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, 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.

                                    4,610,697
             ------------------------------------------------------
             (Shares of Common Stock outstanding on March 31, 1999)

<PAGE>


PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended March 31, 1999 and 1998

UNAUDITED

                                                            First Quarter
                                                         1999          1998
                                                     --------------------------

Operating revenue ................................   $ 3,441,978    $ 3,236,847
                                                     --------------------------

Operating expenses
   Maintenance of way ............................       336,185        297,029
   Maintenance of equipment ......................       370,850        402,301
   Transportation expense ........................       882,831        736,594
   Administrative expense ........................       818,331        819,887
   Depreciation  & amortization ..................       432,160        392,263
                                                     --------------------------
                                                       2,840,357      2,648,074
                                                     --------------------------

Operating income .................................       601,621        588,773
                                                     --------------------------

Other income & expense
   Other (income) expense ........................      (145,554)       (69,141)
   Interest expense, equipment ...................       164,906        199,833
   Interest expense, other .......................       184,122        147,239
   Net (gain) loss on sale of fixed assets .......        (1,880)        (8,733)
                                                     --------------------------
                                                         201,594        269,198
                                                     --------------------------

Income before income taxes .......................       400,027        319,575

Provision for income taxes .......................       152,800        113,900
                                                     --------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries ..   $   247,227    $   205,675

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


Net income .......................................   $   215,919    $   174,367
                                                     ==========================

Basic earnings per common share ..................   $      0.05    $      0.04
                                                     ==========================

Diluted earnings per common share ................   $      0.05    $      0.04
                                                     ==========================
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998

UNAUDITED
<TABLE>

                                                            March 31    December 31
                                                              1999         1998
                                                          -------------------------
<S>                                                       <C>           <C>
ASSETS
Current Assets
   Cash ...............................................   $   502,601   $   469,476
   Accounts receivable, less allowance
     for doubtful accounts 1999 $156,331; 1998 $156,282     3,136,301     2,660,012
   Inventories ........................................       310,441       331,841
   Prepaid expenses ...................................       112,701       174,085
   Income tax refund claims ...........................        36,182        56,933
   Deferred taxes .....................................        70,800        70,800
                                                          -------------------------
        Total current assets ..........................     4,169,026     3,763,147
                                                          -------------------------

Property and Equipment less accumulated
  depreciation 1999 $6,388,629; 1998 $5,997,160 .......    21,719,276    19,563,368
                                                          -------------------------

Intangible Assets, less accumulated amortization
  1999 $263,446; 1998 $250,365 ........................     1,051,570     1,065,140
                                                          -------------------------

Investments, cash value of life insurance .............       115,088       112,348
                                                          -------------------------

Total assets ..........................................   $27,054,960   $24,504,003
                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ...................................   $ 3,135,230   $ 2,732,627
   Notes payable ......................................       246,274       307,886
   Income taxes payable ...............................       132,975        14,206
   Current maturities of long-term debt ...............     2,263,218     1,988,041
   Accrued liabilities ................................       494,460       537,018
                                                          -------------------------
        Total current liabilities .....................     6,272,157     5,579,778
                                                          -------------------------

Long-term debt, net of current maturities .............    12,843,390    11,211,737
Deferred income taxes .................................     2,545,900     2,545,900
                                                          -------------------------
        Total liabilities & debt ......................    21,661,447    19,337,415
                                                          -------------------------

Minority interest in subsidiaries .....................     1,183,000     1,186,000

Stockholders' Equity
   Common stock .......................................         4,610         4,610
   Additional paid-in capital .........................     2,041,003     2,041,000
   Retained earnings ..................................     2,164,900     1,934,978
                                                          -------------------------
        Total stockholders' equity ....................     4,210,513     3,980,588
                                                          -------------------------

Total liabilities and equity ..........................   $27,054,960   $24,504,003
                                                          =========================
</TABLE>
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters Ended March 31, 1999 and 1998

UNAUDITED
<TABLE>
                                                                       First Quarter
                                                                   1999           1998
                                                               --------------------------
<S>                                                            <C>            <C>   
Cash Flows From Operating Activities
Net income .................................................   $   215,919    $   174,366
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 .............................................       408,649        379,182
  Amortization .............................................        23,511         13,081
  Increase in cash value life insurance ....................        (2,740)        (4,948)
  (Gain) on sale of property & equipment ...................        (1,880)        (8,733)
  Deferred taxes ...........................................           -0-            -0-
Change in assets and liabilities, net of effects from
  acquisition of subsidiaries
  (Increase) decrease accounts receivable ..................      (476,289)        36,906
  (Increase) decrease inventories ..........................        21,400         (1,757)
  (Increase) decrease prepaid expenses .....................        61,384         22,876
  (Increase) decrease intangible assets ....................           635           (418)
  Increase (decrease) accounts payable .....................       402,603        615,545
  (Increase) decrease income tax refund claims .............        20,751            124
  Increase (decrease) income tax payable ...................       118,739         57,100
  Increase (decrease) accrued liabilities ..................       (42,558)        28,750
                                                                -------------------------
           Net cash provided by operating activities .......       781,432      1,343,382
                                                                -------------------------

Cash Flows From Investing Activities
  Proceeds from sale of property & equipment ..............         5,000         26,772
  Purchase of property & equipment, net of property
    and equipment from acquisition of subsidiaries ........    (2,578,225)      (553,990)
  Acquisition of subsidiaries, net of cash acquired                  -0-            -0-
                                                                -------------------------
           Net cash (used in) investing activities .........    (2,573,225)      (527,218)
                                                                -------------------------

Cash Flows From Financing Activities
  Proceeds from short-term borrowings, net of debt
    assumed in acquisition of subsidiaries .................       507,000      1,235,563
  Proceeds from long-term borrowings, net of debt
    assumed in acquisition of subsidiaries .................     2,400,000        324,100
  Payments on short-term borrowings ........................      (568,612)    (1,234,356)
  Payments on long-term borrowings .........................      (493,170)      (465,137)
  Repurchase of minority interest ..........................        (3,000)
  Proceeds from warrants and options exercised .............           -0-            -0-
  Payments to minority interest ............................       (17,300)       (17,300)
                                                                -------------------------
           Net cash provided by financing activities: ......     1,824,918       (157,130)
                                                                -------------------------

Net increase (decrease) in cash ............................        33,125        659,034

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

Cash, end of period ........................................    $  502,601    $ 1,066,462
                                                                =========================
</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.

                                                            First Quarter 
                                                         1999           1998
                                                      -------------------------

Revenues from external customers
   Railroads .....................................     2,792,529      2,531,127
   Leasing company ...............................       649,449        705,720
   Corporate .....................................             0              0
                                                      -------------------------
      Total revenues from external customers .....     3,441,978      3,236,847
                                                      =========================

Intersegment revenues
   Railroads .....................................             0              0
   Leasing company ...............................       104,100        106,000
   Corporate .....................................     1,277,646      1,151,838
                                                      -------------------------
      Total intersegment revenues ................     1,381,746      1,257,838
                                                      =========================

Segment profit
   Railroads .....................................     1,046,893        928,471
   Leasing company ...............................       355,849        389,301
   Corporate .....................................       580,625        528,839
                                                      -------------------------
      Total segment profit .......................     1,983,367      1,846,611

Reconciling items
    Intersegment revenues ........................    (1,381,746)    (1,257,838)
    Income taxes .................................      (152,800)      (113,900)
    Minority interest ............................       (31,308)       (31,308)
    Other income(expense), net ...................      (201,594)      (269,198)
                                                      -------------------------
       Total consolidated net income .............       215,919        174,367
                                                      =========================



<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.  (WMI),
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  Industrial  Railway Co. (PRY),
Pioneer  Resources,  Inc. (PRI),  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 share:

Basic  per-share  amounts are computed by dividing net income (the numerator) by
the weighted  average  number of common shares  outstanding  (the  denominator).
Diluted  per-share  amounts assume the  conversion,  exercise or issuance of all
potential  common stock  instruments  unless the effect is to reduce the loss or
increase the net income per share.
                                       
<PAGE>


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.

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,
1999,  a total  of  194,759  options  are  outstanding  under  this  plan  after
forfeitures and exercises.

On June 26,  1996,  the  Company's  shareholders  approved a stock  option  plan
permitting the issuance of 407,000 shares of common stock. Options granted under
the plan are  incentive  based  except for the options  granted to the CEO whose
options are non-qualified.  The options are fully vested and will be exercisable
as of July 1, 2001,  and the effect on earnings per share has been  reflected in
the accompanying  financial statements.  The exercise date can be accelerated if
Pioneer  Railcorp  common  shares reach a closing  price of $7.25 per share,  or
higher,  for any  consecutive  10-day  period,  as  reported  in The Wall Street
Journal.  The  options  will be  exercisable  at the market  price of the common
shares at the date the  options  were  granted,  in whole or in part,  within 10
years from the date of grant.  As of March 31, 1999, a total of 237,000  options
are outstanding under this plan after forfeitures of 170,000 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,  1999,  a total of 67,244  warrants  had been  exercised  since  their
issuance on June 24, 1995.

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.


<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),  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
Industrial Railway Co. (PRY),  Pioneer Resources,  Inc. (PRI),  Pioneer Railroad
Equipment  Co., Ltd.  (PREL),  Pioneer Air,  Inc.  (PAR),  and Pioneer  Railroad
Services, Inc. (PRS).

Summary: First Quarter 1999 Compared to First Quarter 1998.

The Company's net income in the first quarter 1999  increased by 24% to $216,000
up from $174,000 in the same period last year.  Revenue increased by $205,000 or
6% to $3,442,000 from $3,237,000 in the same period last year. Operating expense
increased by $192,000 or 7%, to  $2,840,000  from  $2,648,000 in the same period
last year.  Operating  income  increased  by  $13,000,  or 2% to  $602,000  from
$589,000 in the same period last year.

Operating  income  was  increased  in the first  quarter  1999 by the  Company's
railroad operations which increased operating income by approximately $88,000 in
the period.  The equipment  leasing  operations  decreased  operating  income by
approximately  $40,000  in  the  period,  primarily  from  a  reduction  in  the
utilization  of its railcar  fleet by  non-affiliated  railroads.  In  addition,
corporate support services decreased  operating income by approximately  $35,000
in the period.

Revenue:

Revenue increased in the first quarter 1999 by approximately $205,000, or 6%, to
$3,442,000 from $3,237,000 in the same period last year. The railroad operations
increased  revenue by approximately  $261,000 in the period.  Several  operating
railroad  subsidiaries  had  increases  in  revenues  primarily  resulting  from
increased loadings.  Some of the more significant  increases in revenues include
$180,000 from the Minnesota Central Railroad  resulting from a one-time shipping
contract  for the  movement  of  approximately  166 cars of pipe  for a  utility
company.  The  Alabama & Florida  Railway  increased  revenue  by  approximately
$105,000 in the period,  the Alabama Railroad  increased  revenue $60,000 in the
period, and the Keokuk Junction increased revenue  approximately  $73,000 in the
period.  These  increases in revenue  were offset by a $156,000  loss of revenue
resulting form the  termination of the Rochelle  Railroad  lease.  The equipment
leasing  operations  had a $57,000  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  quarter  1999 by $182,000 or 7%, to
$2,830,000 from $2,648,000 in the prior year. The railroad operations  increased
operating expense by approximately  $167,000 in the first quarter 1999, of which
approximately  $120,000 is attributable to the Minnesota  Central  Railroad as a
result of the costs  associated  with handling the one time shipment of 166 pipe
cars. The equipment leasing operations decreased operating expense approximately
$25,000,  primarily from a reduction in maintenance  costs  associated  with the
railcar  fleet.   Corporate   support  services   increased   operating  expense
approximately  $40,000,  primarily related to professional  services, and public
relation expenditures.

                                       
<PAGE>


Maintenance  of way and  structures  expense (MOW)  increased  $39,000 or 13% to
$336,000 from $297,000 in the same period last year. The primary increase in MOW
related to increased signal maintenance expense in the railroad operations.

Maintenance of equipment expense (MOE) decreased $31,000, or 8% to $371,000 from
$402,000  in the same period last year.  Approximately  $38,000 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 a decrease in MOE expense of approximately $7,000.

Transportation  expense  (TRAN)  increased  $146,000,  or 19% to  $883,000  from
$737,000 in the same period last year.  Most of the  increased  TRAN expense was
generated by the railroad operations,  primarily from the Minnesota Central as a
result of the special pipe shipment.

General & administration  expense (ADMIN)  decreased $2,000 in the first quarter
1999 to $818,000 from $820,000,  in the prior year. The railroad operations were
responsible for approximately a $41,000 decrease in ADMIN expense in the period.
Corporate expenses related to professional services, public relations, and other
corporate support expenditures  increased ADMIN expense by approximately $23,000
in the period,  and the equipment leasing  operations  increased  administration
expense  approximately  $16,000 as a result of expenses related to repositioning
the Company's railcar fleet.

Depreciation and amortization  expense  increased  $40,000,  or 10%, to $432,000
compared to $392,000 in the same period last year.  Approximately $20,000 of the
increase  is  related to  depreciation  expense  of assets  associated  with the
purchase of the Michigan Southern Railroad stock on January 1, 1999.

Other Income and Expense Income Statement Line Item Discussion:

In the first quarter 1999 other income and expense increased $76,000 to $145,000
compared to $69,000 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.

Interest expense related to equipment  financing  decreased $35,000 in the first
quarter  1999 to $165,000  compared to $200,000 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 $37,000
in the first  quarter  1999 to  $184,000  from  $147,000  in the prior  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.

Net gain on fixed asset dispositions decreased approximately $7,000 in the first
quarter 1999 to $2,000 compared to $9,000 in the same period last year. The gain
in 1999 relates to the sale of a corporate fleet vehicle.

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.

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.

                                       
<PAGE>


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 of which $974,000
was available  for use at the end of the first  quarter  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 to provide a $2.5 million  annual  revolving  acquisition  line of credit.
This facility is  collateralized by the common stock of the Alabama Railroad Co.
and the Mississippi Central Railroad Co., as well as the Company's investment in
stock of any  subsidiaries  acquired  under the line.  The interest rate for the
line is currently  11%. 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.  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.

The  Company  has  signed  a  commitment  letter  with  National  City  Bank  of
Michigan/Illinois  for  several  credit  facilities,   including  a  $4  million
revolving line of credit for railroad  acquisitions at a variable  interest rate
of prime plus 1%. This credit line will be secured by all non real estate assets
of the  Mississippi  Central  Railroad  Co.,  the Alabama  Railroad  Co. and any
company  acquired  by line  proceeds.  This  credit  facility  will  replace the
Citizens  Bank & Trust  credit  line,  and in  addition,  National  City Bank of
Michigan/Illinois will provide separate term debt for the $2.4 million currently
outstanding on the Citizens Bank line related to the Michigan  Southern Railroad
stock  purchase at a fixed  interest rate of 8.5%  amortized  over 10 years . In
addition,  National  City Bank has  agreed to reduce  the  interest  rate on the
Keokuk Junction  Railway Co. note from 9.5% to 8.5% and reduce the interest rate
on the Alabama & Florida Railway Co. note from 9.25% to 8.5%. All fixed interest
rates related to National City Bank  financing's  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.  These financing  activities  involving  National City
Bank will have a positive impact on cashflow and reduce interest rate expense.

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.

                                       
<PAGE>


On July 1, 1995, the Company's  stock split and warrant  issuance became payable
to  shareholders.  The 2 for 1 stock split increased the number of shares issued
and  outstanding  from  2,099,142 to  4,198,284.  At the same time  shareholders
became  entitled  to purchase  an  additional  4,198,284  shares  through  stock
warrants  issued by the  Company as  dividends.  One warrant was issued for each
share of common stock held after the split,  entitling  the holder to purchase 1
share of common  stock for $2.00 per share.  The shares  purchased  through  the
exercise  of the  warrants  must be held for 1 year  from date of  purchase.  No
warrants were exercised in the first quarter 1999. As of March 31, 1999, a total
of  67,244  warrants  originally  issued  had been  exercised,  and the  Company
realized  $134,488  on  the  issuance  of  the  warrants.  The  Company  expects
additional  capital to be generated by the continued exercise of warrants but is
uncertain as to the amount.

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 from $1.50 to $4.40 per share.  No options  were  exercised  in the first
quarter  1999.  Since the plans  inception  a total of 69,700  options  had been
exercised and the Company has realized  $104,550 on the exercise of the options.
As of March 31,  1999,  a total of 194,759  options are  outstanding  under this
plan.

On June 26,  1996,  the  Company's  shareholders  approved a stock  option  plan
permitting the issuance of 407,000 shares of common stock. Options granted under
the plan are  incentive  based  except for the options  granted to the CEO whose
options  are  non-qualified.  The  options  will be  fully  vested  and  will be
exercisable  as of July 1, 2001. 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 $2.75,  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, 1999, a total of 237,000 options are outstanding
under this plan.

The  Company is still  negotiating  with the State of  Minnesota  Department  of
Transportation  (MNDOT) for up to  approximately  $4.2 million of interest  free
financing to  rehabilitate  the entire line. As of the date of this report,  the
outcome of these  negotiations  is uncertain  and the Company is  continuing  to
evaluate its options  concerning the MCTA  including  repairing a portion of the
line using its own capital resources,  primarily  long-term debt. If the Company
undertakes  its own  rehabilitation  program,  it is  estimated  that the  total
capital requirement would be less than $2 million.

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.

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 $781,000 in the
first quarter 1999 compared to $1,343,000 in the same period last year. Net cash
from operating activities for the first quarter 1999 was generated from $216,000
of net  income,  $440,000  of  depreciation  and  amortization,  an  increase in
accounts  payable of $403,000,  $198,000 net cash provided by changes in various
other  operating  assets and  liabilities,  reduced by an  increase  in accounts
receivable  of  $476,000.  The  increase  in  accounts  receivable  and  payable
primarily  relates to the Company's  emphasis on collecting its freight revenues
under "interline" contracts as opposed to "switching" contracts. Under interline
contracts,  the Company's  operating  railroads  primarily  bill and collect the
complete  freight rate which would  include the amounts due other  railroads who
are in the delivery route. Under switching  contracts,  the Company's  operating
railroads bill and collect only the Company's portion of revenue. Therefore, the
receivables  are higher under an interline  settlement  environment  because the
Company is collecting  money due other  railroads and  subsequently  recording a
payable to the other railroads, thereby increasing payables.

                                      
<PAGE>


In the first  quarter  1999,  the Company  recorded $2.4 million of fixed assets
relating to the  purchase of the stock of the  Michigan  Southern  Railroad,  of
which $1,136,577 was allocated to track structures,  $899,619  allocated to land
and right of way, $121,036  allocated to buildings,  and the remaining  $242,768
allocated to transportation equipment, vehicles, and railcars.

In the first quarter 1999, the Company purchased approximately $178,000 of fixed
assets and capital improvements.  Capital expenditures for track totaled $79,000
in the  quarter  1999 with the  remaining  $99,000 of fixed  assets and  capital
improvements relating to equipment and railcar betterments.

On February 20,  1998,  Pioneer  Railcorp  through its  wholly-owned  subsidiary
Pioneer Industrial Railway Co., was assigned a lease by the Peoria Pekin & Union
Railway Company (PPU) to operate  approximately  9 miles of railroad  located in
Peoria County,  Illinois. The PRY interchanges with the PPU at Peoria, Illinois.
The railroad's principal commodities are steel, lumber, and salt.

As previously mentioned herein this report Form 10-KSB filing, effective January
1, 1999,  MSO purchased all of the stock of the MSRR from Gordon D. Morris,  for
$2.4 million  funding the  transaction  with long-term  fixed rate debt obtained
from the  Company's  $2.5  million  revolving  acquisition  line of credit.  The
Company had been  operating the line under an operating  lease since December of
1996. 

                                       
<PAGE>


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.

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

No matters  were  submitted to a vote of security  holders in the first  quarter
1999.

tem 5.   OTHER INFORMATION

As previously mentioned herein this report Form 10-KSB filing, effective January
1, 1999,  MSO purchased all of the stock of the MSRR from Gordon D. Morris,  for
$2.4 million  funding the  transaction  with long-term  fixed rate debt obtained
from the  Company's  $2.5  million  revolving  acquisition  line of credit.  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 will be moved to the  revolving  line of  credit  upon
completion and execution of the documents for the revolver.

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.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

Exhibit # 11 - Statement re  computation of per share  earnings.  
Exhibit # 27 - Financial data schedule.

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

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


       5/10/99                             /s/ Guy L, Brenkman
       -------                             -------------------------------------
        DATE                               GUY L. BRENKMAN
                                             PRESIDENT & CEO




      5/10/99                              /s/ J. Michael Carr
      -------                              -------------------------------------
       DATE                                J. MICHAEL CARR
                                             TREASURER & CHIEF FINANCIAL OFFICER