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
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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
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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.
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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.
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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:
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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.
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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,
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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
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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.
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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.
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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.
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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
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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
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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.
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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
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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.
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NOTE 2. RELATED PARTY TRANSACTIONS
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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.
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NOTE 3. INCOME TAXES
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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.
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NOTE 4. GOING CONCERN
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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.
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