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 September 30, 2002

                        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.

                                    4,527,427
           ----------------------------------------------------------
           (Shares of Common Stock outstanding on September 30, 2002)


                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



                           PIONEER RAILCORP AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF INCOME
                      Quarters Ended September 30, 2002 and 2001
                                       UNAUDITED
<TABLE>

                                                         Three Months Ended               Nine Months Ended
                                                            September 30,                    September 30,
                                                        2002             2001          2002                2001
                                                    ---------------------------------------------------------------
<S>                                                 <C>             <C>            <C>                  <C>


Operating revenue ...............................   $  3,926,202    $  3,679,983    $ 11,383,264        $10,811,493
                                                    ---------------------------------------------------------------
Operating expenses
   Maintenance of way ...........................        267,554         251,336         811,967          1,017,681
   Maintenance of equipment .....................        348,769         376,181       1,055,695          1,230,818
   Transportation expense .......................        826,618         733,792       2,162,215          2,444,851
   Administrative expense .......................      1,030,616       1,069,793       3,120,328          3,201,701
   Depreciation  & amortization .................        500,965         517,717       1,517,769          1,550,034
                                                    ---------------------------------------------------------------
                                                       2,974,522       2,948,819       8,667,974          9,445,085
                                                    ---------------------------------------------------------------

Operating income ................................        951,680         731,164       2,715,290          1,366,408
                                                    ---------------------------------------------------------------

Other income & expense
   Other (income) expense .......................        (26,218)        (55,526)       (285,868)          (200,662)
   Interest expense, equipment ..................        118,128         140,011         355,695            494,157
   Interest expense, other ......................        150,368         171,043         444,943            559,219
   Net (gain) loss on sale of fixed assets ......         (7,812)        (17,728)         (8,593)        (1,938,331)
                                                    ---------------------------------------------------------------
                                                         234,466         237,800         506,177         (1,085,617)
                                                    ---------------------------------------------------------------

Income before income taxes ......................        717,214         493,364       2,209,113          2,452,025

Provision for income taxes ......................        312,122         208,700         981,122          1,030,700
                                                    ---------------------------------------------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries .   $    405,092    $    284,664    $  1,227,991        $ 1,421,325

Minority interest in preferred stock dividends of
    consolidated subsidiaries ...................   $     31,308    $     31,308    $     93,924             93,924
                                                    ---------------------------------------------------------------

Net income ......................................   $    373,784    $    253,356    $  1,134,067        $ 1,327,401
                                                    ===============================================================

Basic earnings per common share .................   $       0.08    $       0.06    $       0.25        $      0.29
                                                    ===============================================================

Diluted earnings per common share ...............   $       0.08    $       0.06    $       0.25        $      0.29
                                                    ===============================================================

Cash dividends per common share .................   $       0.03    $     0.0000    $       0.03        $         0
                                                    ===============================================================
</TABLE>

See notes to unaudited consolidated financial statements


                                       2
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2002 and DECEMBER 31, 2001
                                    UNAUDITED
<TABLE>
                                                           September 30     December 31
                                                               2002            2001
                                                           ----------------------------
<S>                                                        <C>             <C>
ASSETS
Current Assets
   Cash ................................................   $  1,687,540    $    976,678
   Accounts receivable, less allowance
     for doubtful accounts 2002 $35,457; 2001 $71,981 ..      3,193,779       3,431,008
   Inventories .........................................        279,689         222,257
   Prepaid expenses ....................................        279,165         202,787
   Income tax refund claims ............................        132,905         132,905
   Deferred taxes ......................................         80,000          80,000
                                                           ----------------------------
        Total current assets ...........................      5,653,078       5,045,635
                                                           ----------------------------

Property and Equipment less accumulated
  depreciation 2002 $11,578,873; 2001 $10,070,520 ......     27,624,262      27,150,300
                                                           ----------------------------

Goodwill, less accumulated amortization
  2002 $198,578; 2001 $198,578 .........................      1,017,430       1,017,430
                                                           ----------------------------

Investments, cash value of life insurance ..............        208,310         184,090
                                                           ----------------------------

Total assets ...........................................   $ 34,503,080    $ 33,397,455
                                                           ============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ....................................   $  2,068,230    $  2,914,471
   Notes payable .......................................        119,982          57,712
   Income taxes payable ................................        620,072               0
   Current maturities of long-term debt ................      4,536,312       4,828,203
   Accrued liabilities .................................        723,586         775,031
                                                           ----------------------------
        Total current liabilities ......................      8,068,182       8,575,417
                                                           ---------------------------

Long-term debt, net of current maturities ..............     10,655,171      10,820,867
                                                           ----------------------------

Deferred revenue .......................................      1,656,100         870,066
                                                           ----------------------------

Deferred income taxes ..................................      5,285,000       5,285,000
                                                           ----------------------------

Minority interest in subsidiaries ......................      1,085,000       1,103,000
                                                           ----------------------------

Stockholders' Equity

   Common stock ........................................          4,612           4,612
   In Treasury 2002 85,090 shares; 2001 84,040 .........            (85)            (84)
                                                           ----------------------------
   Outstanding 2002 4,527,427; 2001 4,528,477 ..........          4,527           4,528
   Additional paid-in capital ..........................      2,044,041       2,044,041
   Retained earnings ...................................      5,705,059       4,694,536
                                                           ----------------------------
        Total stockholders' equity .....................      7,753,627       6,743,105
                                                           ----------------------------

Total liabilities and stockholders equity ..............   $ 34,503,080    $ 33,397,455
                                                           ============================
</TABLE>
See notes to unaudited consolidated financial statements

                                       3
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               First Nine Months Ended September 30, 2002 and 2001
                                    UNAUDITED
<TABLE>

                                                                 First Nine Months
                                                                 2002           2001
                                                              --------------------------
<S>                                                           <C>            <C>
Cash Flows From Operating Activities
Net income ................................................   $ 1,134,067    $ 1,327,401
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Minority interest in preferred stock dividends of
    consolidated subsidiaries .............................        93,924         93,924
  Depreciation and amortization ...........................     1,517,769      1,550,034
  Increase in cash value life insurance ...................       (24,220)       (19,619)
  (Gain) loss on sale of property & equipment .............        (8,593)    (1,938,331)
  Deferred taxes ..........................................             0        600,000
Change in assets and liabilities, net of effects from
  acquisition of subsidiaries
  (Increase) decrease accounts receivable .................       237,229        (23,470)
  (Increase) decrease inventories .........................       (57,432)         6,124
  (Increase) decrease prepaid expenses ....................       (76,378)      (181,794)
  (Increase) decrease intangible assets ...................             0         (2,351)
  Increase (decrease) accounts payable ....................      (846,241)        76,845
  (Increase) decrease income tax refund claims ............             0         59,314
  Increase (decrease) income tax payable ..................       620,072        274,212
  Increase (decrease) deferred revenue ....................       786,034              0
  Increase (decrease) accrued liabilities .................       (51,445)      (105,268)
                                                              --------------------------
        Net cash provided by (used in) operating activities     3,324,786      1,717,021
                                                              --------------------------

Cash Flows From Investing Activities
  Proceeds from sale of property & equipment ..............        38,700      2,811,679
  Purchase of property & equipment ........................    (2,021,830)    (2,916,642)
                                                              --------------------------
        Net cash (used in) investing activities ...........    (1,983,130)      (104,963)
                                                              --------------------------

Cash Flows From Financing Activities
  Proceeds from short-term borrowings .....................     1,282,254      1,407,858
  Proceeds from long-term borrowings ......................     1,219,770      4,499,891
  Payments on short-term borrowings .......................    (1,219,984)    (1,292,433)
  Payments on long-term borrowings ........................    (1,677,357)    (6,382,886)
  Repurchase of minority interest .........................       (18,000)        (3,000)
  Purchase of common stock for treasury ...................        (1,656)        (2,600)
  Common stock dividend payments ..........................      (135,906)             0
  Preferred stock dividend payments to minority interest ..       (79,915)       (79,915)
                                                              --------------------------
        Net cash provided by (used in) financing activities      (630,794)    (1,853,085)
                                                              --------------------------

        Net increase (decrease) in cash ...................       710,862       (241,027)

Cash, beginning of period .................................       976,678        564,490
                                                              --------------------------

Cash, end of period .......................................   $ 1,687,540    $   323,463
                                                              ==========================
</TABLE>
See notes to unaudited consolidated financial statements

                                       4
<PAGE>

SEGMENT INFORMATION

Description of products and services from reportable segments:

Pioneer Railcorp has two reportable segments,  railroad operations and equipment
leasing  operations.  All other  operations are classified as corporate  support
services for purposes of this disclosure.

Measurement of segment profit or loss and segment assets:

The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting policies.  Pioneer Railcorp evaluates segment
profit based on operating income  including  intersegment  revenues,  but before
provision  for income  taxes,  items of other income and  expense,  and minority
interest in preferred stock dividends of consolidated subsidiaries.

Intersegment transactions:

Intersegment   transactions  are  recorded  at  cost  and  are  eliminated  from
consolidated financial results.

Factors management used to identify the reportable segments:

Pioneer  Railcorp's  reportable  segments  consist  of  wholly-owned  short line
railroad  subsidiaries  that offer  similar  services  and a railroad  equipment
subsidiary that leases railcars,  locomotives,  and other railroad  equipment to
affiliated  and  unaffiliated  entities.  The  corporate  operations  consist of
support services provided to the operating segments.

                                                             Third Quarter
                                                       ------------------------
                                                          2002           2001
                                                       ------------------------
Revenues from external customers
   Railroad operations ...........................     3,189,891      2,872,640
   Equipment leasing operations ..................       730,308        795,117
   Corporate support services ....................         6,003         12,226
                                                       ------------------------
      Total revenues from external customers .....     3,926,202      3,679,983
                                                       ========================

Intersegment revenues

   Railroad operations ...........................             0              0
   Equipment leasing operations ..................        99,600         99,600
   Corporate support services ....................     1,534,426      1,512,410
                                                       ------------------------
      Total intersegment revenues ................     1,634,026      1,612,010
                                                       ========================

Segment profit

   Railroad operations ...........................     1,517,723      1,167,227
   Equipment leasing operations ..................       315,457        447,283
   Corporate support services ....................       752,526        728,664
                                                       ------------------------
      Total segment profit .......................     2,585,706      2,343,174

Reconciling items

    Intersegment revenues ........................    (1,634,026)    (1,612,010)
    Income taxes .................................      (312,122)      (208,700)
    Minority interest ............................       (31,308)       (31,308)
    Other income(expense), net ...................      (234,466)      (237,800)
                                                       ------------------------

       Total consolidated net income .............       373,784        253,356
                                                       ========================

                                       5
<PAGE>

                                                          Nine Months Ended
                                                       9/30/02         9/30/01
                                                     ---------------------------
Revenues from external customers
   Railroad operations .........................      9,082,749       8,464,782
   Equipment leasing operations ................      2,288,665       2,322,214
   Corporate support services ..................         11,850          24,497
                                                     --------------------------
      Total revenues from external customers ...     11,383,264      10,811,493
                                                     ==========================

Intersegment revenues

   Railroad operations .........................              0               0
   Equipment leasing operations ................        298,800         298,800
   Corporate support services ..................      4,469,018       5,049,355
                                                     --------------------------
      Total intersegment revenues ..............      4,767,818       5,348,155
                                                     ==========================

Segment profit

   Railroad operations .........................      4,151,515       3,070,678
   Equipment leasing operations ................      1,145,171       1,167,060
   Corporate support services ..................      2,186,422       2,476,825
                                                     --------------------------
      Total segment profit .....................      7,483,108       6,714,563

Reconciling items

    Intersegment revenues ......................     (4,767,818)     (5,348,155)
    Income taxes ...............................       (981,122)     (1,030,700)
    Minority interest ..........................        (93,924)        (93,924)
    Other income(expense), net .................       (506,177)      1,085,617
                                                     --------------------------

       Total consolidated net income ...........      1,134,067       1,327,401
                                                     =========================


                                       6
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
PIONEER RAILCORP AND SUBSIDIARIES

NOTE 1.   STATEMENTS

The  accompanying   Consolidated  Statements  of  Income,  Balance  Sheets,  and
Statements of Cash Flows are unaudited. The interim financial statements reflect
all adjustments (consisting only of normal recurring accruals) which are, in the
opinion of  management,  necessary  for a fair  statement of the results for the
interim  periods   presented.   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.  The  results  of  operations  for the  interim  periods  should not be
considered indicative of results to be expected for the full year.

NOTE 2.   SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned  and controlled  subsidiaries  (collectively,  "the Company").  The
Company's  railroad  operations  segment  consists  of  wholly-owned  short line
railroad  subsidiaries  that offer  similar  services and includes the following
wholly-owned  subsidiaries:  West Michigan Railroad Co. (WMI), Michigan Southern
Railroad  Company  (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),
Keokuk  Junction  Railway Co. (KJRY),  Shawnee  Terminal  Railway Company (STR),
Pioneer  Industrial  Railway Co. (PRY),  The Garden City Western  Railway,  Inc.
(GCW), Indiana Southwestern Railway Co. (ISW), Kendallville Terminal Railway Co.
(KTR) (a spin off  from the  Michigan  Southern  Railroad  Company),  Elkhart  &
Western  Railroad  Co.  (EWR) (a spin off from the  Michigan  Southern  Railroad
Company),  and the Gettysburg & Northern Railroad Co. (GET) (operating effective
2/20/01). The Company's equipment leasing segment leases railcars,  locomotives,
and other  railroad  equipment  to  affiliated  and  unaffiliated  entities  and
includes only the wholly-owned  subsidiary  Pioneer Railroad Equipment Co., Ltd.
(PREL). All other Company operations are classified as corporate and include the
following wholly-owned subsidiaries: Pioneer Resources, Inc. (PRI), Pioneer Air,
Inc.  (PAR),  and  Pioneer  Railroad  Services,   Inc.  (PRS).  All  significant
intercompany balances and transactions have been eliminated in consolidation.

NOTE 3. CONTINGENCIES

As of the date of this Form  10-QSB,  management  is not  aware of any  incident
which is likely to  result in a  liability  that  would  materially  affect  the
Company's  consolidated  financial  position  or results of  operation.  Readers
should make reference to Part II, Item 1 of this 10-QSB, regarding contingencies
surrounding a switching  revenue dispute between the Keokuk Junction Railway Co.
and the  Burlington  Northern  Santa Fe Railway for  revenues  generated  by the
Company between March 1, 1999 and May 1, 2001 of approximately $663,000.

NOTE 4. ACCOUNTING PRONOUNCEMENTS

On January 1, 2002,  the Company  implemented  SFAS No. 142,  Goodwill and Other
Intangible  Assets.  Under the  provisions  of SFAS 142,  goodwill  is no longer
subject to  amortization  over its  estimated  useful life,  but instead will be
subject to at least annual  assessments  for impairment by applying a fair-value
based test. SFAS 142 also requires that an acquired  intangible  asset should be
separately recognized if the benefit of the intangible asset is obtained through
contractual  or other legal  rights,  or if the asset can be sold,  transferred,
licensed, rented or exchanged, regardless of the acquiror's intent to do so. The
Company determined that no transitional  impairment loss was required at January
1, 2002. In the  consolidated  balance sheet as of September 30, 2002,  goodwill
totaled $1,216,000 and accumulated amortization totaled $199,000.

                                       7
<PAGE>

The following  table presents  proforma net income and earnings per share in all
periods presented exclusive of goodwill amortization expense:
<TABLE>
                                                 Three Months Ended Sept. 30,
                                                 ----------------------------
                                                    2002             2001
                                                  --------------------------
<S>                                               <C>               <C>         <C>
Reported net Income ........................      $374,000          $253,000
Add back goodwill amort. ...................             -             9,000
                                                  --------------------------
Adjusted net Income ........................      $374,000          $262,000

Basic earnings per share:
  Reported net income ......................      $    .08          $    .06
  Add back goodwill amort. .................             -                 -    *less than $.01 in 2001
                                                  --------------------------
Adjusted net Income ........................      $    .08          $    .06

Fully diluted earnings per share:
  Reported net income ......................      $    .08          $    .06
  Add back goodwill amort. .................             -                 -    *less than $.01 in 2001
                                                  --------------------------
Adjusted net Income ........................      $    .08          $    .06


                                                   Nine Months Ended Sept. 30,
                                                  -----------------------------
                                                     2002             2001

Reported net income ........................      $1,134,000       $1,327,000
Add back goodwill amort. ...................           -               27,000
                                                  ---------------------------
Adjusted net income ........................      $1,134,000       $1,354,000

Basic earnings per share:
  Reported net income ......................      $      .25       $      .29
  Add back goodwill amort. .................               -                -   *less than $.01 in 2001
                                                  ---------------------------
Adjusted net Income ........................      $      .25       $      .29

Fully diluted earnings per share:
  Reported net income ......................      $      .25       $      .29
  Add back goodwill amort. .................               -                -   *less than $.01 in 2001
                                                  ---------------------------
Adjusted net Income .......................       $      .25        $     .29
</TABLE>

In October 2001 the Financial Accounting Standards Board (FASB) issued Statement
No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets." This
statement  supersedes FASB Statement No. 121,  "Accounting for the Impairment of
Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", and APB Opinion
No. 30, "Reporting the Results of  Operations-Reporting  the Effects of Disposal
of  a  Segment  of a  Business,  and  Extraordinary,  Unusual  and  Infrequently
Occurring Events and Transactions", for the disposal of a segment of a business.
This statement also amends ARB No. 51, "Consolidated  Financial  Statements" and
was adopted in the first quarter 2002. The adoption of this accounting  standard
did not have a material effect on the Company's financial position or results of
operations.

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

This management's  discussion and analysis of financial condition and results of
operations  references  the  Company's  two  operating  segments.  The Company's
railroad  operations  segment  consists  of  wholly-owned  short  line  railroad
subsidiaries  that offer similar  services and the Company's  equipment  leasing
segment leases railcars, locomotives, and other railroad equipment to affiliated
and  unaffiliated  entities.  All other  operations  are classified as corporate
support services for purpose of these discussions.  All information provided for
each  operating  segment is  presented  after  elimination  of all  intersegment
transactions, therefore reflecting its share of consolidated results.

                                       8
<PAGE>

Pioneer Railcorp, an Iowa corporation, is a railroad holding company. As used in
this Form 10-QSB,  unless the context requires otherwise,  the term "Company" or
"PRC" refers to the parent, Pioneer Railcorp and its subsidiaries: West Michigan
Railroad  Co.  (WMI),  Michigan  Southern  Railroad  Company  (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),  Keokuk Junction Railway Co. (KJRY),
Shawnee Terminal Railway Company (STR),  Pioneer  Industrial  Railway Co. (PRY),
The Garden City Western Railway,  Inc. (GCW),  Indiana  Southwestern Railway Co.
(ISW),  Kendallville  Terminal  Railway Co.  (KTR) (a spin off from the Michigan
Southern  Railroad  Company),  Elkhart & Western  Railroad Co. (EWR) (a spin off
from the Michigan Southern Railroad Company), Gettysburg & Northern Railroad Co.
(GET) (operating  effective  2/20/01),  Pioneer Resources,  Inc. (PRI),  Pioneer
Railroad  Equipment  Co.,  Ltd.  (PREL),  Pioneer Air, Inc.  (PAR),  and Pioneer
Railroad Services, Inc. (PRS).

Summary: Third Quarter 2002 Compared to Third Quarter 2001.

The Company's net income in the third quarter 2002 was $374,000,  an increase of
$121,000  from the third  quarter  2001 which had net income of  $253,000.  This
increase relates primarily to increased revenue from the railroad  operations in
the third quarter 2002.  The  Company's  revenue  increased in the third quarter
2002 by $246,000,  or 7%, to $3,926,000  from $3,680,000 in the same period last
year.  Operating  expense  increased  $26,000,  less than 1%, to $2,975,000 from
$2,949,000 in the same period last year. Operating income increased by $221,000,
or 30%, to $952,000 from $731,000 in the same period last year. Operating income
was increased in the third quarter 2002 from the Company's  railroad  operations
by  approximately  $354,000  resulting  from  increased  revenues  of  $321,000,
primarily from increased  switching related revenues,  and also reduced expenses
of $33,000, resulting from the Company's efforts to control and reduce operating
costs. Operating income was decreased in the third quarter 2002 by the Company's
equipment  leasing  operations by approximately  $133,000,  primarily from an 8%
reduction  in  revenue  from its  railcar  fleet of  approximately  $51,000  and
increased  expenses related to railcar  maintenance and railcar fleet relocation
of  approximately  $77,000.  Corporate  support  services did not  significantly
effect operating income in the third quarter 2002.

Revenue:

Revenue increased in the third quarter 2002 by approximately $246,000, or 7%, to
$3,926,000 from $3,680,000 in the same period last year. The railroad operations
increased  revenue by  $318,000  primarily  as a result of  increased  switching
revenue.  The equipment leasing  operations had a $65,000 decrease in revenue in
the period resulting  primarily from decreased  revenue generated by its railcar
fleet.  Corporate support service decreased revenue $7,000 primarily relating to
insignificant  amounts of revenue  generated from  performing  railroad  related
services to unaffiliated entities.

Operating Expense:

Operating expense increased slightly in the third quarter 2002 by $26,000 or 1%,
to  $2,975,000  from  $2,949,000  in the prior  year.  The  railroad  operations
decreased  operating  expense by  approximately  $34,000 in the period primarily
from  decreased  maintenance  of  equipment  expense,  decreased  administration
expense and decreased depreciation and amortization expense, offset by increased
maintenance  of way expense and  increased  transportation  expense,  as further
discussed below. The equipment leasing  operations  increased  operating expense
approximately  $67,000,  primarily from expenses related to railcar  maintenance
and railcar fleet relocation. In addition,  corporate support services decreased
operating expense by approximately $7,000 in the period resulting primarily from
decreased payroll resulting from personnel actions.

Maintenance of way and structure  expense (MOW) includes all expenses related to
track  maintenance;  including  payroll,  track materials,  signal  maintenance,
vegetation control,  and bridge  maintenance.  Maintenance of way and structures
expense  (MOW)  increased  $17,000,  or 6% to $268,000 from $251,000 in the same
period last year.  Railroad  operations  increased  MOW  $19,000  and  corporate
services decreased MOW $2,000 in the period.

                                       9
<PAGE>

Maintenance  of equipment  expense (MOE)  includes  expenses  related to railcar
repair expenses for both foreign and Company owned railcars;  including payroll,
car  repair  parts,  processing  fees  for  Company  owned  railcars,  and  also
maintenance to Company owned  vehicles.  Maintenance of equipment  expense (MOE)
decreased $27,000, or 7% to $349,000 from $376,000 in the same period last year.
The railroad  operations had decreased MOE of $38,000,  primarily  relating to a
reduction in expenses for material  needed to generate  revenue from  authorized
repairs  to  unaffiliated  railcars  while  on the  Company's  rail  lines.  The
equipment leasing operations had an increase in MOE of approximately  $56,000 as
a result of increased costs  associated with  maintaining the Company's  railcar
fleet. In addition,  MOE was decreased  $45,000 from corporate  support services
resulting from personnel reductions.

Transportation  expense  (TRAN)  includes  expenses  related  to train  movement
operations  including  payroll,  locomotive  fuel and supplies  expense,  repair
expenses to Company owned  locomotives,  car hire expense,  derailment  expense,
lading and damage  claims,  switching  services  purchased,  and joint  facility
expenses with other carriers.  Transportation  expense (TRAN) increased $93,000,
or 13% to $827,000  from  $734,000  in the same  period  last year.  Most of the
increase came from the railroad  operations which had increased TRAN of $92,000.
The  majority  of the  railroad  operations  TRAN  increase  relates  to carhire
expense.   The  equipment   leasing   operations  had  a  decrease  in  TRAN  of
approximately  $8,000 as a result of reduced costs  associated with  maintaining
the Company's  locomotive  fleet.  In addition,  TRAN was increased  $9,000 from
corporate   support  services   primarily   related  to  increased  repairs  and
maintenance to the Company aircraft.

General &  administration  expense  (ADMIN)  includes  includes  general manager
payroll  expenses,  legal  expenses,  bad  debt  expense  related  to  interline
settlements,  liability insurance,  utilities,  postage and freight, real estate
taxes, dues, licenses and fees, vehicle insurance, freight to move company owned
railcars and locomotives,  health and dental insurance expense, audit and income
tax fees,  printing,  and corporate  headquarters  support  service  payroll for
executive management, accounting, operations, marketing, real estate, legal, and
other support staff. General & administration expense (ADMIN) decreased $39,000,
or 4%, to $1,031,000  from $1,070,000 in the same period last year. The railroad
operations  had a decrease of $95,000 in ADMIN expense in the period,  primarily
as a result of reduced legal fees, particularly those associated with the Keokuk
Junction  Railway - BNSF dispute.  The equipment  leasing  operations  increased
ADMIN  approximately  $22,000 as a result of increased expenses  associated with
relocating the Company's  railcar fleet.  Corporate  support services  increased
ADMIN expense by approximately  $34,000 in the period  resulting  primarily from
personnel actions.

Depreciation and amortization expense decreased $17,000, or 3%, to $501,000 from
$518,000  in the same  period  last  year.  The  railroad  operations  decreased
depreciation and amortization expense by $11,000 of which $9,000 related to SFAS
142 which was discussed  previously in Note 4. The equipment leasing  operations
had decreased depreciation expense of approximately $3,000 and corporate support
services also had decreased depreciation of $3,000 in the period.

Other Income and Expense Income Statement Line Item Discussion:

In the third quarter 2002, other income and expense decreased $29,000 to $26,000
of income compared to $55,000 of income in the third quarter 2001.  Other income
relates primarily to lease income for the use of railroad property.  The Company
continues to place a strong emphasis on identifying and collecting revenues from
third parties  occupying Company  property.  In addition to lease income,  other
income and expense  includes  revenues  generated  from scrap  sales,  and other
miscellaneous  non-operating  revenues and expenses,  primarily generated by the
Company's railroad operations.

Interest expense related to equipment  financing  decreased $22,000 in the third
quarter 2002 to $118,000 compared to $140,000 in the same period last year. This
decrease is primarily the result of debt  refinancing  in late 2001 under a more
favorable  interest rate environment.  Other interest  expense,  which primarily
relates to the financing of the Company's railroad operations, decreased $21,000
to $150,000 from $171,000 in the prior year.

In the third  quarter 2002 the Company had a gain from fixed asset  dispositions
of $8,000,  primarily from the disposition of a two railcars and three cabooses.
In the third quarter 2001 the Company had a gain on fixed asset  dispositions of
approximately  $18,000, also generated from the disposition of a small number of
railcars.

                                       10
<PAGE>

Summary: First Nine Months 2002 Compared to First Nine Months 2001.

The  Company's  net  income in the first  nine  months  2002 was  $1,134,000,  a
decrease  of  $193,000  from the first nine  months 2001 which had net income of
$1,327,000.  This decrease relates  primarily to the second quarter 2001 gain on
sales from a 34 mile segment of track by the Alabama & Florida Railway Co. and 3
parcels  of land on the  West  Michigan  Railroad  Co.  These  two  transactions
resulted  in  approximately  $1,055,000  of net income in the first nine  months
2001.  Excluding these two transactions that resulted in one-time gains in 2001,
net income would have increased significantly. Revenue increased by $572,000, or
5%, to  $11,383,000  from  $10,811,000  in the same period last year.  Operating
expense decreased by $777,000,  or 8%, to $8,668,000 from $9,445,000 in the same
period  last  year.  Operating  income  increased  by  $1,349,000,  or  98%,  to
$2,715,000 from $1,366,000 in the same period last year.

Operating  income was  increased in the first nine months 2002 by the  Company's
railroad operations by approximately $1,081,000 resulting from increased revenue
of $618,000  and reduced  operating  expenses  of  $463,000  resulting  from the
Company's  efforts to control and reduce operating  costs.  Operating income was
decreased  in the first nine  months  2002 by the  Company's  equipment  leasing
operations by  approximately  $21,000,  primarily from a 1% reduction in revenue
from its  railcar  fleet and  locomotive  leasing  activities  of  approximately
$33,000  offset by  decreased  expenses  related to  equipment  maintenance  and
railcar  fleet  relocation  of  approximately  $12,000.  In addition,  corporate
support services  increased  operating  income by approximately  $289,000 in the
first nine months 2002 primarily from a decrease in health insurance expenses of
approximately   $100,000  and  decreased   payroll   resulting   from  personnel
reductions.

Revenue:

Revenue increased in the first nine months 2002 by approximately  $572,000, or 5
%, to  $11,383,000  from  $10,811,000 in the same period last year. The railroad
operations increased revenue by approximately  $618,000 in the first nine months
2002 which  resulted  from an increase in  revenues  of  approximately  $823,000
generated  by the  railroads  operated  in the  first  nine  months  2002 less a
decrease in revenue of approximately $205,000 as a result of the sale of certain
Alabama & Florida  Railway Co.  trackage in June 2001.  The railroad  operations
increased  revenue resulted  primarily from increased  switching related revenue
and car repair revenue.  The equipment leasing operations had a $33,000 decrease
in  revenue  in  the  period  resulting  from  decreased  revenue  generated  by
utilization of its railcar fleet by unaffiliated third parties and a decrease in
locomotive leasing revenue.  Corporate support service decreased revenue $13,000
primarily relating to railroad related services to unaffiliated entities.

Operating Expense:

Operating  expense decreased in the first nine months 2002 by $777,000 or 8%, to
$8,668,000 from $9,445,000 in the prior year. The railroad operations  decreased
operating  expense  by  approximately  $463,000  in the  period  which  included
$295,000 of decreased operating expense related to the sale of certain Alabama &
Florida  Railway Co.  trackage in June 2001.  The equipment  leasing  operations
decreased  operating  expense  approximately  $12,000,  primarily  from  reduced
expenses  related to railcar  and  locomotive  maintenance,  and  railcar  fleet
relocation. In addition,  corporate support services decreased operating expense
by  approximately  $302,000  in the period  primarily  from a decrease in health
insurance  expenses of approximately  $100,000 and decreased  payroll  resulting
from personnel reductions.

Maintenance of way and structure  expense (MOW) includes all expenses related to
track  maintenance;  including  payroll,  track materials,  signal  maintenance,
vegetation control,  and bridge  maintenance.  Maintenance of way and structures
expense (MOW) decreased $206,000 or 20%, to $812,000 from $1,018,000 in the same
period last year.  Railroad  operations had decreased MOW of $152,000,  of which
$93,000 relates to the sale of certain Alabama & Florida Railway Co. trackage in
June 2001. Corporate services decreased MOW $54,000 in the period as a result of
personnel reductions.

                                       11
<PAGE>

Maintenance  of equipment  expense (MOE)  includes  expenses  related to railcar
repair expenses for both foreign and Company owned railcars;  including payroll,
car  repair  parts,  processing  fees  for  Company  owned  railcars,  and  also
maintenance to Company owned  vehicles.  Maintenance of equipment  expense (MOE)
decreased $175,000, or 14% to $1,056,000 from $1,231,000 in the same period last
year.  The railroad  operations  had decreased MOE of $69,000,  primarily from a
reduction in expenses for material  needed to generate  revenue from  authorized
repairs  to  unaffiliated  railcars  while  on the  Company's  rail  lines.  The
equipment leasing operations had an increase in MOE of approximately  $10,000 as
a result of a slight increase in costs associated with maintaining the Company's
railcar fleet. In addition,  MOE was decreased  $116,000 from corporate  support
services as a result of personnel reductions.

Transportation  expense  (TRAN)  includes  expenses  related  to train  movement
operations  including  payroll,  locomotive  fuel and supplies  expense,  repair
expenses to Company owned  locomotives,  car hire expense,  derailment  expense,
lading and damage  claims,  switching  services  purchased,  and joint  facility
expenses with other carriers.  Transportation expense (TRAN) decreased $283,000,
or 12% to $2,162,000  from $2,445,000 in the same period last year. The railroad
operations  had a decrease in TRAN of $206,000,  including a decrease of $95,000
related to the sale of certain  Alabama & Florida  Railway Co.  trackage in June
2001.  The  railroad  operations  also had  decreased  TRAN costs as a result of
decreased personnel costs and decreased derailment related expenses, offset by a
increase in carhire expense.  The equipment leasing operations had a decrease in
TRAN of  approximately  $36,000 as a result of decreased  costs  associated with
maintaining  the Company's  locomotive  fleet.  In addition,  TRAN was decreased
$41,000 from corporate  support  services,  of which $16,000  relates to reduced
costs related to infrequent use of the Company  aircraft and $25,000  relates to
reduction in personnel.

General &  administration  expense  (ADMIN)  includes  includes  general manager
payroll  expenses,  legal  expenses,  bad  debt  expense  related  to  interline
settlements,  liability insurance,  utilities,  postage and freight, real estate
taxes, dues, licenses and fees, vehicle insurance, freight to move company owned
railcars and locomotives,  health and dental insurance expense, audit and income
tax fees,  printing,  and corporate  headquarters  support  service  payroll for
executive management, accounting, operations, marketing, real estate, legal, and
other support staff. General & administration expense (ADMIN) decreased $82,000,
or 3%, to $3,120,000  from $3,202,000 in the same period last year. The railroad
operations had decreased  ADMIN of $8,000 in the period.  The equipment  leasing
operations  increased  ADMIN  approximately  $9,000  as a  result  of  increased
expenses  associated  with  relocating the Company's  railcar  fleet.  Corporate
support services decreased ADMIN expense by approximately  $83,000 in the period
resulting  primarily from decreased health insurance expenses and a reduction in
personnel.

Depreciation and amortization  expense decreased  $32,000,  or 2%, to $1,518,000
from $1,550,000 in the same period last year. The railroad operations  decreased
depreciation  expense by $29,000,  which  included a decrease  of  approximately
$25,000 related to the sale of certain Alabama & Florida Railway Co. trackage in
June 2001. The railroad operations also decreased  depreciation and amortization
expense by $27,000 related to SFAS 142 which was discussed previously in Note 4.
In addition, the railroad operations had increased depreciation of approximately
$19,000  related to the KJRY  purchase  of 12.1  miles of track from  LaHarpe to
Lomax,  Illinois in December 2001. The equipment  leasing  operations  increased
depreciation  expense   approximately  $5,000  and  corporate  support  services
decreased depreciation expense by $8,000.

Other Income and Expense Income Statement Line Item Discussion:

In the first nine months  2002 other  income and  expense  increased  $85,000 to
$286,000  of income in the period  compared  to  $201,000  of income in the same
period last year. Other income relates  primarily to lease income for the use of
railroad  property.  The Company  places a strong  emphasis on  identifying  and
collecting  revenues from third parties occupying Company property.  In addition
to lease income, other income and expense includes revenues generated from scrap
sales, and other miscellaneous  non-operating  revenues and expenses,  primarily
generated by the Company's railroad  operations.  In the first nine months 2001,
the Company recorded  approximately  $79,000 of expense resulting from a payment
made as a guarantor on an  outstanding  loan of the Minnesota  Central  Railroad
Co., which the Company sold in 1999.

                                       12
<PAGE>

Interest expense related to equipment  financing decreased $138,000 in the first
nine months 2002 to $356,000  compared to $494,000 in the same period last year.
This decrease is the result of the early repayment of certain debt with proceeds
from the AF track sale in June 2001 and a  reduction  in  interest  expense as a
result of debt  refinancing  in late 2001 under a more  favorable  interest rate
environment. Other interest expense, which primarily relates to the financing of
the Company's railroad operations,  decreased $114,000 to $445,000 from $559,000
in the prior year.

In the  first  nine  months  2002  the  Company  had a  gain  from  fixed  asset
dispositions of $9,000,  primarily from the disposition of several  railcars and
cabooses.  In the first nine months 2001 the Company had a  significant  gain on
fixed asset  dispositions  of  approximately  $1,938,000.  On June 11, 2001, the
Company's  Alabama & Florida  Railway Co. (AF) subsidiary sold a 34 mile segment
of its track from  Georgiana,  AL to Andalusia,  AL, to the Three Notch Railroad
Co. (TNR), a wholly owned  subsidiary of Gulf & Ohio Railways in Knoxville,  TN.
The sale price was $2.5  million and the pre-tax gain  realized was  $1,738,000.
The AF retained 43 miles of the line and  continues  operating on the  remaining
trackage.  In  addition,  in 2001 the West  Michigan  Railroad  Co. sold 3 small
parcels of commercial development land to one of its online patrons for $280,000
and the pre-tax gain realized on the sale was $183,000.

Impact of New Accounting Pronouncements:

The Company is not aware of any 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.

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 facilities totaling  $1,100,000,  all of which was available for
use at the end of the third quarter 2002.

The Company had a credit agreement with National City Bank of  Michigan/Illinois
to  provide a $5  million  revolving  acquisition  line of credit  for  railroad
acquisitions  at a  variable  interest  rate of prime  plus 1%.  This  agreement
expired  in the third  quarter  2002 and was not  renewed  by the  Company.  The
primary reason the Company has decided not to renew the credit  facility is that
the current commercial lending  environment is requiring loan covenants that are
stricter  than the Company is willing to agree to. The Company  still  considers
National  City Bank an important  source of  acquisition  financing,  and future
acquisition opportunities,  absent of this credit line, will require the bank to
review and approve the transaction prior to any funding  decisions.  Previously,
under the terms of the credit line,  the Company did not need bank  approval for
an acquisition  utilizing the credit line. The outstanding balance of $2,105,000
on the line was converted to a 5 year 5.75% fixed rate note on October 10, 2002.

In addition to converting the outstanding balance on the acquisition line to a 5
year 5.75% fixed rate note,  effective October 10, 2002, the Company  negotiated
reduced  interest rates on several of its notes  outstanding  with National City
Bank. The ability to renegotiate interest rates was limited by the assessment of
prepayment  premiums by National City Bank in  accordance  with the terms of the
original notes.  Therefore,  it was not cost effective to renegotiate all notes,
and the  reduction in interest  rates on  renegotiated  notes was limited by the
prepayment  premiums.  The  interest  rate on the note  related to the  Michigan
Southern  Railroad  Co. was  reduced  from 8.375% to 7.55% for 5 years on a note
balance  of  $1,897,000.  The  interest  rate on the note  related to the Keokuk
Junction  Railway  Co. was  reduced  from  8.375% to 7.15% for 5 years on a note
balance of $2,392,000.  The KJRY note includes $500,000 of additional  principal
that was previously  funded by the acquisition line relating to the December 19,
2001  purchase  of 12.1  miles of track  from  LaHarpe  to Lomax,  Illinois.  In
addition,  the Company  converted  the variable  note related to the Garden City
Western Railway Inc. to a fixed rate of 5.7% for the next 5 years on the current
note balance of $1,216,000.

Long-term  equipment  financing has historically  been readily  available to the
Company for its railcar  acquisition  program.  The Company  believes it will be
able to continue obtaining  long-term equipment financing should the need arise.
The Company's  plans for new debt in the  foreseeable  future is contingent upon
new railroad acquisitions and increased needs and/or opportunities for railcars.

On August 27, 2002, the Company's  wholly owned subsidiary  Mississippi  Central
Railroad  Co.  sent  notice to all of its  preferred  shareholders  that it will
redeem all outstanding  shares of 10% preferred stock. The call price is 110% of
the  $1,000  par value per share and there are 332  shares  outstanding  held by
unaffiliated parties,  therefore the total call price will be $356,200, and will
be disbursed to the shareholders by December 31, 2002. The call price was funded
by a 5 year 5.16% fixed rate note.

                                       13
<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  2,099,142 to  4,198,284.  At the same time  shareholders
became  entitled  to purchase  an  additional  4,198,284  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 $2.00 per share.  The shares  purchased  through  the
exercise of the warrants  must be held for 1 year from date of  purchase.  As of
September  30,  2002,  a total of 68,766  warrants  originally  issued  had been
exercised  to date and the Company  realized  $137,532 on the  exercise of those
warrants.

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 became fully vested and exercisable as of
July 1, 2001. The options are exercisable at prices ranging from $2.75 to $3.03,
based  upon the  trading  price on the  date of the  grant,  in whole or in part
within 10 years from the date of grant.  As of  September  30,  2002, a total of
155,000 options are outstanding under this plan.

In 1999,  Pioneer  Railcorp's  Board of  Directors  authorized  and approved the
repurchase  of up to one million  shares  (1,000,000)  of the  Company's  common
stock.  As of September 30, 2002, a total of 85,090 shares had been  repurchased
at a cost of  $120,993.  The Company  plans to  continue  buying back its common
stock but believes the  repurchase  will be limited due to capital  requirements
and the trading volume of the Company's stock.

The Company  anticipates that the outcomes  involving  current legal proceedings
will not  materially  adversely  affect  the  Company's  consolidated  financial
position or results of operation.

The Company  believes its cashflow from  operations  and its  available  working
capital  credit  lines,  will be more than  sufficient to meet  liquidity  needs
through at least the next 12 months.

Balance Sheet and Cash Flow Items:

The  Company's  operating  activities  in the first nine months  2002  generated
positive cash flow of  $3,325,000.  Net cash from  operating  activities for the
first nine months 2002 was generated from $1,134,000 of net income, increased by
$1,518,000 of depreciation and amortization,  a decrease in accounts  receivable
of  $237,000,  an  increase in income tax  payable of  $620,000,  an increase in
deferred  revenue of  $786,000,  and an  increase  in net cash of  $60,000  from
changes  in  various  other  operating  assets  and  liabilities.  Net cash from
operating activities was reduced in the period by a decrease in accounts payable
of  $846,000,  a decrease  in accrued  liabilities  of  $51,000,  an increase in
inventories of $57,000 and an increase in prepaid expenses of $76,000.

In  the  first  nine  months  2002,  the  Company   purchased  and   capitalized
approximately $2,022,000 of fixed assets and capital improvements which included
the purchase of approximately 78 railcars at a cost of $320,000 and the purchase
of 5 locomotives at a cost of $330,000.  The railcars and  locomotive  purchases
were financed using the Company's  working capital line of credit and refinanced
with  long-term  fixed rate  financing  as  previously  discussed.  The  Company
capitalized approximately $928,000 of track structure additions and improvements
including  $793,000  for  upgrades to the GET track to handle  heavy loads for a
power  plant.  The GET  track  upgrades  were  paid for by the  power  plant and
recorded as deferred revenue on the Company's balance sheet.  Current accounting
principles  dictate that this deferred  revenue be amortized to income at a rate
equal to depreciation expense and therefore will have no effect on net income in
future periods.  Other capital expenditures in 2002 include $245,000 capitalized
for buildings  and  structures,  including  $145,000 for  construction  of a new
engine house on the GCW,  replacing the previous building which was destroyed by
a tornado in 2001. Other capital expenditures include approximately $199,000 for
railcar and locomotive betterments and various equipment. Unless otherwise noted
above, capital expenditures were funded with working capital.

                                       14
<PAGE>

Item 4. CONTROLS AND PROCEDURES

(a)  Evaluation  of  disclosure   controls  and   procedures:   Based  on  their
     evaluations  as of a date within 90 days of the filing date of this report,
     the  principal  executive  officer and principal  financial  officer of the
     Company  have  concluded  that  the  Company's   disclosure   controls  and
     procedures  (as  defined  in  Rules   13a-14(c)  and  15d-14(c)  under  the
     Securities Exchange Act) are effective to ensure that information  required
     to be disclosed by the Company in reports that the Company files or submits
     under the Securities  Exchange Act is recorded,  processed,  summarized and
     reported  within the time  periods  specified in the rules and forms of the
     SEC.

(b)  Changes in  internal  controls:  There were no  significant  changes in the
     Company's  internal  controls or in other factors that could  significantly
     affect these internal controls  subsequent to the date of their most recent
     evaluation,  including any  corrective  actions with regard to  significant
     deficiencies and material weaknesses.

PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

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.

In a letter dated  November 13, 1998 Keokuk  Junction  Railway  (KJRY)  notified
Burlington  Northern  Santa Fe Railway (BNSF) that it desired to negotiate a new
agreement  for  BNSF's  access to its  Mooar  Line in  Keokuk,  Iowa or the then
current agreement and supplements thereto would be terminated effective March 1,
1999. No new agreement was reached and KJRY put in place an interchange  between
BNSF and KJRY for movement of BNSF cars and  locomotives to the Mooar Line for a
charge of $85 per car. On April 27, 1999 BNSF filed a Petition  for  Declaration
or Prescription of Crossing,  Trackage or Joint use Rights and for Determination
of  Compensation  and Other  Terms in  Finance  Docket  Numbers  33740 and 33740
(Sub-No-1).  In a  decision  dated  June 20,  2001 the STB ruled that BNSF had a
right to cross the KJRY's track to access the Mooar Line. It ordered the parties
to negotiate  compensation  for the  crossing  and if a settlement  could not be
reached then the STB would set the  compensation.  No settlement was reached and
BNSF filed a Petition  to  Establish  Compensation  and Other  Terms on July 23,
2001. In addition to asking the STB to set the compensation for the crossing the
BNSF  also  asked  the STB to  order a  refund  of the  difference  between  the
compensation  set by the STB and the amount paid by BNSF  between  March 1, 1999
and May 1, 2001.  The total amount paid by BNSF between March 1, 1999 and May 1,
2001 is approximately $663,000. Mediation has been conducted but has not reached
a resolution  to this point.  The STB has not ruled on the Petition to Establish
Compensation.  The  KJRY  filed a notice  of  appeal  of the  June 20,  2001 STB
decision  with the United  States  Court of Appeals for the District of Columbia
Circuit.  In a decision dated June 14, 2002,  the D.C.  Circuit Court of Appeals
vacated the STB decision dated June 20, 2001.  KJRY and the BNSF again discussed
resolving the Mooar Line situation but no agreement could be reached. BNSF again
began  interchanging cars to KJRY on July 1, 2002 for delivery to the Mooar Line
at a rate of $85 per car.  KJRY  will  exclude  from  income  switching  revenue
charged  beginning  July 1, 2002,  related to BNSF Mooar Line  traffic  and will
escrow the  switching  revenue as deferred  revenue in the balance sheet pending
final  resolution  of this  matter.  On July 1,  2002,  BNSF  filed at the STB a
Petition for Issuance of a Certificate of Public  Convenience  and Necessity and
Declaration  of Crossing  Rights in Finance  Docket No. 33740.  KJRY will file a
reply to that petition.  Management does not believe the BNSF is entitled to any
refund for  switching  revenue BNSF paid for services  between March 1, 1999 and
May 1, 2001,  and in  addition,  management  believes the Company is entitled to
compensation  for BNSF traffic on the KJRY between May 1, 2001 and June 30, 2002
that was not recorded by the Company pending final resolution of this matter.

As of September 30, 2002,  management  and internal  legal counsel are unable to
determine  what the outcome of the  litigation  may be and whether there will be
any adverse or favorable financial consequences.

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

No matters  were  submitted to a vote of security  holders in the third  quarter
2002.

                                       15
<PAGE>

Item 5.   OTHER INFORMATION

Michigan Southern Railroad  operations into Coldwater,  Michigan - Pursuant to a
June 6, 1991 Operating  Agreement  between  Michigan  Southern  Railroad Company
(MSO) and the Branch & St. Joseph Counties Rail Users Association (RUA), MSO was
granted the right to operate 24 miles of track  between  Sturgis and  Coldwater,
Michigan.  The June 6, 1991 Operating Agreement also contained an option for MSO
to purchase  the RUA track from  Coldwater  to Sturgis,  Michigan.  MSO filed an
action  for  specific  performance  of the  "option to  purchase  clause" in the
Circuit Court of St. Joseph County,  Michigan, in 1999. The MSO has entered into
a settlement  agreement  with the RUA whereby MSO agreed it would not pursue its
option to purchase, and no longer operate on RUA owned track. The MSO determined
that the purchase  price set  pursuant to a formula  contained in the "option to
purchase  clause" had risen to more than $700,000,  and was not justified  based
upon the traffic volumes and the estimated annual operating profit of $50,000 on
the Coldwater business. The June 6, 1991 Operating Agreement expired on December
6, 2001and pursuant to the settlement agreement RUA will file a notice of change
of operators at the Surface Transportation Board, after which MSO will no longer
have operating  authority to operate between Sturgis and Coldwater,  Michigan to
serve the customers in Coldwater.

On July 2, 2002,  the  Company's  newly  elected  director,  J. William  Sharpe,
resigned from the Board for personal  reasons.  On August 1, 2002,  the Board of
Directors  appointed Clifton T. Lopez to replace Mr. Sharpe.  Mr. Lopez lives in
Creve Coeur,  MO and currently  works as a consultant.  Previously Mr. Lopez has
over 30 years  experience in  accounting,  finance and  strategic  planning with
Monsanto  Company in St. Louis,  Mo. Mr. Lopez will serve on the Company's audit
committee.

On June 11, 2001, the Company's  Alabama & Florida  Railway Co. (AF)  subsidiary
sold a 34 mile segment of its track from Georigiana, AL to Andalusia, AL, to the
Three  Notch  Railroad  Co.  (TNR),  a wholly  owned  subsidiary  of Gulf & Ohio
Railways  in  Knoxville,  TN.  The cash sale price was  $2,500,000  and the sale
generated a pre-tax gain of $1,738,000. In addition, in the Second Quarter 2001,
the West Michigan  Railroad Co. sold 3 small  parcels of commercial  development
land to one of its online  patrons for $280,000 and the pre-tax gain realized on
the sale was $183,000.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

Exhibit # 11 - Statement regarding computation of per share earnings.

Exhibit 99 - Certification

No reports were filed on Form 8-K during the first nine months 2002

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
       11/05/02                        -----------------------------------------
        DATE                           GUY L. BRENKMAN
                                        PRESIDENT & CEO


                                       /s/ J. Michael Carr
      11/05/02                         -----------------------------------------
       DATE                            J. MICHAEL CARR
                                         TREASURER & CHIEF FINANCIAL OFFICER


                                       16
<PAGE>

CERTIFICATIONS

Certification by the Chief Executive Officer:

I, Guy L. Brenkman certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Pioneer Railcorp;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   Theregistrant's  other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: November 5, 2002


/s/ Guy L. Brenkman
-----------------------
Guy L. Brenkman
Chief Executive Officer

                                       17
<PAGE>

Certification by the Chief Financial Officer:

I, J. Michael Carr, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Pioneer Railcorp;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function): '

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: November 5, 2002


/s/ J. Michael Carr
------------------------
J. Michael Carr
Chief Financial Officer


                                       18