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 September 30, 2004

                        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 [ ]

                                    4,497,102
            ---------------------------------------------------------
           (Shares of Common Stock outstanding on September 30, 2004)


                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



                        PIONEER RAILCORP AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
             Three and Nine Months Ended September 30, 2004 and 2003

                                    UNAUDITED
<TABLE>
                                                          Three Months Ended             Nine Months Ended
                                                             September 30,                  September 30,
                                                    ------------------------------------------------------------
                                                         2004            2003           2004            2003
                                                    ------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>
Operating revenue ...............................   $  4,360,000    $  3,904,000    $ 12,532,000    $ 11,628,000
                                                    ------------------------------------------------------------

Operating expenses
   Maintenance of way ...........................        163,000         328,000         977,000         948,000
   Maintenance of equipment .....................        456,000         403,000       1,253,000       1,133,000
   Transportation expense .......................      1,114,000         890,000       3,012,000       2,476,000
   Administrative expense .......................      1,231,000       1,115,000       3,343,000       3,181,000
   Depreciation  & amortization .................        545,000         550,000       1,652,000       1,640,000
   Net (gain) loss on sale of fixed assets ......       (272,000)             --        (236,000)             --
                                                    ------------------------------------------------------------
                                                       3,237,000       3,286,000      10,001,000       9,378,000
                                                    ------------------------------------------------------------

Operating income ................................      1,123,000         618,000       2,531,000       2,250,000
                                                    ------------------------------------------------------------

Other income & expense
   Other (income) expense .......................         45,000         (20,000)       (301,000)       (275,000)
   Interest expense, equipment ..................         65,000          91,000         219,000         302,000
   Interest expense, other ......................        115,000         132,000         353,000         394,000
                                                    ------------------------------------------------------------
                                                         225,000         203,000         271,000         421,000
                                                    ------------------------------------------------------------
Income before income taxes ......................        898,000         415,000       2,260,000       1,829,000

Provision for income taxes ......................        376,000         174,000         946,000         768,000
                                                    ------------------------------------------------------------
Income before minority interest in preferred
   stock dividends of consolidated subsidiaries .   $    522,000    $    241,000    $  1,314,000    $  1,061,000

Minority interest in preferred stock dividends of
    consolidated subsidiaries ...................         23,000          23,000          68,000          68,000
                                                    ------------------------------------------------------------

Net income ......................................   $    499,000    $    218,000    $  1,246,000    $    993,000
                                                    ============================================================

Basic earnings per common share .................   $       0.11    $       0.05    $       0.28    $       0.22
                                                    ============================================================

Diluted earnings per common share ...............   $       0.10    $       0.05    $       0.25    $       0.22
                                                    ============================================================

Cash dividends per common share .................   $       0.05    $       0.05    $       0.05    $       0.05
                                                    ============================================================
</TABLE>
See notes to unaudited consolidated financial statements

                                       2
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2004 and DECEMBER 31, 2003

                                    UNAUDITED
<TABLE>

                                                         September 30,  December 31,
                                                             2004           2003
                                                         ---------------------------
<S>                                                      <C>            <C>
ASSETS
Current Assets
   Cash ..............................................   $ 1,703,000    $ 1,199,000
   Accounts receivable, less allowance
     for doubtful accounts 2004 $119,000; 2003 $39,000     3,343,000      3,924,000
   Inventories .......................................       366,000        353,000
   Prepaid expenses ..................................       481,000        274,000
   Income tax refund claims ..........................       146,000        201,000
                                                         --------------------------
        Total current assets .........................     6,039,000      5,951,000

Investments, cash value of life insurance ............       271,000        247,000

Property and equipment, less accumulated
  depreciation 2004 $15,366,000; 2003 $14,171,000 ....    25,456,000     26,496,000

Other assets .........................................         7,000         12,000

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

Total assets .........................................   $32,790,000    $33,723,000
                                                         ==========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Current maturities of long-term debt ..............   $ 2,469,000    $ 2,955,000
   Notes payable .....................................       218,000        146,000
   Income taxes payable ..............................        22,000             --
   Accounts payable ..................................     2,613,000      2,544,000
   Deferred income taxes .............................        62,000         62,000
   Accrued liabilities ...............................       565,000        836,000
                                                         --------------------------
        Total current liabilities ....................     5,949,000      6,543,000
                                                         --------------------------

Long-term debt, net of current maturities ............     7,937,000      9,638,000
                                                         --------------------------

Deferred revenue .....................................     1,725,000      1,788,000
                                                         --------------------------

Deferred income taxes ................................     6,431,000      6,063,000
                                                         --------------------------

Minority interest in subsidiaries ....................       736,000        737,000
                                                         --------------------------

Stockholders' Equity
   Common stock :
   Outstanding 2004 4,497,102; 2003 4,485,102
   (In Treasury 2004 136,415 shares; 2003 130,615) ...         5,000          5,000
   Additional paid-in capital ........................     2,052,000      2,016,000
   Retained earnings .................................     7,955,000      6,933,000
                                                         --------------------------
        Total stockholders' equity ...................    10,012,000      8,954,000
                                                         --------------------------

Total liabilities and stockholders' equity ...........   $32,790,000    $33,723,000
                                                         ==========================
</TABLE>
See notes to unaudited consolidated financial statements

                                       3
<PAGE>

                        PIONEER RAILCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 2004 and 2003

                                    UNAUDITED
<TABLE>
                                                           First Nine Months
                                                      --------------------------
                                                          2004           2003
                                                      --------------------------
<S>                                                   <C>            <C>
Cash Flows From Operating Activities
Net income ........................................   $ 1,246,000    $   993,000
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Minority interest in preferred stock dividends of
    consolidated subsidiaries .....................        68,000         68,000
  Depreciation and amortization ...................     1,652,000      1,640,000
  Increase in cash value life insurance ...........       (24,000)       (24,000)
  (Gain) loss on sale of property & equipment .....      (236,000)            --
  Deferred taxes ..................................       368,000        366,000
  Change in assets and liabilities
    (Increase) decrease accounts receivable .......       581,000       (107,000)
    (Increase) decrease inventories ...............       (13,000)       (67,000)
    (Increase) decrease prepaid expenses ..........      (207,000)      (161,000)
    (Increase) decrease other assets ..............         2,000       (287,000)
    Increase (decrease) accounts payable ..........        69,000        (41,000)
    (Increase) decrease income tax refund claims ..        55,000          4,000
    Increase (decrease) income tax payable ........        22,000        321,000
    Increase (decrease) deferred revenue ..........       (63,000)       219,000
    Increase (decrease) accrued liabilities .......      (271,000)      (352,000)
                                                      --------------------------
        Net cash provided by operating activities .     3,249,000      2,572,000
                                                      --------------------------

Cash Flows From Investing Activities
  Proceeds from sale of property & equipment ......       623,000         95,000
  Purchase of property & equipment ................    (1,004,000)      (988,000)
                                                      --------------------------
        Net cash (used in) investing activities ...      (381,000)      (893,000)
                                                      --------------------------

Cash Flows From Financing Activities
  Proceeds from short-term borrowings .............       290,000        271,000
  Proceeds from long-term borrowings ..............            --      1,812,000
  Payments on short-term borrowings ...............      (218,000)      (147,000)
  Payments on long-term borrowings ................    (2,187,000)    (3,096,000)
  Purchase of common stock for treasury ...........       (14,000)       (33,000)
  Cash dividends paid .............................      (225,000)      (225,000)
  Purchase of minority interest ...................        (1,000)        (9,000)
  Payments to minority interest ...................       (45,000)       (45,000)
  Proceeds from warrants exercised ................        36,000             --
                                                      --------------------------
        Net cash (used in) financing activities ...    (2,364,000)    (1,472,000)
                                                      --------------------------

Net increase in cash ..............................       504,000        207,000

Cash, beginning of period .........................     1,199,000      1,148,000
                                                      --------------------------
Cash, end of period ...............................   $ 1,703,000    $ 1,355,000
                                                      ==========================

Supplemental Disclosures of Cash Flow Information
  Cash payments for:
    Interest ......................................   $   572,000    $   696,000
                                                      ==========================

    Income taxes ..................................   $   501,000    $    81,000
                                                      ==========================
</TABLE>
See notes to unaudited consolidated financial statements

                                       4
<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 Resources, Inc. (PRI), 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 significant accounting policies, see Note 1 to
our Consolidated Financial Statements in our 2003 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

In January 2003, FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" (FASB Interpretation No. 46), was issued. It clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated  Financial Statements," to
certain  entities  in which  the  equity  investors  do not  have a  controlling
financial interest or do not have sufficient equity at risk. FASB Interpretation
No. 46, as amended in December 2003, is effective for the Company for the period
ending December 31, 2004,  except for entities  considered to be special purpose
entities,  as to which the effective  date is December 31, 2003. The Company has
not completed its full assessment of the effects of FASB  Interpretation  No. 46
on its financial  statements  and so it is uncertain as to the impact,  however,
the Company does not believe it had any special  purpose  entities to which FASB
Interpretation  No. 46, as amended,  applied as of December 31, 2003,  nor other
entities to which the standard will apply in the beginning in 2004.

                                       5
<PAGE>

In May 2003, FASB issued  Statement No. 150,  "Accounting for Certain  Financial
Instruments with Characteristics of both Liabilities and Equity".  Statement No.
150 requires  that certain  freestanding  financial  instruments  be reported as
liabilities in the balance sheet. Depending on the type of financial instrument,
it will be  accounted  for at either fair value or the  present  value of future
cash flows  determined  at each balance sheet date with the change in that value
reported  as  interest  expense  in  the  statement  of  income.  Prior  to  the
application of Statement No. 150,  either those financial  instruments  were not
required to be recognized, or if recognized,  were reported in the balance sheet
as equity with changes in the value of those instruments normally not recognized
in net income. The Company believes the adoption of FASB No. 150 will not have a
material impact on the Company's financial position or results of operations.

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.

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>
                                                                                         Third Quarter
                                                                                 ----------------------------
                                                                                     2004            2003
                                                                                 ----------------------------
<S>                                                                              <C>             <C>
Revenues from external customers
  Railroad operations ........................................................   $  3,677,000    $  3,133,000
  Equipment leasing operations ...............................................        679,000         765,000
  Corporate support services .................................................          4,000           6,000
                                                                                 ----------------------------
        Total revenues from external customers ...............................   $  4,360,000    $  3,904,000
                                                                                 ============================

Intersegment revenues
  Railroad operations ........................................................   $         --    $         --
  Equipment leasing operations ...............................................         99,000          99,000
  Corporate support services .................................................      1,819,000       1,578,000
                                                                                 ----------------------------
        Total intersegment revenues ..........................................   $  1,918,000    $  1,677,000
                                                                                 ============================

Segment profit
  Railroad operations ........................................................   $  1,712,000    $  1,190,000
  Equipment leasing operations ...............................................        521,000         348,000
  Corporate support services .................................................        808,000         757,000
                                                                                 ----------------------------
        Total segment profit .................................................      3,041,000       2,295,000

Reconciling items
  Intersegment revenues ......................................................     (1,918,000)     (1,677,000)
  Income taxes ...............................................................       (376,000)       (174,000)
  Minority interest ..........................................................        (23,000)        (23,000)
  Other income (expense), net ................................................       (225,000)       (203,000)
                                                                                 ----------------------------

        Total consolidated net income ........................................   $    499,000    $    218,000
                                                                                 ============================
</TABLE>

                                       6
<PAGE>
<TABLE>
                                                                                      First Nine Months
                                                                                 ----------------------------
                                                                                     2004            2003
                                                                                 ----------------------------
<S>                                                                              <C>             <C>
Revenues from external customers
  Railroad operations ........................................................   $ 10,406,000    $  9,229,000
  Equipment leasing operations ...............................................      2,115,000       2,385,000
  Corporate support services .................................................         11,000          14,000
                                                                                 ----------------------------
        Total revenues from external customers ...............................   $ 12,532,000    $ 11,628,000
                                                                                 ============================

Intersegment revenues
  Railroad operations ........................................................   $         --    $         --
  Equipment leasing operations ...............................................        297,000         299,000
  Corporate support services .................................................      4,747,000       4,595,000
                                                                                 ----------------------------
        Total intersegment revenues ..........................................   $  5,044,000    $  4,894,000
                                                                                 ============================

Segment profit
  Railroad operations ........................................................   $  4,279,000    $  3,712,000
  Equipment leasing operations ...............................................      1,168,000       1,175,000
  Corporate support services .................................................      2,128,000       2,257,000
                                                                                 ----------------------------
        Total segment profit .................................................      7,575,000       7,144,000

Reconciling items
  Intersegment revenues ......................................................     (5,044,000)     (4,894,000)
  Income taxes ...............................................................       (946,000)       (768,000)
  Minority interest ..........................................................        (68,000)        (68,000)
  Other income (expense), net ................................................       (271,000)       (421,000)
                                                                                 ---------------------------

        Total consolidated net income ........................................   $  1,246,000    $    993,000
                                                                                 ============================
</TABLE>

Note 6. EARNINGS PER COMMON SHARE

Following is information  about the  computation of the earnings per share (EPS)
data for the quarters ended September 30, 2004 and 2003:
<TABLE>

                                                                For the Quarter Ended September 30, 2004
                                                        --------------------------------------------------------
                                                           Income                  Shares              Per-Share
                                                        (Numerator)            (Denominator)             Amount
                                                        --------------------------------------------------------
<S>                                                     <C>                    <C>                     <C>
Basic EPS
Income available to common stockholders ..........       $ 499,000               4,497,418              $   0.11
                                                                                                        ========
Effect of Dilutive Securities ....................              --                 597,297                 (0.01)
                                                        -------------------------------------------------------
Diluted EPS
Income available to common stockholders
  plus assumed conversions .......................       $ 499,000               5,094,715              $   0.10
                                                         =======================================================


                                                                For the Quarter Ended September 30, 2003
                                                         -------------------------------------------------------
                                                           Income                 Shares               Per-Share
                                                        (Numerator)            Denominator               Amount
                                                        --------------------------------------------------------
Basic EPS
Income available to common stockholders ..........      $ 218,000                4,490,647              $   0.05
                                                                                                        ========

Effect of Diluted Securities .....................             --                  288,903                    --
                                                        --------------------------------------------------------
Diluted EPS
Income available to common stockholders
  plus assumed conversions .......................      $ 218,000                4,779,550              $   0.05
                                                        ========================================================
</TABLE>

                                       7
<PAGE>

Following is information  about the  computation of the earnings per share (EPS)
data for the nine months ended September 30, 2004 and 2003:
<TABLE>
                                                              For the Nine Months Ended September 30, 2004
                                                        -------------------------------------------------------
                                                          Income                  Shares               Per-Share
                                                        (Numerator)            (Denominator)             Amount
                                                        --------------------------------------------------------
<S>                                                     <C>                    <C>                     <C>
Basic EPS
Income available to common stockholders ..........       $1,246,000              4,488,722              $   0.28
                                                                                                        ========

Effect of Dilutive Securities ....................              --                 459,568                 (0.03)
                                                         -------------------------------------------------------
Diluted EPS
Income available to common stockholders
  plus assumed conversions .......................       $1,246,000              4,948,290              $   0.25
                                                         =======================================================

                                                              For the Nine Months Ended September 30, 2003
                                                        -------------------------------------------------------
                                                          Income                  Shares               Per-Share
                                                        (Numerator)            (Denominator)             Amount
                                                        --------------------------------------------------------

Basic EPS
Income available to common stockholders ..........       $  993,000              4,496,985              $   0.22
                                                                                                        ========

Effect of Diluted Securities - None ..............              --                      --                    --
                                                         -------------------------------------------------------
Diluted EPS
Income available to common stockholders
  plus assumed conversions ......................       $  993,000              4,496,985              $   0.22
                                                         =======================================================
</TABLE>

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.


                                       8
<PAGE>

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, 2004.

Net  property,  plant and  equipment  comprised  78% of our  total  assets as of
September  30,  2004.   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 nine months ended
September 30, 2004.

For a complete description of our significant accounting policies, see Note 1 to
our Consolidated Financial Statements in our 2003 Form 10-KSB.

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)

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.

                                       9
<PAGE>

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  $3,000  per  car.  Below  is a  chart  illustrating  the  life
expectancy of the Company's railcar fleet as of December 31, 2003:
<TABLE>

Expiration Year      Box Car     Cov.Hop.     Gondola    Flat    Hopper       Total      % of Fleet
----------------------------------------------------------------------------------------------------
<S>                  <C>         <C>          <C>        <C>     <C>          <C>        <C>
    2004                 31           18                                          49           3.62%
    2005                 42           44           3      12                     101           7.46%
    2006                103           80           5       1                     189          13.96%
    2007                  3          156                              2          161          11.89%
    2008                 28            5           5                  2           40           2.95%
    2009                 40          154           4                             198          14.62%
    2010                  9            4           5                              18           1.33%
    2011                 90           50                              1          141          10.41%
    2012                164           14           4                  4          186          13.74%
    2013                  6           32           2                              40           2.95%
    2014                 20            9           3                  1           33           2.44%
    2015                 10           11                              1           22           1.62%
    2016                 20           10           1                              31           2.29%
    2017                  4            6           2                              12           0.89%
    2018                 13            4           1                              18           1.33%
    2019                 15            2                                          17           1.26%
    2020                  3            8                                          11           0.81%
    2021                 11            4          46      19           2          82           6.06%
    2023                               3                                           3           0.22%
    2024                               2                                           2           0.15%
                        612          616          81      32          13       1,354         100.00%
</TABLE>

Nationally  there is a surplus  of  locomotives  for  lease and sale,  which has
caused a  decrease  in lease  rates and a  decrease  in  opportunities  to lease
locomotives as potential customers may choose to purchase locomotives in lieu of
leasing them. The Company's  lease renewals will be subject to market rates that
are currently lower than the Company is earning.  Historically,  there have been
upturns  and  downturns  in the  locomotive  leasing  industry,  and the Company
believes it is well  positioned to take advantage of the next up turn due to the
size and quality of its locomotive fleet.

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.

                                       10
<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:  Third Quarter 2004 Compared to Third  Quarter 2003  Financial  Results
discussion:

The  Company's  net income in the third quarter 2004 was $499,000 an increase of
$281,000  or 129%  compared to $218,000  net income in the third  quarter  2003.
Revenue  increased in the third  quarter 2004 by $456,000 or 12%, to  $4,360,000
from $3,904,000 in the third quarter 2003.  Operating  expense  decreased in the
third quarter 2004 by $49,000 or 1%, to $3,237,000  from $3,286,000 in the third
quarter 2003.  Operating  income increased in the third quarter 2004 by $505,000
or 82%, to $1,123,000 from $618,000 in the third quarter 2003.

Revenue  increased in the third  quarter  2004 by $456,000 or 12% to  $4,360,000
from  $3,904,000  in the prior year.  The railroad  operations  generated  total
revenue of $3,677,000  in the third quarter 2004, an increase of $544,000  (17%)
compared  to revenue of  $3,133,000  in the third  quarter  2003.  The  railroad
operations  increased  revenue  from  increased  switching  revenue of  $477,000
primarily  related to a 13%  increase  in  freight  volume,  and also  increased
demurrage  revenue  of  $249,000.  As the  economy  continues  to  improve,  the
Company's  railroad  operations have  experienced a decrease in revenue from the
storage  of  railcars  for  non-affiliated  companies  as  such  companies  find
utilization  for their  railcars in an improving  economy.  In the third quarter
2004 revenue from car storage  decreased $51,000 to $81,000 compared to $132,000
in the third quarter 2003. The railroad  operations also had a $134,000 decrease
in  contract  service  revenue as a result of a decrease  in track  projects  on
behalf of state  governments  and customers.  The equipment  leasing  operations
generated  total  revenue of $679,000 in the third  quarter  2004, a decrease of
$86,000  (11%)  compared  to $765,000 in the third  quarter  2003.  In the third
quarter 2004 revenue from the  equipment  leasing  operations  included  carhire
revenue of  $474,000,  a decrease of $108,000  (19%) from  $582,000 in the third
quarter 2003, and unaffiliated lease income of $202,000,  an increase of $43,000
(27%) from $159,000 in the third quarter 2003.  The decrease in carhire  revenue
in the  quarter  primarily  relates  to the  underutilization  of the  Company's
covered hopper fleet. The Company leased 84 covered hoppers in the third quarter
2003 and expects to lease 40 excess  covered  hoppers to  non-affiliates  in the
fourth  quarter  2004.  The lease  terms are  expected to be for two years at an
average monthly rate of $320 per car. This is expected to increase revenues from
the equipment  leasing  operations  $475,000 per year while the leases remain in
effect.  Corporate  services did not have  significant  revenues in either third
quarter 2004 or 2003.

                                       11
<PAGE>

Operating  expenses  decreased  in the third  quarter  2004 by $49,000 or 1%, to
$3,237,000  from $3,286,000 in the third quarter 2003. The decrease in operating
expenses was affected by a gain on sale of fixed assets of $272,000 in the third
quarter 2004.  Excluding this gain, operating expenses increased $223,000 or 7%.
The majority of this  increase in operating  expenses  resulted  from  increased
transportation  expenses of $224,000 and  increased  administrative  expenses of
$116,000 in the third  quarter  2004.  The $224,000 of increased  transportation
expense  was  primarily  from the  railroad  operations,  which  had a  $154,000
increase resulting primarily from increased carhire and fuel costs. The railroad
operations  also had a decrease  in  maintenance  of way  expense  of  $176,000,
primarily  resulting from $247,000 of  capitalized  labor related to major track
rehabilitation  projects.  The railroad  operations  generated  total  operating
expenses of $1,964,000  in the third quarter 2004, a $20,000  increase (1%) from
$1,944,000 in the third quarter 2003. The equipment leasing operations generated
operating  expenses of $257,000 in the third quarter  2004, a $258,000  decrease
(50%) from $515,000 in the third quarter 2003. The primary decrease in operating
expenses by the equipment  leasing  operations in the third quarter 2004 relates
to a gain on sale of fixed  assets of  $271,000.  The  increased  administrative
expenses of $116,000 was primarily from Corporate  support services  relating 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  respectively,  and as is
more  fully  described  in  Item 5 - Other  Information  in  this  Form  10-QSB.
Corporate  support  services  generated  operating  expense of $1,016,000 in the
third quarter 2004 an $189,000 increase (23%) from $827,000 in the third quarter
2003.

Operating  income  increased  in the third  quarter  2004 by $505,000 or 82%, to
$1,123,000 from $618,000 in 2003. The railroad  operations  generated  operating
income of $1,713,000 in the third quarter 2004, a $524,000  increase  (44%) from
$1,189,000 in the third quarter 2003. The equipment leasing operations generated
operating  income of $422,000 in the third  quarter  2004,  a $172,000  increase
(69%) from  $250,000  in the third  quarter  2003.  Corporate  support  services
reduced  operating  income  $1,012,000 in the third  quarter  2004,  compared to
reduced operating income in the third quarter 2003 of $821,000.  This represents
an $191,000  decrease in the third quarter 2004 operating  income (23%) compared
to the third quarter 2003.

Third Quarter 2004 Operations by Business Segment
<TABLE>
                              Railroad       Equipment      Corporate
                             Operations       Leasing       Services         Total
                             --------------------------------------------------------
<S>                          <C>            <C>            <C>            <C>
Revenue ..................   $ 3,677,000    $   679,000    $     4,000    $ 4,360,000
                             --------------------------------------------------------
Expenses:
  Mow ....................   $   140,000    $         0    $    23,000    $   163,000
  Moe ....................   $   236,000    $   127,000    $    93,000    $   456,000
  Tran ...................   $   993,000    $    62,000    $    59,000    $ 1,114,000
  Admin ..................   $   385,000    $    17,000    $   829,000    $ 1,231,000
  Dep/Amort ..............   $   211,000    $   322,000    $    12,000    $   545,000
  (Gain)/Loss sale of F.A    $    (1,000)   $  (271,000)   $        --    $  (272,000)
                             --------------------------------------------------------
        Operating Expense    $ 1,964,000    $   257,000    $ 1,016,000    $ 3,237,000
                             --------------------------------------------------------

Operating Income .........   $ 1,713,000    $   422,000    $(1,012,000)   $ 1,123,000
                             ========================================================
</TABLE>

                                       12
<PAGE>

Third Quarter 2003 Operations by Business Segment
<TABLE>
                               Railroad      Equipment      Corporate
                              Operations      Leasing       Services        Total
                              ------------------------------------------------------
<S>                           <C>           <C>            <C>            <C>
Revenue ...................   $3,133,000    $  765,000     $    6,000     $3,904,000
                              ------------------------------------------------------
Expenses:
  Mow .....................   $  316,000    $       --     $   12,000     $  328,000
  Moe .....................   $  199,000    $  133,000     $   71,000     $  403,000
  Tran ....................   $  839,000    $   37,000     $   14,000     $  890,000
  Admin ...................   $  379,000    $   22,000     $  714,000     $1,115,000
  Dep/Amort ...............   $  211,000    $  323,000     $   16,000     $  550,000
  (Gain)/Loss sale of F.A .   $       --    $       --     $       --     $       --
                              ------------------------------------------------------
        Operating Expense .   $1,944,000    $  515,000     $  827,000     $3,286,000
                              ------------------------------------------------------

Operating Income ..........   $1,189,000    $  250,000     $ (821,000)    $  618,000
                              ======================================================
</TABLE>

Third Quarter 2004-2003 Variances by Business Segment
Increase (decrease)
<TABLE>
                                Railroad    Equipment      Corporate
                               Operations    Leasing       Services         Total
                               ----------------------------------------------------
<S>                            <C>          <C>            <C>            <C>
Revenue ....................   $ 544,000    $ (86,000)     $  (2,000)     $ 456,000
                               ----------------------------------------------------
Expenses:
  Mow ......................   $(176,000)   $      --      $  11,000      $(165,000)
  Moe ......................   $  37,000    $  (6,000)     $  22,000      $  53,000
  Tran .....................   $ 154,000    $  25,000      $  45,000      $ 224,000
  Admin ....................   $   6,000    $  (5,000)     $ 115,000      $ 116,000
  Dep/Amort ................   $      --    $  (1,000)     $  (4,000)     $  (5,000)
  (Gain)/Loss sale of F.A ..   $  (1,000)   $(271,000)     $      --      $(272,000)
                               ----------------------------------------------------
        Operating Expense ..   $  20,000    $(258,000)     $ 189,000      $ (49,000)
                               ----------------------------------------------------

Operating Income ...........   $ 524,000    $ 172,000      $(191,000)     $ 505,000
                               ====================================================
</TABLE>

Other Income and Expense Income Statement Line Item Discussions:

Interest expense  decreased  $43,000 (19%) in the third quarter 2004 to $180,000
compared to $223,000 in the third quarter  2003.  This decrease is the result of
the Company  having paid down  long-term  debt  pursuant to scheduled  repayment
terms.  Interest  expense related to the financing of railroad  acquisitions and
railroad improvements was $115,000 in the third quarter 2004, a $17,000 decrease
(13%) from $132,000 in the third quarter 2003. The equipment leasing  operations
interest expense was $65,000 in the third quarter 2004, a $26,000 decrease (29%)
from $91,000 in the third quarter 2003.

In the third quarter 2004, $45,000 of non-operating  expense was recorded by the
Company,  primarily  related  to the  write  off a  $51,000  account  receivable
recorded  from  a  previous   railroad   acquisition  which  has  proven  to  be
uncollectible.  In the third quarter 2003, $20,000 of other income was earned by
the Company,  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 Nine  Months 2004  Compared to First Nine Months 2003  Financial
Results discussion:

The  Company's  net  income in the first  nine  months  2004 was  $1,246,000  an
increase of $253,000  or 25%  compared to $993,000  net income in the first nine
months 2003.  Revenue increased in the first nine months 2004 by $904,000 or 8%,
to $12,532,000 from $11,628,000 in the first nine months 2003. Operating expense
increased  in the first nine months of 2004 by  $623,000  or 7%, to  $10,001,000
from $9,378,000 in the first nine months 2003. Operating income increased in the
first nine months 2004 by $281,000 or 12%, to $2,531,000  from $2,250,000 in the
first nine months 2003.

                                       13
<PAGE>

Revenue  increased  in the  first  nine  months  2004  by  $904,000  or  8%,  to
$12,532,000  from  $11,628,000  in  the  prior  year.  The  railroad  operations
generated  total  revenue of  $10,406,000  in the first  nine  months  2004,  an
increase of  $1,177,000  (13%)  compared to revenue of  $9,229,000  in the prior
year. The railroad operations increased revenue from increased switching revenue
of  $828,000  primarily  related to a 9% increase  in freight  volume,  and also
demurrage  revenue  of  $420,000.  As the  economy  continues  to  improve,  the
Company's  railroad  operations have  experienced a decrease in revenue from the
storage  of  railcars  for  non-affiliated  companies  as these  companies  find
utilization for their railcars in an improving economy. In the first nine months
2004  revenue  from car  storage  decreased  $163,000  to  $281,000  compared to
$444,000  in the first  nine  months  2003.  The  equipment  leasing  operations
generated  total revenue of $2,115,000 in the first nine months 2004, a decrease
of $270,000  (11%)  compared to  $2,385,000 in the prior year. In the first nine
months 2004 revenue  from the  equipment  leasing  operations  included  carhire
revenue of $1,594,000, a decrease of $281,000 (15%) from $1,875,000 in the prior
year,  and  unaffiliated  lease income of $516,000,  an increase of $32,000 (7%)
from  $484,000 in the prior year.  The  decrease  in carhire  revenue  primarily
relates to the  underutilization  of the Company's  covered  hopper  fleet.  The
Company leased 84 covered hoppers in the third quarter 2003 and expects to lease
40 excess covered hoppers to non-affiliates starting in the fourth quarter 2004.
The lease terms are  expected to be for two years at an average  monthly rate of
$320 per car. This is expected to increase  revenues from the equipment  leasing
operations  $475,000  per year  while the  leases  remain in  effect.  Corporate
services did not have significant  revenues in either the first nine months 2004
or 2003.

Operating expenses increased in the first nine months 2004 by $623,000 or 7%, to
$10,001,000  from  $9,378,000  in the prior  year.  The  increase  in  operating
expenses was affected by a gain on sale of fixed assets of $236,000 in the first
nine months 2004.  Excluding this gain, operating expenses increased $859,000 or
9%. The majority of this increase in operating expenses in the first nine months
2004  resulted from  increased  transportation  expenses of $536,000.  Increased
transportation expenses were primarily from the railroad operations, which had a
$414,000 increase resulting  primarily from increased  carhire,  fuel costs, and
increased train service wages resulting from increased  traffic.  Maintenance of
way  expense  increased  only  $29,000 in the first nine months  2004;  however,
approximately  $247,000 of maintenance  of way expenses were  capitalized in the
first nine  months  2004  related to major track  rehabilitation  projects.  The
railroad  operations  generated  total  operating  expenses of $6,127,000 in the
first nine months 2004, a $603,000  increase (11%) from  $5,524,000 in the first
nine months 2003. The equipment leasing operations  generated operating expenses
of  $1,244,000  in the first nine months  2004, a $259,000  decrease  (17%) from
$1,503,000 in the first nine months 2003. The decrease in operating  expenses in
the first nine months 2004 by the equipment leasing operations primarily relates
to a gain on the sale of fixed assets of $235,000. The increased  administrative
expense of $162,000 was primarily from corporate  support  services  relating to
the  Company's  actions to "go  private" as detailed in the  Company's  Form 8-K
filed on  September  21, 2004 and 8-K/A filed on September  23, 2004.  Corporate
support  services  generated  operating  expense of $2,630,000 in the first nine
months 2004 a $279,000  increase (12%) from  $2,351,000 in the first nine months
2003.

Operating  income increased in the first nine months 2004 by $281,000 or 12%, to
$2,531,000  from  $2,250,000  in  the  first  nine  months  2003.  The  railroad
operations  generated  operating  income of  $4,279,000 in the first nine months
2004, a $574,000  increase (15%) from  $3,705,000 in the first nine months 2003.
The equipment leasing operations  generated  operating income of $871,000 in the
first nine months 2004, an $11,000 decrease (1%) from $882,000 in the first nine
months 2003.  Corporate  support services reduced operating income $2,619,000 in
the first nine months 2004,  compared to reduced  operating  income in the first
nine months 2003 of $2,337,000. This represents a $282,000 decrease in the first
nine months 2004 operating income (12%) compared to the first nine months 2003.

First Nine Months 2004 Operations by Business Segment
<TABLE>

                                                              Railroad       Equipment       Corporate
                                                             Operations       Leasing        Services          Total
                                                            ------------------------------------------------------------
<S>                                                         <C>             <C>             <C>             <C>
Revenue .................................................   $ 10,406,000    $  2,115,000    $     11,000    $ 12,532,000
                                                            ------------------------------------------------------------
Expenses:
  Mow ...................................................   $    907,000    $          0    $     70,000    $    977,000
  Moe ...................................................   $    658,000    $    337,000    $    258,000    $  1,253,000
  Tran ..................................................   $  2,746,000    $    124,000    $    142,000    $  3,012,000
  Admin .................................................   $  1,179,000    $     43,000    $  2,121,000    $  3,343,000
  Dep/Amort .............................................   $    638,000    $    975,000    $     39,000    $  1,652,000
  (Gain)/Loss sale of F.A ...............................   $     (1,000)   $   (235,000)   $         --    $   (236,000)
                                                            ------------------------------------------------------------
        Operating Expense ...............................   $  6,127,000    $  1,244,000    $  2,630,000    $ 10,001,000
                                                            ------------------------------------------------------------

Operating Income ........................................   $  4,279,000    $    871,000    ($ 2,619,000)   $  2,531,000
                                                            ============================================================
</TABLE>

                                       14
<PAGE>

First Nine Months 2003 Operations by Business Segment
<TABLE>

                                                              Railroad       Equipment       Corporate
                                                             Operations       Leasing        Services          Total
                                                            ------------------------------------------------------------
<S>                                                         <C>             <C>             <C>             <C>
Revenue .................................................   $  9,229,000    $  2,385,000    $     14,000    $ 11,628,000
                                                            ------------------------------------------------------------

Expenses:
  Mow ...................................................   $    896,000    $         --    $     52,000    $    948,000
  Moe ...................................................   $    554,000    $    380,000    $    199,000    $  1,133,000
  Tran ..................................................   $  2,332,000    $    119,000    $     25,000    $  2,476,000
  Admin .................................................   $  1,108,000    $     48,000    $  2,025,000    $  3,181,000
  Dep/Amort .............................................   $    628,000    $    962,000    $     50,000    $  1,640,000
  (Gain)/Loss sale of F.A ...............................   $      6,000    $     (6,000)   $         --    $         --
                                                            ------------------------------------------------------------
        Operating Expense ...............................   $  5,524,000    $  1,503,000    $  2,351,000    $  9,378,000
                                                            ------------------------------------------------------------

Operating Income ........................................   $  3,705,000    $    882,000    ($ 2,337,000)   $  2,250,000
                                                            ============================================================
</TABLE>

First Nine Months 2004-2003 Variances by Business Segment
Increase (decrease)
<TABLE>
                                                              Railroad        Equipment       Corporate
                                                             Operations        Leasing        Services           Total
                                                            ------------------------------------------------------------
<S>                                                         <C>              <C>             <C>            <C>
Revenue .................................................   $  1,177,000    $   (270,000)   $     (3,000)   $    904,000
                                                            ------------------------------------------------------------
Expenses:
  Mow ...................................................   $     11,000    $         --    $     18,000    $     29,000
  Moe ...................................................   $    104,000    $    (43,000)   $     59,000    $    120,000
  Tran ..................................................   $    414,000    $      5,000    $    117,000    $    536,000
  Admin .................................................   $     71,000    $     (5,000)   $     96,000    $    162,000
  Dep/Amort .............................................   $     10,000    $     13,000    $    (11,000)   $     12,000
  (Gain)/Loss sale of F.A ...............................   $     (7,000)   $   (229,000)   $         --    $   (236,000)
                                                            ------------------------------------------------------------
Operating Expense .......................................   $    603,000    $   (259,000)   $    279,000    $    623,000
                                                            ------------------------------------------------------------

Operating Income ........................................   $    574,000    $    (11,000)   $   (282,000)   $    281,000
                                                            ============================================================
</TABLE>

Other Income and Expense Income Statement Line Item Discussions:

Interest  expense  decreased  $124,000 in the first nine months 2004 to $572,000
compared to $696,000 in the first nine months 2003.  This decrease is the result
of the Company having paid down  long-term debt pursuant to scheduled  repayment
terms.  Interest  expense related to the financing of railroad  acquisitions and
railroad  improvements  was  $353,000 in the first nine months  2004,  a $41,000
decrease  (10%) from  $394,000  in the first nine  months  2003.  The  equipment
leasing operations  interest expense was $219,000 in the first nine months 2004,
an $83,000 decrease (27%) from $302,000 in the first nine months 2003.

In the first  nine  months  2004,  $301,000  of other  income  was earned by the
Company,  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.  In the first nine months 2003,  $275,000 of other income
was  earned  by the  Company,  primarily  from  lease  income  generated  by the
Company's railroad operations.

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.  The
Company has working capital  facilities  totaling  $1,100,000 that was available
for use at the end of the third quarter 2004.  The Company's  credit  agreements
with  National  City Bank contain  various  restrictive  loan  covenants.  As of
September 30, 2004, the Company  believes it is in compliance  with all of these
covenants.

                                       15
<PAGE>

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.

Historically,  the Company has  negotiated  reduced  interest rates on its notes
outstanding  with  National  City Bank.  However,  the  ability  to  renegotiate
interest rates is limited by the  assessment of prepayment  premiums by National
City Bank in accordance with the terms of the original notes.  Therefore,  it is
not cost  effective  to  renegotiate  all notes.  No debt  refinancing  to lower
interest rates has occurred during the nine months ended September 30, 2004.

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
September  30,  2004,  a total of 89,564  warrants  originally  issued  had been
exercised, and the Company realized $179,128 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 September 30, 2004, 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 September 30, 2004, a total of 136,415 shares had been  repurchased
at a cost of  $205,154.  The Company  plans to  continue  buying back its common
stock  but  believes  the  repurchase  will  be on a  more  limited  scope  then
previously anticipated due to capital requirements and the trading volume of the
Company's stock.

As  previously  reported,  the  Company  plans to make  significant  upgrades to
existing  track  structure on several of its railroad  properties at an expected
cost  of  approximately  $1  million.  The  anticipated  costs  represent  track
materials, additional labor and contractors that will be required to perform the
upgrades.  Through the first nine months of 2004 the Company has incurred  costs
and  capitalized  $562,000  related to these planned  upgrades.  The Company has
funded a majority of these  expenditures  with working capital,  and anticipates
funding the remaining track upgrades with working capital.

The Company's  feeder line  application on file with the Surface  Transportation
Board  (STB) to acquire the west end of the Toledo  Peoria and  Western  Railway
(TPW) was granted on October 28, 2004.  The STB set the  purchase  price at $3.9
million  dollars and ordered the  transaction to close no later than January 26,
2005. The Company  believes this  acquisition  would add synergies to its Keokuk
Junction  Railway  Co.,  as the two lines will  connect,  giving  the  Company's
largest  customer  access to  additional  markets via Peoria,  IL. The Company's
primary  lender has committed to provide long term fixed rate financing for this
acquisition. The Company believes that the cash it would generate from operating
the  west  end of the TPW  would  more  than  offset  debt  requirements  of the
acquisition.

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 $3,249,000 in the
first nine months 2004 compared to $2,572,000  net cash generated from operating
activities in the first nine months 2003. Net cash from operating  activities in
the first nine months 2004 was provided by $1,246,000 of net income,  $1,652,000
of  depreciation  and  amortization,  an increase in  deferred  income  taxes of
$368,000,  a decrease in accounts  receivable of $581,000,  a decrease in income
tax refund claims of $55,000,  an increase in accounts  payable of $69,000,  and
$92,000 from changes in various other operating assets and liabilities. Net cash
was used in operating  activities  in the first nine months 2004 from a decrease
in accrued liabilities of $271,000,  a decrease in prepaid expenses of $207,000,
a gain on sale of property and  equipment of $236,000 and $100,000  from changes
in various other operating assets and liabilities.

                                       16
<PAGE>

The first nine months 2004 decrease in accounts  receivable is primarily related
to a $250,000 net change in  receivables  collected  for state  funded  crossing
projects.  In addition,  accounts payable had  approximately a $250,000 decrease
also relating to this state funded crossing  projects  whereby cash was received
from the state  and paid to a  contractor.  Excluding  the  change  in  accounts
payable  related to state projects,  accounts  payable  increased  approximately
$320,000.  This  increase,  as  well  as  the  remaining  decrease  in  accounts
receivable relates primarily to freight  receivables.  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.  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 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  increase  in  prepaid
expenses  in the first nine  months  2004  primarily  relates  to the  Company's
liability  insurance  premium,  which renews each year in July.  The decrease in
accrued  liabilities  in the first nine months 2004 resulted from the payment or
settlement of December 31, 2003 accrued expenses.

Cash  flow  used for  investing  activities  primarily  relates  to the  Company
purchasing and capitalizing approximately $1,004,000 of fixed assets and capital
improvements  in the first nine months 2004 offset by $623,000 of proceeds  from
the sale of property and  equipment.  Included in the 2004 capital  additions is
the purchase of a used  locomotive  for $31,000 and $610,000 of track  structure
additions and improvements.  In addition,  the Company  capitalized  $171,000 of
leasehold  track  improvements.  Other  capital  expenditures  in the first nine
months  2004  include   approximately   $105,000  for  railcar  and   locomotive
betterments, $33,000 for four vehicles, $17,000 for bridge upgrades, and $37,000
of various  equipment  items. All of the capital  expenditures  were funded with
working capital.

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  $290,000 in the first nine months 2004 relate to the
financing of the Company's liability insurance premium. In the first nine months
2004, approximately 18,000 warrants were exercised generating cash of $36,000.

The Company  anticipates  additional cash  requirements in 2004 will approximate
$200,000 as a result of the reversal of deferred  taxes.  In future  years,  the
Company anticipates  additional cash requirements  totaling $400,000 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.

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.

                                       17
<PAGE>

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, 2004                --       $        --            --             869,385
February 1 - 29, 2004               --                --            --             869,385
March 1 - 31, 2004                  --                --            --             869,385
April 1 - 30, 2004                 300              2.42           300             869,085
May 1 - 31, 2004                    --                --            --             869,085
June 1 - 30, 2004                  500              2.33           500             868,585
July 1 - 30, 2004                3,000              2.41         3,000             865,585
August 1 - 30, 2004                 --                --            --             865,585
September 1 - 30, 2004           2,000              2.21         2,000             863,585
                              -------------------------------------------------------------
Total                            5,800     $        2.33         5,800             863,585
                              =============================================================
<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 September 30, 2004.

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

No Matters  were  submitted to a vote of security  holders in the third  quarter
2004.

Item 5.   OTHER INFORMATION

The Board of Directors of Pioneer Railcorp announced  September 21, 2004 that it
has  preliminarily  approved a going  private  merger  transaction  in which all
shareholders  with less than 2,000  shares of the  Company's  common stock would
receive  $2.85 in cash for each  share of  Company  common  stock that they held
prior to merger.  Also,  all warrant  holders will receive $.85 per warrant held
prior to the  merger,  which  amount  is based on the  $2.85  per  share  merger
consideration less the $2.00 warrant exercise price.  Shareholders  owning 2,000
shares or greater will continue to hold their shares.

The proposed  transaction is subject to shareholder  approval and is intended to
reduce the number of Pioneer  Railcorp holders of record to under 300, the level
at which the Company is required to continue to file  periodic  reports with the
SEC. As a result,  if  completed,  Pioneer  Railcorp  intends to  terminate  the
registration of its stock with the SEC and cause the stock to cease to be traded
on the Nasdaq  SmallCap  Market and the  Chicago  Stock  Exchange.  The  Company
believes  there will be a market for its stock on the Pink sheets.  The Board of
Directors  believes that the increasing costs of being a "public" company is not
justified by the benefits,  given the Company's  limited trading  activity.  The
Company  intends  to  hold a  special  meeting,  at  which  the  matter  will be
considered,  during the first quarter of 2005, with the intent of completing the
"going private" transaction by March 31, 2005.

Details of the transaction may be found in Pioneer Railcorp's  Preliminary Proxy
Statement that has been filed with the SEC on November 9, 2004. Pioneer Railcorp
plans  to  mail  to  each  shareholder  a proxy  statement  about  the  proposed
transaction,  and shareholders are advised to read the proxy statement carefully
when it becomes available  because it will contain  important  information about
the  transaction,  the persons  soliciting  proxies,  and their interests in the
transaction  and  related  matters.  Shareholders  may obtain free copies of the
proxy statement (when  available) and other documents filed by Pioneer  Railcorp
at the SEC's website or from the Company.

                                       18
<PAGE>

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

         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.

Form 8-K and 8-K/A  were  filed  September  21,  2004 and  September  23,  2004,
respectively, regarding the Company's plans to "go private".

                                       19
<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)





11/11/04                                                /s/ Guy L. Brenkman
--------                                                ------------------------
 DATE                                                   GUY L. BRENKMAN, CEO





11/11/04                                                /s/ J. Michael Carr
--------                                                ------------------------
 DATE                                                   J. MICHAEL CARR
                                                        PRESIDENT, TREASURER &
                                                        CHIEF FINANCIAL OFFICER








                                       20=