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, 1998

                        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  [  ]

                                    4,609,513
             ------------------------------------------------------
             (Shares of Common Stock outstanding on March 31, 1998)


<PAGE>



PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended March 31, 1998 and 1997

UNAUDITED

                                                            First Quarter  
                                                     --------------------------
                                                         1998           1997
                                                     --------------------------

Operating revenue ................................   $ 3,236,847    $ 2,801,517
                                                     --------------------------

Operating expenses
   Maintenance of way ............................       297,029        227,676
   Maintenance of equipment ......................       402,301        368,256
   Transportation expense ........................       736,594        697,372
   Administrative expense ........................       819,887        794,731
   Depreciation  & amortization ..................       392,263        367,586
                                                     --------------------------
                                                       2,648,074      2,455,621
                                                     --------------------------

Operating income .................................       588,773        345,896
                                                     --------------------------

Other income & expense
   Other (income) expense ........................       (69,141)      (133,919)
   Interest expense, equipment ...................       199,833        202,159
   Interest expense, other .......................       147,239        146,175
   Net (gain) loss on sale of fixed assets .......        (8,733)       (28,952)
                                                     --------------------------
                                                         269,198        185,463
                                                      --------------------------

Income before income taxes .......................       319,575        160,433

Provision for income taxes .......................       113,900         58,900
                                                     --------------------------


Income before minority interest in preferred
   stock dividends of consolidated subsidiaries ..   $   205,675    $   101,533

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


Net income .......................................   $   174,367    $    70,225
                                                     ==========================

Basic earnings per common share ..................   $      0.04    $      0.02
                                                     ==========================

Diluted earnings per common share ................   $      0.04    $      0.02
                                                     ==========================
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997

UNAUDITED
<TABLE>


                                                          March 31    December 31,
                                                            1998           1997
                                                        --------------------------
<S>                                                     <C>            <C>   
ASSETS
Current Assets
   Cash ..............................................   $ 1,066,462   $   407,428
   Accounts receivable, less allowance
     for doubtful accounts 1998 $122,882; 1997 $82,375     2,330,603     2,367,509
   Inventories .......................................       353,088       351,331
   Prepaid expenses ..................................       170,076       192,952
   Income tax refund claims ..........................        74,478        74,602
   Deferred taxes ....................................        66,400        66,400
                                                        --------------------------
        Total current assets .........................     4,061,107     3,460,222
                                                        --------------------------

Property and Equipment less accumulated
  depreciation 1998 $4,977,845; 1997 $4,602,015 ......    20,129,854    19,974,702
                                                        --------------------------

Intangible Assets, less accumulated amortization
  1998 $210,814; 1997 $140,109 .......................     1,106,161     1,117,205
                                                        --------------------------

Investments, cash value of life insurance ............       100,495        95,547
                                                        --------------------------

Total assets .........................................   $25,397,617   $24,647,676
                                                         =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ..................................   $ 3,133,735   $ 2,518,190
   Notes payable .....................................       251,241       250,034
   Income taxes payable ..............................       118,849        61,749
   Current maturities of long-term debt ..............     1,898,442     1,836,132
   Accrued liabilities ...............................       460,895       432,145
                                                        --------------------------
        Total current liabilities ....................     5,863,162     5,098,250
                                                        --------------------------

Long-term debt, net of current maturities ............    12,262,151    12,465,498
Deferred income taxes ................................     2,250,700     2,250,700
                                                        --------------------------
        Total liabilities & debt .....................    20,376,013    19,814,448
                                                        --------------------------

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

Stockholders' Equity
   Common stock ......................................         4,607         4,607
   Additional paid-in capital ........................     2,040,203     2,040,203
   Retained earnings .................................     1,790,794     1,602,418
                                                        --------------------------
        Total stockholders' equity ...................     3,835,604     3,647,228
                                                        --------------------------

Total liabilities and equity .........................   $25,397,617   $24,647,676
                                                         =========================
</TABLE>
<PAGE>




PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters Ended March 31, 1998 and 1997

UNAUDITED
<TABLE>

                                                                     First Quarter
                                                              --------------------------
                                                                   1998         1997
                                                              --------------------------
<S>                                                           <C>             <C>   
Cash Flows From Operating Activities
Net income ................................................   $   174,366    $    70,225
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 .................................       379,182        356,418
             Amortization .................................        13,081         11,167
          Increase in cash value life insurance ...........        (4,948)        (4,858)
          (Gain) on sale of property & equipment ..........        (8,733)       (28,952)
           Deferred taxes .................................           -0-            -0-
Change in assets and liabilities, net of effects from
          acquisition of subsidiaries
          (Increase) decrease accounts receivable .........        36,906       (162,742)
          (Increase) decrease inventories .................        (1,757)         7,048
          (Increase) decrease prepaid expenses ............        22,876         69,922
          (Increase) decrease intangible assets ...........          (418)           488
          Increase (decrease) accounts payable ............       615,545        220,528
          (Increase) decrease income tax refund claims ....           124         11,635
          Increase (decrease) income tax payable ..........        57,100         47,100
          Increase (decrease) accrued liabilities .........        28,750        289,701
                                                              --------------------------
          Net cash provided by operating activities .......     1,343,382        918,988
                                                              --------------------------

Cash Flows From Investing Activities
          Proceeds from sale of property & equipment ......        26,772         53,089
          Purchase of property & equipment, net of property
          and equipment from acquisition of subsidiaries ..      (553,990)      (278,403)
          Acquisition of subsidiaries, net of cash acquired           -0-            -0-
                                                              --------------------------
          Net cash (used in) investing activities .........      (527,218)      (225,314)
                                                              --------------------------

Cash Flows From Financing Activities
          Proceeds from short-term borrowings, net of debt
          assumed in acquisition of subsidiaries ..........     1,235,563        400,328
          Proceeds from long-term borrowings, net of debt
          assumed in acquisition of subsidiaries ..........       324,100        119,700
          Payments on short-term borrowings ...............    (1,234,356)      (597,210)
          Payments on long-term borrowings ................      (465,137)      (453,323)
          Repurchase of minority interest
          Proceeds from warrants and options exercised ....           -0-         26,590
          Payments to minority interest ...................       (17,300)       (17,300)
                                                              --------------------------
          Net cash provided by financing activities: ......      (157,130)      (521,215)
                                                              --------------------------

Net increase (decrease) in cash ...........................       659,034        172,459
Cash, beginning of period .................................       407,428        501,212
                                                              --------------------------

Cash, end of period .......................................   $ 1,066,462    $   673,671
                                                              ==========================
</TABLE>
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER RAILCORP AND SUBSIDIARIES

NOTE 1.   STATEMENTS

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

NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principals of consolidation:

The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned  and controlled  subsidiaries  (collectively,  "the Company").  The
significant  subsidiaries  are as follows:  West  Michigan  Railroad Co.  (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. (PIR),  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

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards  (FAS 128),  "Earnings  Per Share." FAS 128  requires  the
presentation  of both basic  earnings per share and diluted  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. The Company initially applied FAS 128 for the
year ended December 31, 1997, and as required by this statement has restated all
per share information for the prior year to conform to the statement.

In July 1997,  Statement of Financial  Accounting  Standard No. 130,  "Reporting
Comprehensive  Income"  (FAS  130),  was  issued  by  the  Financial  Accounting
Standards Board. The standard establishes  reporting of comprehensive income for
general purpose  financial  statements.  Comprehensive  income is defined as the
change in equity of a business  enterprise  during a period and all other events
and  circumstances  from  non-owner  sources.  The  standard  is  effective  for
financial  statement periods beginning after December 15, 1997. The Company does
not believe  the  adoption of the  standard  will have a material  impact on its
consolidated financial statements.

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
will be 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 the  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,
1998,  a total  of  762,300  options  are  outstanding  under  this  plan  after
forfeitures and exercises.

On June 26,  1996,  the  Company's  shareholders  approved a stock  option  plan
permitting the issuance of 407,000 shares of common stock. Options granted under
the plan are  incentive  based  except for the options  granted to the CEO whose
options are non-qualified.  The options are fully vested and will be exercisable
as of July 1, 2001,  and the effect on earnings per share has been  reflected in
the accompanying  financial statements.  The exercise date can be accelerated if
Pioneer  Railcorp  common  shares reach a closing  price of $7.25 per share,  or
higher,  for any  consecutive  10-day  period,  as  reported  in The Wall Street
Journal.  The  options  will be  exercisable  at the market  price of the common
shares at the date the  options  were  granted,  in whole or in part,  within 10
years from the date of grant.  As of March 31, 1998, a total of 287,000  options
are outstanding under this plan after forfeitures of 120,000 shares.


NOTE 5.   STOCK SPLIT AND STOCK WARRANTS ISSUED AS DIVIDENDS

On May 16,  1995 the  Board of  Directors  authorized  a 2 for 1 stock  split to
shareholders  of record June 30, 1995,  payable July 1, 1995. This increased the
outstanding common shares to 4,198,084 from 2,099,042.  In addition, on June 24,
1995 the  shareholders  ratified an amendment  to the Articles of  Incorporation
authorizing  the  issuance  of stock  warrants  as a  dividend  to  shareholders
immediately  after the stock split.  Each  shareholder  received one warrant for
each share of common stock owned. Each warrant permits  shareholders to purchase
an additional  share of common stock at a  predetermined  price of $2 per share.
The warrants  expire on July 1, 2015, and the effect of the warrants on earnings
per share has been reflected in the  accompanying  financial  statements.  As of
March 31,  1998,  a total of 66,844  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

The Company operated the following  thirteen  railroads during the first quarter
of 1998:  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), and Pioneer Industrial  Railway Co.(PRY).  The Company also operated four
railroad-related  subsidiaries,  Pioneer Resources, Inc. (PIR), Pioneer Railroad
Equipment Co., Ltd. (PREL), Pioneer Railroad Services,  Inc. (PRSI), and Pioneer
Air, Inc. (PAR).

Summary: First Quarter 1998 Compared to First Quarter 1997.

The Company's net income in the first quarter 1998 increased by 149% to $174,366
from  $70,225  in the same  period  last  year.  Operating  revenue in the first
quarter 1998  increased by $400,000 or 15% to $3.2 from $2.8 million in the same
period last year.  Operating  expense  increased  in the first  quarter  1998 by
$192,000 or 8% to $2.648  million  from  $2.456  million in the same period last
year. Operating income increased in the first quarter 1998 by $243,000 or 71% to
$589,000 from $346,000 in the same period last year.

Operating Revenue:

The  increase in  operating  revenue in the first  quarter  1998 of $435,000 was
positively  affected by a 20% or $136,000 increase in revenue generated from the
Keokuk Junction Railway which had operating  revenues of approximately  $845,000
in the first quarter 1998 compared to $709,000 in the same period last year. The
KJRY increase in operating  revenue resulted from increased rail loadings on the
line. In addition, the Rochelle Railroad had increased operating revenue of 61%,
or approximately  $59,000,  to approximately  $156,000 in the first quarter 1998
compared to $97,000 in the same period last year,  resulting from both increased
rail loadings and freight rates in the quarter.  The Minnesota  Central Railroad
operating revenue  increased  approximately  $100,000,  to $112,000 in the first
quarter  1998  compared to $12,000 in the same period last year.  MCTA  revenues
were  adversely  affected  in the  same  period  last  year  by  severe  weather
conditions.  Operating revenue from Pioneer Railroad Equipment Co. increased 27%
or  approximately  $146,000,  to $705,000 in the first  quarter 1998 compared to
$559,000 in the same period last year. The PREL revenue  increase  resulted from
Company efforts to increase utilization of its rail car fleet.

Pioneer  Industrial  Railway,  which began  operations on February 20, 1998, had
operating revenue of $29,000 in the first quarter 1998.

The  Alabama  &  Florida  Railway  had  a  decrease  in  operating   revenue  of
approximately  $60,000,  or 17%, reporting operating revenues of $294,000 in the
first  quarter  1998  compared to  $354,000  in the same  period last year.  The
decrease  in  revenues  resulted  from the  railroad  being out of  service  for
approximately  10 days in March as a  result  of  severe  flooding  in  southern
Alabama. Several sections of the line remain out of service as described in more
detail in Part II Item 5 of this report.

The remaining  operating  subsidiaries had constant overall revenue in the first
quarter 1998 compared to the same period last year.

Operating Expense:

The increase in operating expense of $192,000 in the first quarter 1998 resulted
from normal operating activities,  none of which when considered individually is
significant.  Some of the factors related to increased  operating expense are as
follows:

Increase in  maintenance  of way expense in the first quarter 1998 was primarily
attributable to an increase in  non-capitalized  track maintenance on the Keokuk
Junction  Railway,  the Michigan  Southern  Railroad,  and the Alabama & Florida
Railway . The  increase  in  maintenance  of  equipment  expense  was  primarily
attributable to increased  expenses  related to both the repair of Company owned
Railcars  and the  repair of  Railcars  not  affiliated  with the  Company.  The
increase  in  transportation  expense in the first  quarter  1998 was  primarily
attributable  to the  Minnesota  Central  Railroad  and  the  Michigan  Southern
Railroad.   The  Pioneer  Industrial  Railway  had  transportation   expense  of
approximately  $16,000 in the first quarter 1998. The increase in administrative
expense in the first quarter 1998 was  attributable to payroll costs  associated
with the hiring of additional support personnel.

The remaining  operating  subsidiaries had constant overall operating expense in
the first quarter 1998 compared to the same period last year.
<PAGE>


Other Income and Expense Line Item Discussion:

Other income of $69,000 for the first quarter 1998 consisted  primarily of lease
income.  Other income of $134,000 for the first  quarter 1997  consisted of real
estate lease income, scrap income and other miscellaneous items. The decrease in
1998 reflects  scrap sale income in 1997 not realized in 1998,  and a portion of
Keokuk Junction  Railway lease income in 1997 included  revenues for years prior
to 1997  not  billed  or  collected  by the  previous  owners.  The  Company  is
continuing in its efforts to generate right of way lease income.

Interest  expense  remained  constant in the first  quarter 1998 compared to the
same period last year, primarily because the amount of overall long-term debt of
the Company did not change significantly in the first quarter 1998 when compared
to the same period last year.

Net gain on fixed asset dispositions during the first quarter 1998 resulted from
the disposition of three Railcars.  Net gain on fixed asset dispositions  during
the first quarter 1997 of $29,000 included $24,000 from the sale of a locomotive
and $5,000 from the sale of a railcar.

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 by the year-end 1998. The program includes  engaging
an outside  consultant  to review all of the  Company's  computer  hardware  and
software,  as well as to confirm  with outside  vendors that their  products are
Year 2000 compliant.  Although final cost estimates have not been determined, it
is not expected that these expenses will have a material impact on the Company's
financial condition, liquidity, or results of operations.

Liquidity and Capital Resources:

The Company  primarily  uses cash  generated  from  operations  to fund  working
capital  needs and relies on long-term  financing  for  Railcars,  new operating
subsidiaries, and other significant capital expenditures.

The Company has working capital facilities totaling $1,100,000 of which $877,000
was available  for use at the end of the first  quarter  1998. In addition,  the
Company has seen the market value of its railcar  fleet  increase  significantly
over the last several years.  This increase in value has resulted from the short
supply of railcars  compared to the increased  demand for their use. The Company
believes it could  refinance  or sell part of its railcar  fleet and generate at
least $1 million in cash.

In March 1996, the Company negotiated a credit facility with its primary bank to
provide  a $2.5  million  annual  revolving  acquisition  line of  credit.  This
facility is  collateralized  by the common stock of the Alabama Railroad Co. and
the  Mississippi  Central  Railroad Co., as well as the Company's  investment in
stock of any  subsidiaries  acquired  under the line.  The interest rate for the
line is currently  11%. The interest rate is  adjustable  quarterly to 2.5% over
New York Prime,  limited to a one percent  annual  increase or decrease,  not to
exceed  13.5% or be reduced  below 10%.  Any  amounts  drawn on the line must be
repaid monthly over a seven year period.  The line is fully available for use as
of March 31, 1998.

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 Company does not expect to make  significant  additions to its railcar fleet
in 1998.

The Company plans to take advantage of the favorable  interest rate  environment
and has commitments  from  commercial  lenders to refinance  approximately  $3.3
million of equipment debt in the second quarter 1998.
<PAGE>


On July 1, 1995, the Company's  stock split and warrant  issuance became payable
to  shareholders.  The 2-for-1 stock split increased the number of shares issued
and  outstanding  from  2,099,042 to  4,198,084.  At the same time  shareholders
became  entitled  to purchase  an  additional  4,198,084  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  have been  exercised in 1998.  As of March 31, 1998, a total of 66,844
warrants originally issued had been exercised, and the Company realized $133,688
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 have been exercised in 1998. As
of March 31, 1998, a total of 69,700  options had been exercised and the Company
has  realized  $104,550 on the  exercise  of the  options.  The Company  expects
additional  capital to be  generated  by the  exercise of options in 1997 but is
uncertain as to the amount. As of March 31, 1998, a total of 691,271 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, 1998, a total of 282,000 options are outstanding
under this  plan.  The  Company  is  currently  negotiating  with the  Minnesota
Department  of  Transportation  for  approximately  $6 million of  interest-free
financing to rehabilitate the Minnesota Central  Railroad.  The Company believes
the outcome of these negotiations will be known by the end of the second quarter
1998.  The Company  believes  that there is strong  support for the project from
local economic development agencies and a majority of the railroad's customers.

The City of Rochelle,  Illinois  terminated  the Rochelle  Railroad  Co.'s lease
agreement  effective  January  19,  1998.  The City is seeking  to  replace  the
Rochelle Railroad as operator of the line with one of the on-line customers. The
Rochelle   Railroad  is  seeking  damages,   seeking  relief  from  the  Surface
Transportation  Board, and is also seeking to condemn the property.  The outcome
of these actions is uncertain.  If the Rochelle  Railroad  ceases  operating the
railroad,  it would have a material  adverse effect on the Company's  results of
operation.  In 1997 the Rochelle Railroad Co. generated  $408,000 in revenue and
$250,000 of operating income. In the first quarter of 1998 the Rochelle Railroad
Co. generated $156,000 in revenue and $95,000 of operating income.

The Michigan Southern Railroad's lease expires in December 1998, and the Company
has an option to purchase the stock and leased personal property of the railroad
for $2.6  million.  The Company has not yet  determined  if it will exercise its
purchase  option.  If the purchase option is exercised the transaction  would be
funded with long-term debt. In 1997 the Michigan Southern Railroad  generated $1
million in revenue and $326,000 of  operating  income.  In the first  quarter of
1998 the Michigan Southern Railroad generated $246,000 in revenue and $86,000 of
operating income.

Except for the  uncertainties  of the  Rochelle  Railroad  Co.  litigation,  the
Company anticipates favorable outcomes involving current legal proceedings.  The
Company does not  anticipate  any material  judgements  against it or any of its
subsidiaries will arise out of the current proceedings.

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


Balance Sheet and Cash Flow Items:

The Company  generated net cash from  operating  activities of $1,343,000 in the
first quarter 1998  compared to $919,000 in the same period last year.  Net cash
from  operating  activities  for the first quarter 1998 resulted  primarily from
$174,366  of net  income,  $410,000  of  depreciation  and  amortization  and an
increase in  accounts  payable of  $616,000.  The  increase in accounts  payable
includes  $147,000 payable for lost lading that resulted from a 1997 derailment;
the full amount of this payable is recorded in accounts  receivable  and will be
reimbursed by the Company's  insurance  carrier.  The accounts  payable increase
also  includes   approximately   $150,000  of  interline   freight   payable  to
non-affiliated  railroads.  The  Company  has  collected  cash  or has  accounts
receivable  balances  that  together  offset the interline  payable  amount.  In
addition,  approximately  $110,000 of the accounts  payable  increase relates to
money  owed  for  repairs  to  the  Company's   railcars   which  were  made  by
non-affiliated  railroads  late in the first  quarter  1998.  This increase is a
direct result of increased utilization of the Company's railcar fleet.

In the first quarter 1998 the Company purchased  approximately $533,990 of fixed
assets and capital improvements.  The capital additions included the purchase of
27 railcars  at a total cost of  $324,000  which were  financed  with  long-term
fixed-rate  financing.  In  addition,  the  Company  capitalized   approximately
$100,000 of track and structure  repair  related to severe  flooding in Alabama.
Also,  $30,000 in  railcar  and  locomotive  betterments,  $27,000 of  leasehold
improvements to the Pioneer Industrial  Railway track,  $21,000 for the purchase
of industrial  development  land,  and  miscellaneous  capital  expenditures  of
approximately $36,000 for machinery, equipment and other assets were capitalized
in the first quarter of 1998. All capital  expenditures  other than the purchase
of railcars were financed with working capital cash flow.

PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

There are a number of legal actions  pending  between the Rochelle  Railroad Co.
("RRCO"), the City of Rochelle, Illinois, and other entities, arising out of the
City's  termination  of RRCO's lease  agreement.  The City is seeking to replace
RRCO as operator of the line with one of the on-line customers.  RRCO is seeking
damages,  seeking  relief from the  Surface  Transportation  Board,  and is also
seeking to condemn the property.  The outcome of these actions is uncertain.  If
RRCO were to cease  operating  the  railroad,  it would have a material  adverse
effect on the Company's results of operation.

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
1998.


Item 5.   OTHER INFORMATION

The Alabama & Florida  Railway had five miles of track washed out as a result of
severe  floods  and heavy  rains in March  1998.  This  damage  has cut off rail
service  between  Andalusia  and the end of the  line in  Geneva,  Alabama.  The
customers  affected by the washout  had not  previously  been heavy users of the
railroad, although several opportunities for significantly increased loads which
had just begun to be realized in the first  quarter of 1998 have been lost until
such time the railroad is repaired. The total estimated cost to repair the flood
damage is  approximately  $2 million.  Federal  legislation  has been passed and
signed  by the  President,  which  may  result  in  allocation  of  grant  funds
sufficient to repair the railroad.  If such grant funds do not become available,
the Company will have to consider alternative plans to restore rail usage to the
affected  customers.  This event will not have a material  adverse effect on the
Company's operating results.

On April 2, 1998,  Pioneer  Railcorp's  Board of  Directors  declared a $.02 per
common share dividend  payable to  shareholders  of record as of April 30, 1998,
payable no later than June 30, 1998.
<PAGE>



Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

No reports were filed on Form 8-K during the first quarter 1998.

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

<PAGE>




                                   SIGNATURES


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





PIONEER RAILCORP
(Registrant)





       05/11/98               /s/ Guy L. Brenkman
       --------               --------------------------------------------------
        DATE                  GUY L. BRENKMAN
                                PRESIDENT & CEO




       05/11/98               /s/ J. Michael Carr
       --------               --------------------------------------------------
        DATE                  J. MICHAEL CARR
                                 TREASURER & CHIEF FINANCIAL OFFICER