SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
                            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  STATEMENTS  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 and no affiliated  properties.  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 has obtained  quotation on the NASD OTC Bulletin Board,  and its
common stock commenced trading under the symbol PEPM on November 25, 1999.

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

     Peppermill  originally  planned to explore  and develop  mineral  rights to
certain  mineral  claims  located 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.

     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 be that of  Varner,  namely,
providing Internet Service, and engaging in

                                       1
<PAGE>


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.

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

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.

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

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.


                                       2
<PAGE>

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.

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.


<PAGE>


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

General

     Peppermill  has not received any revenues  from its limited  operations  to
date.

Plan of Operation

     Assuming  the merger is  completed,  it is  anticipated  that  management's
primary  focus will be on the  business of Varner and that  Peppermill's  mining
operations will not be developed.

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 any kind of business.  No financing  has been  arranged.  If  Peppermill is
unable  to raise  additional  capital,  it will not be able to  engage in future
operations of any kind.

     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:

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


                                       4
<PAGE>


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 mining
exploration  work.  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.

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) for expenses incurred in identifying
a market maker for Peppermill. The expense was incurred subsequent to the former
President resigning.

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 certain mining claims dated June 16, 1998.


                                       5
<PAGE>


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 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
certain mining claims.

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

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,


                                       6
<PAGE>


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


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  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


                                       7
<PAGE>

     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.


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.


                                       8
<PAGE>


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.


                                    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.


                                       9
<PAGE>


Item No. 12    Certain Relationships and Related Transactions

                                 Not Applicable


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.


                                       10
<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 December 21, 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       December 21, 2000
-------------------------         and Director
Clayton W. Varner

/s/ Robert W. Rapp                Director                   December 21, 2000
-------------------------
Robert W. Rapp


<PAGE>


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





                         PEPPERMILL CAPITAL CORPORATION
                      FINANCIAL STATEMENTSDECEMBER 31, 1999





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


<PAGE>


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

INDEPENDENT AUDITORS' REPORT                                       1

FINANCIAL STATEMENTS

         Balance Sheet                                             2

         Statement of Operations                                   3

         Statement of Stockholders' Equity                         4

         Statement of Cash Flows                                   5

         Notes to Financial Statements                           6 - 7



<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


<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.

                                       2
<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.

                                       3
<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.

                                       4
<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.

                                       5
<PAGE>


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


          Organization and Business  ActivityPeppermill 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.


                                       6
<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.


                                       7