FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2001

                          Commission File No. 000-25989


                         PEPPERMILL CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)


            Nevada                                              98-0186841
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)


1819 Clarkson Road, Suite 204, Chesterfield, Missouri             63017
  (Address of principal executive offices)                      (Zip Code)


                                 (636) 530-4532
              (Registrant's telephone number, including area code)

     Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     COMMON STOCK, $.001 par value, 11,239,700 shares outstanding as of June 30,
2001.



<PAGE>


Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operation

General

Peppermill Capital Corporation, a Nevada corporation,  was incorporated on April
9,  1998.  Peppermill  has  no  subsidiaries.   On  November  22,  1999,  Varner
Technologies,  Inc.  ("Varner")  completed the purchase of 10,116,000  shares of
Peppermill Common Stock from several  Peppermill  shareholders.  On November 19,
1999, Peppermill entered into a Letter of Intent with Varner Technologies,  Inc.
("Varner"),  relating  to the  merger of Varner  into  Peppermill.  Varner is an
Internet service  provider,  and is further engaged in the marketing and sale of
long  distance   telephone   services,   prepaid   telephone   cards  and  other
telecommunications   products  and   services  via  a  network  of   independent
distributors,  pursuant  to a  multilevel  marketing  plan,  in 49 states of the
United States.

The  purchase of the shares of  Peppermill's  Common Stock by Varner was made in
contemplation  of a  business  combination/merger  transaction  between  the two
entities,  whereby it is expected  that all  outstanding  voting and  non-voting
Common  Stock of Varner  will be  exchanged  for shares of  Peppermill's  Common
Stock. The final terms of this business combination/merger have been negotiated,
and are contained in a formal Acquisition Agreement,  which was executed on June
2, 2000. In connection therewith,  Peppermill filed a Registration  Statement on
Form S-4 with the Securities and Exchange  Commission on July 7, 2000, and after
revising  the  content  and  disclosures  made  in said  Registration  Statement
pursuant to comments received from the U.S. Securities and Exchange  Commission,
the effectiveness of said Registration  Statement was achieved on July 16, 2001.
Notwithstanding the execution of the formal Acquisition Agreement and the filing
of the Registration Statement on Form S-4 (and all amendments thereto), there is
no  guarantee  that any business  combination  or merger  transaction  will take
place. Peppermill provided notice to its shareholders regarding the contemplated
business  combination/merger  with  Varner on July 26,  2001,  and is  presently
soliciting written approval of its shareholders regarding the same.

Peppermill  originally  planned to explore and develop mineral rights to certain
mineral claims in the Princeton  area of British  Columbia,  Canada.  Peppermill
currently has no planned  operations or assets. It is anticipated that after the
merger,  management  efforts will be focused primarily on the business of Varner
and no effort will be made to develop Peppermill's mining business.

Peppermill  has no revenue to date from its operations and its ability to effect
its plans for the future will depend on the availability of financing.

Plan of Operation

Peppermill has had no operations during this reporting period.

                                       2

<PAGE>


Upon the conclusion of any final business combination/merger transaction between
Varner and  Peppermill,  Peppermill  anticipates  that the focus of its business
will shift from that of exploring and  developing  its mineral claims to that of
Varner,  namely,  providing  Internet  Service and engaging in the marketing and
sale of long distance  telephone  services,  prepaid  telephone  cards and other
telecommunications   products  and   services  via  a  network  of   independent
distributors,  pursuant to a  multi-level  marketing  plan,  in 49 states of the
United States.  Notwithstanding the execution of the Acquisition  Agreement,  or
the filing and effectiveness of the Registration Statement on Form S-4, there is
no guarantee that such business combination/merger transaction will take place.

Liquidity and Capital Resources

Peppermill  had no assets and accrued  liabilities  of $62,493.00 as of June 30,
2001. If Peppermill is unable to raise  additional  capital,  or if the business
combination/merger  transaction  with Varner does not take place, it will not be
able to engage in any future operations. No financing has been arranged.

Safe Harbor  Provision  of the  Private  Securities  Litigation  Act of 1995 and
Forward Looking Statements

The statements contained in this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts may
be forward-looking  statements (as such term is defined in the rules promulgated
pursuant to the  Securities  Exchange Act of 1934) that are subject to a variety
of risks and uncertainties more fully described in Peppermill's filings with the
Securities  and  Exchange  Commission  including,   without  limitation,   those
described under "Risk Factors" in Peppermill's Form 10-SB Registration Statement
(File No. 000-25989)  effective May 6, 1999, and those described in Peppermill's
Post-Effective Amendment No. 1 to Form S-4 Registration Statement, as filed with
the Commission on July 11, 2001. The forward-looking statements are based on the
beliefs  of  Peppermill's  management,  as  well as  assumptions  made  by,  and
information currently available to Peppermill's management.  Accordingly,  these
statements are subject to significant  risks,  uncertainties  and  contingencies
which could cause Peppermill's actual growth, results,  performance and business
prospects and  opportunities in 2001 and beyond to differ  materially from those
expressed  in, or implied  by,  any such  forward-looking  statements.  Wherever
possible,  words such as "anticipate," "plan," "expect," "believe,"  "estimate,"
and  similar  expressions  have  been  used to  identify  these  forward-looking
statements,  but are not the exclusive  means of  identifying  such  statements.
These risks  include the chance that the merger with Varner  Technologies,  Inc.
may not occur or may occur on terms different than anticipated.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

        Not applicable.


<PAGE>


Item 2. Changes in Securities and Use of Proceeds

        Not applicable.

Item 3. Defaults Upon Senior Securities

        Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

        Not applicable.

Item 5. Other Information

        Not applicable.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

          (i)  Post-Effective  Amendment No. 1 to Registration Statement on Form
               S-4 and all Exhibits  thereto,  as filed with the  Commission  on
               July 11, 2001 (incorporated by reference).

          (ii) Acquisition  Agreement  dated  June 2,  2000,  as filed  with the
               Commission  as an Exhibit to the Company's  initial  Registration
               Statement  on  Form  S-4  on  July  7,  2000   (incorporated   by
               reference).

     (b)  The Company has not filed a Current Report during the quarter  covered
          by this report.

                                       4

<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.


Dated: August 10, 2001             PEPPERMILL CAPITAL CORPORATION


                                   By: /s/ Clayton W. Varner
                                       -----------------------------------------
                                       Clayton W. Varner, President and
                                       Chief Financial Officer


                                       5


<PAGE>


                                                  PEPPERMILL CAPITAL CORPORATION
--------------------------------------------------------------------------------
                                                            FINANCIAL STATEMENTS
                                                                   JUNE 30, 2001






<PAGE>



PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
================================================================================
                                                       (Unaudited)    December
LIABILITIES AND STOCKHOLDERS' EQUITY                  June 30, 2001   31, 2000
================================================================================

CURRENT LIABILITIES
   Accrued liabilities, to related parties (Note 2)       $  62,493    $ 38,416
--------------------------------------------------------------------------------

DEFICIENCY IN ASSETS
   Common stock, 200,000,000 shares authorized, at
       $0.001 par value; 11,239,700 shares issued
       and outstanding                                       11,240      11,240
   Additional paid-in capital                                33,291      33,291
   Accumulated deficit                                     (107,024)    (82,947)
--------------------------------------------------------------------------------
       Total deficiency in assets                           (62,493)    (38,416)
--------------------------------------------------------------------------------

                                                               $ --        $ --
================================================================================

            See notes to condensed financial statements - unaudited.

                                        4

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2001 AND 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               Three Months Ended               Six Months Ended
                                                     June 30                        June 30
                                         ------------------------------------------------------------
                                              2001            2000           2001            2000
-----------------------------------------------------------------------------------------------------
<S>                                      <C>             <C>             <C>             <C>
REVENUE                                   $        --     $        --     $        --     $        --

OPERATING EXPENSES
     General and administrative                18,082             565          24,077          12,221
-----------------------------------------------------------------------------------------------------

NET LOSS                                 ($    18,082)   ($       565)   ($    24,077)   ($    12,221)
=====================================================================================================

WEIGHTED AVERAGE NUMBER OF
     SHARES OUTSTANDING                    11,239,700      11,239,700      11,239,700      11,239,700
=====================================================================================================

NET LOSS PER SHARE - BASIC AND DILUTED    $        --     $        --     $        --     $        --
=====================================================================================================
</TABLE>

            See notes to condensed financial statements - unaudited.

                                       3

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2001 AND 2000

                                                                  Six Months
                                                                Ended June 30
                                                              ------------------
                                                                2001      2000
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                   $24,077   $12,221
    Adjustment to reconcile net loss to net cash
      used in operating activities:
      Increase in accounts payable and accrued expenses         24,077    12,221
--------------------------------------------------------------------------------
          Net cash used in operating activities,
            representing the net decrease in cash
            and cash equivalents for the period                     --        --

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                     --        --
--------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS - END OF PERIOD                      $    --   $    --
================================================================================


            See notes to condensed financial statements - unaudited.

                                       4


<PAGE>


PEPPERMILL CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION
--------------------------------------------------------------------------------

     Basis of Presentation

     The accompanying  (unaudited)  financial  statements of Peppermill  Capital
     Corporation  have been prepared in accordance  with  accounting  principles
     generally  accepted in the United States for interim financial  information
     and with the  instructions  to Form  10-QSB  for  quarterly  reports  under
     Section 13 or 15(d) of the  Securities  Exchange Act of 1934,  accordingly,
     they do not include all information and footnotes  necessary for a complete
     presentation of financial position, results of operations and cash flows in
     conformity  with  accounting  principles  generally  accepted in the United
     States.

     In the opinion of management,  all adjustments  considered  necessary for a
     fair presentation of the results of operations and financial  position have
     been included and all such  adjustments are of a normal  recurring  nature.
     Operations  for the  period  ended  June  30,  2001,  are  not  necessarily
     indicative of the results that can be expected for the year ended  December
     31, 2001.

     The financial  data at December 31, 2000 is derived from audited  financial
     statements  which are included in the Company's form 10-KSB which should be
     read in conjunction with these condensed financial statements.

     Use of Estimates

     The  preparation  of financial  statements  in accordance  with  accounting
     principles  generally accepted in the United States requires  management to
     make  estimates  and  assumptions  that affect the amounts  reported in the
     financial  statements and accompanying  notes.  Actual results could differ
     from these estimates.

--------------------------------------------------------------------------------
NOTE 2. BUSINESS COMBINATION/MERGER
--------------------------------------------------------------------------------

     On November 22, 2000, in a private transaction,  Varner Technologies,  Inc.
     (Varner)  purchased  approximately 90% of the Company's  outstanding common
     stock.  The  final  terms of this  business  combination/merger  have  been
     negotiated,  and are contained in a formal Acquisition Agreement, which was
     executed  on June 2,  2000.  This  merger is  contingent  upon and will not
     become effective until such time as the Company  completes the registration
     of the underlying  stock and obtains the consent of its  shareholders.  The
     effectiveness  of the  Registration  Statement  on Form S-4 was achieved on
     July  16,  2001  and  the  Company  expects  to  seek  the  consent  of its
     shareholders in the near future.

                                       5

<PAGE>

--------------------------------------------------------------------------------
NOTE 3. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

     Varner Technologies, Inc. (90% owner of the Company) paid certain legal and
     accounting  expenses  on  behalf of the  Company  aggregating  $18,082  and
     $24,077  for  the  three  and  six  month  periods  ended  June  30,  2001,
     respectively.

--------------------------------------------------------------------------------
NOTE 4. NET LOSS PER COMMON SHARE
--------------------------------------------------------------------------------

     Basic and diluted net loss per common  share was  computed by dividing  the
     net loss by the  weighted  number of shares  of  common  stock  outstanding
     during each period.

--------------------------------------------------------------------------------
NOTE 5. GOING CONCERN UNCERTAINTIES
--------------------------------------------------------------------------------

     The Company has sustained losses and negative cash flows from inception and
     has no working capital  available to fund any possible future  expenditures
     necessary to remain in business.  The Company  believes any future  capital
     requirements will be provided by the majority stockholder.

                                        6