                                       15
<PAGE>
 
                                 EXHIBIT INDEX

Designation     Description
-----------     -----------

3.1.1  Amended and Restated Certificate of Incorporation.*

3.1.2  Bylaws of the Company.**

27.1   Financial Data Schedule

__________________

*    Previously filed on February 17, 1999 with Amendment No. 6 to the Company's
     Registration Statement on Form S-11 (S.E.C. File No. 333-59297).

**   Previously filed on April 1, 1998 with the Company's Registration Statement
     on Form S-4 (S.E.C. File No. 333-49147).

                                      16