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, 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 March
31, 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 is
currently  in the process of revising the content and  disclosures  made in said
Registration  Statement  pursuant to comments received from the U.S.  Securities
and  Exchange  Commission,  in  order  to  achieve  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 (and all
amendments  thereto),  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  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,  the
filing of the Registration  Statement on Form S-4 or the filing of any revisions
or amendments to said  Registration  Statement,  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 $44,411 as of March 31,
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
Fourth Amended Form S-4 Registration  Statement, as filed with the Commission on
May 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.

                                       3

<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)  Fourth  Amended  Registration  Statement  on  Form  S-4  and  all
               Exhibits  thereto,  as filed with the  Commission on May 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: May 14, 2001                     PEPPERMILL CAPITAL CORPORATION


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


<PAGE>


                                                  PEPPERMILL CAPITAL CORPORATION
--------------------------------------------------------------------------------

                                                            FINANCIAL STATEMENTS
                                                              THREE MONTHS ENDED

                                                                  MARCH 31, 2001







<PAGE>

PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
--------------------------------------------------------------------------------
                                                       (Unaudited)
                                                          March      December
LIABILITIES AND DEFICIENCY IN ASSETS                    31, 2001     31, 2000
--------------------------------------------------------------------------------
CURRENT LIABILITIES
     Accrued liabilities, to related parties (Note 2)   $ 44,411    $ 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                                 (88,942)    (82,947)
       Total deficiency in assets                        (44,411)    (38,416)
--------------------------------------------------------------------------------
                                                        $     --    $     --
================================================================================

            See notes to condensed financial statements - unaudited.

                                       2

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
--------------------------------------------------------------------------------
                                                        Three months ended
                                                              March
                                                       2001             2000
--------------------------------------------------------------------------------
REVENUE                                            $       --      $       --
OPERATING EXPENSES
     General and administrative                           5,995          11,656
--------------------------------------------------------------------------------
NET LOSS                                           ($     5,995)   ($    11,656)
================================================================================
WEIGHTED AVERAGE NUMBER OF
     SHARES OUTSTANDING                              11,239,700      11,239,700
================================================================================
NET LOSS PER SHARE - BASIC AND DILUTED             $       --      $       --
================================================================================

            See notes to condensed financial statements - unaudited.

                                       3

<PAGE>


PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
--------------------------------------------------------------------------------
                                                            Three months ended
                                                                  March
                                                             2001        2000
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                 ($5,995)   ($11,656)
  Adjustment to reconcile net loss to net cash
    used in operating activities:
    Increase in accounts payable and accrued expenses        5,995      11,656
--------------------------------------------------------------------------------
      Net cash provided by operating activities,
        representing the net increase in cash
        for the period                                        --          --
--------------------------------------------------------------------------------
CASH - BEGINNING OF PERIOD                                    --          --
--------------------------------------------------------------------------------
CASH - 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 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  March  31,  2001,  are not  necessarily
     indicative of the results that can be expected for the year ended  December
     31, 2001.

     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.

     The financial  data at December 31, 2000 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. 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.  In  connection  therewith,  the Company filed a
     fourth amended  Registration  Statement on Form S-4 with the Securities and
     Exchange  Commission  on May 11,  2001,  and is currently in the process of
     revising the content and disclosures  made in said  Registration  Statement
     pursuant  to  comments  received  from the SEC,  in  order to  achieve  the
     effectiveness of said Registration Statement.

                                       5

<PAGE>

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

     Varner Technologies,  Inc. (90% owner of the Company) paid certain expenses
     on behalf of the  Company  aggregating  $5,995 for the three  month  period
     ended March 31, 2001.

--------------------------------------------------------------------------------
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.