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 March 31, 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.

                                    4,588,263
             ------------------------------------------------------
             (Shares of Common Stock outstanding on March 31, 1997)



<PAGE>



PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended March 31, 1997 and 1996

UNAUDITED

                                                     First Quarter First Quarter
                                                         1997           1996
                                                     --------------------------

Operating revenue ................................   $ 2,801,517    $ 2,450,441
                                                     --------------------------

Operating expenses
   Maintenance of way ............................       227,676        201,518
   Maintenance of equipment ......................       368,256        279,920
   Transportation expense ........................       697,372        455,289
   Administrative expense ........................       794,731        615,457
   Depreciation  & amortization ..................       367,586        314,576
                                                     --------------------------
                                                       2,455,621      1,866,760
                                                     --------------------------

Operating income .................................       345,896        583,681
                                                     --------------------------

Other income & expense
   Other (income) expense ........................      (133,919)       (59,433)
   Interest expense, equipment ...................       202,159        200,167
   Interest expense, other .......................       146,175         87,267
   Net (gain) loss on sale of fixed assets .......       (28,952)       (29,505)
                                                     --------------------------
                                                         185,463        198,496
                                                     --------------------------

Income before income taxes .......................       160,433        385,185

Provision for income taxes .......................        58,900        142,400
                                                     --------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries ..   $   101,533    $   242,785

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


Net income .......................................   $    70,225    $   211,477
                                                     ==========================

Earnings per common share ........................   $      0.02    $      0.04
                                                     ==========================

Weighted average number of common shares
and common share equivalents used in
computing earnings per share .....................     8,869,448      8,618,796
                                                     ==========================
<PAGE>



PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996

UNAUDITED
<TABLE>
                                                            March 31    December 31
                                                              1997          1996
                                                          -------------------------
<S>                                                       <C>           <C>   

ASSETS
Current Assets
   Cash ...............................................   $   673,671   $   501,212
   Accounts receivable, less allowance
     for doubtful accounts (1997 $45,290; 1996 $26,892)     2,234,031     2,071,289
   Inventories ........................................       413,904       420,952
   Prepaid expenses ...................................       191,505       261,427
   Income tax refund claims ...........................       338,246       349,881
   Deferred taxes .....................................        25,901        25,901
                                                          -------------------------
        Total current assets ..........................     3,877,258     3,630,662
                                                          -------------------------
Property and Equipment less accumulated
  depreciation 1997 $3,645,853; 1996 $3,294,610 .......    20,029,414    20,131,566
                                                          -------------------------
Intangible Assets, less accumulated amortization
  1997 $151,276; 1996 $140,109 ........................     1,159,459     1,171,114
                                                          -------------------------

Investments, cash value of life insurance .............        79,820        74,962
                                                          -------------------------
Total assets ..........................................   $25,145,951   $25,008,304
                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ...................................   $ 3,193,786   $ 2,973,258
   Notes payable ......................................       572,653       769,535
   Income taxes payable ...............................        66,078        18,978
   Current maturities of long-term debt ...............     1,817,421     1,813,246
   Accrued liabilities ................................       781,311       491,610
                                                          -------------------------
        Total current liabilities .....................     6,431,249     6,066,627
                                                          -------------------------

Long-term debt, net of current maturities .............    12,226,335    12,564,133
Deferred income taxes .................................     1,967,651     1,967,651
                                                          -------------------------
        Total liabilities & debt ......................    20,625,236    20,598,411
                                                          -------------------------

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

Stockholders' Equity
   Common stock .......................................         4,585         4,571
   Additional paid-in capital .........................     2,007,724     1,981,149
   Retained earnings ..................................     1,320,407     1,236,173
                                                          -------------------------
        Total stockholders' equity ....................     3,332,716     3,221,893
                                                          -------------------------
Total liabilities and equity ..........................   $25,145,951   $25,008,304
                                                          =========================
</TABLE>
<PAGE>



PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters Ended March 31, 1997 and 1996

UNAUDITED
<TABLE>
                                                                First Quarter First Quarter
                                                                    1997          1996
                                                                --------------------------
<S>                                                             <C>            <C> 
Cash Flows From Operating Activities
Net income ..................................................   $    70,225    $   211,476
Adjustments to reconcile net income to net cash
provided by operating activities:
          Minority interest in preferred stock dividends of
            consolidated subsidiaries .......................        31,308         31,308
          Depreciation ......................................       356,418        303,444
          Amortization ......................................        11,167         11,132
          Increase in cash value life insurance .............        (4,858)           -0-
          (Gain) on sale of property & equipment ............       (28,952)       (29,505)
          Deferred taxes ....................................           -0-            -0-
Change in assets and liabilities, net of effects from
          acquisition of subsidiaries
          (Increase) decrease accounts receivable ...........      (162,742)       (61,720)
          (Increase) decrease inventories ...................         7,048         (6,188)
          (Increase) decrease prepaid expenses ..............        69,922         57,385
          (Increase) decrease intangible assets .............           488            249
          Increase (decrease) accounts payable ..............       220,528        213,389
          (Increase) decrease income tax refund claims ......        11,635         50,998
          Increase (decrease) income tax payable ............        47,100        106,518
          Increase (decrease) accrued liabilities ...........       289,701         65,148
                                                                --------------------------
          Net cash provided by operating activities .........       918,988        953,634
                                                                --------------------------

Cash Flows From Investing Activities
          Proceeds from sale of property & equipment ........        53,089            -0-
          Purchase of property & equipment, net of property
               and equipment from acquisition of subsidiaries      (278,403)      (714,690)
          Acquisition of subsidiaries, net of cash acquired .           -0-     (2,786,882)
                                                                --------------------------
          Net cash (used in) investing activities ...........      (225,314)    (3,501,572)
                                                                --------------------------

Cash Flows From Financing Activities
          Proceeds from short-term borrowings, net of debt
             assumed in acquisition of subsidiaries .........       400,328        278,438
          Proceeds from long-term borrowings, net of debt
             assumed in acquisition of subsidiaries .........       119,700      3,046,000
          Payments on short-term borrowings .................      (597,210)       (49,212)
          Payments on long-term borrowings ..................      (453,323)      (358,084)
          Repurchase of minority interest
          Proceeds from warrants and options exercised ......        26,590         41,040
          Payments to minority interest .....................       (17,300)       (17,300)
                                                                 -------------------------
          Net cash provided by financing activities: ........      (521,215)     2,940,882
                                                                 -------------------------

Net increase (decrease) in cash .............................       172,459        392,944

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

Cash, end of period .........................................    $  673,671    $   669,174
                                                                 =========================
</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.

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 first quarter
of 1997,  basic  earnings  per share  would have been $.02 per share and diluted
earnings per share would have been $.02 per share.
<PAGE>



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 March 31,
1997,  a total  of  782,300  options  are  outstanding  under  this  plan  after
forfeitures and exercises.

On June  26,  1996,  the  Company  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 March 31,  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
March 31, 1997, a total of 65,594 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 first 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: First Quarter 1997 Compared to First Quarter 1996.

The Company's  net income in the first quarter 1997  decreased by 67% to $70,225
down from $211,477 in the same period last year.  Operating revenue in the first
quarter 1997  increased by $351,000 or 15% to $2.8 million from $2.45 million in
the same period last year. Operating expense increased in the first quarter 1997
by $589,000  or 32% to $2.5  million  from $1.9  million in the same period last
year. Operating income decreased in the first quarter 1997 by $238,000 or 41% to
$346,000 from $584,000 in the same period last year.
<PAGE>



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

The Minnesota  Central  Railroad had a decrease in operating income of $129,000,
recording an operating  loss of $159,000 in the first quarter 1997 compared to a
$29,000 loss in the same period last year.  MCTA's  decrease was a direct result
of the severe winter weather in the region,  which left the railroad  inoperable
for almost all of the first quarter 1997. Pioneer Railroad  Equipment  operating
income was down $174,000,  recording  operating  income of $254,000 in the first
quarter 1997 compared to $428,000 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, 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 April 1996.

The Decatur  Junction  Railway  operating  income was down  $40,000 in the first
quarter 1997,  recording  operating  income of $26,000 in the first quarter 1997
compared to $66,000 in the same period last year.  DT's  decrease  resulted from
decreased grain  shipments due to market  conditions.  The  Mississippi  Central
Railroad operating income decreased  approximately  $81,000 in the first quarter
1997,  recording  operating income of $33,000 in the first quarter 1997 compared
to  $114,000 in the same period  last year.  MSCI's  decrease  was the result of
reduced shipping by the two principal users of the line, one relating to a below
normal cotton  harvest,  and the other relating to a decrease in timber material
needed for plant production. The Fort Smith Railroad had a decrease in operating
income of approximately  $80,000 in the first quarter 1997,  recording operating
income of $261,000 in the first  quarter  1997  compared to $341,000 in the same
period  last year.  FSR's  decrease  was the result of a decrease  in  demurrage
revenue in 1997 compared to 1996.

Pioneer Railroad Services had increased operating costs of approximately $45,000
in the first quarter 1997  compared to the same period last year,  most of which
relates to hiring and  retaining of several  support  personnel  not  previously
employed in the first quarter of 1996.

The Alabama & Florida Railway had increased  operating  income of $56,000 in the
first quarter 1997,  recording operating income of $191,000 compared to $135,000
in the same  period  last year.  AF's  increase  resulted  from both  volume and
pricing increases. The Company's Keokuk Junction Railway subsidiary, which began
operations on March 13, 1996,  contributed  operating  income of $243,000 in the
first quarter 1997, compared to $40,000 in the same period in 1996. The Rochelle
Railroad which began  operations in April 1996 had operating  income of $37,000,
and the Michigan  Southern  Railroad which began operations in December 1996 had
operating income of $54,000.

Interest expense  increased  approximately  $61,000 in the first quarter 1997 to
$348,000  compared to $287,000 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  quarter  1997 of $351,000 was
positively  affected by a $568,000 increase of 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 $97,000 of operating  revenue in the first  quarter  1997,  and the Michigan
Southern  Railroad,  which began  operations in December  1996,  had $216,000 of
operating revenue in the quarter. In addition, the Alabama & Florida Railway had
an increase of approximately  $72,000 in operating  revenue in the first quarter
of 1997 to $354,000 compared to $282,000 in the same period last year.

The  increases in  operating  revenue  from these  subsidiaries  was offset by a
$178,000 operating revenue decrease by the Minnesota Central Railroad, which had
operating  revenue of $12,000 in the first  quarter 1997 compared to $190,000 in
the same period last year, as a result of severe weather  conditions.  Operating
revenue from Pioneer Railroad Equipment Co. was down  approximately  $145,000 to
$559,000 in the first  quarter 1997 compared to $704,000 in the same period last
year. The PREL revenue decrease was a result of the non-utilization of its grain
hopper  cars  assigned to the MCTA,  and the  non-renewal  of the railcar  lease
previously mentioned.

Mississippi  Central Railroad operating revenue was down approximately  $103,000
to $150,000 in the first  quarter  1997  compared to $253,000 in the same period
last year as a result of reduced shipping by the two principal users of the line
as mentioned above.  Decatur Junction Railway operating revenue was down $42,000
to $61,000 in the first  quarter  1997  compared  to $103,000 in the same period
last year,  as a result of reduced grain  shipments due to market  conditions in
the first quarter 1997.

The remaining  operating  subsidiaries had constant overall revenue in the first
quarter 1997 compared to the same period last year.
<PAGE>



Operating Expense:

The increase of operating expense of $589,000 in the first quarter 1997 resulted
from the following factors:

Increase in maintenance of way and maintenance of equipment expense in the first
quarter  1997  was  primarily   attributable  to  the  Keokuk  Junction  Railway
operations which began in March 1997. The increase in transportation  expense in
the first quarter 1997 was primarily  attributable to new operating subsidiaries
as follows: KJRY $205,000, RRCO $23,000, and MSO $102,000. The Minnesota Central
had a decrease in transportation expense of $63,000 in the first quarter 1997 as
a result of the  reduced  operations  resulting  from the  severe  weather.  The
increase in administrative expense in the first quarter 1997 was attributable to
both new operating  subsidiaries and  administrative  expense related to payroll
costs associated with the hiring of additional support  personnel.  The increase
in administrative costs related to the new operating subsidiaries is as follows:
KJRY $58,000, RRCO $37,000, and MSO $24,000.

The remaining  operating  subsidiaries had constant overall operating expense in
the first quarter 1997 compared to the same period last year.

Other Income and Expense Income Statement Line Item Discussion:

Other  income of $134,000  for the first  quarter  1997  consists of real estate
lease income,  scrap income and other miscellaneous  items. The increase in 1997
is primarily  related to improved and increased  efforts in generating  right of
way lease income.

Other  interest  expense  increased  in the first  quarter  1997 by  $59,000  to
$146,000 compared to $87,000 in the same period last year. Most of this increase
is a result of financing activities related to the Company's  acquisition of the
Keokuk Junction Railway.

Net gain on fixed asset  dispositions  during the first  quarter 1997 of $29,000
included  $24,000  from the sale of a  locomotive  and $5,000 from the sale of a
railcar.  Net gain on fixed asset dispositions  during the first quarter 1996 of
$29,505 was generated  from 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  $1,075,000 of which
approximately  $553,000 was  available at the end of the first  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 10.75%. 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 has been 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.

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 8,420  warrants  were  exercised  in the first  quarter  1997,  and the
Company  realized  $16,840 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
March 31, 1997.
<PAGE>



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 quarter 1997 and the Company
realized $9,750 as a result of their exercise.  As of March 31, 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 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 has financing in
place to repay the  acquisition  line of credit,  pending final  negotiation  of
documents  and  other  miscellaneous  items.  The  terms  of the  financing,  if
obtained,  would include a fixed rate of interest and monthly payments over a 66
month period.

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 $919,000 in the
first quarter 1997  compared to $954,000 in the same period last year.  Net cash
from  operating  activities  for the first quarter 1997 resulted  primarily from
$70,000 of net income, $367,000 of depreciation and amortization, an increase in
trade payables of $220,000 and an increase in accrued liabilities of $290,000.

In the first quarter 1997 the Company purchased  approximately $278,000 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 $78,000
of track and structure  betterments,  and the remaining capital  expenditures of
approximately  $78,000 were for machinery,  equipment and other assets.  All the
expenditures  other than the  railcars  purchased  were  financed  with  working
capital cash flow.


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 first quarter 1997.

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

A Federal  Employer's  Liability  Act  ("FELA")  lawsuit is pending  against the
Alabama & Florida  Railway Co. 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.

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.  The other case was brought by KJRY in the Hancock County  (Illinois)
Circuit Court, and involves unpaid car storage charges due KJRY.
<PAGE>



A case is currently pending in the Circuit Court of Sebastian County,  Arkansas,
involving a crossing  accident  which  occurred in Fort Smith in December  1993.
Management is vigorously  defending  that case, and does not believe FSR has any
liability.  As such,  the case is not  likely to result  in a  material  adverse
effect  on the  Registrant'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.

In addition,  KJRY has been notified that an employee who allegedly sustained an
injury on December 26, 1996, may file an FELA action.  Management has inadequate
information  at this time to evaluate the extent or validity of that  employee's
potential claim.

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.

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

No matters  were  submitted to a vote of security  holders in the first  quarter
1997.


Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

None.
<PAGE>






                                   SIGNATURES


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

PIONEER RAILCORP
(Registrant)



                              /s/ Guy L. Brenkman
       5/12/97                --------------------------------------------------
        DATE                  GUY L. BRENKMAN
                              PRESIDENT & CEO



                              /s/ J. Michael Carr
       5/12/97                --------------------------------------------------
       DATE                   J. MICHAEL CARR
                              ASSISTANT TREASURER &
                              CHIEF FINANCIAL OFFICER