U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

       Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                      For the quarter ended June 30, 1997

                        Commission File Number 33-6658-C

                                Pioneer Railcorp
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

            Iowa                                                 37-1191206
-------------------------------                              -------------------
(State or other jurisdiction of                              (IRS Employer ID #)
incorporation or organization)

     1318 S. Johanson Rd. Peoria, IL                                  61607
----------------------------------------                           ----------
(Address of principal executive offices)                           (Zip Code)

                  Registrant's telephone number: 309-697-1400

          Securities registered pursuant to Section 12(g) of the Act:

 Title of each Class                   Name of each exchange on which registered
---------------------                  -----------------------------------------
Common Stock, Class A                        NASDAQ, Chicago Stock Exchange

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]

                                   4,589,513
              ----------------------------------------------------
              (Shares of Common Stock outstanding on June 30, 1997

<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended June 30, 1997 and 1996

UNAUDITED
<TABLE>

                                                          Second Quarter              First Six Months    
                                                    --------------------------    --------------------------
                                                        1997          1996            1997          1996
                                                    --------------------------    --------------------------
<S>                                                 <C>            <C>            <C>            <C>   

Operating revenue ...............................   $ 3,509,995    $ 3,171,895    $ 6,323,230    $ 5,622,337
                                                    --------------------------------------------------------

Operating expenses
   Maintenance of way ...........................       354,099        249,926        581,776        455,571
   Maintenance of equipment .....................       391,095        395,792        759,351        671,586
   Transportation expense .......................       782,996        678,906      1,492,085      1,134,195
   Administrative expense .......................       782,011        809,819      1,576,742      1,424,076
   Depreciation  & amortization .................       376,438        356,230        744,024        670,806
                                                    --------------------------------------------------------
                                                      2,686,639      2,490,673      5,153,978      4,356,234
                                                    --------------------------------------------------------

Operating income ................................       823,356        681,222      1,169,252      1,266,103
                                                    --------------------------------------------------------

Other income & expense
   Other (income) expense .......................       (60,902)      (123,461)      (194,820)      (181,694)
   Interest expense, equipment ..................       195,459        199,976        397,617        400,143
   Interest expense, other ......................       148,717        157,655        294,892        244,922
   Net (gain) loss on sale of fixed assets ......       (35,612)         2,630        (64,564)       (26,875)
                                                    --------------------------------------------------------
                                                        247,662        236,800        433,125        436,496
                                                    --------------------------------------------------------
Income before income taxes ......................       575,694        444,422        736,127        829,607

Provision for income taxes ......................       209,350        178,210        268,250        320,610
                                                    --------------------------------------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries .   $   366,344    $   266,212    $   467,877    $  
508,997

Minority interest in preferred stock dividends of
    consolidated subsidiaries ...................   $    31,308    $    31,308    $    62,615    $    62,615


Net income ......................................   $   335,036    $   234,904    $   405,262    $   446,382
                                                   
========================================================

Earnings per common share .......................   $      0.05    $      0.04    $      0.07    $      0.08
                                                   
========================================================
Weighted average number of common shares
and common share equivalents used in
computing earnings per share ....................     8,871,667      9,008,052      8,869,699      9,000,368
                                                   
========================================================

</TABLE>
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996

UNAUDITED

<TABLE>
                                                             June 30    December 31
                                                          -----------   -----------
                                                              1997          1996
                                                          -------------------------
<S>                                                       <C>           <C>  

ASSETS
Current Assets
   Cash ...............................................   $   858,169   $   501,212
   Accounts receivable, less allowance
     for doubtful accounts (1997 $64,468; 1996 $45,291)     2,369,342     2,071,289
   Inventories ........................................       402,143       420,952
   Prepaid expenses ...................................       110,097       261,427
   Income tax refund claims ...........................       338,246       349,881
   Deferred taxes .....................................        25,901        25,901
                                                          -------------------------
        Total current assets ..........................     4,103,898     3,630,662
                                                          -------------------------

Property and Equipment less accumulated
  depreciation 1997 $3,926,501; 1996 $3,294,610 .......    19,753,307    20,131,566
                                                          -------------------------

Intangible Assets, less accumulated amortization
  1997 $171,328; 1996 $140,109 ........................     1,144,919     1,171,114
                                                          -------------------------

Investments, cash value of life insurance .............        84,738        74,962
                                                          -------------------------
Total assets ..........................................   $25,086,862   $25,008,304
                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ...................................   $ 2,811,942   $ 2,973,258
   Notes payable ......................................     1,044,973       769,535
   Income taxes payable ...............................       248,178        18,978
   Current maturities of long-term debt ...............     1,930,473     1,813,246
   Accrued liabilities ................................       599,918       491,610
                                                          -------------------------
        Total current liabilities .....................     6,635,484     6,066,627
                                                          -------------------------

Long-term debt, net of current maturities .............    11,639,482    12,564,133
Deferred income taxes .................................     1,967,651     1,967,651
                                                          -------------------------
        Total liabilities & debt ......................    20,242,617    20,598,411
                                                          -------------------------

Minority interest in subsidiaries .....................     1,188,000     1,188,000

Stockholders' Equity
   Common stock .......................................         4,587         4,571
   Additional paid-in capital .........................     2,010,223     1,981,149
   Retained earnings ..................................     1,641,435     1,236,173
                                                          -------------------------
        Total stockholders' equity ....................     3,656,245     3,221,893
                                                          -------------------------

Total liabilities and equity ..........................   $25,086,862   $25,008,304
                                                          =========================

</TABLE>
<PAGE>

PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ending June 30, 1997 and 1996

UNAUDITED
<TABLE>

                                                                       6 Months Ended 
                                                                --------------------------
                                                                     1997          1996
                                                                --------------------------
<S>                                                             <C>            <C>   

Cash Flows From Operating Activities
Net income ..................................................   $   405,262    $   446,379
Adjustments to reconcile net income to net cash
provided by operating activities:
          Minority interest in preferred stock dividends of
            consolidated subsidiaries .......................        62,615         62,616
          Depreciation ......................................       712,815        645,765
          Amortization ......................................        31,209         25,041
          Increase in cash value life insurance .............        (9,776)        (7,169)
          (Gain) on sale of property & equipment ............       (64,564)       (26,875)
          Deferred taxes ....................................           -0-        160,000
Change in assets and liabilities, net of effects from
          acquisition of subsidiaries
          (Increase) decrease accounts receivable ...........      (298,053)      (133,935)
          (Increase) decrease inventories ...................        18,809         (5,413)
          (Increase) decrease prepaid expenses ..............       151,330         39,734
          (Increase) decrease intangible assets .............        (5,014)       (33,558)
          Increase (decrease) accounts payable ..............      (161,316)      (426,248)
          (Increase) decrease income tax refund claims ......        11,635         50,998
          Increase (decrease) income tax payable ............       229,200         21,050
          Increase (decrease) accrued liabilities ...........       108,310         86,431
                                                                --------------------------
          Net cash provided by operating activities .........     1,192,462        904,816
                                                                --------------------------

Cash Flows From Investing Activities
          Proceeds from sale of property & equipment ........       137,957         32,700
          Purchase of property & equipment, net of property
               and equipment from acquisition of subsidiaries      (407,951)      (898,012)
          Acquisition of subsidiaries, net of cash acquired .           -0-     (2,786,882)
                                                                --------------------------
          Net cash (used in) investing activities ...........      (269,994)    (3,652,194)
                                                                --------------------------

Cash Flows From Financing Activities
          Proceeds from short-term borrowings, net of debt
             assumed in acquisition of subsidiaries .........     1,283,301        901,160
          Proceeds from long-term borrowings, net of debt
             assumed in acquisition of subsidiaries .........       119,700      3,177,519
          Payments on short-term borrowings .................    (1,007,863)      (387,651)
          Payments on long-term borrowings ..................      (927,124)      (917,345)
          Repurchase of minority interest ...................        (1,000)
          Proceeds from warrants and options exercised ......        29,090         75,840
          Payments to minority interest .....................       (62,615)       (62,615)
                                                                --------------------------
          Net cash provided by financing activities: ........      (565,511)     2,785,908
                                                                --------------------------

Net increase (decrease) in cash .............................       356,957         38,530

Cash, beginning of period ...................................       501,212        276,230
                                                                --------------------------

Cash, end of period .........................................   $   858,169    $   314,760
                                                                ==========================

</TABLE>
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER RAILCORP AND SUBSIDIARIES

NOTE 1.   STATEMENTS

The  accompanying  unaudited  interim  financial  statements  have been prepared
pursuant to the rules and regulations for reporting on Form 10-QSB. Accordingly,
certain disclosures required by generally accepted accounting principles are not
included herein. These interim statements should be read in conjunction with the
latest  financial  statements and notes thereto included in the Company's latest
Annual Report on Form 10-KSB and subsequent Form 10-QSB filings.

NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principals of consolidation:

The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned  and controlled  subsidiaries  (collectively,  "the Company").  The
significant subsidiaries are as follows: West Michigan Railroad Co. (WJ), Wabash
& Western  Railway  Co.  d/b/a  Michigan  Southern  Railroad  (MSO),  Fort Smith
Railroad Co. (FSR),  Alabama Railroad Co. (ALAB),  Mississippi  Central Railroad
Co. (MSCI),  Alabama & Florida Railway Co., Inc. (AF),  Decatur Junction Railway
Co. (DT),  Vandalia  Railroad  Company (VRRC),  Minnesota  Central  Railroad Co.
(MCTA),  Keokuk  Junction  Railway Co.  (KJRY),  Rochelle  Railroad Co.  (RRCO),
Shawnee  Terminal Railway Company (STR),  Pioneer  Railroad  Equipment Co., Ltd.
(PREL), Pioneer Air, Inc. (PAR), and Pioneer Railroad Services,  Inc. (PRS). All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

Inventories:

Inventories   consisting  of  various  mechanical  parts,  track  materials  and
locomotive  supplies are stated at the lower of cost  (determined by the average
cost method) or market.

Property and equipment:

Property and equipment are stated at cost.  Depreciation is computed principally
on a straight-line basis over the following estimated useful lives:

Roadbed  - 20 years

Transportation  equipment - 10 to 15 years Railcars - 10 to 15 years Buildings -
20 to 40 years  Machinery and equipment - 5 to 10 years Office  equipment - 5 to
10 years

Maintenance  and repair  expenditures,  which keep the rail facilities in proper
operating  condition,  are  charged  to  operations  as  incurred.  Expenditures
considered to be renewals and betterments  are capitalized if such  expenditures
improve track  conditions and benefit future  operations with more efficient use
of rail facilities.

Intangible assets:

Intangible  assets consist  principally of goodwill which is being  amortized by
the  straight-line   method  over  a  forty-year  period.  The  Company  reviews
intangible assets quarterly to determine  potential  impairment by comparing the
carrying value of the intangible with the undiscounted  anticipated  future cash
flows of the related property before interest charges.  If future cash flows are
less than the carrying  value,  the Company will determine the fair market value
of the  property and adjust the carrying  value of the  intangibles  if the fair
market value is less than the carrying value.

Earnings per common and common share equivalent share:

Primary  earnings  per common  share was  computed by dividing net income by the
weighted  average number of shares of common stock and common stock  equivalents
outstanding  at the end of the  respective  periods  under  the  Treasury  Stock
Method.
<PAGE>


NOTE 3.  ESTIMATED IMPACT OF THE ADOPTION OF RECENT ACCOUNTING
STANDARDS

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 128,  "Earnings Per Share." SFAS No.
128  requires  the  presentation  of both basic  earnings  per share and diluted
earnings  per share.  Basic  earnings per share will be computed by dividing net
income by the weighted  average  number of common  shares  outstanding.  Diluted
earnings  per share will be  computed  in the same manner used by the Company in
computing  earnings per share.  SFAS No. 128 will be effective for the Company's
1997 annual report. If SFAS No. 128 had been in effect during the second quarter
of 1997,  basic  earnings  per share  would have been $.07 per share and diluted
earnings  per share would have been $.05 per share.  If SFAS No. 128 had been in
effect during the first six months of 1997,  basic earnings per share would have
been $.09 per share and  diluted  earnings  per share  would  have been $.07 per
share.

The Company is not aware of any other recent accounting standard issued, but not
yet required to be adopted by the Company,  that would have a material effect on
its financial position or results of operations.

NOTE 4.   STOCK OPTION PLANS

On April  12,  1994,  Pioneer  adopted,  with  the  subsequent  approval  of its
shareholders,  a stock  option  plan  permitting  the  issuance of up to 836,000
shares of common stock. Options granted under the plan were incentive based. The
options became  exercisable on July 5, 1995 at a price equal to the market value
of the common  stock at the date of grant,  and the effect on earnings per share
has been  reflected in the  accompanying  financial  statements.  As of June 30,
1997,  a total  of  782,300  options  are  outstanding  under  this  plan  after
forfeitures and exercises.

On June 26,  1996,  the  Company's  shareholders  approved a stock  option  plan
permitting the issuance of 407,000 shares of common stock. Options granted under
the plan are  incentive  based  except for the options  granted to the CEO whose
options are non-qualified.  The options are fully vested and will be exercisable
as of July 1, 2001,  and the effect on earnings per share has been  reflected in
the accompanying  financial statements.  The exercise date can be accelerated if
Pioneer  Railcorp  common  shares reach a closing  price of $7.25 per share,  or
higher,  for any  consecutive  10-day  period,  as  reported  in the Wall Street
Journal.  The  options  will be  exercisable  at the market  price of the common
shares at the date the options were granted, in whole or in part within 10 years
from the date of grant.  As of June 30,  1997,  a total of 287,000  options  are
outstanding under this plan after forfeitures of 120,000 shares.

NOTE 5.   STOCK SPLIT AND STOCK WARRANTS ISSUED AS DIVIDENDS

On May 16,  1995 the  Board of  Directors  authorized  a 2 for 1 stock  split to
shareholders  of record June 30, 1995,  payable July 1, 1995. This increased the
outstanding common shares to 4,198,084 from 2,099,042.  In addition, on June 24,
1995 the  shareholders  ratified an amendment  to the Articles of  Incorporation
authorizing  the  issuance  of stock  warrants  as a  dividend  to  shareholders
immediately  after the stock split.  Each  shareholder  received one warrant for
each share of common stock owned. Each warrant permits  shareholders to purchase
an additional  share of common stock at a  predetermined  price of $2 per share.
The warrants  expire on July 1, 2015, and the effect of the warrants on earnings
per share has been reflected in the  accompanying  financial  statements.  As of
June 30, 1997, a total of 66,844 warrants had been exercised.

NOTE 6. MINORITY INTERESTS IN SUBSIDIARIES

Three of the Company's subsidiaries have preferred stock outstanding. This stock
is accounted for as minority interest in subsidiaries and dividends on the stock
are accounted for as a current expense.

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

The Company operated the following twelve railroads during the second quarter of
1997:  West  Michigan  Railroad  Co.  (WJ),  Wabash & Western  Railway Co. d/b/a
Michigan  Southern  Railroad  (MSO),  Fort Smith  Railroad  Co.  (FSR),  Alabama
Railroad Co. (ALAB),  Mississippi Central Railroad Co. (MSCI), Alabama & Florida
Railway Co., Inc. (AF),  Decatur  Junction Railway Co. (DT),  Vandalia  Railroad
Company (VRRC),  Minnesota Central Railroad Co. (MCTA),  Keokuk Junction Railway
Co. (KJRY),  Rochelle Railroad Co. (RRCO),  and Shawnee Terminal Railway Company
(STR). The Company also operated three  railroad-related  subsidiaries,  Pioneer
Railroad Equipment Co., Ltd. (PREL), Pioneer Railroad Services, Inc. (PRSI), and
Pioneer Air, Inc (PAR). Summary:  Second Quarter 1997 Compared to Second Quarter
1996.
<PAGE>


The Company's net income in the second quarter 1997 increased by 43% to $335,036
up from $234,904 in the same period last year.  Operating  revenue in the second
quarter 1997  increased by $338,000 or 11% to $3.5 million from $3.17 million in
the same period last year.  Operating  expense  increased in the second  quarter
1997 by approximately  $200,000 or 8% to $2.69 million from $2.49 million in the
same period last year.  Operating income increased in the second quarter 1997 by
$142,000 or 21% to $823,000 from $681,000 in the same period last year.

Several  factors  contributed  positively to the increase in second quarter 1997
net income:

The Company's  Michigan Southern  Railroad,  which began operating in the fourth
quarter 1996,  had operating  income of $113,000 in the second quarter 1997. The
Rochelle  Railroad,  which began  operating in April of 1996, had an increase in
operating income of $51,000, recording operating income of $52,000 in the second
quarter  1997  compared to $1,000 in the same period  last year.  This  increase
resulted from increases in pricing.  The Keokuk Junction Railway had an increase
in operating income of $192,000,  recording  operating income of $401,000 in the
second  quarter  1997  compared to  $209,000  in the same period last year.  The
increase in operating  income  resulted from  increased  operating  efficiencies
resulting from the Company's operating procedures,  and increased rail shipments
resulting from marketing efforts by the Company.  The Minnesota Central Railroad
had an increase in operating income of $131,000,  recording  operating income of
$156,000 in the second  quarter 1997 compared to $25,000 in the same period last
year.  Most of the increase in MCTA operating  income  resulted from  additional
switching  revenues  recorded due to  adjustments  involving time limits for the
settlement of freight and switching  liabilities  required by railway accounting
rules as established by the  Association  of American  Railroads,  the governing
body of all  North  American  railroads.  The  MCTA  also  benefited  from  more
efficient  train  handling as a result of a new operating  plan developed by the
Company.

In addition,  the Fort Smith Railroad had increased  operating income of $43,000
in the second  quarter  1997 and the  Decatur  Junction  Railway  had  increased
operating revenue of $25,000 in the quarter.

Several factors adversely affected second quarter 1997 net income:

Pioneer  Railroad  Equipment  operating  income  was  down  $293,000,  recording
operating  income of $116,000 in the second quarter 1997 compared to $409,000 in
the same  period  last year.  PREL's  decrease  related to lost  revenue  due to
under-utilization  of  grain  hopper  cars and box cars  system-  wide,  and the
non-renewal  of a  short-term  lease of 75 covered  hoppers to a  non-affiliated
party that generated income of approximately  $90,000 in the second quarter 1996
and was in effect from  November  1995  through  May 1996.  The Company has made
efforts to relocate  certain groups of railcars and expects a modest increase in
railcar revenues from these efforts.

The  Mississippi  Central  Railroad  operating  income  decreased  approximately
$57,000 in the second quarter 1997, recording operating income of $22,000 in the
second  quarter  1997  compared to $79,000 in the same period last year.  MSCI's
decrease resulted from changes in logistics and supply of inbound pulpwood which
has reduced  the  competitiveness  of MSCI's  served  locations.  The Company is
vigorously pursuing avenues to regain pulpwood shipments.

The Alabama Railroad  operating income  decreased  approximately  $67,000 in the
second quarter 1997, recording operating income of $48,000 in the second quarter
1997 compared to $115,000 in the same period last year. ALAB's decrease resulted
from the same  circumstances  affecting MSCI, changes in logistics and supply of
inbound wood raw  materials.  The Company does not  anticipate a further drop in
shipping levels, but is uncertain as to when levels will increase.

Operating Revenue:

The  increase in  operating  revenue in the second  quarter 1997 of $338,000 was
positively  affected by a $145,000 increase of revenue generated from the Keokuk
Junction  Railway which began  operations  under Pioneer  Railcorp  ownership on
March 13, 1996. Also, the Michigan  Southern  Railroad,  which the Company began
operating in December 1996, had $254,000 of operating revenue in the quarter. In
addition,  the  Minnesota  Central  Railroad  had an increase  of  approximately
$154,000 in operating revenue in the second quarter of 1997 to $498,000 compared
to $345,000 in the same period last year. Most of the increase in MCTA operating
revenue resulted from additional  switching revenues recorded due to adjustments
involving  time limits for the  settlement of freight and switching  liabilities
required  by railway  accounting  rules as  established  by the  Association  of
American  Railroads,  the governing  body of all North  American  railroads.  In
addition,  the Fort Smith  Railroad  had  increased  revenues  of  $88,000,  the
Rochelle  Railroad had  increased  revenues of $35,000 and the Alabama & Florida
Railway had increased revenues of $49,000.  Almost all of these increases relate
to increases in pricing.
<PAGE>


The  increases in  operating  revenue  from these  subsidiaries  was offset by a
$93,000  operating revenue decrease by the Mississippi  Central Railroad,  which
had  operating  revenue of  $149,000  in the second  quarter  1997  compared  to
$242,000 in the same period last year.  Operating  revenue from Pioneer Railroad
Equipment  Co.  was down  approximately  $321,000  in the  second  quarter  1997
recording  operating  revenue of $510,000 in the second quarter 1997 compared to
$831,000 in the same period last year. The PREL revenue decrease was a result of
under-utilization  of  grain  hopper  cars  and box cars  system  wide,  and the
non-renewal  of a  short-term  lease of 75 covered  hoppers to a  non-affiliated
party.

The remaining  operating  subsidiaries had immaterial  changes in revenue in the
second quarter 1997 compared to the same period last year.

Operating Expense:

Operating expense increased in the second quarter 1997 by approximately $200,000
or 8% to $2.6  million  from $2.4  million in the same  period  last year.  This
increase in operating expense resulted from the following factors:

The $104,000  increase in  maintenance of way expense in the second quarter 1997
to $354,000  compared to $250,000 for the same period last year included $40,000
recorded by the Michigan Southern Railroad, which the Company began operating in
December  1996. The remaining  increase in  maintenance of way expense  resulted
from  moderate  increases  at the  Minnesota  Central  Railroad  and the  Keokuk
Junction Railway. The $104,000 increase in transportation  expense in the second
quarter  1997 to  $783,000  from  $679,000  was  primarily  attributable  to the
Michigan Southern Railroad's transportation expense of $58,000 and a combination
of moderate  increases from several other operating  subsidiaries as a result of
minor  derailments,  increased  carhire  expense,  fuel and other  miscellaneous
items.

The  remaining  operating  subsidiaries  had no  material  changes in  operating
expense in the second quarter 1997 compared to the same period last year.

Other Income and Expense Income Statement Line Item Discussion:

Other  income of $61,000  for the second  quarter  1997  consists of real estate
lease income,  scrap income and other  miscellaneous  items. The decrease in the
second quarter 1997 other income compared to the same period last year primarily
resulted from a one-time  scrap sale of  approximately  $90,000  recorded in the
second  quarter  1996.  None of the other  income  transactions  are material in
nature when considered alone.

The Company experienced an 8% decrease in interest expense in the second quarter
1997  compared to the same period  last year as the result of the  reduction  in
long  term-debt  from  scheduled  principal  payments,  and the  absence  of any
additional debt during the quarter.

Net gain on fixed asset  dispositions  during the second quarter 1997 of $36,000
included $5,500 from the sale of an excess locomotive,  $11,000 from the sale of
a small  parcel  of land and  $20,000  from  the  sale of a crane  that was used
sparingly in Company operations.

Summary: First Six Months 1997 Compared to First Six Months 1996.

The  Company's  net  income in the  first six  months  1997  decreased  by 9% to
$405,262 down from $446,382 in the same period last year.  Operating  revenue in
the first six months 1997 increased by $701,000 or 12% to $6.3 million from $5.6
million in the same period last year.  Operating  expense increased in the first
six months 1997 by $800,000 or 18% to $5.1 million from $4.3 million in the same
period last year.  Operating  income  decreased  in the first six months 1997 by
$97,000 or 8% to $1,169,000 from $1,266,000 in the same period last year.

Several  factors  attributed  to the  decrease  in the first six months 1997 net
income:

The Minnesota  Central Railroad had limited rail operations in the first quarter
1997 as a result of the severe winter  weather in the region which resulted in a
decrease in operating income of $129,000 in the first quarter 1997 when compared
to the same period in 1996.  The  Minnesota  Central  resumed  operations in the
second  quarter 1997,  and as a result of a more  efficient  operating  plan and
additional switching revenues previously discussed,  the MCTA was able to record
six month operating income not materially  different than the same period in the
prior year.
<PAGE>


Pioneer  Railroad  Equipment  operating  income  was  down  $468,000,  recording
operating  income of $370,000 in the first six months 1997  compared to $838,000
in the same period last year.  PREL's  decrease  related to lost  revenue due to
non-utilization  of grain hopper cars  assigned to the MCTA in the first quarter
1997,  under-utilization  of grain  hopper cars and  boxcars  system wide in the
second  quarter 1997, and the  non-renewal  of a short-term  lease of 75 covered
hoppers to a non-affiliated  party that was in effect from November 1995 through
May of 1996 which  generated  $200,000  of revenue  during the six month  period
1996.  The Company has made efforts to relocate  certain  groups of railcars and
expects a modest increase in railcar  revenues from these efforts.  The expected
shift of grain markets to the west coast in the fall of 1997 would significantly
increase the Company's revenues from its grain hopper fleet.

The  Mississippi  Central  Railroad  operating  income  decreased  approximately
$138,000 in the first six months 1997,  recording operating income of $55,000 in
the first six months  1997  compared  to  $193,000 in the same period last year.
MSCI's  decrease  resulted  from  changes  in  logistics  and  supply of inbound
pulpwood which has reduced the  competitiveness of MSCI's served locations.  The
Company is vigorously pursuing avenues to regain pulpwood shipments.

The Alabama Railroad  operating income  decreased  approximately  $74,000 in the
first six months 1997,  recording  operating  income of $88,000 in the first six
months 1997 compared to $160,000 in the same period last year.  ALAB's  decrease
resulted from the same  circumstances  affecting MSCI,  changes in logistics and
supply of inbound wood raw materials.  The Company does not anticipate a further
drop in shipping levels, but is uncertain as to when levels will increase.

The  Company's  Keokuk  Junction  Railway  subsidiary,  which the Company  began
operating on March 13,  1996,  contributed  operating  income of $644,000 in the
first six months  1997,  compared to  $248,000  in the same  period in 1996,  an
increase of $396,000.  The Rochelle  Railroad,  which began  operations in April
1996, had increased operating income of $88,000. The Michigan Southern Railroad,
which began operations in December 1996, had operating income of $166,000.

Interest expense increased approximately $47,000 in the first six months 1997 to
$692,000  compared to $645,000 in the same period last year, most of which was a
direct result of the financing of the Keokuk Junction Railway acquisition.

Operating Revenue:

The increase in  operating  revenue in the first six months 1997 of $701,000 was
positively  affected by a $715,000 increase in revenue generated from the Keokuk
Junction  Railway which began  operations  under Pioneer  Railcorp  ownership on
March 13, 1996.  Also, the Rochelle  Railroad,  which began  operations in April
1996, had $133,000 of increased  operating revenue in the first six months 1997,
and the Michigan Southern Railroad, which began operations in December 1996, had
$470,000 of operating revenue in the six month period. In addition,  the Alabama
& Florida Railway had an increase of approximately $130,000 in operating revenue
in the first six months with  revenues  of $718,000  compared to $588,000 in the
same period last year.

The  increases in  operating  revenue  from these  subsidiaries  was offset by a
decrease in revenues  from Pioneer  Railroad  Equipment Co. which had a $460,000
decrease  in  revenues to  $1,157,000  in the first six months 1997  compared to
$1,617,000 in the same period last year. The PREL revenue  decrease was a result
of  non-utilization  of grain  hopper  cars  assigned  to the MCTA in the  first
quarter 1997,  under-utilization of grain hopper cars and boxcars system wide in
the second quarter 1997, and the non-renewal of a short-term lease of 75 covered
hoppers to a non-affiliated  party that was in effect from November 1995 through
May of 1996 and generated $200,000 of revenue during the six month period 1996.

Mississippi  Central Railroad operating revenue was down approximately  $196,000
with  revenues of $299,000 in the first six months 1997  compared to $495,000 in
the same period last year.  MSCI's decrease in revenues resulted from changes in
logistics and supply of inbound  pulpwood which has reduced the  competitiveness
of MSCI's served locations. The Company is vigorously pursuing avenues to regain
pulpwood shipments.  The Minnesota Central Railroad which had limited operations
in the first  quarter 1997 because of severe winter  weather,  had strong second
quarter 1997 revenues,  as mentioned  above,  with the net result being a slight
decrease in operating revenue of $24,000 in the first six months 1997.

The  remaining  operating  subsidiaries  had no  material  changes in  operating
revenues in the first six months 1997 compared to the same period last year.
<PAGE>


Operating Expense:

The  increase  in  operating  expense of  $800,000  in the first six months 1997
resulted from the following factors:

Increases in maintenance of way,  maintenance of equipment,  and  transportation
expense in the first six months 1997 was primarily  attributable to the Michigan
Southern  Railroad  which  began  operations  in December  1996,  and the Keokuk
Junction  Railway  which  the  Company  began  operating  in March of 1996.  The
Michigan Southern Railroad  increased  maintenance of way expense $48,000 in the
first six  months  1997 and the Keokuk  Junction  increased  maintenance  of way
expense  $34,000  in  the  period.  The  Michigan  Southern  Railroad  increased
maintenance  of equipment  expense  $53,000 in the first six months 1997 and the
Keokuk Junction Railway  increased  maintenance of equipment  expense $47,000 in
the period. The increase in transportation expense was primarily attributable to
the Michigan Southern Railroad which had transportation  expense of $160,000 and
the  Keokuk  Junction  Railway  which had  increased  transportation  expense of
$166,000  when  compared  to 1996.  The  Minnesota  Central  had a  decrease  in
transportation  expense of  $43,000 in the first six months  1997 as a result of
the reduced  operations  resulting  from the severe weather in the first quarter
and  efficient   train  handling  in  the  second   quarter.   The  increase  in
administrative expense in the first six months 1997 was attributable to both new
operating  subsidiaries  and  administrative  expense  related to payroll  costs
associated with the hiring of additional support personnel.

The  remaining  operating  subsidiaries  had no  material  changes in  operating
expenses in the first six months 1997 compared to the same period last year.

Other Income and Expense Income Statement Line Item Discussion:

Other income of $195,000  for the first six months 1997  consists of real estate
lease  income,  scrap income and other  miscellaneous  items.  None of the other
income transactions are material in nature when considered alone.

Interest  expense  increased  in the first six  months  1997 by  $47,000  and is
attributable to financing related to the Company's March 12, 1996 acquisition of
the Keokuk Junction Railway.

Net gain on fixed asset dispositions during the first six months 1997 of $65,000
included $30,000 from the sale of 2 excess locomotives,  $5,000 from the sale of
a railcar,  $11,000 from the sale of a small parcel of land and $20,000 from the
sale of a crane that was used sparingly in  operations.  Net gain on fixed asset
dispositions  during  the  first  six  months  1996  of  $27,000  was  primarily
attributable  to the sale of 5.36 miles of Alabama  Railroad  right of way.  The
real estate was not located on an active part of the rail line.

Liquidity and Capital Resources:

The Company  primarily  uses cash  generated  from  operations  to fund  working
capital  needs and relies on long-term  financing  for  railcars,  new operating
subsidiaries,  and other  significant  capital  expenditures.  The  Company  has
working  capital  lines of credit  totaling  $1,175,000  of which  approximately
$227,000 was available at the end of the second quarter 1997.

In addition, the Company has seen the market value of its railcar and locomotive
fleet increase significantly over the last several years. This increase in value
has resulted from the short supply of railcars and  locomotives  compared to the
increased  demand for their use. The Company believes it could refinance part of
its railcar or locomotive fleet with an asset-based lender and generate up to $1
million in cash.

In March of 1996, the Company negotiated a credit facility with its primary bank
to provide a $2.5 million  annual  revolving  acquisition  line of credit.  This
facility is  collateralized  by the common stock of the Alabama Railroad Co. and
the  Mississippi  Central  Railroad Co., as well as the Company's  investment in
stock of any  subsidiaries  acquired  under the line.  The interest rate for the
line is currently 11.00%. The interest rate is adjustable quarterly to 2.5% over
New York Prime,  limited to a one percent  annual  increase or decrease,  not to
exceed  13.5% or be reduced  below 10%.  Any  amounts  drawn on the line must be
repaid  monthly  over a seven  year  period.  The line was fully  drawn  upon in
connection  with the  Company's  March 12,  1996  acquisition  of a  controlling
interest of KNRECO, Inc. d/b/a Keokuk Junction Railway,  common stock and has an
available balance of approximately $320,000 as of June 30, 1997.
<PAGE>


On July 1, 1995, the Company's  stock split and warrant  issuance became payable
to  shareholders.  The 2 for 1 stock split increased the number of shares issued
and  outstanding  from  2,099,042 to  4,198,084.  At the same time  shareholders
became entitled to purchase an additional  4,198,084 common shares through stock
warrants  issued by the  Company as  dividends.  One warrant was issued for each
share of common stock held after the split,  entitling  the holder to purchase 1
share of  common  stock for $2 per  share.  The  shares  purchased  through  the
exercise of the warrants  must be held for 1 year from the date of  purchase.  A
total of 9,670  warrants  were  exercised in the first six months 1997,  and the
Company  realized  $19,340 on the exercise of the warrants.  The Company expects
increased  capital to be generated by the continued  exercise of warrants but is
uncertain as to the amount. A total of 4,132,490  warrants are outstanding as of
June 30, 1997.

The  Company  granted  836,000  options  to  certain  employees  under  its 1994
incentive  stock option plan. The options are exercisable at prices equal to the
market value of the  Company's  stock at the date of grant.  The exercise  price
ranges are from $1.50 to $4.40 per share. The Company expects  increased capital
to be generated by the exercise of options but is uncertain as to the amount.  A
total of 6,500  options  were  exercised  in the first six  months  1997 and the
Company  realized $9,750 as a result of their  exercise.  As of June 30, 1997, a
total of 782,300 options are outstanding  under this plan after  forfeitures and
exercises.

Long-term  equipment  financing has historically  been readily  available to the
Company for its railcar  acquisition needs. The Company believes it will be able
to continue obtaining  long-term  equipment financing should the need arise. The
Company's plans for new equipment debt in the  foreseeable  future is contingent
upon new railroad  acquisitions  and increased  needs and/or  opportunities  for
railcars.  The  Company  does not expect to make  significant  additions  to its
railcar fleet in 1997.

The Company is considering  and analyzing the refinancing of some of its present
debt, particularly its $2.5 million annual revolving acquisition line of credit.
As of the date of this report,  the Company  believes it will have  financing in
place to repay its  acquisition  line of credit by the end of the third  quarter
1997.

The Company anticipates  favorable outcomes involving current legal proceedings.
The Company does not anticipate any material judgements against it or any of its
subsidiaries will arise out of the current proceedings.

The Company  believes its cash flow from  operations  and its available  working
capital credit lines will be adequate to meet  liquidity  needs for at least the
next twelve months.

Balance Sheet and Cash Flow Items:

The Company  generated net cash from  operating  activities of $1,192,000 in the
first six months 1997  compared  to  $905,000 in the same period last year.  Net
cash from operating  activities for the first six months 1997 resulted primarily
from  $405,000 of net income,  $744,000 of  depreciation  and  amortization,  an
increase in accounts  receivable  of $298,000,  a decrease in trade  payables of
$161,000,  an increase in income  taxes  payable of $229,000  and an increase in
accrued liabilities of $108,000.

In the first six months 1997 the  Company  purchased  approximately  $438,000 of
fixed  assets and capital  improvements.  The  capital  additions  included  the
purchase of approximately 17 railcars at a total cost of $122,000, financed with
long-term  fixed  rate   financing.   In  addition,   the  Company   capitalized
approximately  $110,000 of track and structure  betterments,  $65,000 in railcar
and  locomotive  betterments,  $48,000  of  leasehold  improvements  to  several
operating railroads, $18,000 for a parcel of industrial development land located
adjacent to the Alabama & Florida Railway and the remaining capital expenditures
of approximately $75,000 were for machinery, equipment and other assets. All the
expenditures  other than the  railcars  purchased  were  financed  with  working
capital cash flow.
<PAGE>


PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

Several  lawsuits  were  pending  by and  against  Pioneer  Railcorp  and/or its
subsidiaries (collectively, the "Company") during the second quarter of 1997.

Two crossing accident cases are currently  pending,  one in the Circuit Court of
Sebastian County, Arkansas, involving a crossing accident which occurred in Fort
Smith in December 1993, and another in the Federal District Court for the Middle
District  of Alabama  (Montgomery),  involving  an  accident  which  occurred in
Andalusia, Alabama in May, 1996. Management is vigorously defending these cases.
The Company does not believe it has any liability in the Arkansas case.  Alabama
law is  considerably  less favorable to the Company's  interests,  however,  the
Company  believes it has  adequate  insurance  coverage and that neither case is
likely to result in a material adverse effect on the  Registrant's  consolidated
financial position or results of operation.

A Federal  Employer's  Liability  Act  ("FELA")  lawsuit is pending  against the
Alabama & Florida  Railway  in  Alabama.  That  action  was  brought by a former
employee of a track contractor (or its sub-contractor), and is being defended by
the contractor  pursuant to an indemnification  agreement.  The Company does not
believe it has any  liability in the matter,  and does not believe the case will
result in a material adverse effect on the Registrant's  consolidated  financial
position or results of operation.

The Keokuk  Junction  Railway Co.  received a summons on July 22,  1997,  giving
notice of a FELA lawsuit  filed by an employee who alleges he was injured on the
job. No other  proceedings  have been had in that case and  management  is still
evaluating the claim.  The Company  believes it has adequate  insurance to cover
any possible liability,  and that the case is not likely to result in a material
adverse effect on the Registrant's consolidated financial position or results of
operation.

There are two cases  currently  pending  between  Ralston L. Taylor,  the former
General Manager of Keokuk Junction  Railway  ("KJRY"),  and the Company.  One of
those  cases,  which is in the  District  Court of Lee  County  (Iowa)  involves
certain  allegations by Mr. Taylor relating to the termination of his employment
relationship  with KJRY.  Management  believes  that Mr.  Taylor's  position  is
without merit,  and that the case is not likely to result in a material  adverse
effect  on the  Registrant's  consolidated  financial  position  or  results  of
operation.

Fort Smith  Railroad's  appeal to the  Seventh  Circuit  of a Railway  Labor Act
ruling by the United States District Court for the Central  District of Illinois
was not successful.  Management believes the issue of the situs of bargaining is
an important one and is considering  petitioning the United States Supreme Court
for a writ of certiorari in this case. The ruling by the Seventh Circuit did not
have a  material  adverse  effect  on the  Registrant's  consolidated  financial
position or results of operation.

The cases between  Minnesota  Central  Railroad Co.  ("MCTA") and MNVA Railroad,
Inc. ("MNVA") and Dakota,  Missouri Valley & Western Railroad,  Inc., concerning
the asset sale from MNVA to MCTA in December, 1994 were settled and dismissed in
April,  1997.  The  settlement  did not have a  material  adverse  effect on the
Company's consolidated financial position or results of operation.

Pioneer's  subsidiary  railroads  have a number  of  claims  against  delinquent
licensees,  customers and others, some of which are in litigation, and others of
which are likely to result in litigation. None of the amounts involved, however,
would have a material impact on the Company's consolidated financial position or
results of operations if they proved to be uncollectible.

In the course of business, the Company experiences crossing accidents,  employee
injuries,  delinquent and/or disputed accounts, and other incidents,  which give
rise to claims  that may result in  litigation.  Management  vigorously  pursues
settlement and release of such claims, but at any one time, some such incidents,
which could  result in lawsuits by and against the Company,  remain  unresolved.
Management believes it has valid claims for, or good defenses to, these actions.
Management considers such claims to be a routine part of the Company's business.

As of the  date  of this  Form-10-QSB,  management  is not  aware  of any  other
incident which is likely to result in a liability that would  materially  effect
the Company's consolidated financial position or results of operation.
<PAGE>


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

The  Annual  Meeting  of the  Shareholders  was  held  on June  18,  1997 at the
Company's  headquarters  in  Peoria,  Illinois.  All five  seats on the Board of
Directors were up for election at this meeting.  Directors Guy L.  Brenkman,  J.
Michael Carr,  Orvel L. Cox, and John S. Fulton were  re-elected  for a one year
term. Timothy F. Shea was elected a Director, replacing John P. Wolk who was not
up for re-election.

In addition to the election of the Board of Directors, shareholders ratified the
appointment  of  McGladrey  & Pullen,  LLP,  Certified  Public  Accountants  and
Consultants,  as the Company's  independent  public  accountants  for the coming
year.



The vote  totals  for the  matters  voted  upon at the  Annual  Meeting  were as
follows:
<TABLE>
                Proposal                       Votes For  Votes Withheld    Abstained
--------------------------------------------   ---------  --------------    ---------
<S>                                            <C>        <C>               <C>

Nomination of Guy L. Brenkman
to the Board of Directors ..................   3,366,190      10,300         14,420

Nomination of Orvel L. Cox
to the Board of Directors ..................   3,365,690      10,800         14,420

Nomination of Timothy F.Shea
to the Board of Directors ..................   3,311,340      65,150         14,420

Nomination of John S. Fulton
to the Board of Directors ..................   3,362,490      14,000         14,420

Nomination of J. Michael Carr
to the Board of Directors ..................   3,362,090      14,400         14,420

Ratification of McGladrey & Pullen, LLP
as Independent Auditor .....................   3,371,792      16,168          2,950
</TABLE>

Item 5.   OTHER INFORMATION

Pioneer  Railcorp  sold all of the  outstanding  stock of  Columbia  &  Northern
Railway Co. to a non-affiliated  non-railroad  entity,  effective July 26, 1997.
This  transaction did not have a material  effect on the Company's  consolidated
financial position or results of operation.

The  Company  has been  notified  by the City of  Rochelle  that it  intends  to
terminate the Rochelle  Railroad Co.'s lease,  without  cause,  in January 1998.
Management  is  evaluating  its options in this matter,  and it is possible that
litigation may result.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

Exhibit # 20.1  Notice of Annual  Meeting  and Proxy  Statement  used to solicit
votes for the Annual Meeting of Shareholders, held June 18, 1997.

Exhibit # 20.2 Form of Ballot used at the Annual Meeting on June 18, 1997.

Exhibit # 20.3 Annual  Report for 1996 sent to  shareholders  with the Notice of
Annual Meeting and Proxy Statement.

No reports were filed on Form 8-K during the second quarter 1997.




<PAGE>




                                   SIGNATURES


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





PIONEER RAILCORP
(Registrant)




                              /s/ Guy L. Brenkman
       8/13/97                -----------------------------------
        DATE                  GUY L. BRENKMAN
                              PRESIDENT & CEO


                              /s/ J. Michael Carr
       8/13/97                -----------------------------------
       DATE                   J. MICHAEL CARR
                              TREASURER & CHIEF FINANCIAL OFFICER