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

                                   FORM 10-QSB

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

                       For the quarter ended June 30, 1999

                        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 [ ].

                                    4,610,717
              -----------------------------------------------------
              (Shares of Common Stock outstanding on June 30, 1999)
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended June 30, 1999 and 1998

UNAUDITED
<TABLE>
                                                                          Second Quarter                     First Six Months
                                                                  -----------------------------       -----------------------------
                                                                      1999              1998              1999              1998
                                                                  -----------------------------------------------------------------
<S>                                                               <C>               <C>               <C>               <C>

Operating revenue ..........................................      $ 3,493,955       $ 3,653,418       $ 6,935,933       $ 6,890,265
                                                                  -----------------------------------------------------------------

Operating expenses
   Maintenance of way ......................................          383,052           411,733           719,237           708,762
   Maintenance of equipment ................................          387,481           416,010           758,332           818,311
   Transportation expense ..................................          730,197           796,949         1,613,028         1,533,543
   Administrative expense ..................................          954,244           944,794         1,772,456         1,764,681
   Depreciation  & amortization ............................          453,560           394,601           875,409           786,864
                                                                  -----------------------------------------------------------------
                                                                    2,908,534         2,964,087         5,738,462         5,612,161
                                                                  -----------------------------------------------------------------

Operating income ...........................................          585,421           689,331         1,197,471         1,278,104
                                                                  -----------------------------------------------------------------

Other income & expense
   Other (income) expense ..................................          (63,162)          (36,421)         (198,286)         (105,563)
   Loss on sale of subsidiary ..............................          565,873               -0-           565,873               -0-
   Interest expense, equipment .............................          162,403           199,235           327,309           399,068
   Interest expense, other .................................          187,162           111,199           371,285           256,822
   Net (gain) loss on sale of fixed assets .................             (335)          (68,579)           (2,215)          (75,695)
                                                                  -----------------------------------------------------------------
                                                                      851,941           205,434         1,063,966           474,632
                                                                  -----------------------------------------------------------------

Income before income taxes .................................         (266,520)          483,897           133,505           803,472

Provision for income taxes .................................         (111,300)          180,500            41,500           294,400
                                                                  -----------------------------------------------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries ............      ($  155,220)      $   303,397       $    92,005       $   509,072

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


Net income .................................................      $  (186,528)      $   272,089       $    29,390       $   446,457
                                                                  =================================================================

Basic earnings per common share ............................      $     (0.04)      $      0.06       $      0.01       $      0.10
                                                                  =================================================================

Diluted earnings per common share ..........................      $     (0.04)      $      0.06       $      0.01       $      0.10
                                                                  =================================================================

Cash dividends per common share ............................      $    0.0225       $    0.0200       $    0.0225       $    0.0200
                                                                  =================================================================
</TABLE>
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998

UNAUDITED

<TABLE>
                                                            June 30     December 31
                                                              1999          1998
                                                          -------------------------
<S>                                                       <C>           <C>
ASSETS
Current Assets
   Cash ...............................................   $   384,150   $   469,476
   Accounts receivable, less allowance
     for doubtful accounts 1999 $169,445; 1998 $156,282     2,723,250     2,660,012
   Inventories ........................................       299,673       331,841
   Prepaid expenses ...................................       124,985       174,085
   Income tax refund claims ...........................        33,272        56,933
   Deferred taxes .....................................        70,800        70,800
                                                          -------------------------
        Total current assets ..........................     3,636,130     3,763,147
                                                          -------------------------

Property and Equipment less accumulated
  depreciation 1999 $6,379,739; 1998 $5,997,160 .......    23,897,702    19,563,368
                                                          -------------------------

Intangible Assets, less accumulated amortization
  1999 $215,599; 1998 $250,365 ........................     1,147,711     1,065,140
                                                          -------------------------

Investments, cash value of life insurance .............       120,606       112,348
                                                          -------------------------

Total assets ..........................................   $28,802,149   $24,504,003
                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ...................................   $ 2,424,358   $ 2,732,627
   Notes payable ......................................             0       307,886
   Income taxes payable ...............................       225,160        14,206
   Current maturities of long-term debt ...............     2,267,843     1,988,041
   Accrued liabilities ................................       438,481       537,018
                                                          -------------------------
        Total current liabilities .....................     5,355,842     5,579,778
                                                          -------------------------

Long-term debt, net of current maturities .............    14,208,292    11,211,737
Deferred income taxes .................................     4,158,740     2,545,900
                                                          -------------------------
        Total liabilities & debt ......................    23,722,874    19,337,415
                                                          -------------------------

Minority interest in subsidiaries .....................     1,173,000     1,186,000

Stockholders' Equity
   Common stock .......................................         4,610         4,610
   Additional paid-in capital .........................     2,041,044     2,041,000
   Retained earnings ..................................     1,860,621     1,934,978
                                                          -------------------------
        Total stockholders' equity ....................     3,906,275     3,980,588
                                                          -------------------------

Total liabilities and equity ..........................   $28,802,149   $24,504,003
                                                          =========================
</TABLE>
<PAGE>

PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FIRST SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30,1998

UNAUDITED
<TABLE>
                                                                     First Six Months
                                                                    1999          1998
                                                                -------------------------
<S>                                                             <C>           <C>
Cash Flows From Operating Activities
Net income .................................................    $   29,390    $   446,457
Adjustments to reconcile net income to net cash
provided by operating activities:
           Minority interest in preferred stock dividends of
           consolidated subsidiaries .......................        62,615         62,615
             Depreciation ..................................       839,620        760,700
             Amortization ..................................        35,789         26,164
           Increase in cash value life insurance ...........        (8,258)        (9,336)
                    (Gain) on sale of property & equipment .        (2,215)       (75,695)
           Loss on sale of subsidiary ......................       565,872            -0-
           Deferred taxes ..................................      (224,000)           -0-
Change in assets and liabilities, net of effects from
           acquisition of subsidiaries
                (Increase) decrease accounts receivable ....      (258,152)       (86,186)
                (Increase) decrease inventories ............        32,168         (2,148)
                (Increase) decrease prepaid expenses .......        59,739         76,123
                (Increase) decrease intangible assets ......        (4,283)          (279)
           Increase (decrease) accounts payable ............       126,963        376,917
                (Increase) decrease income tax refund claims        23,661            124
           Increase (decrease) income tax payable ..........       210,954        172,400
           Increase (decrease) accrued liabilities .........        99,411        (19,365)
                                                                -------------------------
           Net cash provided by operating activities .......     1,589,274      1,728,491
                                                                -------------------------

Cash Flows From Investing Activities
           Proceeds from sale of property & equipment ......        10,925        305,709
           Purchase of property & equipment, net of property
           and equipment from acquisition of subsidiaries ..    (1,206,913)      (846,115)
           Acquisition of subsidiaries, net of cash acquired    (3,875,000)           -0-
                                                                -------------------------
           Net cash (used in) investing activities .........    (5,070,988)      (540,406)
                                                                -------------------------

Cash Flows From Financing Activities
           Proceeds from short-term borrowings, net of debt
           assumed in acquisition of subsidiaries ..........     1,013,472      2,097,918
           Proceeds from long-term borrowings, net of debt
           assumed in acquisition of subsidiaries ..........     7,273,650      3,692,181
           Payments on short-term borrowings ...............    (1,321,358)    (2,122,965)
           Payments on long-term borrowings ................    (3,390,059)    (4,216,936)
           Repurchase of minority interest .................       (13,000)           -0-
           Proceeds from warrants and options exercised ....            40            800
           Cash dividends paid .............................      (103,742)       (92,201)
           Payments to minority interest ...................       (62,615)       (62,615)
                                                                -------------------------
           Net cash provided by financing activities: ......     3,396,388       (703,818)
                                                                -------------------------

Net increase (decrease) in cash ............................       (85,326)       484,267

Cash, beginning of period ..................................       469,476        407,428
                                                                -------------------------

Cash, end of period ........................................    $  384,150    $   891,695
                                                                =========================
</TABLE>
<PAGE>



SEGMENT INFORMATION

Description of products and services from reportable segments:

Pioneer has two reportable  segments,  investing in operating  railroad entities
and an investment  in a railroad  equipment  entity.  All other  operations  are
classified as corporate 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 before  intersegment  revenues,  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.

Factors management used to identify the reportable segments:

Pioneer  Railcorp's  reportable  segments  consist of a 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.

                                                           Second Quarter
                                                       ------------------------
                                                         1999          1998
                                                       ------------------------
Revenues from external customers
   Railroads .....................................     2,816,860      2,950,973
   Leasing company ...............................       677,095        702,445
   Corporate .....................................             0              0
                                                      -------------------------
      Total revenues from external customers .....     3,493,955      3,653,418
                                                      =========================

Intersegment revenues
   Railroads .....................................             0              0
   Leasing company ...............................        98,400        105,400
   Corporate .....................................     1,578,853      1,414,943
                                                       ------------------------
      Total intersegment revenues ................     1,677,253      1,520,343
                                                       ========================

Segment profit
   Railroads .....................................     1,189,681      1,245,879
   Leasing company ...............................       337,902        376,670
   Corporate .....................................       735,091        587,125
                                                       ------------------------
      Total segment profit .......................     2,262,674      2,209,674

Reconciling items
    Intersegment revenues ........................    (1,677,253)    (1,520,343)
    Income taxes .................................       111,300       (180,500)
    Minority interest ............................       (31,308)       (31,308)
    Other income(expense), net ...................      (851,941)      (205,434)
                                                       ------------------------

       Total consolidated net income .............      (186,528)       272,089
                                                       ========================

<PAGE>


                                                        Six Months Ended
                                                      6/30/99         6/30/98
                                                     --------------------------

Assets
   Railroads ...................................     16,937,190      14,096,831
   Leasing company .............................     10,801,450      10,059,207
   Corporate ...................................      1,063,509         826,843
                                                     --------------------------
      Total assets .............................     28,802,149      24,982,881
                                                     ==========================

Revenues from external customers
   Railroads ...................................      5,609,389       5,482,100
   Leasing company .............................      1,326,544       1,408,165
   Corporate ...................................              0               0
                                                     --------------------------
      Total revenues from external customers ...      6,935,933       6,890,265
                                                     ==========================

Intersegment revenues
   Railroads ...................................              0               0
   Leasing company .............................        202,500         211,400
   Corporate ...................................      2,856,499       2,566,781
                                                     --------------------------
      Total intersegment revenues ..............      3,058,999       2,778,181
                                                     ==========================

Segment profit
   Railroads ...................................      2,247,003       2,174,350
   Leasing company .............................        693,751         765,971
   Corporate ...................................      1,315,716       1,115,964
                                                     --------------------------
      Total segment profit .....................      4,256,470       4,056,285

Reconciling items
    Intersegment revenues ......................     (3,058,999)     (2,778,181)
    Income taxes ...............................        (41,500)       (294,400)
    Minority interest ..........................        (62,615)        (62,615)
    Other income(expense), net .................     (1,063,966)       (474,632)
                                                     --------------------------

       Total consolidated net income ...........         29,390         446,457
                                                     ==========================

<PAGE>


NOTES TO 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  period  should  not be
considered indicative of results to be expected for the full year.

NOTE 2.   NATURE OF BUSINESS

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),
Minnesota  Central  Railroad Co.  (MCTA) (sold  effective  May 1, 1999),  Keokuk
Junction Railway Co. (KJRY), Midwest Terminal Railway Company (formerly Rochelle
Railroad Co.) (RRCO), Shawnee Terminal Railway Company (STR), Pioneer Industrial
Railway Co. (PRY),  The Garden City Western  Railway,  Inc.(GCW).  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.  ESTIMATED IMPACT OF THE ADOPTION OF RECENT ACCOUNTING
         STANDARDS

In July 1997,  Statement of Financial  Accounting Standard No. 131,  "Disclosure
about Segments of an Enterprise and Related  Information"  (FAS 131), was issued
by the Financial  Accounting  Standards Board. The standard requires the Company
to disclose the factors used to identify reportable segments including the basis
of  organization,  differences in products and services,  geographic  areas, and
regulatory  environments.  FAS 131 additionally requires financial results to be
reported in the financial  statements for each reportable segment.  The standard
is  effective  for the  Company's  1998  annual  report  and  interim  financial
statements  following the 1998 annual  report.  The Company does not believe the
adoption  of this  standard  will have a  material  impact  on its  consolidated
financial statements.

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.
<PAGE>



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 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.

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),  Minnesota  Central  Railroad Co.
(MCTA),  Keokuk Junction  Railway Co. (KJRY),  Midwest Terminal Railway Company,
(formerly Rochelle Railroad Co.) (RRCO), Shawnee Terminal Railway Company (STR),
Pioneer   Industrial  Railway  Co.  (PRY),  The  Garden  City  Western  Railway,
Inc.(GCW),  Pioneer Resources,  Inc. (PRI), Pioneer Railroad Equipment Co., Ltd.
(PREL), Pioneer Air, Inc. (PAR), and Pioneer Railroad Services, Inc. (PRS).

Summary: Second Quarter 1999 Compared to Second Quarter 1998.

The Company  recorded a net loss of $186,528 in the second quarter 1999 compared
to net income of $272,089 in the same period last year.  Net Income was affected
by a one-time charge relating to the sale of the Minnesota  Central Railroad Co.
stock and the write-off of the net assets associated with the MCTA in the amount
of $566,000  before tax and $342,000  after tax.  Therefore,  excluding the MCTA
sale  transaction,  net  income  for the  second  quarter  1999  would have been
approximately  $155,000.  Revenue decreased by $159,000 or 5% to $3,494,000 from
$3,653,000 in the same period last year.  Operating expense decreased by $56,000
or 2%, to $2,908,000  from  $2,964,000  in the same period last year.  Operating
income  decreased  by  $104,000,  or 15% to $585,000  from  $689,000 in the same
period last year.

In the second  quarter 1999 the  Company's  railroad  operations  had  decreased
operating  income  of  approximately  $56,000.  Railroad  operating  income  was
adversely  affected by the loss of the Rochelle Railroad Co.  operations,  which
resulted in a decrease of operating  income of $111,000 in the quarter  compared
to the same period last year. In addition, the Fort Smith Railroad had decreased
operating  income in the second  quarter  1999 of $62,000  compared  to the same
period last year resulting from increased  maintenance of equipment  expense and
costs  associated  with using  non-affiliated  railcars for  customer  loadings.
Railroad operating income was positively  affected in the second quarter 1999 by
increased operating income from the Keokuk Junction Railway of $111,000 compared
to the same period last year. In addition, The Garden City Western Railway Inc.,
which the Company began  operating May 1, 1999,  generated  $39,000 of operating
income.  The  equipment  leasing  operations   decreased   operating  income  by
approximately  $33,000  in  the  period,  primarily  from  a  reduction  in  the
utilization  of  its  railcar  fleet  by  non-affiliated   railroads  and  costs
associated  with  relocating  part of the  fleet  to  enhance  future  revenues.
Corporate operations decreased operating income by approximately  $15,000 in the
period.

Revenue:

Revenue  decreased in the second  quarter  1999 by $159,000 or 5% to  $3,494,000
from  $3,653,000  in the same  period last year.  The  railroad  operations  had
decreased revenue of approximately  $135,000 in the second quarter 1999 compared
to the same period last year. Some of the more significant  decreases in revenue
include $160,000 from the Minnesota Central  Railroad,  which was sold April 30,
1999 and a $183,000  decrease in revenue  resulting from the  termination of the
Rochelle   Railroad  lease  which  ceased   operations  on  November  13,  1998.
Significant  increases in revenue in the second quarter 1999 included a $127,000
revenue  increase  by the  Keokuk  Junction  Railway  and  $103,000  of  revenue
generated by The Garden City Western Railway.  The equipment leasing  operations
had a $25,000  decrease in revenue in the period  resulting  from the  decreased
utilization of its railcars by non-affiliated railroads.
<PAGE>


Operating Expense:

Operating  expense  decreased  in the second  quarter  1999 by $56,000 or 2%, to
$2,908,000  from  $2,964,000  in the prior year.  The  railroad  operations  had
decreased  operating  expense of  approximately  $102,000 in the second  quarter
1999, of which $153,000 was  attributable  to the sale of the Minnesota  Central
Railroad stock,  and $71,000 was attributable to the termination of the Rochelle
Railroad  lease.  In addition,  the Fort Smith Railroad had increased  operating
expense in the second  quarter 1999 of $51,000  compared to the same period last
year  resulting  from  increased  maintenance  of  equipment  expense  and costs
associated with using non-affiliated  railcars for customer loadings. The Garden
City Western  Railway  Inc.  had  operating  expense of $64,000.  The  equipment
leasing operations increased operating expense approximately  $7,000.  Corporate
support services  increased  operating expense  approximately  $53,000 primarily
related to professional services,  and public relation  expenditures,  increased
health insurance costs and payroll related expenditures.

Maintenance of way and structures  expense (MOW) decreased in the second quarter
$29,000 or 7% to $383,000 from  $412,000 in the same period last year,  most all
of which is related to the  railroad  operations.  The  primary  decrease in MOW
related  to the sale of the MCTA  which  decreased  MOW  $26,000  in the  second
quarter  1999  compared to the same period  last year.  The Garden City  Western
Railway increased MOW $15,000 in the second quarter.

Maintenance  of equipment  expense  (MOE)  decreased in the second  quarter 1999
$29,000,  or 7% to  $387,000  from  $416,000  in  the  same  period  last  year.
Approximately   $20,000  of  the  decrease  related  to  the  equipment  leasing
operations  as a result of  decreased  costs  associated  with  maintaining  the
Company's  railcar  fleet.  The  railroad  operations  had an increase in MOE of
approximately  $3,000. The Garden City Western Railway had $6,000 of MOE expense
in the quarter. The Fort Smith Railroad had an increase in MOE of $14,000 in the
quarter,  primarily  related to increased  car repair  supplies.  The MCTA had a
decrease of $14,000 in the quarter.  Corporate  operations had a decrease in MOE
of approximately $11,000 primarily related to reduced payroll expenses.

Transportation  expense (TRAN) decreased in the second quarter 1999 $67,000,  or
1% to $730,000 from $797,000 in the same period last year. Most of the decreased
TRAN was  generated by the railroad  operations,  primarily  from the  Minnesota
Central Railroad which had a decrease of $74,000 and the Rochelle Railroad which
had a decrease of $29,000.  The Fort Smith  Railroad had  increased  TRAN in the
second  quarter  1999  of  $29,000  related  to  costs   associated  with  using
non-affiliated  railcars for customer loadings.  The Garden City Western Railway
had $5,000 of TRAN in the quarter.  Corporate  operations had a increase in TRAN
of approximately $18,000 primarily related to increased payroll expenses.

General & administration  expense (ADMIN) increased $9,000 in the second quarter
1999 to $954,000 from $945,000,  in the prior year. The railroad operations were
responsible  for  approximately  a  $31,000  decrease  in  ADMIN  in the  period
primarily  from the Minnesota  Central  Railroad which had a decrease of $19,000
and the  Rochelle  Railroad  which had a decrease  of  $35,000.  The Garden City
Western  Railway  had  $18,000  of ADMIN in the  quarter.  Corporate  operations
increased ADMIN by approximately  $25,000 in the period.  The equipment  leasing
operations increased ADMIN approximately $15,000 as a result of expenses related
to repositioning the Company's railcar fleet.

Depreciation  and  amortization  expense  increased  in the second  quarter 1999
$59,000,  or 15%, to $454,000 compared to $395,000 in the same period last year.
The railroad operations had increased  depreciation and amortization  expense of
$46,000.  Approximately $50,000 of the railroad operation increase is related to
depreciation  expense of assets  associated  with the  purchase of the  Michigan
Southern  Railroad stock on January 1, 1999. The Garden City Western Railway had
depreciation and amortization expense of $18,000 in the quarter. The Sale of the
Minnesota Central decreased depreciation and amortization expense $20,000 in the
quarter.  The  equipment  leasing  operations  had  increased  depreciation  and
amortization  expense of $12,000 in the quarter  resulting from increases to the
railcar and locomotive fleet.

Other Income and Expense Income Statement Line Item Discussion:

In the second quarter 1999 other income  increased $7,000 to $43,000 compared to
$36,000  in the same  period  last  year.  The  increase  relates  primarily  to
additional 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.
<PAGE>



A loss on the sale of the Minnesota Central Railroad Co. stock and the write-off
of the net  assets  associated  with  the MCTA in the  amount  of  $566,000  was
recorded in the second quarter 1999.

Interest expense related to equipment  financing decreased $37,000 in the second
quarter  1999 to $162,000  compared to $199,000 in the same period last year.  A
majority of this  decrease is the result of  refinancing  activities  associated
with the equipment leasing operations.  Other interest expense increased $76,000
in the second  quarter  1999 to $187,000  from  $111,000 in the same period last
year. A majority of this  increase  relates to the  financing of the purchase of
the  Michigan  Southern  Railroad  stock on  January  1, 1999 for the  amount of
$2,400,000 and the purchase of The Garden City Western Railway Inc. stock on May
1, 1999 for the amount of $1,500,000.

Net gain on fixed  asset  dispositions  decreased  approximately  $68,000 in the
second  quarter 1999 to less than $1,000  compared to $69,000 in the same period
last year. The net gain on fixed asset  dispositions  in the second quarter 1999
resulted from insignificant sales of miscellaneous  vehicles and equipment.  Net
gain on fixed  asset  dispositions  during  the second  quarter  1998 of $69,000
included  a gain of  $97,000  from the sale of  railcars  and a loss of  $28,000
resulting from the sale of the Company's old corporate  building in Chillicothe,
Illinois.

Summary: First Six Months 1999 Compared to First Six Months 1998.

The Company's  net income for the first six months 1999 was $29,390  compared to
net income of $446,457 in the same period last year, a decrease of $417,067. Net
Income was affected by a one-time  charge in the second quarter 1999 relating to
the sale of the  Minnesota  Central  Railroad Co. stock and the write-off of the
net assets of the MCTA in the amount of $566,000  before tax and $342,000  after
tax.  Therefore,  excluding the MCTA sale transaction,  net income for the first
six months 1999 would have been  approximately  $371,000.  Revenue  increased by
$46,000  or 1% to  $6,936,000  from  $6,890,000  in the same  period  last year.
Operating  expense increased by $126,000 or 3%, to $5,738,000 from $5,612,000 in
the same period  last year.  Operating  income  decreased  by $81,000,  or 7% to
$1,197,000 from $1,278,000 in the same period last year.

Operating  income was  increased  in the first six months 1999 by the  Company's
railroad operations by approximately  $42,000 in the period.  Railroad operating
income  was  adversely  affected  by the  loss  of  the  Rochelle  Railroad  Co.
operations,  which resulted in a decrease of operating income of $208,000 in the
first six months 1999  compared to the same period last year.  In addition,  the
Fort Smith Railroad had decreased  operating  income of $62,000 in the first six
months  1999  compared to the same period  last year  resulting  from  increased
maintenance of equipment expenses and costs associated with using non-affiliated
railcars  for  customer  loadings.  Railroad  operating  income  was  positively
affected in the first six months  1999 by  increased  operating  income from the
Keokuk Junction Railway of $208,000 in the first six months 1999 compared to the
same period last year.  In addition,  operating  income  generated by The Garden
City Western  Railway Inc.  which the Company  began  operating  May 1, 1999 was
$39,000.  The Minnesota Central Railroad  increased  operating income $52,000 in
the first six months 1999 primarily  resulting from a one-time shipping contract
in the  first  quarter  1999 of  approximately  166 cars of pipe  for a  utility
company that generated  approximately $140,000 of revenue. The Alabama & Florida
Railway  operating income  increased by  approximately  $97,000 in the first six
months 1999. The Michigan  Southern  Railroad had decreased  operating income of
$85,000 in the first 6 months 1999. The Michigan Southern decrease was caused by
decreased  revenues from one of the railroads primary shippers  resulting from a
tariff increase issued by Conrail prior to its break-up which made the rail move
non-competitive. The Company is working with the new connecting carrier, the NS,
to reduce the rates to a more competitive  level. In addition,  in the first six
months 1999 the MSO had a reduction in contract  service  income  generated from
road crossing flagging projects,  had increased signal maintenance expenses, and
had increased  carhire  expense . The  equipment  leasing  operations  decreased
operating  income  by  approximately  $64,000  in the  first  six  months  1999,
primarily  from  a  reduction  in  the  utilization  of  its  railcar  fleet  by
non-affiliated  railroads and costs associated with relocating part of the fleet
to enhance future revenues.  In addition,  corporate support services  decreased
operating income by approximately $59,000 in the first six months 1999.
<PAGE>



Revenue:

Revenue  increased  in the first six months 1999 by $46,000 or 1% to  $6,936,000
from $6,890,000 in the same period last year. The railroad operations  increased
revenue by  approximately  $127,000  in the  period.  Significant  increases  in
revenue in the first six months 1999 included a $200,000 revenue increase by the
Keokuk  Junction  and  $103,000 of revenue  generated by The Garden City Western
Railway. In addition, the Alabama & Florida had increased revenue of $113,000 in
the first six months  1999.  Some of the more  significant  decreases in revenue
include a $338,000  decrease in revenue  resulting  from the  termination of the
Rochelle  Railroad  lease which ceased  operations  on November 13, 1998,  and a
$62,000  decrease  in revenue  from the  Michigan  Southern  Railroad  caused by
decreased  revenues from one of the railroads primary shippers  resulting from a
tariff increase issued by Conrail prior to its break-up which made the rail move
non-competitive. The Company is working with the new connecting carrier, the NS,
to reduce the rates to a more competitive level. Michigan Southern revenues were
also  reduced by a reduction  in contract  service  income  generated  from road
crossing  flagging  projects.  The equipment  leasing  operations  had a $81,000
decrease in revenue in the period  resulting  from the decreased  utilization of
its railcars by non-affiliated railroads.

Operating Expense:

Operating  expense  increased in the first six months 1999 by $126,000 or 3%, to
$5,738,000 from $5,612,000 in the prior year. The railroad operations  increased
operating  expense by  approximately  $68,000 in the first six months 1999.  The
Fort Smith Railroad had increased operating expense in the first six months 1999
of $99,000  compared  to the same  period  last year  resulting  from  increased
maintenance of equipment expense and costs associated with using  non-affiliated
railcars  for  customer  loadings.  The Garden City  Western  Railway  Inc.  had
operating  expense of $64,000.  The Michigan  Southern  Railroad  had  increased
operating expense of $25,000 resulting from increased signal maintenance expense
and increased  carhire  expense.  Operating  expense was decreased  $32,000 as a
result  of the  sale of the  Minnesota  Central  Railroad  stock  and  also  was
decreased  $130,000  resulting  from the  termination  of the Rochelle  Railroad
lease.   The  equipment   leasing   operations   decreased   operating   expense
approximately  $18,000.  Corporate support services increased  operating expense
approximately  $76,000,  primarily related to professional  services, and public
relation  expenditures,  increased  health  insurance  costs and payroll related
expenditures.

Maintenance  of way and  structures  expense  (MOW)  increased  in the first six
months  1999  $10,000 or 2% to  $719,000  from  $709,000 in the same period last
year,  most all of which is related to the  railroad  operations.  The  Michigan
Southern  Railroad had increased MOW of $15,000 as a result of increased  signal
maintenance.  The Garden City Western  Railway  increased MOW $15,000 in period.
MOW was decreased $24,000 as a result of the sale of the Minnesota Central.

Maintenance  of equipment  expense (MOE)  decreased in the first six months 1999
$60,000,  or 8% to $758,000 from $818,000 in the same period last year.  Most of
the  decrease  is related to the  equipment  leasing  operations  as a result of
decreased costs  associated with  maintaining the Company's  railcar fleet.  The
railroad  operations had an increase in MOE of approximately  $9,000. The Garden
City Western Railway had $6,000 of MOE in the first six months 1999 and the Fort
Smith  Railroad  had an  increase  in MOE of  $25,000 in the  period,  primarily
related to  increased  car repair  supplies.  The MCTA had a decrease  in MOE of
$25,000 in the first six months 1999. Corporate operations had a decrease in MOE
of approximately $11,000 primarily related to reduced payroll expenses.

Transportation expense (TRAN) increased in the first six months 1999 $80,000, or
6% to  $1,613,000  from  $1,533,000  in the same period  last year.  Most of the
increase  in TRAN was  generated  by the  railroad  operations.  The Fort  Smith
Railroad had increased  TRAN in the first six months 1999 of $65,000  associated
with using  non-affiliated  railcars  for  customer  loadings.  The Garden  City
Western Railway had $5,000 of TRAN in the period. The Minnesota Central Railroad
had an increase of $62,000 in TRAN as a result  increased costs  associated with
handling the special pipe shipment in the first quarter 1999. TRAN was decreased
by  $57,000  as a result of the  termination  of the  Rochelle  Railroad  lease.
Corporate  operations  increased  TRAN  approximately  $27,000  primarily due to
increased payroll expenses.
<PAGE>



General  &  administration  expense  (ADMIN)  increased  $7,000 in the first six
months 1999 to  $1,772,000  from  $1,765,000,  in the prior year.  The  railroad
operations were responsible for approximately a $73,000 decrease in ADMIN in the
period  primarily  from the Minnesota  Central  Railroad which had a decrease of
$37,000 and the Rochelle  Railroad  which had a decrease of $54,000.  The Garden
City Western  Railway had $18,000 of ADMIN in the period.  Corporate  operations
increased ADMIN by  approximately  $50,000 in the period,  primarily  related to
professional  services,  and  public  relation  expenditures,  increased  health
insurance  costs  and  payroll  related  expenditures.   The  equipment  leasing
operations increased ADMIN approximately $30,000 as a result of expenses related
to repositioning the Company's railcar fleet.

Depreciation  and  amortization  expense  increased in the first six months 1999
$89,000,  or 12%, to $875,000 compared to $787,000 in the same period last year.
The railroad operations had increased  depreciation and amortization  expense of
$68,000.  Approximately $71,000 of the railroad operation increase is related to
depreciation  expense of assets  associated  with the  purchase of the  Michigan
Southern  Railroad stock on January 1, 1999. The Garden City Western Railway had
depreciation and amortization  expense of $18,000 in the period. The Sale of the
Minnesota Central decreased depreciation and amortization expense $20,000 in the
period.  The  equipment  leasing  operations  had  increased   depreciation  and
amortization  expense of $19,000 in the period  resulting  from increases to the
railcar and locomotive fleet.

Other Income and Expense Income Statement Line Item Discussion:

In the first six months 1999 other income increased $93,000 to $198,000 compared
to $105,000 in the same period last year.  The  increase  relates  primarily  to
additional 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.

A loss on the sale of the Minnesota Central Railroad Co. stock and the write-off
of the net  assets  associated  with  the MCTA in the  amount  of  $566,000  was
recorded in the second quarter 1999.

Interest expense related to equipment  financing  decreased $72,000 in the first
six months 1999 to $327,000 compared to $399,000 in the same period last year. A
majority of this  decrease is the result of  refinancing  activities  associated
with the equipment leasing operations. Other interest expense increased $114,000
in the first six months 1999 to $371,000  from  $257,000 in the same period last
year. A majority of this  increase  relates to the  financing of the purchase of
the  Michigan  Southern  Railroad  stock on  January  1, 1999 for the  amount of
$2,400,000 and the purchase of The Garden City Western Railway Inc. stock on May
1, 1999 for the amount of $1,500,000.

Net gain on fixed  asset  dispositions  decreased  approximately  $73,000 in the
first six months  1999 to $2,000  compared  to $75,000 in the same  period  last
year.  The net gain on fixed  asset  dispositions  in the first six months  1999
resulted from insignificant sales of miscellaneous  vehicles and equipment.  Net
gain on fixed  asset  dispositions  during the first six months  1998 of $76,000
included a gain of $105,000 from the sale or  disposition of railcars and a loss
of  $28,000   resulting  from  the  sale  of  the  Company's   former  corporate
headquarters building in Chillicothe, Illinois.

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.

Year 2000 Compliance:

The Year  2000  compliance  issue  exists  because  many  computer  systems  and
applications  currently use two-digit fields to designate a year. As the century
date  change  occurs,  date-sensitive  systems  may either  fail or not  operate
properly unless the underlying programs are modified or replaced.
<PAGE>



The Company has  initiated  a program to ensure that all  computer  applications
will be Year 2000 compliant on a timely basis. The program includes  engaging an
outside  consultant  to  review  all  of the  Company's  computer  hardware  and
software,  as well as to confirm  with  significant  outside  vendors that their
products are Year 2000 compliant.  Based on this review the Company believes its
internal systems are Year 2000 compliant.

The Company relies  primarily on one third party software company whose software
is critical to daily  operations.  The Company  believes this third party vendor
will be Year 2000 compliant in a timely manner. If the third party vendor is not
Year 2000 compliant in a timely manner, it will have a materially adverse affect
on the Company. To date the Company is not aware of any unaffiliated entity with
a Year 2000  issue  that  would  materially  impact  the  Company's  results  of
operations,  liquidity, or capital resources.  However, the Company has no means
of  ensuring  that  unaffiliated  entities  will be  Year  2000  compliant.  The
inability  of  unaffiliated  entities  to  complete  their Year 2000  resolution
process in a timely fashion could materially impact the Company.

The Company has expended  approximately $49,000 to date on its resolution of the
Year 2000 compliance issue and estimates that less than $10,000 will be expended
to complete Year 2000 compliance.

As noted,  the Company will be dependent on  successful  resolution of Year 2000
issues by unaffiliated  entities.  Failure by one or more of these  unaffiliated
entities  to  successfully  resolve  the Year  2000  issue  could  result in the
mishandling  of revenue loads and delayed  collection of revenues.  In addition,
disruptions in the economy  generally  resulting from the Year 2000 issues could
also materially  adversely affect the Company. The amount of lost revenue as the
results of these events cannot  reasonably be determined at this time, but could
be material in nature.

The  Company  currently  has no  contingency  plans in place to address  unknown
shortcomings  in its internal  systems or those of  unaffiliated  entities.  The
Company  plans to  continually  evaluate  its Year 2000  situation  periodically
throughout the year.

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 $1,200,000 all of which was
available  for use at the end of the first six months  1999.  In  addition,  the
Company believes the market value of its railcar fleet is  significantly  higher
then the  amount of debt  associated  with the  railcar  fleet.  Therefore,  the
Company  believes  it could  refinance  or sell  part of its  railcar  fleet and
generate up to $1 million in cash.

In March 1996,  the Company  negotiated a credit  facility  with Citizens Bank &
Trust located in  Chillicothe,  MO., to provide a $2.5 million annual  revolving
acquisition line of credit. This facility was 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 was 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 were to be repaid  monthly over a seven
year period.  On January 1, 1999, the Company  borrowed $2.4 million on the line
in connection with its purchase of the stock of the Michigan Southern  Railroad.
This credit facility was replaced with a credit facility with National City Bank
of  Michigan/Illinois  and the $2.4  million  advanced  for the  purchase of the
Michigan  Southern  Railroad stock was financed on a separate note with National
City Bank of Michigan/Illinois on May 21, 1999.

The Company,  on June 18, 1999,  entered into 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%, renewable every 2 years. Amounts drawn on the line are amortized over a
10 year period. This credit line is secured by all non real estate assets of the
Mississippi  Central  Railroad  Co.,  the Alabama  Railroad  Co. and any company
acquired using proceeds from the credit line. This credit facility  replaced the
Citizens  Bank & Trust  credit  line.  The  Company has used $1.5 of this credit
facility to finance the purchase of The Garden City Western Railway, Inc. common
stock,  leaving  $3.5 million  available  for future  acquisitions.  The monthly
principal and interest payment currently required to be repaid is $18,800.
<PAGE>



The Company, on May 21, 1999, entered into a credit agreement with National City
Bank of  Michigan/Illinois to refinance the $2.4 million that was outstanding on
the Citizens Bank & Trust line related to the Michigan  Southern  Railroad stock
purchase.  The National  City Bank credit  facility is a fixed  interest rate of
8.5% amortized over 10 years. The monthly principal and interest payment on this
note is $30,830.

The Company,  on May 21, 1999, entered into interest  repricing  agreements with
National City Bank that reduced the interest rate on the Keokuk Junction Railway
Co.  note from  9.5% to 8.5% and  reduced  the  interest  rate on the  Alabama &
Florida  Railway Co.  note from 9.25% to 8.5%.  Both rates are fixed and will be
repriced  in five  years to the  bank's  cost of funds  plus  2.25%.  The  total
outstanding  principal  balance on the Keokuk Junction Railway and the Alabama &
Florida Railway notes is approximately $4 million.

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.

The City of Rochelle,  Illinois,  terminated  the Rochelle  Railroad Co.'s lease
agreement effective January 19, 1998,  however,  Rochelle Railroad Co. continued
to operate on the  trackage  until  November  13,  1998  pending  the outcome of
certain legal proceedings.  In 1998 the Rochelle Railroad Co. generated $440,000
in revenue and $216,000 of operating  income. In 1997, the Rochelle Railroad Co.
generated  $408,000 in revenue and  $250,000 of  operating  income.  The Company
believes  that a  majority  of the  lost  operating  income  resulting  from the
termination  of the  Rochelle  Railroad  will  be  recovered  through  increased
marketing efforts on the remaining operating railroads.

Pioneer  Railcorp  previously  guaranteed two long-term debt  obligations of the
Minnesota  Central Railroad Co. in connection with the initial asset purchase by
the Minnesota  Central  Railroad Co. in 1994.  Pioneer  Railcorp  remains on the
notes as a guarantor  and could be required to repay the  principal  and accrued
interest of the notes if they are defaulted  upon. The principal  balance of the
notes as of June 30, 1999 was approximately $116,000.

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

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

Balance Sheet and Cash Flow Items:

The Company  generated net cash from  operating  activities of $1,589,000 in the
first six months 1999 compared to  $1,192,000 in the same period last year.  Net
cash from operating  activities for the first six months 1999 was generated from
$29,000 of net income, $875,000 of depreciation and amortization, an increase in
accounts  payable of $127,000 an increase in income tax payable of $211,000,  an
increase of net cash provided by changes in various other  operating  assets and
liabilities  of  $263,000,  and a noncash  write off of  approximately  $566,000
related to the Company's  investment in the net assets of the Minnesota  Central
Railroad at the date of sale. Net cash from operating  activities was reduced by
an increase in accounts receivable of $258,000, and a decrease in deferred taxes
of $224,000 related to the disposition of the Minnesota Central Railroad
<PAGE>



In the first six months 1999, the Company recorded  $3,119,000  million of fixed
assets relating to the purchase of the stock of the Michigan Southern  Railroad,
of which $1,643,300 was allocated to track structures,  $1,300,700  allocated to
land and  right of way,  $175,000  allocated  to  buildings,  and the  remaining
$351,000  allocated to  transportation  equipment,  vehicles,  and railcars.  In
addition,  as a result of the  purchase,  the Company  recorded  goodwill in the
amount of $90,000 and a deferred tax liability of $1,160,000.

In the first six months 1999, the Company recorded  $2,144,510  million of fixed
assets  relating to the purchase of the stock of The Garden City Western Railway
Inc., of which $1,280,000 was allocated to track structures,  $272,000 allocated
to land and right of way,  $253,000  allocated to  buildings,  and the remaining
$339,510  allocated to  transportation  equipment,  vehicles,  and railcars.  In
addition,  as a result of the  purchase,  the Company  recorded  goodwill in the
amount of $24,077 and a deferred tax liability of $676,840.

In the first six months 1999, the Company purchased approximately  $1,207,000 of
fixed assets and capital improvements,  including 170 railcars costing $828,650.
The  railcars  were  financed  with long term  fixed rate  debt.  Other  capital
expenditures  include  $71,0000 for track,  $12,000 for leasehold  improvements,
$46,000 for a locomotive,  $90,000 for various vehicles and equipment,  with the
remaining  $249,350 related to railcar and locomotive  betterments and purchases
of vehicles and equipment.

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.

On January 7, 1999,  Michigan  Southern  Railroad  Company,  Inc.  exercised its
option to purchase the rail line owned by the Branch & St. Joseph  Counties Rail
Users  Association,  Inc.  (RUA) between  Sturgis and Coldwater,  Michigan.  RUA
refused to honor the option and litigation is currently  pending in the Michigan
Circuit  Court for St.  Joseph  County,  Michigan.  Management  believes it will
prevail in this matter, but RUA's attempted introduction of another carrier onto
the line creates a risk to the Company's business in Coldwater.  Management does
not believe that this controversy is likely to have a material adverse affect on
the  Company's  consolidated  financial  position or results of  operation.  The
Company  believes  the cost to  purchase  the rail  line  will be  approximately
$600,000.

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.

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

The  Annual  Meeting  of the  Shareholders  was  held  on June  15,  1999 at the
Company's  headquarters  in  Peoria,  Illinois.  All five  seats on the Board of
Directors were up for election at this meeting.  Directors Guy L.  Brenkman,  J.
Michael Carr,  Orvel L. Cox, Timothy F. Shea, and John S. Fulton were re-elected
for a one year term.

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



The vote  totals  for the  matters  voted  upon at the  Annual  Meeting  were as
follows:

                                                                          Votes
               Proposal                                 Votes For       Withheld
--------------------------------------------------      ---------       --------

Nomination of Guy L. Brenkman
to the Board of Directors ........................      3,589,802        195,622

Nomination of Orvel L. Cox
to the Board of Directors ........................      3,659,974        125,450

Nomination of Timothy F.Shea
to the Board of Directors ........................      3,543,164        242,260

Nomination of John S. Fulton
to the Board of Directors ........................      3,596,794        188,630

Nomination of J. Michael Carr
to the Board of Directors ........................      3,659,474        125,950

Ratification of McGladrey & Pullen, LLP
as Independent Auditor ...........................      3,702,264        129,200


Item 5.   OTHER INFORMATION

Effective  January 1,  1999,  the  Company's  wholly-owned  subsidiary  Michigan
Southern  Railroad  Company  (MSO)  purchased  all of the stock of the  Michigan
Southern Railroad Company,  Inc. (MSRR) from Gordon D. Morris, for $2.4 million.
The  transaction  was initially  funded with long-term  fixed rate debt obtained
from the  Company's  $2.5  million  revolving  acquisition  line of credit  with
Citizens Bank and Trust and  subsequently  refinanced  with a separate note with
National  City Bank on May 21,  1999.  The Company had been  operating  the line
under an operating lease since December of 1996.

On April 30,  1999,  the  Company  purchased  100% of the  stock of Garden  City
Western Railway, Inc.(GCW) from the Garden City Coop, Inc. and immediately began
operations.  The GCW is  located  in  southwest  Kansas  and  totals 45 miles of
operating railroad. In 1998 the GCW handled over 2,000 cars and has handled over
3,000 cars in previous  years.  The primary  commodities  include grain,  frozen
beef, fertilizer,  farm implements, feed products and utility poles. The Company
projects  that  during  the  first  full  year of  operations,  the GCW will add
approximately $750,000 of revenue and $250,000 of operating income. The purchase
was  financed  with a 60 day note with an  interest  rate of Prime  plus 1% from
National  City Bank and was  refinanced  with the National  City Bank  revolving
acquisition line of credit on June 18, 1999.
<PAGE>



On May 13, 1999, Pioneer Railcorp sold all of the stock of the Minnesota Central
Railroad Co. to Southern Rail  Resources,  Inc., an Iowa  Corporation.  Southern
Rail Resources,  Inc. is not affiliated with Pioneer  Railcorp or any of Pioneer
Railcorp's  officers,  directors,  or employees.  The Company realized a loss of
$19,999 on the sale of the stock and  $546,000  on the  write-off  of net assets
associated  with the Minnesota  Central  Railroad.  At the date of the sale, the
Minnesota Central  accounted for approximately  $374,000 of revenue and $387,000
of operating expense on Pioneer Railcorp's  consolidated statement of income. At
the date of the sale, the Minnesota  Central  accounted for  approximately  $1.8
million of assets and $1.3 million of liabilities  reported on the  consolidated
balance sheet of Pioneer  Railcorp.  Since the transaction was a stock sale, all
liabilities of the Minnesota Central Railroad Co.
remain with the Minnesota Central Railroad Co.

On March 22, 1999,  Pioneer  Railcorp's Board of Directors declared a $.0225 per
common share dividend  payable to  shareholders  of record as of April 30, 1999,
payable by June 30,1999. The total dividend paid was $103,742.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

Exhibit # 20.1  Notice of Annual  Meeting  and Proxy  Statement  used to solicit
votes for the Annual Meeting of Shareholders, held June 15, 1999.

Exhibit # 20.2 Form of Ballot used at the Annual Meeting on June 15, 1999.

Exhibit # 20.3 Annual  Report for 1998 sent to  shareholders  with the Notice of
Annual Meeting and Proxy Statement.

Exhibit # 27 - Financial data schedule.

The following reports were filed on Form 8-K during the first six months 1999:

(1) Form 8-K filed  January  15, 1999  regarding  the  purchase of the  Michigan
    Southern Railroad stock.

(2) Form 8-K filed May 27,  1999  regarding  the sale of the  Minnesota  Central
    Railroad Co. stock.
<PAGE>



                                   SIGNATURES


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




PIONEER RAILCORP
(Registrant)





       8/10/99                /s/ Guy L. Brenkman
       -------                --------------------------------------
        DATE                  GUY L. BRENKMAN
                              PRESIDENT & CEO




      8/10/99                 /s/ J. Michael Carr
      -------                 --------------------------------------
       DATE                   J. MICHAEL CARR
                              TREASURER & CHIEF FINANCIAL OFFICER