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 September 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
September 30, 2000.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
Peppermill Capital Corporation, a Nevada corporation, was incorporated on April
9, 1998. Peppermill has no subsidiaries. On November 22, 1999, Varner
Technologies, Inc. ("Varner") completed the purchase of 10,116,000 shares of
Peppermill Common Stock from several Peppermill shareholders. On November 19,
1999, Peppermill entered into a Letter of Intent with Varner Technologies, Inc.
("Varner"), relating to the merger of Varner into Peppermill. Varner is an
Internet service provider, and is further engaged in the marketing and sale of
long distance telephone services, prepaid telephone cards and other
telecommunications products and services via a network of independent
distributors, pursuant to a multilevel marketing plan, in 49 states of the
United States.
The purchase of the shares of Peppermill's Common Stock by Varner was made in
contemplation of a business combination/merger transaction between the two
entities, whereby it is expected that all outstanding voting and non-voting
Common Stock of Varner will be exchanged for shares of Peppermill's Common
Stock. The final terms of this business combination/merger have been negotiated,
and are contained in a formal Acquisition Agreement, which was executed on June
2, 2000. In connection therewith, Peppermill filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission on July 7, 2000, and is
currently in the process of revising the content and disclosures made in said
Registration Statement pursuant to comments received from the SEC, in order to
achieve the effectiveness of said Registration Statement. Notwithstanding the
execution of the formal Acquisition Agreement and the filing of the Registration
Statement on Form S-4 (or any amendment thereto), there is no guarantee that any
business combination or merger transaction will take place. Peppermill shall
provide notice to and shall seek the consent of its shareholders to the
contemplated business combination/merger with Varner upon the effectiveness of
the S-4 Registration Statement.
Peppermill originally planned to explore and develop mineral rights to certain
mineral claims in the Princeton area of British Columbia, Canada. Peppermill
currently has no planned operations or assets. It is anticipated that after the
merger, management efforts will be focused primarily on the business of Varner
and no effort will be made to develop Peppermill's mining business.
Peppermill has no revenue to date from its operations and its ability to effect
its plans for the future will depend on the availability of financing.
2
<PAGE>
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, the
filing of the Registration Statement on Form S-4 or the filing of any revisions
to said Registration Statement, there is no guarantee that such business
combination/merger transaction will take place.
Liquidity and Capital Resources
Peppermill had no assets and accrued liabilities of $27,951.00 as of September
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.
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 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.
3
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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.
4
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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.
5
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PEPPERMILL CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, 2000 December 31, 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accrued liabilities, to related parties (Note 2) $ 27,951 $ --
-------- --------
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 (72,482) (44,531)
-------- --------
Total stockholders' equity (deficiency) (27,951) --
-------- --------
$ -- $ --
-------- --------
</TABLE>
See notes to condensed financial statements - unaudited.
<PAGE>
PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30 September 30
----------------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ -- $ -- $ -- $ --
OPERATING EXPENSES
General and administrative 15,730 558 27,951 17,800
---------------------------------------------------------------------------------------------------------------------
NET LOSS ($ 15,730) ($ 558) ($ 27,951) ($ 17,800)
---------------------------------------------------------------------------------------------------------------------
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.
<PAGE>
PEPPERMILL CAPITAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months Ended September 30
------------------------------
2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 15,730) ( $ 17,800)
Adjustment to reconcile net loss to net cash used in
operating activities:
Decrease in note receivable -- 15,000
Increase in accounts payable and accrued expenses 15,730 3,245
-------------------------------------------------------------------------------------------------------
Net cash provided by operating activities, representing the
net increase in cash and cash equivalents for the period -- 445
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -- 1,125
-------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ -- $ 1,570
-------------------------------------------------------------------------------------------------------
</TABLE>
See notes to condensed financial statements - unaudited.
<PAGE>
PEPPERMILL CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION
Basis of Presentation
The accompanying (unaudited) financial statements of Peppermill Capital
Corporation have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and, therefore, do not include all information
and footnotes necessary for a complete presentation of financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles.
In the opinion of management, all adjustments considered necessary for a
fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operations for the period ended September 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.
NOTE 2. BUSINESS COMBINATION/MERGER
On November 22, 1999, in a private transaction, Varner Technologies, Inc.
(Varner) purchased approximately 90% of the Company's outstanding common
stock. The final terms of this business combination/merger have been
negotiated, and are contained in a formal Acquisition Agreement, which was
executed on June 2, 2000. This merger is contingent upon and will not
become effective until such time as the Company completes the registration
of the underlying stock. In connection therewith, the Company filed a
Registration Statement on Form S-4 with the Securities and Exchange
Commission on July 7, 2000, and is currently in the process of revising the
content and disclosures made in said Registration Statement pursuant to
comments received from the SEC, in order to achieve the effectiveness of
said Registration Statement.
NOTE 3. RELATED PARTY TRANSACTIONS
Varner Technologies, Inc. (90% owner of the Company) paid certain legal and
accounting expenses on behalf of the Company aggregating $15,730 and
$27,951 for the three and nine month periods ended September 30, 2000,
respectively. NOTE 1.
<PAGE>
NOTE 4. NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share was computed by dividing the
net loss by the weighted number of shares of common stock outstanding
during each period.
NOTE 5. GOING CONCERN UNCERTAINTIES
The Company has sustained losses and negative cash flows from inception and
has no working capital available to fund any possible future expenditures
necessary to remain in business. The Company believes any future capital
requirements will be provided by the majority stockholder.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 14, 2000 PEPPERMILL CAPITAL CORPORATION
By: /s/ Clayton W. Varner
----------------------------------
Clayton W. Varner, President and
Chief Financial Officer
