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, 2005

                        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

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 [ ]

                                   4,497,782
             -----------------------------------------------------
             (Shares of Common Stock outstanding on June 30, 2005)


                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



                             PIONEER RAILCORP AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF INCOME
                     Three and Six Months Ended June 30, 2005 and 2004

                                         UNAUDITED
<TABLE>

                                                        Three Months Ended             Six Months Ended
                                                             June 30,                       June 30,
                                                    --------------------------------------------------------
                                                        2005           2004           2005          2005
                                                    --------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>
Operating revenue ...............................   $ 4,621,000    $ 4,056,000    $ 9,041,000    $ 8,172,000
                                                    --------------------------------------------------------

Operating expenses
  Maintenance of way ............................       422,000        421,000        761,000        814,000
  Maintenance of equipment ......................       447,000        410,000        905,000        796,000
  Transportation expense ........................     1,078,000        867,000      2,071,000      1,899,000
  Administrative expense ........................     1,136,000      1,086,000      2,498,000      2,114,000
  Depreciation  & amortization ..................       580,000        551,000      1,157,000      1,104,000
  Net (gain) loss on sale of property & equipment      (250,000)        27,000       (276,000)        37,000
                                                    --------------------------------------------------------
                                                      3,413,000      3,362,000      7,116,000      6,764,000
                                                    --------------------------------------------------------

Operating income ................................     1,208,000        694,000      1,925,000      1,408,000
                                                    --------------------------------------------------------

Other income & expense
  Other (income) expense ........................       (38,000)       (71,000)      (299,000)      (346,000)
  Interest expense ..............................       208,000        191,000        415,000        393,000
                                                    --------------------------------------------------------
                                                        170,000        120,000        116,000         47,000
                                                    --------------------------------------------------------

Income before income taxes ......................     1,038,000        574,000      1,809,000      1,361,000

Provision for income taxes ......................       434,000        239,000        758,000        570,000
                                                    --------------------------------------------------------

Income before minority interest in preferred
  stock dividends of consolidated subsidiaries ..   $   604,000    $   335,000    $ 1,051,000    $   791,000

Minority interest in preferred stock dividends of
  consolidated subsidiaries .....................        23,000         23,000         45,000         45,000
                                                    --------------------------------------------------------


Net income ......................................   $   581,000    $   312,000    $ 1,006,000    $   746,000
                                                    ========================================================

Basic earnings per common share .................   $      0.13    $      0.07    $      0.22    $      0.17
                                                    ========================================================

Diluted earnings per common share ...............   $      0.10    $      0.06    $      0.17    $      0.15
                                                    ========================================================

Cash dividends per common share .................   $      --      $      0.05    $      --      $      0.05
                                                    ========================================================
</TABLE>

See notes to unaudited consolidated financial statements

                                       2
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2005 and DECEMBER 31, 2004

                                    UNAUDITED

<TABLE>
                                                            June 30,     December 31,
                                                             2005            2004
                                                         ----------------------------
<S>                                                      <C>             <C>
ASSETS
Current Assets
  Cash ...............................................   $  2,240,000    $    958,000
  Accounts receivable, less allowance
    for doubtful accounts 2005 $110,000; 2004 $109,000      3,663,000       3,732,000
  Inventories ........................................        378,000         370,000
  Prepaid expenses ...................................        313,000         299,000
  Income tax refund claims ...........................        238,000         242,000
                                                         ----------------------------
        Total current assets .........................      6,832,000       5,601,000

Investments, cash value of life insurance ............        296,000         280,000

Property and equipment, less accumulated
  depreciation 2005 $16,441,000; 2004 $15,807,000 ....     28,827,000      25,309,000

Other assets .........................................          3,000           4,000

Goodwill .............................................      1,017,000       1,017,000
                                                         ----------------------------

Total assets .........................................   $ 36,975,000    $ 32,211,000
                                                         ============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term debt ...............   $  2,609,000    $  1,478,000
  Notes payable ......................................             --         146,000
  Accounts payable ...................................      2,923,000       2,469,000
  Income taxes payable ...............................        345,000              --
  Deferred income taxes ..............................         46,000          46,000
  Accrued liabilities ................................        644,000         968,000
                                                         ----------------------------
        Total current liabilities ....................      6,567,000       5,107,000
                                                         ----------------------------

Long-term debt, net of current maturities ............     10,362,000       8,080,000
                                                         ----------------------------

Deferred revenue .....................................      1,647,000       1,702,000
                                                         ----------------------------

Deferred income taxes ................................      6,534,000       6,396,000
                                                         ----------------------------

Minority interest in subsidiaries ....................        736,000         736,000
                                                         ----------------------------

Stockholders' Equity
  Common stock :
  Issued 2005 4,636,547; 2004 4,634,917
  In Treasury 2005 138,765 shares; 2004 137,665
  Outstanding 2005 4,497,782; 2004 4,497,252 .........          5,000           5,000
  Additional paid-in capital .........................      2,058,000       2,054,000
  Retained earnings ..................................      9,133,000       8,131,000
  Accumulated other comprehensive loss ...............        (67,000)             --
                                                         ---------------------------
        Total stockholders' equity ...................     11,129,000      10,190,000
                                                         ----------------------------

Total liabilities and stockholders' equity ...........   $ 36,975,000    $ 32,211,000
                                                         ============================
</TABLE>

See notes to unaudited consolidated financial statements

                                       3
<PAGE>


                        PIONEER RAILCORP AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                         Six Months Ended June 30, 2005

                                    UNAUDITED


                                                              Six Months Ended
                                                                  June 30,
                                                          ----------------------
                                                             2005         2004
                                                          ----------------------

Comprehensive income:
  Net Income ..........................................   $ 581,000    $ 312,000
  Other comprehensive loss, net of tax:
    unrealized loss on derivative financial instruments
    net of taxes of $45,000 for 2005 ..................     (67,000)        --
                                                          ----------------------

Comprehensive  income .................................   $ 514,000    $ 312,000
                                                          ======================

See notes to unaudited consolidated financial statements


Remainder of page intentionally left blank

                                       4
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 2005 and 2004

                                    UNAUDITED
<TABLE>
                                                                    Six Months Ended
                                                              ----------------------------
                                                                   2005           2004
                                                              ----------------------------
<S>                                                           <C>             <C>
Cash Flows From Operating Activities
Net income ................................................   $  1,006,000    $    746,000
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Minority interest in preferred stock dividends of
    consolidated subsidiaries .............................         45,000          45,000
  Depreciation and amortization ...........................      1,157,000       1,104,000
  Increase in cash value life insurance ...................        (16,000)        (16,000)
  (Gain) loss on sale of property & equipment .............       (276,000)         37,000
   Deferred taxes .........................................        183,000         234,000
Change in assets and liabilities
  (Increase) decrease accounts receivable .................         69,000         150,000
  (Increase) decrease inventories .........................         (8,000)         (8,000)
  (Increase) decrease prepaid expenses ....................        (14,000)        (69,000)
   Increase (decrease) accounts payable ...................        454,000        (249,000)
   (Increase) decrease income tax refund claims ...........          4,000          55,000
   Increase (decrease) income tax payable .................        345,000             --
   Increase (decrease) deferred revenue ...................        (55,000)        (39,000)
   Increase (decrease) accrued liabilities ................       (436,000)       (257,000)
                                                              ----------------------------
        Net cash provided by operating activities .........      2,458,000       1,733,000
                                                              ----------------------------

Cash Flows From Investing Activities
  Proceeds from sale of property & equipment ..............        555,000          71,000
  Purchase of property & equipment ........................     (4,953,000)       (489,000)
                                                              ----------------------------
        Net cash (used in) investing activities ...........     (4,398,000)       (418,000)
                                                              ----------------------------

Cash Flows From Financing Activities
  Proceeds from short-term borrowings .....................        176,000              --
  Proceeds from long-term borrowings ......................     11,263,000              --
  Payments on short-term borrowings .......................       (322,000)       (146,000)
  Payments on long-term borrowings ........................     (7,850,000)     (1,447,000)
  Payments to minority interests ..........................        (45,000)        (45,000)
  Purchase of common stock for treasury ...................         (3,000)         (2,000)
  Purchase of minority interest ...........................             --          (1,000)
  Proceeds from warrants exercised ........................          3,000          23,000
                                                              ----------------------------
        Net cash provided by (used in) financing activities      3,222,000      (1,618,000)
                                                              ----------------------------

Net increase (decrease) in cash ...........................      1,282,000        (303,000)

Cash, beginning of period .................................        958,000       1,199,000
                                                              ----------------------------

Cash, end of period .......................................   $  2,240,000    $    896,000
                                                              ============================

Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Interest ..............................................   $    415,000    $    393,000
                                                              ============================

    Income taxes ..........................................   $    237,000    $    286,000
                                                              ============================
</TABLE>

See notes to unaudited consolidated financial statements

                                       5
<PAGE>

This Form 10-QSB contains certain  "forward-looking"  statements as such term is
defined in The Private Securities  Litigation Reform Act of 1995 and information
relating to the Company  and its  subsidiaries  that are based on the beliefs of
the  Company's  management.  When used in this report,  the words  "anticipate,"
"believe,"  "estimate,"  "expect,"  and "intend" and words or phrases of similar
import, as they relate to the Company or its subsidiaries or Company management,
are intended to identify forward-looking statements. Such statements reflect the
current  risks,   uncertainties  and  assumptions  related  to  certain  factors
including, without limitation, competitive factors, general economic conditions,
customer relations,  relationships with vendors,  the interest rate environment,
governmental  regulation and supervision,  seasonality,  distribution  networks,
product introductions and acceptance,  technological change, changes in industry
practices,  one-time  events  and other  factors  described  herein and in other
filings made by the Company with the Securities and Exchange  Commission.  Based
upon changing conditions, should any one or more of these risks or uncertainties
materialize,  or should  any  underlying  assumptions  prove  incorrect,  actual
results  may  vary  materially  from  those  described  herein  as  anticipated,
believed,  estimated,  expected,  or  intended.  The Company  does not intend to
update these forward-looking statements.

NOTES TO  UNAUDITED  CONSOLIDATED  FINANCIAL  STATEMENTS  PIONEER  RAILCORP  AND
SUBSIDIARIES

NOTE 1. STATEMENTS

The  accompanying   Consolidated  Statements  of  Income,  Balance  Sheets,  and
Statements of Cash Flows are unaudited. The interim financial statements reflect
all adjustments (consisting only of normal recurring accruals) which are, in the
opinion of  management,  necessary  for a fair  statement of the results for the
interim  periods   presented.   These  interim  statements  should  be  read  in
conjunction with the latest  financial  statements and notes thereto included in
the Company's  latest Annual  Report on Form 10-KSB and  subsequent  Form 10-QSB
filings.  The  results  of  operations  for the  interim  periods  should not be
considered indicative of results to be expected for the full year.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned  and controlled  subsidiaries  (collectively,  "the Company").  The
Company's  railroad  operations  segment  consists  of  wholly-owned  short line
railroad  subsidiaries  that offer  similar  services and includes the following
wholly-owned  subsidiaries:  West Michigan Railroad Co. (WMI), Michigan Southern
Railroad  Company  (MSO),  Fort Smith Railroad Co. (FSR),  Alabama  Railroad Co.
(ALAB),  Mississippi Central Railroad Co. (MSCI), Alabama & Florida Railway Co.,
Inc. (AF), Decatur Junction Railway Co. (DT),  Vandalia Railroad Company (VRRC),
Keokuk  Junction  Railway Co. (KJRY),  Shawnee  Terminal  Railway Company (STR),
Pioneer  Industrial  Railway Co. (PRY),  The Garden City Western  Railway,  Inc.
(GCW), Indiana Southwestern Railway Co. (ISW), Kendallville Terminal Railway Co.
(KTR), Elkhart & Western Railroad Co. (EWR),  Gettysburg & Northern Railroad Co.
(GET),  Pioneer  Resources,  Inc. (PRI),  Pioneer  Railroad  Equipment Co., Ltd.
(PREL), Pioneer Air, Inc. (PAR), and Pioneer Railroad Services,  Inc. (PRS). 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  Air,  Inc.  (PAR),  and  Pioneer  Railroad
Services,  Inc. (PRS).  All significant  intercompany  balances and transactions
have been eliminated in consolidation.

For a complete  description of our other significant  accounting  policies,  see
Note 1 to our Consolidated Financial Statements in our 2004 Form 10-KSB.

NOTE 3. CONTINGENCIES

As of the date of this Form  10-QSB,  management  is not  aware of any  incident
which is likely to  result in a  liability  that  would  materially  affect  the
Company's consolidated financial position or results of operation.

NOTE 4. ACCOUNTING PRONOUNCEMENTS

FASB Statement No. 153, Exchange of Nonmonetary  Assets,  was issued in December
2004.  This  Statement  addresses the  measurement  of exchanges of  nonmonetary
assets and eliminates the exception from fair value  measurement for nonmonetary
exchanges of similar  productive  assets and  replaces it with an exception  for
exchanges  that do not have  commercial  substance.  A nonmonetary  exchange has
commercial  substance  if the future  cash flows of the entity are  expected  to
change  significantly  as a result of the exchange.  This Statement is effective
for periods  beginning  after June 15,  2005.  The  Company  does not expect the
application of Statement  No.153 to have a material  effect on the  accompanying
financial statements.

                                       6
<PAGE>

In December 2004, the Financial  Accounting  Standards Board ("FASB")  published
FASB Statement No. 123 (revised  2004),  "Share-Based  Payment" ("FAS 123(R)" or
the  "Statement").  FAS 123(R) requires that the  compensation  cost relating to
share-based payment transactions, including grants of employee stock options, be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability  instruments  issued.  FAS 123(R) covers a wide
range  of  share-based   compensation   arrangements  including  stock  options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. FAS 123(R) is a replacement of FASB Statement No.
123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees,  and its related interpretive guidance
(APB 25).

The effect of the Statement  will be to require  entities to measure the cost of
employee services received in exchange for stock options based on the grant-date
fair value of the award,  and to recognize the cost over the period the employee
is required to provide  services for the award.  FAS 123(R) permits  entities to
use any  option-pricing  model  that  meets  the  fair  value  objective  in the
Statement.

The  Company  will be required  to apply FAS 123(R) as of the  beginning  of its
first interim period that begins after December 15, 2005, which will be the year
ending December 31, 2006.

FAS 123(R) allows two methods for determining the effects of the transition: the
modified prospective  transition method and the modified retrospective method of
transition.  Under the modified  prospective  transition method, an entity would
use the fair value based  accounting  method for all  employee  awards  granted,
modified,  or  settled  after the  effective  date.  As of the  effective  date,
compensation cost related to the nonvested  portion of awards  outstanding as of
that  date  would be based  on the  grant-date  fair  value of those  awards  as
calculated  under the  original  provisions  of Statement  No. 123;  that is, an
entity would not remeasure the  grant-date  fair value  estimate of the unvested
portion of awards  granted prior to the effective  date. An entity will have the
further  option to either apply the Statement to only the quarters in the period
of adoption and  subsequent  periods,  or apply the Statement to all quarters in
the  fiscal  year of  adoption.  Under  the  modified  retrospective  method  of
transition, an entity would revise its previously issued financial statements to
recognize  employee  compensation cost for prior periods presented in accordance
with the original provisions of Statement No. 123.

The Company has not yet  completed its study of the  transition  methods or made
any decisions  about how it will adopt FAS 123(R).  The impact of this Statement
on the Company in fiscal 2006 and beyond will depend upon various factors, among
them being our future compensation  strategy including whether or not additional
stock options will be awarded in the future.

NOTE 5. SEGMENT INFORMATION

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

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

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

                                       7
<PAGE>

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

                                                                                             Second Quarter
                                                                                       --------------------------
                                                                                          2005            2004
                                                                                       --------------------------
<S>                                                                                    <C>            <C>
Revenues from external customers
  Railroad operations ..............................................................   $ 3,918,000    $ 3,383,000
  Equipment leasing operations .....................................................       698,000        670,000
  Corporate support services .......................................................         5,000          3,000
                                                                                       --------------------------
        Total revenues from external customers .....................................   $ 4,621,000    $ 4,056,000
                                                                                       ==========================

Intersegment revenues
  Railroad operations ..............................................................   $        --    $        --
  Equipment leasing operations .....................................................        90,000         99,000
  Corporate support services .......................................................     1,430,000      1,541,000
                                                                                       --------------------------
        Total intersegment revenues ................................................   $ 1,520,000    $ 1,640,000
                                                                                       ==========================

Segment profit
  Railroad operations ..............................................................   $ 1,696,000    $ 1,385,000
  Equipment leasing operations .....................................................       563,000        271,000
  Corporate support services .......................................................       469,000        678,000
                                                                                       --------------------------
        Total segment profit .......................................................     2,728,000      2,334,000

Reconciling items
  Intersegment revenues ............................................................    (1,520,000)    (1,640,000)
  Income taxes .....................................................................      (434,000)      (239,000)
  Minority interest ................................................................       (23,000)       (23,000)
  Other income (expense), net ......................................................      (170,000)      (120,000)
                                                                                       --------------------------

        Total consolidated net income ..............................................   $   581,000    $   312,000
                                                                                       ==========================

                                                                                              Six Months
                                                                                       --------------------------
                                                                                           2005           2004
                                                                                       --------------------------
Revenues from external customers
  Railroad operations ..............................................................   $ 7,623,000    $ 6,729,000
  Equipment leasing operations .....................................................     1,408,000      1,436,000
  Corporate support services .......................................................        10,000          7,000
                                                                                       --------------------------
        Total revenues from external customers .....................................   $ 9,041,000    $ 8,172,000
                                                                                       ==========================

Intersegment revenues
  Railroad operations ..............................................................   $        --    $        --
  Equipment leasing operations .....................................................       180,000        198,000
  Corporate support services .......................................................     3,072,000      2,929,000
                                                                                       --------------------------
        Total intersegment revenues ................................................   $ 3,252,000    $ 3,127,000
                                                                                       ==========================

Segment profit
  Railroad operations ..............................................................   $ 3,211,000    $ 2,568,000
  Equipment leasing operations .....................................................       890,000        647,000
  Corporate support services .......................................................     1,076,000      1,320,000
                                                                                       --------------------------
        Total segment profit .......................................................     5,177,000      4,535,000

Reconciling items
  Intersegment revenues ............................................................    (3,252,000)    (3,127,000)
  Income taxes .....................................................................      (758,000)      (570,000)
  Minority interest ................................................................       (45,000)       (45,000)
  Other income (expense), net ......................................................      (116,000)       (47,000)
                                                                                       --------------------------

        Total consolidated net income ..............................................   $ 1,006,000    $   746,000
                                                                                       ==========================
</TABLE>
                                       8
<PAGE>

Note 6. EARNINGS PER COMMON SHARE

Following is information  about the  computation of the earnings per share (EPS)
data for the quarters and six months ended June 30, 2005 and 2004:
<TABLE>
                                                  For the Quarter Ended June 30, 2005
                                                --------------------------------------
                                                  Income        Shares       Per-Share
                                                (Numerator)  (Denominator)     Amount
                                                --------------------------------------
<S>                                             <C>          <C>             <C>
Basic EPS
Income available to common stockholders .....    $ 581,000     4,497,981     $   0.13
                                                                             ========

Effect of Dilutive Securities ...............           --     1,281,958        -0.03
                                                 ------------------------------------
Diluted EPS
Income available to common stockholders
    plus assumed conversions ................    $ 581,000     5,799,939    $    0.10
                                                 ====================================
</TABLE>

<TABLE>
                                                  For the Quarter Ended June 30, 2004
                                                --------------------------------------
                                                  Income        Shares       Per-Share
                                                (Numerator)  (Denominator)     Amount
                                                --------------------------------------
<S>                                             <C>          <C>             <C>

Basic EPS
Income available to common stockholders .....    $ 312,000    4,492,767     $   0.07
                                                                            ========

Effect of Diluted Securities ................           --      715,560        -0.01
                                                 -----------------------------------
Diluted EPS
Income available to common stockholders
  plus assumed conversions ..................    $ 312,000    5,208,327     $   0.06
                                                 ===================================
</TABLE>

Following is information  about the  computation of the earnings per share (EPS)
data for the six months ended June 30, 2005 and 2004:

<TABLE>
                                                 For the Six Months Ended June 30, 2005
                                                 --------------------------------------
                                                   Income       Shares       Per-Share
                                                 (Numerator) (Denominator)    Amount
                                                 --------------------------------------
<S>                                              <C>         <C>             <C>
Basic EPS
Income available to common stockholders .....    $1,006,000    4,497,835     $   0.22
                                                                             ========

Effect of Dilutive Securities ...............            --    1,361,947        -0.05
                                                 ------------------------------------

Diluted EPS
Income available to common stockholders
  plus assumed conversions ..................    $1,006,000    5,859,782     $   0.17
                                                 ====================================
</TABLE>

<TABLE>
                                                For the Six Months Ended June 30, 2004
                                                --------------------------------------
                                                  Income        Shares       Per-Share
                                                (Numerator) (Denominator)      Amount
                                                --------------------------------------
<S>                                             <C>         <C>              <C>
Basic EPS
Income available to common stockholders .....    $ 746,000    4,489,271    $   0.17
                                                                           ========

Effect of Diluted Securities ................           --        409,623     -0.02
                                                 ----------------------------------

Diluted EPS
Income available to common stockholders
    plus assumed conversions ................    $ 746,000    4,898,894    $   0.15
                                                                           ========
</TABLE>

                                       9
<PAGE>

NOTE 7. CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and disclosure of contingent  assets and liabilities at the dates of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods.  The financial statement  components or accounts that are
subject to  significant  estimation  are reserves for  litigation,  casualty and
environmental matters, accounts receivable,  deferred income taxes and property,
plant and equipment.

In accordance with Statement of Financial Accounting Standards,  or SFAS, No. 5,
"Accounting for  Contingencies," an accrual for a loss contingency  (litigation,
casualty and  environmental  matters) is established  if  information  available
prior to the issuance of the financial  statements indicates that it is probable
that a  liability  has been  incurred  or an  asset  has  been  impaired.  These
estimates have been developed in consultation  with outside counsel handling our
defense in these  matters and are based upon an analysis of  potential  results,
assuming a  combination  of litigation  and  settlement  strategies.  Subsequent
changes to those  estimates  are  reflected in our  statements  of income in the
period of the change.  Management  believes  that it has  adequate  insurance to
cover most of the likely loss  contingency  situations,  and most accruals for a
loss  contingency  would  be  no  more  than  the  Company's  maximum  insurance
self-retention  of $50,000 per  occurrence.  To date all losses on such  matters
have been within management's expectations.

Provisions are made for estimated uncollectible accounts receivable.  An account
receivable is considered to be past due if any portion of the receivable balance
is outstanding  for more than 90 days.  Management  determines the allowance for
doubtful accounts by regularly  evaluating  individual customer  receivables and
considering  a  customer's  financial  condition,  credit  history,  and current
economic   conditions.   Accounts   receivables  are  written  off  when  deemed
uncollectible.  Recoveries  of  trade  receivables  previously  written  off are
recorded when received. To date, losses on accounts receivable have been minimal
in  relation  to  the  volume  of  sales  and  have  been  within   management's
expectations.

Deferred  taxes  are  recognized  based on  differences  between  the  financial
statement  carrying  amounts  and the tax bases of assets  and  liabilities.  We
regularly review our deferred tax assets for recoverability. Deferred tax assets
are reduced by a valuation  allowance when, in the opinion of management,  it is
more likely than not that some  portion or all of the  deferred  tax assets will
not be realized based on projected  future taxable income,  a material change in
the  actual  effective  tax rates or time  period  within  which the  underlying
temporary  differences become taxable or deductible,  and the expected timing of
the reversals of existing  temporary  differences.  If we are unable to generate
sufficient  future  taxable income to utilize  deferred tax assets,  we would be
required to  establish a valuation  allowance  against a portion of our deferred
tax assets,  resulting  in an increase in our future  effective  tax rate with a
coinciding adverse impact on earnings. To date the Company has not had to record
a valuation  allowance  for deferred  tax assets  previously  recognized  on its
balance sheet,  nor does it expect to record such an allowance  through at least
December 31, 2005.

Net  property  and  equipment  comprised  78% of our total assets as of June 30,
2005. These assets are stated at cost, less accumulated depreciation. We use the
straight-line  method of depreciation over estimated lives generally  applicable
to the railroad  industry.  Expenditures  that  increase  asset values or extend
useful lives are capitalized. Repair and maintenance expenditures are charged to
operating  expense  when the  work is  performed.  We  periodically  review  the
carrying value of our  long-lived  assets for  impairment.  This review is based
upon  our  projections  of  anticipated  future  cash  flows.  If the sum of the
expected future cash flows  (undiscounted  and without interest charges) is less
than the carrying amount of the asset, the Company would recognize an impairment
loss measured by the amount by which the carrying value of the asset exceeds the
fair value of the asset.  The  estimate of fair value shall be based on the best
information available in the circumstances.  While we believe that our estimates
of future cash flows are reasonable,  different  assumptions regarding such cash
flows could materially  affect our evaluations.  No impairment has been recorded
on fixed assets during the six months ended June 30, 2005.

Derivative  instruments are recognized on the balance sheet at their fair value.
On the date the derivative  contract is entered into, the Company designates the
derivative as a hedge of a forecasted  transaction or of the variability of cash
flows to be received or paid  related to a recognized  asset or liability  "cash
flow" hedge.  Changes in the fair value of a derivative that is highly effective
as, and that is designated and qualifies as, a cash-flow  hedge, are recorded in
other  comprehensive  income,  until earnings are affected by the variability of
cash  flows  (e.g.,  when  periodic  settlements  on a  variable-rate  asset  or
liability are recorded in earnings).

                                       10
<PAGE>

The Company formally documents all relationships between hedging instruments and
hedged  items,  as  well  as its  risk-management  objective  and  strategy  for
undertaking  various  hedged  transactions.  This process  includes  linking all
derivatives  that are  designated  as  cash-flow  hedges to specific  assets and
liabilities  on the balance sheet or forecasted  transactions.  The Company also
formally  assesses,  both at the  hedge's  inception  and on an  ongoing  basis,
whether  the  derivatives  that  are used in  hedging  transactions  are  highly
effective  in  offsetting  changes  in cash  flows of hedged  items.  When it is
determined  that a derivative is not highly  effective as a hedge or that it has
ceased to be a highly effective hedge, the Company discontinues hedge accounting
prospectively, as discussed below.

The  Company  discontinues  hedge  accounting   prospectively  when  (1)  it  is
determined that the derivative is no longer  effective in offsetting  changes in
the cash flows of a hedged item  (including  forecasted  transactions);  (2) the
derivative expires or is sold, terminated,  or exercised;  (3) the derivative is
designated  as a hedge  instrument,  because it is  unlikely  that a  forecasted
transaction  will occur; or (4) management  determines  that  designation of the
derivative as a hedge instrument is no longer appropriate.

When hedge  accounting is discontinued  because it is probable that a forecasted
transaction  will not occur,  the derivative  will continue to be carried on the
balance sheet at its fair value,  and gains and losses that were  accumulated in
other comprehensive  income will be recognized  immediately in earnings.  In all
other situations in which hedge accounting is discontinued,  the derivative will
be carried at its fair value on the balance sheet,  with  subsequent  changes in
its fair value recognized in current-period earnings.

For a complete description of our significant accounting policies, see Note 1 to
our Consolidated Financial Statements in our 2004 Form 10-KSB.

NOTE 8. INTERST RATE SWAPS

The Company  entered into an interest rate swap with a total notional  amount of
$11,000,000,  on  April 1,  2005,  to lock in the  interest  cash  outflows  for
interest  payments on its  floating-rate  debt. This cash flow hedge changes the
variable-rate interest on the entire balance of the Company's loan from National
City Bank to fixed-rate interest.  Under the terms of the swap (which expires in
March  2010),  the Company  pays  monthly a fixed  interest  rate of 4.30%.  The
Company  receives  monthly the variable  interest  rate of LIBOR on the interest
rate swap.  The estimated  fair value of this  agreement at June 30, 2005, was a
liability of approximately $112,000, which is included in accrued liabilities in
the Company's  balance  sheet.  This amount is  subsequently  reclassified  into
interest  expense as a yield  adjustment in the same period in which the related
interest on the floating-rate debt obligation  affects earnings.  As long as the
Company  elects the LIBOR  interest  rate for the hedged  debt  obligation,  the
Company assumes no ineffectiveness in the hedging relationship,  as there are no
differences  between the critical terms of the interest rate swap and the hedged
debt  obligation.  If in the  future the  Company  elects the prime rate for the
hedged debt obligation,  we will measure for and record  ineffectiveness  to the
statement of income.

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

This management's  discussion and analysis of financial condition and results of
operations  references  the  Company's  two  operating  segments.  The Company's
railroad  operations  segment  consists  of  wholly-owned  short  line  railroad
subsidiaries  that offer similar  services and the Company's  equipment  leasing
segment leases railcars, locomotives, and other railroad equipment to affiliated
and  unaffiliated  entities.  All other  operations  are classified as corporate
support services for purposes 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),  Keokuk Junction Railway Co. (KJRY),
Shawnee Terminal Railway Company (STR),  Pioneer  Industrial  Railway Co. (PRY),
The Garden City Western Railway,  Inc. (GCW),  Indiana  Southwestern Railway Co.
(ISW),  Kendallville  Terminal Railway Co. (KTR), Elkhart & Western Railroad Co.
(EWR), Gettysburg & Northern Railroad Co. (GET), Pioneer Resources,  Inc. (PRI),
Pioneer  Railroad  Equipment  Co., Ltd.  (PREL),  Pioneer Air, Inc.  (PAR),  and
Pioneer Railroad Services, Inc. (PRS)

                                       11
<PAGE>

Overview:

The Company operates in two business segments,  railroad operations and railroad
equipment   leasing.   Railroad   operations   are  provided  by  the  Company's
wholly-owned  short line railroad  subsidiaries.  PRC's rail system is primarily
devoted to carrying  freight.  The railroad  subsidiaries  generate revenue from
several  activities,  with the primary source referred to as switching  revenue.
Switching revenue is the amount the Company receives for handling and delivering
a load of freight via  railcar to and from its online  customers.  The  railroad
operations also generate  revenue through repair of foreign  railcars  (railcars
owned by an unrelated entity) used to carry freight on the Company's  railroads.
In addition,  the railroad  operations earn revenue from demurrage,  a charge to
online  customers for holding a foreign railcar for an excessive number of days.
Generally,  demurrage  revenues  will be  partially  offset by  carhire  expense
(charges to the Company's railroad  operations for using a foreign railcar).  In
addition to revenues generated from online customers, the Company also generates
revenue  from the  storage of  private  railcars  (railcars  that are owned by a
non-railroad  company). In addition, the railroad operations generate revenue by
performing contract services,  primarily track construction and maintenance, for
customers  and  governmental  agencies.   Finally,  the  Company,   through  its
wholly-owned  railroad  subsidiary  Gettysburg & Northern Railroad Co. generates
revenue from a tourist passenger train in Gettysburg, PA.

The Company's revenue from its railroad  operations could be affected by several
events.  In most  instances,  several  railroads  take part in the  delivery  of
freight to and from the Company's customers.  Each railroad will set its revenue
requirement for handling the freight.  If the total revenue  requirement for all
railroads involved is not competitive with other  transportation  options, it is
likely the freight will not move by rail.  In addition,  the  Company's  current
customers make changes in the origin of their raw materials and  destination for
their finished products that could positively or negatively affect rail traffic.
In  addition,  a  significant  portion  of the  Company's  freight is carried in
railcars  supplied by the  nation's  largest  railroads,  referred to as Class 1
railroads.  The Class 1 railroads  ability to continue to supply  railcars is an
important  factor  in  generating  revenues.  The  Company's  equipment  leasing
operations  own  a  large  railcar  fleet,   which  helps  to  minimize  adverse
consequences from a limited railcar supply. The Company continually searches for
railcars to purchase that will provide its customers with a reliable car supply.

The equipment leasing operations  generate revenue from carhire revenue (charges
non-affiliated  railroads  pay the Company for using its  railcars)  and revenue
from locomotive leases to unaffiliated  entities.  The Company's railcars have a
limited useful life,  generally 40 to 50 years from the year they were built. In
future  years,  as the  Company's  railcars  reach their useful life limit,  the
Company  will need to replace  the  railcars to  maintain  its  current  carhire
revenue levels. Any significant purchase of railcars will require long term debt
financing.  When the Company's  railcars reach the end of their useful life, the
Company  could still use some of the railcars on its own  railroads  for captive
grain loads or generate  income from the scrap value of the  railcars,  which is
currently  about  $5,000  per  car.  Below  is a  chart  illustrating  the  life
expectancy of the Company's railcar fleet as of December 31, 2004:
<TABLE>

Expiration Year      Box      Cov Hop     Gond     Flat    Hopper    Total    % of Fleet
----------------------------------------------------------------------------------------
<S>                  <C>      <C>         <C>      <C>     <C>       <C>      <C>
    2005              14          57         3       38        1      113         8.94%
    2006              72         137         6                        215        17.01%
    2007               2          99                           2      103         8.15%
    2008              21           5         5                 2       33         2.61%
    2009              38         154         5                        197        15.59%
    2010               9           6         4                         19         1.50%
    2011              88          50                           1      139        11.00%
    2012             162          17         4                 2      185        14.63%
    2013              94          88        55       19        4      260         20.57%
----------------------------------------------------------------------------------------
    Totals           500         613        82       57       12    1,264        100.00%
</TABLE>

The Company also seeks to encourage  development on or near, and utilization of,
the real estate right of way of its operating railroads by potential shippers as
a source of additional revenue and also generates revenue by granting to various
entities,  such  as  utilities,   pipeline  and  communications   companies  and
non-industrial  tenants, the right to occupy its railroad right of way and other
real estate property.

                                       12
<PAGE>

The  Company's  primary  outflow  of cash  pertains  to  employee  wages,  track
materials, repair expenses to railcars and locomotives,  fuel, car hire expense,
liability insurance, health insurance, and debt repayments. The Company uses the
following categories to group expenses in the financial statements:

     Maintenance  of Way and  structure  expense  (MOW)  includes  all  expenses
     related to track maintenance;  including payroll,  track materials,  signal
     maintenance, vegetation control, and bridge maintenance.

     Maintenance of equipment expense (MOE) includes expenses related to railcar
     repair  expenses for both  foreign and Company  owned  railcars;  including
     payroll, car repair parts,  processing fees for Company owned railcars, and
     also maintenance to Company owned vehicles.

     Transportation  expense (TRAN) includes  expenses related to train movement
     operations; including payroll, locomotive fuel and supplies expense, repair
     expenses  to  Company  owned  locomotives,  car  hire  expense,  derailment
     expense, lading and damage claims,  switching services purchased, and joint
     facility expenses with other carriers.

     General &  administration  expense (ADMIN) includes general manager payroll
     expenses,   legal   expenses,   bad  debt  expense   related  to  interline
     settlements,  liability  insurance,  utilities,  postage and freight,  real
     estate taxes, dues,  licenses and fees, vehicle insurance,  freight to move
     company  owned  railcars  and  locomotives,  health  and  dental  insurance
     expense,  audit fees, printing,  and corporate headquarters support service
     payroll for executive management,  accounting,  operations, marketing, real
     estate, legal, and other support staff.

Summary:  Second Quarter 2005 Compared to Second Quarter 2004 Financial  Results
discussion:

The Company's net income in the second  quarter 2005 was $581,000 an increase of
$269,000  or 86%  compared to $312,000  net income in the second  quarter  2004.
Revenue  increased in the second  quarter 2005 by $565,000 or 14%, to $4,621,000
from $4,056,000 in the second quarter 2004.  Operating  expense increased in the
second  quarter  2005 by $51,000 or 2%, to  $3,413,000  from  $3,362,000  in the
second quarter 2004.  Operating  income  increased in the second quarter 2005 by
$514,000 or 41%, to $1,208,000 from $694,000 in the second quarter 2004.

Revenue  increased in the second  quarter 2005 by $565,000 or 14% to  $4,621,000
from  $4,056,000  in the prior year.  The railroad  operations  generated  total
revenue of $3,918,000 in the second  quarter 2005, an increase of $535,000 (14%)
compared to revenue of  $3,383,000  in the second  quarter  2004.  The  railroad
operations  increased switching revenue by $396,000 (17%) to $2,697,000 compared
to  $2,301,000  in the same  period  last  year.  This  increase  is  related to
increased  loads  delivered or received,  some of which relates to the Company's
acquisition of the west end of the TPW as is further described in the "Liquidity
and  Capital  Resources"  section  herein.  The  railroad  operations  also  had
increased  demurrage  revenue of $165,000 (39%) to $591,000 compared to $426,000
in the same period last year. The equipment leasing  operations  generated total
revenue of  $698,000 in the second  quarter  2005,  an increase of $28,000  (4%)
compared to $670,000 in the second  quarter  2004.  In the second  quarter  2005
revenue  from the  equipment  leasing  operations  included  carhire  revenue of
$396,000, a decrease of $111,000 (22%) from $507,000 in the second quarter 2004.
The  decrease  in  carhire  revenue  in the  quarter  primarily  relates  to the
underutilization  of a portion of the Company's  railcar fleet, and also relates
to railcars being leased to  unaffiliated  entities which generated the increase
in  unaffiliated  lease  income.  The  equipment  leasing  operations  generated
unaffiliated lease income of $291,000 in the second quarter 2005, an increase of
$129,000 (79%) from $162,000 in the second quarter 2004.  Corporate services did
not have significant revenues in either second quarter 2005 or 2004.

                                       13
<PAGE>

Operating  expenses  increased  in the second  quarter 2005 by $51,000 or 2%, to
$3,413,000 from $3,362,000 in the second quarter 2004. Excluding the decrease in
operating  expenses  related  to the gain on sale of fixed  assets  of  $277,000
operating  expenses  increased  $328,000 or 10% in the second  quarter 2005. The
majority  of  this  increase  in  operating  expenses  resulted  from  increased
transportation  expenses of $211,000 in the second  quarter  2005.  The railroad
operations increased  transportation expense $196,000 related to the acquisition
of the west end of the TPW and increased fuel costs  system-wide.  The equipment
leasing operations did not have a significant  increase in operating expenses in
the second quarter 2005, excluding the effects of the gain/loss on sale of fixed
assets.  Corporate support services increased  operating expenses  approximately
$98,000 in the second  quarter 2005,  primarily  related to  additional  support
personnel and also  professional fees primarily related to the Company's actions
to "go private" as detailed in the Company's Form 8-K and 8-K/A filed  September
21, 2004 and September 23, 2004 (as amended) respectively,  and as is more fully
described  in Part II,  Item 5 - Other  Information  in this  Form  10-QSB.  The
railroad  operations  generated  total  operating  expenses of $2,224,000 in the
second  quarter 2005, a $226,000  increase  (19%) from  $1,998,000 in the second
quarter 2004. The equipment  leasing  operations,  excluding the gain on sale of
fixed assets,  generated  operating  expenses of $473,000 in the second  quarter
2005, a $2,000 increase (1%) from $471,000 in the second quarter 2004. Corporate
support services  generated  operating expense of $964,000 in the second quarter
2005 a $98,000 increase (11%) from $866,000 in the second quarter 2004.

Operating  income  increased  in the second  quarter 2005 by $514,000 or 74%, to
$1,208,000 from $694,000 in 2004. The railroad  operations  generated  operating
income of $1,694,000 in the second quarter 2005, a $309,000  increase (15%) from
$1,385,000  in  the  second  quarter  2004.  The  equipment  leasing  operations
generated  operating  income of $473,000 in the second  quarter 2005, a $301,000
increase  (175%)  from  $172,000  in the  second  quarter  2004.  Excluding  the
gain/loss on sale of fixed assets,  the equipment leasing  operations  generated
operating  income of $225,000 in the second quarter 2005 compared to $199,000 in
the second quarter 2004.  Corporate  support services  reduced  operating income
$959,000 in the second quarter 2005, compared to reduced operating income in the
second  quarter 2004 of  $863,000.  This  represents  a $96,000  decrease in the
second quarter 2005 operating income (11%) compared to the second quarter 2004.

Second Quarter 2005 Operations by Business Segment
<TABLE>

                                                           Railroad       Equipment      Corporate
                                                          Operations       Leasing       Services        Total
                                                          --------------------------------------------------------
<S>                                                       <C>            <C>            <C>            <C>
Revenue ...............................................   $ 3,918,000    $   698,000    $     5,000    $ 4,621,000

Expenses:
Mow ...................................................   $   387,000    $        --    $    35,000    $   422,000
Moe ...................................................   $   210,000    $   136,000    $   101,000    $   447,000
Tran ..................................................   $   982,000    $    21,000    $    75,000    $ 1,078,000
Admin .................................................   $   376,000    $    18,000    $   742,000    $ 1,136,000
(Gain)/Loss Sale of F.A ...............................   $   (2,000)    $  (248,000)   $        --    $  (250,000)
Dep/Amort .............................................   $   271,000    $   298,000    $    11,000    $   580,000
                                                          --------------------------------------------------------
Operating Expense .....................................   $ 2,224,000    $   225,000    $   964,000    $ 3,413,000

Operating Income ......................................   $ 1,694,000    $   473,000    ($  959,000)   $ 1,208,000
</TABLE>

Second Quarter 2004 Operations by Business Segment
<TABLE>
                                                          Railroad        Equipment       Corporate
                                                          Operations       Leasing        Services       Total
                                                          --------------------------------------------------------
<S>                                                       <C>            <C>            <C>            <C>
Revenue ...............................................   $ 3,383,000    $   670,000    $     3,000    $ 4,056,000

Expenses:
Mow ...................................................   $   392,000    $         0    $    29,000    $   421,000
Moe ...................................................   $   211,000    $   107,000    $    92,000    $   410,000
Tran ..................................................   $   786,000    $    26,000    $    55,000    $   867,000
Admin .................................................   $   397,000    $    12,000    $   677,000    $ 1,086,000
(Gain)/Loss Sale of F.A ...............................   $         0    $    27,000    $         0    $    27,000
Dep/Amort .............................................   $   212,000    $   326,000    $    13,000    $   551,000
                                                          --------------------------------------------------------
Operating Expense .....................................   $ 1,998,000    $   498,000    $   866,000    $ 3,362,000

Operating Income ......................................   $ 1,385,000    $   172,000    $  (863,000)   $   694,000
</TABLE>
                                       14
<PAGE>

Second Quarter 2005-2004 Variances by Business Segments
Increase (decrease)
<TABLE>
                                                            Railroad      Equipment      Corporate
                                                           Operations      Leasing        Services        Total
                                                          --------------------------------------------------------
<S>                                                       <C>            <C>            <C>            <C>
Revenue ...............................................   $   535,000    $    28,000    $     2,000    $   565,000

Expenses:
Mow ...................................................   $    (5,000)   $        --    $     6,000    $     1,000
Moe ...................................................   $    (1,000)   $    29,000    $     9,000    $    37,000
Tran ..................................................   $   196,000    $    (5,000)   $    20,000    $   211,000
Admin .................................................   $   (21,000)   $     6,000    $    65,000    $    50,000
(Gain)/Loss Sale of F.A ...............................   $    (2,000)   $  (275,000)   $        --    $  (277,000)
Dep/Amort .............................................   $    59,000    $   (28,000)   $    (2,000)   $    29,000
                                                          --------------------------------------------------------
Operating Expense .....................................   $   226,000    $  (273,000)   $    98,000    $    51,000

Operating Income ......................................   $   309,000    $   301,000    $   (96,000)   $   514,000
</TABLE>

Other Income and Expense Income Statement Line Item Discussions:

Interest expense  increased  $17,000 (9%) in the second quarter 2005 to $208,000
compared to $191,000 in the second  quarter  2004.  In the second  quarter 2005,
$38,000 of other income was earned by the Company,  compared to $71,000 of other
income in the second quarter 2004,  primarily from lease income generated by the
Company's railroad  operations from the granting of easements and leases for the
use of railroad right of way property.

Summary:  First Six Months  2005  Compared  to First Six Months  2004  Financial
Results discussion:

The Company's net income in the first six months 2005 was $1,006,000 an increase
of $260,000 or 35% compared to $746,000 net income in the first six months 2004.
Revenue increased in the first six months 2005 by $869,000 or 11%, to $9,041,000
from $8,172,000 in the first six months 2004. Operating expense increased in the
first six months 2005 by $352,000 or 5%, to  $7,116,000  from  $6,764,000 in the
first six months 2004.  Operating  income increased in the first six months 2005
by $517,000 or 37%, to $1,925,000 from $1,408,000 in the first six months 2004.

Revenue increased in the first six months 2005 by $869,000 or 11%, to $9,041,000
from  $8,172,000  in the prior year.  The railroad  operations  generated  total
revenue of  $7,623,000  in the first six months  2005,  an  increase of $894,000
(13%)  compared  to revenue of  $6,729,000  in the first six  months  2004.  The
railroad  operations  increased switching revenue by $377,000 (8%) to $5,058,000
compared to $4,681,000 in the same period last year. This increase is related to
increased  loads  delivered or received,  some of which relates to the Company's
acquisition of the west end of the TPW as is further described in the "Liquidity
and Capital  Resources"  section.  The railroad  operations  also had  increased
demurrage  revenue of $425,000  (56%) to $1,184,000  compared to $759,000 in the
same period last year. The equipment leasing operations  generated total revenue
of  $1,408,000 in the first six months 2005, a decrease of $28,000 (2%) compared
to $1,436,000 in the first six months 2004. In the first six months 2005 revenue
from the equipment leasing  operations  included carhire revenue of $831,000,  a
decrease of $289,000  (26%) from  $1,120,000  in the first six months 2004.  The
decrease in carhire  revenue in the first six months 2005  primarily  relates to
the  underutilization  of a portion of the  Company's  railcar  fleet,  and also
relates to railcars being leased to  unaffiliated  entities which  generated the
increase  in  unaffiliated   lease  income.  The  equipment  leasing  operations
generated  unaffiliated lease income of $558,000,  an increase of $244,000 (78%)
from  $314,000 in the first six months  2004.  Corporate  services  did not have
significant revenues in either the first six months 2005 or 2004.

                                       15
<PAGE>

Operating  expenses increased in the first six months 2005 by $352,000 or 5%, to
$7,116,000 from $6,764,000 in the first six months 2004.  Excluding the decrease
in operating expenses related to change from the gain on sale of fixed assets of
$313,000,  operating  expenses increased $665,000 or 10% in the first six months
2005.  The  majority  of this  increase  in  operating  expenses  resulted  from
increased  transportation  expenses by the  railroad  operations  and  increased
administrative  expenses by corporate support services.  The railroad operations
increased transportation expense $137,000 related to the acquisition of the west
end of the TPW and increased fuel costs system-wide.  Corporate support services
increased operating expenses  approximately $387,000 in the second quarter 2005,
primarily  related to  increased  medical  claims by the  Company's  self-funded
health plan,  additional  support  personnel,  and  professional  fees primarily
related to the  Company's  actions to "go private" as detailed in the  Company's
Form 8-K and 8-K/A filed  September 21, 2004 and September 23, 2004 (as amended)
respectively,  in the Company's  Definitive Proxy Statement (DEFM14a) filed July
22, 2005 and mailed to  shareholders  on or about July 26, 2005,  and as is more
fully described in Part II, Item 5 - Other Information in this Form 10-QSB.  The
railroad  operations  generated  total  operating  expenses of $4,414,000 in the
first six months 2005, a $253,000 increase (6%) from $4,161,000 in the first six
months  2004.  The  equipment  leasing  operations  did not  have a  significant
increase in operating expenses in the first six months 2005,  excluding the gain
on sale of  fixed  assets.  The  equipment  leasing  operations,  excluding  the
gain/loss on sale of fixed assets,  generated  operating expenses of $973,000 in
the first six months 2005, a $23,000  increase  (2%) from  $950,000 in the first
six months 2004.  Corporate  support  services  generated  operating  expense of
$2,003,000  in  the  first  six  months  2005 a  $387,000  increase  (24%)  from
$1,616,000 in the first six months 2005.

Operating  income  increased in the first six months 2005 by $517,000 or 37%, to
$1,925,000 from $1,408,000 in 2004. The railroad operations  generated operating
income of  $3,209,000  in the first six months 2005, a $641,000  increase  (25%)
from $2,568,000 in the first six months 2004. The equipment  leasing  operations
generated  operating income of $709,000 in the first six months 2005, a $260,000
increase  (58%)  from  $449,000  in the first six  months  2004.  Excluding  the
gain/loss on sale of fixed assets the  equipment  leasing  operations  generated
operating  income of $435,000 in the first six months 2005  compared to $486,000
in the first six months  2004.  Corporate  support  services  reduced  operating
income  $1,993,000 in the first six months 2005,  compared to reduced  operating
income in the first six months 2004 of  $1,609,000.  This  represents a $384,000
decrease in the first six months 2005  operating  income  (24%)  compared to the
first six months 2004.

First Six Months 2005 Operations by Business Segment
<TABLE>
                                                              Railroad      Equipment      Corporate
                                                             Operations      Leasing       Services         Total
                                                            --------------------------------------------------------
<S>                                                         <C>            <C>            <C>            <C>
Revenue .................................................   $ 7,623,000    $ 1,408,000    $    10,000    $ 9,041,000

Expenses:
Mow .....................................................   $   706,000    $         0    $    55,000    $   761,000
Moe .....................................................   $   452,000    $   246,000    $   207,000    $   905,000
Tran ....................................................   $ 1,890,000    $    52,000    $   129,000    $ 2,071,000
Admin ...................................................   $   843,000    $    67,000    $ 1,588,000    $ 2,498,000
(Gain)/Loss Sale of F.A .................................   $    (2,000)   $  (274,000)   $         0    $  (276,000)
Dep/Amort ...............................................   $   525,000    $   608,000    $    24,000    $ 1,157,000
                                                            --------------------------------------------------------
Operating Expense .......................................   $ 4,414,000    $   699,000    $ 2,003,000    $ 7,116,000

Operating Income ........................................   $ 3,209,000    $   709,000    ($1,993,000)   $ 1,925,000
</TABLE>

                                       16
<PAGE>

First Six Months 2004 Operations by Business Segment
<TABLE>
                                                              Railroad      Equipment      Corporate
                                                             Operations      Leasing        Services       Total
                                                            --------------------------------------------------------
<S>                                                         <C>            <C>            <C>            <C>

Revenue .................................................   $ 6,729,000    $ 1,436,000    $     7,000    $ 8,172,000

Expenses:
Mow .....................................................   $   767,000    $         0    $    47,000    $   814,000
Moe .....................................................   $   423,000    $   209,000    $   164,000    $   796,000
Tran ....................................................   $ 1,753,000    $    62,000    $    84,000    $ 1,899,000
Admin ...................................................   $   794,000    $    26,000    $ 1,294,000    $ 2,114,000
(Gain)/Loss Sale of F.A .................................   $         0    $    37,000    $        --    $    37,000
Dep/Amort ...............................................   $   424,000    $   653,000    $    27,000    $ 1,104,000
                                                            --------------------------------------------------------
Operating Expense .......................................   $ 4,161,000    $   987,000    $ 1,616,000    $ 6,764,000

Operating Income ........................................   $ 2,568,000    $   449,000    $(1,609,000)   $ 1,408,000
</TABLE>

First Six Months 2005-2004 Variances by Business Segments
Increase (decrease)
<TABLE>
                                                              Railroad      Equipment      Corporate
                                                             Operations      Leasing        Services        Total
                                                            --------------------------------------------------------
<S>                                                         <C>            <C>            <C>            <C>
Revenue .................................................   $   894,000    $   (28,000)   $     3,000    $   869,000

Expenses:
Mow .....................................................   $   (61,000)   $         0    $     8,000    $   (53,000)
Moe .....................................................   $    29,000    $    37,000    $    43,000    $   109,000
Tran ....................................................   $   137,000    $   (10,000)   $    45,000    $   172,000
Admin ...................................................   $    49,000    $    41,000    $   294,000    $   384,000
(Gain)/Loss Sale of F.A .................................   $    (2,000)   $  (311,000)   $        --    $  (313,000)
Dep/Amort ...............................................   $   101,000    $   (45,000)   $    (3,000)   $    53,000
                                                            --------------------------------------------------------
Operating Expense .......................................   $   253,000    $  (288,000)   $   387,000    $   352,000

Operating Income ........................................   $   641,000    $   260,000    $  (384,000)   $   517,000
</TABLE>

Other Income and Expense Income Statement Line Item Discussions:

Interest expense increased $22,000 (6%) in the first six months 2005 to $415,000
compared to $393,000 in the first six months 2004. In the first six months 2005,
$299,000  of other  income was earned by the  Company,  compared  to $346,000 of
other income in the first six months 2004, primarily from lease income generated
by the Company's  railroad  operations from the granting of easements and leases
for the use of railroad right of way property.

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. See Note 4 for further discussions.

Liquidity and Capital Resources:

The Company  primarily  uses cash  generated  from  operations  to fund  working
capital  needs and relies on long-term  financing  for the purchase of railcars,
new operating subsidiaries, and other significant capital expenditures including
the proposed  repurchase  of  outstanding  common stock  pursuant to the planned
privatization  transaction  that is  described  in Part II,  Item 5 of this Form
10-QSB. The Company has working capital facilities totaling  $2,000,000,  all of
which was available for use at the end of the second quarter 2005. The Company's
credit  agreements  with National  City Bank contain  various  restrictive  loan
covenants.  As of June 30, 2005, the Company  believes it is in compliance  with
all of these covenants.

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 to obtain 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.

                                       17
<PAGE>

On October  28, 2004 the  Company's  feeder  line  application  on file with the
Surface  Transportation Board (STB) to acquire the assets of the west end of the
Toledo Peoria and Western Railway (TPW) was granted.  The Company  completed the
acquisition  on  February  11,  2005 at the STB  determined  purchase  price  of
$4,165,742.  This  acquisition  was financed  with proceeds from a National City
Bank  credit  facility  of up to $16  million.  National  City Bank  granted the
Company the $16 million  credit  facility on January 19,  2005,  the proceeds of
which are to be utilized (1) to finance the aforementioned TPW acquisition,  (2)
to refinance  approximately  $7 million of  outstanding  debt with National City
Bank  and (3) to  finance  the  Company's  proposed  $5  million  going  private
transaction expected to occur in 2005, which is more fully described in Part II,
Item 5 - Other Information in this Form 10-QSB.  The $16 million credit facility
provides for interest at the LIBOR  interest rate plus a spread ranging from 200
basis points to 275 basis points  depending upon the Company's  ratio of debt to
earnings before interest, taxes, depreciation and amortization expense (EBITDA).
The debt is to be amortized over seven years with a five-year  balloon  payment.
The debt is  collateralized  by a security interest in all of the assets of each
of Pioneer Railcorp's  subsidiary  railways,  a pledge of the stock of each such
company,  and a guaranty  from each of the Company's  subsidiaries.  The Company
entered  into an  interest  rate  swap  agreement  as  described  in Note 8 with
National City Bank in conjunction with the $16 million credit facility. The swap
agreement, with an effective date of April 1, 2005, exchanges the variable LIBOR
interest rate for a fixed  interest rate of 4.30% until  maturity of the note on
May 1, 2010,  resulting  in a current  effective  interest  rate of 7.05% (4.30%
fixed rate plus 275 basis point  performance-based  spread as of June 30, 2005).
As of June 30, 2005 the Company has borrowed  $11 million  under the $16 million
credit facility.

In addition to the $16 million credit facility, the Company secured a $2 million
line-of-credit  from  National  City Bank on January 19,  2005,  to replace it's
existing $1.1 million  line-of-credit.  The line-of-credit bears interest at the
Bank's prime rate with interest  payments due monthly  through January 2007. The
line-of-credit  matures  on January  19,  2007,  at which  time all  outstanding
borrowings would be due. The line-of-credit is collateralized in the same manner
as the $16  million  credit  facility.  As of  June  30,  2005,  no  balance  is
outstanding under the $2 million line-of-credit.

On July 1, 1995, the Company's  stock split and warrant  issuance became payable
to  shareholders.  The 2 for 1 stock split increased the number of shares issued
and  outstanding  from  2,099,142 to  4,198,284.  At the same time  shareholders
became  entitled  to purchase  an  additional  4,198,284  shares  through  stock
warrants  issued by the  Company as  dividends.  One warrant was issued for each
share of common stock held after the split,  entitling  the holder to purchase 1
share of common  stock for $2.00 per share.  The shares  purchased  through  the
exercise of the warrants  must be held for 1 year from date of  purchase.  As of
June 30, 2005, a total of 92,594 warrants  originally issued had been exercised,
and the Company realized $185,188 from the exercise of the warrants.

On June 26,  1996,  the  Company's  shareholders  approved a stock  option  plan
permitting the issuance of 407,000 shares of common stock. Options granted under
the plan are  incentive  based  except for the options  granted to the CEO whose
options are non-qualified. The options became fully vested and exercisable as of
July 1, 2001.  The options are  exercisable  at $2.75,  the trading price on the
date of the grant,  in whole or in part  within 10 years from the date of grant.
As of June 30, 2005, a total of 150,000 options are outstanding under this plan.

In 1999,  Pioneer  Railcorp's  Board of  Directors  authorized  and approved the
repurchase  of up to one  million  (1,000,000)  shares of the  Company's  common
stock. As of June 30, 2005, a total of 138,765 shares had been  repurchased at a
cost of $211,720.

The Company  generally  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 12 months.

Balance Sheet and Cash Flow Items:

The Company  generated net cash from  operating  activities of $2,458,000 in the
first six months 2005 compared to $1,733,000  net cash  generated from operating
activities in the first six months 2004. Net cash from  operating  activities in
the first six months 2005 was provided by $1,006,000  of net income,  $1,157,000
of  depreciation  and  amortization,  an increase in  deferred  income  taxes of
$183,000,  a decrease in accounts  receivable of $69,000,  an increase in income
tax  payable of  $345,000,  an increase in  accounts  payable of  $454,000,  and
$49,000 from changes in various other operating assets and liabilities. Net cash
was used in operating activities in the first six months 2005 from a decrease in
accrued  liabilities  of $436,000,  a gain on sale of property and  equipment of
$276,000  and  $93,000  from  changes  in  various  other  operating  assets and
liabilities.

                                       18
<PAGE>

The first six  months  2005  decrease  of  $69,000  in  accounts  receivable  is
primarily  related to the collection of freight  receivables  and unearned lease
income  recorded at December  31, 2004.  The  majority of the  accounts  payable
increase  of  approximately  $454,000  also  relates  to  freight  activity.  As
previously  discussed,  several railroads are usually involved in the process of
delivering  freight.  The Company  collects the total  revenue for all railroads
involved in the  delivery of freight in a majority  of its  shipments.  When the
Company  issues an invoice for freight,  a  receivable  is created for the total
freight charge and the Company records its share of the revenue, and records the
amount due the other  railroads  as a current  payable.  The amounts  payable to
other railroads are generally  settled monthly.  Depending on the mix of freight
handled  by the  Company,  there  could be  significant  variances  in  accounts
receivable and accounts  payable in comparable  periods.  Under normal operating
conditions,  these  changes do not have a material  impact on  liquidity  or the
Company's  ability  to meet its cash  requirements.  The  $436,000  decrease  in
accrued  liabilities  in the first six months 2005  primarily  resulted from the
realization of unearned  revenues  recorded at December 31, 2004 and the payment
of December 31, 2004 accrued expenses.

Cash  flow  used for  investing  activities  primarily  relates  to the  Company
purchasing and capitalizing approximately $4,953,000 of fixed assets and capital
improvements  in the first six months 2005  offset by $555,000 of proceeds  from
the sale of property and  equipment.  Included in the 2005 capital  additions is
the purchase of the rail assets of the west end of the TPW which  included track
structures  valued at  $4,027,000  and land  valued at  $139,000.  In  addition,
$215,000 was capitalized for bridge  rehabilitation and $445,000 was capitalized
for track structure  additions and improvements.  Other capital  expenditures in
the first six months  2005 total  $127,000  for the  purchase  of two  railcars,
railcar and locomotive  betterments,  and various equipment and other items. All
of the capital  expenditures were funded with working capital with the exception
of the TPW asset  purchase  which was financed  with long term debt as described
previously in this report.

Cash flow from  financing  activities  primarily  relates to the  borrowing  and
repayment of debt and certain treasury stock and stock warrant transactions. New
short-term  borrowings  of  $176,000  in the first six months 2005 relate to the
refinancing of the Company's  National City Bank notes.  Proceeds from long-term
borrowings of $11,263,000  include $4.2 million  related to the Financing of the
purchase of the railroad assets of the west-end of the TPW, $6.8 million for the
refinancing  of other  National City Bank notes,  and $263,000  related to state
financing  for railroad  track  rehabilitation  projects.  Payments of long-term
borrowings  include $6.8 million for the refinancing of other National City Bank
notes and $1 million for  amortizing  principal  repayments  on other  long-term
debt. In the first six months 2005,  approximately 1,500 warrants were exercised
generating cash of $3,000.

The Company  anticipates  additional cash  requirements in 2005 will approximate
$200,000 as a result of the reversal of deferred taxes.

Item 3. CONTROLS AND PROCEDURES

As of the end of the period  covered by this  report,  the Company  conducted an
evaluation,  under the supervision and with the  participation  of the principal
executive officer and principal financial officer,  of the Company's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal  executive officer and principal  financial officer concluded that
the Company's  disclosure  controls and  procedures are effective to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.  There was no change in the Company's internal control over financial
reporting  during the Company's most recently  completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

                                       19

<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.

Item 2. CHANGES IN  SECURITIES  AND SMALL  BUSINESS  ISSUER  PURCHASES OF EQUITY
        SECURITIES

The  following  table  presents  for the  periods  indicated  a  summary  of the
purchases  made by or on  behalf of  Pioneer  Railcorp  of shares of its  common
stock.
<TABLE>
                                                           Total          Maximum
                                                         Number of       Number of
                                                          Shares          Shares
                                                        Purchased        That May
                                                        as Part of         Yet be
                           Total                         Publicly        Purchased
                         Number of       Average        Announced        Under the
                           Shares    Price Paid per      Plans or        Plans or
                         Purchased        Share          Programs       Programs (1)
------------------------------------------------------------------------------------
<S>                      <C>         <C>                <C>             <C>
January 1 - 31, 2005         200          $ 2.85            200          862,135
February 1 - 28, 2005         --              --             --          862,135
March 1 - 31, 2005            --              --             --          862,135
April 1 - 30, 2005           600          $ 2.85            600          861,535
May 1- 31, 2005              100          $ 2.85            100          861,435
June 1- 30, 2005             200          $ 2.85            200          861,235
--------------------------------------------------------------------------------
Total                      1,100          $ 2.85          1,100          861,235
<FN>

(1)  Pioneer  Railcorp's  Board of Directors  approved a stock  purchase plan on
     December 14, 1999 for the  repurchase  of up to 1,000,000  shares of common
     stock. This repurchase plan has no expiration date.
</FN>
</TABLE>

Item 3. DEFAULTS UPON SENIOR SECURITIES

There are no defaults upon senior debt securities as of June 30, 2005.

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

No Matters were  submitted to a vote of security  holders in the Second  quarter
2005.

Item 5. OTHER INFORMATION

On September 20, 2004, the Company's Board of Directors  unanimously  approved a
going  private  transaction  designed to  repurchase  outstanding  shares of the
Company's Class A common stock (common stock).  The Board of Directors  believes
the costs of being a publicly  traded  company  are no longer  justified  by the
benefits.  This  proposed  transaction  would  effectively  reduce the number of
shareholders  to less  than  300,  thereby  terminating  the need for  continued
registration of the Company's stock with the Securities and Exchange  Commission
(SEC) and thus  privatizing  ownership of the Company.  Each shareholder of less
than 2,000 shares would receive an independently determined fair market value of
$2.85 per share for each  outstanding  share of common  stock  that the  Company
would  acquire  under the  proposed  transaction.  It is expected  the number of
shareholders will be reduced from approximately  1,680 to approximately 150 as a
result of the proposed transaction. Furthermore, all warrant holders on the date
of the transaction would receive $.85 per warrant,  said amount being determined
as the  $2.85  fair  market  value  less the  warrant  exercise  price of $2.00.
Shareholders owning 2,000 or more shares will continue to own their shares.

                                       20
<PAGE>

The  proposed  transaction  is  subject  to  shareholder  approval,  tentatively
scheduled  for August 24, 2005,  and if  completed,  would permit the Company to
terminate  the  registration  of its common  stock with the SEC. The Company has
discontinued  the trading of its common stock on the NASDAQ  SmallCap Market and
the Chicago  Stock  Exchange  and  currently  trades on the Pink  Sheets.  Costs
associated with this proposed transaction are approximately $5 million and would
be funded with $5 million of proceeds  from the $16 million  National  City Bank
credit facility.  Details of the transaction may be found in Pioneer  Railcorp's
Proxy Statement that was filed with the SEC on July 22, 2005.

Item 6. EXHIBITS

Exhibit # 31.1 - Certification  by the Chief Executive  Officer.

Exhibit # 31.2 - Certification by the Chief Financial Officer.

Exhibit # 32.1 - Certification  under 18 U.S.C.  Section  1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       21
<PAGE>

                                   SIGNATURES


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





PIONEER RAILCORP
(Registrant)




                                                         /S/ Guy L. Brenkman
8/15/05                                                  -----------------------
 DATE                                                    GUY L. BRENKMAN, CEO




                                                         /s/ J. Michael Carr
8/15/05                                                  -----------------------
 DATE                                                    J. MICHAEL CARR
                                                         PRESIDENT, TREASURER &
                                                         CHIEF FINANCIAL OFFICER




                                       22=