FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File No. 000-25989
PEPPERMILL CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 98-0186841
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1819 Clarkson Road, Suite 204, Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
(636) 530-4532
(Registrant's telephone number, including area code)
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
APPLICABLE ONLY TO CORPORATE ISSUERS:
COMMON STOCK, $.001 par value, 11,239,700 shares outstanding as of June 30,
2000.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
General
Peppermill Capital Corporation, a Nevada corporation, was incorporated on April
9, 1998. Peppermill has no subsidiaries. On November 22, 1999, Varner
Technologies, Inc. ("Varner") completed the purchase of 10,116,000 shares of
Peppermill Common Stock from several Peppermill shareholders. On November 19,
1999, Peppermill entered into a Letter of Intent with Varner Technologies, Inc.
("Varner"), relating to the merger of Varner into Peppermill. Varner is an
Internet service provider, and is further engaged in the marketing and sale of
long distance telephone services, prepaid telephone cards and other
telecommunications products and services via a network of independent
distributors, pursuant to a multilevel marketing plan, in 49 states of the
United States.
The purchase of the shares of Peppermill's Common Stock by Varner was made in
contemplation of a business combination/merger transaction between the two
entities, whereby it is expected that all outstanding voting and non-voting
Common Stock of Varner will be exchanged for shares of Peppermill's Common
Stock. The final terms of this business combination/merger have been negotiated,
and are contained in a formal Acquisition Agreement, which was executed on June
2, 2000. In connection therewith, Peppermill filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission on July 7, 2000, and is
awaiting comments from the SEC pending the effectiveness of said Registration
Statement. Notwithstanding the execution of the formal Acquisition Agreement and
the filing of the Registration Statement on Form S-4, there is no guarantee that
any business combination or merger transaction will take place. Peppermill shall
provide notice to and shall seek the consent of its shareholders to the
contemplated business combination/merger with Varner upon the effectiveness of
the S-4 Registration Statement.
Peppermill was engaged in the exploration and development of mineral properties.
Peppermill presently has a 100% interest in certain mineral claims known as the
Star Mineral Claims situated 12 miles north of the Village of Princeton, British
Columbia, Canada. The claims area totals approximately 587 acres. Peppermill
undertook exploration activities on these mineral claims in February 1999, in
order to maintain the claims in good standing with the Gold Commission of
British Columbia.
Peppermill has no revenue to date from its operations and its ability to effect
its plans for the future will depend on the availability of financing. It is
anticipated that after the merger, management efforts will be focused primarily
on the business of Varner and that
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at least for the immediate future little or no effort will be made to develop
Peppermill's mining business further.
Plan of Operation
Peppermill has had no operations during this reporting period
Upon the conclusion of any final business combination/merger transaction between
Varner and Peppermill, Peppermill anticipates that the focus of its business
will shift from that of exploring and developing its mineral claims to that of
Varner, namely, providing Internet Service and engaging in the marketing and
sale of long distance telephone services, prepaid telephone cards and other
telecommunications products and services via a network of independent
distributors, pursuant to a multi-level marketing plan, in 49 states of the
United States. Notwithstanding the execution of the Acquisition Agreement and
the filing of the Registration Statement on Form S-4, there is no guarantee that
such business combination/merger transaction will take place.
Liquidity and Capital Resources
Peppermill had no assets and no liabilities as of June 30, 2000. If Peppermill
is unable to raise additional capital, or if the business combination/merger
transaction with Varner does not take place, it will not be able to engage in
any future operations. No financing has been arranged.
Year 2000 Issue
The Year 2000 issue (i.e. the ability of computer systems to recognize a date
using "00" as the year 2000 rather than 1900) affects all companies and
organizations. As a result of the Peppermill's Year 2000 efforts, no significant
internal problems have occurred to date. The Company has not experienced any
problems with suppliers, vendors, customers, or financial institutions. There
were no significant expenditures related to Year 2000 compliance, and Peppermill
does not anticipate any further expenses associated with Year 2000.
Safe Harbor Provision of the Private Securities Litigation Act of 1995 and
Forward Looking Statements
The statements contained in this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts may
be forward-looking statements (as such term is defined in the rules promulgated
pursuant to the Securities Exchange Act of 1934) that are subject to a variety
of risks and uncertainties more fully described in Peppermill's filings with the
Securities and Exchange Commission including, without limitation, those
described under "Risk Factors" in Peppermill's Form 10-SB Registration Statement
(File No. 000-25989) effective May 6, 1999, and those described in Peppermill's
Form S-4 registration Statement, as filed with the Commission on July 7, 2000.
The forward-looking
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statements are based on the beliefs of Peppermill's management, as well as
assumptions made by, and information currently available to Peppermill's
management. Accordingly, these statements are subject to significant risks,
uncertainties and contingencies which could cause Peppermill's actual growth,
results, performance and business prospects and opportunities in 2000 and beyond
to differ materially from those expressed in, or implied by, any such
forward-looking statements. Wherever possible, words such as "anticipate,"
"plan," "expect," "believe," "estimate," and similar expressions have been used
to identify these forward-looking statements, but are not the exclusive means of
identifying such statements. These risks include the chance that the merger with
Varner Technologies, Inc. may not occur or may occur on terms different than
anticipated.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Registration Statement on Form S-4 and all Exhibits thereto,
as filed with the Commission on July 7, 2000 (incorporated
by reference).
(ii) Acquisition Agreement dated June 2, 2000, as filed with the
Commission as an Exhibit to the Company's Registration
Statement on Form S-4 (incorporated by reference).
(b) The Company has not filed a Current Report during the quarter
covered by this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 11, 2000 PEPPERMILL CAPITAL CORPORATION
By: /s/ Clayton W. Varner
------------------------------
Clayton W. Varner, President and
Chief Financial Officer
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PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
==========================================================================================================
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2000 December 31, 1999
==========================================================================================================
<S> <C> <C>
CURRENT LIABILITIES
Accrued liabilities, to related parties (Note 2) $ 12,221 $ --
----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, 200,000,000 shares authorized, at $0.001 par
value; 11,239,700 shares issued and outstanding 11,240 11,240
Additional paid-in capital 33,291 33,291
Accumulated deficit (56,752) (44,531)
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Total stockholders' equity (deficiency) (12,221) --
----------------------------------------------------------------------------------------------------------
$ -- $ --
==========================================================================================================
</TABLE>
See notes to condensed financial statements - unaudited.
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PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
=================================================================================================================
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------------------------------------------
2000 1999 2000 1999
=================================================================================================================
<S> <C> <C> <C> <C>
REVENUE $ -- $ -- $ -- $ --
OPERATING EXPENSES
General and administrative 565 16,043 12,221 17,243
-----------------------------------------------------------------------------------------------------------------
NET LOSS ($ 565) ($ 16,043) ($ 12,221) ($ 17,243)
=================================================================================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 11,239,700 11,239,700 11,239,700 11,239,700
=================================================================================================================
NET LOSS PER SHARE - BASIC AND DILUTED $ -- $ -- $ -- $ --
=================================================================================================================
</TABLE>
See notes to condensed financial statements - unaudited.
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PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
========================================================================================================================
Six Months Ended June 30
---------------------------------
2000 1999
========================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ 12,221 ($17,243)
Adjustment to reconcile net loss to net cash used in operating
activities:
Increase in accounts payable and accrued expenses 12,221 17,286
------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities, representing the net
decrease in cash and cash equivalents for the period -- 43
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -- 1,125
========================================================================================================================
CASH AND CASH EQUIVALENTS - END OF PERIOD $ -- $ 1,168
========================================================================================================================
</TABLE>
See notes to condensed financial statements - unaudited.
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PEPPERMILL CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1. BASIS OF PRESENTATION
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Basis of Presentation
The accompanying (unaudited) financial statements of Peppermill
Capital Corporation have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and, therefore, do not include
all information and footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles.
In the opinion of management, all adjustments considered necessary for
a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal
recurring nature. Operations for the period ended June 30, 2000, are
not necessarily indicative of the results that can be expected for the
year ended December 31, 2000.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
these estimates.
The financial data at December 31, 1999 is derived from audited
financial statements which are included in the Company's form 10-KSB
and should be read in conjunction with the audited financial
statements and the notes thereto.
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NOTE 2. RELATED PARTY TRANSACTIONS
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Varner Technologies, Inc. (90% owner of the Company) paid certain
legal and accounting expenses on behalf of the Company aggregating
$565 and $12,221 for the three and six month periods ended June 30,
2000, respectively.
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NOTE 3. NET LOSS PER COMMON SHARE
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Basic and diluted net loss per common share was computed by dividing
the net loss by the weighted number of shares of common stock
outstanding during each period.
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NOTE 4. GOING CONCERN UNCERTAINTIES
================================================================================
The Company has sustained losses and negative cash flows from
inception and has no working capital available to fund any possible
future expenditures necessary to remain in business. The Company
believes any future capital requirements will be provided by the
majority stockholder.
