<PAGE>   1

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




                                   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 SEPTEMBER 30, 2000


                                       OR


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


         FOR THE TRANSITION PERIOD FROM ____________ TO ______________


                         COMMISSION FILE NUMBER 0-24773
                                                -------

                             PINNACLE HOLDINGS INC.


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

             301 NORTH CATTLEMEN ROAD, SARASOTA, FLORIDA 34232-6427

                           TELEPHONE: (941) 364-8886


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
















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

<PAGE>   2

PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                                           PAGE
                                                                                           ----
<S>           <C>                                                                          <C>

Item 1.       Financial Statements
              Unaudited Condensed Consolidated Balance Sheets as of
              December 31, 1999 and September 30, 2000                                        1
              Unaudited Condensed Consolidated Statements of Operations for the
                 nine months ended September 30, 1999 and 2000                                2
              Unaudited Condensed Consolidated Statements of Operations for
                 the three months ended September 30, 1999 and 2000                           3
              Unaudited Condensed Consolidated Statement of Changes in
                Stockholders' Equity for the nine months ended
                September 30, 2000                                                            4
              Unaudited Condensed Consolidated Statements of Cash Flows
                for the nine months ended September 30, 1999 and 2000                         5
              Notes to Unaudited Condensed Consolidated Financial Statements               6-10

Item 2.       Management's Discussion and Analysis of Financial Condition and
                Results of Operations                                                     11-21


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings                                                              22

Item 2        Not Applicable

Item 3        Not Applicable

Item 4        Submission of Matters to a Vote of Security Holders                            22

Item 5        Other Information                                                           22-24

Item 6.       Exhibits and Reports on Form 8-K                                               24


SIGNATURES                                                                                   25

EXHIBIT INDEX                                                                                26
</TABLE>


<PAGE>   3

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements:


                             PINNACLE HOLDINGS INC.
                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                           December 31,           September 30,
                                                               1999                    2000
                                                         ---------------         ---------------
                                                                                   (Unaudited)
<S>                                                      <C>                     <C>

Assets
Current assets:
Cash and cash equivalents                                $    94,862,918         $    70,170,748
Accounts receivable, net                                      12,076,689              20,182,157
Prepaid expenses and other current assets                      5,235,972              10,142,351
                                                         ---------------         ---------------
   Total current assets                                      112,175,579             100,495,256

Fixed assets, net                                            955,689,136           1,298,139,083
Leasehold interests, net                                      74,037,558              72,313,300
Deferred debt issue costs, net                                14,299,519              18,732,165
Other assets                                                   3,232,248               6,499,447
                                                         ---------------         ---------------
                                                         $ 1,159,434,040         $ 1,496,179,251
                                                         ===============         ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                         $     7,297,498         $     9,705,252
Accrued expenses                                              53,853,059              28,664,716
Deferred revenue                                               3,910,551               7,249,279
Current portion of long-term debt                              6,705,578               9,678,738
                                                         ---------------         ---------------
   Total current liabilities                                  71,766,686              55,297,985

Long-term debt                                               712,659,042             861,616,231
Other liabilities                                                510,090                 876,090
                                                         ---------------         ---------------
                                                             784,935,818             917,790,306

Minority interest in subsidiary                                       --                 439,703

Commitments and contingencies                                         --                      --

Stockholders' equity:
  Common Stock , $.001 par value,
     150,000,000 shares authorized; 41,094,471
     and 48,430,593 shares issued and outstanding
     at December 31, 1999 and September 30, 2000,
     respectively                                                 41,094                  48,431
  Additional paid-in capital                                 489,090,451             773,244,966
  Foreign currency translation                                  (418,488)                228,977
  Accumulated deficit                                       (114,214,835)           (195,573,132)
                                                         ---------------         ---------------
                                                             374,498,222             577,949,242
                                                         ---------------         ---------------
                                                         $ 1,159,434,040         $ 1,496,179,251
                                                         ===============         ===============
</TABLE>




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



                                       1
<PAGE>   4

                             PINNACLE HOLDINGS INC.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                            Nine Months Ended September 30,
                                                                              1999                   2000
                                                                          -------------         -------------
                                                                           (Unaudited)           (Unaudited)
<S>                                                                       <C>                   <C>

Revenues                                                                  $  48,816,143         $ 129,595,725
Direct operating expenses, excluding depreciation and amortization           11,691,067            46,255,673
                                                                          -------------         -------------
   Gross margin, excluding depreciation and amortization                     37,125,076            83,340,052
                                                                          -------------         -------------
Other expenses:
  General and administrative                                                  2,822,760             8,043,809
  Corporate development                                                       5,731,059            21,767,449
  State franchise, excise and minimum taxes                                     699,836               843,298
  Depreciation and amortization                                              35,118,413            86,790,825
                                                                          -------------         -------------
                                                                             44,372,068           117,445,381
                                                                          -------------         -------------
Loss from operations                                                         (7,246,992)          (34,105,329)
Interest expense                                                             14,439,470            27,102,582
Amortization of original issue discount and debt issuance costs              17,334,738            20,210,683
Minority interest in subsidiary                                                       0               (60,297)
                                                                          -------------         -------------
Net loss                                                                  $(39,021,200)         $ (81,358,297)
                                                                          =============         =============
Payable-in-kind preferred dividends and accretion                             2,930,338                    --
                                                                          -------------         -------------
Net loss attributable to common shareholders                              $(41,951,538)         $ (81,358,297)
                                                                          =============         =============
Basic and diluted loss per common share                                   $       (1.41)        $       (1.70)
                                                                          =============         =============
Weighted average number of common shares outstanding                         29,721,466            47,746,133
                                                                          =============         =============
</TABLE>


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



                                       2
<PAGE>   5

                             PINNACLE HOLDINGS INC.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                                           Three Months Ended September 30,
                                                                              1999                   2000
                                                                          -------------         -------------
                                                                           (Unaudited)           (Unaudited)
<S>                                                                       <C>                   <C>

Revenues                                                                  $  23,059,176         $  45,313,138
Direct operating expenses, excluding depreciation and amortization            6,863,660            16,958,003
                                                                          -------------         -------------
   Gross margin, excluding depreciation and amortization                     16,195,516            28,355,135
Other expenses:
  General and administrative                                                  1,210,505             4,030,682
  Corporate development                                                       2,459,995            13,619,585
  State franchise, excise and minimum taxes                                     295,502               100,944
  Depreciation and amortization                                              15,469,742            31,875,795
                                                                          -------------         -------------
                                                                             19,435,744            49,627,006
                                                                          -------------         -------------
Loss from operations                                                         (3,240,228)          (21,271,871)

Interest expense                                                              6,199,411            10,791,905
Amortization of original issue discount and debt issuance costs               6,107,045             6,961,131
Minority interest in subsidiary                                                       0               (60,297)
                                                                          -------------         -------------

Net loss                                                                  $ (15,546,684)        $ (38,964,610)
                                                                          =============         =============
Basic and diluted loss per common share                                   $       (0.40)        $       (0.80)
                                                                          =============         =============
Weighted average number of common shares outstanding                         38,842,567            48,408,148
                                                                          =============         =============
</TABLE>



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



                                       3
<PAGE>   6

                             PINNACLE HOLDINGS INC.

 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                    COMPREHENSIVE         COMMON STOCK        ADDITIONAL
                                       INCOME        ---------------------      PAID-IN        ACCUMULATED
                                       (LOSS)          SHARES       AMOUNT      CAPITAL          DEFICIT           EQUITY
                                    ------------     ----------    -------    ------------    -------------     -------------
<S>                                 <C>              <C>           <C>        <C>             <C>               <C>

Balance at December 31, 1999 ...                     41,094,471    $41,094    $489,090,451    $(114,633,323)    $ 374,498,222

Unaudited:

Issuance of common stock, net of
    issuance costs .............                      7,336,122      7,337     284,154,515                        284,161,852

Foreign currency translation
    gain (loss) ................    $    647,465                                                    647,465           647,465

Net loss .......................     (81,358,297)                                               (81,358,297)      (81,358,297)
                                    ------------     ----------    -------    ------------    -------------     -------------

Balance at September 30, 2000 ..    $(80,710,832)    48,430,593    $48,431    $773,244,966    $(195,344,155)    $ 577,949,242
                                    ============     ==========    =======    ============    =============     =============

</TABLE>



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



                                       4
<PAGE>   7

                             PINNACLE HOLDINGS INC.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                            Nine Months Ended September 30,
                                                                              1999                   2000
                                                                          -------------         -------------
                                                                           (Unaudited)           (Unaudited)
<S>                                                                       <C>                   <C>

Cash flows from operating activities:
 Net loss                                                                 $ (39,021,200)        $ (81,358,297)
                                                                          -------------         -------------
    Adjustments to reconcile net loss to net cash provided by operating
      activities:
        Depreciation and amortization                                        35,118,413            86,790,825
        Amortization of original issue discount and debt issuance costs      17,334,738            20,210,682
        Provision for doubtful accounts                                         568,000               432,272
        Impairment of capitalized acquisition and construction costs                 --             8,684,012
        Minority share of net loss of subsidiary                                     --               (60,297)
      (Increase) decrease in:
          Accounts receivable, gross                                         (3,077,230)           (7,961,227)
          Prepaid expenses and other current assets                            (758,769)           (5,934,690)
          Other assets                                                       (1,096,531)           (3,267,198)
        Increase (decrease) in:
          Accounts payable                                                     (430,522)            2,407,754
          Accrued expenses                                                    4,041,112           (24,160,032)
          Deferred revenue                                                      296,130             3,338,728
          Other liabilities                                                     233,993               366,000
                                                                          -------------         -------------
              Total adjustments                                              52,229,334            80,846,829
                                                                          -------------         -------------
Net cash provided by and used in operating activities                        13,208,134              (511,468)
                                                                          -------------         -------------

Cash flows from investing activities:
         Payments made in connection with acquisitions:
           Fixed assets                                                    (400,214,749)         (382,671,454)
           Leasehold interests                                              (83,387,340)          (20,106,537)
           Net current liabilities acquired                                  36,135,378               176,573
         Capital expenditures:
           Fixed assets                                                     (29,540,167)          (23,871,994)
                                                                          -------------         -------------
Net cash used in investing activities                                      (477,006,878)         (426,473,412)
                                                                          -------------         -------------
Cash flows from financing activities:
         Borrowings under long-term debt, net                               556,080,721           319,501,206
         Repayment of long-term debt                                       (317,963,299)         (202,037,597)
         Proceeds from issuance of common stock, net                        501,237,846           284,161,853
         Liquidation of PIK preferred stock and warrants                    (93,741,617)                   --
         Distribution of contributed capital and payment of
          accretion on various classes of common stock                      (43,747,734)                   --
         Minority interest in subsidiary                                             --               500,000
                                                                          -------------         -------------
Net cash provided by financing activities                                   601,865,917           402,125,462
Effect of exchange rate changes on cash                                              --               167,248
                                                                          -------------         -------------
Net increase (decrease) in cash and cash equivalents                        138,067,173           (24,692,170)
Cash and cash equivalents, beginning of period                               13,801,190            94,862,918
                                                                          -------------         -------------
Cash and cash equivalents, end of period                                  $ 151,868,363         $  70,170,748
                                                                          =============         =============
Supplemental disclosure of cash flows:
        Cash paid for interest                                            $  16,498,833         $  24,157,013
                                                                          =============         =============
Non-Cash Transactions:
        Seller debt issued in connection with acquisitions                $   8,998,250         $   9,929,355
        Payable-in-kind preferred dividends and accretion                 $   2,930,338         $          --
        Stock issued for acquisitions                                     $   8,804,163         $          --
</TABLE>



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



                                       5
<PAGE>   8
                             PINNACLE HOLDINGS INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



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

         The preparation of financial statements in conformity with Generally
Accepted Accounting Principles ("GAAP") requires management to make estimates
and use assumptions that affect the reported amounts of assets and liabilities
and the disclosure for contingent assets and liabilities at the date of the
financial statements as well as the reported amounts of revenues and expenses
during the reporting period. Actual results may vary from estimates used.

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


2.       ACQUISITIONS

         We actively acquire communications sites and related real estate
assets.

         On August 31, 1999, we acquired 1,858 communications sites and related
assets from Motorola, Inc. ("Motorola") for $254 million, comprised of $245
million in cash and $9 million of our common stock, plus fees and expenses of
approximately $17 million (the "Motorola Antenna Site Acquisition"). This
acquisition results in Pinnacle having sites in all 50 states and nine Canadian
Provinces.

         Included in the total purchase price recorded for the Motorola
acquisition were accrued costs related to completion of the transaction of
approximately $31.5 million. These accrued deal costs were comprised primarily
of employee severance and relocation costs ($1.7 million), contract and title
work related to communications sites, due diligence and closing costs ($29.8
million). As of September 30, 2000, approximately $28.5 million of these
accrued costs had been paid by us.

         The accruals for employee severance and relocation costs were
established due to a contractual



                                       6
<PAGE>   9
obligation made as part of the Motorola acquisition. Under the agreement,
Pinnacle was required to offer employment to some 68 Motorola employees. Each
such employee who accepted employment with Pinnacle who was terminated without
cause by Pinnacle during the following two years would be entitled to severance
pay through the balance of the two year period. Any former Motorola employee
who accepted employment with Pinnacle and who Pinnacle subsequently desired to
have move to another part of the country or Canada but who did not wish to move
to another area would also be entitled to receive the same severance pay.

         During the past year we have only had to make severance payments to
four former Motorola employees totaling $0.5 million. Although the term of our
obligation related to severance payments under the Motorola agreement runs
through August 31, 2001, we do not anticipate significant further activity of
this kind. The accrual for severance and relocation costs has therefore been
reduced by $1.2 million to reflect this lower level of experience.
Additionally, we have refined our estimates of due diligence efforts to be
completed as of August 31, 2000, and accordingly have increased the accrual for
such items included in our total purchase price by $0.6 million.

         As the net result of adjusting these two estimates made in our
preliminary purchase accounting for the Motorola transaction, we have made an
adjustment to reduce the total purchase price recorded as fixed assets
associated with this acquisition by $0.6 million as of August 31, 1999. The
effects of this reduction of recorded purchase price on depreciation and
amortization expense for the three month period ended September 30, 1999, the
year ended December 31, 1999, each of the three month periods ended March 31,
2000 and June 30, 2000, and the six month period ended June 30, 2000 were
$3,333, $13,333, $9,999, and $19,999, respectively. The total effect of these
adjustments, or $33,330, has been reflected in our depreciation and
amortization expenses for the three month period ended September 30, 2000.

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

         Also in conjunction with the Motorola Antenna Site Acquisition,
Motorola performed certain services on our behalf under a Transition Services
Agreement, receipt of cash payments from tenants for a one month period and
payment of vendor invoices for a two month period subsequent to closing.
Accordingly, there is an amount of cash settlement, net of the fees charged by
Motorola for this service, due us of $4.3 million recorded as prepaid expenses
and other current assets as of September 30, 2000. These amounts have been
recorded based on information provided to us by Motorola in connection with
their receipt of cash and payment of vendors.

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

         During the nine months ended September 30, 2000, we completed 194
acquisitions of 1,444 communications sites and related assets, each of which
was individually insignificant to Pinnacle, from various sellers for an
aggregate purchase price of $412.7 million consisting of $402.7 million in cash
and $10 million of notes payable to the former communications site owners.

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



                                       7
<PAGE>   10

<TABLE>
<CAPTION>

                                                                       Pro Forma
                                                             ------------------------------
                                                                     (in thousands)
                                                             September 30,    September 30,
                                                                1999              2000
                                                              --------           -------
                                                             (unaudited)       (unaudited)
<S>                                                          <C>               <C>

Revenues                                                     $ 134,825         $ 140,085
Gross margin, excluding depreciation and amortization           87,882            91,879
Net loss                                                      (105,294)          (92,975)
Net loss attributable to common stockholders                  (108,224)          (92,975)
Basic and diluted loss per common share                          (3.64)            (1.95)

</TABLE>

         Included in corporate development expense for the three month period
ended September 30, 2000 are non-recurring charges of $8.7 million. These
non-recurring charges are comprised of non-cash charges related to the
impairment of capitalized costs on pending acquisitions ($7.0 million) and
communications site construction project ($1.7 million) tower assets which the
company has chosen not to pursue at this time. Non-recurring charges associated
with an equity offering discontinued during the quarter ($1.3 million) and
costs incurred as a result of a non-public informal inquiry by the Securities
and Exchange Commission ("the SEC") ($0.3 million) are included in general and
administrative expenses for the three month period ended September 30, 2000
(see Note 4).

3.       LONG-TERM DEBT

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

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

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

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

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



                                       8
<PAGE>   11

4.       PUBLIC OFFERINGS AND STOCKHOLDERS' EQUITY

         Initial Public Offering

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

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

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

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

         Secondary Offerings

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

         On January 24, 2000, we completed another secondary offering of common
stock (the "January Offering") whereby we sold 7,200,000 shares of our common
stock. The price per share was $41, resulting in net proceeds from the January
Offering of approximately $283 million. Certain stockholders of Pinnacle also
sold 3,150,000 shares of common stock, the net proceeds of which are not
available to us. The proceeds from the January Offering were invested initially
in short-term liquid securities and will be used to reduce




                                       9
<PAGE>   12

our debt or be used with borrowings made under the Senior Credit Facility to
fund acquisitions, the construction of new communications sites and
improvements to existing communications sites (approximately $264 million used
through September 30, 2000). The total shares sold included a concurrent
exercise of the underwriters' over-allotment option whereby 1,350,000 shares
were sold (including 450,000 shares sold by certain of our stockholders).

         Other Issuances of Stock

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

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

         Unsuccessful Offering Costs and SEC Investigation

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

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

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

5.       COMMITMENTS

         Since September 30, 2000, we have completed 20 acquisitions of 14
communications sites and 10 previously leased land sites under owned towers,
for an aggregate purchase price of $13.0 million. Included in the acquisitions
was 1 carrier neutral colocation facility located in San Antonio, Texas we
acquired for $8.7 million pursuant to an agreement we entered into as of May
22, 2000. In addition, as of and subsequent to September 30, 2000, we entered
into several agreements or letters of intent with various third parties to
purchase 71 communications sites that we currently believe are probable to
close, reflecting an aggregate commitment to pay approximately $22.8 million.
All of these probable acquisitions are subject to conditions of a closing and
consummation of a transaction pending completion of due diligence efforts and
any further negotiation which may result therefrom.



                                      10
<PAGE>   13

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

         The following discussion of the consolidated financial condition and
results of operations of Pinnacle should be read in conjunction with the
consolidated financial statements and related notes thereto. This discussion
contains forward-looking statements within the meaning of the federal
securities laws. The words "believe," "estimate," "expect," "intend,"
"anticipate," "plan," and similar expressions and variations of such
expressions identify certain of such forward-looking statements that speak only
as of the dates on which they were made. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual events or results may
differ materially from those discussed in the forward-looking statements as a
result of various factors, including, without limitation, the forward-looking
statements and associated considerations set forth in Pinnacle's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999 and the risk factors
section of our Amendment No. 1 to Registration Statement on Form S-3 filed with
the SEC on September 19, 2000.


OVERVIEW

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

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

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

         Colocation facilities are buildings that provide telecommunications
service providers, such as incumbent local exchange carriers ("ILECs"),
competitive local exchange carriers ("CLECs"), fiber optic network carriers,
Internet backbone providers, application service providers ("ASPs"), and
Internet data centers ("IDCs"), square footage space to house their equipment
(i.e. switches, servers, routers) and access to an interexchange carrier
(typically known as long distance carriers). Independently owned carrier
neutral colocation facilities provide interconnectivity to multiple
communications carriers versus carrier-owned facilities that offer
interconnectivity to just their own network.

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

         The table below outlines the number of acquisitions we have completed
and the corresponding wireless communication sites and carrier neutral
colocation facilities as of September 30, 2000. The table




                                      11
<PAGE>   14
includes a reclassification of sites to reflect a new category of non-revenue
producing sites and to classify sites based on findings pursuant to due
diligence efforts on closed sites previously reported:

<TABLE>
<CAPTION>
                                   Revenue Producing Sites
                  --------------------------------------------------------- Non-Revenue       Acquisitions
                  Owned    Managed   Leased   Built   Co-location   Subtotal   Sites    Total   Completed
                  -----    -------   ------   -----   -----------   --------   -----    -----   ---------
<S>               <C>      <C>       <C>      <C>     <C>           <C>        <C>      <C>     <C>

1995                29        --       --        4         -            33        --       33      13
1996               119        --       --        4         -           123        --      123      49
1997               134        --       --       22         -           156        --      156      72
1998               517        --       --       47         -           564        --      564      82
1999               858       584      858       23         -         2,323     1,569    3,892     130
YTD 9/30/2000      728       697       10        5         4         1,444        --    1,444     194
                 -----     -----      ---      ---        ---        -----     -----    -----     ---
Subtotal         2,385     1,281      868      105         4         4,643        --    6,212     540
Q3 reclass        (117)     (632)     111       --         -          (638)      434     (204)
                 -----     -----      ---      ---        ---        -----     -----    -----
YTD 9/30/2000    2,268       649      979      105         4         4,005     2,003    6,008

</TABLE>

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

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

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



                                      12
<PAGE>   15

                                            Owned              All
                                            Sites             Sites
                                            -----             -----
         Gross new revenues                 16.5%             15.2%
         Net of cancellations                9.5%              6.5%


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

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

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

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

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

         In addition to the tenant lease churn we have discussed above, we are
also experiencing a level of pressure on our revenue base from competitors for
the rooftop management business. As these contracts come up for renewal with
the property owners, we are experiencing instances where certain other
companies who compete with us for the right to manage these rooftops are
offering to manage these sites for a significantly lower gross margin after
rent expense only, frequently in the 15% range, than we feel it is appropriate
for us to compete with. Our strategy is to own and manage sites where we can
make substantial operating margins, as indicated by our results of operations,
and we do not desire to dilute our operating margins for the sake of competing
against companies aggressively pricing this service to rooftop owners.
Therefore, we have made decisions to not renew a number of these contracts over
the past year. As a result, our revenue base has been impacted as of September
30, 2000 as compared to September 30, 1999 by approximately $4.6 million on an
annualized run rate basis by these decisions. The historical gross




                                      13
<PAGE>   16
margins before depreciation and amortization on these sites has typically run
in the 50% range. To compete with these competitors offering this service at a
15% gross margin after rent expense only of 15% is clearly not consistent with
both our operating and growth strategies. As of September 30, 2000, we operated
357 rooftop sites under management rights agreements, which represented 8.9% of
our total portfolio of revenue producing sites at that date. Our annualized run
rate revenues from these sites as of September 30, 2000 was $7.2 million, or
3.9% of total annualized run rate revenues from all sites as of September 30,
2000. Run rate gross margins, estimated based on historical results for the
nine months ended September 30, 2000, on these sites average 51.1%, so these
sites represent 3.1% of our total run rate gross margins as of September 30,
2000. In light of these recent competitive pressures, it is difficult to
ascertain at this time the effects, if any, this competition will have on our
revenues from rooftops we manage under management rights agreements and
resulting gross margins before depreciation and amortization in the future.

         We have generated net losses since inception and at September 30,
2000, had an accumulated deficit totaling approximately $195.6 million. Due to
our plans to continue to grow the business predominantly through acquisitions,
it is expected that charges relating to depreciation of existing and future
assets and interest expense associated with related debt balances will be
substantial. Also, corporate development expenses will remain as a direct
variable of acquisition growth. Accordingly, we expect to continue to generate
losses for the foreseeable future.

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

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

         Following the closing of the Motorola Antenna Site Acquisition we
transferred a portion of the rooftop communication sites we acquired from
Motorola to PT III, a corporation in which we own substantially all of the
equity interests, in exchange for $9.8 million of convertible preferred stock
and a $39.2 million Convertible Promissory note, in order to minimize the risk
that the ownership of or income from such assets might negatively affect our
qualification as a REIT. We also agreed to make our personnel, facilities and
general and administrative overhead available to PT III, the cost thereof to be
reimbursed to us by PT III. During the quarterly period ended March 31, 2000,
we purchased approximately $2.4 million of additional convertible preferred
stock of PT III and approximately $9.5 of additional convertible promissory
notes. PT III used such funds to acquire all of the stock of a corporation that
owns and manages communications sites, and to acquire certain assets used in
communications site management and related activities.

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

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

RESULTS OF OPERATIONS

The following table sets forth, for the nine month periods indicated, each
statement of operations item as a percentage of revenue. The results of
operations are not necessarily indicative of results for any future period. The
following data should be read in conjunction with our consolidated financial
statements and notes thereto included elsewhere herein.
                                       14

<PAGE>   17

<TABLE>
<CAPTION>

                                                     For the               For the
                                                nine months ended:   three months ended:
                                               --------------------  --------------------
                                               September  September  September  September
                                                   30,        30,        30,        30,
                                                  1999       2000       1999       2000
                                                 -----      -----      -----      -----
<S>                                            <C>        <C>        <C>        <C>

Statement of operations data:
  Revenues                                       100.0%     100.0%     100.0%     100.0%
  Direct operating expenses, excluding
    Depreciation and amortization                 23.9       35.7       29.8       37.4
                                                 -----      -----      -----      -----
  Gross margin, excluding
    Depreciation and amortization                 76.1       64.3       70.2       62.6
  Other expenses:
    General and administrative                     5.8        6.2        5.2        8.9
    Corporate development                         11.7       16.8       10.7       30.1
    State franchise, excise and minimum taxes      1.4        0.7        1.3         .2
    Depreciation and amortization                 72.0       67.0       67.1       70.3
                                                 -----      -----      -----      -----
  Loss from operations                           (14.8)     (26.4)     (14.1)     (46.9)
  Interest expense                                29.6       20.9       26.8       23.8
  Amortization of original issue discount and
    debt issuance costs                           35.5       15.6       26.5       15.4
    Minority interest in subsidiary                 --         --         --         .1
                                                 -----      -----      -----      -----
  Net loss                                       (79.9)     (62.9)     (67.4)     (86.2)
                                                 =====      =====      =====      =====
</TABLE>

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

         Revenues increased by $80.8 million, or 165.5%, to $129.6 million for
the nine month period ended September 30, 2000 from $48.8 million for the nine
month period ended September 30, 1999. This additional revenue is mainly
attributable to the acquisition and construction of 1,614 wireless
communication sites since September 30, 1999 - 170 sites during the second
quarter of 1999 and 1,444 sites during the first nine months of 2000. Also, the
1999 results included only one month of revenue from the Motorola Antenna Site
Acquisition versus three months in the nine months ending September 30, 2000. A
portion of the revenue increase is related to "same-site" organic growth.

         Direct operating expenses, excluding depreciation and amortization,
increased by $34.6 million or 295.6% to $46.3 million for the nine month period
ended September 30, 2000 from $11.7 million for the nine month period ended
September 30, 1999. This increase is consistent with the acquisition and
construction of the 1,614 sites discussed above. Direct operating expenses as a
percentage of revenue increased to 35.7% for the nine month period ended
September 30, 2000 from 23.9% for the nine month period ended September 30,
1999. The percentage increase is primarily a result of the change in mix of
sites. Both managed and leased sites produce lower margins than owned sites
because of their variable rent expense. Notwithstanding, these sites are
financially and strategically consistent with our objective of providing
wireless service providers a large selection of antenna site locations.

         General and administrative expenses increased 185.0% for the nine
month period ended September 30, 2000 to $8.0 million from $2.8 million for the
nine month period ended September 30, 1999. The increase in expenses is from
additional staffing required for the increased work volume, increased levels of
advertising and marketing expenditures, costs associated with growth, as well
as significant non-recurring charges in the third quarter totaling $1.6
million. As a percentage of revenue, general and administrative expenses
increased to 6.2% of revenue for the nine month period ended September 30, 2000
from 5.8% for the nine month period ended September 30, 1999. This increase is
the result of non-recurring charges in the third quarter totaling $1.6 million.
These non-recurring charges are associated with an equity offering discontinued
during the quarter ($1.3 million) and costs incurred as a result of a
non-public informal inquiry by the SEC ($0.3 million).

         Corporate development expenses increased by $16.0 million or 279.8% to
$21.7 million for the nine month period ended September 30, 2000 from $5.7
million for the nine month period ended September 30, 1999. Corporate
development expenses increased as a percentage of revenue to 16.8% for the nine
month period ended September 30, 2000 compared to 11.7% for the nine month
period ended September 30, 1999. The increase in expense is related to the
overall growth in the business and related activity during this same period as
well as significant, nonrecurring charges in the third quarter totaling $8.7
million. These non-recurring charges are comprised of non-cash charges related
to the impairment of capitalized costs on pending acquisitions ($7.0 million)
and communications site construction project ($1.7 million) tower assets which
the company has chosen not to pursue at this time.





                                      15
<PAGE>   18
         State franchise, excise and minimum taxes, which represent taxes
assessed in connection with our operations in various state jurisdictions,
increased to $0.8 million for the nine month period ended September 30, 2000
from $0.7 million for the nine month period ended September 30, 1999. Such
taxes are calculated using various methods such as a portion of our property
within a given state, our capital structure or based upon a minimum tax in lieu
of income taxes. The increase in expense is related to the overall growth in
the business and related activity during this same period.

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

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

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

         Revenues increased by $22.3 million, or 96.5%, to $45.3 million for
the three month period ended September 30, 2000 from $23.1 million for the
three month period ended September 30, 1999. This additional revenue is mainly
attributable to the acquisition and construction of 1,614 wireless
communication sites since September 30, 1999 - 170 sites during the fourth
quarter of 1999 and 1,444 sites during the first nine months of 2000. Also, the
1999 results included only one month of revenue from the Motorola Antenna Site
Acquisition versus three months in the three months ending September 30, 2000.
A portion of the revenue increase is related to same-site organic growth.

         Direct operating expenses, excluding depreciation and amortization,
increased by $10.1 million or 147.1% to $17.0 million for the three month
period ended September 30, 2000 from $6.9 million for the three month period
ended September 30, 1999. This increase is consistent with the acquisition and
construction of the 1,614 sites discussed above. Direct operating expenses as a
percentage of revenue increased to 37.4% for the three-month period ended
September 30, 2000 from 29.8% for the three month period ended September 30,
1999. The percentage increase is primarily a result of the change in mix of
sites. Both managed and leased sites produce lower margins than owned sites
because of their variable rent expense. Notwithstanding, these sites are
financially and strategically consistent with our objective of providing
wireless service providers a large selection of antenna site locations.

         General and administrative expenses increased 233.0% for the three
month period ended September 30, 2000 to $4.0 million from $1.2 million for the
three month period ended September 30, 1999. The increase in expenses is from
additional staffing required for the increased work volume, increased levels of
advertising and marketing expenditures, costs associated with growth, as well
as significant non-recurring charges in the third quarter totaling $1.6
million. As a percentage of revenue, general and administrative expenses
increased to 8.9% of revenue for the three month period ended September 30,
2000 from 5.2% for the three month period ended September 30, 1999. This
increase is the result of non-recurring charges in the third quarter totaling
$1.6 million. These non-recurring charges are associated with an equity
offering discontinued during the quarter ($1.3 million) and costs incurred as a
result of a non-public informal inquiry by the SEC ($0.3 million).



                                      16
<PAGE>   19
         Corporate development expenses increased by $11.1 million or 453.6% to
$13.6 million for the three month period ended September 30, 2000 from $2.5
million for the three month period ended September 30, 1999. Corporate
development expenses increased as a percentage of revenue to 30.1% for the
three month period ended September 30, 2000 compared to 10.7% for the three
month period ended September 30, 1999. The increase in expense is related to
the overall growth in the business and related activity during this same
period, as well as significant, nonrecurring charges in the third quarter
totaling $8.7 million. These non-recurring charges are comprised of non-cash
charges related to the impairment of capitalized costs on pending acquisitions
($7.0 million) and communications site construction project ($1.7 million)
tower assets which the company has chosen not to pursue at this time.

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

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

         Amortization of original issue discount and debt issuance cost
increased $0.9 million, or 14.0%, to $7.0 million for the three month period
ended September 30, 2000 from $6.1 million for the three month period ended
September 30, 1999. The increase resulted from increased amortization of
original issue discount of $0.6 million because of the semi-annual compounding
of the amortization under the indenture agreement, and increased amortization
of debt issuance costs of $0.3 million, attributable to the issuance costs for
our 5.5% Convertible Subordinated Notes Due 2007 issued March 14, 2000.


LIQUIDITY AND CAPITAL RESOURCES

         Our liquidity needs arise from our acquisition-related activities,
debt service obligations, working capital needs and capital expenditures. We
have historically funded our liquidity needs with proceeds from equity
contributions, public equity offerings, bank borrowings, debt offerings, and
cash flow from operations. We had net working capital of $45.2 million and
$40.4 million as of September 30, 2000 and December 31, 1999, respectively. Our
ratio of total debt to stockholders' equity was 1.5 to 1.0 at September 30,
2000 and 1.9 to 1.0 at December 31, 1999.

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



                                      17
<PAGE>   20

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

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

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

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

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

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

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



                                      18
<PAGE>   21

         Capital investments, including acquisitions, for the nine month period
ended September 30, 2000 were $427.0 million, compared to $477.00 million in
the comparable 1999 period. Depending on availability of additional capital, we
expect that we may make substantial additional capital investments for
acquisitions, construction and upgrading of additional towers in 2000. We
expect to incur total capital expenditures of $22 million to $24 million during
the three months ended December 31, 2000. These planned capital expenditures
include communications site acquisition costs of $12 million to $14 million,
relating to the closing of previously announced acquisitions, and
communications site construction and improvements costs of approximately $10
million. To the extent we commit to complete additional significant
acquisitions beyond those we have identified and currently believe are probable
that we will complete, that amount may increase materially.

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

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

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


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

<TABLE>
<CAPTION>

                                                                        EXPECTED MATURITY DATE
                                                                        ----------------------
                                             2000      2001            2002          2003          2004          THEREAFTER
                                             ----   -----------    -----------    -----------    -----------    ------------
<S>                                          <C>    <C>            <C>             <C>           <C>            <C>

Liabilities
Long-term Debt
Fixed Rate (8.03%) .......................    --             --             --             --             --    $525,000,000
Variable Rate (Weighted Average Interest
  Rate of 8.39%)..........................    --    $13,600,000    $19,850,000    $23,600,000    $77,138,953    $249,099,999
</TABLE>


         Our primary market risk exposure relates to the following:

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

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

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

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

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

         Inflation

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


                                      19
<PAGE>   22

PART II.

ITEM 1.  LEGAL PROCEEDINGS.

         As previously disclosed by Pinnacle in a SEC filing and a press
release of August 7, 2000, the Staff of the SEC requested information from
Pinnacle and its independent public accountants as part of a nonpublic informal
inquiry. Pinnacle fully cooperated with the Staff's request. As disclosed by
Pinnacle in a press release of October 12, 2000, Pinnacle learned that the SEC
had entered an order of investigation. Initially the focus of the Staff's
efforts was on certain accounting issues associated with the Motorola Antenna
Site Acquisition. The Staff later expanded its inquiry to include a review of
the independence of our independent accountants in light of the scope of
non-audit services provided by them to us. Pinnacle cannot be certain that the
Staff's focus will remain on these issues.

         Since the Staff first contacted Pinnacle in late July on these
matters, Pinnacle has fully cooperated with the Staff and believes that its
independent accountants have done likewise. Pinnacle continues to cooperate
with the Staff and believes that the Staff did not obtain its order of
investigation as a result of any lack of cooperation by the Pinnacle or its
independent accountants, or because the Staff was expanding its focus beyond
matters previously disclosed.

         Pinnacle believes that its accounting practices and financial
statements are in accordance with Generally Accepted Accounting Principles.
Since Pinnacle originally disclosed the SEC's inquiry, its independent
accountants have reaffirmed their opinion on Pinnacle's financial statements
and their independence. If the Staff determines that Pinnacle's independent
accountants were not independent, Pinnacle might be required to engage a
different independent accountant prospectively, and it might be required to
seek a re-audit of its previous years' financial statements. Pinnacle cannot
predict the outcome of the Staff's efforts and what effect, if any, it might
have on it.

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

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION.

     Pinnacle Towers III Inc. and Pinnacle Towers IV Inc.

         We are taxed as a Real Estate Investment Trust ("REIT") for federal
income tax purposes. The federal tax laws and regulations relating to REITs
limit our ability to own and derive income from certain types of assets. In
order to minimize the risk that our ownership of or income from certain assets
might negatively affect our qualification as a REIT, we previously transferred
certain potentially non-REIT qualifying assets to PT III, a corporation in
which Pinnacle owns substantially all of the equity interests in the form of
nonvoting, convertible preferred stock, as well as approximately 9% of the
voting common stock. Certain officers of Pinnacle own the remaining outstanding
shares of voting common stock of PT III. During the first quarter ended March
31, 2000, Pinnacle purchased approximately $2.4 million of additional
convertible preferred stock of PT III and approximately $9.5 million of
additional convertible promissory notes. PT III used such funds to acquire all
of the stock of a corporation that owns and manages communications sites, which
may not be REIT qualifying assets or which may generate income from assets that
are non-REIT qualifying, and to acquire certain assets used in communication
tower consulting and management activities, which assets and the income
generated thereby may not be REIT qualifying.

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

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

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

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

         On July 18, 2000, the Internal Revenue Service issued a private letter
ruling to PT III confirming that the ownership of, and receipt of income from,
its rooftop sites and related equipment will be considered qualifying assets
and income for REIT purposes. However, PT III did not elect to be taxed as a
REIT for the short period year of 1999. PT III has determined that it will not
be able to make a REIT election for the 2000 calendar year because of non-REIT
qualifying income which it has recognized in 2000. The level of non-REIT
qualifying income causes PT III to fail to meet at least one of the REIT income
tests for 2000. PT III currently anticipates transferring certain assets that
do not conform to REIT standards to a wholly-owned PTI subsidiary in early
2001, then acquiring the shares of PT III owned by others so that PT III will
become a qualified REIT subsidiary through which the remaining PT III assets
will fall under Pinnacle's REIT election. We expect that we and such
wholly-owned PTI subsidiary will jointly elect for such wholly-owned PTI
subsidiary to become a Taxable REIT Subsidiary ("TRS") as permitted under
legislative changes which take effect on January 1, 2001. In addition, we
expect that we and PT IV will elect to be treated as a TRS for Federal tax
purposes effective January 1, 2001. However, as additional acquisition
opportunities become available to us in our existing line of business or in
complementary non-real estate based communication site or services activities,
we may determine that it is in our best interests to acquire, operate or derive
income from assets, businesses or entities that would cause us to no longer
qualify as a REIT.


                                      20
<PAGE>   23

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

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

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



                                      22
<PAGE>   24

                                   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:  November 14, 2000                       By: /s/ Jeffrey J. Card
                                                  -----------------------------
                                                       Jeffrey J. Card
                                                       Chief Financial Officer
                                                       Vice President


            Duly Authorized Officer and Principal Financial Officer.



                                      23
<PAGE>   25

                                 EXHIBIT INDEX


EXHIBIT
  NO.                           DESCRIPTION
-------                         -----------


    3.1   Amended and Restated Certificate of Incorporation of the Company (1)

    3.2   Bylaws of the Company(1)

    4.1   Indenture dated as of March 22, 2000 among the Company and The Bank
          of New York, as Trustee, including the form of 5.5% Note

    4.2   Form of 5.5% Note (3)

    4.3   Registration Rights Agreement dated as of March 22, 2000 by and among
          the Company and each of the Purchasers referred to therein (3)

    4.4   Specimen Stock Certificate(2)

   10.1   Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
          Towers III Inc., dated as of January 13, 2000 (3)

   10.2   Convertible Promissory Note of Pinnacle Towers III Inc., dated
          January 13, 2000 (3)

   10.3   Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
          Towers III Inc., dated as of January 27, 2000 (3)

   10.4   Convertible Promissory Note of Pinnacle Towers III Inc., dated
          January 27, 2000 (3)

   10.5   Subscription Agreement between Pinnacle Towers Inc. and Pinnacle
          Towers IV Inc., dated August 17, 2000

   10.6   Convertible Promissory Note of Pinnacle Towers IV Inc., dated
          August 17, 2000

   27.1   Financial Data Schedule


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

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

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



                                      24