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, 2000

                          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,
2000.

<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 is
awaiting  comments from the SEC pending the  effectiveness of said  Registration
Statement. Notwithstanding the execution of the formal Acquisition Agreement and
the filing of the Registration Statement on Form S-4, there is no guarantee that
any business combination or merger transaction will take place. Peppermill shall
provide  notice  to and  shall  seek  the  consent  of its  shareholders  to the
contemplated business  combination/merger  with Varner upon the effectiveness of
the S-4 Registration Statement.

Peppermill was engaged in the exploration and development of mineral properties.
Peppermill  presently has a 100% interest in certain mineral claims known as the
Star Mineral Claims situated 12 miles north of the Village of Princeton, British
Columbia,  Canada.  The claims area totals  approximately 587 acres.  Peppermill
undertook  exploration  activities on these mineral  claims in February 1999, in
order to  maintain  the  claims in good  standing  with the Gold  Commission  of
British Columbia.

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.  It is
anticipated that after the merger,  management efforts will be focused primarily
on the business of Varner and that


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<PAGE>


at least for the  immediate  future  little or no effort will be made to develop
Peppermill's mining business further.

Plan of Operation

Peppermill has had no operations during this reporting period

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 and
the filing 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 no  liabilities as of June 30, 2000. 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.

Year 2000 Issue

The Year 2000 issue (i.e.  the ability of computer  systems to  recognize a date
using  "00" as the year  2000  rather  than  1900)  affects  all  companies  and
organizations. As a result of the Peppermill's Year 2000 efforts, no significant
internal  problems have occurred to date.  The Company has not  experienced  any
problems with suppliers,  vendors,  customers, or financial institutions.  There
were no significant expenditures related to Year 2000 compliance, and Peppermill
does not anticipate any further expenses associated with Year 2000.

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
Form S-4 registration  Statement,  as filed with the Commission on July 7, 2000.
The forward-looking


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<PAGE>


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 2000 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.

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.


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<PAGE>


Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               (i)  Registration Statement on Form S-4 and all Exhibits thereto,
                    as filed with the  Commission on July 7, 2000  (incorporated
                    by reference).

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

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


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<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 11, 2000                  PEPPERMILL CAPITAL CORPORATION


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


                                       6
<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999

<TABLE>
<CAPTION>
==========================================================================================================
                                                                     (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY                                June 30, 2000        December 31, 1999
==========================================================================================================
<S>                                                                    <C>                   <C>
CURRENT LIABILITIES
  Accrued liabilities, to related parties (Note 2)                     $ 12,221              $     --
----------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (DEFICIENCY)
  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                                                   (56,752)              (44,531)
----------------------------------------------------------------------------------------------------------
        Total stockholders' equity (deficiency)                         (12,221)                   --
----------------------------------------------------------------------------------------------------------

                                                                       $     --              $     --
==========================================================================================================
</TABLE>


            See notes to condensed financial statements - unaudited.

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999

<TABLE>
<CAPTION>
=================================================================================================================
                                                   Three Months Ended                     Six Months Ended
                                                         June 30                              June 30
                                            ---------------------------------------------------------------------
                                                2000               1999               2000               1999
=================================================================================================================
<S>                                        <C>                <C>                <C>                <C>
REVENUE                                     $         --       $         --       $         --       $         --

OPERATING EXPENSES
     General and administrative                      565             16,043             12,221             17,243
-----------------------------------------------------------------------------------------------------------------

NET LOSS                                   ($        565)     ($     16,043)     ($     12,221)     ($     17,243)
=================================================================================================================

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.

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
========================================================================================================================
                                                                                           Six Months Ended June 30
                                                                                       ---------------------------------
                                                                                          2000         1999
========================================================================================================================
<S>                                                                                    <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                             $ 12,221      ($17,243)
  Adjustment to reconcile net loss to net cash used in operating
    activities:
      Increase in accounts payable and accrued expenses                                  12,221        17,286
------------------------------------------------------------------------------------------------------------------------
        Net cash used in operating activities, representing the net
          decrease in cash and cash equivalents for the period                               --            43

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                              --         1,125
========================================================================================================================

CASH AND CASH EQUIVALENTS - END OF PERIOD                                               $    --       $ 1,168
========================================================================================================================
</TABLE>


            See notes to condensed financial statements - unaudited.

<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 generally
          accepted accounting  principles for interim financial  information and
          with the  instructions to Form 10-QSB and,  therefore,  do not include
          all information and footnotes necessary for a complete presentation of
          financial position, results of operations and cash flows in conformity
          with generally accepted accounting principles.

          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, 2000, are
          not necessarily indicative of the results that can be expected for the
          year ended December 31, 2000.

          The  preparation of financial  statements in accordance with generally
          accepted  accounting  principles 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.

          The  financial  data at  December  31,  1999 is derived  from  audited
          financial  statements  which are included in the Company's form 10-KSB
          and  should  be  read  in  conjunction  with  the  audited   financial
          statements and the notes thereto.


================================================================================
NOTE 2.   RELATED PARTY TRANSACTIONS
================================================================================

          Varner  Technologies,  Inc.  (90% owner of the  Company)  paid certain
          legal and  accounting  expenses on behalf of the  Company  aggregating
          $565 and  $12,221 for the three and six month  periods  ended June 30,
          2000, respectively.


================================================================================
NOTE 3.   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 4.   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.