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 March 31, 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
March 31, 2000.


<PAGE>


Part I.  FINANCIAL INFORMATION

PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================================

                                                                                                 (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY                                                           March 31, 2000      December 31, 1999
====================================================================================================================================
<S>                                                <C>                                            <C>                  <C>
CURRENT LIABILITIES
     Accrued liabilities, to related parties (Note 2)                                             $ 11,656             $     --

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                                                                           (56,187)             (44,531)
------------------------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity (deficiency)                                                    11,656)                  --
------------------------------------------------------------------------------------------------------------------------------------

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


            See notes to condensed financial statements - unaudited.

                                       1

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
====================================================================================================================================

                                                                                                      Three Months Ended
                                                                                                           March 31
                                                                                          ------------------------------------------
                                                                                              2000                         1999
====================================================================================================================================
<S>                                                                                       <C>                          <C>
REVENUE                                                                                   $         --                 $         --

OPERATING EXPENSES
     General and administrative                                                                 11,656                        1,200
------------------------------------------------------------------------------------------------------------------------------------

NET LOSS                                                                                  ($    11,656)                ($     1,200)
====================================================================================================================================

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

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


            See notes to condensed financial statements - unaudited.

                                       1

<PAGE>

PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                            2000             1999
====================================================================================================================================
<S>                                                                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                                              ($11,656)        ($ 1,200)
    Adjustment to reconcile net loss to net cash used in operating activities:
       Increase in accounts payable and accrued expenses                                                   (11,656)          (1,116
------------------------------------------------------------------------------------------------------------------------------------
          Net cash used in operating activities, representing the net decrease
              in cash and cash equivalents for the period                                                       --              (84)

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

CASH AND CASH EQUIVALENTS - END OF PERIOD                                                                 $     --         $  1,041
====================================================================================================================================
</TABLE>


            See notes to condensed financial statements - unaudited.

                                        3

<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 quarter ended March 31, 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
          expenses  on  behalf of the  Company  aggregating  $11,656,  including
          accounting and legal expenses.

================================================================================
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.

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<PAGE>

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 10,116,000  shares of  Peppermill's
Common Stock.  The final terms of such business  combination/merger  by way of a
formal  Acquisition  Agreement are currently  being  negotiated  and there is no
guarantee  such  transaction  will take  place.  Peppermill  will be required to
provide  notice to and seek the  consent  of its  shareholders  to any  business
combination/merger with Varner.

     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 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


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<PAGE>

     Upon the conclusion of any final business combination/merger transaction by
way of a formal Acquisition Agreement 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.  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 March 31,  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 Company'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 the
Company 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. 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 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



                                       3
<PAGE>

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

               None

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



                                       5
<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: May 19, 2000            PEPPERMILL CAPITAL CORPORATION


                                              By: /s/ Clayton W. Varner
                                                 -------------------------------
                                                    Clayton W. Varner, President

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