---



CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDEDJULY 31, 2007, 2006 AND 2005

(Expressed in United States Dollars, unless otherwise
stated)

---



INDEPENDENT AUDITORS REPORT

To the Shareholders of
  Quartz Mountain Resources Ltd.

We have audited the consolidated balance sheets of Quartz Mountain
  Resources Ltd. as at July 31, 2007 and 2006 and the consolidated statements
  of operations, deficit and cash flows for the years ended July 31, 2007, 2006
  and 2005. These financial statements are the responsibility of the Company's
  management. Our responsibility is to express an opinion on these financial statements
  based on our audits.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards and with the standards of the Public Company Accounting
  Oversight Board (United States). Those standards require that we plan and perform
  an audit to obtain reasonable assurance 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.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2007 and 2006 and the results of its operations and cash flows for
  the years ended July 31, 2007, 2006 and 2005 in accordance with Canadian generally
  accepted accounting principles.

"DAVIDSON & COMPANY LLP"

|Vancouver, Canada | Chartered Accountants
|----------------- | ---------------------
|October 24, 2007  |                      

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA 
  U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast substantial
  doubt on the Company's ability to continue as a going concern, such as those
  described in Note 1 to the financial statements. Our report to the shareholders
  dated October 24, 2007 is expressed in accordance with Canadian reporting standards
  which do not permit a reference to such events and conditions in the auditors'
  report when these are adequately disclosed in the financial statements.

"DAVIDSON & COMPANY LLP"

|Vancouver, Canada | Chartered Accountants
|----------------- | ---------------------
|October 24, 2007  |                      

|                                                                                                  | A Member
      of SCINTERNATIONAL | 
|------------------------------------------------------------------------------------------------- | --------------------------------- | 
|                                                                                                  |                                   | 
|1200 - 609 Granville Street, P.O. Box 10372, Pacific
      Centre, Vancouver, BC, Canada, V7Y 1G6
|Telephone (604) 687-0947 Fax (604) 687-6172                                                      

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Consolidated Balance Sheets                                        
|(Expressed in United States Dollars, unless otherwise
      stated)

|                                                    |   | July
      31 |   |   | July
      31 |  
|--------------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                                    |   | 2007          |   |   | 2006          |  
|                                                    |   |               |   |   |               |  
|ASSETS                                              |   |               |   |   |               |  
|                                                    |   |               |   |   |               |  
|Current assets                                      |   |               |   |   |               |  
|Cash and cash equivalents                           | $ | 663,877       |   | $ | 1,071,431     |  
|Amounts receivable and prepaids                     |   | 38,374        |   |   | 8,922         |  
|Amounts due
      from related parties (note 6)     |   | 10,659        |   |   | 33,677        |  
|                                                    |   | 712,910       |   |   | 1,114,030     |  
|                                                    |   |               |   |   |               |  
|Mineral property interests(note 4)                  |   | 1             |   |   | 1             |  
|                                                    |   |               |   |   |               |  
|                                                    | $ | 712,911       |   | $ | 1,114,031     |  
|                                                    |   |               |   |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                |   |               |   |   |               |  
|                                                    |   |               |   |   |               |  
|Current liabilities                                 |   |               |   |   |               |  
|Accounts
      payable and accrued liabilities      | $ | 14,408        |   | $ | 16,664        |  
|                                                    |   |               |   |   |               |  
|Shareholders' equity                                |   |               |   |   |               |  
|Share capital (note 5)                              |   | 21,269,046    |   |   | 21,269,046    |  
|Deficit                                             |   | (20,570,543   | ) |   | (20,171,679   | )
|                                                    |   | 698,503       |   |   | 1,097,367     |  
|Nature and
      continuance of operations (note 1) |   |               |   |   |               |  
|                                                    |   |               |   |   |               |  
|                                                    |   |               |   |   |               |  
|                                                    | $ | 712,911       |   | $ | 1,114,031     |  

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

Approved by the Board of Directors

|/s/ R. Carrier  | /s/ G. Fretwell   
|--------------- | ------------------
|                |                   
|Rene G. Carrier | Gordon J. Fretwell
|Director        | Director          

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Consolidated Statements of Operations                              
|(Expressed in United States Dollars, unless otherwise
      stated)

|                                                     |   | Years ended July 31 |  
|---------------------------------------------------- | - | ------------------- | -
|                                                     |   | 2007                |  
|                                                     |   |                     |  
|                                                     |   |                     |  
|                                                     |   |                     |  
|Expenses and other                                   |   |                     |  
|Foreign exchange gain                                | $ | (25,873             | )
|Interest income                                      |   | (35,741             | )
|Legal, accounting and audit                          |   | 21,689              |  
|Mineral property
      investigations                |   | 325,856             |  
|Office and administration                            |   | 89,607              |  
|Regulatory, trust and filing                         |   | 23,326              |  
|                                                     |   |                     |  
|Loss for the year                                    | $ | 398,864             |  
|                                                     |   |                     |  
|Basic and diluted loss per common share              | $ | 0.03                |  
|                                                     |   |                     |  
|Weighted average number of common shares outstanding |   | 13,399,426          |  

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

|Consolidated Statements of Deficit                                 
|-------------------------------------------------------------------
|(Expressed in United States Dollars, unless otherwise
      stated)

|                           |   | Years ended July 31 |  
|-------------------------- | - | ------------------- | -
|                           |   | 2007                |  
|                           |   |                     |  
|                           |   |                     |  
|                           |   |                     |  
|                           |   |                     |  
|Deficit, beginning of year | $ | (20,171,679         | )
|Loss for the
      year    |   | (398,864            | )
|Deficit, end of year       | $ | (20,570,543         | )

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Consolidated Statements of Cash Flows                              
|(Expressed in United States Dollars, unless otherwise
      stated)

|                                                                    |   | Years ended July 31 |  
|------------------------------------------------------------------- | - | ------------------- | -
|Cash provided
      by (used in)                                    |   | 2007                |  
|                                                                    |   |                     |  
|Operating activities                                                |   |                     |  
|Loss for the year                                                   | $ | (398,864            | )
|Items not involving cash                                            |   |                     |  
|Changes in non-cash working capital items                           |   |                     |  
|Amounts
      receivable and prepaids                               |   | (29,452             | )
|Accounts payable and accrued
      liabilities                      |   | (2,256              | )
|Amounts due from/(to) related
      parties                         |   | 23,018              |  
|                                                                    |   | (407,554            | )
|                                                                    |   |                     |  
|Financing activities                                                |   |                     |  
|Shares issued net of issuance costs                                 |   |                    |  
|                                                                    |   |                     |  
|(Decrease) increase in cash and cash
      equivalents              |   |                     |  
|during the year                                                     |   | (407,554            | )
|                                                                    |   |                     |  
|Cash and cash
      equivalents, beginning of year                  |   | 1,071,431           |  
|                                                                    |   |                     |  
|Cash and cash
      equivalents, end of year                        | $ | 663,877             |  
|                                                                    |   |                     |  
|Components of cash and cash equivalents are as follows:             |   |                     |  
|Cash                                                                | $ | (88                 | )
|Commercial paper                                                    |   | 61,992              |  
|Bankers acceptances                                                 |   | 601,973             |  
|                                                                    | $ | 663,877             |  
|                                                                    |   |                     |  
|Supplemental disclosure:                                            |   |                     |  
|Interest received during the
      year                             | $ | 35,741              |  
|Income taxes paid during the year                                   | $ |                    |  
|                                                                    |   |                     |  
|                                                                    |   |                     |  
|Non-cash financing activities                                       |   |                     |  
|Fair
      value of warrants exercised transferred to share capital | $ |                    |  

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|1. | NATURE AND CONTINUANCE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Quartz Mountain Resources Ltd. (the Company)
        is incorporated under the laws of British Columbia. The Company is primarily
        engaged in the acquisition and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements have been prepared
        using Canadian generally accepted accounting principles assuming a going
        concern. At July 31, 2007, the Company had working capital of approximately
        $698,500 (2006  $1,097,000). Other than incidental interest income,
        the Company has no source of revenue and has incurred operating losses
        since its inception. The ability of the Company to continue as a going
        concern depends upon its ability to develop profitable operations and
        to continue to raise adequate financing. There can be no assurance that
        the Company will be able to secure additional financial resources or achieve
        profitability or positive cash flows. If the Company is unable to obtain
        adequate additional financing or enter into business alliances, the Company
        will be required to curtail its operations and exploration activities.
        Failure to continue as a going concern would require that the Companys
        assets and liabilities be restated on a liquidation basis which could
        differ significantly from the going concern basis.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements have been prepared
        in accordance with Canadian generally accepted accounting principles and
        have been reconciled to United States generally accepted accounting principles
        in note 8. These consolidated financial statements include the accounts
        of (i) Quartz Mountain Resources Ltd., (ii) Quartz Mountain Gold Inc.,
        a wholly-owned subsidiary incorporated in the State of Nevada, and (iii)
        Wavecrest Resources Inc., a wholly-owned subsidiary of Quartz Mountain
        Gold Inc., incorporated in the State of Delaware.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | All material intercompany balances and transactions
        have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|(a) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Cash and cash equivalents consist of highly liquid investments,
        having maturity dates of three months or less from the date of purchase,
        which are readily convertible to known amounts of cash.                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | At July 31, 2007, the Company held Canadian-dollar-denominated
        cash and equivalents totaling Cdn$641,876 (2006  Cdn$1,141,607).                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(b) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Companys financial instruments consist of
        cash and cash equivalents, amounts receivable, amounts due from related
        parties and accounts payable and accrued liabilities. The fair value of
        these financial instruments approximates their carrying values due to
        their short term nature. It is managements opinion that the Company
        is not exposed to significant interest or credit risks arising from these
        financial instruments.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company maintains its cash and cash equivalents
        substantially in Canadian dollars and is subject to currency risk.                                                                                                                                                                                                                                                                                                                                                            

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(c) | Allowance for receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company establishes an allowance for receivables
        on a specific account basis. No allowance for receivables was recorded
        by the Company as at July 31, 2007 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Mineral property acquisition costs, and exploration
        and development expenditures incurred subsequent to the determination
        of the feasibility of mining operations, are capitalized until the property
        to which they relate is placed into production, sold, allowed to lapse
        or abandoned. Mineral property acquisition costs include the cash consideration
        and the fair value of common shares and warrants issued for mineral property
        interests, pursuant to the terms of the relevant agreement. These costs
        are amortized over the estimated life of the property following commencement
        of commercial production, or written off if the property is sold, allowed
        to lapse or abandoned, or when an impairment in value has been determined
        to have occurred.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Exploration expenses incurred prior to determination
        of the feasibility of mining operations, including periodic option payments
        and administrative expenditures are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company reviews its long-lived assets for impairment
        whenever events or changes in circumstances indicate that the carrying
        value of an asset may not be recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(e) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company records the fair value of an asset retirement
        obligation as a liability in the period in which it incurs a legal obligation
        associated with the retirement of tangible long-lived assets that result
        from the acquisition, construction, development and/or normal use of the
        assets. The Company also records a corresponding asset value which is
        amortized over the remaining service life of the asset being retired.
        Subsequent to the initial measurement of the asset retirement obligation,
        the obligation will be adjusted at the end of each period to reflect the
        passage of time (accretion expense) and changes in the estimated future
        cash flows underlying the obligation (asset retirement cost).                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company also reviews its long-lived assets for
        impairment whenever events or changes in circumstances indicate that the
        carrying value of an asset may not be recoverable. Recoverability of assets
        to be held and used is measured by a comparison of the carrying amount
        of an asset to future net cash flows expected to be generated by the asset.
        If the carrying amount of an asset exceeds its estimated future cash flows,
        an impairment charge is recognized in the amount by which the carrying
        amount of the asset exceeds the fair value of the asset.                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company has no material asset obligations as the
        Company, as at July 31, 2007 had not yet acquired a suitable mineral property
        upon which to conduct exploration activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(f) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company considers its functional currency to be
        the United States dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Monetary assets and liabilities of the Company and
        its integrated foreign operations are translated into United States dollars
        at exchange rates in effect at the balance sheet date. Non-monetary assets
        and liabilities are translated at historical exchange rates unless such
        items are carried at market, in which case they are translated at the
        exchange rates in effect on the balance sheet date. Revenues and expenses,
        except amortization, are translated at the average exchange rates for
        the period. Amortization is translated at the same exchange rate as the
        assets to which it relates. Gains or losses on translation are recorded
        in the statement of operations.                                                                                    

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(g) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company uses the asset and liability method of
        accounting for income taxes. Under this method, future income tax assets
        and liabilities are computed based on differences between the carrying
        amount of existing assets and liabilities on the balance sheet and their
        corresponding tax values, using the enacted or substantively enacted income
        tax rates expected to apply to taxable income in the years in which those
        temporary differences are expected to be recovered or settled.                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Future income tax assets also result from unused loss
        carry forwards and other deductions. Future tax assets are recognized
        to the extent that they are considered more likely than not to be realized.
        The valuation of future income tax assets is adjusted, if necessary, by
        the use of a valuation allowance to reflect the estimated realizable amount.                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(h) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company records proceeds from share issuances
        net of issue costs. Shares issued for consideration other than cash are
        valued at the quoted price on the stock exchange on the date that shares
        are issued pursuant to the relevant agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(i) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has a share option plan which is described
        in note 5(e). The Company accounts for all non- cash stock-based payments
        to non-employees, and employee awards that are direct awards of shares
        that call for settlement in cash or other assets, or that are share appreciation
        rights which call for settlement by the issuance of equity instruments,
        using the fair value method.                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Under the fair value method, stock-based payments
        are measured at the fair value of the consideration received, or the fair
        value of the equity instruments issued, or liabilities incurred, whichever
        is more reliably measurable. The fair value of non-cash stock-based payments
        is periodically re-measured until counterparty performance is complete,
        and any change therein is recognized in the same manner as if the Company
        had paid cash instead of paying with or using equity instruments. The
        cost of non-cash stock-based payments to service providers that are fully
        vested and non-forfeitable at the grant date is measured and recognized
        at that date.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Consideration received by the Company upon the exercise
        of share purchase options and warrants, and the stock-based compensation
        previously credited to contributed surplus related to such options and
        warrants, is credited to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | During the years ended July 31, 2007, 2006 and 2005,
        no stock options were granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(j) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Basic loss per share is calculated by dividing the
        loss for the period by the weighted average number of common shares outstanding
        during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Diluted loss per share is calculated using the treasury
        stock method. Under the treasury stock method, the weighted average number
        of common shares outstanding used for the calculation of diluted loss
        per share assumes that the proceeds to be received on the exercise of
        dilutive stock options and warrants are used to repurchase common shares
        at the average market price during the period.                                                                                                                                                                                                                                                                                                     

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(k) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The preparation of consolidated financial statements
        in conformity with Canadian generally accepted accounting principles requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and the disclosure of contingent assets
        and liabilities as at the balance sheet date and the reported amounts
        of revenue and expenses during the reporting period. Significant areas
        requiring the use of management estimates include the determination of
        potential impairment of asset values, reclamation obligations, as well
        as the assumptions used in determining the fair value of non-cash stock-based
        compensation. Actual results could differ from those estimates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(l) | Segment disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company is currently operating in a single segment
         the acquisition and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|4. | MINERAL PROPERTY INTERESTS
|-- | --------------------------

| |                                  |   | Years ended July 31 | 
| | -------------------------------- | - | ------------------- | 
| |                                  |   | 2007                | 
| |                                  |   |                     | 
| | Quartz Mountain Property         |   |                     | 
| | Net smelter
      royalty        |   | 1                   | 
| |                                  |   |                     | 
| |                                  |   |                     | 
| | Total mineral property interests | $ | 1                   | 

Quartz Mountain Property  Oregon,
  USA

During the year ended July 31, 2002,
  the Company sold 100% of its title, rights and interest in the Quartz Mountain
  property located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge")
  for 300,000 common shares of Seabridge, 200,000 common share purchase warrants
  of Seabridge, cash of $100,000, and a 1% net smelter return royalty payable
  to the Company on any production from the Quartz Mountain property.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|5.  | SHARE CAPITAL                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                           
|(a) | Authorized share capital                                                                                                                                                                  
|    |                                                                                                                                                                                           
|    | The Companys authorized
        share capital consists of an unlimited number of common shares, without
        par value and an unlimited number of preferred shares, without par value.
|    |                                                                                                                                                                                           
|(b) | Issued and outstanding common shares                                                                                                                                                      

| |                                            |  |            |  |  |        |  |   |            | 
| | ------------------------------------------ |  | ---------- |  |  | ------ |  | - | ---------- | 
| |                                            |  | Number of  |  |  | Price  |  |   | Amount     | 
| | Common shares issued                       |  | Shares     |  |  | (US$)  |  |   | (US$)      | 
| | Balance at July 31, 2004                   |  | 11,178,315 |  |  |        |  | $ | 20,627,632 | 
| | Cash received on exercise of warrants (i)  |  | 711,111    |  |  | 0.1254 |  |   | 89,179     | 
| | Fair value of warrants exercised           |  |           |  |  |        |  |   | 9,492      | 
| | Balance at July 31, 2005                   |  | 11,889,426 |  |  |        |  |   | 20,726,303 | 
| | Cash received on exercise of warrants (ii) |  | 1,510,000  |  |  | 0.3233 |  |   | 488,203    | 
| | Fair value of warrants
      exercised     |  |           |  |  |        |  |   | 54,540     | 
| | Balance at July 31, 2006 and 2007          |  | 13,399,426 |  |  |        |  | $ | 21,269,046 | 

| | (i)  | On December 2, 2002, the Company issued 711,111 units
        at a price of Cdn$0.1125 (US$0.071) per unit for gross proceeds of Cdn$80,000
        (net proceeds of US$40,895). Each unit was comprised of one common share
        and one share purchase warrant. Each warrant entitled the holder to purchase
        a further common share exercisable until December 2, 2004 at a price of
        Cdn$0.15. The share purchase warrants issued as part of this private placement
        had been recorded at an estimated fair value of $9,492. In November 2004,
        these warrants were exercised by the warrant holders. The estimated fair
        value of $9,492 was reallocated from contributed surplus to share capital.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii) | On April 19, 2004, the Company issued 1,510,000 units
        at a price of Cdn$0.28 (US$0.210) per unit for net proceeds of $258,712.
        Each unit was comprised of one common share and one share purchase warrant.
        Each warrant was exercisable until April 19, 2006 and entitled the holder
        to purchase a further common share at a price of Cdn$0.37. The share purchase
        warrants issued as part of this private placement had been recorded at
        an estimated fair value of $54,540. In April 2006, these warrants were
        exercised and the estimated fair value of $54,540 was reallocated from
        contributed surplus to share capital.                                                 

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(c) | Share purchase warrants                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                
|    | The continuity of share purchase warrants (each exercisable
        into one common share) for the year ended July 31, 2007 is:

| |                                      |  |             |   |  |          | 
| | ------------------------------------ |  | ----------- | - |  | -------- | 
| |                                      |  | Number      |   |  |          | 
| | Share purchase
      warrants issued |  | of Warrants |   |  | Price    | 
| |                                      |  |             |   |  |          | 
| | Balance at July 31, 2004             |  | 2,221,111   |   |  |          | 
| | Exercised (note 5(b)(i))             |  | (711,111    | ) |  | Cdn$0.15 | 
| |                                      |  |             |   |  |          | 
| | Balance at July 31, 2005             |  | 1,510,000   |   |  |          | 
| | Exercised (note 5(b)(ii))            |  | (1,510,000  | ) |  | Cdn$0.37 | 
| |                                      |  |             |   |  |          | 
| | Balance at July 31, 2006 and 2007    |  |            |   |  |         | 

|(d) | Contributed surplus
|--- | -------------------

| | Balance at July 31, 2004                                                 | $ | 64,032  |  
| | ------------------------------------------------------------------------ | - | ------- | -
| | Share purchase warrants exercised for common stock (note 5(b)(i))        |   | (9,492  | )
| |                                                                          |   |         |  
| | Balance at July 31, 2005                                                 |   | 54,540  |  
| | Share purchase warrants
      exercised for common stock (note 5(b)(ii)) |   | (54,540 | )
| |                                                                          |   |         |  
| | Balance at July 31, 2006 and 2007                                        | $ |        |  

|(e) | Share purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | On January 19, 2007, the Company amended its existing
        share purchase option compensation plan. The amended plan allows the Company
        to grant up to 10% of the issued and outstanding shares of the Company
        at any one time, typically vesting over two years, subject to regulatory
        terms and approval, to its directors, employees, officers, and consultants
        (previously, the Company was allowed to grant up to 1,900,000 share purchase
        options). The exercise price of each option may be set equal to or greater
        than the closing market price of the common shares on the NEX Exchange
        on the day prior to the date of the grant of the option, less any allowable
        discounts. Options have a maximum term of five years and terminate 30
        days following the termination of the optionee's employment, except in
        the case of retirement or death. This amendment is subject to approval
        by the shareholders of the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | To July 31, 2007, no share purchase options had been
        granted under the original or amended plans. Accordingly, there were no
        stock options outstanding as at July 31, 2007, 2006 and 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|6. | RELATED PARTY BALANCES AND TRANSACTIONS
|-- | ---------------------------------------

| | Balances receivable                         |   |                     |  |   | As at July 31 | 
| | ------------------------------------------- | - | ------------------- |  | - | ------------- | 
| |                                             |   |                     |  |   | 2007          | 
| | Hunter Dickinson Inc. (a)                   |   |                     |  | $ | 10,659        | 
| |                                             |   |                     |  |   |               | 
| | Transactions                                |   | Years ended July 31 | 
| |                                             |   | 2007                |  |   | 2006          | 
| | Services rendered and expenses reimbursed   |   |                     |  |   |               | 
| | Hunter Dickinson Inc. (a)                   | $ | 417,768             |  | $ | 69,407        | 
| | Euro-American Capital Corporation
      (b) |   |                    |  |   |              | 

Related party balances receivable or
  payable arise from advances by the Company for current and future services rendered
  to or costs incurred on behalf of the Company by Hunter Dickinson Inc. (HDI).
  The related party balances are non-interest bearing and due on demand.

| | (a) | HDI is a private company owned equally by ten public
        companies. HDI has certain directors in common with the Company and provides
        geological, corporate development, administrative and management services
        to, and incurs third party costs on behalf of, the Company and its subsidiaries
        on a full cost recovery basis pursuant to an agreement dated December
        31, 1996.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | During the year ended July 31, 2003, the Company completed
        a private placement with HDI of 711,111 units comprised of one common
        share and one share purchase warrant at a price of Cdn$0.1125 per unit.                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (b) | Euro-American Capital Corporation is a private company
        controlled by a director of the Company that provides management services
        to the Company based on the fair market value of those services.                                                                                                                                                                                                  

The amounts charged to the Company for
  the services provided have been determined by negotiation among the parties
  and in certain cases, by signed agreements. These transactions were in the normal
  course of operations and were measured at the exchange amount, which is the
  amount of consideration established and agreed to by the related parties.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|7. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | At July 31, 2007, the Company had estimated income tax
        losses available for application against future years taxable income
        of approximately $755,256 (2006  $1,350,099) in the United States
        which, if unused, will predominantly expire between fiscal years ending
        2008 and 2021. The Company also has tax losses in Canada of approximately
        $869,000 (2006  $457,000), which if unused, will expire between
        fiscal 2008 and 2027. The Company also has resource allowance expenditures
        and capital asset deductions of approximately $3,413,000 (2006 
        $3,639,000) and $106,000 (2006  $113,000), respectively, which carry
        forward indefinitely. Because of the uncertainty regarding the Company's
        ability to utilize these amounts in future years, an allowance equal to
        the amount of the tax asset relating to these amounts has been provided.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | A reconciliation of income tax expense at the statutory
        rate of 34.95% (2006  36.95%, 2005  35.6%) with reported taxes
        is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                              |   | Years ended July 31 |  
| | -------------------------------------------- | - | ------------------- | -
| | Income tax expense                           |   | 2007                |  
| |                                              |   |                     |  
| | Income (loss) before income taxes (recovery) | $ | (398,864            | )
| |                                              |   |                     |  
| | Income taxes (recovery) at statutory rates   |   | (148,649            | )
| | Non deductible items                         |   | 8,252               |  
| | Unrecognized (recognized) benefit of non-    |   |                     |  
| | capital losses                               |   | 140,397             |  
| | Net income taxes (recovery)                  | $ |                    |  

Amounts of future tax assets and liabilities
  are as follows:

| | Future tax assets and liabilities            |   | As at July 31 |  
| | -------------------------------------------- | - | ------------- | -
| |                                              |   | 2007          |  
| |                                              |   |               |  
| | Tax benefit of:                              |   |               |  
| | Losses carried forward  Canada              | $ | 269,000       |  
| | Losses carried forward
       United States |   | 234,000       |  
| | Resource allowance                           |   | 1,058,000     |  
| | Property and equipment                       |   | 33,000        |  
| |                                              |   | 1,594,000     |  
| | Valuation allowance                          |   | (1,594,000    | )
| | Future income tax
      asset (liability)    | $ |              |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|8. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
        ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The consolidated financial statements have been prepared
        in accordance with Canadian generally accepted accounting principles (Canadian
        GAAP), which differ in certain material aspects from those principles
        that the Company would have followed had its consolidated financial statements
        been prepared in accordance with United States generally accepted accounting
        principles (US GAAP). Had the Company followed US GAAP, certain
        items on the statements of loss and deficit, and balance sheets would
        have been reported as below:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Consolidated statements of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                                    |   |                     |   |   |            |   |   |            |  
| | -------------------------------------------------- | - | ------------------- | - | - | ---------- | - | - | ---------- | -
| |                                                    |   | Years ended July 31 |  
| |                                                    |   | 2007                |   |   | 2006       |   |   | 2005       |  
| |                                                    |   |                     |   |   |            |   |   |            |  
| |                                                    |   |                     |   |   |            |   |   |            |  
| | Loss for the year, Canadian GAAP                   | $ | (398,864            | ) | $ | (65,458    | ) | $ | (85,405    | )
| | Mineral property acquisition
      costs           |   |                    |   |   |           |   |   | (1         | )
| |                                                    |   |                     |   |   |            |   |   |            |  
| | Loss for the year,
      US GAAP                   | $ | (398,864            | ) | $ | (65,458    | ) | $ | (85,406    | )
| |                                                    |   |                     |   |   |            |   |   |            |  
| | Basic and diluted loss per common share,           |   |                     |   |   |            |   |   |            |  
| | US GAAP                                            | $ | (0.03               | ) | $ | (0.01      | ) | $ | (0.01      | )
| |                                                    |   |                     |   |   |            |   |   |            |  
| | Weighted average shares outstanding,               |   |                     |   |   |            |   |   |            |  
| | basic
      and diluted, Canadian GAAP and US GAAP |   | 13,399,426          |   |   | 12,322,741 |   |   | 11,694,601 |  

Consolidated balance sheets

| |                                                               |   |                     |   |   |                     |  
| | ------------------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
| |                                                               |   | As at               |   |   | As at               |  
| |                                                               |   | July
      31, 2007 |   |   | July
      31, 2006 |  
| | Total assets, Canadian GAAP                                   | $ | 712,911             |   | $ | 1,114,031           |  
| | Mineral
      property acquisition costs expensed per US GAAP |   | (1                  | ) |   | (1                  | )
| | Total assets  US GAAP                                        | $ | 712,910             |   | $ | 1,114,030           |  
| | Current liabilities,
      Canadian GAAP and US GAAP          | $ | 14,408              |   | $ | 16,664              |  
| | Shareholders equity, Canadian GAAP                           |   | 698,503             |   |   | 1,097,367           |  
| | Mineral property acquisition
      costs                      |   | (1                  | ) |   | (1                  | )
| | Shareholders equity, US GAAP                                 |   | 698,502             |   |   | 1,097,366           |  
| | Total liabilities
      and shareholders equity, US GAAP     | $ | 712,910             |   | $ | 1,114,030           |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

Consolidated statements of cash flows

| |                                                             |   |                     |   |   |           |   |   |          |  
| | ----------------------------------------------------------- | - | ------------------- | - | - | --------- | - | - | -------- | -
| |                                                             |   | Years ended July 31 |  
| |                                                             |   | 2007                |   |   | 2006      |   |   | 2005     |  
| |                                                             |   |                     |   |   |           |   |   |          |  
| |                                                             |   |                     |   |   |           |   |   |          |  
| | Cash flows used in operating activities, Canadian
      and |   |                     |   |   |           |   |   |          |  
| | US
      GAAP                                               | $ | (407,554            | ) | $ | (87,527   | ) | $ | (104,810 | )
| |                                                             |   |                     |   |   |           |   |   |          |  
| | Cash flows provided by financing activities,                |   |                     |   |   |           |   |   |          |  
| | Canadian and US GAAP                                        |   |                    |   |   | 488,203   |   |   | 89,179   |  
| |                                                             |   |                     |   |   |           |   |   |          |  
| | (Decrease) increase in cash and cash equivalents            |   |                     |   |   |           |   |   |          |  
| | during the year                                             |   | (407,554            | ) |   | 400,676   |   |   | (15,631  | )
| | Cash and cash equivalents, beginning of year                |   | 1,071,431           |   |   | 670,755   |   |   | 686,386  |  
| | Cash and cash equivalents,
      end of year                | $ | 663,877             |   | $ | 1,071,431 |   | $ | 670,755  |  

| | (a) | Mineral properties
| | --- | ------------------

Under Canadian GAAP, the Company accounts
  for mineral properties as described in note 3(d).

Costs of acquiring mining properties
  are capitalized upon acquisition. Mine development costs incurred either to
  develop new ore deposits, expand the capacity of mines, or to develop mine areas
  substantially in advance of current production are also capitalized once proven
  and probable reserves exist and the property is a commercially mineable property.
  Costs incurred to maintain current production or to maintain assets on a standby
  basis are charged to operations. Costs of abandoned projects are charged to
  operations upon abandonment. The Company evaluates the carrying value of capitalized
  mining costs and related property, plant and equipment costs, to determine if
  these costs are in excess of their net recoverable amount whenever events or
  changes in circumstances indicate that their carrying amounts may not be recoverable.
  The periodic evaluation of carrying value of capitalized costs and any related
  property, plant and equipment costs are based upon expected future cash flows
  and/or estimated salvage value in accordance with Statement of Financial Accounting
  Standards (SFAS) No. 144, Accounting for Impairment or Disposal of Long-Lived
  Assets.

| | (b) | Other presentation items
| | --- | ------------------------

Pursuant to US GAAP, the Company would
  be considered an exploration stage company as it is devoting its efforts to
  establishing a commercially viable mineral property. However, the identification
  of the Company as such for accounting purposes does not impact the measurement
  principles applied in these consolidated financial statements.

| | (c) | Impact of recent United States accounting
      pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | i)  | In June 2006, FASB issued Financial
        Interpretation No. 48, "Accounting for Uncertainty in Income Taxes
         An Interpretation of SFAS Statement No. 109". This interpretation
        provides guidance on recognition and measurement of uncertainties in income
        taxes and is effective for fiscal years commencing after December 15,
        2006. The Company has not yet determined the extent of the impact the
        adoption of this standard will have on the Company's results of operations
        or financial position.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2007, 2006 and 2005                   
|(Expressed in United
      States Dollars, unless otherwise stated)

| | ii)  | In September 2006, the FASB issued SFAS No. 157, Fair
        Value Measurements.SFAS No. 157 establishes a framework for
        measuring the fair value of assets and liabilities. This framework is
        intended to provide increased consistency in how fair value determinations
        are made under various existing accounting standards which permit, or
        in some cases require, estimates of fair market value. SFAS No. 157 is
        effective for fiscal years beginning after November 15, 2007, and interim
        periods within those fiscal years. Earlier application is encouraged,
        provided that the reporting entity has not yet issued financial statements
        for that fiscal year, including any financial statements for an interim
        period within that fiscal year. We are currently assessing the impact
        of SFAS No. 157 on our consolidated financial position and results of
        operations.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | iii) | In February, 2007, the FASB issued SFAS No. 159 The
        Fair Value Option for Financial Assets and Financial Liabilities.
        SFAS No. 159 permits entities to choose to measure many financial assets
        and financial liabilities at fair value. Unrealized gains and losses on
        items for which the fair value option has been elected are reported in
        earnings. SFAS No. 159 is effective for fiscal years beginning after November
        15, 2007. We are currently assessing the impact of SFAS No. 159 on our
        consolidated financial position and results of operations.                                                                                                                                                                                                                                                                                                                                                     

---