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, 1999

                        Commission File Number 33-6658-C

                                Pioneer Railcorp
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

              Iowa                                                37-1191206
-------------------------------                              -------------------
(State or other jurisdiction of                              (IRS Employer ID #)
 incorporation or organization)

      1318 S. Johanson Rd Peoria, IL                                61607
----------------------------------------                          ----------
(Address of principal executive offices)                          (Zip code)

                   Registrant's telephone number: 309-697-1400

           Securities registered pursuant to Section 12(g) of the Act:

 Title of each Class                   Name of each exchange on which registered
---------------------                  -----------------------------------------
Common Stock, Class A                       NASDAQ , Chicago Stock Exchange


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. YES [ X ]  NO [  ]

                                    4,611,217
           ---------------------------------------------------------
           (Shares of Common Stock outstanding on September 30, 1999)

<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

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

UNAUDITED
<TABLE>

                                                             Third Quarter                First Nine Months
                                                          1999          1998              1999          1998
                                                    ----------------------------    ----------------------------
<S>                                                 <C>             <C>             <C>             <C>
Operating revenue ...............................   $  3,586,959    $  3,481,246    $ 10,522,892    $ 10,367,582
                                                    ------------------------------------------------------------

Operating expenses
   Maintenance of way ...........................        383,836         254,934       1,103,073         963,697
   Maintenance of equipment .....................        367,870         391,337       1,126,201       1,209,648
   Transportation expense .......................        742,125         910,689       2,355,153       2,444,232
   Administrative expense .......................        901,638         894,379       2,673,975       2,659,060
   Depreciation  & amortization .................        435,298         395,963       1,310,826       1,182,827
                                                    ------------------------------------------------------------
                                                       2,830,767       2,847,302       8,569,228       8,459,464
                                                    ------------------------------------------------------------

Operating income ................................        756,192         633,944       1,953,664       1,908,118
                                                    ------------------------------------------------------------

Other income & expense
   Other (income) expense .......................        (56,922)        (50,798)       (255,208)       (156,361)
   Loss on sale of subsidiary ...................            -0-             -0-         565,873             -0-
   Interest expense, equipment ..................        165,959         171,364         493,269         570,432
   Interest expense, other ......................        193,541         137,200         564,826         394,014
   Net (gain) loss on sale of fixed assets ......          1,107          11,824          (1,108)        (63,871)
                                                    ------------------------------------------------------------
                                                         303,685         269,590       1,367,652         744,214
                                                    -------------------------------------------------------------

Income before income taxes ......................        452,507         364,354         586,012       1,163,904

Provision for income taxes ......................        170,670         130,277         212,170         424,677
                                                    ------------------------------------------------------------

Income before minority interest in preferred
   stock dividends of consolidated subsidiaries .   $    281,837    $    234,077    $    373,842    $    739,227

Minority interest in preferred stock dividends of
    consolidated subsidiaries ...................   $     31,308    $     31,308    $     93,924    $     93,924


Net income ......................................   $    250,529    $    202,769    $    279,918    $    645,303
                                                    ============================================================

Basic earnings per common share .................   $       0.05    $       0.04    $       0.06    $       0.14
                                                    ============================================================

Diluted earnings per common share ...............   $       0.05    $       0.04    $       0.06    $       0.14
                                                    ============================================================

Cash dividends per common share .................   $     0.0000    $     0.0000    $     0.0225    $     0.0200
                                                    ============================================================
</TABLE>
<PAGE>


PIONEER RAILCORP AND SUBSIDIARIES

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

UNAUDITED
<TABLE>

                                                          September 30  December 31
                                                              1999         1998
                                                          -------------------------
<S>                                                       <C>           <C>
ASSETS
Current Assets
   Cash ...............................................   $   264,692   $   469,476
   Accounts receivable, less allowance
     for doubtful accounts 1999 $192,059; 1998 $156,282     2,971,724     2,660,012
   Inventories ........................................       299,111       331,841
   Prepaid expenses ...................................        92,044       174,085
   Income tax refund claims ...........................        33,272        56,933
   Deferred taxes .....................................        70,800        70,800
                                                          -------------------------
        Total current assets ..........................     3,731,643     3,763,147
                                                          -------------------------

Property and Equipment less accumulated
  depreciation 1999 $6,801,246; 1998 $5,997,160 .......    23,760,665    19,563,368
                                                          -------------------------

Intangible Assets, less accumulated amortization
  1999 $226,225; 1998 $250,365 ........................     1,136,598     1,065,140
                                                          -------------------------

Investments, cash value of life insurance .............       124,774       112,348
                                                          -------------------------

Total assets ..........................................   $28,753,680   $24,504,003
                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ...................................   $ 2,285,206   $ 2,732,627
   Notes payable ......................................       108,532       307,886
   Income taxes payable ...............................       347,537        14,206
   Current maturities of long-term debt ...............     2,376,078     1,988,041
   Accrued liabilities ................................       451,749       537,018
                                                          -------------------------
        Total current liabilities .....................     5,569,102     5,579,778
                                                          -------------------------

Long-term debt, net of current maturities .............    13,700,027    11,211,737
Deferred income taxes .................................     4,158,740     2,545,900
                                                          -------------------------
        Total liabilities & debt ......................    23,427,869    19,337,415
                                                          -------------------------

Minority interest in subsidiaries .....................     1,154,000     1,186,000

Stockholders' Equity
   Common stock .......................................         4,611         4,610
   Additional paid-in capital .........................     2,042,042     2,041,000
   Retained earnings ..................................     2,125,158     1,934,978

                                                          -------------------------
        Total stockholders' equity ....................     4,171,811     3,980,588
                                                          -------------------------

Total liabilities and equity ..........................   $28,753,680   $24,504,003
                                                          =========================
</TABLE>
<PAGE>

PIONEER RAILCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FIRST NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30,1998

UNAUDITED
<TABLE>
                                                                     First Nine Months
                                                               --------------------------
                                                                    1999          1998
                                                               --------------------------
<S>                                                            <C>            <C>
Cash Flows From Operating Activities
Net income .................................................   $   279,918    $   645,303
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Minority interest in preferred stock dividends of
      consolidated subsidiaries ............................        93,924         93,924
    Depreciation ...........................................     1,264,449      1,143,582
    Amortization ...........................................        46,377         39,245
    Increase in cash value life insurance ..................       (12,426)       (13,446)
    (Gain) on sale of property & equipment .................        (1,108)       (63,871)
    Loss on sale of subsidiary .............................       565,872            -0-
    Deferred taxes .........................................      (224,000)           -0-
Change in assets and liabilities, net of effects from
  acquisition of subsidiaries
    (Increase) decrease accounts receivable ................      (506,626)      (258,202)
    (Increase) decrease inventories ........................        32,730          2,652
    (Increase) decrease prepaid expenses ...................        92,680        (66,817)
    (Increase) decrease intangible assets ..................        (3,758)           207
    Increase (decrease) accounts payable ...................       (12,189)       149,078
    (Increase) decrease income tax refund claims ...........        23,661            168
    Increase (decrease) income tax payable .................       333,331        307,504
    Increase (decrease) accrued liabilities ................       113,641         32,349
                                                                -------------------------
           Net cash provided by operating activities .......     2,086,476      2,011,676
                                                                -------------------------

Cash Flows From Investing Activities
  Proceeds from sale of property & equipment ...............        10,925        315,706
  Purchase of property & equipment, net of property
    and equipment from acquisition of subsidiaries..........    (1,496,775)    (1,087,439)
  Acquisition of subsidiaries, net of cash acquired ........    (3,875,000)           -0-
                                                               -------------------------
           Net cash (used in) investing activities .........    (5,360,850)      (771,733)
                                                                -------------------------

Cash Flows From Financing Activities
  Proceeds from short-term borrowings, net of debt
    assumed in acquisition of subsidiaries .................     1,852,004      2,813,442
  Proceeds from long-term borrowings, net of debt
    assumed in acquisition of subsidiaries .................     7,421,590      3,779,181
  Payments on short-term borrowings ........................    (2,051,358)    (2,693,981)
  Payments on long-term borrowings .........................    (3,938,029)    (4,662,278)
  Repurchase of minority interest ..........................       (32,000)           -0-
  Proceeds from warrants and options exercised .............         1,040            800
  Cash dividends paid ......................................      (103,742)       (92,201)
  Payments to minority interest ............................       (79,915)       (79,915)
                                                                -------------------------
           Net cash provided by financing activities: ......     3,069,590       (934,952)
                                                                -------------------------

Net increase (decrease) in cash ............................      (204,784)       304,991

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

Cash, end of period ........................................    $  264,692    $   712,419
                                                                =========================
</TABLE>
<PAGE>



SEGMENT INFORMATION

Description of products and services from reportable segments:

Pioneer has two reportable  segments,  investing in operating  railroad entities
and an investment  in a railroad  equipment  entity.  All other  operations  are
classified as corporate for purposes of this disclosure.

Measurement of segment profit or loss and segment assets:

The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting policies.  Pioneer Railcorp evaluates segment
profit based on operating income  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.

Factors management used to identify the reportable segments:

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

                                                             Third Quarter
                                                       ------------------------
                                                          1999           1998
                                                       ------------------------
Revenues from external customers
   Railroads .....................................     2,938,992      2,902,880
   Leasing company ...............................       647,967        573,866
   Corporate .....................................             0          4,500
                                                       ------------------------
      Total revenues from external customers .....     3,586,959      3,481,246
                                                       ========================

Intersegment revenues
   Railroads .....................................             0              0
   Leasing company ...............................        95,100        108,600
   Corporate .....................................     1,541,613      1,253,732
                                                       ------------------------
      Total intersegment revenues ................     1,636,713      1,362,332
                                                       ========================

Segment profit
   Railroads .....................................     1,363,535      1,215,111
   Leasing company ...............................       309,001        277,658
   Corporate .....................................       720,369        503,507
                                                       ------------------------
      Total segment profit .......................     2,392,905      1,996,276

Reconciling items
    Intersegment revenues ........................    (1,636,713)    (1,362,332)
    Income taxes .................................      (170,670)      (130,277)
    Minority interest ............................       (31,308)       (31,308)
    Other income(expense), net ...................      (303,685)      (269,590)
                                                       ------------------------

       Total consolidated net income .............       250,529        202,769
                                                       ========================
<PAGE>



                                                             Nine Months
                                                     --------------------------
                                                       9/30/99         9/30/98
                                                     --------------------------
Assets
   Railroads ...................................     17,091,093      14,169,110
   Leasing company .............................     10,832,853      10,012,573
   Corporate ...................................        829,734         759,195
                                                     --------------------------
      Total assets .............................     28,753,680      24,940,878
                                                     ==========================

Revenues from external customers
   Railroads ...................................      8,544,380       8,379,313
   Leasing company .............................      1,978,512       1,982,464
   Corporate ...................................              0           5,805
                                                     --------------------------
      Total revenues from external customers ...     10,522,892      10,367,582
                                                     ==========================

Intersegment revenues
   Railroads ...................................              0               0
   Leasing company .............................        293,600         320,000
   Corporate ...................................      4,398,111       3,746,683
                                                     --------------------------
      Total intersegment revenues ..............      4,691,711       4,066,683
                                                     ==========================

Segment profit
   Railroads ...................................      3,607,539       4,743,374
   Leasing company .............................      1,001,753       1,043,630
   Corporate ...................................      2,036,083         187,797
                                                     --------------------------
      Total segment profit .....................      6,645,375       5,974,801

Reconciling items
    Intersegment revenues ......................     (4,691,711)     (4,066,683)
    Income taxes ...............................       (212,170)       (424,677)
    Minority interest ..........................        (93,924)        (93,924)
    Other income(expense), net .................     (1,367,652)       (744,214)
                                                     --------------------------

       Total consolidated net income ...........        279,918         645,303
                                                     ==========================

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER RAILCORP AND SUBSIDIARIES

NOTE 1.   STATEMENTS

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

NOTE 2.   NATURE OF BUSINESS

The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned  and controlled  subsidiaries  (collectively,  "the Company").  The
Company's  railroad  operations  segment  consists  of  wholly-owned  short line
railroad  subsidiaries  that offer  similar  services and includes the following
wholly-owned  subsidiaries:  West Michigan Railroad Co. (WMI), Michigan Southern
Railroad  Company  (MSO),  Fort Smith Railroad Co. (FSR),  Alabama  Railroad Co.
(ALAB),  Mississippi Central Railroad Co. (MSCI), Alabama & Florida Railway Co.,
Inc. (AF), Decatur Junction Railway Co. (DT),  Vandalia Railroad Company (VRRC),
Minnesota  Central  Railroad Co.  (MCTA) (sold  effective  May 1, 1999),  Keokuk
Junction Railway Co. (KJRY), Midwest Terminal Railway Company (formerly Rochelle
Railroad Co.) (RRCO), Shawnee Terminal Railway Company (STR), Pioneer Industrial
Railway Co. (PRY),  The Garden City Western  Railway,  Inc.(GCW).  The Company's
equipment  leasing  segment  leases  railcars,  locomotives,  and other railroad
equipment  to  affiliated  and  unaffiliated  entities  and  includes  only  the
wholly-owned  subsidiary  Pioneer Railroad Equipment Co., Ltd. (PREL). All other
Company operations are classified as corporate and include the following wholly-
owned subsidiaries:  Pioneer Resources, Inc. (PRI), Pioneer Air, Inc. (PAR), and
Pioneer Railroad Services, Inc. (PRS). All significant intercompany balances and
transactions have been eliminated in consolidation.

NOTE 3.  ESTIMATED IMPACT OF THE ADOPTION OF RECENT ACCOUNTING
         STANDARDS

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

The Company is not aware of any other recent accounting standard issued, but not
yet required to be adopted by the Company,  that would have a material effect on
its financial position or results of operations.



<PAGE>



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

This management's  discussion and analysis of financial condition and results of
operations  references  the  Company's  two  operating  segments.  The Company's
railroad  operations  segment  consists  of  wholly-owned  short  line  railroad
subsidiaries  that offer similar  services and the Company's  equipment  leasing
segment leases railcars, locomotives, and other railroad equipment to affiliated
and unaffiliated  entities. All other operations are classified as corporate for
purpose  of these  discussions.  All  information  provided  for each  operating
segment  is  presented  after  elimination  of  all  intersegment  transactions,
therefore reflecting its share of consolidated results.

Pioneer Railcorp, an Iowa corporation, is a railroad holding company. As used in
this Form 10-QSB,  unless the context requires otherwise,  the term "Company" or
"PRC" refers to the parent, Pioneer Railcorp and its subsidiaries: West Michigan
Railroad  Co.  (WMI),  Michigan  Southern  Railroad  Company  (MSO),  Fort Smith
Railroad Co. (FSR),  Alabama Railroad Co. (ALAB),  Mississippi  Central Railroad
Co. (MSCI),  Alabama & Florida Railway Co., Inc. (AF),  Decatur Junction Railway
Co. (DT),  Vandalia  Railroad  Company (VRRC),  Minnesota  Central  Railroad Co.
(MCTA),  Keokuk Junction  Railway Co. (KJRY),  Midwest Terminal Railway Company,
(formerly Rochelle Railroad Co.) (RRCO), Shawnee Terminal Railway Company (STR),
Pioneer   Industrial  Railway  Co.  (PRY),  The  Garden  City  Western  Railway,
Inc.(GCW),  Pioneer Resources,  Inc. (PRI), Pioneer Railroad Equipment Co., Ltd.
(PREL), Pioneer Air, Inc. (PAR), and Pioneer Railroad Services, Inc. (PRS).

Summary: Third Quarter 1999 Compared to Third Quarter 1998.

The Company  recorded net income of $250,529 in the third  quarter 1999 compared
to net income of $202,769  in the same period last year,  an increase of $47,760
or 24%. Revenue increased by $106,000 or 3% to $3,587,000 from $3,481,000 in the
same period last year.  Operating  expense  decreased by $16,000,  to $2,831,000
from  $2,847,000  in the same period last year.  Operating  income  increased by
$122,000, or 20% to $756,000 from $634,000 in the same period last year.

In the third  quarter  1999 the  Company's  railroad  operations  had  increased
operating  income of  approximately  $146,000.  Railroad  operating  income  was
positively affected in the third quarter 1999 by increased operating income from
the Keokuk Junction  Railway of $102,000  compared to the same period last year.
In  addition,  The Garden City Western  Railway  Inc.,  which the Company  began
operating  May  1,  1999,  generated  $156,000  of  operating  income.  Railroad
operating  income was positively  affected by the sale of the Minnesota  Central
Railroad  which had an  operating  loss of  approximately  $64,000  in the third
quarter 1998.  Railroad  operating income was adversely  affected by the loss of
the  Rochelle  Railroad,  which  resulted in a decrease of  operating  income of
$20,000 in the quarter  compared to the same period last year. In addition,  the
Fort Smith Railroad had decreased  operating income in the third quarter 1999 of
$34,000  compared  to  the  same  period  last  year  resulting  from  increased
maintenance of equipment expense and costs associated with using  non-affiliated
railcars for customer loadings.  The Mississippi Central had decreased operating
income of $32,000 in the third  quarter  1999  compared  to the same period last
year resulting from a decrease in loadings from the lines primary customer.  The
Company  is  exploring  ways to  increase  traffic  on the  MSCI  and  does  not
anticipate  a further  decrease in shipping  levels.  In  addition,  the Alabama
Railroad had a decrease in operating income of $97,000 in the third quarter 1999
compared to the same period  last year.  This  decrease  resulted  from  several
factors,  including a reduction  in plywood  shipments,  a reduction of contract
services for track work in the third quarter 1999 that generated  $30,000 in the
same  period  last year and an  increase  in  maintenance  of way  expense.  The
equipment leasing operations increased operating income by approximately $45,000
in the period,  primarily  from  increased  utilization  of its railcar fleet by
non-affiliated   railroads  and  increased  income  from  locomotive  leases  to
non-affiliated  entities.  Corporate  operations  decreased  operating income by
approximately $66,000 in the period.
<PAGE>


Revenue:

Revenue increased in the third quarter 1999 by $106,000 or 3% to $3,587,000 from
$3,481,000 in the same period last year.  The railroad  operations had increased
revenue of approximately  $34,000 in the third quarter 1999 compared to the same
period last year.  Significant  increases  in revenue in the third  quarter 1999
from the railroad  operations included a $158,000 revenue increase by the Keokuk
Junction  Railway,  a $78,000 revenue  increase by the Alabama & Florida Railway
and  $258,000  of  revenue   generated  by  The  Garden  City  Western  Railway.
Significant  decreases in revenue from the railroad  operations include $253,000
from the Minnesota Central  Railroad,  which was sold in the second quarter 1999
and a $78,000 decrease in revenue resulting from the termination of the Rochelle
Railroad  lease which ceased  operations on November 13, 1998. In addition,  the
Mississippi  Central  Railroad had a decrease in revenue of $29,000 in the third
quarter 1999 compared to the same period last year and the Alabama  Railroad had
a decrease  in revenue of  $78,000  in the third  quarter  compared  to the same
period last year. The equipment  leasing  operations  had a $74,000  increase in
revenue in the period  resulting from  increased  utilization of its railcars by
non-affiliated   railroads  and  increased  income  from  locomotive  leases  to
non-affiliated entities.

Operating Expense:

Operating  expense  decreased in the third quarter 1999 by $16,000 to $2,831,000
from  $2,847,000  in the prior  year.  The  railroad  operations  had  decreased
operating expense of approximately  $112,000 in the third quarter 1999, of which
a decrease of $317,000 was  attributable  to the sale of the  Minnesota  Central
Railroad stock,  and $58,000 was attributable to the termination of the Rochelle
Railroad  lease.  In addition,  the Fort Smith Railroad had increased  operating
expense in the third  quarter  1999 of $32,000  compared to the same period last
year  resulting  from  increased  maintenance  of  equipment  expense  and costs
associated with using non-affiliated  railcars for customer loadings. The Keokuk
Junction Railway had increased  operating expense of $57,000,  primarily related
to increased operating costs resulting from increased loadings,  and the Alabama
& Florida Railway had increased  operating  expense of $63,000 primarily related
to capitalized labor in the third quarter 1998 and increased  operating costs in
the third  quarter  1999  resulting  from  increased  loadings.  The Garden City
Western  Railway  had  operating  expense of  $102,000.  The  equipment  leasing
operations increased operating expense approximately $29,000.  Corporate support
services increased operating expense  approximately $66,000 primarily related to
professional  services,  and  public  relation  expenditures,  increased  health
insurance costs and payroll related expenditures.

Maintenance of way and structures  expense (MOW)  increased in the third quarter
$129,000 or 51% to $384,000 from $255,000 in the same period last year, most all
of which is related to the railroad operations.  The Garden City Western Railway
increased MOW $29,000 in the third quarter 1999.

Maintenance  of equipment  expense  (MOE)  decreased  in the third  quarter 1999
$23,000,  or 6% to $368,000  from  $391,000  in the same  period last year.  The
railroad operations had an decrease in MOE of approximately  $40,000. The Garden
City Western Railway had $12,000 of MOE expense in the quarter.  The sale of the
MCTA  resulted in a decrease of $23,000 in the quarter.  The  equipment  leasing
operations  increased  MOE  expense  $11,000  as a  result  of  increased  costs
associated with maintaining the Company's  railcar fleet.  Corporate  operations
had a  increase  in MOE of  approximately  $6,000  primarily  related to reduced
payroll expenses.

Transportation  expense (TRAN) decreased in the third quarter 1999 $169,000,  or
19% to  $742,000  from  $911,000  in the  same  period  last  year.  Most of the
decreased TRAN was generated by the railroad operations, primarily from the sale
of the  Minnesota  Central  Railroad  which  decreased  TRAN by $223,000 and the
Rochelle  Railroad  which  decreased  TRAN $28,000.  The Fort Smith Railroad had
increased TRAN in the third quarter 1999 of $38,000 related to costs  associated
with using  non-affiliated  railcars for  customer  loadings.  In addition,  the
Keokuk  Junction  had  increased  TRAN of  $66,000  in the  third  quarter  1999
primarily  resulting from increased  operating costs due to increased  loadings.
The Garden City Western  Railway had $17,000 of TRAN in the  quarter.  Corporate
operations did not significantly affect TRAN expense in the quarter.
<PAGE>


General & administration  expense (ADMIN)  increased $7,000 in the third quarter
1999 to $902,000 from $895,000,  in the prior year. The railroad operations were
responsible  for  approximately  a  $67,000  decrease  in  ADMIN  in the  period
primarily from the sale of the Minnesota  Central Railroad which decreased ADMIN
$28,000 and the Rochelle Railroad which decreased ADMIN $25,000. The Garden City
Western  Railway  had  $16,000  of ADMIN in the  quarter.  Corporate  operations
increased ADMIN by approximately  $63,000 in the period.  The equipment  leasing
operations  increased ADMIN approximately $9,000 as a result of expenses related
to repositioning the Company's railcar fleet.

Depreciation  and  amortization  expense  increased  in the third  quarter  1999
$39,000,  or 10%, to $435,000 compared to $396,000 in the same period last year.
The railroad operations had increased  depreciation and amortization  expense of
$26,000.  Approximately $30,000 of the railroad operation increase is related to
depreciation  expense of assets  associated  with the  purchase of the  Michigan
Southern  Railroad stock on January 1, 1999. The Garden City Western Railway had
depreciation and amortization expense of $27,000 in the quarter. The Sale of the
Minnesota Central decreased depreciation and amortization expense $31,000 in the
quarter.  The  equipment  leasing  operations  had  increased  depreciation  and
amortization  expense of $11,000 in the quarter  resulting from increases to the
railcar and locomotive fleet.

Other Income and Expense Income Statement Line Item Discussion:

In the third quarter 1999 other income  increased  $6,000 to $57,000 compared to
$51,000  in the same  period  last  year.  The  increase  relates  primarily  to
additional lease income for the use of railroad property.  The Company continues
to place a strong  emphasis on identifying  and  collecting  revenues from third
parties occupying Company  property.  In addition to lease income,  other income
and  expense   includes   revenues   generated  from  scrap  sales,   and  other
miscellaneous  non-operating  revenues and expenses,  primarily generated by the
company's railroad operations.

Interest  expense related to equipment  financing  decreased $5,000 in the third
quarter 1999 to $166,000 compared to $171,000 in the same period last year. This
decrease is the result of refinancing  activities  associated with the equipment
leasing  operations,  offset by additional  interest  expense in 1999 related to
financing  transactions  for  additional  equipment  purchased  in  1999.  Other
interest  expense  increased  $57,000 in the third quarter 1999 to $194,000 from
$137,000 in the same period last year.  A majority of this  increase  relates to
the financing of the purchase of the Michigan Southern Railroad stock on January
1, 1999 for the amount of $2,400,000 and the purchase of The Garden City Western
Railway Inc. stock on May 1, 1999 for the amount of $1,500,000.

Net gain on fixed  asset  dispositions  decreased  approximately  $11,000 in the
third  quarter  1999 to less than $1,000  compared to $12,000 in the same period
last year.  The net gain on fixed asset  dispositions  in both periods  resulted
from insignificant sales of miscellaneous vehicles and equipment.

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

The Company's net income for the first nine months 1999 was $279,918 compared to
net income of $645,303  in the same period last year,  a decrease of $365,385 or
57%.  Net Income was  affected by a one-time  charge in the second  quarter 1999
relating  to the  sale of the  Minnesota  Central  Railroad  Co.  stock  and the
write-off of the net assets of the MCTA in the amount of $566,000 before tax and
$342,000  after tax.  Revenue  increased by $155,000 or 1% to  $10,523,000  from
$10368,000 in the same period last year. Operating expense increased by $110,000
or 1%, to $8,569,000  from  $8,459,000  in the same period last year.  Operating
income  increased by $46,000,  or 2% to $1,954,000  from  $1,908,000 in the same
period last year.
<PAGE>


Operating  income was  increased in the first nine months 1999 by the  Company's
railroad operations by approximately $192,000 in the period.  Railroad operating
income was  positively  affected  in the first  nine  months  1999 by  increased
operating  income from the Keokuk Junction Railway of $309,000 in the first nine
months 1999 compared to the same period last year. In addition, operating income
generated  by The Garden City  Western  Railway  Inc.  which the  Company  began
operating May 1, 1999 was $194,000.  The Minnesota Central  Railroad,  which the
Company sold in the second quarter 1999,  increased operating income $116,000 in
the first nine months  1999.  The  Alabama & Florida  Railway  operating  income
increased  by  approximately  $114,000 in the first nine months  1999.  Railroad
operating  income was adversely  affected by the loss of the Rochelle  Railroad.
operations,  which resulted in a decrease of operating income of $227,000 in the
first nine months 1999 compared to the same period last year.  In addition,  the
Fort Smith Railroad had decreased  operating income of $96,000 in the first nine
months  1999  compared to the same period  last year  resulting  from  increased
maintenance of equipment expenses and costs associated with using non-affiliated
railcars for customer  loadings.  The Michigan  Southern  Railroad had decreased
operating  income of  $105,000  in the first  nine  months  1999.  The  Michigan
Southern  decrease was caused by decreased  revenues  from one of the  railroads
primary shippers resulting from a tariff increase issued by Conrail prior to its
breakup  which made the rail move  non-competitive.  The Company is working with
the new connecting  carrier,  the NS, to reduce the rates to a more  competitive
level.  In  addition,  in the first nine months 1999 the MSO had a reduction  in
contract  service income  generated from road crossing  flagging  projects,  had
increased signal  maintenance  expenses,  and had increased carhire expense.  In
addition, the MSO revenue has been negatively affected by extremely poor service
from the NS resulting from the Conrail breakup. The equipment leasing operations
decreased  operating  income by  approximately  $18,000 in the first nine months
1999,  primarily  from costs  associated  with  relocating  part of the fleet to
enhance future  revenues.  In addition,  corporate  support  services  decreased
operating income by approximately $128,000 in the first nine months 1999.

Revenue:

Revenue increased in the first nine months 1999 by $155,000 or 1% to $10,523,000
from $10,368,000 in the same period last year. The railroad operations increased
revenue by  approximately  $144,000  in the  period.  Significant  increases  in
revenue in the first nine months 1999  included a $358,000  revenue  increase by
the Keokuk Junction Railway and $360,000 of revenue generated by The Garden City
Western  Railway.  In addition,  the Alabama & Florida had increased  revenue of
$192,000 in the first nine months 1999. Some of the more  significant  decreases
in revenue include a $415,000 decrease in revenue resulting from the termination
of the Rochelle Railroad lease which ceased operations on November 13, 1998, and
a $82,000  decrease in revenue from the  Michigan  Southern  Railroad  caused by
decreased  revenues from one of the railroads primary shippers  resulting from a
tariff increase issued by Conrail prior to its break-up which made the rail move
non-competitive. The Company is working with the new connecting carrier, the NS,
to reduce the rates to a more competitive level. Michigan Southern revenues were
also  reduced by a reduction  in contract  service  income  generated  from road
crossing  flagging  projects.  In addition,  the MSO revenue has been negatively
affected  by  extremely  poor  service  from the NS  resulting  from the Conrail
breakup.  The Minnesota Central Railroad reduced revenues by $233,000 during the
first nine months 1999. Due to decreased loadings the Mississippi  Central had a
reduction of revenues of $47,000 in the period,  and the Vandalia Railroad had a
reduction in revenues of $79,000 in the period. The equipment leasing operations
had a $8,000 decrease in revenue in the period.

Operating Expense:

Operating  expense increased in the first nine months 1999 by $110,000 or 1%, to
$8,569,000 from $8,459,000 in the prior year. The railroad operations  decreased
operating  expense by  approximately  $47,000 in the first nine months 1999. The
Fort Smith  Railroad had  increased  operating  expense in the first nine months
1999 of $131,000  compared to the same period last year resulting from increased
maintenance of equipment expense and costs associated with using  non-affiliated
railcars  for  customer  loadings.  The Garden City  Western  Railway  Inc.  had
operating expense of $166,000.  Operating expense was decreased  $349,000 by the
Minnesota  Central  Railroad  and also  decreased  $188,000  resulting  from the
termination of the Rochelle  Railroad  lease.  The Alabama & Florida Railway had
increased operating expense of $78,000 primarily related to capitalized labor in
the  first  nine  months  1998 and  increased  operating  costs  resulting  from
increased loadings. The equipment leasing operations increased operating expense
approximately  $12,000.  Corporate support services increased  operating expense
approximately  $145,000,  primarily related to professional services, and public
relation  expenditures,  increased  health  insurance  costs and payroll related
expenditures.
<PAGE>


Maintenance  of way and  structures  expense  (MOW)  increased in the first nine
months 1999 $139,000 or 2% to  $1,103,000  from $964,000 in the same period last
year, most all of which is related to the railroad  operations.  The Garden City
Western Railway increased MOW $44,000 in period.  MOW was decreased $35,000 as a
result of the sale of the Minnesota  Central.  Most of the remaining increase in
MOW resulted from the Alabama & Florida Railway, Alabama Railroad and the Keokuk
Junction Railway related to capitalized labor in 1998 and increased  maintenance
to track.

Maintenance of equipment  expense (MOE)  decreased in the first nine months 1999
$84,000,  or 7% to  $1,126,000  from  $1,210,000  in the same  period last year.
Approximately a $47,000 decrease is related to the equipment leasing  operations
resulting from decreased costs associated with maintaining the Company's railcar
fleet. The railroad operations had an decrease in MOE of approximately  $31,000.
The Garden City Western Railway had $17,000 of MOE in the first nine months 1999
and the Fort Smith  Railroad  had an  increase  in MOE of $29,000 in the period,
primarily  related to increased car repair supplies.  The MCTA had a decrease in
MOE of $38,000 in the first nine months  1999 and the  Michigan  Southern  had a
decrease  in MOE of  $57,000  in the first  nine  months  1999  relating  to the
termination of equipment  leases in effect prior to the purchase of the railroad
by the  Company.  Corporate  operations  had a decrease in MOE of  approximately
$6,000 primarily related to reduced payroll expenses.

Transportation  expense (TRAN)  decreased in the first nine months 1999 $89,000,
or 4% to $2,355,000  from  $2,444,000 in the same period last year.  Most of the
increase  in TRAN was  generated  by the  railroad  operations.  The Fort  Smith
Railroad had increased TRAN in the first nine months 1999 of $103,000 associated
with using  non-affiliated  railcars  for  customer  loadings.  The Garden  City
Western  Railway  had  $22,000  of TRAN in the  period.  The  Minnesota  Central
Railroad had a decrease of $161,000 in TRAN and TRAN was decreased by $86,000 as
a result of the  termination  of the  Rochelle  Railroad  lease.  The  equipment
leasing  operations  decreased  TRAN by  $11,000  in the  period  and  Corporate
operations  increased  TRAN  approximately  $32,000  primarily  due to increased
payroll expenses.

General &  administration  expense (ADMIN)  increased  $15,000 in the first nine
months 1999 to  $2,674,000  from  $2,659,000,  in the prior year.  The  railroad
operations were  responsible for  approximately a $140,000  decrease in ADMIN in
the period primarily from the Minnesota Central Railroad which had a decrease of
$65,000 and the Rochelle  Railroad  which had a decrease of $79,000.  The Garden
City Western  Railway had $36,000 of ADMIN in the period.  Corporate  operations
increased ADMIN by approximately  $115,000 in the period,  primarily  related to
professional  services,  and  public  relation  expenditures,  increased  health
insurance  costs  and  payroll  related  expenditures.   The  equipment  leasing
operations increased ADMIN approximately $40,000 as a result of expenses related
to repositioning the Company's railcar fleet.

Depreciation  and amortization  expense  increased in the first nine months 1999
$128,000,  or 11%, to $1,311,000  compared to $1,183,000 in the same period last
year.  The railroad  operations  had  increased  depreciation  and  amortization
expense of $94,000. Approximately $100,000 of the railroad operation increase is
related to  depreciation  expense of assets  associated with the purchase of the
Michigan  Southern  Railroad  stock on January 1, 1999.  The Garden City Western
Railway had depreciation and amortization  expense of $46,000 in the period. The
Sale of the Minnesota  Central decreased  depreciation and amortization  expense
$50,000  in  the  period.   The  equipment  leasing   operations  had  increased
depreciation  and  amortization  expense of $30,000 in the period resulting from
increases to the railcar and locomotive fleet.

Other Income and Expense Income Statement Line Item Discussion:

In the first  nine  months  1999 other  income  increased  $99,000  to  $255,000
compared  to  $156,000  in the same  period  last  year.  The  increase  relates
primarily  to  additional  lease  income for the use of railroad  property.  The
Company  continues  to place a strong  emphasis on  identifying  and  collecting
revenues from third parties  occupying  Company  property.  In addition to lease
income,  other income and expense includes revenues  generated from scrap sales,
and other miscellaneous non-operating revenues and expenses, primarily generated
by the company's railroad operations.

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


Interest expense related to equipment  financing  decreased $77,000 in the first
nine months 1999 to $493,000  compared to $570,000 in the same period last year.
A majority of this decrease is the result of refinancing  activities  associated
with the equipment leasing operations. Other interest expense increased $171,000
in the first nine months 1999 to $565,000  from $394,000 in the same period last
year. A majority of this  increase  relates to the  financing of the purchase of
the  Michigan  Southern  Railroad  stock on  January  1, 1999 for the  amount of
$2,400,000 and the purchase of The Garden City Western Railway Inc. stock on May
1, 1999 for the amount of $1,500,000.

Net gain on fixed  asset  dispositions  decreased  approximately  $63,000 in the
first nine  months  1999 to $1,000  compared  to $64,000 in the same period last
year.  The net gain on fixed  asset  dispositions  in the first nine months 1999
resulted from insignificant sales of miscellaneous  vehicles and equipment.  Net
gain on fixed  asset  dispositions  during the first nine months 1998 of $64,000
included a gain of $90,000 from the sale or  disposition  of railcars and a loss
of  $28,000   resulting  from  the  sale  of  the  Company's   former  corporate
headquarters building in Chillicothe, Illinois.

Impact of New Accounting Pronouncements:

The Company is not aware of any recent accounting  standard issued,  but not yet
required to be adopted by the Company,  that would have a material effect on its
financial position or results of operations.

Year 2000 Compliance:

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

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

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

The Company has expended  approximately $50,000 to date on its resolution of the
Year 2000 compliance issue and estimates that less than $10,000 will be expended
to complete Year 2000 compliance.

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

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

Liquidity and Capital Resources:

The Company  primarily  uses cash  generated  from  operations  to fund  working
capital  needs and relies on long-term  financing  for  railcars,  new operating
subsidiaries,  and other  significant  capital  expenditures.  The  Company  has
working  capital  facilities  totaling  $1,200,000  all of which  $1,100,000 was
available for use at September 30, 1999.
<PAGE>


In March 1996,  the Company  negotiated a credit  facility  with Citizens Bank &
Trust located in  Chillicothe,  MO., to provide a $2.5 million annual  revolving
acquisition line of credit. This facility was collateralized by the common stock
of the Alabama Railroad Co. and the Mississippi Central Railroad Co., as well as
the Company's  investment in stock of any subsidiaries  acquired under the line.
The interest rate was adjustable  quarterly to 2.5% over New York Prime, limited
to a one percent annual increase or decrease,  not to exceed 13.5% or be reduced
below 10%. Any amounts drawn on the line were to be repaid  monthly over a seven
year period.  On January 1, 1999, the Company  borrowed $2.4 million on the line
in connection with its purchase of the stock of the Michigan Southern  Railroad.
This credit facility was replaced with a credit facility with National City Bank
of  Michigan/Illinois  and the $2.4  million  advanced  for the  purchase of the
Michigan  Southern  Railroad stock was financed on a separate note with National
City Bank of Michigan/Illinois on May 21, 1999.

The Company,  on June 18, 1999,  entered into a credit  agreement  with National
City Bank of  Michigan/Illinois  to provide a $5 million  revolving  acquisition
line of credit for railroad  acquisitions  at a variable  interest rate of prime
plus 1%, renewable every 2 years. Amounts drawn on the line are amortized over a
10 year period. This credit line is secured by all non real estate assets of the
Mississippi  Central  Railroad  Co.,  the Alabama  Railroad  Co. and any company
acquired using proceeds from the credit line. This credit facility  replaced the
Citizens  Bank & Trust  credit  line.  The  Company has used $1.5 of this credit
facility to finance the purchase of The Garden City Western Railway, Inc. common
stock,  leaving  $3.5 million  available  for future  acquisitions.  The monthly
principal and interest payment currently required to be repaid is $18,800.

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

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

Long-term  equipment  financing has historically  been readily  available to the
Company for its railcar  acquisition  program.  The Company  believes it will be
able to continue obtaining  long-term equipment financing should the need arise.
The Company's  plans for new debt in the  foreseeable  future is contingent upon
new railroad acquisitions and increased needs and/or opportunities for railcars.

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

Pioneer Railcorp  guaranteed certain long-term debt obligations of the Minnesota
Central  Railroad  Co. in  connection  with the  initial  asset  purchase by the
Minnesota Central Railroad Co. in 1994.  Pioneer Railcorp remains on one note as
a guarantor and could be required to repay the principal and accrued interest of
the  note if it is  defaulted  upon.  The  principal  balance  of the note as of
September 30, 1999 was approximately $80,000.

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

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


Balance Sheet and Cash Flow Items:

The Company  generated net cash from  operating  activities of $2,070,000 in the
first nine months 1999 compared to $2,011,676 in the same period last year.  Net
cash from operating activities for the first nine months 1999 was generated from
$280,000 of net income, $1,311,000 of depreciation and amortization, an increase
in income tax payable of $333,000,  an increase of net cash  provided by changes
in various other  operating  assets and  liabilities of $310,000,  and a noncash
write off of approximately  $566,000 related to the Company's  investment in the
net assets of the Minnesota  Central Railroad at the date of sale. Net cash from
operating  activities  was  reduced by an increase  in  accounts  receivable  of
$506,000,  and  a  decrease  in  deferred  taxes  of  $224,000  related  to  the
disposition of the Minnesota Central Railroad

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

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

In the first nine months 1999, the Company purchased approximately $1,500,000 of
fixed assets and capital improvements,  including 170 railcars costing $828,650.
The  railcars  were  financed  with long term  fixed rate  debt.  Other  capital
expenditures  include  $84,000 for track,  $12,000 for  leasehold  improvements,
$110,000 for two  locomotives,  $108,000  for various  vehicles,  equipment  and
structures,  with the  remaining  $357,350  related  to railcar  and  locomotive
betterments.

PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

In the course of business, the Company experiences crossing accidents,  employee
injuries,  delinquent and/or disputed accounts, and other incidents,  which give
rise to claims  that may result in  litigation.  Management  vigorously  pursues
settlement and release of such claims, but at any one time, some such incidents,
which could  result in lawsuits by and against the Company,  remain  unresolved.
Management believes it has valid claims for, or good defenses to, these actions.
Management considers such claims to be a routine part of the Company's business.

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

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

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

No matters  were  submitted to a vote of security  holders in the third  quarter
1999.
<PAGE>


Item 5.   OTHER INFORMATION

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

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

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

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

Pioneer  Railcorp's  Board of Directors  authorized  the repurchase of up to one
million shares  (1,000,0000) of the Company's  common stock. The repurchase will
coincide with the planned sale of certain  non-essential  assets  expected to be
completed within the next six months.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

Exhibit # 27 - Financial data schedule.

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

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

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

(3) Form 8-K filed September 23, 1999 regarding common stock repurchase.

<PAGE>




                                   SIGNATURES


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


PIONEER RAILCORP
(Registrant)


      11/08/99                         /s/ Guy L. Brenkman
      --------                         -----------------------------------------
        DATE                           GUY L. BRENKMAN
                                        PRESIDENT & CEO




      11/08/99                         /s/ J. Michael Carr
      --------                         -----------------------------------------
        DATE                           J. MICHAEL CARR
                                        TREASURER & CHIEF
                                        FINANCIAL OFFICER