SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
                            ANNUAL REPORT PURSUANT TO
                      SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1999

Commission File Number
          0-25989

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

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

     1819 Clarkson Road, Suite 205
     Chesterfield, Missouri                                   63017
 (Address of principal executive offices)                  (Zip Code)

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

Securities registered pursuant to Sections 12(b) and 12(g) of the Act:

                                                      Name of each exchange
    Title of Class                                     on which registered:

    Common Stock, $.001 par value per share           NASD Bulletin Board

     Check whether the Registrant (1) 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 (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.
                  [x] Yes     [_] No

     Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated in Part III of the Form 10-KSB or any amendment to the Form 10-KSB.
[_]

     The Registrant's revenues for the fiscal year ended December 31, 1999, were
$0

     Based upon the average bid and asked price of $6.75 for the Registrant's
Common Stock as of March 25, 2000. The aggregate market value of the voting
stock held by non-affiliates of the Registrant was then approximately
$7,584,975. (Determination of stock ownership by non-affiliates was made solely
for the purpose of responding to the requirements of this Form 10-KSB and the
Registrant is not bound by this determination for any other purpose).

     The number of shares of the Registrant's Common Stock outstanding as of
March 25, 2000, was 11,239,700 (excluding treasury shares).

     Transitional Small Business Disclosure Format (check one): [_] Yes [x] No


<PAGE>


PART I

Item Nos. 1 and 2  Description of Business; Description of Property

     Information concerning all the factors associated with Peppermill is set
forth in this combined Item 1 and 2 below. FOR A COMPLETE UNDERSTANDING OF SUCH
FACTORS, THIS ENTIRE DOCUMENT, INCLUDING THE FINANCIAL STAEMENTS AND THEIR
ACCOMPANYING NOTES, SHOULD BE READ IN ITS ENTIRETY.

Background.

     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.

     Upon the purchase of Peppermill's Common Stock by Varner, the then current
officers and directors of Peppermill resigned, and Clayton W. Varner, President
and CEO of Varner, was elected sole director and President of Peppermill.

     Peppermill intends to change its corporate name and trading symbol upon the
conclusion of any business combination/merger transaction between Peppermill and
Varner.

     Peppermill's executive offices were located at 2500-1177 West Hastings
Street, Vancouver, B.C., Canada, V6E 2K3. Upon Varner's acquisition of the
controlling interest in the outstanding shares of Peppermill's Common Stock,
Peppermill's executive offices were moved to Varner's offices, located at 1819
Clarkson Road, Suite 205, Chesterfield, Missouri 63017.

     Peppermill was engaged in the exploration and development of mineral
properties. Peppermill presently has the mineral rights to certain mineral
claims located in the Princeton area of British Columbia, Canada and undertook
exploration activities on its mineral claims in February 1999 in order to
maintain the claims in good standing with the Gold Commission of British
Columbia and to adhere to the recommendations put forth in the June 16, 1998
geological report prepared by James W. McLeod, P. Geo. as more fully described
below.


                                       1
<PAGE>


     Peppermill has obtained quotation on the NASD OTC Bulletin Board, and its
common stock commenced trading under the symbol PEPM on November 25, 1999.

     Peppermill has no revenue to date from the development of its mineral
claims, 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.

     Peppermill has not been subject to bankruptcy, receivership or any similar
proceedings.

Description of the Mineral Claim

     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.

Exploration Activities

     Peppermill completed an exploration program on its mineral claims in
February 1999 that was undertaken by Mr. Edward Skoda, mining consultant. The
program, as performed and reported upon by Mr. Skoda comprised the following.

          "In preparation for a proposed geological and geophysical survey, as
     per the recommendations in the June 16, 1998 Geological Report by Mr. James
     W. McLeod, P. Geo., line cutting and grid establishment was commenced on
     February 4, 1999.

     The baseline was brushed out and stations were horizontally chained-in
every 100 meters. Chaining was completed using 10 meter intervals and flagged.
The baseline totals were 1,581 meters.

     The grid sampling lines were brushed out with stations horizontally
chained-in and flagged every 10 meters, for a total distance of 2,949 meters.

     To date the combined gridding for the baseline and gridline layout is 4,530
meters.

     On February 8, 1999, the above exploration work was filed with the Ministry
of Energy and Mines under a Statement of Work, Section 29, 30, 31 and 50 of the
Minerals Act. All 11 of


                                       2
<PAGE>


the Star Claims were therefore maintained in good standing. Six of the claims
expired on February 16, 2000 and five of the claims expire on June 22, 2000.

     Notwithstanding the foregoing, 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.

Other Mineral Properties

     Peppermill has not identified any other mineral properties either for
staking or purchasing. It is not contemplated that Peppermill will seek other
mineral properties in the near future in order to diversify its holdings into
other areas of interest and minerals. Peppermill has not as yet inaugurated any
steps toward the investigation of any mineral claims, and does not presently
have the financial capacity to do so and it is not anticipated that Peppermill
will commence its mining operations in the near future.

Employees

     As of March 30, 2000, Peppermill had one part-time employee, Clayton W.
Varner, its President. Peppermill is not a party to any employment contracts or
collective bargaining agreements. The British Columbia area has a relatively
large pool of people experienced in exploration and development of mineral
properties; being mainly geologists and mining consultants. In addition, there
is no lack of people who have experience in working on the mineral claim either
as laborers or prospectors.

Item No. 3 Legal Proceedings

     There are no legal proceedings to which Peppermill is a party or to which
its property is subject, nor to the best of management's knowledge are any
material legal proceedings contemplated.

Item No. 4 Submission of Matters to a Vote of Security Holders

                     Not Applicable


                                       3
<PAGE>


PART II

Item No. 5 Market for Registrant's Common Equity and Related Stockholder Matters

Market Information.

     The Company's Common Stock was admitted to trading on the NASD OTC Bulletin
Board under the symbol PEPM on November 25, 1999. Prior to that time, there was
no established public trading market for the Company's Common Stock. As a
result, there is no available trading information for the period from January 1,
1998, to November 24, 1999.

     The high and low bid prices during fiscal 1999 by quarter, according to the
NASD OTC Bulletin Board were:

                                                        High              Low
                                                        ---------------------

     November 25, 1999 (the inception of trading)       $10.00            $4.875
     to December 31, 1999

Since the foregoing are over-the-counter market quotations, the quotations
reflect inter-dealer prices without retail mark-up, mark-down or commission, and
may not represent actual transactions.

     Peppermill's market maker is Emerson, Bennett & Associates, LLC, 6261 North
West 6th Way, Suite 207, Fort Lauderdale, Florida 33309.

Description of Securities

     Peppermill's articles of incorporation currently provide that Peppermill is
authorized to issue up to 200,000,000 shares of common stock, par value $0.001
per share. As of March 30, 2000, 11,239,700 shares were outstanding.

Common Stock

     Each holder of record of Peppermill's common stock is entitled to one vote
per share in the election of Peppermill's directors and all other matters
submitted to Peppermill's stockholders for a vote. Holders of Peppermill's
common stock are also entitled to share ratably in all dividends when, as, and
if declared by Peppermill's Board of Directors from funds legally available
therefor, and to share ratably in all assets available for distribution to
Peppermill's stockholders upon liquidation or dissolution. There are no
preemptive rights to subscribe to any of Peppermill's securities, and no
conversion rights or sinking fund provisions applicable to the common stock.

     Neither Peppermill's Articles of Incorporation nor its bylaws provide for
cumulative voting. Accordingly, persons who own or control a majority of the
shares outstanding may elect all of the Board of Directors, and persons owning
less than a majority could be foreclosed from electing any.


                                       4
<PAGE>


Options Outstanding

     There are currently no options, warrants or rights to purchase Peppermill's
common stock outstanding.

Holders

     The number of record holders of Peppermill Common Stock as at March 31,
2000, was 32, of which 1 was a director.

Dividends

     Peppermill has never paid cash dividends on its common stock and does not
intend to do so in the foreseeable future. Peppermill currently intends to
retain any earnings for the operation and expansion of its business.

     The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be equity securities that has a market price
(as defined) of less than $5.00 per share, subject to certain exemptions.
Peppermill's Common Stock may be deemed to be a "penny stock" and thus, may
become subject to rules that impose additional sales practice requirements on
broker/dealers who sell such securities to persons other than established
customers and accredited investors, unless the Common Stock is listed on The
NASDAQ SmallCap Market or other exchange.

     Consequently, the "penny stock" rules may restrict the ability of
broker/dealers to sell Peppermill's securities, and may adversely affect the
ability of holders of Peppermill's Common Stock to resell their shares in the
secondary market.


Item No. 6  Management's Discussion and Analysis of Financial Condition and
            Results of Operations

General

     Peppermill has not yet received revenues from operations. Assuming the
merger is completed, it is anticipated that management's primary focus will be
on the business of Varner and that Peppermill's operations will not be developed
further at least for the immediate future.

Plan of Operation

     Peppermill's management to date concentrated on the Star Claims. Peppermill
has had limited operations and no revenues to date.

Liquidity and Capital Resources

     Peppermill had no assets and no liabilities as of December 31, 1999.
Peppermill will require significant additional financing in order to continue on
with either the Varner or mining business. No financing has been arranged. If
Peppermill is unable to raise additional capital, it will not be able to engage
in any future operations.

     An analysis of the expenses for the period from inception, being April 9,
1998, to December 31, 1998 and for the year ended December 31, 1999 are as
follows:


                                       5
<PAGE>


                                          From April 9, 1998
                                         (date of inception)      For the Year
                                                 to                  Ended
                                         December 31, 1998     December 31, 1999
                                         -----------------     -----------------

Accounting and audit                          $ 3,050              $ 2,798
Amoritization of Mining Rights                   --                $ 2,129
Assessment work                                 1,800                 --
Bank charges                                      119                   36
Consulting fees                                 7,800               13,200
Filing Fee - EDGAR                               --                  1,634
Incorporation costs written off                   640                 --
Legal                                           2,500                 --
Office and miscellaneous                          727                  267
Report preparation                                619                 --
Salary                                           --                   --
Transfer agent's fees                           2,777                1,435
Travel                                          3,000                 --
                                              -------              -------
         TOTAL EXPENSES                       $23,032              $21,499
                                              =======              =======


An analysis of the above expenses is as follows:

Accounting and Audit

     Peppermill has expended funds for accounting and auditing in connection
with a Form 15C-211B submitted to NASD in connection with the listing of its
common stock on the OTC Bulletin Board. Peppermill has also been required to
file quarterly reports on Form 10-QSB.

Amortization of Mining Rights

     Peppermill is amortizing costs of obtaining mining rights which were
previously capitalized.

Assessment Work

     Peppermill engaged the services of Edward Skoda to perform certain
exploration work on the property more fully described above. This work was
assigned in December but was not performed and filed with the Gold
Commissioner's Office until February 1999.

Bank Charges

     Represents bank service charges during the period.


                                       6
<PAGE>


Consulting Fees

     Consulting fees include payments for (i) preparation of various  securities
subscription agreements, Offering Memoranda, corporate minutes and various other
documents  required by Peppermill,  and (ii) expenses  incurred in identifying a
market maker for Peppermill.

Incorporation Costs Written Off

     Peppermill decided to write off the cost of incorporation rather than
capitalize it.

Legal

     Legal fees were incurred in obtaining a tradeability letter on the issued
shares of Peppermill. This letter was filed along with the Form 15C-211.

Office and Miscellaneous

     Office and miscellaneous represents charges paid for photocopying, faxing
and delivery.

Report Preparation

     James McLeod was paid the sum of $619 for the preparation of his geological
report on the Star Claims dated June 16, 1998.

Transfer Agent's Fees

     Transfer agent's fees include an annual fee of $1,200, printing of share
certificates and obtaining CUSIP.

Travel

     Peppermill reimbursed its former President, Brent Vickers, for travel costs
to Florida to meet with Peppermill's market maker. This expense was incurred
subsequent to the resignation of Brent Vickers as President and Director of
Peppermill.

     Peppermill has no contractual obligations for either lease premises,
employment agreements or work commitments on the Star Claims and has made no
commitments to acquire any asset of any nature.

     The majority of the general and administrative expenses relate to filing
costs, transfer agent's fees and audit and accounting.

     To date, Peppermill has spent $2,129 for exploration and development of the
Star Claims.

     Management does not believe Peppermill's operations have been materially
affected by inflation.


                                       7
<PAGE>


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

     Peppermill operates in a rapidly changing environment that involves
numerous risks and uncertainties. The mining business is generally characterized
by intense competition and a fluctuating demand for the particular ores to be
mined. The statements contained in Item 1 (Description of Business) and Item 6
(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 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.

Item No. 7  Financial Statements

                                    PART F/S

                              FINANCIAL STATEMENTS
                         INCEPTION TO FEBRUARY 28, 1999

     The following financial statements are filed with this Form 10-KSB:

                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants                             9
Financial Statements of Peppermill Capital Corporation
     Balance Sheet as at February 28, 1999                                    10
     Statement of Operations for the Period from April 9, 1998 (Date
          of Inception) to February 28, 1999                                  11
     Statement of Cash Flows for the Period from April 9, 1998 (Date
          of Inception) to February 28, 1999                                  12
     Statement of Changes in Stockholders' Equity for the Period from
          April 9, 1998 (Date of Inception) to February 28, 1999              13

     Notes to Financial Statements                                        14- 16



                                        8



<PAGE>



ANDERSEN ANDERSEN & STRONG, L.C.                  941 East 3300 South, Suite 220
Certified Public Accountants and Business            Salt Lake City, Utah, 84106
 Consultants Board                                        Telephone 801-486-0096
Member SEC Practice Section of the AICPA                        Fax 801-486-0098
                                                      E-mail Kandersen @ msn.com


Board of Directors
Peppermill Capital Corporation
Vancouver, B.C., Canada


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have audited the accompanying balance sheet of Peppermill Capital Corporation
(a  development  stage  company) at February 28, 1999, and December 31, 1998 the
statement of operations, stockholders' equity, and cash flows for the two months
ended  February  28, 1999 and the period from April 9, 1998 to December 31, 1998
and the period  from April 9, 1998 (date of  inception)  to February  28,  1999.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles used and financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Peppermill Capital Corporation
at February 28, 1999 and December 31, 1998, and the results of  operations,  and
cash flows for the two months ended  February 28, 1999 and the period from April
9,  1998 to  December  31,  1998 and the  period  from  April 9,  1998  (date of
inception) to February 28, 1999 in conformity with generally accepted accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  The Company is in the  development
stage and will need additional  working capital for its planned activity,  which
raises  substantial  doubt about its  ability to  continue  as a going  concern.
Management's  plans in regard to these  matters are  described  in Note 5. These
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

Salt Lake City, Utah                            /s/ "Andersen Andersen & Strong"
April 12, 1999

         A member of ACF International with affiliated offices worldwide



                                        9



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                     FEBRUARY 28, 1999 AND DECEMBER 31, 1998
================================================================================



<TABLE>
<CAPTION>
                                                                             Feb 28               Dec 31
ASSETS                                                                        1999                 1998
                                                                              ----                 ----
<S>                                                                         <C>                   <C>
CURRENT ASSETS

     Cash                                                                   $ 16,125              $  1,125
     Note Receivable                                                              --                15,000
                                                                            --------              --------

           Total Current Assets                                               16,125                16,125
                                                                            --------              --------

OTHER ASSETS

     Mineral lease - Note 3                                                    2,129                 2,129
                                                                            --------              --------

                                                                            $ 18,254              $ 18,254
                                                                            ========              ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

      Accounts payable - related parties                                    $  6,800              $  6,800
      Accounts payable                                                         2,516                 1,316
                                                                            --------              --------

            Total Current Liabilities                                          9,316                 8,116
                                                                            --------              --------

STOCKHOLDERS' EQUITY

Common stock

      200,000,000 shares authorized, at $0.001 par
      value; 11,239,700 shares issued and outstanding                         11,240                11,240

Capital in excess of par value                                                21,930                21,930

Deficit accumulated during the development stage                             (24,232)              (23,032)
                                                                            --------              ========

Total Stockholders' Equity                                                     8,938                10,138
                                                                            --------              --------

                                                                            $ 18,254              $ 18,254
                                                                            ========              ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       10



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS
            FOR THE TWO MONTHS ENDED FEBRUARY 28, 1999 AND THE PERIOD
                APRIL 9, 1998 TO DECEMBER 31, 1998 AND THE PERIOD
             APRIL 9, 1998 (DATE OF INCEPTION) TO FEBRUARY 28, 1999
================================================================================


<TABLE>
<CAPTION>
                                                                                             April 9, 1998
                                             Feb 28,                   Dec 31,            (date of inception)
                                              1999                      1998                to Feb 28, 1999
                                             -------                   -------            -------------------
<S>                                       <C>                       <C>                       <C>
REVENUE                                   $         --              $         --              $         --

EXPENSES                                         1,200                    23,032                    24,232
                                          ------------              ------------              ------------

NET LOSS                                  $     (1,200)             $    (23,032)             $    (24,232)
                                          ============              ============              ============


NET LOSS PER COMMON SHARE

     Basic                                $         --              $    (0.002)
                                          ------------              ============


AVERAGE OUTSTANDING SHARES

     Basic                                  11,239,700                11,239,700
                                          ------------              ------------
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                       11



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS
            FOR THE TWO MONTHS ENDED FEBRUARY 28, 1999 AND THE PERIOD
         APRIL 9, 1999 TO DECEMBER 31, 1998 AND THE PERIOD APRIL 9, 1998
                    (DATE OF INCEPTION) TO FEBRUARY 28, 1999
================================================================================


<TABLE>
<CAPTION>
                                                                                           Apr 9, 1998
                                                 Feb 28,              Dec 31,          (date of inception)
                                                  1999                 1998              to Feb 28, 1999
                                                 -------              -------          -------------------
<S>                                             <C>                   <C>                   <C>
CASH FLOWS FROM
     OPERATING ACTIVITIES:

Net loss                                        $ (1,200)             $(23,032)             $(24,232)

Adjustments to reconcile net loss to net cash provided by operating activities:

    Change in accounts payable                     1,200                 8,116                 9,316


         Net Cash From Operations                     --               (14,916)              (14,916)
                                                --------              ========              ========

CASH FLOWS FROM INVESTING
    ACTIVITIES:

Change in note receivable                         15,000               (15,000)                   --
Purchase of mineral lease                             --                (2,129)               (2,129)
                                                --------              --------              --------

CASH FLOWS FROM FINANCING
    ACTIVITIES:

Proceeds from issuance of common stock                --                33,170                33,170
                                                --------              --------              --------

Net Increase in Cash                              15,000                 1,125                16,125

Cash at Beginning of Period                        1,125                    --                    --
                                                --------              --------              --------

Cash at End of Period                           $ 16,125              $  1,125              $ 16,125
                                                ========              ========              ========
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                       12



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE PERIOD FROM APRIL 9, 1998 (DATE OF INCEPTION)
                              TO FEBRUARY 28, 1999
================================================================================



<TABLE>
<CAPTION>
                                                       Common Stock                             Capital in
                                                 -------------------------         Excess of          Accumulated
                                                 Shares             Amount         Par Value            Deficit
                                                 ------             ------         ---------            -------
<S>                                             <C>               <C>              <C>                <C>
BALANCE DECEMBER 2, 1998
 (date of inception)                                   --         $       --       $       --         $       --

Issuance of common stock for cash
  at $.001 - June 6, 1999                       4,000,000              4,000               --                 --

Issuance of common stock for cash
   at $.001 - June 23, 1998                     6,000,000              6,000               --                 --

Issuance of common stock for cash
    at $.001 - June 25, 1998                    1,150,000              1,150               --                 --

Issuance of common stock for cash
    at $.10 - June 26, 1998                         2,700                  3              267                 --

Issuance of common stock for cash
    at $0.25 - September 17, 1998                  87,000                 87           21,663                 --

Net operating loss for the period from
    April 9, 1998 to December 31, 1998                 --                 --               --            (23,032)



BALANCE DECEMBER 31, 1998                      11,239,700             11,240           21,930            (23,032)

Net operating loss for the two
   Months ended February 28, 1999                      --                 --               --             (1,200)



BALANCE FEBRUARY 28, 1999                      11,040,050         $   11,240       $   21,930         $  (24,232)
                                               ==========         ==========       ==========         ==========
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                       13



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
================================================================================

1.   ORGANIZATION

The Company was  incorporated  under the laws of the State of Nevada on April 9,
1998 with authorized common stock of 200,000,000 shares at $0.001 par value.

Since its  inception  the company has  completed  two  Regulation D offerings of
7,239,700 shares of its capital stock for cash.

The Company is in the  development  stage and was  organized  for the purpose of
engaging in the business of mineral development.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting, Methods

The  Company  recognizes  income and  expenses  based on the  accrual  method of
accounting.

Dividend Policy

The Company has not yet adopted a policy regarding payment of dividends.

Income Taxes

On December  31, 1998,  the Company had a net  operating  loss carry  forward of
$23,032.  The income tax  benefit  from the loss  carry  forward  has been fully
offset by a  valuation  reserve  because  the use of the future  tax  benefit is
doubtful since the Company has no operations.  The loss carryforward will expire
in the year 2019.

Earning (Loss) Per Share

Earnings  (loss) per share  amounts are computed  based on the weighted  average
number  of  shares  actually  outstanding  using the  treasury  stock  method in
accordance with FASB statement No. 128.

Cash and Cash Equivalents

The Company considers all highly liquid  instruments  purchased with a maturity,
at the time of purchase, of less than three months, to be cash equivalents.



                                       14



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================

Foreign Currency Translation

The  transactions  of the  Company  completed  in  Canadian  dollars  have  been
translated to US dollars.  Assets and liabilities are translated at the year end
exchange  rates and the income and  expenses  at the  average  rates of exchange
prevailing during the period reported on.

Amortization of Capitalized Mineral Lease Costs

The Company will use the successful  efforts method to amortize the  capitalized
costs of any mineral  leases it acquires,  which provides for  capitalizing  the
purchase  price of the  project and the  additional  costs  directly  related to
proving  the  properties,  and  amortizing  these  amounts  over the life of the
mineral  deposit.  All other  costs will be expensed  as  incurred.  Unamortized
capitalized costs will be expensed if the property is proven to be of no value.

Financial Instruments

The carrying amounts of financial  instruments,  including cash, mineral leases,
and accounts  payable,  are considered by management to be their  estimated fair
values.  These  values are not  necessarily  indicative  of the amounts that the
Company could realize in a current market exchange.

Estimates and Assumptions

Management uses estimates and assumptions in preparing  financial  statements in
accordance with generally accepted  accounting  principles.  Those estimates and
assumptions  affect the  reported  amounts of the  assets and  liabilities,  the
disclosure of contingent  assets and liabilities,  and the reported revenues and
expenses.  Actual  results  could vary from the  estimates  that were assumed in
preparing these financial statements.

3.   PURCHASE OF MINERAL LEASES

On June 18, 1998 the Company  acquired  mineral  claims  known as "Star  Claims"
consisting of 11 units located near the town of Merritt,  British Columbia,  for
$2,129 with expiration dates in 1999. The units cover 587 acres.



                                       15



<PAGE>



                         PEPPERMILL CAPITAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================

4.   RELATED PARTY TRANSACTIONS

Related parties have acquired 36% of the common stock issued for cash.

The  officers  and  directors  of the  Company are  involved  in other  business
activities and they may, in the future,  become involved in additional  business
ventures  which  also  may  require  their  attention.  If a  specific  business
opportunity  becomes  available,  such  persons may face a conflict in selecting
between  the  Company  and their  other  business  interests.  The  Company  has
formulated no policy for the resolution of such conflicts.

5.   GOING CONCERN

Continuation  of the  Company as a going  concern is  dependent  upon  obtaining
additional  working  capital and the  management  of the Company has developed a
strategy,  which it believes will accomplish this objective  through  additional
equity  funding,  and long term  financing,  which will  enable  the  Company to
operate in the future.

Management  recognizes  that, if it is unable to raise additional  capital,  the
Company cannot operate in the future.



                                       16

<PAGE>



--------------------------------------------------------------------------------




                         PEPPERMILL CAPITAL CORPORATION
                             FINANCIAL STATEMENTS
                               DECEMBER 31, 1999




--------------------------------------------------------------------------------


                                       17

<PAGE>


C O N T E N T S
                                                                            Page
--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT                                                 19

FINANCIAL STATEMENTS

         Balance Sheet                                                       20

         Statement of Operations                                             21

         Statement of Stockholders' Equity                                   22

         Statement of Cash Flows                                             23

         Notes to Financial Statements                                  24 - 25



                                       18

<PAGE>


INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------


To the Stockholders
Peppermill Capital Corporation
Chesterfield, Missouri


We have audited the accompanying balance sheet of Peppermill Capital Corporation
as of December 31, 1999, and the related statements of operations, stockholders'
equity and cash flows for the year then ended.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Peppermill Capital Corporation
as of December 31, 1999, and the results of its  operations,  and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 4 to the
financial  statements,  the Company does not have working capital as of December
31, 1999. This raises  substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.



                                         KAUFMAN, ROSSIN & CO.

Miami, Florida
April 10, 2000


                                       19

<PAGE>


PEPPERMILL CAPITAL CORPORATION
BALANCE SHEET
DECEMBER 31, 1999
--------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

   Common stock, 200,000,000 shares authorized, at $0.001 par value;
       11,239,700 shares issued and outstanding                     $    11,240
   Additional paid-in capital                                            33,291
   Accumulated deficit                                             (     44,531)
--------------------------------------------------------------------------------

         Total stockholders' equity                                 $        --
--------------------------------------------------------------------------------



                            See accompanying notes.


                                       20
<PAGE>


PEPPERMILL CAPITAL CORPORATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
REVENUE                                                             $        --

EXPENSES                                                                 21,499
--------------------------------------------------------------------------------

NET LOSS                                                           ($    21,499)
--------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                                              11,239,700
--------------------------------------------------------------------------------

NET LOSS PER SHARE                                                 ($      0.00)
--------------------------------------------------------------------------------


                             See accompanying notes.

                                       21
<PAGE>


PEPPERMILL CAPITAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------

                                                                    Common Stock
                                                             -------------------------      Additional    Accumulated
                                                               Shares          Amount     Paid-in Capital   Deficit          Total
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                          <C>            <C>            <C>            <C>            <C>
BALANCE DECEMBER 31, 1998                                    11,239,700     $   11,240     $   21,930     ($  23,032)    $   10,138

Contribution of capital (Note 2)                                   --             --           11,361           --           11,361

Net loss for the year ended December 31, 1999                      --             --             --       (   21,499)   (    21,499)
-----------------------------------------------------------------------------------------------------------------------------------

BALANCE DECEMBER 31, 1999                                    11,239,700     $   11,240     $   33,291     ($  44,531)    $     --
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                            See accompanying notes.

                                       22

<PAGE>


PEPPERMILL CAPITAL CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                          ($21,499)
-------------------------------------------------------------------------------
     Adjustments to reconcile net loss to net cash
        used in operating activities:
        Amortization                                                      2,129
        Change in accounts payable                                        3,245
-------------------------------------------------------------------------------
              Total adjustments                                           5,374
-------------------------------------------------------------------------------
                  Net cash used in operating activities                ( 16,125)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Collection of note receivable                                       15,000
-------------------------------------------------------------------------------

NET DECREASE IN CASH                                                   (  1,125)

CASH AT BEGINNING OF YEAR                                                 1,125
-------------------------------------------------------------------------------

CASH AT END OF YEAR                                                    $     --
-------------------------------------------------------------------------------

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
-------------------------------------------------------------------------------

     During 1999, certain stockholders of the Company converted
      amounts owed to them into capital                                 $11,361
------------------------------------------------------------------------------


                            See accompanying notes.

                                       23


<PAGE>


PEPPERMILL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

          Organization and Business  Activity

          Peppermill Capital Corporation (the Company) was incorporated in April
          1998,  under  the  laws of the  State of  Nevada  for the  purpose  of
          exploration  and  development of mineral  properties.  The Company was
          considered to be in the development  stage through  December 31, 1998.
          On November 22, 1999, in a private  transaction,  Varner Technologies,
          Inc. (Varner) purchased approximately 90% of the Company's outstanding
          common stock. The purchase of the shares of the Company's common stock
          by Varner was done in contemplation  of a business  combination/merger
          transaction between the two entities. The entities have entered into a
          letter of intent,  however, the final terms of the  combination/merger
          have not been finalized as of the date of this report.

          At December 31, 1999,  the Company had no planned  operations  and was
          not considered to be in the development stage.

          Use of Estimates

          The  preparation  of these  financial  statements in  conformity  with
          generally accepted  accounting  principles requires management to make
          estimates and assumptions  that affect the reported  amounts of assets
          and liabilities and disclosure of contingent assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenues and expenses during the reported period. Actual results could
          differ from those estimates.

          Income Taxes

          The Company  accounts  for income  taxes  according  to  Statement  of
          Financial  Accounting Standards (SFAS) No. 109, "Accounting for Income
          Taxes". Under the liability method specified by SFAS No. 109, deferred
          income  taxes  are  recognized  for the  future  tax  consequences  of
          temporary differences between the financial statement carrying amounts
          and tax bases of assets and liabilities.

          Net Loss Per Share

          The Company applies  Statement of Financial  Accounting  Standards No.
          128, "Earnings Per Share" (FAS 128). Net loss per share is computed by
          dividing  net loss by the  weighted  average  number of common  shares
          outstanding  during the  reported  period.  There were no  potentially
          dilutive securities outstanding at December 31, 1999.


                                       24


<PAGE>


--------------------------------------------------------------------------------
NOTE 2.   RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

          The  Company's  stockholders,  from  time to  time,  pay  for  Company
          expenses  and are  reimbursed  by the  Company.  At December 31, 1999,
          $11,361 was due to the stockholders, which the stockholders elected to
          contribute to capital.

--------------------------------------------------------------------------------
NOTE 3.   INCOME TAXES
--------------------------------------------------------------------------------

          At  December  31,  1999  the  Company  had a  deferred  tax  asset  of
          approximately   $17,000,   resulting  from  net  operating  losses  of
          approximately  $44,000. The deferred tax asset is offset entirely by a
          valuation allowance.  The net operating losses will expire in 2018 and
          2019.

          Deferred  tax assets are reduced by a valuation  allowance  if, in the
          opinion of management, it is more likely than not that some portion or
          all of the  deferred  tax assets  will not be  realized.  Management's
          valuation  procedures  consider projected  utilization of deferred tax
          assets  prospectively  over the next several  years,  and  continually
          evaluate new circumstances  surrounding the future realization of such
          assets.

          The income tax benefit  differs  from the amount  computed by applying
          the federal statutory tax rate to loss before income taxes principally
          due to an increase in the  deferred tax asset  valuation  allowance of
          approximately $8,000.

--------------------------------------------------------------------------------
NOTE 4.   GOING CONCERN
--------------------------------------------------------------------------------

          The accompanying financial statements have been prepared in conformity
          with generally  accepted  accounting  principles,  which  contemplates
          continuation  of the  Company  as a going  concern.  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.


                                       25


<PAGE>



Item No. 8  Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure

Disagreement With Accountants and Financial Disclosure

     From inception to April 7, 2000, Peppermill's principal accountant was
Andersen Andersen & Strong, L.C. of Salt Lake City, Utah. On April 7, 2000,
Peppermill voluntarily changed its independent accountants from Andersen
Andersen & Strong, L.C. to Kaufman, Rossin & Company. This change was approved
by Peppermill's Board of Directors on March 23, 2000. The financial statements
for the year ended December 31, 1999 were audited by Kaufman, Rossin & Company.
The report of Andersen Andersen & Strong, L.C. for the period from inception to
February 28, 1999 contained no adverse opinion or disclaimer of opinion and was
not qualified


                                       26
<PAGE>


or modified as to uncertainty, audit scope or application of accounting
principles. The report of Andersen Andersen & Strong, L.C. covering the period
ended December 31, 1998, and February 28, 1999, contains an explanatory
paragraph that states that the developmental state of Peppermill and the need
for additional working capital for its planned activities, raise substantive
doubt about its ability to continue as a going concern. Through the date of
replacement, there were no disagreements with Andersen Andersen & Strong, L.C.
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.


PART III

Item No. 9  Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers

The Company's current directors and executive officers and their ages, as of
March 30, 2000, are as follows:

Name                       Age               Position with Company
----                       ---               ---------------------

Clayton W. Varner          40                Chairman, Chief Executive Officer,
                                             and Sole Director

Robert Rapp                52                Director

All directors hold office until the annual meeting of stockholders next
following their election and/or until their successors are elected and
qualified. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board. Information with respect to the business experience
and affiliation of the directors and the executive officers of the Company is
set forth below.

     Clayton W. Varner, Chairman, Chief Executive Officer and Director. Mr.
Varner was appointed as Chairman, Chief Executive Officer, and Director in
November, 1999. Mr. Varner is responsible for the overall management and
direction of Peppermill. Mr. Varner has been the President and Chief Executive
officer of Varner Technologies, Inc. since its inception in 1994. Mr. Varner has
over 20 years of experience in the areas of computer technology and Information
Services, and was instrumental in the development and management of an
Information System for a start-up network marketing business, Reliv
International, Inc., which grew to be a public company with sales of $50 million
per year (NASDAQ NM- "RELV"). Mr. Varner is educated in Business Administration
and Computer Science.

     Robert W. Rapp, Director. Mr. Rapp was appointed as Director in November,
1999. Mr. Rapp has been Executive Vice President of Varner since January 1997,
and has been self-employed as a consultant for the past 12 years in areas of
capitalization and investment in start-up companies. He was Senior
Vice-President and Director of American Life Investors, a holding company and
previous majority owner of Reliv International, Inc.


                                       27
<PAGE>


Section 16(a) Beneficial Ownership Reporting Compliance

     There were no late filings required by Section 16(a) during the most recent
fiscal year or prior years by any officer, director or 10% shareholder.


Item No. 10  Executive Compensation

Executive Compensation

     Neither Peppermill's President nor any of its executive officers have
received compensation since Peppermill's incorporation except as noted below.

     There has been no compensation given to any of Peppermill's Directors or
Executive Officers during 1999 other than $4,000 that was paid to the former
president and director, Brent Vickers, in consulting fees and $3,000 in
traveling fees in connection with meetings with Peppermill's market makers,
Emerson Bennett & Associates, LLC, 6261 North West 6th Way, Suite 207, Fort
Lauderdale, Florida, 33309. Mr. Vickers was appointed to the Board of Directors
on April 14, 1998 and resigned as President and Director on May 27, 1998.

     There are no stock options outstanding as at December 31, 1999, but it is
contemplated that Peppermill may issue stock options in the future to certain
individuals, including but not limited to its officers, directors, advisers and
future employees.

Director Compensation

     Members of the Board of Directors do not receive cash compensation for
their services as Directors. Directors are not presently reimbursed for expenses
incurred in attending Board meetings.

Employment Agreements

     Peppermill is not a party to any individual employment contracts or
collective bargaining agreements.

Item No. 11  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain information with respect to the
beneficial ownership of each person who is known to be an executive officer,
director or the beneficial owner of more than 5% of Peppermill's Common Stock as
of March 31, 2000.


                                       28
<PAGE>


                                    Amount and Nature
Name and Address                    of Beneficial                  Percent
of Beneficial Owner                 Ownership(1)                   Ownership
-------------------                 ------------                   ---------

Varner Technologies, Inc.           10,116,000                        90%
1809 Clarkson
Suite 205
Chesterfield, MO 63017

Clayton W. Varner                        4,252(2)                     *



Robert W. Rapp                      _____0____(3)                     *
All Officers and Directors as a
group (2 persons)                        4,252(2)(3)                __0__(2)(3)


*    less than one percent

----------------------

(1)  As of March 31, 2000, there were 11,239,700 common shares outstanding.
     Unless otherwise noted, the security ownership disclosed in this table is
     of record and beneficial.

(2)  As of March 31, 2000, Mr. Varner was the beneficial owner of 8,542,210
     shares (including options to purchase up to 750,000 shares) comprising
     approximately (42.1%) of Varner Technologies, Inc. Capital Stock

(3)  As of March 31, 2000, Mr. Rapp was the beneficial owner of 1,507,408 shares
     (including options to purchase up to 500,000 shares) comprising
     approximately (7.52%) of Varner Technologies, Inc. Capital Stock


Item No. 12  Certain Relationships and Related Transactions

                                 Not Applicable


                                       29
<PAGE>


Item No. 13  Exhibits and Reports on Form 8-K

Exhibits

   Exhibit
   Number      Description
   --------------------------

     *3.1      Articles of Incorporation of Peppermill Capital Corporation filed
               April 9, 1998.

     *3.2      By-laws of Peppermill Capital Corporation

     *4.1      Text of Certificate for Common Stock of Peppermill Capital
               Corporation

    *10.1      Letter of Intent dated November 19, 1999, between Peppermill
               Capital Corporation and Varner Technologies, Inc.

     11.1      Computation of Earnings Per Share - Annual

     23.1      Consent of Accountants (Andersen, Andersen & Strong, L.C.) (to be
               filed by amendment)

     27.1      Financial Data Schedule


*    Incorporated by reference to Exhibits contained in Peppermill's Form 10-SB
     Registration Statement (File No. 000-25989) effective May 6, 1999.

**   Incorporated by reference to Exhibits contained in the report on Form
     8-KSB, as filed by Peppermill on December 7, 1999.


Reports on Form 8-K

The following report on Form 8-KSB was filed by Peppermill during the last
quarter of fiscal 1999:

(1)  On December 7, 1999, Peppermill filed a Report on Form 8-K disclosing that
     a controlling interest in the outstanding shares of Peppermill's Common
     Stock was purchased by Varner Technologies, Inc. on November 22, 1999, in
     contemplation of a future business combination/merger transaction between
     the two entities.

The following report on Form 8-KSB was filed by Peppermill after the last
quarter of fiscal 1999, and is hereby reported as a subsequent event:

(1)  On April 7, 2000, Peppermill filed a report on Form 8-KSB disclosing a
     change in its independent auditors, from Andersen Andersen & Strong, L.C.
     to Kaufman, Rossin & Company effective April 10, 2000.


                                       30
<PAGE>


                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act the Registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on April 14, 2000.


                                    PEPPERMILL CAPITAL CORPORATION



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

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

Signatures                       Title                                      Date
----------                       -----                                      ----

/s/ Clayton W. Varner            President, Secretary             April 14, 2000
-------------------------        and Director
Clayton W. Varner

/s/ Robert W. Rapp               Director                         April 14, 2000
-------------------------
Robert W. Rapp


                                       31