---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[     ]     REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934

OR

[ x ]     ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2012 OR

[     ]     TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

OR

[     ]     SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

Commission file number 0-15490

QUARTZ MOUNTAIN RESOURCES
LTD.(Exact name of Registrant as specified in its
charter)

BRITISH COLUMBIA, CANADA(Jurisdiction of
incorporation or organization)

15thFloor, 1040 West Georgia Street
Vancouver, British Columbia, Canada, V6E 4H1(Address of principal
executive offices)

Xenia Kritsos, Corporate Secretary Facsimile No.:
604-681-2741 15thFloor, 1040 West Georgia Street
Vancouver, British Columbia, Canada, V6E 4H1(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section
12(b) of the Act.

|Title of Each Class: | Name of each exchange on which registered
|-------------------- | -----------------------------------------
|Not applicable       | Not applicable                           

Securities registered or to be registered pursuant to Section
12(g) of the Act

Common shares, no par value

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report: 22,032,793 common shares as of July 31, 2012

Indicate by check mark if the Registrant is a well known
seasoned issuer, as defined in Rule 405 of the Securities Act.Yes
[    ]  No  [ x ]

If this report is an annual or transition report, indicate by
check mark if the Registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.Yes
[     ]   No  [ x ]

Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934during the preceding 12 months (or for such shorter
period that Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ x
]  No  [   ]

1

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Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).Yes [   ]  No [   ]

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer or non-accelerated filer. See definition
of "accelerated filer" and "large accelerated filer" in Rule 126-2 of the
Exchange Act.

|Large Accelerated Filer [    ] | Accelerated Filer [    ] | Non Accelerated Filer [ x
]
|------------------------------ | ------------------------ | ---------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [    ] | International Financial
      Reporting Standards as issued | Other [    ]
|---------------- | ----------------------------------------------------------- | ------------
|                 | by the International Accounting
      Standards Board [ x ] |             

If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow.Item 17 [    ]  Item 18 
[    ]

If this is an annual report, indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
  
Yes [   ]  No [ x ]

2

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T A B L E O F C O N T E N T S

|ITEM 1   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                              | 8 
|-------- | ---------------------------------------------------------------------------------- | --
|ITEM 2   | OFFER
      STATISTICS AND EXPECTED TIMETABLE                                      | 8 
|ITEM 3   | KEY INFORMATION                                                                    | 8 
|ITEM 4   | INFORMATION ON
      THE COMPANY                                                   | 14
|ITEM 4A  | UNRESOLVED STAFF COMMENTS                                                          | 25
|ITEM 5   | OPERATING AND
      FINANCIAL REVIEW AND PROSPECTS                                 | 25
|ITEM 6   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                         | 30
|ITEM 7   | MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 40
|ITEM 8   | FINANCIAL INFORMATION                                                              | 42
|ITEM 9   | THE OFFER AND
      LISTING                                                        | 42
|ITEM 10  | ADDITIONAL INFORMATION                                                             | 44
|ITEM 11  | QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK.                  | 55
|ITEM 12  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                             | 55
|ITEM 13  | DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES                              | 55
|ITEM 14  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      AND USE OF PROCEEDS | 55
|ITEM 15  | CONTROLS AND
      PROCEDURES                                                      | 55
|ITEM 16  | [RESERVED]                                                                         | 56
|ITEM 16A | AUDIT
      COMMITTEE FINANCIAL EXPERT                                             | 56
|ITEM 16B | CODE OF ETHICS                                                                     | 57
|ITEM 16C | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                       | 57
|ITEM 16D | EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES                             | 58
|ITEM 16E | PURCHASES OF
      EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 58
|ITEM 16F | CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT                                       | 58
|ITEM 16G | CORPORATE
      GOVERNANCE                                                         | 58
|ITEM 17  | FINANCIAL STATEMENTS                                                               | 58
|ITEM 18  | FINANCIAL
      STATEMENTS                                                         | 59
|ITEM 19  | EXHIBITS                                                                           | 59

3

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GENERAL

In this Annual Report on Form 20-F, all references to "we", the
"Company" or "Quartz Mountain" refer to Quartz Mountain Resources Ltd. and its
consolidated subsidiary.

The Company uses the Canadian dollar as its reporting currency.
All references in this document to "dollars" or "$" are expressed in Canadian
dollars, unless otherwise indicated. See also Item 3  "Key
Information"for more detailed currency and conversion information.

Except as noted, the information set forth in this Annual
Report is as of November 22, 2012, and all information included in this document
should only be considered correct as of such date.

Certain terms used herein are defined as follows:

ICP
    Inductively coupled plasma (ICP) mass spectrometry is a
      type of mass spectrometry which is capable of detecting metals and several
      non-metals at concentrations as low as one part in 1012 (part per
      trillion).ICP-AES
    Inductively coupled plasma atomic emission spectroscopy
      is an analytical technique used for the detection of trace metals. It is a
      type of emission spectroscopy that uses the inductively coupled plasma to
      produce excited atoms and ions that emit electromagnetic radiation at
      wavelengths characteristic of a particular element. The intensity of this
      emission is indicative of the concentration of the element within the
      sample.Induced Polarization (IP) Survey
    A geophysical survey used to identify a feature that
      appears to be different from the typical or background survey results when
      tested for levels of electro-conductivity; IP detects both chargeable,
      pyrite-bearing rock and non-conductive rock that has a high content of
      quartz.Epithermal Deposit
    Gold, gold-silver or silver, some with important base
      metal minerals, occurring in veins, fractures and breccias or as
      disseminations; range from narrow vein to large low grade disseminated
      deposits.


4

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Mineral Reserve
    Securities and Exchange Commission Industry Guide 7
      Description of Property by Issuers Engaged or to be Engaged in
      Significant Mining Operations(under the United States
      Securities Exchange Act of 1934, as amended) defines a 'reserve' as that
      part of a mineral deposit which could be economically and legally
      extracted or produced at the time of the reserve determination. Reserves
      consist of:
      (1) Proven (Measured) Reserves.Reserves for
      which: (a) quantity is computed from dimensions revealed in outcrops,
      trenches, workings or drill holes; grade and/or quality are computed from
      the results of detailed sampling; and (b) the sites for inspection,
      sampling and measurement are spaced so closely and the geologic character
      is so well defined that size, shape, depth and mineral content of reserves
      are well-established.
      (2) Probable (Indicated) Reserves.Reserves for
      which quantity and grade and/or quality are computed from information
      similar to that used for proven (measured) reserves, but the sites for
      inspection, sampling and measurement are farther apart or are otherwise
      less adequately spaced. The degree of assurance, although lower than that
      for proven (measured) reserves, is high enough to assume continuity
      between points of observation.
      As a reporting issuer under the Securities Actsof
      British Columbia and Alberta, the Company is subject to National
      Instrument 43-101 Standards of Disclosure for Mineral Projectsof the Canadian Securities Administrators. Securities and Exchange
      Commission Industry Guide 7, as interpreted by Securities and Exchange
      Commission Staff, applies standards that are different from those
      prescribed by National Instrument 43-101 in order to classify
      mineralization as a reserve. Under the standards of the Securities and
      Exchange Commission, mineralization may not be classified as a "reserve"
      unless the determination has been made that the mineralization could be
      economically and legally produced or extracted at the time the reserve
      determination is made. Among other things, all necessary permits would be
      required to be in hand or issued imminently in order to classify
      mineralized material as reserves under Securities and Exchange Commission
      Industry Guide 7. Accordingly, mineral reserve estimates established in
      accordance with National Instrument 43-101 may not qualify as "reserves"
      under SEC standards. The Company does not currently have any mineral
      deposits that have been classified as reserves.


5

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Mineral Resource
    National Instrument 43-101 Standards of Disclosure for
      Mineral Projects of the Canadian Securities Administrators defines a
      "Mineral Resource" as a concentration or occurrence of natural, solid,
      inorganic or fossilized organic material in or on the Earth's crust in
      such form and quantity and of such a grade or quality that it has
      reasonable prospects for economic extraction. The location, quantity,
      grade, geological characteristics and continuity of a mineral resource are
      known, estimated or interpreted from specific geological evidence and
      knowledge.
      Mineral Resources are sub-divided, in order of increasing
      geological confidence, into Inferred, Indicated and Measured categories.
      An Inferred Mineral Resource has a lower level of confidence than that
      applied to an Indicated Mineral Resource. An Indicated Mineral Resource
      has a higher level of confidence than an Inferred Mineral Resource but has
      a lower level of confidence than a Measured Mineral Resource. It cannot be
      assumed that all or any part of Measured Mineral Resources, Indicated
      Mineral Resources, or Inferred Mineral Resources will ever be upgraded to
      a higher category. It also cannot be assumed that any part of any reported
      Measured Mineral Resources, Indicated Mineral resources, or Inferred
      Mineral Resources is economically or legally mineable. Further, in
      accordance with Canadian rules, estimates of Inferred Mineral Resources
      cannot form the basis of feasibility or other economic studies.
      (1) Inferred Mineral Resource.An 'Inferred
      Mineral Resource' is that part of a Mineral Resource for which quantity
      and grade or quality can be estimated on the basis of geological evidence
      and limited sampling and reasonably assumed, but not verified, geological
      and grade continuity. The estimate is based on limited information and
      sampling gathered through appropriate techniques from locations such as
      outcrops, trenches, pits, workings and drill holes.
      (2) Indicated Mineral Resource.An 'Indicated
      Mineral Resource' is that part of a Mineral Resource for which quantity,
      grade or quality, densities, shape and physical characteristics can be
      estimated with a level of confidence sufficient to allow the appropriate
      application of technical and economic parameters, to support mine planning
      and evaluation of the economic viability of the deposit. The estimate is
      based on detailed and reliable exploration and testing information
      gathered through appropriate techniques from locations such as outcrops,
      trenches, pits, workings and drill holes that are spaced closely enough
      for geological and grade continuity to be reasonably assumed.
      (3) Measured Mineral Resource.A 'Measured Mineral
      Resource' is that part of a Mineral Resource for which quantity, grade or
      quality, densities, shape, physical characteristics are so well
      established that they can be estimated with confidence sufficient to allow
      the appropriate application of technical and economic parameters, to
      support production planning and evaluation of the economic viability of
      the deposit. The estimate is based on detailed and reliable exploration,
      sampling and testing information gathered through appropriate techniques
      from locations such as outcrops, trenches, pits, workings and drill holes
      that are spaced closely enough to confirm both geological and grade
      continuity.
      Industry Guide 7  "Description of Property by Issuers
      Engaged or to be Engaged in Significant Mining Operations"of
      the Securities and Exchange Commission does not define or recognize
      resources. In addition, disclosure of resources using "contained ounces"
      is permitted under Canadian regulations; however, the Securities and
      Exchange Commission only permits issuers to report mineralization that
      does not qualify as a reserve as in place tonnage and grade without
      reference to unit measures. As used in this Form 20-F, "resources" are as
      defined in National Instrument 43-101.
      For the above reasons, information in the Company's
      publicly-available documents containing descriptions of the Company's
      mineral deposits may not be comparable to similar information made public
      by U.S. companies subject to the reporting and disclosure requirements
      under the United States federal securities laws and the rules and
      regulations thereunder.


6

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Mineral Symbols
    As  arsenic; Au  gold; Ag  silver; Cu  copper; Fe 
      iron; Hg  mercury; Mo  molybdenum; Na  sodium; Ni  nickel; O  oxygen;
      Pd - palladium; Pt  platinum; Pb  lead; S  sulphur; Sb  antimony; Zn 
      zinc.Net Smelter Return (NSR)
    Monies received for concentrate delivered to a smelter
      net of metallurgical recovery losses, transportation costs, smelter
      treatment-refining charges and penalty charges.Porphyry Deposit
    Mineral deposit characterized by widespread disseminated
      or veinlet- hosted sulphide mineralization, characterized by large tonnage
      and moderate to low grade.Sulphide
    A compound of sulphur with another element, typically a
      metallic element or compound.Vein
    A tabular or sheet-like mineral deposit with identifiable
      walls, often filling a fracture or fissure.


Currency and Measurement

All currency amounts in this Annual Report are stated in
Canadian dollars unless otherwise indicated.

Conversion of metric units into imperial equivalents is as
follows:

Metric Units
    Multiply by
    Imperial Unitshectares
    2.471
    = acresmeters
    3.281
    = feetkilometers
    0.621
    = miles (5,280 feet)grams
    0.032
    = ounces (troy)tonnes
    1.102
    = tons (short) (2,000 lbs)grams/tonne
    0.029
    = ounces (troy)/ton


NOTE ON FORWARD LOOKING STATEMENTS

This Annual Report on Form 20-F contains statements that
constitute "forward-looking statements". Any statements that are not statements
of historical facts may be deemed to be forward-looking statements. These
statements appear in a number of different places in this Annual Report and, in
some cases, can be identified by words such as "anticipates", "estimates",
"projects", "expects", "intends", "believes", "plans", or their negatives or
other comparable words. The forward-looking statements, including the statements
contained in Item 3D "Risk Factors", Item 4B "Business Overview",
Item 5 "Operating and Financial Review and Prospects"and Item 11
"Quantitative and Qualitative Disclosures About Market Risk", involve
known and unknown risks, uncertainties and other factors which may cause the
Company's actual results, performance or achievements to be materially different
from any future results, performance or achievements that may be expressed or
implied by such statements. Forward-looking statements include statements
regarding the outlook for the Company's future operations, plans and timing for
the Company's exploration programs, statements about future market conditions,
supply and demand conditions, forecasts of future costs and expenditures, the
outcome of legal proceedings, and other expectations, intentions and plans that
are not historical facts.

You are cautioned that forward-looking statements are not
guarantees. The risks and uncertainties that could cause the Company's actual
results to differ materially from those expressed or implied by the
forward-looking statements include:

- changes in general economic and business conditions, including commodity
  prices, costs associated with mineral exploration and development, changes in
  interest rates and the availability of financing on reasonable terms;
- natural phenomena, including geological and meteorological phenomena;
- actions by government authorities, including changes in government
  regulation and permitting requirements;
- uncertainties associated with legal proceedings;
- future decisions by management in response to changing conditions;
- the Company's ability to execute prospective business plans; and
- misjudgments in the course of preparing forward-looking statements.

7

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The Company advises you that these cautionary remarks expressly
qualify, in their entirety, all forward-looking statements attributable to
Quartz Mountain or persons acting on the Company's behalf. The Company assumes
no obligation to update the Company's forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such statements. You should carefully review the cautionary statements and risk
factors contained in this and other documents that the Company files from time
to time with the Securities and Exchange Commission.

|ITEM 1 | IDENTITY OF DIRECTORS,
      SENIOR MANAGEMENT AND ADVISERS
|------ | -----------------------------------------------------------

|A. | DIRECTORS AND SENIOR
MANAGEMENT
|-- | -------------------------------

Not applicable.

|B. | ADVISERS
|-- | --------

Not applicable.

|C. | AUDITORS
|-- | --------

Not applicable.

|       |                                              
|------ | ---------------------------------------------
|ITEM 2 | OFFER STATISTICS AND
      EXPECTED TIMETABLE

Not applicable.

---

|ITEM 3 | KEY INFORMATION
|------ | ---------------

|A. | Selected Financial Data
|-- | -----------------------

The following tables summarize selected financial data for the
Company (stated in Canadian dollars) prepared, in respect of the years ended
July 31, 2012 and July 31, 2011, in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) (IFRS-IASB). The Companys consolidated financial statements
have been prepared in accordance with IFRS-IASB for the first time for the
fiscal year ended July 31, 2012, together with comparative consolidated
financial statements for the prior fiscal year also in accordance with
IFRS-IASB. Pursuant to SEC Release 33-8567 this information is presented solely
for these two years, and information based on US GAAP is not provided. The
information in the table was extracted from the more detailed consolidated
financial statements and related notes included herein and should be read in
conjunction with these consolidated financial statements and with the
information appearing under the heading Item 5  Operating And Financial Review
And Prospects. Results for the period ended July 31, 2012 are not necessarily
indicative of results for future periods.

The selected financial data of the Company for the fiscal years
2012 and 2011 was derived from the consolidated financial statements of the
Company that have been audited by Davidson & Company LLP, independent
Chartered Accountants, as indicated in their audit report which is included
elsewhere in this Annual Report.

The auditors conducted their audits in accordance with United
States and Canadian generally accepted auditing standards, and the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that the auditor plan and perform the audit to obtain reasonable
assurance about whether the consolidated 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 consolidated financial
statement presentation.

For the year ended July 31, 2012
    For the year ended July 31, 2011Sales Revenue
    $ 
    $ Loss from Operations
    $ 3,587,805
    $ 174,867Loss and Comprehensive Loss
    $ 3,587,805
    $ 183,483


8

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Basic and Diluted Loss per Common Share
    $ 0.20
    $ 0.01Dividends Per Share
    
    Working Capital
    $ 911,035
    $ 57,066Total Assets
    $ 2,821,289
    $ 99,230Shareholders Equity
    $ 989,036
    $ 57,067Shares Outstanding
    22,032,793
    13,399,422


Currency and Exchange Rates

On November 22, 2012 the rate of exchange of the Canadian
dollar, based on the daily noon rate in Canada as published by the Bank of
Canada, was US$1 = Canadian $0.9974. Exchange rates published by the Bank of
Canada are, available on its website www.bankofcanada.ca, nominal
quotations  not buying or selling rates  and are intended for statistical or
analytical purposes.

The following tables set out the exchange rates, based on the
daily noon rates in Canada as published by the Bank of Canada for the conversion
of Canadian dollars into U.S. dollars.

For year ended July 31
      (Canadian Dollar per U.S. Dollar)2012
    2011
    2010
    2009
    2008End of Period
    $0.9986
    $0.9538
    $1.0290
    $1.0790
    $1.0257Average for the Period(1)
    $0.9935
    $0.9941
    $1.0486
    $1.1758
    $1.0070High for the Period
    $1.0583
    $1.0642
    $1.1079
    $1.3000
    $1.0755Low for the Period
    $0.9430
    $0.9449
    $0.9961
    $1.0253
    $0.9170


(1) The average rate for each period is the average of the
daily noon rates on the last day of each month during the period.

Monthly High and Low Exchange Rate
      (Canadian Dollar per U.S. Dollar)Month
    High
    LowJuly 2012
    $0.9986
    $0.9790June 2012
    $0.9825
    $0.9599May 2012
    $1.0164
    $0.9663April 2012
    $1.0197
    $0.9961March 2012
    $1.0153
    $0.9985


|B. | Capitalization and
Indebtedness
|-- | -------------------------------

Not applicable.

|C. | Reasons for the Offer and Use of
  Proceeds
|-- | -------------------------------------------

Not applicable.

|D. | Risk Factors
|-- | ------------

Due to the nature of the Company's business and the present
stage of exploration and development of its projects in British Columbia, an
investment in the securities of Quartz Mountain is highly speculative and
subject to a number of risks. Briefly, these include the highly speculative
nature of the resources industry, characterized by the requirement for large
capital investments from an early stage and a very small probability of finding
economic mineral deposits. In addition to the general risks of mining, there are
country-specific risks, including currency, political, social, permitting and
legal risk. An investor should carefully consider the risks described below and
the other information that Quartz Mountain furnishes to, or files with, the
Securities and Exchange Commission and with Canadian securities regulators
before investing in Quartz Mountain's common shares, and should not consider an
investment in Quartz Mountain unless the investor is capable of sustaining an
economic loss of the entire investment. The Company's actual exploration and
operating results may be very different from those expected as at the date of
this Annual Report.

9

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Exploration, Development and Mining Risks

Resource exploration, development, and operations are highly
speculative, characterized by a number of significant risks, which even a
combination of careful evaluation, experience and knowledge may not reduce,
including among other things, unsuccessful efforts resulting not only from the
failure to discover mineral deposits but from finding mineral deposits which,
though present, are insufficient in quantity and quality to return a profit from
production. Few properties that are explored are ultimately developed into
producing mines. Unusual or unexpected formations, formation pressures, fires,
power outages, labour disruptions, flooding, explosions, cave-ins, landslides
and the inability to obtain suitable or adequate machinery, equipment or labour
are other risks involved in the operation of mines and the conduct of
exploration programs. The Company will rely upon consultants and others for
exploration, development, construction and operating expertise. Substantial
expenditures are required to establish mineral resources and mineral reserves
through drilling, to develop metallurgical processes to extract the metal from
mineral resources, and in the case of new properties, to develop the mining and
processing facilities and infrastructure at any site chosen for mining.

No assurance can be given that minerals will be discovered in
sufficient quantities to justify commercial operations or that funds required
for development can be obtained on a timely basis. Whether a mineral deposit
will be commercially viable depends on a number of factors, some of which are:
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure; metal prices, which are highly cyclical; and government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals, and environmental
protection. The exact effect of these factors cannot accurately be predicted,
but the combination of these factors may result in the Company not receiving an
adequate return on invested capital.

The Company will carefully evaluate the political and economic
environment in considering any properties for acquisition.

Future Profits/Losses and Production
Revenues/Expenses

The Company has no history of operations or earnings, and
expects that its losses and negative cash flow will continue for the foreseeable
future. The Company currently a limited number of mineral properties and there
can be no assurance that the Company will, if needed, be able to acquire
additional properties of sufficient technical merit to represent a compelling
investment opportunity. If the Company is unable to acquire additional
properties, its entire prospects will rest solely with its current projects and
accordingly, the risk of being unable to identify a mineral deposit will be
higher than if the Company had additional properties to explore. There can be no
assurance that the Company will ever be profitable in the future. The Company's
operating expenses and capital expenditures may increase in subsequent years as
needed consultants, personnel and equipment associated with advancing
exploration, development and commercial production of its current properties and
any other properties that the Company may acquire are added. The amounts and
timing of expenditures will depend on the progress of on-going exploration and
development, the results of consultants' analyses and recommendations, the rate
at which operating losses are incurred, the execution of any joint venture
agreements with strategic partners, and the Company's acquisition of additional
properties and other factors, many of which are beyond the Company's control.
The Company does not expect to receive revenues from operations in the
foreseeable future, and expects to incur losses unless and until such time as
its current properties, or any other properties the Company may acquire commence
commercial production and generate sufficient revenues to fund its continuing
operations. The development of the Companys current properties and any other
properties the Company may acquire will require the commitment of substantial
resources to conduct the time-consuming exploration and development of
properties. The Company anticipates that it will retain any cash resources and
potential future earnings for the future operation and development of the
Company's business. The Company has not paid dividends since incorporation and
the Company does not anticipate paying dividends in the foreseeable future.
There can be no assurance that the Company will generate any revenues or achieve
profitability. There can be no assurance that the underlying assumed levels of
expenses will prove to be accurate. To the extent that such expenses do not
result in the creation of appropriate revenues, the Company's business may be
materially adversely affected. It is not possible to forecast how the business
of the Company will develop.

Permits and Licenses

The operations of the Company will require licenses and permits
from various governmental authorities. There can be no assurance that the
Company will be able to obtain all necessary licenses and permits which may be
required to carry out exploration and development of the Buck, Galaxie, Karma
and ZNT Projects.

Additional Funding Requirements

Further development of the Company's properties will require
additional capital. The Company currently does not have sufficient funds to
fully develop the properties it holds. In addition, a positive production
decision at these properties or any other development projects acquired in the
future would require significant capital for project engineering and
construction. Accordingly, the continuing development of the Company's
properties will depend upon the Company's ability to obtain funding through debt
or equity financings, the joint venturing of projects, or other means. It is
possible that the financing required by the Company will not be available, or, if available, will
not be available on acceptable terms. If the Company issues treasury shares to
finance its operations or expansion plans, control of the Company may change and
shareholders may suffer dilution of their investment. If adequate funds are not
available, or are not available on acceptable terms, the Company may not be able
to take advantage of opportunities, or otherwise respond to competitive
pressures and remain in business. In addition, a positive production decision at
any of the Companys current projects or any other development projects acquired
in the future would require significant resources/funding for project
engineering and construction. Accordingly, the continuing development of the
Companys properties will depend upon the Companys ability to obtain financing
through debt financing, equity financing, the joint venturing of projects, or
other means. There is no assurance that the Company will be successful in
obtaining the required financing for these or other purposes, including for
general working capital.

10

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Going concern assumption

The Company's consolidated financial statements have been
prepared assuming the Company will continue on a going concern basis. However,
unless additional funding is obtained, this assumption will have to change. The
Company has incurred losses since inception. Failure to continue as a going
concern would require that Quartz Mountain's assets and liabilities be restated
on a liquidation basis, which could differ significantly from the going concern
basis.

Infrastructure Risk

The operations of the Company are carried out in geographical
areas which may lack adequate infrastructure and are subject to various other
risk factors. Mining, processing, development and exploration activities depend,
to one degree or another, on adequate infrastructure. Reliable roads, bridges,
power sources and water supply are important determinants which affect capital
and operating costs. Lack of such infrastructure or unusual or infrequent
weather phenomena, government or other interference in the maintenance or
provision of such infrastructure could adversely affect the Company's
operations, financial condition and results of operations.

Changes in Local Legislation or Regulation

The Company's mining and processing operations and exploration
activities are subject to extensive laws and regulations governing the
protection of the environment, exploration, development, production, exports,
taxes, labour standards, occupational health, waste disposal, toxic substances,
mine and worker safety, protection of endangered and other special status
species and other matters. The Company's ability to obtain permits and approvals
and to successfully operate in particular communities may be adversely impacted
by real or perceived detrimental events associated with the Company's activities
or those of other mining companies affecting the environment, human health and
safety of the surrounding communities. Delays in obtaining or failure to obtain
government permits and approvals may adversely affect the Company's operations,
including its ability to explore or develop properties, commence production or
continue operations. Failure to comply with applicable environmental and health
and safety laws and regulations may result in injunctions, fines, suspension or
revocation of permits and other penalties. The costs and delays associated with
compliance with these laws, regulations and permits could prevent the Company
from proceeding with the development of a project or the operation or further
development of a mine or increase the costs of development or production and may
materially adversely affect the Company's business, results of operations or
financial condition. The Company may also be held responsible for the costs of
addressing contamination at the site of current or former activities or at third
party sites. The Company could also be held liable for exposure to hazardous
substances.

Environmental Matters

All of the Company's operations are and will be subject to
environmental laws and regulations, which can make operations expensive or
prohibit them altogether. The Company may be subject to potential risks and
liabilities associated with pollution of the environment and the disposal of
waste products that could occur as a result of its mineral exploration,
development and production. In addition, environmental hazards may exist on a
property in which the Company directly or indirectly holds an interest, which
are unknown to the Company at present and have been caused by previous or
existing owners or operators of the Companys projects. Environmental
legislation provides for restrictions and prohibitions on spills, releases or
emissions of various substances produced in association with certain mining
industry operations which would result in environmental pollution. A breach of
such legislation may result in the imposition of fines and penalties, or the
requirement to remedy environmental pollution, which would reduce funds
otherwise available to the Company and could have a material adverse effect on
the Company. If the Company is unable to fully remedy an environmental problem,
it could be required to suspend operations or undertake interim compliance
measures pending completion of the required remedy, which could have a material
adverse effect on the Company.

There is no assurance that future changes in environmental
regulation, if any, will not adversely affect the Companys operations. There is
also a risk that the environmental laws and regulations may become more onerous,
making the Company's operations more expensive. Many of the environmental laws
and regulations applicable to the Companys operations will require the Company
to obtain permits for its activities. The Company will be required to update and
review its permits from time to time, and may be subject to environmental impact analyses and public review
processes prior to approval of the additional activities. It is possible that
future changes in applicable laws, regulations and permits or changes in their
enforcement or regulatory interpretation could have a significant impact on some
portion of the Company's business, causing those activities to be economically
re-evaluated at that time.

11

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Groups Opposed to Mining May Interfere with the Company's
Efforts to Explore and Develop its Properties

Organizations opposed to mining may be active in the regions in
which the Company conducts its exploration activities. Although the Company
intends to comply with all environmental laws and maintain good relations with
local communities, there is still the possibility that those opposed to mining
will attempt to interfere with the development of the Company's properties. Such
interference could have an impact on the Company's ability to explore and
develop its properties in a manner that is most efficient or appropriate, or at
all, and any such impact could have a material adverse effect on the Company's
financial condition and the results of its operations.

Market for Securities and Volatility of Share Price

There can be no assurance that active trading market in the
Company's securities will be established or sustained. The market price for the
Company's securities is subject to wide fluctuations. Factors such as
announcements of exploration results, as well as market conditions in the
industry or the economy as a whole, may have a significant adverse impact on the
market price of the securities of the Company.

The stock market has from time to time experienced extreme
price and volume fluctuations that have often been unrelated to the operating
performance of particular companies.

Conflicts of Interest

The Company's directors and officers may serve as directors or
officers of other companies, joint venture partners, or companies providing
services to the Company or they may have significant shareholdings in other
companies. Situations may arise where the directors and/or officers of the
Company may be in competition with the Company. Any conflicts of interest will
be subject to and governed by the law applicable to directors' and officers'
conflicts of interest. In the event that such a conflict of interest arises at a
meeting of the Company's directors, a director who has such a conflict will
abstain from voting for or against the approval of such participation or such
terms. In accordance with applicable laws, the directors of the Company are
required to act honestly, in good faith and in the best interests of the
Company.

Lack of Revenue and a History of Operating Losses

The Company does not have any operational history or earnings
and the Company has incurred net losses and negative cash flow from its
operations since its incorporation. Although the management of the Company hopes
to eventually generate revenues, significant operating losses are to be
anticipated for at least the next several years and possibly longer. To the
extent that such expenses do not result in the creation of appropriate revenues,
the Company's business may be materially adversely affected. It is not possible
to forecast how the business of the Company will develop.

General Economic Conditions

Global financial markets have experienced a sharp increase in
volatility during the last few years. Market conditions and unexpected
volatility or illiquidity in financial markets may adversely affect the
prospects of the Company and the value of the Company's shares.

Reliance on Key Personnel

The Company is dependent on the continued services of its
senior management team, and its ability to retain other key personnel. The loss
of such key personnel could have a material adverse effect on the Company. There
can be no assurance that any of the Company's employees will remain with the
Company or that, in the future, the employees will not organize competitive
businesses or accept employment with companies competitive with the Company.
Furthermore, as part of the Company's growth strategy, it must continue to hire
highly qualified individuals. There can be no assurance that the Company will be
able to attract, train or retain qualified personnel in the future, which would
adversely affect its business.

Risks Related to Flow-Through Shares

Financing of the Company may involve the issuance of
flow-through common shares under the Income Tax Act(Canada). There is no
guarantee that there will not be any differences of opinion between the Canadian
federal and British Columbia provincial tax authorities with respect to the tax
treatment of flow-through common shares issued under a financing, if any, and
the activities contemplated by the Company's exploration and development
programs.

If the Company does not expend an amount equal to the gross
proceeds from the sale of flow-through common shares so as to incur sufficient
qualifying expenditures within the relevant timeframe, subscribers in the
flow-through financing may be reassessed. The Company shall be obligated to
indemnify any subscribers of flow-through common shares for tax payable pursuant
to any such reassessment pursuant to the terms and conditions set out in the
subscription agreements that the Company will enter into with each subscriber in a flow-through
financing. There can be no assurances that the Company will have sufficient
funds to satisfy such obligations.

12

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Competition

The resources industry is highly competitive in all its phases,
and the Company will compete with other mining companies, many of which have
greater financial, technical and other resources. Competition in the mining
industry is primarily for: attractive mineral rich properties capable of being
developed and producing economically; the technical expertise to find, develop
and operate such properties; the labour to operate the properties; and the
capital for the purpose of funding such properties. Many competitors not only
explore for and mine certain minerals, but also conduct production and marketing
operations on a worldwide basis. Such competition may result in the Company
being unable to acquire desired properties, to recruit or retain qualified
employees or to acquire the capital necessary to fund its operations and develop
its properties. The Company's inability to compete with other mining companies
for these resources could have a materially adverse effect on the Company's
results of operation and its business.

Uninsurable Risks

In the course of exploration, development and production of
mineral properties, certain risks, and in particular, unexpected or unusual
geological operating conditions including rock bursts, cave ins, fires, flooding
and earthquakes may occur. It is not always possible to fully insure against
such risks and the Company may decide not to take out insurance against such
risks as a result of high premiums or other reasons.

Land Claims

In Canada, aboriginal interests, rights (including treaty
rights), claims and title may exist notwithstanding that they may be
unregistered or overlap with other tenures and interests granted to third
parties. Generally speaking, the scope and content of such rights are not well
defined and may be the subject of litigation or negotiation with the government.
The government has a legal obligation to consult First Nations on proposed
activities that may have an impact on asserted or proven aboriginal interests,
claims, rights or title. All of the mineral claims in the Companys projects are
identified by the Province of British Columbia as overlapping with areas in
which certain aboriginal groups have asserted aboriginal interests, rights,
claims or, title or undefined rights under historic treaties. Nevertheless,
potential overlaps between the Companys properties and existing or asserted
aboriginal interests, rights, claims or, title, or undefined rights under
historic treaties, may exist notwithstanding whether the Province of British
Columbia has identified such interests, rights, claims or, title or undefined
rights under historic treaties.

Property Title

The acquisition of title to resource properties is a very
detailed and time-consuming process. Title to, and the area of, resource claims
may be disputed. Although the Company believes it has taken reasonable measures
to ensure that title to the mineral claims comprising part of its projects are
held as described, there is no guarantee that title to any of those claims will
not be challenged or impaired. There may be valid challenges to the title of any
of the mineral claims comprising the Companys projects that, if successful,
could impair development or operations or both.

The mineral property underlying the Company's net smelter
return royalty interest contains no known ore.

The Company holds a 1% net smelter return ("NSR") royalty
interest on the Quartz Mountain Property (recently renamed "Angel's Camp"), an
exploration stage prospect in Oregon. The Company's interest in the property
will be limited to any future NSR that would be forthcoming only if or when any
mining commences on the property. There is currently no known body of ore on the
property. Extensive additional exploration work will be required to ascertain if
any mineralization may be economic.

Likely PFIC status has consequences for United States
investors

Potential investors who are U.S. taxpayers should be aware that
the Company expects to be classified for U.S. tax purposes as a passive foreign
investment company ("PFIC") for the current fiscal year, and may also have been
a PFIC in prior years and may also be a PFIC in future years. If the Company is
a PFIC for any year during a U.S. taxpayer's holding period, then such U.S.
taxpayer generally will be required to treat any so-called "excess distribution"
on its common shares, or any gain realized upon a disposition of common shares,
as ordinary income which would be taxed at the shareholder's highest marginal
rates and to pay an interest charge on a portion of such distribution or gain,
unless the taxpayer has made a timely qualified electing fund ("QEF") election
or a mark-to-market election with respect to the shares of the Company. In
certain circumstances, the sum of the tax and the interest charge may exceed the
amount of the excess distribution received, or the amount of proceeds of
disposition realized, by the taxpayer. A U.S. taxpayer who makes a QEF election
generally must report on a current basis its share of the Company's net capital
gain and ordinary earnings for any year in which the Company is a PFIC, whether
or not the Company distributes any amounts to its shareholders.
A U.S. taxpayer who makes the mark-to-market election generally must include as
ordinary income each year the excess of the fair market value of the common
shares over the taxpayer's tax basis therein. See also Item 10E  "Passive
Foreign Investment Company".

13

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Potential investors should also note that recently enacted
legislation may require U.S. shareholders to report their interest in a PFIC on
an annual basis. US shareholders of the Company should consult their tax
advisors as to these reporting requirements as well as the consequences of
investing in the Company.

Penny stock classification could affect the marketability of
the Company's common stock and shareholders could find it difficult to sell
their stock

The penny stock rules in the United States require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation.

Further, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These additional broker-dealer practice and
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the Company's common shares in the U.S.,
and shareholders may find it more difficult to sell their shares.

|ITEM 4 | INFORMATION ON THE
      COMPANY
|------ | --------------------------------

|A. | History and Development of the
  Company
|-- | ----------------------------------------

Incorporation

The legal name of the Company is "Quartz Mountain Resources
Ltd."

Quartz Mountain Resources Ltd. was incorporated on August 3,
1982, in British Columbia, Canada, and it continues to subsist under the laws of
the Province of British Columbia.

The Company was originally incorporated as Wavecrest Resources
Ltd., but changed its name to Quartz Mountain Gold Corp. on June 18, 1986. On
November 5, 1997, the name of the Company was changed from Quartz Mountain Gold
Corp. to Quartz Mountain Resources Ltd., and the common shares were consolidated
on a ten-old-for-one-new share basis.

Market for the Company's Securities

The Company's common shares were quoted on NASDAQ SmallCap
Market in the United States until May 12, 1994, when the Company ceased to meet
the SmallCap Market's minimum listing requirements. The Company's common shares
were also listed on The Toronto Stock Exchange until November 10, 1994, when it
ceased to meet the Exchange's minimum listing requirements. Prior to November
15, 1989, the shares were also listed on the Vancouver Stock Exchange (a
predecessor to the TSX Venture Exchange). The Company voluntarily surrendered
its listing on the Vancouver Stock Exchange at that time.

After delisting from the NASDAQ SmallCap Market and the
Vancouver Stock Exchange, the Company's common shares continued to trade in
Canada on the Canadian Dealer Network Inc. (the "CDN", colloquially known as the
Canadian "unlisted" market). In October 2000, as a result of an agreement
between The Toronto Stock Exchange and the CDN, the Canadian unlisted market
ceased to operate, and qualifying issuers that were formerly quoted on the CDN
were invited to list on a newly created Tier 3 of the Canadian Venture Exchange
(now renamed the TSX Venture Exchange).

On December 23, 2003, the Company was reclassified as a Tier 2
company on the TSX Venture Exchange. On February 17, 2005, the Company
transferred its listing to NEX, a separate board of the TSX Venture Exchange
established in 2003 to provide a new trading forum for listed companies that
have fallen below the TSX Venture Exchange's continued listing standards, due to
low levels of business activity.

The Company was relisted on the TSX Venture Exchange on
December 30, 2011.

Currently, the Company's common shares trade on the TSX Venture
Exchange under the symbol QZM, and certain broker-dealers in the United States
make market in the Company's common shares on the OTC Grey Market under the
symbol QZMRF.

14

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Offices

The Company's business office is located at 15thFloor, 1040 West Georgia Street, Vancouver, British Columbia V6E 4H1;
telephone (604) 684-6365. The Company's registered office is Suite 1500  1055
West Georgia Street, Vancouver, British Columbia V6E 4N7; telephone (604)
689-9111.

|B. | Business Overview
|-- | -----------------

The Company's Business Strategy and Principal
Activities

Quartz Mountain is in the business of exploring and developing
mineral properties. The Companys activities are primarily focused in British
Columbia, Canada, where it has assembled a portfolio of projects through option
or purchase agreements and ground staking. Exploration activities on the
properties are primarily focused on ascertaining whether the properties host
commercially viable mineral deposits.

In the first three years of its existence, the Company was
active in the exploration of small gold and silver prospects in Canada, but none
of these prospects warranted further exploration or development. In 1986, the
Company acquired the Quartz Mountain gold property, located in south central
Oregon, and until January 2002 most of the Company's efforts were expended on
the exploration and maintenance of these claims. The Company's interests in the
Quartz Mountain gold property, and in its other properties, were acquired by
direct purchase, lease and option, or through joint ventures.

The Company sold the Quartz Mountain gold property during the
fiscal year ended July 31, 2002, to Seabridge Resources Ltd. and Seabridge
Resources Inc. (collectively "Seabridge"). Seabridge subsequently changed its
name to Seabridge Gold Inc. At closing, Quartz Mountain received 300,000
Seabridge common shares, 200,000 Seabridge common share purchase warrants,
US$100,000 and a 1% NSR from any future production on the Quartz Mountain gold
property. The Seabridge warrants were exercised and all Seabridge common shares
held by the Company have been sold. The Company's interest in the Quartz
Mountain gold property is limited to the 1% NSR royalty. The Company does not
expect to generate any royalty revenue from the Quartz Mountain gold property
for several years, and it is not known at this time when any mining will
commence, if at all, on that property.

Following the sale of the Quartz Mountain gold property, the
Company continued in its efforts to find a suitable mineral property for
potential acquisition and exploration during the period of 2002 to 2011.

In December 2011, the Company acquired an option to earn a 100%
interest in the Buck gold-silver property near the town of Houston in central
British Columbia (the Buck Project). Concurrently with the Buck Project
acquisition, the Company completed a $4.2 million private placement financing
and began trading on the TSX Venture Exchange.

In August 2012, the Company acquired 100% of the Galaxie
copper-gold property in northwestern British Columbia (the Galaxie
Project).

The Company also staked the Karma Project and the ZNT Project
by utilizing British Columbias on-line mineral tenure system in 2012. The
100%-owned Karma and ZNT properties are both located in central British
Columbia. The Karma Project is 41 kilometres south of Houston, British Columbia.
The ZNT Project is located 15 kilometres southeast of the town of Smithers,
British Columbia.

In November 2012, Quartz Mountain entered into an option and
joint venture agreement with Amarc Resources Ltd. (Amarc) pursuant to which
Amarc can earn a 40% ownership interest, with an option to acquire an additional
10% ownership interest, in the Galaxie and ZNT Projects.

The Company does not have any operating revenue and anticipates
that it will rely on sales of its equity securities in order to finance its
acquisition and exploration activities.

British Columbia Mineral Tenure

On January 12, 2005, the Province of British Columbia adopted
an on-line mineral tenure system that includes mineral tenure acquisition and
tenure maintenance procedures, as well as a method of converting previous format
claims (legacy claims) to new format claims (cell claims). All of the Company's
mineral tenures have been converted to cell claims resulting in new tenure
numbers and marginally larger claim boundaries. The mineral claims are
maintained through the completion of exploration activities referred to as
"Assessment Work". The financial requirements related to these exploration works
defined by the Provincial Government. Currently the cost to stake a mineral
claim is $1.75 per hectare and the cost of maintaining a claim is $5.00 per
hectare per year during the first two years following location of the mineral
claim, $10.00 per hectare per year in the third and fourth years, $15.00 per
hectare in the fifth and sixth years, and $20.00 per hectare in the seventh and
all succeeding years. If the assessment work is not completed the mineral claims
may be maintained by a cash payment, but if this payment is not made before the
forfeiture date, the tenure is relinquished.

15

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Another type of mineral tenure exists, called crown-granted
mineral claims, on which the perimeter has been physically surveyed.
Crown-granted mineral claims are maintained by paying taxes on an annual basis.
Unlike mineral claims, the taxes can be paid late with penalties and interest.
If the taxes remain unpaid after a specified period of time, the claims will
revert to the Crown and will be subsequently made available for acquisition by
normal procedures.

Environmental Matters

Environmental matters related to mineral exploration companies
in British Columbia are administered by the Ministry of Energy, Mines and
Petroleum Resources. The Company files notice of its work programs with the
Ministry, and a reclamation security is determined that will set aside
sufficient monies to reclaim the exploration sites to their pre-exploration land
use. Typically, no reclamation security is required for non-mechanized
exploration activities such as surface geological, geochemical and geophysical
surveys. However, a reclamation security is generally required for mechanized
activities such as machine work and drilling. The required level of reclamation
usually involves leaving the sites in a geotechnically stable condition, and
grooming the sites to both prevent forest fire hazards and to ensure that
natural regeneration of indigenous plant species can progress within a
reasonable period of time.

Mineral Properties and Exploration Activities and
Plans

The location of Quartz Mountains Galaxie, Buck, ZNT and Karma
projects is shown on the map below.



16

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Galaxie Project, Northwestern British
Columbia

Agreements

Sale Agreement with Finsbury Exploration Ltd.

In August 2012, Quartz Mountain completed the acquisition of a
100% interest in the Galaxie Project from Finsbury Exploration Ltd (Finsbury),
a Non-Arms Length Party, through a sale agreement (the Sale Agreement) dated
July 27, 2012. The Galaxie Project-area, acquired from Finsbury, included an
area of 1,488 square kilometres, comprised of three mineral claims totalling
1,294.3 hectares (the Gnat Pass Property) and the surrounding mineral claims
staked by Finsbury to that time. Some of the originally purchased claims were
allowed to expire and new adjacent claims were staked by Quartz Mountain, with
the result that the Galaxie Property currently covers an area of 1,324 square
kilometres. Pursuant to the terms of the Sale Agreement, Quartz Mountain issued
2,038,111 shares to Finsbury and assumed the rights and obligations of Finsbury
under a mineral property purchase agreement (the Bearclaw Agreement) on the
Gnat Pass Property between Finsbury and Bearclaw Capital Corp. (Bearclaw).
Quartz Mountain also assumed the rights and obligations under an NSR Royalty
Agreement between Finsbury and Bearclaw.

The remaining payment obligations to Bearclaw for the Gnat Pass
Property under the Bearclaw Agreement to be assumed by Quartz Mountain consisted
of:

| | 1. | a payment, on or before August 20, 2012, to Bearclaw of
      $50,000 in cash (paid);                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                     
| | 2. | the issuance, on or before August 20, 2012, to Bearclaw
      of a convertible debenture note in the amount of $650,000 at a rate of 8%
      per annum and with a maturity date of October 31, 2013 (issued);
  and
| |    |                                                                                                                                                                                                                     
| | 3. | the issuance, following the closing date of the
      transactions contemplated in the Sale Agreement, to Bearclaw of 1,000,000
      shares in the capital of Quartz Mountain (issued).                            

Acquisition of Hotai Claims

Quartz Mountain acquired a 100% interest in nine mineral claims
(the Hot and Hot Doughnut mineral claims, collectively called the Hotai
Claims, formerly referred to as the Hotailuh Slope Mineral Claims) totalling
3,846 hectares, that are adjacent to, and now form a part of, the Galaxie
Project from Crucible Resources Ltd. and Michael Rowley (together, the Hotai
Vendors) through a mineral property sale and purchase agreement (the Hotai
Agreement) dated as of July 27, 2012.

Pursuant to the terms of the Hotai Agreement, the consideration
payable by Quartz Mountain to the Hotai Vendors in aggregate consists of:

| | 1. | on the closing date, $5,000 payable in cash and $5,000
      payable by the issuance of shares in the capital of Quartz Mountain (paid)
      and the issuance of a 2% NSR royalty which is capped at $5,000,000
      (issued);
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                 
| | 2. | on August 23, 2013, $10,000 payable in cash and $10,000
      payable by the issuance of shares in the capital of Quartz Mountain;
      and                                                                                    
| |    |                                                                                                                                                                                                                                 
| | 3. | on August 23, 2014 and August 23, 2015 $20,000 payable in
      cash and $20,000 payable by the issuance of shares in the capital of
      Quartz Mountain.                                                                     

Quartz Mountain is required to incur expenditures on the Hotai
Claims of at least $1,000,000 during the period ending on August 23, 2015.

Quartz Mountain and Amarc Joint Venture on Galaxie and
ZNT

Quartz Mountain and Amarc Resources Ltd. (Amarc) entered into
a binding letter agreement (Letter Agreement) dated November 1, 2012, pursuant
to which Quartz Mountain will grant to Amarc an initial 40% ownership interest
in the Galaxie and ZNT Projects, upon Amarc making a cash payment of $1 million
to Quartz and funding $1 million in exploration expenditures to be incurred by
Quartz Mountain relating to the Galaxie Project on or before December 31, 2012.
Quartz Mountain will also grant to Amarc an option to acquire an additional 10%
ownership interest in the Galaxie and ZNT Projects, by funding an additional $1
million in exploration expenditures in relation to the Projects, on or before
September 30, 2013.

The transactions contemplated by the Letter Agreement are
subject to regulatory approval and it is contemplated that the parties will
enter into definitive agreements governing in greater detail the transactions
contemplated by the Letter Agreement. Quartz Mountain and Amarc have certain
directors in common and are accordingly considered by the TSX Venture Exchange
to be Non-Arms Length Parties.

Location, Access and Local Resources

The Galaxie Project is located 24 km south of the community of
Dease Lake in northwestern British Columbia. It is accessed by the paved,
two-lane Stewart-Cassiar Highway (#37) which crosses the central part of the
property. A four-wheel drive road leads easterly from the highway for a distance
of about 1.5 km to a network of drill roads at the Gnat deposit, a porphyry
copper occurrence that is located on the property. The rest of the property is
most easily accessed by helicopter.

17

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Dease Lake (population 600) offers an array of services,
including motel accommodations, food, fuel, a variety of small equipment
operators, post office, health clinic, bank agent and government services.
Mining and exploration make up the most substantial industry, and a small
experienced workforce is available for contract hire. The Dease Lake airport has
regularly scheduled flights to Terrace or Smithers in the summer, with
connecting flights to Vancouver. Pacific Western Helicopters has a year-round
base at the Dease Lake. Dease Lake is powered by an off-grid source of
distributed power generation, with diesel backup. A transmission line from the
grid is planned for development along Highway 37.

Elevations on the property
  vary from about 1,200 m above sea level (ASL) in the valley bottom to about
  1,300 and 1,600 m ASL to the west and east, respectively. The Gnat deposit
  itself occupies a low hill, the top of which is at an elevation of about 1,340 m
  ASL. In the area of the surrounding claims, the topography is more varied and
  the elevation range much greater.

The climate is typified by relatively short, moderately warm
summers and longer, cold winters. Work programs are best completed between the
five months from June to October.

Property Description

The Galaxie Project is comprised of claims acquired through the
sale agreement described above and also some additional claims staked by Quartz
Mountain. Some of the originally purchased claims were allowed to expire and new
adjacent claims were staked by Quartz Mountain. Names and expiry dates for the
claims that currently comprise the 1,324 square kilometre project-area are
summarized below:

Property
    Claim Name
    Expiry dateGnat Pass
    Tenure # 512878 (no name)
    July 26, 2016Gnat North
    July 28, 2015Gnat 3Galaxie Claims
    Stu 1-060, 062-064, 066-097, 136-162, 168,
      171-175, 178-182, 186-190Stu 223-260, 262-288 289 (tenure 880610),
      Stu 289 (tenure 880909), Stu 290-317Stu 319 (tenure 940641), Stu 319 (tenure
      940649), Stu 320-322, Stu 324-341, Stu 370Stu 342-369, Stu 371
    Jan 10, 2013Stu 373, Stu 37(942614), Stu 374 (983876),
      Stu 375-376
    May 31, 2013Stu 377
    Jul 23, 2013Stu 378-380
    Jul 27, 2013Stu 381
    Jul 29, 2013Stu 382
    Jul 30, 2013Stu 383-385
    Jul 31, 2013Stu 386
    Aug 5, 2013Stu 387
    Aug 6, 2013Stu 388
    Aug 13, 2013Stu 389-390
    Oct 25, 2013Stu 391
    Oct 26, 2013Hot 1-4, Hot 5  Doughnut, Hot 6-9
    Jul 28, 2015Hot 10-34 (1014099), Hot 34 (1014104)
    Oct 29, 2013


For the first two years after a claims registration, the work
cost to maintain the claim is $5.00 per hectare. After the second year, the work
cost doubles to $10.00 per hectare for the third and fourth years, $15 for the
fifth and sixth years, and $20 for subsequent years. The present work and filing
costs to advance (by one year) the expiry dates of all 341 Galaxie Project
claims, including the three Gnat Pass Property claims, from their current expiry
date listed in the table above is approximately $1,143,561.

Geology and Mineralization

The Galaxie Project is underlain mainly by volcanic, intrusive
and lesser sedimentary rocks of the Middle Triassic to Lower Jurassic Stikine
Terrane, which elsewhere in northern British Columbia is known to host the large
Red Chris, Schaft Creek, Galore and Kerr-Sulphurets-Mitchell-Snowfield porphyry
deposits.

Upper Triassic Stuhini Group volcanic rocks and a quartz
feldspar porphyry (QFP) dike complex host the Gnat Pass copper deposit. Two
distinctive types of mineralization are present. One is characterized by
chalcopyrite (copper iron sulphide)-magnetite-hematite (iron oxides) with minor
bornite (copper sulphide) as veinlets, fracture-fillings and lesser
disseminations in volcanic rocks. Local (but rare) replacement of volcanic rocks
has produced small, higher grade lenses in which copper grades commonly exceed
1%, and rare flecks of molybdenite (molybdenum sulphide) and locally abundant
specular hematite are associated. A second type of mineralization is
characterized by chalcopyrite-tourmaline-carbonate breccia zones which occur
proximal to or within irregular, eastward-dipping feldspar porphyry and QFP
intrusions. Chalcopyrite mainly occurs as fine disseminations in the matrix of
the breccia. Anomalous gold values (>100 parts per billion, (ppb)) is commonly
associated with silicification, tourmaline veining and chalcopyrite. About 65%
of gold values greater than 100 ppb are accompanied by concentrations of greater
than 1% Cu.

18

---

The Gnat deposit is located nearby the northern contact of the
Late Triassic to Middle Jurassic, multiphase Hotailuh Batholith-Three Sisters
Pluton intrusive complex, which occupies most of the remainder of the Galaxie
project-area and hosts a number of base and/or precious metals prospects and
showings some of which are on internal claims held by competitors.

Exploration and Development

Historical work is summarized in the table below.

Year
    Type of Work1964
    rock sampling; mapping; 69.3 line-km ground magnetometer,
      15.2 line-km of electromagnetic surveys; 12 trenches1965-67
    topographical, geological, geochemical and geophysical
      surveys. 4 trenches; 10 holes (1,402.1 m) of AQ diamond drilling. 1966-67
      work at Moss prospect 3,296 soil samples; 99.2 line-km of ground magnetic
      surveying.1966
    14 holes (2,712.8 m) of AQ diamond drilling; geological,
      geochemical and magnetometer surveys.1967
    41 holes (6,716.7 m) of AQ diamond drilling; induced
      polarization and magnetic surveys.1968
    37 holes (6,622.6 m) of AQ diamond drilling. Aggregate
      drilling 1965-68, mostly at Gnat deposit - 17,454.2 m, 102 holes.1969-71
    Moss prospect area, reportedly a few thousand feet of
      trenching and 47 percussion holes1960s- 70s
    unpublished reports state work done in late 1960s, in the
      1970s re-sampled selected sections of core.1971
    145 line-km of airborne magnetics, extending from the
      Gnat deposit northwesterly to beyond the Moss prospect area.1989
    11 rock samples and completed 11 line-km of VLF-ground
      magnetic surveys.1989
    8 holes (935.7 m) diamond drilling; 7 holes in the Gnat
      deposit; 1 in the Creek Zone. Two trenches were also excavated.1990
    adjacent claims east of the Gnat deposit, 1 rock, 4 silt
      (2 regular and 2 bulk) and 82 soil samples.1993
    56 soil and 42 rock samples in the Gnat deposit, and
      between Gnat deposit and Creek Zone.1996
    Expanded 1993 soil survey by 577 samples; re-logged 19
      drill holes; systematic re-sampling of core in 46 holes (1,251 samples) to
      assess the gold content in the 1965-68 drill holes.2005
    34 line-km of induced polarization and ground
      magnetometer surveys in/between the Gnat deposit and Creek Zone.2011
    first-pass reconnaissance prospecting and geochemical
      silt, soil and rock sampling program within 20 areas across the Project,
      outside of the Gnat Pass Property


Historical drilling in the Gnat deposit-area resulted in a
historical estimate of the mineral resources in 1972. It also showed that the
copper mineralization remains open to the east and at depth in the eastern and
central parts of the drill area (see cross section below). Deeper drill testing
of the deposit may show that zones of mineralization within the deposit coalesce
at depth, increasing the potential to expand the deposit and establish
significant resources.

19

---

Gnat Deposit Generalized Cross Section, Looking North



Work by Quartz Mountain

In 2012, Quartz Mountains technical team carried out a
geological assessment of the Gnat deposit, involving compiling and interpreting
historical data that confirmed that copper mineralization in the deposit remains
open to expansion, including to depth. This exercise was followed by a field
program of re-logging core, soil sampling (115 samples) and an Induced
Polarization (IP) survey which have refined targets for drilling.

In addition to the Gnat deposit and other copper and/or
molybdenum occurrences discovered historically at Galaxie, at least five target
areas were identified by prospecting surveys carried out across the property in
2011.

In 2012, Quartz Mountain followed up on these targets as well
as carrying out initial surveys on the Hot Claims. This work included geological
mapping, silt and rock sampling, and soil sampling on reconnaissance and
detailed grids (totaling over 6000 samples) and 330 line-kilometre of IP
geophysical surveys. Results are pending.

Sample Preparation, Analyses and Security

Silt samples are comprised of fines material taken from the
active part of streams. Sample protocols for soil samples were similar to those
for silt samples. For soil samples, B horizon material was collected at most
sites,; in disturbed areas, the top of the C horizon was the preferred sample
medium with surface material or buried organic materials avoided as well as
larger rock fragments, with an average sample size of about 500 grams. For both
soils and silts, sample material was placed into a standard kraft sample bag and
the location was marked by a survey ribbon. Rock samples were collected as a
composite or select grabs of variably mineralized, altered and/or iron-stained
rock chip material. About 2-3 kilograms of sample material was placed into a
plastic bag, identified by an assay ticket and secured with a nylon cable
tie.

Field notes were recorded for each sample including sampler
name; property name; target area and grid number; date and time; sample site
coordinates (UTM, NAD 83 - Zone 9); sample number and sample description. For
rock samples, the size of the occurrence, its orientation (strike and dip if
measurable), host rock, sulphides present and their amounts in percent, and any
other data that would aid in later interpretation after receipt of analytical
results were also recorded. All field notes were later compiled into a digital
file.

Silt and soil samples were hung to dry, then packed in a secure
container and shipped to the Acme Analytical Laboratories Ltd. (Acme)
preparation facility in Smithers, B.C where they were dried at 60° Celsius and
sieved to -80 mesh (0.18 mm or 180μm), then shipped to Acmes laboratory in
Vancouver where they were analyzed for gold and multi-elements by ICP
methods.

Rock samples were packed in a secure container and also shipped
to Acmes preparation lab in Smithers, B.C. Entire rock samples were crushed to
80% passing 10 mesh, from which a 250 gram split was pulverized to 85% passing
200 mesh, and the assay pulps were shipped to Acmes laboratory in Vancouver
where 15 gram splits were analyzed for gold and multi-elements by acid digestion
ICP methods. A few of the rock samples for the Buck Project (see below) were
analysed by 30 gram fire assay fusion for gold with ICP-AES.

20

---

For the early stage programs carried out in 2012, quality
control/quality assurance (QA/QC) samples were done at the laboratory. QAQC
samples were inserted as flows: 1 blank for every 30 regular samples, 1 standard
for every 30 regular samples and 1 duplicate for every 20 regular samples.

Acme is ISO 9001:2005 certified for the provision of assays and
geochemical analysis and is also ISO/IEC 17025:2005 certified for gold by Fire
Assay.

Planned Program

Quartz Mountain plans to initiate follow up programs, which
began with focused drilling at the Gnat deposit in late 2012.

Buck Project, Central British Columbia

Agreements

In December 2011, the Company purchased an option (the
"Option") to acquire a 100% interest in the Buck Project.

|(i) | Pursuant to the Option, the Company must make certain
      scheduled payments to the underlying owners of the Buck Project (the
      "Optionors") as follows:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Payable on or before
    Cash payment
    Number of common shares issuable
    Status as of the date of this Annual ReportDecember 30, 2011
    $20,000
    100,000
    paid and issuedJune 28, 2012
    $25,000
    150,000
    paid and issuedJune 28, 2013
    $30,000
    200,000June 28, 2014
    $30,000
    200,000


|(ii) | Prior to the acquisition of the Option by the Company, a
      private party (the "Vendor") held the Option. In December 2011, the
      Company paid $100,000 in cash and issued 1,200,000 common shares to the
      Vendor to acquire the Option from the Vendor. The common shares issued
      were valued at the fair value on the date of issue ($0.50 per common
      share) and were expensed along with the cash consideration paid. The
      Company agreed to issue up to 6,000,000 additional common shares to the
      Vendor upon the achievement of certain
milestones.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Payable upon
    Cash 
      payment
    Number of 
      common shares issuable
    Status as of the date 
      of this Annual
    ReportDecember 30, 2011
    $100,000
    1,200,000
    paid and issuedCompletion of a National Instrument 43-101 compliant
      resource estimate on the Buck Project
    
    1,200,000Completion of a "preliminary assessment" or a
      "pre-feasibility study" (as those terms are used in National
      Instrument 43-101) on the Buck Project
    
    2,400,000Completion of a "feasibility study" (as that term is
      used in National Instrument 43-101) on the Buck Project
    
    2,400,000


Under the terms of the Option, the Optionors retain a 3% net
smelter returns royalty. The royalty percentage will decrease by 1% when
aggregate royalty payments equal or exceed $10 million. The Company has the
right at any time to reduce the royalty by 1% by paying $500,000 to the
Optionors.

Location, Access and Local Resources

The Buck Project is located in central British Columbia near
the town of Houston. Access to the western central and eastern parts of the
property is via local resource roads. Other parts of the Buck Project are
accessible by helicopter, which can be chartered from local bases in Houston and
the town of Smithers, located some 50 kilometres to the northwest.

The topography of the Buck Project is generally subdued,
ranging from about 900 metres above sea level along the Buck Creek and Morice
River valleys to over 1,500 metres above sea level in the eastern part of the
property.

The area is serviced by Highway 16, the main arterial highway
from Prince George, and by Canadian National rail. The nearest airport is
located at Smithers, where daily scheduled air services provide direct access to
Vancouver. The region is host to several present and past producing mines and
skilled labour is readily available in the region, both for mining and mineral
exploration. A natural gas pipeline and high voltage electricity transmission
lines occur immediately to the north of the Buck Project.

Property Description

The Buck Project consists of 200 contiguous mineral claims,
totalling approximately 83,600 hectares. The list of claims detailing expiry
dates are shown in Table 1.

21

---

Claim Name
    Expiry dateNew Buck, Bob Creek 2, Gotcha, Gotcha 2
    Aug 01, 2013Bob Creek 5,6,7,8, 10, 12-47
    Aug 01, 2013Buck 1-88, TUTH 01-17, ITUTH 01-17, ITUTN 18 (985625),
      ITUTH 18 (986006), ITUTH 19-22
    Aug 01, 2013Buck 89 (tenure 935598), Buck 89 (tenure 935699), Buck 90
      (tenure 935629) Buck 90 (tenure 935701), Buck 91 (tenure 935698), Buck
      92 (tenure 935695), Buck 94 (tenure 935691), Buck 95 (tenure 935597),
      Buck 96 (tenure 935694), Buck 97 (tenure 935690), Buck 98 (tenure
      935609)
    June 22, 2013IRK
    Mar 06, 2013Buck 91 (tenure 985622), Buck 92 (tenure 985623), Buck 93
      (tenure 985624), Buck 94 (tenure 985625), Buck 95 (tenure 985626),
      Buck 96 (tenure 985627), Buck 97 (tenure 985642), Buck 98 (tenure
      985643), Buck 99-102
    May 10, 2013Buck 103
    May 12, 2013


For the first two years after a claims registration, the work
cost to maintain the claim is $5.00 per hectare. After the second year, the work
cost doubles to $10.00 per hectare for the third and fourth years, $15 for the
fifth and sixth years, and $20 for subsequent years. The present work and filing
costs to advance (by one year) the expiry dates of all 200 Buck claims totals
approximately $418,052.

Geological Setting

Lying within the Stikine Terrane of central British Columbia,
the regional geology is characterized by volcanic assemblages of the Upper
Triassic Takla Group and the Lower to Middle Jurassic Hazelton Group and
overlain by sedimentary assemblages of the Bowser Lake, Skeena and Sustut
groups. Late Jurassic, Cretaceous and Tertiary age belts of rocks formed as a
result of both arc volcanism (e.g. Ootsa Lake and Kasalka groups) and later
crustal extension (e.g. Endako, Kamloops, Buck Creek and Chilcotin groups),
overlie older Mesozoic rocks. In other areas of the Stikine Terrane, the
intrusive rocks associated with Cretaceous and Tertiary volcanic assemblages are
known to host significant copper and molybdenum deposits (e.g. Granisle, Endako
and Huckleberry porphyry deposits) and epithermal precious metal deposits, such
as Blackwater-Davidson, Chu and Sam Goosly (Equity Silver), are probably also
associated with Late Cretaceous and Tertiary intrusive events.

The Buck Project is underlain by andesitic and dacitic
volcaniclastic units of the Lower Jurassic Telkwa Formation of the Hazelton
Group, dominantly dacitic units, of the Upper Cretaceous Tip Top Hill Formation
and Eocene basaltic andesite and andesite of the Buck Creek Formation. Intruding
this assemblage are mafic to felsic stocks that possibly are part of the Upper
Cretaceous Bulkley intrusive suite and intermediate to felsic dykes that are
considered to belong to the Duck Lake intrusive suite.

Deformation is present in
  all of the rock assemblages of the Stikine Terrane. In the region of the Buck
  Project, faults are dominantly northwest-striking and in many cases have
  resulted in the formation of down-faulted blocks in which younger rocks such as
  the Tip Top Hill and Goosly Lake formations are preserved.

Mineralization

Drilling, trenching and geological mapping by previous
operators in the Bob Creek area, now called the Canyon Zone, has shown that
mineralization is of epithermal character, similar in age and to the reported
signature of other BC mid Cretaceous mineral occurrences. Three zones of
mineralization are contained within an alteration zone of that extends at least
700 metres in an east-west direction and at least 600 metres in a north-south
direction.

Mineralization is most commonly hosted by narrow quartz veins
and veinlets and includes iron-rich sphalerite (zinc sulphide), galena (lead
sulphide) and iron sulphides (pyrite, marcasite and arsenopyrite). No
metallurgical studies have been undertaken and, thus, the habit of occurrence of
gold and silver are not known. Although it is likely that some silver is
contained within galena, there is a stronger relationship between silver and
zinc than between silver and lead.

Exploration and Development

Historical Work

The Buck Project area first became of interest to prospectors
in 1905 when alluvial gold was discovered in Bob Creek near its confluence with
Buck Creek. The following information is a summary of historical work on the
property:

- The first mineral claims covering bedrock were staked in 1914. In 1936
  about 85 tons of mineralized rock was extracted from a 10 metres long adit in
  the Bob Creek gorge. Twelve tons of gravity concentrate from the mined
  material assayed 0.1 oz/ton gold, 1.0 oz/ton silver and 1.1% zinc.
- Between 1945 and 1968, 18 holes were drilled in the Bob Creek gorge area.
  Most of these holes intersected anomalous gold and silver mineralization along
  with elevated zinc concentrations within quartz feldspar porphyry rocks.

22

---

- An electromagnetic (EM) survey of the Bob Creek area was carried out in
  1978. Drilling to test the resultant EM anomalies indicated the presence of
  anomalous gold and silver to the west of earlier drilling in the Bob Creek
  gorge area.
- A pole-dipole induced polarization (IP) survey was carried out c1982 that
  defined a geophysically anomalous zone (a pronounced chargeability response
  over an area of about 400 metres x 600 metres in size). A soil geochemical
  program in the vicinity of Bob Creek and also to the west, across Buck Creek.
  Significant precious metal anomalies in soils were defined to the south of Bob
  Creek.
- In the period from 1983 to 1985, 40 diamond drill holes were completed
  south of Bob Creek and, with the aid of trenching, outlined three zones of
  anomalous silver-gold-zinc mineralization within an alteration zone in felsic
  dykes and the volcanic rocks adjacent to the dykes.
- 16 diamond drill holes were completed during the period from 1988 to 1989,
  although holes 13, 14 and 15 are not recorded. This drilling demonstrated the
  altered and mineralized rock extends to the east under the post mineralization
  Buck Creek Formation that covers the eastern part of the property.

Significant Intersections from
      HistoricalDrillingHole No
    From (m)
    To (m)
    Length (m)
    Au g/t
    Ag g/t
    Zn%83-9
    42.00
    54.00
    12.00
    0.15
    8.30
    1.0584-11
    124.00
    133.00
    9.00
    1.67
    5.50
    0.1784-13
    22.00
    40.75
    18.75
    3.38
    32.50
    >0.8284-17
    92.00
    105.00
    13.00
    <0.1
    9.40
    >0.4684-18
    11.00
    17.00
    6.00
    0.56
    12.40
    0.2385-19
    9.85
    60.15
    50.30
    0.80
    11.68
    Not analysed85-20
    18.00
    30.00
    12.00
    1.05
    20.41
    Not analysed85-23
    24.00
    30.00
    6.00
    1.70
    40.50
    Not analysed85-24
    33.00
    45.00
    12.00
    0.22
    17.20
    Not analysed85-25
    6.10
    78.00
    71.90
    0.40
    8.90
    Not analysed85-26
    48.00
    60.00
    12.00
    0.30
    8.35
    Not analysed85-28
    3.50
    24.00
    20.50
    0.81
    11.61
    Not analysed85-29
    9.10
    45.00
    35.90
    0.20
    9.30
    Not analysed88-1
    24.00
    47.00
    23.00
    0.58
    12.65
    0.7989-6
    94.00
    104.50
    10.50
    0.61
    10.40
    0.1789-7
    115.00
    124.00
    9.00
    <0.1
    6.00
    0.2889-11
    144.50
    177.50
    33.00
    0.40
    4.20
    0.23


- Five holes, totalling 1,206 metres, were drilled in 1990 to the north of
  Bob Creek and intersected moderately to highly altered volcanic and intrusive
  rocks which, in places contained anomalous precious metals over narrow
  intervals, for example, 52 g/t Ag and 2.94 g/t Au over 3 metres. While records
  are incomplete, this work does indicate that the alteration and mineralization
  extend to the north of where most previous drilling was concentrated.
- IP geophysical surveys were carried to the west of Buck Creek in 2003 and,
  in 2004, carried out a soil sampling program over the areas underlain by
  induced polarization anomalies.
- Five holes, one adjacent to Bob Creek and four to the south to test an IP
  anomaly extension of the 1982 survey were completed in 2004. The northern hole
  confirmed previous drill results, but work in the south was not sufficiently
  encouraging to suggest that further work.

23

---

The mineralized system at the Canyon Zone is currently
defined by geophysics, geochemistry and limited drilling (see figure below), and
is open to expansion. Other parts of the property have not beenadequately
explored.



Work by Quartz Mountain

The Company has completed ground geophysical surveys in late
2011 and followed up with a program of geological mapping, and collection of
soil (723), silt (10) and rock chip (41) samples in 2012 to refine targets for
drilling. Results are pending.

Sample Preparation, Analyses and Security

Sample preparation, analyses and security are described under
the Galaxie Project above.

Planned Program

Once results from the 2012 program have been received and
assessed, plans for follow up work will be determined.

Other Projects

Karma Project

The Karma property consists of 109 mineral claims, owned 100%
by Quartz Mountain. The property is located 41 kilometres south of Houston, BC
and directly south of and contiguous to the Companys Buck Project.

Claim expiry dates are as follows:

Claim Name
    ExpiryBON 038-059, CNKS 060-077, DALE 016- 037, DALE 078,
      KARMA 001-015
    Mar 02, 2013OOT 001-015
    Feb
      08, 2013NIRN 001-007, ARGO
      001-009
    May
      10, 2013


The present work cost to advance (by one year) the expiry dates
of all 109 Karma claims totals $196,500.

24

---

Regional geology is similar to the adjacent Buck Project. The
468-square kilometre Karma property was staked in 2012 to cover 70-73 million
year old Kasalka volcanic units which at are the same age as the rocks that host
gold and silver deposits in BCs Blackwater-Newton gold district.

An airborne magnetic geophysical survey was carried and
followed up by ground reconnaissance work, including geological mapping and
collection of 766 soil and 41 rock samples (sample preparation, analyses and
security are as described under the Galaxie Project above) to establish drill
targets. Results are pending.

ZNT Project

The ZNT property consists of 80 mineral claims owned 100% by
Quartz Mountain. The property is located in central British Columbia, some 15
kilometres southeast of the town of Smithers, BC.

Claim expiry dates are as follows:

Claim Name
    ExpiryZNT 01-16
    Jun 20, 2013ZNT 17-19
    Jun 21, 2013ZNT 20
    Oct 05, 2013ZNT 21
    Oct 24, 2013ZNT 22-28
    Nov 11, 2013ZNT 29-34
    Nov 13, 2013ZNT 35-71, ZNT 72 (1014656), ZNT 72 (1014686), ZNT
      74-80
    Nov 20, 2013


The present work cost to advance (by one year) the expiry dates
of all 34 ZNT claims totals $75,800.

The 372-square km property was staked by Quartz Mountain in
2012 on the basis of significant zinc and gold values in regional till samples,
as well as copper and silver mineral occurrences as reported by Geoscience BC
and the provincial government surveys, respectively.

Reconnaissance surveys, including geological mapping,
collection of 2,500 soil samples (sample preparation, analyses and security are
as described under the Galaxie Project above) and completion of 20
line-kilometres of IP, have been done by Quartz Mountain in 2012 and additional
ground work is planned.

|C. | Organizational Structure
|-- | ------------------------

The Company operates in a single reportable operating segment 
the acquisition, exploration and development of mineral property interests. The
Company is currently focused on the acquisition and exploration of mineral
property interests in Canada, and conducts most of its business affairs through
its Canadian parent entity.

The Company has one inactive wholly-owned subsidiary, Wavecrest
Resources Inc., a Delaware corporation.

|D. | Property, Plant and
Equipment
|-- | -----------------------------

The Company has no material tangible fixed assets, such as
mining equipment or plant facilities.

|E. | Currency
|-- | --------

All currency amounts in this Annual Report are stated in
Canadian dollars unless otherwise indicated (see Item 3for exchange rate
information).

|ITEM 4A | UNRESOLVED STAFF
      COMMENTS
|------- | -------------------------------

Not applicable.

|ITEM 5 | OPERATING AND FINANCIAL
      REVIEW AND PROSPECTS
|------ | --------------------------------------------------

OVERVIEW

The Company currently has four active exploration projects.
Accordingly, during the fiscal year ended July 31, 2012, the Company's
activities primarily involved the acquisition, planning and execution of initial
exploration activities of the Buck Project as well administrative activities
associated with property investigations of mineral property interests.
Subsequent to year end in August 2012, the Company acquired the Galaxie Project
and also initiated an exploration program on the Galaxie Project. As Quartz
Mountain is an exploration stage company, it does not have any revenues from its
operations to offset its expenditures. Accordingly, the Company's ability to continue
its exploration activities will be contingent upon receiving additional
financing.

25

---

The Company's financial statements are prepared on the basis
that it will continue as a going concern. The Company has incurred losses since
inception, and the ability of the Company to continue as a going concern depends
upon its ability to continue to raise adequate financing and to develop
profitable operations. Quartz Mountain's financial statements do not reflect
adjustments, which could be material, to the carrying values of assets and
liabilities, which may be required should the Company be unable to continue as a
going concern.

The following discussion should be read in conjunction with the
audited annual consolidated financial statements for the years ended July 31,
2012 and 2011 and the related notes accompanying this Annual Report. The Company
prepares its financial statements in accordance with International Financial
Reporting Standards ("IFRS"). These financial statements are the Company's first
financial statements prepared in accordance with IFRS. The Company includes
selected financial data prepared in compliance with IFRS without reconciliation
to U.S. GAAP.

TRANSITION TO IFRS

For all periods up to and including July 31, 2011, the Company
prepared its consolidated financial statements in accordance with Canadian GAAP.
The financial statements for the year ended July 31, 2012 are the first annual
consolidated financial statements the Company has prepared in accordance with
IFRS as in effect as at July 31, 2012, as detailed in the accounting policies
described in Note 3. In preparing these financial statements, the Company's
opening statement of financial position was prepared as at August 1, 2010, the
Company's date of transition to IFRS. The consolidated financial statements have
been prepared in accordance with IFRS as issued by the International Accounting
Standards Board (IASB) and interpretations of the International Financial
Reporting Interpretations Committee (IFRIC).

IFRS 1 First-time Adoption of International Financial
Reporting Standards sets forth guidance for the initial adoption of IFRS. Under
IFRS 1 the standards are applied retrospectively at the transitional balance
sheet date, with all adjustments to assets and liabilities taken to deficit
unless certain exemptions are applied.

Subject to certain transition elections disclosed in note 15 to
the consolidated financial statements, the Company has consistently applied the
same accounting policies in its opening IFRS statement of financial position at
August 1, 2010, and throughout all periods presented, as if these policies had
always been in effect. The policies applied in these consolidated financial
statements are based on IFRS issued and outstanding as of November 22, 2012, the
date the Board of Directors approved the financial statements.

|A. | Operating Results
|-- | -----------------

Comprehensive loss for the year ended July 31, 2012 vs.
2011

The Company recorded a loss from operations of $3,588,000 in
the current year compared to a loss from operations of $175,000 in the prior
fiscal year due mainly to higher exploration and evaluation expenses incurred
(discussed below).

The increase was due to the commencement of exploration
activities.

In the current fiscal year, the Company made payments of cash
and shares pursuant to an option agreement to acquire the Buck Property and
Hotai Claims, claim staking costs for the Galaxie and Karma properties, and
geological and site activities for the Buck, Galaxie (including the Hotai
Claims) and Karma Properties. Prior to December 2011, the Company was largely
inactive and did not have any significant exploration activities in the previous
fiscal year.

During the fiscal year ended July 31, 2011 the operations of
the Company were mainly focused on activities of a property evaluation
nature.

26

---

The following table provides the breakdown of exploration costs
incurred:

Exploration and evaluation costs
    Buck
    Galaxie
    Hotai
    Karma
    Other
    Total2012
    2012
    2012
    2012
    2012
    2012Assays and analysis
    $ 45,963
    $ 2,696
    $ 
    $ 1,998
    $ 2,088
    $ 52,745Engineering
    8,400
    
    
    
    
    8,400Environmental
    1,375
    
    
    
    
    1,375Equipment rental
    
    
    
    
    
    Geological
    329,108
    288,152
    13,280
    225,603
    14,374
    870,517Graphics
    9,741
    702
    312
    624
    1,627
    13,006Helicopter
    
    100,914
    
    
    
    100,914Property fees and assessments
    889,044
    1,518
    
    16,944
    3,313
    910,819Site activities
    31,595
    89,928
    6,200
    14,201
    1,620
    143,544Socio economics
    77,969
    2,410
    1,365
    7,842
    60
    89,646Travel and accommodation
    13,978
    31,210
    
    9,943
    553
    55,684Total
    $ 1,407,173
    $ 517,530
    $ 21,157
    $ 277,155
    $ 23,635
    $ 2,246,650


The increase in administration expenses was mainly due to the
legal and administrative costs related to the reactivation of the Company, and
moving from the NEX Exchange to the TSX-V, and legal costs related to acquiring
the options on the Buck Property and the Galaxie Property (including the Hotai
Claims).

The following table provides a breakdown of the administration
costs incurred:

Administration costs
    2012
    2011Legal, accounting and audit
    $ 301,641
    $ 55,125Office and administration
    70,140
    19,784Salaries and benefits
    686,358
    72,798Shareholder communication
    28,097
    1,986Travel
    31,357
    Trust and filing
    48,659
    36,090Total
    $ 1,166,252
    $ 185,783


In the current fiscal year, the Company expensed stock options
to employees and directors amounting to $381,000 compared to nil in the same
comparative fiscal year.

|B. | Liquidity and Capital
Resources
|-- | -------------------------------

The Company's source of funding has been the issuance of equity
securities for cash, primarily through private placements to sophisticated
investors and institutions.

At July 31, 2012, the Company had cash and cash equivalents of
$2.5 million as compared to $0.1 million at July 31, 2011, and working capital
of $0.9 million. The source of these funds was the December 2011 Flow-Through
financing.

Until December 2011, the Companys cash flows were
predominantly related to cash used in operating activities for general and
administration expenses as the Company was largely inactive until this point.
Subsequent to the purchase of the Buck Option and related private placement, the
Company generated $4.0 million from financing activities.

In recent months, general market conditions for junior resource
companies have deteriorated and have resulted in depressed equity prices for
resource companies, despite higher commodity prices. Although the Company was
able to successfully complete a private placement in December 2011, the
deterioration in market conditions could potentially increase the cost of
obtaining capital and/or limit the availability of funds in the future.
Accordingly, management is actively monitoring the effects of the current
economic and financing conditions on our business and reviewing our
discretionary spending, capital projects and operating expenditures, and
implementing appropriate cash and cash management strategies.

Management
  believes that its current liquid assets are sufficient to meet its known
  obligations and to maintain its mineral rights in good standing for the next 12
  month period. Additional debt or equity financing will be required to fund
  additional exploration or development programs. The Company has a reasonable
  expectation that additional funds will be available when necessary to meet
  ongoing exploration and development costs. However, there can be no assurance
  that the Company will continue to obtain additional financial resources and/or
  achieve profitability or positive cash flows. If the Company is unable to obtain
  adequate additional financing, the Company will be required to re-evaluate its
  planned expenditures until additional funds can be raised through financing
  activities.

27

---

Debenture

In August 2012, pursuant to the Galaxie Project Sale Agreement,
the Company issued a convertible debenture (the Debenture) in the amount of
$0.65 million maturing on October 31, 2013, and bearing interest at a rate of 8%
per annum (payable quarterly in arrears) to Bearclaw. The Debenture is
convertible into the Companys common shares at a conversion price of $0.40 per
shares any time before its expiry. Any interest accrued, but unpaid, shall be
converted at an exercise price of the higher of $0.40 per share and the market
price at the time of conversion.

Financing

Concurrent with the completion of the option agreement in
December 2011 related to the Buck Project, the Company completed a non-brokered
private placement of 7,183,371 common shares, of which 6,043,171 were
flow-through common shares issued at a price of $0.60 per share and 1,140,200
were non-flow-through common shares issued at a price of $0.50 per share, for
gross cash proceeds of $4.2 million. The Company paid issuance costs totaling
$0.2 million, for net cash proceeds of $4.0 million.

In accordance with the terms of the flow-through share
agreements, the Company is obligated to spend the proceeds, $3,625,902, on
eligible Canadian Exploration Expenses ("CEE"), as defined in the Income Tax Act
(Canada), by December 31, 2012. At July 31, 2012, approximately $2.5 million
remained to be spent. As of the date of this Annual Report approximately $0.1
million remained to be spent.

Joint Venture Agreement

Pursuant to a letter agreement between the Company and Amarc,
Amarc will make a cash payment of $1,000,000 to the Company and fund $1,000,000
in exploration expenses related to the Galaxie Project. In November 2012, the
Company received $1,950,000 from Amarc in relation to this letter agreement.
Should the Company fail to meet any of the conditions precedent in the letter
agreement, any exploration expenditures funded by Amarc will constitute a demand
loan bearing interest at the CIBC prime rate plus 5% from the date of advance.
Upon earning an initial 40% interest, Amarc will have an option to earn an
additional 10% (for a total of 50%) interest in these properties by funding
$1,000,000 of exploration expenses to be incurred by Quartz Mountain on the
Galaxie and ZNT Projects, prior to September 30, 2013.

Other Matters Relating to Financing

The Company had no material commitments for capital
expenditures as at July 31, 2012.

The Company has no lines of credit or other sources of
financing which have been arranged but are as of yet, unused.

Financial Instruments

The Company keeps its financial instruments primarily
denominated in Canadian dollars with a very small amount held in US dollars. The
Company does not engage in any hedging operations with respect to currency or
in-situ minerals.

Quartz Mountain does not have any material, legally
enforceable, obligations requiring it to make capital expenditures and
accordingly, can remain relatively flexible in gearing its activities to the
availability of funds.

Financial assets and liabilities are recognized when the
Company becomes party to the contracts that give rise to them. The Company
determines the classification of its financial assets and liabilities at initial
recognition and, where allowed and appropriate, re-evaluates such classification
at each financial year end. The Company does not have any derivative financial
instruments.

Non-derivative financial assets:

The Company classifies its non-derivative financial assets into
the following categories:

Cash and cash equivalents

Cash and cash equivalents are comprised of cash and short term
deposits held at major financial institutions with an original maturity of three
months or less, which are readily convertible into a known amount of cash. The
Company's cash and cash equivalents are invested in business and savings
accounts which are available on demand by the Company for its programs. They are
measured at fair value.

Loans and receivables

Loans and receivables are
  financial assets with fixed or determinable payments that are not quoted in an
  active market. Such assets are initially recognized at fair value plus any
  directly attributable transaction costs. Subsequent to initial recognition loans
  and receivables are measured at amortized cost using the effective interest
  method, less any impairment losses.

Loans and receivables comprise amounts receivable and
restricted cash.

28

---

Non-derivative financial liabilities:

The Company's non-derivative financial liabilities comprise
financial liabilities measured at amortized cost. Such financial liabilities are
recognized initially at fair value net of any directly attributable transaction
costs. Subsequent to initial recognition these financial liabilities are
measured at amortized cost using the effective interest method. Financial
liabilities measured at amortized cost comprise amounts payable and balances
payable to related parties.

Requirement of Financing

The Company is in the process of acquiring and exploring
mineral property interests. The Company's continuing operations are entirely
dependent upon the existence of economically recoverable mineral reserves, the
ability of the Company to obtain the necessary financing to complete the
exploration and development of these projects, obtaining the necessary permits
to mine, on future profitable production of any mine and the proceeds from the
disposition of the mineral property interests.

Management believes that its current liquid assets, as of the
date of this Annual Report, are sufficient to meet all known obligations and to
maintain its mineral rights in good standing for the next 12 month period.
Additional debt or equity financing will be required to fund additional
exploration or development programs. The Company has a reasonable expectation
that additional funds will be available when necessary to meet ongoing
exploration and development costs. However, there can be no assurance that the
Company will continue to obtain additional financial resources and/or achieve
profitability or positive cash flows. If the Company is unable to obtain
adequate additional financing, the Company will be required to re-evaluate its
planned expenditures until additional funds can be raised through financing
activities.

The Company has no long-term debt, capital lease obligations,
operating leases or any other long-term obligations.

The Company has no "Purchase Obligations" defined as any
agreement to purchase goods or services that is enforceable and legally binding
on the Company that specifies all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction.

|C. | Research Expenditures
|-- | ---------------------

Quartz Mountain does not carry out any research or development
activities. Please refer to Item 5Aand Item 5Babove for a
discussion of the expenditures that the Company has incurred in connection with
its business activities.

|D. | Trend Information
|-- | -----------------

As a natural resource exploration company, Quartz Mountain's
activities reflect the traditional cyclical nature of metal prices.
Consequently, Quartz Mountain's business is primarily an "event-driven" business
based on exploration results.

Although there has been periodic volatility in the gold market,
the average annual price has been on an upward trend for the past five years. In
response to the global economic uncertainty that began in mid-2008, gold prices
were strong in 2009 and 2010, and continued their overall upward trend for most
of 2011, reaching more than US$1,800 per ounce. Prices have varied between
US$1,540 and US$1,784 per ounce since that time.

Silver prices were impacted by economic volatility in
2008-2009. Prices increased significantly in 2010. The upward trend in the
silver price continued through most of 2011, reaching as high as US$43 per
ounce. Prices have ranged between US$20 and US$37 per ounce since October
2011.

Copper prices increased significantly between late 2003 and mid
2008 before declining in late 2008 and through early 2009. Prices steadily
increased through 2009, 2010 and most of 2011. After dropping to $3.07 per pound
in October 2011, they have been increasing, overall, since that time.

Average annual prices as well as the average prices so far in
2012 for gold, silver and copper are shown in the table below, all dollar
figures are presented in USD:

Average Metal PriceCalendar Year
    Au
    Ag
    Cu2008
    $871/oz
    $14.95/oz
    $3.16/lb2009
    $974/oz
    $14.70/oz
    $2.34/lb2010
    $1,228/oz
    $20.24/oz
    $3.42/lb2011
    $1,532/oz
    $36.56/oz
    $4.00/lb2012 to date of this 20F
    $1,667/oz
    $31.04/oz
    $3.59/lb


29

---

|E. | Off  Balance Sheet
Arrangements
|-- | --------------------------------

Quartz Mountain has no off-balance sheet arrangements.

As used in this Item 5E, the term "off-balance sheet
arrangement" means any transaction, agreement or other contractual arrangement
to which an entity, unconsolidated with the Company, is a party, under which the
Company has:

(a) any obligation under a guarantee contract that has any of
the characteristics identified in paragraph 3 of FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others (November 2002) ("FIN 45"), as may
be modified or supplemented, excluding the types of guarantee contracts
described in paragraphs 6 and 7 of FIN 45;

(b) a retained or contingent interest in assets transferred to
an unconsolidated entity or similar arrangement that serves as credit, liquidity
or market risk support to such entity for such assets;

(c) any obligation under a derivative instrument that is both
indexed to the Company's own stock and classified in stockholders' equity, or
not reflected, in the Company's statement of financial position; or

(d) any obligation, including a contingent obligation, arising
out of a variable interest (as referenced in FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (January 2003), as may be modified
or supplemented) in an unconsolidated entity that is held by, and material to,
the Company, where such entity provides financing, liquidity, market risk or
credit risk support to, or engages in leasing, hedging or research and
development services with, the Company.

|F. | Tabular Disclosure of Contractual
    Obligations
|-- | -------------------------------------------------

As at July 31, 2012, the Company had no material contractual
obligations:

Payments due by periodContractual Obligations
    Total
    Less than 1 year
    1-3 years
    3-5 years
    More than 5 yearsLong-Term Debt Obligations
    Nil
    Nil
    Nil
    Nil
    NilCapital Finance/Lease
    Nil
    Nil
    Nil
    Nil
    NilOperating Lease
    Nil
    Nil
    Nil
    Nil
    NilPurchase Obligations
    Nil
    Nil
    Nil
    Nil
    NilOther long-term liabilities reflected on the Company's
      balance sheet under IFRS
    Nil
    Nil
    Nil
    Nil
    NilTotal
    Nil
    Nil
    Nil
    Nil
    Nil


|G. | Safe Harbor
|-- | -----------

The safe harbor provided in Section 27A of the Securities Act
and Section 21E of the Exchange Act applies to forward-looking information
provided pursuant to Item 5Eand Item 5Fabove.

|ITEM 6 | DIRECTORS, SENIOR
      MANAGEMENT AND EMPLOYEES
|------ | ------------------------------------------------

|A. | Directors and Senior
Management
|-- | -------------------------------

Ronald W. Thiessen (age 58), President, Chief Executive
Officer and Director

Ronald Thiessen is a Chartered Accountant with professional
experience in finance, taxation, mergers, acquisitions and re-organizations.
Since 1986, Mr. Thiessen has been involved in the acquisition and financing of
mining and mineral exploration companies. Mr. Thiessen is a director of Hunter
Dickinson Inc. (HDI) and its wholly owned subsidiary, Hunter Dickinson
Services Inc. (HDSI), a company providing management and administrative
services to several publicly-traded companies and focuses on directing corporate
development and financing activities.

30

---

Mr. Thiessen is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
    Director
    September 1995
    PresentPresident and Chief Executive Officer
    September 2000
    PresentAtlatsa Resources Corporation
    Director
    April 1996
    June 2011Continental Minerals Corporation
    Director
    November 1995
    April 2011Co-Chairman
    January 2006
    April 2011Detour Gold Corporation
    Director
    July 2006
    PresentChairman
    July 2006
    March 2009Farallon Mining Ltd.
    Director
    August 1994
    January 2011Chairman
    December 2005
    January 2011Great Basin Gold Ltd.
    Director
    October 1993
    PresentChairman
    November 2006
    PresentNorthern Dynasty Minerals Ltd.
    Director
    November 1995
    PresentPresident and Chief Executive Officer
    November 2001
    PresentQuartz Mountain Resources Ltd.
    Director
    December 2011
    PresentTaseko Mines Limited
    Director
    October 1993
    PresentChairman
    May 2006
    Present


Scott D. Cousens (age 47), Chairman and
Director

Mr. Cousens provides management and financial services to a
number of publicly traded companies associated with Hunter Dickinson Inc. His
focus for the past 20 years has been the development of relationships within the
international investment community. Substantial financings and subsequent
corporate success has established strong ties with North American, European and
Middle Eastern investors. Mr. Cousens is also the Director of Capital Finance
for Hunter Dickinson Inc.

Mr. Cousens is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
    Director
    September 1995
    PresentAnooraq Resources Corporation
    Director
    September 1996
    June 2009Continental Minerals Corporation
    Director
    June 1994
    April 2011Heatherdale Resources Ltd.
    Chairman and Director
    November 2009
    PresentNorthcliff Resources Ltd.
    Director
    June 2011
    PresentNorthern Dynasty Minerals Ltd.
    Director
    June 1996
    PresentQuartz Mountain Resources Ltd.
    Chairman and Director
    November 2012
    PresentRockwell Diamonds Ltd.
    Director
    November 2000
    November 2008Taseko Mines Limited
    Director
    October 1992
    Present


Robert A. Dickinson (age 64), Director

Mr. Dickinson is an economic geologist who has been actively
involved in mineral exploration and mine development for over 40 years. He is
Chairman of HDI and HDSI, as well as a director and member of the management
team of a number of the public companies associated with HDI. He is also
President and Director of United Mineral Services Ltd., a private resource
company. He also serves as a Director of the BC Mining Museum and a Trustee of
the BC Mineral Resources Education Program.

31

---

Mr. Dickinson is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToAmarc Resources Ltd.
    Director
    April 1993
    PresentChairman
    April 2004
    PresentAtlatsa Resources Corporation
    Director and Co-Chairman
    October 2004
    June 2009Continental Minerals Corporation
    Director
    June 2004
    April 2011Curis Resources Ltd.
    Director
    November 2010
    November 2012Chairman
    November 2010
    December 2010Detour Gold Corporation
    Director
    August 2006
    February 2009Heatherdale Resources Ltd.
    Director
    November 2009
    PresentNorthcliff Resources Ltd.
    Director and Chairman
    June 2011
    PresentNorthern Dynasty Minerals Ltd.
    Director
    June 1994
    PresentChairman
    April 2004
    PresentQuartz Mountain Resources Ltd.
    Director
    December 2011
    PresentChairman
    December 2011
    November 2012Rathdowney Resources Ltd.
    Director & Chairman
    March 2011
    December 2011Taseko Mines Limited
    Director
    January 1991
    Present


James Kerr (age 66), Director

Mr. Kerr holds a B.A. degree and graduated from the University
of British Columbia in 1968. Mr. Kerr is a Chartered Accountant and was a
partner at KPMG, a national accounting firm, until his retirement in 2007. Mr.
Kerr has extensive experience in public practice, and actively involved with
audit committees of mining and energy companies, providing advice on accounting
and compliance issues based on a risk management approach.

Mr. Kerr is, or was within the past five years, a director of
the following public companies:

Company
    Positions Held
    From
    ToCuris Resources Ltd.
    Director
    November 2010
    PresentQuartz Mountain Resources Ltd.
    Director
    December 2011
    Present


David Mordant (age 67), Director

Retired founder and CEO of an agricultural commodities trading
business that was sold to a listed company. Focused on commodity and stock
market trading in local and international markets since 2002 and has been a
guest commentator on CNBC on commodities and stocks.

Mr. Mordant has not, within the past five years, been an
officer and/or director of any public companies.

Gordon Fretwell (age 57), Director

Mr. Fretwell holds a B.Comm, degree and graduated from the
University of British Columbia in 1979 with his Bachelor of Law degree. Formerly
a partner in a large Vancouver law firm, Mr. Fretwell has, since 1991, been a
self-employed solicitor (Gordon J. Fretwell Law Corporation) in Vancouver
practicing primarily in the areas of corporate and securities law.

32

---

Mr. Fretwell is, or was within the past five years, an officer
and/or director of the following public companies:

Company
    Positions Held
    From
    ToBell Copper Corporation
    Secretary
    March 2001
    May 2011Director
    June 2001
    April 2011Benton Resources Corp.
    Director
    July 2003
    PresentSecretary
    December 2003
    PresentContinental Minerals Corporation
    Director
    February 2001
    April 2011Copper Ridge Explorations Inc.
    Director/Secretary
    September 1999
    August 2009Coro Mining Corporation
    Director
    June 2009
    PresentCoro Resources Corp.
    Director
    January 2009
    PresentCuris Resources Ltd.
    Director
    January 2011
    PresentCVC Cayman Venture Corp.
    Director
    July 2010
    November 2010Frontera Copper Corporation
    Director
    February 2009
    June 2009Golden Dory Resources Corp.
    Secretary
    August 2008
    PresentGrandcru Resources Corp.
    Director
    December 2002
    May 2008ICN Resources Ltd.
    VP of Legal Services
    December 2000
    March 2009Secretary
    March 2009
    August 2010Director
    July 2004
    March 2009International Royalty Corporation
    Director
    June 2003
    February 2010Secretary
    June 2003
    February 2010Keegan Resources Inc.
    Director
    February 2004
    PresentLignol Energy Corporation
    Director
    January 2007
    PresentMeritus Minerals Ltd.
    Director
    June 2007
    PresentNorthern Dynasty Minerals Ltd.
    Director
    June 2004
    PresentQuartz Mountain Resources Ltd.
    Director
    January 2003
    PresentSecretary
    January 2003
    December 2011Rare Earth Metals Inc.
    Secretary
    December 2009
    Present


Simon Beller (age 35), Chief Financial
Officer

Simon Beller is a Chartered Accountant and Chartered Business
Valuator who specializes in mergers, acquisitions, valuations, divestitures and
financings. He is also Vice President, Corporate Finance at HDSI. Prior to
joining HDSI, Mr. Beller acted as chief financial officer for the MultiSport
Centre of Excellence and spent seven years with KPMG practicing corporate
finance.

Mr. Beller has not, within the past five years, been an officer
and/or director of any public companies.

Xenia Kritsos (age 41), Corporate Secretary

Ms. Kritsos is an internationally qualified business lawyer
experienced in providing advice in the mining infrastructure, technology and
other sectors. Areas of expertise include mergers and acquisitions, corporate
finance, securities law, competition law and foreign investment. Ms. Kritsos is
also Legal Counsel for HDSI.

33

---

Ms. Kritsos is, or was within the past five years, an officer
of the following public companies:

Company
    Positions Held
    From
    ToCuris Resources Ltd.
    Secretary
    November 2010
    PresentHeatherdale Resources Ltd.
    Secretary
    October 2010
    PresentQuartz Mountain Resources Ltd.
    Secretary
    December 2011
    Present


|B. | Compensation
|-- | ------------

During the Company's financial year ended July 31, 2012, the
aggregate cash compensation paid or payable by the Company to its directors and
senior officers was $173,158.

Ronald W. Thiessen, President, and Simon Beller, Chief
Financial Officer, are each "Named Executive Officers" of the Company for the
purposes of the following disclosure.

The compensation paid to the Named Executive Officers during
the Company's most recently completed financial year is as set out below:

Name and principal position
    Salary ($)
    Share- based
      awards ($)
    Option- based
      awards ($)
    Pension value
      ($)
    All other compensation
      ($)
    Total compensation
      ($)Ronald W. Thiessen(1)President and Chief
      Executive Officer
    28,875
    Nil
    22,188
    Nil
    Nil
    51,063Simon Beller(2)Chief Financial Officer
    43,750
    Nil
    22,188
    Nil
    Nil
    65,938


Notes:(1) Mr. Thiessen was appointed as President and Chief
Executive Officer on December 30, 2011 (2) Mr. Beller was appointed as Chief
Financial Officer on December 7, 2011

During the fiscal year ended July 31, 2012, the above named
NEOs did not serve the Company solely on a full-time basis, and their
compensation from the Company is allocated based on the estimated amount of time
spent providing services to the Company.

Director Compensation

The compensation provided to the directors, excluding a
director who is already set out in disclosure for a NEO for the Company's most
recently completed financial year ended July 31, 2012 is as set out below:

Name
    Fees earned
      ($)
    Share-based awards
      ($)
    Option-based
      awards(3) ($)
    Non-equity incentive plan
      compensation ($)
    Pension value
      ($)
    All other compensation
      ($)
    Total ($)Robert A. Dickinson(2)(4)
    28,875
    Nil
    22,188
    Nil
    Nil
    Nil
    51,063James Kerr(1)(4)(5)
    15,604
    Nil
    22,188
    Nil
    Nil
    Nil
    37,792David Mordant(1)(4)(6)
    12,688
    Nil
    22,188
    Nil
    Nil
    Nil
    34,876Gordon Fretwell(1)(7)
    15,604
    Nil
    22,188
    Nil
    Nil
    Nil
    37,792


Notes:

(1) Independent directors receive an annual fee of $15,750 for
their services plus an additional $5,000 annually for holding the position of
Committee Chair, and $3,000 annually for being a Committee Member.

(2) Pursuant to the Corporate Services Agreement with HDSI,
compensation for Mr. Dickinson is allocated to the Company on the basis of time
spent in respect of the Company's business.

(3) Options were granted during the year ended July 31, 2012
with an exercise price of $0.45 per option and expiry date of January 18, 2017.
For compensation purposes, the Black-Scholes option valuation model has been
used to determine the fair value on the date of grant. The Black-Scholes option
valuation is determined using the expected life of the share option, expected
volatility of the Company's common share price, expected dividend yield, and
risk-free interest rate.

(4) Messrs. Dickinson, Kerr, and Mordant, were appointed
Directors of the Company effective December 30, 2011. The former Directors (Rene
G. Carrier, Brian Causey and Barry Coughlan) ceased to be Directors on December
30, 2011 and received no compensation in their roles as Directors in the year
ended July 31, 2012.

(5) Mr. Kerr is the Chairman of the Audit and Risk Committee as
well as a member of the Compensation Committee and Nominating and Governance
Committee.

(6) Mr. Mordant is a member of the Audit and Risk Committee and
Nominating and Governance Committee.

34

---

(7) Mr. Fretwell is the Chairman of the Nominating and
Governance Committee as well as a member of the Audit and Risk Committee and
Compensation Committee.

Pension and Retirement Benefits

Neither the Company nor its subsidiary provides any pension,
retirement or similar benefits.

|C. | Board Practices
|-- | ---------------

All directors were re-elected at the annual general meeting of
the Company's shareholders held on March 15, 2012. Mr. Cousens was appointed as
Chairman of the Board on November 22, 2012. All directors have a term of office
expiring at the next annual general meeting of the Company's shareholders, which
is expected to be held in early 2013. All officers have a term of office lasting
until their removal or replacement by the Board of Directors.

Directors Service Contracts

There is no written employment contract between the Company and
any director.

There is no service contract between any director of the
Company and either the Company or its subsidiary, which provides for any
benefits upon termination of employment.

Audit and Risk Committee

Composition of Audit and Risk Committee

The members of the Audit and Risk Committee are James Kerr,
David Mordant and Gordon J. Fretwell. All Audit and Risk Committee members are
financially literate and no Audit and Risk Committee members are officers,
employees or Control Persons of the Company. Mr. Kerr is a Chartered Accountant,
and hence a financial expert.

Relevant Education and Experience

As a result of their education and experience, each member of
the Audit and Risk Committee has familiarity with, an understanding of, or
experience in:

- the accounting principles used by the Company to prepare its financial
  statements, and the ability to assess the general application of those
  principles in connection with estimates, accruals and reserves;
- reviewing or evaluating financial statements that present a breadth and
  level of complexity of accounting issues that are generally comparable to the
  breadth and complexity of issues that can reasonably be expected to be raised
  by the Company's financial statements; and
- an understanding of internal controls and procedures for financial
  reporting.

Mr. Kerr is a Chartered Accountant and was a partner at KPMG, a
national accounting firm, until his retirement in 2007. He has extensive
experience in public practice, and actively involved with audit committees of
mining and energy companies, providing advice on accounting and compliance
issues based on a risk management approach. Mr. Fretwell is an experienced
securities lawyer and Mr. Mordant is an experienced businessman with corporate
finance experience. See disclosure under A. Directors and Senior Management
above.

Audit and Risk Committees Charter

The function of the Audit and Risk Committee is to oversee the
employment and compensation of the Companys independent auditor, and other
matters under the authority of the Committee. The Committee also assists the
Board of Directors in carrying out its oversight responsibilities relating to
the Companys financial, accounting and reporting processes, the Companys
system of internal accounting and financial controls, the Companys compliance
with related legal and regulatory requirements, and the fairness of transactions
between the Company and related parties.

The Audit and Risk Committee has a charter that sets out its
mandate and responsibilities, which is contained in Appendix 6 of the Corporate
Governance Policies and Procedures Manual (available for download from the
Companys website under Corporate Governance at
www.quartzmountainresources.com). The Audit and Risk Committee has the
following responsibilities and authority:

|(a) | Relationship with Independent Auditor
|--- | -------------------------------------
|    | (i)                                  
|    | (ii)                                 
|    | (iii)                                

35

---

| | (iv)   | The Committee shall approve in advance all audit and
      permitted non-audit services with the independent auditor, including the
      terms of the engagements and the fees payable; provided that the Committee
      Chairman may approve services to be performed by the independent auditor
      between Committee meetings if the amount of the fee does not exceed
      $50,000, provided that any such approval shall be reported to the
      Committee at the next meeting thereof. The Committee may delegate to a
      subcommittee the authority to grant pre-approvals of audit and permitted
      non-audit services, provided that the decision of any such subcommittee
      shall be presented to the full Committee at its next scheduled
    meeting.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (v)    | At least annually, the Committee shall review and
      evaluate the experience and qualifications of the lead partner and senior
      members of the independent auditor team.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vi)   | At least annually, the Committee shall obtain and review
      a report from the independent auditor regarding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |        | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |        | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |        | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |        | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (vii)  | At least annually, the Committee shall evaluate the
      qualifications, performance and independence of the independent auditor,
      including considering whether the auditors quality controls are adequate
      and the provision of permitted non-audit services is compatible with
      maintaining the auditors independence.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (viii) | The Committee shall ensure the rotation of the lead (or
      coordinating) audit partner having primary responsibility for the audit,
      the concurring partner responsible for reviewing the audit, and other
      audit partners as required by law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (ix)   | The Committee shall consider whether, in order to assure
      continuing auditor independence, it is appropriate to adopt a policy of
      rotating the independent auditing firm on a regular basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (x)    | The Committee shall recommend to the Board policies for
      the Companys hiring of employees or former employees of the independent
      auditor who were engaged on the Companys account or participated in any
      capacity in the audit of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (xi)   | The Committee shall oversee the implementation by
      management of appropriate information technology systems for the Company,
      including as required for proper financial reporting and
  compliance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|(b) | Financial Statement and Disclosure Review
|--- | -----------------------------------------
|    | (i)                                      
|    | (ii)                                     
|    | (iii)                                    
|    | (iv)                                     
|    |                                          
|    |                                          
|    |                                          

36

---

| | (v)  | Prior to their filing or issuance, the Committee shall
      review the Companys Annual Information Form, quarterly and annual
      earnings press releases, and other financial press releases, including the
      use of pro forma or adjusted non-GAAP information.                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (vi) | The Committee shall review and discuss with management
      the financial information and earnings guidance provided to analysts and
      rating agencies. Such discussion may be specific or it may be in general
      regarding the types of information to be disclosed and the types of
      presentations to be made.

|(c) | Conduct of the Annual Audit                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                     
|    | The Committee shall oversee the annual audit, and in the
      course of such oversight the Committee shall have the following
      responsibilities and authority:

| | (i)   | The Committee shall meet with the independent auditor
      prior to the audit to discuss the planning and conduct of the annual
      audit, and shall meet with the independent auditor as may be necessary or
      appropriate in connection with the audit.                                                                                                                                                                                                                                                                         
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | The Committee shall ascertain that the independent
      auditor is registered and in good standing with the Canadian Public
      Accounting Board and that the independent auditor satisfies all applicable
      independence standards. The Committee shall obtain from the auditor a
      written statement delineating all relationships between the auditor and
      the Company as per applicable independence standards, and review
      relationships that may impact the objectivity and independence of the
      auditor.
| | (iii) | The Committee shall discuss with the independent auditor
      the matters required to be discussed by Statement on Auditing Standards
      No. 61 relating to the conduct of the audit, including                                                                                                                                                                                                                                                                                                                                      
| |       | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (iv)  | The Committee shall make such inquiries to the management
      and the independent auditor as the Committee members deem necessary or
      appropriate to satisfy themselves regarding the efficacy of the Companys
      financial and internal controls and procedures and the auditing
      process.                                                                                                                                                                                                                              

|(d) | Compliance and Oversight
|--- | ------------------------
|    | (i)                     
|    | (ii)                    
|    | (iii)                   
|    | (iv)                    
|    | (v)                     
|    | (vi)                    
|    | (vii)                   

37

---

| | (viii) | At least annually, the Committee shall meet with the
      Companys legal counsel and discuss any legal matters that may have a
      material impact on the financial statements or the Companys compliance
      policies.
| | ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ix)   | The Committee shall oversee the preparation of reports
      relating to the Audit and Risk Committee as required under applicable
      laws, regulations and stock exchange requirements.                                   
| | (x)    | The Committee shall exercise oversight with respect to
      anti-fraud programs and controls.                                                                                                                                

|(e) | Related Party Transactions
|--- | --------------------------
|    | (i)                       
|    | (ii)                      

Compensation Committee

The Boards Compensation Committee currently consists of Scott
Cousens (Chairman), Gordon Fretwell and James Kerr.

The function of the Compensation Committee is to assist the
Board in carrying out its responsibilities relating to executive and director
compensation. The Compensation Committee has a charter that sets out its mandate
and responsibilities, which is contained in Appendix 7 of the Corporate
Governance Policies and Procedures Manual (available for download from the
Companys website under Corporate Governance at
www.quartzmountainresources.com). In furtherance of its purpose, the
Compensation Committee has the following responsibilities and authority:

|(a) | The Compensation Committee shall recommend to the Board
      the form and amount of compensation to be paid by the Company to directors
      for service on the Board and on Board committees. The Compensation
      Committee shall review director compensation at least annually.                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | The Compensation Committee shall annually review the
      Company's base compensation structure and the Company's incentive
      compensation, stock option and other equity based compensation programs
      and recommend changes in or additions in such structure and plans to Board
      as needed.                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | The Compensation Committee shall recommend to the Board
      the annual base compensation of the Company's executive officers and
      senior managers (collectively the "Officers").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | The Compensation Committee shall recommend to the Board
      the range of increase or decrease in the annual base compensation for
      non-Officer personnel providing services to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(e) | The Compensation Committee shall recommend to the Board
      annual corporate goals and objectives under any incentive compensation
      plan adopted by the Company for Officers and non-Officer personnel
      providing services to the Company, and recommend incentive compensation
      participation levels for Officers and non-Officer personnel providing
      services to the Company under any such incentive compensation plan. In
      determining the incentive component of compensation, the Committee will
      consider the Company's performance and relative shareholder return, the
      values of similar incentives at comparable companies and the awards given
      in past years.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(f) | The Compensation Committee shall evaluate the performance
      of Officers generally and in light of annual corporate goals and
      objectives under any incentive compensation plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(g) | The Compensation Committee shall periodically review with
      the Chairman and CEO their assessments of corporate officers and senior
      managers and succession plans, and make recommendations to the Board
      regarding appointment of officers and senior managers.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(h) | The Compensation Committee shall provide oversight of the
      performance evaluation and incentive compensation of non-Officer personnel
      providing services to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(i) | The Compensation Committee shall administer the Company's
      stock option and other equity based compensation plans and determines the
      annual grants of stock options and other equity based
  compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(j) | The Compensation Committee shall recommend to the
      Nominating and Governance Committee the qualifications and criteria for
      membership on the Compensation Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

38

---

Other Board Committees

The Company has a Nominating and Corporate Governance Committee
which is responsible for identifying new candidates for the Board of Directors
as necessary, after considering what competencies and skills the directors as a
group should possess and assessing the competencies and skills the directors as
a group should possess and assessing the competencies and skills of the existing
and any proposed directors, and considering the appropriate size of the Board.
The committee is also responsible for developing and recommending to the Board a
set of corporate governance principles applicable to the Chief Financial
Officer, and overseeing the evaluation of the Board and Senior Management. The
current members of the Nominating and Corporate Governance Committee are Gordon
Fretwell, James Kerr, and David Mordant.

The Company has a Special Committee composed of independent
directors of the Company in order to consider the best interests of the Company
related to all matters in respect of any proposed transactions with members of
the Hunter Dickinson group of companies, including proposed transactions between
non-arms length parties, and to make recommendations to the Board in respect of
such matters. The current members of the Special Committee are Gordon Fretwell,
James Kerr, and David Mordant.

|D. | Employees
|-- | ---------

At November 22, 2012 and for each of the past three fiscal
years, the Company has had no employees and has contracted staff on an as-needed
basis in British Columbia, Canada. The directors of the Company primarily
administer the Company's functions through the employees of HDSI, a private
company with certain directors in common with the Company (see Item 7 
"Major Shareholders and Related Party Transactions").

|E. | Share Ownership
|-- | ---------------

Security Holdings of Directors and Senior Management

As at November 22, 2012, the directors and officers of Quartz
Mountain and their respective affiliates, directly and indirectly, own or
control as a group an aggregate of 3,803,765 common shares or 15.1% .

As at November 22, 2012, the Company's directors and officers
beneficially own the following number of the Company's common shares, options
and warrants:

Name of Insider
    Securities Beneficially Owned(1)(3)
    As a % of outstanding common sharesRonald W. Thiessen
    1,732,686 Common shares 60,000 options
    6.9%Scott Cousens
    147,177 Common shares 60,000 options
    0.6%Robert A. Dickinson
    1,823,902 Common shares(2)60,000 options
    7.3%Simon Beller
    60,000 options
    James Kerr
    60,000 options
    Gordon J. Fretwell
    60,000 options
    David Mordant
    100,000 Common shares 60,000 options
    0.4%Xenia Kritsos
    48,000 options
    


Notes:(1) This information has been provided by the
individual directors as provided by them on www.sedi.ca(2) Certain
of these shares are beneficially owned through a private company controlled by
Mr. Dickinson. (3) Options to purchase Common Shares at $0.45 per share
expiring on January 18, 2017.

Share Option Plan

As at November 22, 2012, an aggregate of 1,754,600 were
outstanding pursuant to the Company's share option plan (the "Plan"), described
below, and an aggregate of 753,919 common shares remained available for issuance
pursuant to the Plan, described below.

The Company adopted the Plan in order to advance the interests
of the Company by providing a means to encourage directors, officers, employees,
and others who provide services to the Company and its subsidiaries to acquire
shares of the Company, thereby increasing their proprietary interest in the
Company, encouraging them to remain associated with the Company and furnishing
them with additional incentive to advance the interests of the Company in the
conduct of their affairs.

39

---

The Plan is a "rolling" plan, whereby the maximum number of
shares that may be reserved for issuance pursuant to all option awards granted
under the Plan is 10% of the Company's outstanding common shares, as calculated
at the time that an award is granted. Under the policies of the TSX Venture
Exchange (the "TSX-V"), the continuation of the Plan required shareholder
approval by ordinary resolution at each annual general meeting of the Company's
shareholders. The Company's shareholders confirmed the Plan in accordance with
the policies of the TSX-V at the Company's last annual general meeting, held on
March 15, 2012.

Pursuant to the Plan, if outstanding options are exercised, or
expire, or the number of issued and outstanding common shares of the Company
increases, the number of options available to grant under the Plan increases
proportionately. The exercise price of each option is set by the Board of
Directors at the time of grant but cannot be less than the Discounted Market
Price (as defined in, and determined in accordance with, the policies of the
TSX-V). Options can have a maximum term of five years (or 10 years if the
Company becomes a Tier 1 issuer on the TSX-V) and typically terminate 90 days
following the termination of the optionee's employment or engagement, except in
the case of retirement or death. Vesting of options is at the discretion of the
Board of Directors at the time the options are granted.

Eligible Optionees

Under the policies of the TSX-V, to be eligible for the
issuance of a stock option under the Plan, an optionee must either be a
director, officer or employee of the Company, or a consultant or an employee of
a company providing management or other services to the Company, or its
subsidiaries, at the time the option is granted.

Options may be granted only to an individual or to a company
that is wholly-owned by individuals eligible for an option grant. If the option
is granted to a non-individual, the company must provide the TSX-V with an
undertaking that it will not permit any transfer of its securities, nor issue
further securities, to any other individual or entity as long as the incentive
stock option remains in effect without the consent of TSX-V.

Limitations on Awards

No optionee can be granted an option or options to purchase
more than 5% of the outstanding listed shares of the Company in any one year
period.

|ITEM 7 | MAJOR SHAREHOLDERS AND
      RELATED PARTY TRANSACTIONS
|------ | -------------------------------------------------------

|A. | Major Shareholders
|-- | ------------------

Major Shareholders

Quartz Mountain is a publicly-held corporation, with its shares
held by residents of Canada, the United States of America and other countries.
To the best of Quartz Mountain's knowledge, other than as noted below, no
person, corporation or other entity beneficially owns, directly or indirectly,
or controls more than 5% of the common shares of Quartz Mountain, the only class
of securities with voting rights. For these purposes, "beneficial ownership"
means the sole or shared power to vote or direct the voting or to dispose or
direct the disposition of any security.

As of November 22, 2012, Quartz Mountain had authorized
unlimited common shares without par value, of which 25,085,190 were issued and
outstanding. The following table sets forth certain information with respect to
beneficial ownership of the Company's common stock as of November 22, 2012 by
each shareholder known to be the beneficial owner of more than 5% of the common
stock.

Identity of Person or Group
    Shares
    Percentage Beneficially Owned of ClassFinsbury Exploration Ltd.
    2,038,111
    8.1%Robert A. Dickinson
    1,823,902
    7.3%Ronald Thiessen
    1,732,686
    6.9%David Copeland
    1,307,685
    5.2%


All of the common shares have the same voting rights and no
major shareholders of the Company have different voting rights.

Geographic Breakdown of Shareholders

As of November 22, 2012, Quartz Mountain's register of
shareholders indicates that Quartz Mountain's common shares are held as follows:

40

---

Location
    Number of registered
      shareholders of record
    Number of shares
    Percentage of total sharesCanada
    44
    23,588,878
    94.04%United States
    451
    1,461,102
    5.82%Other
    4
    35,210
    0.14%Total
    499
    25,085,190
    100.0%


Shares registered in the names of intermediaries, were assumed
to be held by residents of the same country in which the intermediary was
located.

Transfer Agent

The Company's common shares are recorded on the books of its
transfer agent, Computershare Investor Services Inc., located at 4th Floor, 510
Burrard Street, Vancouver, B.C. V6C 3B9; telephone (604) 661-9400 in registered
form. However, the majority of the Company's common shares are registered in the
name of intermediaries such as brokerage houses and clearing houses (on behalf
of their respective brokerage clients). Quartz Mountain does not have knowledge
or access to the identities of the beneficial owners of such shares registered
through intermediaries.

Control

To the best of its knowledge, the Company is not owned or
controlled, directly or indirectly, by any other corporation, by any foreign
government or by any other natural or legal person, severally or jointly, other
than as noted above under Major Shareholders. There are no arrangements known to
Quartz Mountain which, at a subsequent date, may result in a change in control
of the Company.

Insider Reports under the Securities Acts of British
Columbia, Alberta and Ontario

Since the Company is a reporting issuer under the Securities
Acts of British Columbia, Alberta and Ontario, certain "insiders" of the Company
(including its directors, certain executive officers, and persons who directly
or indirectly beneficially own, control or direct more than 10% of its common
shares) are generally required to file insider reports of changes in their
ownership of Quartz Mountain's common shares within five days following the
trade under National Instrument 55-104  Insider Reporting Requirements and
Exemptions, as adopted by the CSA, and the Securities Act (Ontario). Copies of
such reports are available for public inspection at the offices of the British
Columbia Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver,
British Columbia V7Y 1L2, (604) 899-6500 or at the British Columbia Securities
Commission web site, www.bcsc.bc.ca. In British Columbia, all insider
reports must be filed electronically five days following the date of the trade
at www.sedi.ca. The public is able to access these reports at
www.sedi.ca.

|B. | Related Party Transactions
|-- | --------------------------

Except as disclosed below, Quartz Mountain has not, since the
beginning of its last fiscal year ended July 31, 2012:

(1) entered into any transactions which are material to Quartz
Mountain, or a related party or any transactions unusual in their nature or
conditions involving goods, services or tangible or intangible assets to which
Quartz Mountain or any of its former subsidiaries was a party;

(2) entered into any transactions or loans between the Company
and:

(a) enterprises that directly or
indirectly through one or more intermediaries, control or are controlled by, or
are under common control with, Quartz Mountain;

(b) associates of Quartz Mountain
(unconsolidated enterprises in which Quartz Mountain has significant influence
or which has significant influence over Quartz Mountain) including shareholders
beneficially owning 10% or more of the outstanding shares of Quartz Mountain;

(c) individuals owning, directly or
indirectly, an interest in the common shares of Quartz Mountain that gives them
significant influence over Quartz Mountain, and close members of any such
individuals family;

(d) key management personnel (persons
having authority in responsibility for planning, directing and controlling the
activities of Quartz Mountain including directors and senior management and
close members of such individuals families); or

(e) enterprises in which a substantial
voting interest is owned, directly or indirectly, by any person described in (c)
or (d) or over which such a person is able to exercise significant
influence.

Hunter Dickinson Services Inc. ("HDSI")

As an umbrella organization, HDSI provides, both cost and
expertise advantages to the companies through access to a shared
multidisciplinary team of mining and financial professionals. This includes: management capability, geological, engineering and
environmental expertise, financial acumen, and administrative and support
services. In addition, HDSI organizes and shares leased premises and office and
technical equipment for staff to perform their duties.

41

---

Quartz Mountain's business relationship with HDSI consists of
utilizing the services described above. HDSI provides these services to Quartz
Mountain which includes the services of Quartz Mountain's President, pursuant to
a standard (within the group) Geological Management and Administration Services
Agreement with HDSI, dated June 1, 2008 (the "Geological Management and
Administration Services Agreement") and amended July 2, 2010. Because of cross
membership of many of the boards of directors within the group, certain members
of management and the Board of Directors of Quartz Mountain are also members of
the board of directors or employees of HDSI.

HDSI's arrangements are also flexible enough that it is able to
defer collection of monthly service invoices and on occasion, where surplus
funds are available to HDSI, make short term advances to members of the group.
The Geological Management and Administration Services Agreement can be
terminated by either party on 30 days' notice.

During the fiscal year ended July 31, 2012, the Company had
transactions totaling $1,255,789 (2011 -$nil); (2010  $nil) to HDSI for
services and reimbursements of third party disbursements pursuant to this
agreement.

Finsbury Exploration Ltd.

Finsbury Exploration Ltd. ("Finsbury") is a private company
which has certain directors in common with the Company. During the fiscal year
ended July 31, 2012, the Company had transactions totaling $25,278 (2011 -
$nil); (2010  $nil) to Finsbury relating to the Galaxie Project.

|C. | Interests of Experts and
Counsel
|-- | --------------------------------

Not applicable.

|ITEM 8 | FINANCIAL
      INFORMATION
|------ | ---------------------------

|A. | Consolidated Statements and Other Financial
      Information
|-- | -------------------------------------------------------------

Item 17of this Form 20-F contains Quartz Mountain's
audited consolidated annual financial statements as at July 31, 2012 and
2011.

Legal Proceedings

The Company is not, and has not been in the recent past,
involved in any legal or arbitration proceedings, including governmental
proceedings and those relating to bankruptcy, receivership, or similar
proceedings.

Dividend Policy

The Company has not paid any dividends on its outstanding
common shares since its incorporation and does not anticipate that it will do so
in the foreseeable future. All funds of the Company are being retained for
administration expenses and mineral property investigations.

|B. | Significant Changes
|-- | -------------------

There have been no significant changes to the accompanying
financial statements since July 31, 2012, except as disclosed in this Annual
Report on Form 20-F.

|ITEM 9 | THE OFFER AND
      LISTING
|------ | ---------------------------

|A. | Offer and Listing Details
|-- | -------------------------

Trading Markets

The following tables set forth for the periods indicated the
price history of the Company's common shares on the TSX Venture Exchange (NEX
board from 2008 to 2011) and on the OTC Grey Market:

42

---

TSX Venture Exchange
    OTCFiscal year ended July 31,
    High (Cdn$)
    Low (Cdn$)
    High (US$)
    Low (US$)2012
    0.50
    0.20
    0.50
    0.202011
    0.49
    0.18
    0.42
    0.162010
    0.30
    0.15
    0.30
    0.132009
    0.50
    0.12
    0.43
    0.082008
    0.75
    0.42
    0.72
    0.39


TSX Venture Exchange
    OTCQuarter
    High (Cdn$)
    Low (Cdn$)
    High (US$)
    Low (US$)Q4, 2012
    0.45
    0.31
    0.38
    0.30Q3, 2012
    0.50
    0.37
    0.50
    0.37Q2, 2012
    0.50
    0.20
    0.50
    0.20Q1, 2012
    0.30
    0.20
    0.32
    0.20Q4, 2011
    0.38
    0.32
    0.42
    0.32Q3, 2011
    0.49
    0.30
    0.42
    0.31Q2, 2011
    0.42
    0.18
    0.31
    0.17Q1, 2011
    0.20
    0.18
    0.17
    0.16


TSX Venture Exchange
    OTCMonth
    High (Cdn$)
    Low (Cdn$)
    High (US$)
    Low (US$)October 2012
    0.29
    0.23
    0.30
    0.28September 2012
    0.30
    0.27
    0.30
    0.30August 2012
    0.35
    0.30
    0.37
    0.30July 2012
    0.35
    0.31
    0.34
    0.30June 2012
    0.45
    0.35
    0.34
    0.34May 2012
    0.45
    0.37
    0.38
    0.34


|B. | Plan of Distribution
|-- | --------------------

Not applicable.

|C. | Markets
|-- | -------

On December 30, 2011, the Company acquired a qualifying
property and was relisted on the main board of the TSX Venture Exchange, trading
under the symbol QZM. The Company continues to trade on the OTC Grey Market
under the symbol QZMRF.

On February 17, 2005, the Company transferred its listing to
NEX, a separate board of TSX Venture Exchange and the Company's common shares
traded on NEX under the symbol QZM.H.

Prior to February 17, 2005, the Company's common shares were
listed and traded in Canada on Tier 2 on the TSX Venture Exchange, under the
symbol QZM.V. The transition to Tier 2 became effective December 23, 2003. Prior
to this, the Company traded on Tier 3 on the TSX Venture Exchange.

|D. | Selling Shareholders
|-- | --------------------

Not applicable.

|E. | Dilution
|-- | --------

Not applicable.

|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.

43

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|ITEM 10 | ADDITIONAL
      INFORMATION
|------- | ----------------------------

|A. | Share Capital
|-- | -------------

Not applicable.

|B. | Memorandum and Articles of
  Association
|-- | ----------------------------------------

Articles of Association

Quartz Mountain's original corporate constituting documents
comprised of the Memorandum and Articles of Association were registered with the
British Columbia Registrar of Companies under Corporation No. BC0253743. The
Companys Memorandum and Articles have subsequently been replaced by a Notice of
Articles and Articles under the Business Corporations Act(British
Columbia) (BCA), and the Articles were last amended by shareholder resolution
at the Companys Annual General Meeting, held on March 15, 2012. The Company's
articles of incorporation do not contain a description or place any restrictions
on the Company's objects and purposes. For more information, see the Articles of
Amalgamation filed as Exhibit 10.1 to this Form 20-F.

Certain Powers of Directors

The Companys articles require that a director or senior
officer who holds any office or possesses any property, right or interest that
could result, directly or indirectly, in the creation of a duty or interest that
materially conflicts with that individuals duty or interest as a director or
senior officer, must disclose the nature and extent of the conflict as required
by the BCA.

The BCA requires that every director or senior officer who is a
party to, or who is a director or officer of, or has a material interest in, any
person who is a party to, a material contract or transaction or a proposed
material contract or transaction with the Company, must disclose in writing to
the Company or request to have entered in the minutes of a meeting or a consent
resolution of directors, the nature and extent of his or her interest, and must
refrain from voting in respect of the contract or transaction, unless the
contract or transaction is: (a) one relating primarily to his or her
remuneration as a director of the corporation or an affiliate; (b) one for
indemnity of or insurance for directors as contemplated under the BCA; or (c)
one with an affiliate of the Company. However, a director who is prohibited by
the BCA from voting on a material contract or proposed material contract may be
counted in determining whether a quorum is present for the purpose of the
resolution, if the director disclosed his or her interest in accordance with the
BCA and the contract or transaction was reasonable and fair to the corporation
at the time it was approved.

The Company's Articles provide that the Board will from time to
time determine the remuneration to be paid to the directors. The Company must
reimburse each director for the reasonable expenses that he or she may incur in
and about the business of the Company. The Board may also, by resolution, award
special remuneration to any director for undertaking any professional or other
services on the Company's behalf, outside than the ordinary duties of a director
of the Company.

The Company's Articles provide that the directors may: (a)
borrow money in the manner and amount, on the security, from the sources and on
the terms and conditions that they consider appropriate; (b) issue bonds,
debentures and other debt obligations either outright or as security for any
liability or obligation of the Company or any other person and at such discounts
or premiums and on such other terms as the directors consider appropriate; (c)
guarantee the repayment of money by any other person or the performance of any
obligation of any other person; and (d) mortgage, charge, whether by way of
specific or floating charge, grant a security interest in, or give other
security on, the whole or any part of the present and future assets and
undertaking of the Company.

The directors may, by resolution, amend or repeal any articles
that regulate the business or affairs of the Company. The BCA requires the
directors to submit any such amendment or repeal to the Company's shareholders
at the next meeting of shareholders, and the shareholders may confirm, reject or
amend the amendment or repeal.

The Board does not have a mandatory retirement policy for
directors based solely on age. The Company has a practice of conducting annual
Board, Committee and individual director evaluations, pursuant to which each
director's performance is evaluated annually. There is no minimum share
ownership requirement for directors qualification.

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.

All outstanding common shares of the Company are fully paid and
non-assessable. The holders of the common shares are entitled to one vote per
share at meetings of shareholders and to receive dividends if, as and when
declared by the directors of the Company. In the event of voluntary or
involuntary liquidation, dissolution or winding-up of the Company, after payment
of all outstanding debts, the remaining assets of the Company available for
distribution would be distributed rateably to the holders of the common shares. Holders of the common shares of the Company
have no pre-emptive, redemption, exchange or conversion rights.

44

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The preferred shares may be issued in series on such terms as
determined by the Company's directors in accordance with the class rights and
restrictions. The special rights and restrictions attaching to the preferred
shares are set forth in Part 26 of the Articles, and provide the directors with
wide latitude to create a series of preferred shares which may be convertible
into common shares, and have attached to them rights that rank ahead of common
shares in respect of entitlement to dividends. The directors may, by resolution,
create, define and attach special rights and restrictions to the shares of each
series, subject to the special rights and restrictions attached to the preferred
shares.

Except as described above, the Company may not create any class
or series of shares or make any modification to the provisions attaching to the
Company's shares without the affirmative vote of a majority of the votes cast by
the holders of the common shares.

Majority Voting Policy

Under the Companys Corporate Governance Manual, in an
uncontested director election, if the votes for the election of a director
nominee at a meeting of shareholders are fewer than the number voted withhold,
the nominee is expected to submit his or her resignation promptly after the
meeting for the consideration of the Nominating and Governance Committee. T he
Nominating and Governance Committee will make a recommendation to the Board of
Directors after reviewing the matter, and the Board of Directors will then
decide whether to accept or reject the resignation. The Boards decision to
accept or reject the resignation will be disclosed to shareholders. The nominee
will not participate in any Nominating and Governance Committee deliberations
whether to accept or reject the resignation.

Meetings of Shareholders

The BCA requires the Company to call an annual shareholders'
meeting not later than 15 months after holding the last preceding annual meeting
and permits the Company to call a special shareholders' meeting at any time. In
addition, in accordance with the BCA, the holders of not less than 5% of the
Company's shares carrying the right to vote at a meeting sought to be held may
requisition the directors to call a special shareholders' meeting for the
purposes stated in the requisition. The Company is required to mail a notice of
meeting and management information circular to registered shareholders not less
than 21 days and not more than 2 months prior to the date of any annual or
special shareholders' meeting. These materials are also filed with Canadian
securities regulatory authorities and furnished to the SEC. The Company's
articles provide that a quorum of two shareholders in person or represented by
proxy holding or representing by proxy at least 10% of the Company's issued
shares carrying the right to vote at the meeting is required to transact
business at a shareholders' meeting. In addition to shareholders and their duly
appointed proxies and corporate representatives, the Company's directors,
president, secretary, lawyers, auditors, and invitees of the directors or
chairperson, are entitled to be admitted to the Company's annual and special
shareholders' meetings; provided that any such person is not to be counted in
the quorum and is not entitled to vote at the meeting unless that person is a
shareholder or proxy holder entitled to vote at the meeting.

Disclosure of Share Ownership

The Securities Act(British Columbia) currently provides
that the directors and certain officers of an issuer and its subsidiaries and
any person or company that beneficially owns, directly or indirectly, voting
securities of an issuer or that exercises control or direction over voting
securities of an issuer or a combination of both, carrying more than 10% of the
voting rights attached to all the issuer's outstanding voting securities (a
"significant shareholder"), as well as the directors and officers of any
significant shareholder, (each an "insider") must, within 10 days of becoming an
insider, file a report in the required form effective the date on which the
person became an insider, disclosing any direct or indirect beneficial ownership
of, or control or direction over, securities of the reporting issuer. The
Securities Act(British Columbia) also provides for the filing of a
report by an insider of a reporting issuer who acquires or transfers securities
of the issuer or who enters into, materially amends or terminates an arrangement
the effect of which is to alter the insider's economic interest in a security of
the issuer or the insider's economic exposure to the issuer. These reports must
be filed within five days after the reportable event. The Securities Act(British Columbia) also requires these reports to be filed by reporting
insiders within five days after the applicable event, though are only required
by the Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, directors, any person or company responsible for a principal business
unit and significant shareholders of the Company.

The Securities Act(British Columbia) also provides that
a person or company that acquires (whether or not by way of a take-over bid,
offer to acquire or subscription from treasury) beneficial ownership of voting
or equity securities or securities convertible into voting or equity securities
of a reporting issuer that, together with previously held securities brings the
total holdings of such holder to 10% or more of the outstanding securities of
that class, must (a) issue and file forthwith a news release containing certain
prescribed information and (b) file a report within two business days containing
the same information set out in the news release. The acquiring person or
company must also issue a news release and file a report each time it acquires,
in the aggregate, an additional 2% or more of the outstanding securities of the
same class and every time there is a change to any material fact in
the news release and report previously issued and filed.

45

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The rules in the United States governing the ownership
threshold above which shareholder ownership must be disclosed are more stringent
than those discussed above. Section 13(d) of the Securities Exchange Actof 1934, as amended (the "Exchange Act"), imposes reporting requirements on
persons who acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) of more than 5% of a class of an equity security
registered under Section 12 of the Exchange Act. In general, such persons must
file, within ten days after such acquisition, a report of beneficial ownership
with the SEC containing the information prescribed by the regulations under
Section 13(d) of the Exchange Act and promptly file an amendment to such report
to disclose any material change to the information reported, including any
acquisition or disposition of 1% or more of the outstanding securities of the
registered class. Certain institutional investors that acquire shares in the
ordinary course of business and not with the purpose or with the effect of
changing or influencing the control of the issuer, are subject to lesser
disclosure obligations.

|C. | Material Contracts
|-- | ------------------

Quartz Mountain's material contracts as of November 22, 2012
are:

- Corporate Services Agreement with HDSI, dated for reference July 2, 2010.
  See Item 7B;
- Option Agreement with Richard Billingsley, R.G. Lifeboat Holdings Ltd. and
  Dwayne Kress dated June 28, 2011, as amended on October 19, 2011 and June 15,
  201. See Item 4B;
- Sale Agreement with Finsbury Exploration Ltd., dated for reference July 27,
  2012. See Item 4B;
- Convertible Debenture Agreement with Bearclaw Capital Corp., dated for
  reference August 20, 2012. See Item 4B;
- Mineral Property Sale and Purchase Agreement with Crucible Resources Ltd.
  and Michael Rowley dated as of July 27, 2012. See Item 4B; and
- Letter Agreement with Amarc Resources Ltd., dated November 1, 2012. See
  Item 4B.

|D. | Exchange Controls
|-- | -----------------

Quartz Mountain is incorporated pursuant to the laws of the
Province of British Columbia, Canada. There is no law or governmental decree or
regulation in Canada that restricts the export or import of capital, or affects
the remittance of dividends, interest or other payments to a non-resident holder
of common shares, other than withholding tax requirements. Any such remittances
to United States residents are generally subject to withholding tax, however no
such remittances are likely in the foreseeable future. See "Taxation",
below.

There is no limitation imposed by Canadian law or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote Common Shares of the Company, except that except
that the Investment Canada Actmay require review and approval by the
Minister of Industry (Canada) of certain acquisitions of "control" of the
Company by a "non-Canadian". The threshold for acquisitions of "control" is
generally defined as being one-third or more of the voting shares of the
Company. "Non-Canadian" generally means an individual who is not a Canadian
citizen or a permanent resident of Canada, or a corporation, partnership, trust
or joint venture that is ultimately controlled by non-Canadians.

|E. | Taxation
|-- | --------

Certain Canadian Federal Income Tax Information for
United States Residents

The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of common
shares of the Company by a holder (a) who, for the purposes of the Income Tax
Act (Canada) the (Tax Act), is not resident in Canada or deemed to be resident
in Canada, deals at arms length and is not affiliated with the Company, holds
the common shares as capital property and does not use or hold the common shares
in the course of carrying on, or otherwise in connection with, a business in
Canada, and (b) who, for the purposes of the Canada-United States Income Tax
Convention (the Treaty), is a resident of the United States, has never been a
resident of Canada, has not held or used (and does not hold or use) common
shares in connection with a permanent establishment or fixed base in Canada, and
who qualifies for the full benefits of the Treaty. The Canada Revenue Agency has
recently introduced special forms to be used in order to substantiate
eligibility for Treaty benefits, and affected holders should consult with their
own advisors with respect to these forms and all relevant compliance matters.

Holders who meet all such criteria in clauses (a) and (b) above
are referred to herein as a U.S. Holder or U.S. Holders, and this summary
only addresses such U.S. Holders. The summary does not deal with special
situations, such as particular circumstances of traders or dealers, limited
liability companies, tax-exempt entities, insurers, financial institutions (including
those to which the mark-to-market provisions of the Tax Act apply), or entities
considered fiscally transparent under applicable law, or otherwise.

46

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This summary is based on the current provisions of the Tax Act
and the regulations thereunder, all proposed amendments to the Tax Act and
regulations publicly announced by the Minister of Finance (Canada) to the date
hereof, the current provisions of the Treaty and our understanding of the
current administrative practices of the Canada Revenue Agency. It has been
assumed that all currently proposed amendments to the Tax Act and regulations
will be enacted as proposed and that there will be no other relevant change in
any governing law, the Treaty or administrative policy, although no assurance
can be given in these respects. This summary does not take into account
provincial, U.S. or other foreign income tax considerations, which may differ
significantly from those discussed herein.

This summary is not exhaustive of all possible Canadian income
tax consequences. It is not intended as legal or tax advice to any particular
U.S. Holder and should not be so construed. The tax consequences to a U.S.
Holder will depend on that U.S. Holders particular circumstances.
Accordingly, all U.S. Holders or prospective U.S. Holders should consult
their own tax advisors with respect to the tax consequences applicable to them
having regard to their own particular circumstances. The discussion below is
qualified accordingly.

Dividend

Dividends paid or deemed to be paid or credited by the Company
to a U.S. Holder are subject to Canadian withholding tax. Under the Treaty, the
rate of withholding tax on dividends paid to a U.S. Holder is generally limited
to 15% of the gross dividend (or 5% in the case of a U.S. holder that is a
corporate shareholder owning at least 10% of the Companys voting shares),
provided the U.S. Holder can establish entitlement to the benefits of the
Treaty.

Disposition

A U.S. Holder is generally not subject to tax under the Tax Act
in respect of a capital gain realized on the disposition of a common share in
the open market, unless the share is taxable Canadian property to the holder
thereof and the U.S. Holder is not entitled to relief under the Treaty.

Provided that the Companys common shares are listed on a
designated stock exchange for purposes of the Tax Act (which currently
includes the TSX Venture) at the time of disposition, a common share will
generally not constitute taxable Canadian property to a U.S. Holder unless, at
any time during the 60 month period ending at the time of disposition, (i) the
U.S. Holder or persons with whom the U.S. Holder did not deal at arms length
(or the U.S. Holder together with such persons) owned 25% or more of the issued
shares of any class or series of the Company AND (ii) more than 50% of the fair
market value of the share was derived directly or indirectly from certain types
of assets, including real or immoveable property situated in Canada, Canadian
resource properties or timber resource properties, and options, interests or
rights in respect of any of the foregoing. Common shares may also be deemed to
be taxable Canadian property under the Tax Act in certain specific
circumstances. A U.S. Holder holding Common shares as taxable Canadian property
should consult with the U.S. Holders own tax advisors in advance of any
disposition of Common shares or deemed disposition under the Tax Act in order to
determine whether any relief from tax under the Tax Act may be available by
virtue of the Treaty, and any related compliance procedures.

United States Federal Income Tax Consequences

The Company believes it is likely a "passive foreign investment
company" which may have adverse U.S. federal income tax consequences for U.S.
shareholders

U.S. shareholders should be aware that the Company believes it
was classified as a passive foreign investment company (PFIC) during the tax
year ended July 31, 2012, and may be a PFIC in future tax years. If the Company
is a PFIC for any year during a U.S. shareholders holding period, then such
U.S. shareholder generally will be required to treat any gain realized upon a
disposition of common shares, or any so-called excess distribution received on
its common shares, as ordinary income, and to pay an interest charge on a
portion of such gain or distributions, unless the shareholder makes a timely and
effective "qualified electing fund" election (QEF Election) or a
"mark-to-market" election with respect to the common shares. A U.S. shareholder
who makes a QEF Election generally must report on a current basis its share of
the Company's net capital gain and ordinary earnings for any year in which the
Company is a PFIC, whether or not the Company distributes any amounts to its
shareholders. However, U.S. shareholders should be aware that there can be no
assurance that the Company will satisfy record keeping requirements that apply
to a qualified electing fund, or that the Company will supply U.S. shareholders
with information that such U.S. shareholders require to report under the QEF
Election rules, in the event that the Company is a PFIC and a U.S. shareholder
wishes to make a QEF Election. Thus, U.S. shareholders may not be able to make a
QEF Election with respect to their common shares. A U.S. shareholder who makes
the mark-to-market election generally must include as ordinary income each year
the excess of the fair market value of the common shares over the taxpayers
basis therein. This paragraph is qualified in its entirety by the discussion
below under the heading Certain United States Federal Income Tax Considerations. Each U.S. shareholder
should consult its own tax advisor regarding the PFIC rules and the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of common
shares.

47

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Certain United States Federal Income Tax
Considerations

The following is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of
common shares.

This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax considerations that may apply to a U.S. Holder arising from and
relating to the acquisition, ownership, and disposition of common shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder, including specific tax consequences
to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is
not intended to be, and should not be construed as, legal or U.S. federal income
tax advice with respect to any U.S. Holder. This summary does not address the
U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and
local, and foreign tax consequences to U.S. Holders of the acquisition,
ownership, and disposition of common shares. Each prospective U.S. Holder should
consult its own tax advisor regarding the U.S. federal, U.S. federal alternative
minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax
consequences relating to the acquisition, ownership and disposition of common
shares.

No legal opinion from U.S. legal counsel or ruling from the
Internal Revenue Service (the IRS) has been requested, or will be obtained,
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of common shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from,
and contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary is based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of
the conclusions described in this summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the Code), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the Canada-U.S. Tax Convention), and U.S. court decisions that are applicable
and, in each case, as in effect and available, as of the date of this document.
Any of the authorities on which this summary is based could be changed in a
material and adverse manner at any time, and any such change could be applied on
a retroactive or prospective basis which could affect the U.S. federal income
tax considerations described in this summary. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation
that, if enacted, could be applied on a retroactive or prospective basis.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of common shares that is for U.S. federal income tax
purposes:

-  an individual who is a citizen or resident of the
U.S.;

-  a corporation (or other entity taxable as a corporation
for U.S. federal income tax purposes) organized under the laws of the U.S., any
state thereof or the District of Columbia;

-  an estate whose income is subject to U.S. federal
income taxation regardless of its source; or

-  a trust that (1) is subject to the primary supervision
of a court within the U.S. and the control of one or more U.S. persons for all
substantial decisions or (2) has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S. person.

Non-U.S. Holders

For purposes of this summary, a non-U.S. Holder is a
beneficial owner of common shares that is not a U.S. Holder. This summary does
not address the U.S. federal income tax consequences to non-U.S. Holders arising
from and relating to the acquisition, ownership, and disposition of common
shares. Accordingly, a non-U.S. Holder should consult its own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences (including the potential application of and
operation of any income tax treaties) relating to the acquisition, ownership,
and disposition of common shares.

48

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U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed

This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the following: (a) U.S. Holders
that are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are
financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c) U.S. Holders that are
broker-dealers, dealers, or traders in securities or currencies that elect to
apply a mark-to-market accounting method; (d) U.S. Holders that have a
functional currency other than the U.S. dollar; (e) U.S. Holders that own
common shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (f) U.S. Holders that acquired common shares in connection with the
exercise of employee stock options or otherwise as compensation for services;
(g) U.S. Holders that hold common shares other than as a capital asset within
the meaning of Section 1221 of the Code (generally, property held for investment
purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or
by attribution) 10% or more of the total combined voting power of the
outstanding shares of the Company. This summary also does not address the U.S.
federal income tax considerations applicable to U.S. Holders who are: (a) U.S.
expatriates or former long-term residents of the U.S.; (b) persons that have
been, are, or will be a resident or deemed to be a resident in Canada for
purposes of the Income Tax Act (Canada) (the Tax Act); (c) persons that use or
hold, will use or hold, or that are or will be deemed to use or hold common
shares in connection with carrying on a business in Canada; (d) persons whose
common shares constitute taxable Canadian property under the Tax Act; or (e)
persons that have a permanent establishment in Canada for the purposes of the
Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, U.S. Holders described
immediately above, should consult their own tax advisor regarding the U.S.
federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S.
state and local, and foreign tax consequences relating to the acquisition,
ownership and disposition of common shares.

If an entity or arrangement that is classified as a partnership
(or other pass-through entity) for U.S. federal income tax purposes holds
common shares, the U.S. federal income tax consequences to such entity and the
partners (or other owners) of such entity generally will depend on the
activities of the entity and the status of such partners (or owners). This
summary does not address the tax consequences to any such owner. Partners (or
other owners) of entities or arrangements that are classified as partnerships or
as pass-through entities for U.S. federal income tax purposes should consult
their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of
common shares.

Passive Foreign Investment Company Rules

If the Company were to constitute a passive foreign investment
company under the meaning of Section 1297 of the Code (a PFIC, as defined
below) for any year during a U.S. Holders holding period, then certain
potentially adverse rules will affect the U.S. federal income tax consequences
to a U.S. Holder resulting from the acquisition, ownership and disposition of
common shares. The Company believes that it was classified as a PFIC during the
tax year ended July 31, 2012, and may be a PFIC in future tax years. The
determination of whether any corporation was, or will be, a PFIC for a tax year
depends, in part, on the application of complex U.S. federal income tax rules,
which are subject to differing interpretations. In addition, whether any
corporation will be a PFIC for any tax year depends on the assets and income of
such corporation over the course of each such tax year and, as a result, cannot
be predicted with certainty as of the date of this document. Accordingly, there
can be no assurance that the IRS will not challenge any determination made by
the Company (or any subsidiary of the Company) concerning its PFIC status. Each
U.S. Holder should consult its own tax advisor regarding the PFIC status of the
Company and any subsidiary of the Company.

In addition, in any year in which the Company is classified as
a PFIC, such holder would be required to file an annual report with the IRS
containing such information as Treasury Regulations and/or other IRS guidance
may require. U.S. Holders should consult their own tax advisors regarding the
requirements of filing such information returns under these rules, including the
requirement to file a IRS Form 8621.

PFIC Status of the Company

The Company generally will be a PFIC if, for a tax year, (a)
75% or more of the gross income of the Company is passive income (the income
test) or (b) 50% or more of the value of the Companys assets either produce
passive income or are held for the production of passive income, based on the
quarterly average of the fair market value of such assets (the asset test).
Gross income generally includes all sales revenues less the cost of goods
sold, plus income from investments and from incidental or outside operations or
sources, and passive income generally includes, for example, dividends,
interest, certain rents and royalties, certain gains from the sale of stock and
securities, and certain gains from commodities transactions.

49

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Active business gains arising from the sale of commodities
generally are excluded from passive income if substantially all (85% or more) of
a foreign corporations commodities are stock in trade or inventory, depreciable
property used in a trade or business, or supplies regularly used or consumed in
a trade or business and certain other requirements are satisfied.

For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another corporation, the Company will be
treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of
such other corporation. In addition, for purposes of the PFIC income test and
asset test described above, and assuming certain other requirements are met,
passive income does not include certain interest, dividends, rents, or
royalties that are received or accrued by the Company from certain related
persons (as defined in Section 954(d)(3) of the Code), to the extent such items
are properly allocable to the income of such related person that is not passive
income.

Under certain attribution rules, if the Company is a PFIC, U.S.
Holders will generally be deemed to own their proportionate share of the
Companys direct or indirect equity interest in any company that is also a PFIC
(a Subsidiary PFIC), and will be subject to U.S. federal income tax on their
proportionate share of (a) any excess distributions, as described below, on
the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of
the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both
as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In
addition, U.S. Holders may be subject to U.S. federal income tax on any indirect
gain realized on the stock of a Subsidiary PFIC on the sale or disposition of
common shares. Accordingly, U.S. Holders should be aware that they could be
subject to tax even if no distributions are received and no redemptions or other
dispositions of common shares are made.

Default PFIC Rules Under Section 1291 of the Code

If the Company is a PFIC for any tax year during which a U.S.
Holder owns common shares, the U.S. federal income tax consequences to such U.S.
Holder of the acquisition, ownership, and disposition of common shares will
depend on whether and when such U.S. Holder makes an election to treat the
Company and each Subsidiary PFIC, if any, as a qualified electing fund or
QEF under Section 1295 of the Code (a QEF Election) or makes a
mark-to-market election under Section 1296 of the Code (a Mark-to-Market
Election). A U.S. Holder that does not make either a QEF Election or a
Mark-to-Market Election will be referred to in this summary as a Non-Electing
U.S. Holder.

A Non-Electing U.S. Holder will be subject to the rules of
Section 1291 of the Code (described below) with respect to (a) any gain
recognized on the sale or other taxable disposition of common shares and (b) any
excess distribution received on the common shares. A distribution generally will
be an excess distribution to the extent that such distribution (together with
all other distributions received in the current tax year) exceeds 125% of the
average distributions received during the three preceding tax years (or during a
U.S. Holders holding period for the common shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of common shares (including an indirect disposition
of the stock of any Subsidiary PFIC), and any excess distribution received on
common shares or with respect to the stock of a Subsidiary PFIC, must be ratably
allocated to each day in a Non-Electing U.S. Holders holding period for the
respective common shares. The amount of any such gain or excess distribution
allocated to the tax year of disposition or distribution of the excess
distribution and to years before the entity became a PFIC, if any, would be
taxed as ordinary income. The amounts allocated to any other tax year would be
subject to U.S. federal income tax at the highest tax rate applicable to
ordinary income in each such year, and an interest charge would be imposed on
the tax liability for each such year, calculated as if such tax liability had
been due in each such year. A Non-Electing U.S. Holder that is not a corporation
must treat any such interest paid as personal interest, which is not
deductible.

If the Company is a PFIC for any tax year during which a
Non-Electing U.S. Holder holds common shares, the Company will continue to be
treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of
whether the Company ceases to be a PFIC in one or more subsequent tax years. A
Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above), but not loss, as if such common shares were sold on the last
day of the last tax year for which the Company was a PFIC.

50

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QEF Election

A U.S. Holder that makes a timely and effective QEF Election
for the first tax year in which its holding period of its common shares begins
generally will not be subject to the rules of Section 1291 of the Code discussed
above with respect to its common shares. A U.S. Holder that makes a timely and
effective QEF Election will be subject to U.S. federal income tax on such U.S.
Holders pro rata share of (a) the net capital gain of the Company, which will
be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary
earnings of the Company, which will be taxed as ordinary income to such U.S.
Holder. Generally, net capital gain is the excess of (a) net long-term capital
gain over (b) net short-term capital loss, and ordinary earnings are the
excess of (a) earnings and profits over (b) net capital gain. A U.S. Holder
that makes a QEF Election will be subject to U.S. federal income tax on such
amounts for each tax year in which the Company is a PFIC, regardless of whether
such amounts are actually distributed to such U.S. Holder by the Company.
However, for any tax year in which the Company is a PFIC and has no net income
or gain, U.S. Holders that have made a QEF Election would not have any income
inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF
Election has an income inclusion, such a U.S. Holder may, subject to certain
limitations, elect to defer payment of current U.S. federal income tax on such
amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as personal interest,
which is not deductible.

A U.S. Holder that makes a timely and effective QEF Election
with respect to the Company generally (a) may receive a tax-free distribution
from the Company to the extent that such distribution represents earnings and
profits of the Company that were previously included in income by the U.S.
Holder because of such QEF Election and (b) will adjust such U.S. Holders tax
basis in the common shares to reflect the amount included in income or allowed
as a tax-free distribution because of such QEF Election. In addition, a U.S.
Holder that makes a QEF Election generally will recognize capital gain or loss
on the sale or other taxable disposition of common shares.

The procedure for making a QEF Election, and the U.S. federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election will be treated as timely if such QEF
Election is made for the first year in the U.S. Holders holding period for the
common shares in which the Company was a PFIC. A U.S. Holder may make a timely
QEF Election by filing the appropriate QEF Election documents at the time such
U.S. Holder files a U.S. federal income tax return for such year. If a U.S.
Holder does not make a timely and effective QEF Election for the first year in
the U.S. Holders holding period for the common shares, the U.S. Holder may
still be able to make a timely and effective QEF Election in a subsequent year
if such U.S. Holder meets certain requirements and makes a purging election to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above) as if such common shares were sold for their fair market value
on the day the QEF Election is effective. If a U.S. Holder owns PFIC stock
indirectly through another PFIC, separate QEF Elections must be made for the
PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC
for the QEF rules to apply to both PFICs.

A QEF Election will apply to the tax year for which such QEF
Election is timely made and to all subsequent tax years, unless such QEF
Election is invalidated or terminated or the IRS consents to revocation of such
QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax
year, the Company ceases to be a PFIC, the QEF Election will remain in effect
(although it will not be applicable) during those tax years in which the Company
is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent
tax year, the QEF Election will be effective and the U.S. Holder will be subject
to the QEF rules described above during any subsequent tax year in which the
Company qualifies as a PFIC.

U.S. Holders should be aware that there can be no assurances
that the Company will satisfy the record keeping requirements that apply to a
QEF, or that the Company will supply U.S. Holders with information that such
U.S. Holders are required to report under the QEF rules, in the event that the
Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election
with respect to their common shares. Each U.S. Holder should consult its own tax
advisor regarding the availability of, and procedure for making, a QEF
Election.

A U.S. Holder makes a QEF Election by attaching a completed IRS
Form 8621, including a PFIC Annual Information Statement, to a timely filed
United States federal income tax return. However, if the Company cannot provide
the required information with regard to the Company or any of its Subsidiary
PFICs, U.S. Holders will not be able to make a QEF Election for such entity and
will continue to be subject to the rules discussed above that apply to
Non-Electing U.S. Holders with respect to the taxation of gains and excess
distributions.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the
common shares are marketable stock. The common shares generally will be
marketable stock if the common shares are regularly traded on (a) a national securities exchange that is registered with the
Securities and Exchange Commission, (b) the national market system established
pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a
foreign securities exchange that is regulated or supervised by a governmental
authority of the country in which the market is located, provided that (i) such
foreign exchange has trading volume, listing, financial disclosure, and
surveillance requirements, and meets other requirements and the laws of the
country in which such foreign exchange is located, together with the rules of
such foreign exchange, ensure that such requirements are actually enforced and
(ii) the rules of such foreign exchange effectively promote active trading of
listed stocks. If such stock is traded on such a qualified exchange or other
market, such stock generally will be regularly traded for any calendar year
during which such stock is traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter

51

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A U.S. Holder that makes a Mark-to-Market Election with respect
to its common shares generally will not be subject to the rules of Section 1291
of the Code discussed above with respect to such common shares. However, if a
U.S. Holder does not make a Mark-to-Market Election beginning in the first tax
year of such U.S. Holders holding period for the common shares or such U.S.
Holder has not made a timely QEF Election, the rules of Section 1291 of the Code
discussed above will apply to certain dispositions of, and distributions on, the
common shares.

A U.S. Holder that makes a Mark-to-Market Election will include
in ordinary income, for each tax year in which the Company is a PFIC, an amount
equal to the excess, if any, of (a) the fair market value of the common shares,
as of the close of such tax year over (b) such U.S. Holders tax basis in such
common shares. A U.S. Holder that makes a Mark-to-Market Election will be
allowed a deduction in an amount equal to the excess, if any, of (a) such U.S.
Holders adjusted tax basis in the common shares, over (b) the fair market value
of such common shares (but only to the extent of the net amount of previously
included income as a result of the Mark-to-Market Election for prior tax
years).

A U.S. Holder that makes a Mark-to-Market Election generally
also will adjust such U.S. Holders tax basis in the common shares to reflect
the amount included in gross income or allowed as a deduction because of such
Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of common shares, a U.S. Holder that makes a Mark-to-Market Election will
recognize ordinary income or ordinary loss (not to exceed the excess, if any, of
(a) the amount included in ordinary income because of such Mark-to-Market
Election for prior tax years over (b) the amount allowed as a deduction because
of such Mark-to-Market Election for prior tax years). Losses that exceed this
limitation are subject to the rules generally applicable to losses provided in
the Code and Treasury Regulations.

A Mark-to-Market Election applies to the tax year in which such
Mark-to-Market Election is made and to each subsequent tax year, unless the
common shares cease to be marketable stock or the IRS consents to revocation
of such election. Each U.S. Holder should consult its own tax advisor regarding
the availability of, and procedure for making, a Mark-to-Market Election.

Although a U.S. Holder may be eligible to make a Mark-to-Market
Election with respect to the common shares, no such election may be made with
respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as
owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to eliminate the application of the default rules of
Section 1291 of the Code described above with respect to deemed dispositions of
Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed
Treasury Regulations that, subject to certain exceptions, would cause a U.S.
Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of common shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the
specific U.S. federal income tax consequences to a U.S. Holder may vary based on
the manner in which common shares are transferred.

Certain additional adverse rules may apply with respect to a
U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder
makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S.
Holder that uses common shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable
disposition of such common shares.

Special rules also apply to the amount of foreign tax credit
that a U.S. Holder may claim on a distribution from a PFIC. Subject to such
special rules, foreign taxes paid with respect to any distribution in respect of
stock in a PFIC are generally eligible for the foreign tax credit. The rules
relating to distributions by a PFIC and their eligibility for the foreign tax
credit are complicated, and a U.S. Holder should consult with its own tax
advisor regarding the availability of the foreign tax credit with respect to
distributions by a PFIC.

52

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The PFIC rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the PFIC rules and how the PFIC rules may affect
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares.

Ownership and Disposition of Common Shares

The following discussion is subject to the rules described
above under the heading Passive Foreign Investment Company Rules.

Distributions on Common Shares

A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to a common share will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated earnings and profits of the Company, as
computed for U.S. federal income tax purposes. A dividend generally will be
taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC. To
the extent that a distribution exceeds the current and accumulated earnings and
profits of the Company, such distribution will be treated first as a tax-free
return of capital to the extent of a U.S. Holder's tax basis in the common
shares and thereafter as gain from the sale or exchange of such common shares.
(See  Sale or Other Taxable Disposition of common shares below). However, the
Company may not maintain the calculations of earnings and profits in accordance
with U.S. federal income tax principles, and each U.S. Holder should therefore
assume that any distribution by the Company with respect to the common shares
will constitute ordinary dividend income. Dividends received on common shares
generally will not be eligible for the dividends received deduction. In
addition, the Company does not anticipate that its distributions will constitute
qualified dividend income eligible for the preferential tax rates applicable to
long-term capital gains. The dividend rules are complex, and each U.S. Holder
should consult its own tax advisor regarding the application of such rules.

Sale or Other Taxable Disposition of Common Shares

Upon the sale or other taxable disposition of common shares, a
U.S. Holder generally will recognize capital gain or loss in an amount equal to
the difference between the U.S. dollar value of cash received plus the fair
market value of any property received and such U.S. Holder's tax basis in such
common shares sold or otherwise disposed of. A U.S. Holders tax basis in common
shares generally will be such holders U.S. dollar cost for such common shares.
Gain or loss recognized on such sale or other disposition generally will be
long-term capital gain or loss if, at the time of the sale or other disposition,
the common shares have been held for more than one year.

Preferential tax rates currently apply to long-term capital
gain of a U.S. Holder that is an individual, estate, or trust. There are
currently no preferential tax rates for long-term capital gain of a U.S. Holder
that is a corporation. Deductions for capital losses are subject to significant
limitations under the Code.

Additional Considerations

Additional Tax on Passive Income

For tax years beginning after December 31, 2012, certain
individuals, estates and trusts whose income exceeds certain thresholds will be
required to pay a 3.8% Medicare surtax on net investment income including,
among other things, dividends and net gain from dispositions of property (other
than property held in a trade or business). U.S. Holders should consult with
their own tax advisors regarding the effect, if any, of this tax on their
ownership and disposition of common shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign
currency, or on the sale, exchange or other taxable disposition of common
shares, generally will be equal to the U.S. dollar value of such foreign
currency based on the exchange rate applicable on the date of receipt
(regardless of whether such foreign currency is converted into U.S. dollars at
that time). A U.S. Holder will have a basis in the foreign currency equal to its
U.S. dollar value on the date of receipt. Any U.S. Holder who converts or
otherwise disposes of the foreign currency after the date of receipt may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss, and generally will be U.S. source income or loss for foreign tax credit
purposes. Each U.S. Holder should consult its own U.S. tax advisor regarding the
U.S. federal income tax consequences of receiving, owning, and disposing of
foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax with respect
to dividends paid on the common shares generally will be entitled, at the
election of such U.S. Holder, to receive either a deduction or a credit for such
Canadian income tax. Generally, a credit will reduce a U.S. Holders
U.S. federal income tax liability on a dollar-for-dollar basis, whereas a
deduction will reduce a U.S. Holders income subject to U.S. federal income tax.
This election is made on a year-by-year basis and applies to all foreign taxes
paid (whether directly or through withholding) by a U.S. Holder during a
year.

53

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Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holders U.S. federal income tax liability that such U.S. Holders
foreign source taxable income bears to such U.S. Holders worldwide taxable
income. In applying this limitation, a U.S. Holders various items of income and
deduction must be classified, under complex rules, as either foreign source or
U.S. source. Generally, dividends paid by a foreign corporation should be
treated as foreign source for this purpose, and gains recognized on the sale of
stock of a foreign corporation by a U.S. Holder should be treated as U.S. source
for this purpose, except as otherwise provided in an applicable income tax
treaty, and if an election is properly made under the Code. However, the amount
of a distribution with respect to the common shares that is treated as a
dividend may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S. tax advisor
regarding the foreign tax credit rules.

Backup Withholding and Information Reporting

Under U.S. federal income tax law and Treasury Regulations,
certain categories of U.S. Holders must file information returns with respect to
their investment in, or involvement in, a foreign corporation. For example,
recently enacted legislation generally imposes new U.S. return disclosure
obligations (and related penalties) on individuals who are U.S. Holders that
hold certain specified foreign financial assets in excess of $50,000. The
definition of specified foreign financial assets includes not only financial
accounts maintained in foreign financial institutions, but also, unless held in
accounts maintained by a financial institution, any stock or security issued by
a non-U.S. person, any financial instrument or contract held for investment that
has an issuer or counterparty other than a U.S. person and any interest in a
foreign entity. U.S. Holders may be subject to these reporting requirements
unless their common shares are held in an account at a domestic financial
institution. Penalties for failure to file certain of these information returns
are substantial. U.S. Holders should consult with their own tax advisors
regarding the requirements of filing information returns, including the
requirement to file an IRS Form 8938.

Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, common shares will generally be subject to information reporting
and backup withholding tax, at the rate of 28% (and increasing to 31% for
payments made after December 31, 2012), if a U.S. Holder (a) fails to furnish
such U.S. Holders correct U.S. taxpayer identification number (generally on
Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c)
is notified by the IRS that such U.S. Holder has previously failed to properly
report items subject to backup withholding tax, or (d) fails to certify, under
penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, certain exempt
persons generally are excluded from these information reporting and backup
withholding rules. Backup withholding is not an additional tax. Any amounts
withheld under the U.S. backup withholding tax rules will be allowed as a credit
against a U.S. Holders U.S. federal income tax liability, if any, or will be
refunded, if such U.S. Holder furnishes required information to the IRS in a
timely manner. Each U.S. Holder should consult its own tax advisor regarding the
information reporting and backup withholding rules.

|F. | Dividends and Paying
Agents
|-- | ---------------------------

Not applicable.

|G. | Statement by Experts
|-- | --------------------

Not applicable.

|H. | Documents on Display
|-- | --------------------

Exhibits attached to this Form 20-F are also available for
viewing on EDGAR at http://www.sec.gov/, or at the offices of the
Company, 15thFloor - 1040 West Georgia Street, Vancouver, British
Columbia V6E 4H1 or on request of the Company at 604-684-6365, attention:
Investor Relations Department. Copies of the Company's IFRS financial statements
and other continuous disclosure documents required under the British Columbia
Securities Act are available for viewing on the internet at
www.sedar.com.

|I. | Subsidiary Information
|-- | ----------------------

Not applicable.

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|ITEM 11 | QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------------

|A. | Transaction Risk and Currency Risk
    Management
|-- | -------------------------------------------------

The Company is exposed in varying degrees to a variety of
financial instrument related risks. The Board approves and monitors the risk
management processes, inclusive of documented treasury policies, counterparty
limits, and controlling and reporting structures.

|B. | Exchange Rate Sensitivity
|-- | -------------------------

The Company incurs substantially all of its expenditures in
Canada and substantially all of its cash and cash equivalents held are
denominated in Canadian dollars. Consequently the Company is not subject to
material foreign exchange risk.

|C. | Interest Rate Risk and Equity Price
  Risk
|-- | ------------------------------------------

The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. The Company's policy is to invest
cash at fixed rates of interest and cash reserves are to be maintained in cash
and cash equivalents in order to maintain liquidity, while achieving a
satisfactory return for shareholders. Fluctuations in interest rates when the
cash and cash equivalents mature impact interest income earned.

As at July 31, 2012 the Company held cash and cash equivalents
in financial institutions in the amount of $2,450,451 (2011 - $78,652).

|D. | Commodity Price Risk
|-- | --------------------

While the value of the Company's resource properties, if any,
can always be said to relate to the price of precious metals and the outlook for
same, the Company does not have any resource properties or operating mines and
hence does not have any hedging or other commodity based operational risks
respecting to its business activities.

|ITEM 12 | DESCRIPTION OF
      SECURITIES OTHER THAN EQUITY SECURITIES
|------- | ------------------------------------------------------------

Not applicable.

|ITEM 13 | DEFAULTS, DIVIDEND
      ARREARAGES AND DELINQUENCIES
|------- | -----------------------------------------------------

Not applicable.

|ITEM 14 | MATERIAL MODIFICATIONS
      TO THE RIGHTS OF SECURITY HOLDERS **AND USE OF PROCEEDS**
|------- | --------------------------------------------------------------------------------------

Not applicable.

|ITEM 15 | CONTROLS AND
      PROCEDURES
|------- | -----------------------------

Disclosure Controls and Procedures

At the end of the period covered by this annual report on Form
20-F, an evaluation was carried out with the participation of the Company's
management, including the President and Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a  15(e) and 15d
15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")). Based on that evaluation, the President and CEO and the CFO
have concluded that as of the end of the period covered by this annual report on
Form 20-F, the Company's disclosure controls and procedures were effective in
providing reasonable assurance that: (i) information required to be disclosed by
the Company in reports that it files or submits to the SEC under the Exchange
Act was recorded, processed, summarized and reported within the time periods
specified in applicable rules and forms, and (ii) material information required
to be disclosed in the Company's reports filed under the Exchange Act was
accumulated and communicated to the Company's management, including the
President and CEO and the CFO, as appropriate, to allow for accurate and timely
decisions regarding required disclosure.

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Management's Annual Report on Internal Control over
Financial Reporting

The Company's management, including the President and CEO and
CFO, is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of financial
statements for external purposes in accordance with IFRS. The Company's internal
control over financial reporting includes those policies and procedures that:

- pertain to the maintenance of records that, in reasonable detail,
  accurately and fairly reflect the transactions and dispositions of the assets
  of the Company;
- provide reasonable assurance that transactions are recorded as necessary
  to permit preparation of financial statements in accordance with IFRS, and
  that receipts and expenditures of the Company are being made only in
  accordance with authorizations of management and directors of the Company; and
- provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of the Company's assets that
  could have a material effect on the financial statements.

With the participation of the President and CEO and CFO,
management conducted an evaluation of the design and operation of the Company's
internal control over financial reporting as of July 31, 2012, based on the
criteria set forth in Internal Control  Integrated Frameworkissued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management concluded in its report that the Company's internal control over
financial reporting was effective as of July 31, 2012.

This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to rules that permit the
Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

During the period covered by this annual report on Form 20-F,
no changes occurred in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

Limitations of Controls and Procedures

The Company's management, including its President and CEO and
CFO, does not expect that its disclosure controls and procedures or internal
controls and procedures will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is also based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

|ITEM 16 | [RESERVED]
|------- | ----------

|ITEM 16A | AUDIT COMMITTEE
      FINANCIAL EXPERT
|-------- | --------------------------------------

The members of the Audit and Risk Committee are James Kerr,
David Mordant and Gordon J. Fretwell. The Board of Directors has determined that
Mr. Kerr qualifies as a "financial expert" under the rules of the Securities and
Exchange Commission, based on his education and experience. Messrs. Kerr,
Mordant and Fretwell are "independent", as that term is defined in section 803
of the NYSE Amex Company Guide. Mr. Kerr is an accredited Chartered Accountant
in Canada.

Each Audit and Risk Committee member is able to read and
understand fundamental financial statements.

56

---

|ITEM 16B | CODE OF ETHICS
|-------- | --------------

The Company's board of directors has adopted a written Code of
Ethics governing directors, officers and employees. The Code of Ethics sets
forth written standards that are designed to deter wrongdoing and to meet the
Company's core vision: to become a successful and innovative mining and mineral
exploration corporation.

In order to achieve the Company's vision the following values
are to be included in all activities:

| | a) | Responsibly explore for and develop mineral
    resources;                                              
| | -- | --------------------------------------------------------------------------------------------------------
| | b) | Be respectful of the environment;                                                                       
| | c) | Be an industry leader and participate in industry
      organizations devoted to improving the industry;
| | d) | Be a strong and honest competitor;                                                                      
| | e) | Be a responsible corporate citizen and contribute to the
      community;                               
| | f) | Deal fairly with our customers, suppliers and joint
      venture participants;                         
| | g) | Provide a safe and rewarding work environment;
  and                                                    
| | h) | Deliver value to shareholders.                                                                          

The board of directors monitors compliance with the Code of
Ethics by ensuring that all Company personnel have read and understood the Code
of Ethics, and by charging management with bringing to the attention of the
board of directors any issues that arise with respect to the Code of Ethics.

A copy of the Code of Ethics was filed with the Securities and
Exchange Commission as an exhibit to the Company's Annual Report filed on Form
20-F for the fiscal year ended July 31, 2005 and is available at
www.sec.gov. The Company will also provide a copy of the Code of Ethics
to any person without charge, upon request. Requests can be sent by mail to:
15th Floor, 1040 West Georgia Street, Vancouver, British Columbia, Canada, V6E
4H8; or submitted by telephone at 604-684-6365, attention: Investor Relations
Department.

During the most recently completed fiscal year, the Company has
neither: (a) amended its Code of Ethics; nor (b) granted any waiver (including
any implicit waiver) form any provision of its Code of Ethics.

|ITEM 16C | PRINCIPAL ACCOUNTANT
      FEES AND SERVICES
|-------- | --------------------------------------------

The following table discloses the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
Company's audit firm, Davidson & Company LLP for various services.

Services:
    Year endedJuly 31, 2012
    July 31, 2011Audit Fees (1)
    $ 32,750
    $ 24,000Audit Related Fees (2)
    
    Tax Fees (3)
    $ 10,000
    $ 3,000All Other Fees (4)
    
    $ 42,750
    $ 27,000


Notes:

(1) "Audit Fees" include fees necessary to perform the annual
audit and quarterly reviews of the Company's consolidated financial statements.
Audit Fees include fees for review of tax provisions and for accounting
consultations on matters reflected in the financial statements. Audit Fees also
include audit or other attest services required by legislation or regulation,
such as comfort letters, consents, reviews of securities filings and statutory
audits.

(2) "Audit-Related Fees" include services that are
traditionally performed by the auditor. These audit-related services include
employee benefit audits, due diligence assistance, accounting consultations on
proposed transactions, internal control reviews and audit or attest services not
required by legislation or regulation.

(3) "Tax Fees" include fees billed for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax
planning.

(4) "All Other Fees" include fees billed for products and
services provided by the principal accountant, other than the services reported
in (1), (2) or (3) above.

From time to time, management of the Company recommends to and
requests approval from the Audit and Risk Committee for non-audit services to be
provided by the Company's auditors. The Audit and Risk Committee routinely
considers such requests at committee meetings, and if acceptable to a majority
of the Audit and Risk Committee members, pre-approves such non-audit services by
a resolution authorizing management to engage the Company's auditors for such
non-audit services, with set maximum dollar amounts for each itemized service.
During such deliberations, the Audit and Risk Committee assesses, among other
factors, whether the services requested would be considered "prohibited
services" as contemplated by the SEC, and whether the services requested and the
fees related to such services could impair the independence of the auditors. No
material non-audit services were provided by the Company's auditors during the
year ended July 31, 2012.

57

---

|ITEM 16D | EXEMPTIONS FROM LISTING
      STANDARDS FOR AUDIT COMMITTEES
|-------- | ------------------------------------------------------------

Not applicable.

|ITEM 16E | PURCHASES OF EQUITY
      SECURITIES BY THE ISSUER AND AFFILIATED **PURCHASERS**
|-------- | --------------------------------------------------------------------------------

During the year ended July 31, 2012, the Company did not
purchase any of its issued and outstanding common shares pursuant to any
repurchase program or otherwise.

|         |                                                   
|-------- | --------------------------------------------------
|ITEM 16F | CHANGE IN REGISTRANT'S
      CERTIFYING ACCOUNTANT

None.

---

|ITEM 16G | CORPORATE GOVERNANCE
|-------- | --------------------

Not applicable.

|ITEM 17 | FINANCIAL STATEMENTS
|------- | --------------------

The following attached financial statements are incorporated
herein:

- Independent Auditors Report, dated November 22, 2012;
- Statements of financial position as at July 31, 2012, July 31, 2011 and
  August 1, 2011;
- Statements of comprehensive loss for the years ended July 31, 2012 and
  July 31, 2011;
- Statements of cash flows for the years ended July 31, 2012 and July 31,
  2011;
- Statements of changes in equity for the years ended July 31, 2012 and July
  31, 2011;
- Notes to annual financial statements

58

---



QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2012 AND 2011

(Expressed in Canadian Dollars, unless otherwise stated)

---



INDEPENDENT AUDITORS' REPORT

To the Shareholders of
  Quartz Mountain Resources Ltd.

We have audited the accompanying consolidated financial
  statements of Quartz Mountain Resources Ltd., which comprise the consolidated
  balance sheets as at July 31, 2012, July 31, 2011 and August 1, 2010 and the
  consolidated statements of loss and comprehensive loss, changes in equity and
  cash flows for the years ended July 31, 2012 and July 31, 2011, and a summary of
  significant accounting policies and other explanatory information.

Managements Responsibility for the Consolidated
  Financial Statements

Management is responsible for the preparation and fair
  presentation of these consolidated financial statements in accordance with
  International Financial Reporting Standards, as issued by the International
  Accounting Standards Board, and for such internal control as management
  determines is necessary to enable the preparation of consolidated financial
  statements that are free from material misstatement, whether due to fraud or
  error.

Auditors Responsibility

Our responsibility is to express an opinion on these
  consolidated financial statements based on our audits. We conducted our audits
  in accordance with Canadian generally accepted auditing standards and the
  standards of the Public Company Accounting Oversight Board (United States).
  Those standards require that we comply with ethical requirements and plan and
  perform the audit to obtain reasonable assurance about whether the consolidated
  financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
  evidence about the amounts and disclosures in the consolidated financial
  statements. The procedures selected depend on the auditors judgment, including
  the assessment of the risks of material misstatement of the consolidated
  financial statements, whether due to fraud or error. In making those risk
  assessments, the auditors consider internal control relevant to the entitys
  preparation and fair presentation of the consolidated financial statements in
  order to design audit procedures that are appropriate in the circumstances, but
  not for the purpose of expressing an opinion on the effectiveness of the
  entitys internal control. An audit also includes evaluating the appropriateness
  of accounting policies used and the reasonableness of accounting estimates made
  by management, as well as evaluating the overall presentation of the
  consolidated financial statements.

We believe that the audit evidence we have obtained in our
  audits is sufficient and appropriate to provide a basis for our audit
  opinion.



---

Opinion

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of Quartz Mountain
  Resources Ltd. as at July 31, 2012, July 31, 2011 and August 1, 2010 and its
  financial performance and its cash flows for the years ended July 31, 2012 and
  July 31, 2011 in accordance with International Financial Reporting Standards, as
  issued by the International Accounting Standards Board.

|                  | **DAVIDSON** **&
      COMPANY LLP**
|----------------- | --------------------------------------
|                  |                                       
|Vancouver, Canada | Chartered Accountants                 
|                  |                                       
|November 22, 2012 |                                       

---

|QUARTZ MOUNTAIN RESOURCES LTD.          
|----------------------------------------
|Consolidated Balance Sheets             
|(Expressed in Canadian Dollars (note 2))

|                                                     |   | July 31     |   |   | July 31         |   |   | August 1        |  
|---------------------------------------------------- | - | ----------- | - | - | --------------- | - | - | --------------- | -
|                                                     |   | 2012        |   |   | 2011            |   |   | 2010            |  
|                                                     |   |             |   |   | Restated        |   |   | Restated        |  
|                                                     |   |             |   |   | (notes 2 and 15 | ) |   | (notes 2 and 15 | )
|ASSETS                                               |   |             |   |   |                 |   |   |                 |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Cash and cash equivalents (note 4
      (a))         | $ | 2,450,451   |   | $ | 78,652          |   | $ | 258,526         |  
|Amounts
      receivable and other assets (note 5)   |   | 292,837     |   |   | 20,577          |   |   | 13,291          |  
|Total current assets                                 |   | 2,743,288   |   |   | 99,229          |   |   | 271,817         |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Mineral property interests (note 6)                  |   | 1           |   |   | 1               |   |   | 1               |  
|Restricted
      cash (note 4 (b))                   |   | 78,000      |   |   |                |   |   |                |  
|Total non-current assets                             |   | 78,001      |   |   | 1               |   |   | 1               |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Total assets                                         | $ | 2,821,289   |   | $ | 99,230          |   | $ | 271,818         |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|LIABILITIES                                          |   |             |   |   |                 |   |   |                 |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Amounts payable and other liabilities
      (note 8) | $ | 607,389     |   | $ | 42,163          |   | $ | 31,268          |  
|Flow-through share premium (note 9)                  |   | 411,009     |   |   |                |   |   |                |  
|Due to related parties (note 10)                     |   | 813,855     |   |   |                |   |   |                |  
|Total current
      liabilities                      |   | 1,832,253   |   |   | 42,163          |   |   | 31,268          |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|SHAREHOLDERS' EQUITY                                 |   |             |   |   |                 |   |   |                 |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Share capital (note 7)                               | $ | 24,514,381  |   | $ | 29,407,744      |   | $ | 29,407,744      |  
|Reserves (notes 2 and 7)                             |   | 381,139     |   |   | (331,903        | ) |   | (323,287        | )
|Accumulated
      deficit                            |   | (23,906,484 | ) |   | (29,018,774     | ) |   | (28,843,907     | )
|Total shareholders' equity                           |   | 989,036     |   |   | 57,067          |   |   | 240,550         |  
|                                                     |   |             |   |   |                 |   |   |                 |  
|Total liabilities and shareholders' equity           | $ | 2,821,289   |   | $ | 99,230          |   | $ | 271,818         |  

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

|James Kerr | Ronald W. Thiessen
|---------- | ------------------
|Director   | Director          

---

|QUARTZ MOUNTAIN RESOURCES LTD.                              
|------------------------------------------------------------
|Consolidated Statements of Loss and
      Comprehensive Loss
|(Expressed in Canadian Dollars (note 2))                    

|                                                                       |   | For the year ended July 31 |  
|---------------------------------------------------------------------- | - | -------------------------- | -
|                                                                       |   | 2012                       |  
|                                                                       |   |                            |  
|                                                                       |   |                            |  
|Expenses (note 11):                                                    |   |                            |  
|Exploration and evaluation                                             | $ | 2,246,650                  |  
|Assays and
      analysis                                              |   | 52,745                     |  
|Engineering                                                            |   | 8,400                      |  
|Environmental                                                          |   | 1,375                      |  
|Geological                                                             |   | 870,517                    |  
|Graphics                                                               |   | 13,006                     |  
|Property payments                                                      |   | 910,819                    |  
|Site activities                                                        |   | 143,544                    |  
|Socio-economic                                                         |   | 89,646                     |  
|Transportation                                                         |   | 100,914                    |  
|Travel and accommodation                                               |   | 55,684                     |  
|                                                                       |   |                            |  
|General and administration                                             |   | 1,166,252                  |  
|Conferences and
      travel                                           |   | 31,357                     |  
|Legal, accounting and audit                                            |   | 301,641                    |  
|Office and
      administration                                        |   | 70,140                     |  
|Regulatory, trust and filing                                           |   | 48,659                     |  
|Salaries and
      benefits                                            |   | 686,358                    |  
|Shareholder communications                                             |   | 28,097                     |  
|                                                                       |   |                            |  
|Equity-settled
      share-based payments (note 7 (d))                 |   | 381,139                    |  
|                                                                       |   | (3,794,041                 | )
|Flow-through share premium (note 9)                                    |   | 193,308                    |  
|Interest income                                                        |   | 13,067                     |  
|Foreign exchange (loss) gain                                           |   | (139                       | )
|Loss before income tax                                                 |   | (3,587,805                 | )
|Income tax (note 13)                                                   |   |                           |  
|Loss for the year                                                      |   | (3,587,805                 | )
|                                                                       |   |                            |  
|Other comprehensive loss                                               |   |                            |  
|Currency translation difference (note 2)                               |   |                           |  
|Other comprehensive loss for the year                                  |   |                           |  
|                                                                       |   |                            |  
|Total comprehensive loss for the year                                  | $ | (3,587,805                 | )
|                                                                       |   |                            |  
|Basic and diluted loss per common share (note 7(c))                    | $ | (0.20                      | )
|                                                                       |   |                            |  
|Weighted average number of common shares outstanding (note
      7(c)) |   | 18,396,348                 |  

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                   
|-------------------------------------------------
|Consolidated Statement of Changes in
      Equity
|(Expressed in Canadian Dollars (note 2))         

|                                                           |  | Share Capital |  |   | Reserves   |   |   |             |   |   |                | 
|---------------------------------------------------------- |  | ------------- |  | - | ---------- | - | - | ----------- | - | - | -------------- | 
|                                                           |  |               |  |   |            |   |   | Translation |   |   | Equity-settled | 
|                                                           |  |               |  |   |            |   |   | reserve     |   |   | share-based    | 
|                                                           |  | Number        |  |   | Amount     |   |   | (note
    2 | ) |   | payments       | 
|Balance at August 1, 2010                                  |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (323,287    | ) | $ |               | 
|Loss for the year                                          |  |               |  |   |           |   |   |            |   |   |               | 
|Currency translation difference (note 2)                   |  |               |  |   |           |   |   | (8,616      | ) |   |               | 
|Balance at July
      31, 2011 (notes 2 and 15)            |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (331,903    | ) | $ |               | 
|                                                           |  |               |  |   |            |   |   |             |   |   |                | 
|                                                           |  |               |  |   |            |   |   |             |   |   |                | 
|Balance at July 31, 2011                                   |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (331,903    | ) | $ |               | 
|Functional
      currency translation adjustment (note 2)  |  |               |  |   | (9,031,998 | ) |   | 331,903     |   |   |               | 
|Balance at August 1, 2011                                  |  | 13,399,422    |  |   | 20,375,746 |   |   |            |   |   |               | 
|Loss for the year                                          |  |               |  |   |           |   |   |            |   |   |               | 
|Equity-settled share-based payments (note 7
      (d))     |  |               |  |   |           |   |   |            |   |   | 381,139        | 
|Shares issued for cash, net of issuance costs (note 7 (b)) |  | 7,183,371     |  |   | 3,434,635  |   |   |            |   |   |               | 
|Shares issued for property option payment (note 6)         |  | 1,450,000     |  |   | 704,000    |   |   |            |   |   |               | 
|Balance at July
      31, 2012                             |  | 22,032,793    |  | $ | 24,514,381 |   | $ |            |   | $ | 381,139        | 

Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements.

---

|QUARTZ MOUNTAIN RESOURCES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash
      Flows
|(Expressed in Canadian Dollars (note 2))   

|                                                                               |   | For the year ended July 31 |  
|------------------------------------------------------------------------------ | - | -------------------------- | -
|                                                                               |   | 2012                       |  
|                                                                               |   |                            |  
|                                                                               |   |                            |  
|Cash flows from operating activities:                                          |   |                            |  
|Loss for the year                                                              | $ | (3,587,805                 | )
|Adjusted for:                                                                  |   |                            |  
|Foreign exchange                                                               |   | 139                        |  
|Equity-settled share-based
      payments (note 7 (d))                         |   | 381,139                    |  
|Flow-through share premium (note 9)                                            |   | (193,308                   | )
|Property option payments paid
      through issuance of shares (note 6)        |   | 704,000                    |  
|Restricted cash (note 4 (b))                                                   |   | (78,000                    | )
|Changes in non-cash working capital items:                                     |   |                            |  
|Amounts receivable and other assets                                            |   | (272,260                   | )
|Amounts payable and other
      liabilities                                    |   | 565,226                    |  
|Due
      to related parties                                                   |   | 813,855                    |  
|Net cash used in operating activities                                          |   | (1,667,014                 | )
|                                                                               |   |                            |  
|Cash flows from financing activities:                                          |   |                            |  
|Proceeds from issuance of share capital, net of issue costs (note 7
      (b)) |   | 4,038,952                  |  
|Net cash provided by financing activities                                      |   | 4,038,952                  |  
|                                                                               |   |                            |  
|Increase (decrease) in cash and cash
      equivalents                         |   | 2,371,938                  |  
|Effect of exchange rate fluctuations on cash held                              |   | (139                       | )
|                                                                               |   | 2,371,799                  |  
|Cash and cash
      equivalents, beginning of year                             |   | 78,652                     |  
|Cash and cash equivalents, end of year (note 4(a))                             | $ | 2,450,451                  |  
|                                                                               |   |                            |  
|Supplementary cash flow information:                                           |   |                            |  
|Non cash financing activities:                                                 |   |                            |  
|Property option payments paid through issuance of
      shares (note 6)        |   | 704,000                    |  
|                                                                               | $ | 704,000                    |  

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

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|1. | NATURE ANDCONTINUANCE OFOPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Quartz Mountain Resources Ltd. ("Quartz Mountain" or the
      "Company") is a Canadian public company incorporated in British Columbia
      on August 3, 1982. The Company's corporate office is located at 1040 West
      Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The
      Company is primarily engaged in the acquisition and exploration of mineral
      properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements (the "Financial
      Statements") of the Company as at and for the year ended July 31, 2012
      include Quartz Mountain Resources Ltd. and its subsidiary (together
      referred to as the "Group" and individually as "Group entities"). Quartz
      Mountain Resources Ltd. is the ultimate parent entity of the
      Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company is in the process of acquiring and exploring
      mineral property interests. The Company's continuing operations are
      entirely dependent upon the existence of economically recoverable mineral
      reserves, the ability of the Company to obtain the necessary financing to
      complete the exploration and development of these projects, obtaining the
      necessary permits to mine, on future profitable production of any mine and
      the proceeds from the disposition of the mineral property
      interests.                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | After the reporting period, on November 1, 2012, the
      Company announced that it had entered into an agreement with a
      publicly-listed company, Amarc Resources Ltd. ("Amarc") , whereby Amarc
      would acquire a 40% beneficial joint venture interest in the Galaxie (note
      16(a)) and ZNT properties for consideration of $2.0 million (note 16(c)).
      The 40% interest will be earned by Amarc paying to Quartz Mountain $1.0
      million in cash and also funding $1.0 million of exploration expenses
      prior to December 31, 2012.                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Management believes that its current liquid assets are
      sufficient to meet all known obligations (note 14) and to maintain its
      mineral rights in good standing for the next 12 month period. Additional
      debt or equity financing will be required to fund additional exploration
      or development programs. The Company has a reasonable expectation that
      additional funds will be available when necessary to meet ongoing
      exploration and development costs. However, there can be no assurance that
      the Company will continue to obtain additional financial resources and/or
      achieve profitability or positive cash flows. If the Company is unable to
      obtain adequate additional financing, the Company will be required to
      re-evaluate its planned expenditures until additional funds can be raised
      through financing activities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These Financial Statements do not include any adjustments
      to the amounts and classification of assets and liabilities that may be
      necessary should the Company be unable to continue as a going
      concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | CHANGE OFPRESENTATION ANDFUNCTIONALCURRENCY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Following the decision to acquire and explore mineral
      property interests in Canada (note 6), the Company's cash flows were
      anticipated to be principally denominated in Canadian dollars.
      Accordingly, effective August 1, 2011, the Group changed both the
      functional currency of the Company and the currency in which it presents
      its consolidated financial statements, from United States dollars ("USD")
      to Canadian dollars ("CAD").                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

A change in presentation currency is
  accounted for as a change in accounting policy and is applied retrospectively,
  as if the new presentation currency had always been the presentation currency.
  Consequently, the comparative figures for the year ended July 31, 2011, and an
  opening balance sheet at August 1, 2010 have been restated to be presented in
  Canadian dollars using average exchange rates for income and expenses and the
  closing rate at the balance sheet date for assets, liabilities and items related
  to equity. Share capital and accumulated deficit have been translated using
  historic rates. Resulting exchange differences have been recognized within
  equity. In accordance with International Accounting Standards ("IAS") 1,
  Presentation of Financial Statements, an additional balance sheet for the Group
  and the Company has been presented as at August 1, 2010, together with the
  related notes.

The exchange rates applied for
  translation purposes were as follows:

| | Date or Period                   |  | Exchange Rate            | 
| | -------------------------------- |  | ------------------------ | 
| | As at July 31, 2011              |  | 1 CAD = 1.0466
      USD | 
| | For the year ended July 31, 2011 |  | 1 CAD = 1.0057 USD       | 
| | As
      at August 1, 2010       |  | 1 CAD = 1.0239 USD       | 

|3.  | SIGNIFICANTACCOUNTINGPOLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(a) | Statement of compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | In 2010, Canadian accounting standards were revised to
      incorporate International Financial Reporting Standards ("IFRS") as issued
      by the International Accounting Standards Board ("IASB") and
      interpretations of the International Financial Reporting Interpretations
      Committee ("IFRIC"), and require publicly accountable enterprises to apply
      IFRS effective for financial years beginning on or after January 1, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | These Financial Statements have been prepared in
      accordance with International Financial Reporting Standards ("IFRS") as
      issued by the International Accounting Standards Board ("IASB") effective
      for the Company's year ended July 31, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Issuance of these Financial Statements was authorized on
      November 22, 2012 by the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | These Financial Statements have been prepared on a
      historical cost basis. They have been prepared using the accrual basis of
      accounting, except for cash flow information. The preparation of these
      Financial Statements resulted in changes to the accounting policies as
      presented in the most recent annual financial statements prepared under
      Canadian Generally Accepted Accounting Principles ("CGAAP"). The
      accounting policies set out below have been applied consistently to all
      periods presented in these Financial Statements. They also have been
      applied in preparing an opening IFRS balance sheet at August 1, 2010 for
      the purposes of the transition to IFRS, as required by IFRS 1, First Time
      Adoption of International Financial Reporting Standards ("IFRS 1"). The impact of the
    transition from CGAAP to IFRS is described in note 15.

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|(c) | Significant accounting estimates and
      judgments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The preparation of Financial Statements in conformity
      with IFRS requires management to make judgments, estimates and assumptions
      that affect the application of policies and reported amounts of assets and
      liabilities, income and expenses. Actual results may differ from these
      estimates. The impacts of such estimates are pervasive throughout the
      Financial Statements, and may require accounting adjustments based on
      future occurrences. Revisions to accounting estimates are recognized in
      the period in which the estimate is revised and future periods if the
      revision affects both current and future periods. These estimates are
      based on historical experience, current and future economic conditions and
      other factors, including expectations of future events that are believed
      to be reasonable under the circumstances. Specific areas where significant
      estimates or judgments exist are:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Sources of estimation uncertainty:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Critical accounting judgments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

| |  | The classification of the option agreements in respect of
      the Buck Property and Galaxie Property (including the Hotai Claims) as
      earn-in agreements, as opposed to the acquisition of mineral property
      interests, has been identified as an accounting policy which involves
      judgments or assessments made by management. Currently a feasibility study
      has not been completed on any of these properties to determine if the
      properties are capable of supporting commercial production; consequently
      the costs associated with these properties are expensed as
      incurred;
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Management is required to assess the functional currency
      of each entity of the Company. In concluding that the Canadian dollar is
      the functional currency of the parent and of its subsidiary, management
      considered the currency that mainly influences the cost of providing goods
      and services in each jurisdiction in which the Company
      operates.                                                                                                                                                                                                                                        

|(d) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | These Financial Statements include the accounts of the
      Company and its subsidiary. Subsidiaries are all entities over which the
      Company has the power to govern the financial and operating policies
      generally accompanying a shareholding of more than one half of the voting
      rights. The existence and effect of potential voting rights that are
      currently exercisable or convertible are considered when assessing whether
      the Group controls another entity. Subsidiaries are fully consolidated
      from the date on which control is transferred to the Group. Inter-company
      balances and transactions, including any unrealized income and expenses
      arising from inter-company transactions, are eliminated on consolidation.
      Unrealized losses are eliminated in the same way as unrealized gains, but
      only to the extent that there is no impairment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | At July 31, 2012 and July 31, 2011 the Company held an
      ownership interest in the following
      subsidiary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Name of Subsidiary
      Place
        of Incorporation
      Ownership Interest
      Principal ActivityWavecrest Resources Inc.
      Delaware
      100%
      Holding company


|(e) | Foreign currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The functional and presentation currency of the Company
      and its subsidiary, as at July 31, 2012, is the Canadian dollar (note 2).
      Prior to August 1, 2011, the functional and presentation currency of the
      Company was the US dollar. Comparative amounts have been restated to be
      presented in Canadian dollars.                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on the dates of
      transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated at
      the rates prevailing at the period end date. Non-monetary items that are
      measured in terms of historical cost in a foreign currency are not
      re-translated. Gains and losses arising on translation are included in
      profit or loss for the period.

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|(f) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Financial assets and liabilities are recognized when the
      Group becomes party to the contracts that give rise to them. The Group
      determines the classification of its financial assets and liabilities at
      initial recognition and, where allowed and appropriate, re-evaluates such
      classification at each financial year end. The Group does not have any
      derivative financial instruments.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Non-derivative financial assets:                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Group classifies its non-derivative financial assets
      into the following categories:
        Cash and cash equivalents                                                                                                                                                                                                                                                                                          

Cash and cash equivalents are
  comprised of cash and short term deposits held at major financial institutions
  with an original maturity of three months or less, which are readily convertible
  into a known amount of cash. The Group's cash and cash equivalents are invested
  in business and savings accounts which are available on demand by the Group for
  its programs. They are measured at fair value.

Loans and receivables

Loans and receivables are financial
  assets with fixed or determinable payments that are not quoted in an active
  market. Such assets are initially recognized at fair value plus any directly
  attributable transaction costs. Subsequent to initial recognition loans and
  receivables are measured at amortized cost using the effective interest method,
  less any impairment losses.

Loans and receivables comprise amounts
  receivable and restricted cash.

Non-derivative financial
  liabilities:

The Group's non-derivative financial
  liabilities comprise financial liabilities measured at amortized cost. Such
  financial liabilities are recognized initially at fair value net of any directly
  attributable transaction costs. Subsequent to initial recognition these
  financial liabilities are measured at amortized cost using the effective
  interest method. Financial liabilities measured at amortized cost comprise
  amounts payable and balances payable to related parties.

Impairment of financial assets:

Financial assets are assessed for
  indicators of impairment at the end of each reporting period. Financial assets
  are impaired when there is objective evidence that, as a result of one or more
  events that occurred after the initial recognition of the financial asset, the
  estimated future cash flows of the investment have been impacted.

Objective evidence of impairment could
  include:

- significant financial difficulty of the issuer or
      counterparty; or
- default or delinquency in interest or principal
      payments; or
- it becoming probable that the borrower will enter
      bankruptcy or financial re- organization.

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

For certain categories of financial
  assets, such as amounts receivable, assets that are assessed not to be impaired
  individually are subsequently assessed for impairment on a collective basis. The
  carrying amount of the financial asset is reduced by the impairment loss
  directly for all financial assets with the exception of amounts receivable,
  where the carrying amount is reduced through the use of an allowance account.
  When an amount receivable is considered uncollectible, it is written off against
  the allowance account. Subsequent recoveries of amounts previously written off
  are credited against the allowance account. Changes in the carrying amount of
  the allowance account are recognized in profit or loss.

If, in a subsequent period, the amount
  of the impairment loss decreases and the decrease can be related objectively to
  an event occurring after the impairment was recognized, the previously
  recognized impairment loss is reversed through profit or loss to the extent that
  the carrying amount of the investment at the date the impairment is reversed
  does not exceed what the amortized cost would have been had the impairment not
  been recognized.

|(g) | Exploration and evaluation
      expenditures
|--- | ---------------------------------------------

Exploration and evaluation
  expenditures

Exploration and evaluation expenditures
  are expenditures incurred by the Group in connection with the exploration for
  and evaluation of mineral resources before the technical feasibility and
  commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditures
  are expensed as incurred, except for initial expenditures associated with the
  acquisition of exploration and evaluation assets through a business combination
  or an asset acquisition.

Exploration and evaluation expenditures
  include the cash consideration and the estimated fair market value of common
  shares on the date of issue or as otherwise provided under the relevant
  agreements.

Costs for properties for which the
  Group does not possess unrestricted ownership and exploration rights, such as
  option agreements, are expensed in the period incurred or until a feasibility
  study has determined that the property is capable of commercial production.

Administrative expenditures related to exploration activities are expensed in
  the period incurred.

Mineral property interests

Expenditures incurred by the Group in
  connection with the exploration for and evaluation of mineral resources after
  the technical feasibility and commercial viability of extracting a mineral
  resource are demonstrable are capitalized. Such amounts are then amortized over
  the estimated life of the property following the commencement of commercial
  production, or are written off if the property is sold, allowed to lapse or
  abandoned, or when an impairment has been determined to have occurred.

Mineral property interests, if any, are
  assessed for impairment if (i) sufficient data exists to determine technical
  feasibility and commercial viability, and (ii) facts and circumstances suggest
  that the carrying amount exceeds the recoverable amount.

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|    | Once the technical feasibility and commercial viability
      of the extraction of mineral resources in an area of interest are
      demonstrable, mineral property interests attributable to that area of
      interest are first tested for impairment and then reclassified to mineral
      property and development assets within property, plant and
      equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Recoverability of the carrying amount of mineral property
      interests is dependent on successful development and commercial
      exploitation, or alternatively, a sale of the respective areas of
      interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(h) | Impairment of non-financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | At the end of each reporting period the carrying amounts
      of the Group's assets are reviewed to determine whether there is any
      indication that those assets are impaired. If any such indication exists,
      the recoverable amount of the asset is estimated in order to determine the
      extent of the impairment, if any. The recoverable amount is the higher of:
      fair value less costs to sell and value in use. Fair value is determined
      as the amount that would be obtained from the sale of the asset in an
      arm's length transaction between knowledgeable and willing parties. In
      assessing value in use, the estimated future cash flows are discounted to
      their present value using a discount rate that reflects current market
      assessments of the time value of money and the risks specific to the
      asset. If the recoverable amount of an asset is estimated to be less than
      its carrying amount, the carrying amount of the asset is reduced to its
      recoverable amount and the impairment loss is recognized in the profit or
      loss for the period. For an asset that does not generate largely
      independent cash inflows, the recoverable amount is determined for the
      cash generating unit to which the asset belongs.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Where an impairment loss subsequently reverses, the
      carrying amount of the asset (or cash- generating unit) is increased to
      the revised estimate of its recoverable amount, but to an amount that does
      not exceed the carrying amount that would have been determined had no
      impairment loss been recognized for the asset (or cash-generating unit) in
      prior years. A reversal of an impairment loss is recognized immediately in
      profit or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(i) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Common shares are classified as equity. Transaction costs
      directly attributable to the issuance of common shares and share purchase
      options are recognized as a deduction from equity, net of any tax
      effects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Flowthrough shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Canadian tax legislation permits mining entities to issue
      flowthrough shares to investors. Flowthrough shares are securities
      issued to investors whereby the deductions for tax purposes related to
      eligible Canadian exploration expenses ("CEE"), as defined in the Income
      Tax Act (Canada), may be claimed by investors instead of the entity,
      pursuant to a defined renunciation process. Renunciation may
      occur:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

- prospectively (namely, the flowthrough shares are
      issued, renunciation occurs and CEE are incurred subsequently); or

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

- retrospectively (namely, the flowthrough shares
      are issued, CEE are then incurred, and renunciation occurs subsequently).

|    | Flowthrough shares are recorded in share capital at the
      fair value of common shares on date of issuance. When flowthrough shares
      are issued, the difference between the fair value of non-flow-through
      common shares and the amount the investors pay for flowthrough shares is
      recorded as a deferred liability called "flow-through share premium". This
      deferred liability is credited to profit or loss when the eligible
      expenses are incurred and renounced to investors.
      Upon eligible expenses
        being incurred, the Company derecognizes the liability and recognizes a
        deferred tax liability, if any, for the amount of tax reduction renounced
        to shareholders. The premium is recognized as other income and the related
    deferred tax is recognized as a tax provision.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(j) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Group presents basic and diluted loss per share data
      for its common shares, calculated by dividing the loss attributable to
      common shareholders of the Group by the weighted average number of common
      shares outstanding during the period. Diluted loss per share does not
      adjust the loss attributable to common shareholders or the weighted
      average number of common shares outstanding when the effect is
      anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(k) | Share-based payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The cost of equity-settled transactions with employees is
      measured by reference to the fair value of the instruments issued at the
      date at which they are granted and is recognized as an expense over the
      vesting period, which ends on the date on which the relevant employees
      become fully entitled to the award. Fair value is determined using an
      appropriate pricing model. In valuing equity-settled transactions, no
      account is taken of any vesting conditions.                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The cost of equity-settled transactions with
      non-employees is measured by reference to the fair value of the
      instruments issued, on the basis that the fair value of the services
      received cannot be estimated reliably. Fair value is originally measured
      at the date at which they are granted and subsequently re-measured at each
      balance sheet date for any unvested portion, and is recognized as an
      expense over the vesting period, which ends on the date on which the
      relevant non-employees become fully entitled to the award. Fair value is
      determined using an appropriate pricing model.                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | In valuing equity-settled transactions, no account is
      taken of any vesting conditions. Vesting conditions are taken into account
      by adjusting the number of equity instruments included in the measurement
      of the transaction amount, based on an estimate of the number of equity
      instruments expected to vest so that, ultimately, the amount recognized
      for goods or services received as consideration for the equity instruments
      granted will be based on the number of equity instruments that eventually
      vest. On the vesting date, the Company revises the estimate to equal the
      number of equity instruments that ultimately vested.                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | At each balance sheet date prior to vesting, the
      cumulative expense is calculated, representing the extent to which the
      vesting period has expired and management's estimates of
      the achievement or otherwise of non-market conditions and of
      the number of equity instruments that will ultimately vest. The movement
      in cumulative expense from amounts previously recorded is recognized in
    profit or loss, with a corresponding entry in equity.                                                                                                                                                                                                                                                                                                                                                                     

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|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|    | Where the terms of an equity-settled award are modified
      or a new award is designated as replacing a cancelled or settled award,
      the cost based on the original award terms continues to be recognized over
      the original vesting period. In addition, any expense is recognized over
      the remainder of the new vesting period for the incremental fair value of
      any modification, based on the difference between the fair value of the
      original award and the fair value of the modified award, both as measured
      on the date of the modification. No reduction is recognized if this
      difference is negative.                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Where an equity-settled award is cancelled, any cost not
      yet recognized in profit or loss for the award shall not be recognized and
      any previous amounts recognized for awards that have not vested are
      reversed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(l) | Rehabilitation provision                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Statutory, contractual and constructive obligations to
      incur restoration, rehabilitation and environmental costs arise when
      environmental disturbance is caused by the exploration or development of
      an exploration and evaluation asset. Such costs are discounted to their
      estimated net present value and capitalized to the carrying amount of the
      asset, along with a corresponding liability, as soon as the obligation to
      incur such costs arises. The timing of the actual rehabilitation
      expenditure is dependent on a number of factors such as the life and
      nature of the asset, the operating license conditions and, when
      applicable, the environment in which the mine operates.        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Discount rates reflecting the time value of money are
      used to calculate the net present value, where applicable. These costs are
      charged against profit or loss over the economic life of the related
      asset, through amortization using either the unit-of-production or the
      straight line method. The corresponding liability is progressively
      increased as the effect of discounting unwinds, creating an expense
      recognized in profit or loss.                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Decommissioning costs are also adjusted for changes in
      estimates. Those adjustments are accounted for as a change in the
      corresponding capitalized cost, except where a reduction in costs is
      greater than the unamortized capitalized cost of the related assets, in
      which case the capitalized cost is reduced to nil and the remaining
      adjustment is recognized in profit or loss.
      The operations of the Group
        have been, and may in the future be, affected from time to time in varying
        degree by changes in environmental regulations, including those for site
        restoration costs. Both the likelihood of new regulations and their
    overall effect upon the Group are not predictable.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(m) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Income tax on the profit or loss for the periods
      presented comprises current and deferred tax. Income tax is recognized in
      profit or loss except to the extent that it relates to items recognized
      directly in equity, in which case it is recognized in equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

Current tax expense is the expected tax
  payable on the taxable income for the year, using tax rates enacted or
  substantively enacted at year end, adjusted for amendments to tax payable with
  regards to previous years.

Deferred tax is provided using the
  balance sheet liability method, providing for temporary differences between the
  carrying amounts of assets and liabilities for financial reporting purposes and
  the amounts used for taxation purposes.

The following temporary differences are
  not provided for:

- goodwill not deductible for tax purposes;
- the initial recognition of assets or liabilities
      that affect neither accounting nor taxable profit; and
- differences relating to investments in
      subsidiaries, associates, and joint ventures to the extent that they will
      probably not reverse in the foreseeable future.

The amount of deferred tax provided is
  based on the expected manner of realization or settlement of the carrying amount
  of assets and liabilities, using tax rates enacted or substantively enacted at
  the end of the reporting period applicable to the period of expected realization
  or settlement.

A deferred tax asset is recognized only
  to the extent that it is probable that future taxable profits will be available
  against which the asset can be utilized. Deferred tax assets and liabilities are
  offset when there is a legally enforceable right to set off current tax assets
  against current tax liabilities and when they relate to income taxes levied by
  the same taxation authority and the Group intends to settle its current tax
  assets and liabilities on a net basis.

|(n) | Government assistance                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                    
|    | When the Company is entitled to receive mineral
      exploration tax credits and other government grants, these government
      assistances are recognized as a cost recovery within exploration and
      evaluation expenditures when there is reasonable assurance of their
      recovery.                                   
|    |                                                                                                                                                                                                                                                                                                                                    
|(o) | Accounting standards, interpretations and amendments
      to existing standards                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                    
|    | Effective August 1, 2011, the Group adopted new and
      revised IFRS that were issued by the IASB. The application of these new
      and revised IFRS has not had any material impact on the amounts reported
      for the current and prior years but may affect the accounting for future
      transactions or arrangements.
|    |                                                                                                                                                                                                                                                                                                                                    
|    | Accounting standards issued but not yet
      effective                                                                                                                                                                                                                                                                            

| | (i)  | Effective for annual periods beginning on or after
      January 1, 2012
| | ---- | ------------------------------------------------------------------------
| |      |                                                                         
| |      |                                                                         
| |      |                                                                         
| | (ii) | Effective for annual periods beginning on or after July
      1, 2012   
| |      |                                                                         
| |      |                                                                         

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

| | (iii) | Effective for annual periods beginning on or after
      January 1, 2013
| | ----- | ------------------------------------------------------------------------
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| | (iii) | Effective for annual periods beginning on or after
      January 1, 2014
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| | (iv)  | Effective for annual periods beginning on or after
      January 1, 2015
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         
| |       |                                                                         

The Group has not early-adopted these
  revised standards. Amendments to IAS 1 and IAS 12 effective for the Group's
  financial period commencing August 1, 2012 will not have a material impact on
  the Group's financial statements, except for disclosures and presentation. The
  Group is currently assessing the impact that all other new and amended standards
  will have on the Group's financial statements.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|4.  | CASH ANDCASHEQUIVALENTS ANDRESTRICTEDCASH
|--- | -----------------------------------------
|    |                                          
|(a) | Cash and cash equivalents                

| |                               |   | July 31, 2012 |  |   | July 31, 2011     |  
| | ----------------------------- | - | ------------- |  | - | ----------------- | -
| |                               |   |               |  |   | (restated, note 2 | )
| | Business and savings accounts | $ | 2,450,451     |  | $ | 78,652            |  

(b)
      Restricted cashRestricted cash in the amount of $78,000 (July 31, 2011 -
        $nil) consists of guaranteed investment certificates held in support of
        explorations permits.5.
      AMOUNTSRECEIVABLE ANDOTHERASSETS


| |                                 |   | July 31, 2012 |  |   | July 31, 2011     |  
| | ------------------------------- | - | ------------- |  | - | ----------------- | -
| |                                 |   |               |  |   | (restated, note 2 | )
| | Harmonized sales tax receivable | $ | 280,777       |  | $ | 17,744            |  
| | Prepaid expenses  Other        |   | 7,060         |  |   |                  |  
| | Other receivables               |   | 5,000         |  |   | 2,833             |  
| | Total                           | $ | 292,837       |  | $ | 20,577            |  

|6.  | MINERALPROPERTYINTERESTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(a) | Buck Gold-Silver Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | In December 2011, the Company purchased an option (the
      "Option") to acquire a 100% interest in the Buck gold-silver property (the
      "Buck Project") located in central British Columbia.
      In December 2011, the
        Company paid $100,000 in cash and issued 1,200,000 common shares to
        acquire the Option from a private party (the "Vendor"). The common shares
        issued were valued at the fair value on the date of issue ($0.50 per
        common share) and were expensed along with the cash consideration paid.
        The Company agreed to issue up to 6,000,000 additional common shares to
    the Vendor upon the achievement of certain milestones, as follows:

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

| |                                                                                                 |   |         |  |  | Number of       |  |  |                     | 
| | ----------------------------------------------------------------------------------------------- | - | ------- |  |  | --------------- |  |  | ------------------- | 
| |                                                                                                 |   | Cash    |  |  | common          |  |  | Status at           | 
| | Payable upon                                                                                    |   | payment |  |  | shares issuable |  |  | July
      31, 2012 | 
| | December 30, 2011                                                                               | $ | 100,000 |  |  | 1,200,000       |  |  | Completed           | 
| | Completion of a compliant resource estimate on the Buck
      Project                           |   | nil     |  |  | 1,200,000       |  |  |                     | 
| | Completion of a "preliminary assessment" or
      a "pre-feasibility study" on the Buck Project |   | nil     |  |  | 2,400,000       |  |  |                     | 
| | Completion of a
      "feasibility study" on the Buck Project                                   |   | nil     |  |  | 2,400,000       |  |  |                     | 

The Company is also required to make
  certain scheduled payments to the underlying owners of the Buck Project (the
  "Underlying Owners") as follows:

| |                            |   |         |  |  | Number of     |  |  |                     | 
| | -------------------------- | - | ------- |  |  | ------------- |  |  | ------------------- | 
| |                            |   | Cash    |  |  | common shares |  |  | Status at           | 
| | Payable on or
      before |   | payment |  |  | issuable      |  |  | July
      31, 2012 | 
| | December 30, 2011          | $ | 20,000  |  |  | 100,000       |  |  | Completed           | 
| | June 28, 2012              | $ | 25,000  |  |  | 150,000       |  |  | Completed           | 
| | June 28, 2013              | $ | 30,000  |  |  | 200,000       |  |  |                     | 
| | June 28, 2014              | $ | 30,000  |  |  | 200,000       |  |  |                     | 

|    | The common shares issued on December 30, 2011 were valued
      at the estimated fair value on that date ($0.50 per share) and were
      expensed. The common shares issued on June 28, 2012 were valued at the
      estimated fair value on that date ($0.36) and were expensed.                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Under the terms of the Option, the Underlying Owners
      retain a 3% net smelter returns royalty. The royalty percentage will
      decrease by 1% once aggregate royalty payments exceed $10 million. The
      Company has the right at any time to reduce the royalty by 1% by paying
      $500,000 to the Underlying Owners.                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | Galaxie Project                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Galaxie Project covers an area of 1,540 square
      kilometres, comprised of three mineral claims totalling approximately
      1,294 hectares (the "Gnat Pass Property") and the surrounding Galaxie
      Project which consists of 382 mineral claims totalling 151,796 hectares.
      The property straddles the Stewart-Cassiar Highway, and is located 24
      kilometres south of the community of Dease Lake, British
      Columbia.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In July 2012, the Company entered into an earn-in
      agreement (the "Galaxie Earn-in Agreement") with Finsbury Exploration
      Ltd., a non-arm's length party (note 10(b)) whereby it obtained an option
      to earn up to a 50% interest in the Galaxie Project by spending up to
      $1,500,000 in exploration expenditures.                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | After the reporting period, in August 2012, the Galaxie
      Earn-in Agreement was terminated and the Company acquired outright a 100%
      interest in the Galaxie Project, subject to a 1% net smelter returns royalty, capped at aggregate payments of
    $7.5 million, retained by an arm's length party (note 16(a)).                                                                                                                       

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|(c) | Karma Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the year ended July 31, 2012, the Company staked
      93 mineral claims located approximately 41 kilometres south of Houston, BC
      (the "Karma Project"), near the Company's Buck Project. The Company paid
      claim staking costs totalling $13,933.                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(d) | ZNT Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In June 2012, the Company staked 19 mineral claims,
      located approximately 15 kilometres southeast of the town of Smithers, BC,
      in central British Columbia. These 19 claims, together with an additional
      61 claims that were staked in October and November 2012, comprise the
      Companys ZNT Project. The Company paid claim staking costs relating to
      the initial 19 mineral claims totalling $3,313.                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(e) | Angel's Camp Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company retains a 1% net smelter return royalty
      payable to the Company on any production from the Angel's Camp property
      located in Lake County, Oregon. The Angel's Camp property is currently
      held by Golden Predator Corporation and Orsa Ventures Corp., each of which
      holds a 50% beneficial joint venture interest in the property.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the year ended July 31, 2002, the Company sold
      100% of its title, rights and interest in the Angel's Camp property
      located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"),
      which later changed its name to Seabridge Gold Inc., for 300,000 common
      shares of Seabridge (sold in prior years), 200,000 common share purchase
      warrants of Seabridge (exercised and sold in prior years), cash of
      $100,000, and a 1% net smelter return royalty payable to the Company on
      any production from the Angel's Camp property.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In 2003, Seabridge optioned a 50% interest in the
      property to Quincy Gold Inc., which later changed its name to Golden
      Predator Mines Inc., then to Golden Predator Royalty & Development
      Corporation, and is now named Golden Predator Corporation.                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In April 2012, Orsa Ventures Corp. (TSX-V: ORN) exercised
      its option to acquire all of Seabridge's remaining undivided 50%
      beneficial joint venture interest in the Angel's Camp property.                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The royalty has been recorded at a nominal amount of
      $1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|7.  | CAPITAL ANDRESERVES                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                    
|(a) | Authorized share capital                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                    
|    | At July 31, 2012, the authorized share capital of the
      Company comprised an unlimited number of common shares without par value
      and an unlimited number of preferred shares without par value.                          
|    |                                                                                                                                                                                                                                    
|    | No preferred shares have been issued to date.
      All issued common shares are fully paid.                                                                                                                                       
|    |                                                                                                                                                                                                                                    
|(b) | Private Placement and Flow-Through
      Financing                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                    
|    | In December 2011, the Company completed a non-brokered
      private placement (the "Private Placement") of 7,183,371 common shares for
      aggregate gross proceeds of $4,196,002. The Private Placement was
      comprised of:

- 1,140,200 non-flow-through common shares issued at
      a price of $0.50 per share for gross proceeds of $570,100; and
- 6,043,171 flow-through common shares issued at
      $0.60 per share, including a premium of $0.10 per share over the offering
      price for the non-flow through common shares, for gross proceeds of $3,625,902
      (the "Flow-through Funds").

|    | After issuance costs of $157,050, net cash proceeds from
      the Private Placement were $4,038,952, of which $604,317 was recorded as a
      flow-through share premium liability (note 9) and the balance of
      $3,434,635 was allocated to the common shares issued.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                             
|    | Pursuant to the flow-through share agreements, the
      Company renounced eligible Canadian Exploration Expenses ("CEE"), as
      defined in the Income Tax Act (Canada).                                                                                                 
|    |                                                                                                                                                                                                                                                                             
|(c) | Basic and diluted loss per share                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                             
|    | The calculation of basic and diluted loss per share for
      the period was based on the following:                                                                                                                                                                        

| |                                                            |   | Year ended July 31 | 
| | ---------------------------------------------------------- | - | ------------------ | 
| |                                                            |   | 2012               | 
| | Loss attributable to common shareholders                   | $ | 3,679,805          | 
| | Weighted average
      number of common shares outstanding |   | 18,396,348         | 

|(d) | Equity-Settled Share-Based Payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company has a share purchase option plan approved by
      the Company's shareholders that allows the Board of Directors to grant
      share purchase options, subject to regulatory terms and approval, to its
      officers, directors, employees, and service providers. The share purchase
      option plan (the "2012 Option Plan") is based on the maximum number of
      eligible shares equaling 10% of the Company's outstanding common shares,
      calculated from time to time.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

The exercise price of each share
  purchase option is set by the Board of Directors at the time of grant but cannot
  be less than the five day volume weighted average trading price of the Company's
  shares calculated on the day prior to the grant. Share purchase options may have
  a maximum term of ten years (although share purchase options have generally been
  granted with a term of up to five years) and typically terminate 90 days
  following the termination of the optionee's employment or engagement, except in
  the case of retirement or death. The vesting period for share purchase options
  is at the discretion of the Board of Directors at the time the options are
  granted.

The following summarizes the changes in
  the Company's share purchase options for the years ended July 31, 2012 and 2011:

| | Continuity of share options                               |  | Number of options |   |   | Weighted average | 
| | --------------------------------------------------------- |  | ----------------- | - | - | ---------------- | 
| |                                                           |  | outstanding       |   |   | exercise price   | 
| | Share purchase options outstanding at July
      31, 2011 |  |                  |   |   |                 | 
| | Granted during the year                                   |  | 1,776,600         |   | $ | 0.45             | 
| | Forfeited during the year                                 |  | (9,000            | ) | $ | 0.45             | 
| | Share purchase
      options outstanding at July 31, 2012 |  | 1,767,600         |   | $ | 0.45             | 
| | Share purchase options exercisable at July 31, 2012       |  | 589,200           |   | $ | 0.45             | 

The weighted average contractual
  remaining life of the share purchase options outstanding at July 31, 2012 was
  4.0 years.

Options were priced based on the
  Black-Scholes option pricing model using the following weighted average
  assumptions to estimate the fair value of options granted: grant date share
  price of $0.45; risk-free interest rate of 1.2%; expected volatility of 119%;
  expected life of 4.0 years; and expected dividend yield of nil).

The estimated weighted average fair
  value of options granted during the year ended July 31, 2012 was $0.34 per
  option (2011  not applicable). The Company recognized share-based payment
  expense of $381,139 in the year ended July 31, 2012 (2011  nil).

Option pricing models require the input
  of highly subjective assumptions, including the expected price volatility.
  Changes in the subjective input assumptions can materially affect the fair value
  estimate, and therefore the existing models do not necessarily provide a
  reliable measure of the fair value of the Company's share purchase options.

|8. | AMOUNTSPAYABLE ANDOTHERLIABILITIES
|-- | ----------------------------------

| |                           |   | Year ended July 31 | 
| | ------------------------- | - | ------------------ | 
| |                           |   | 2012               | 
| |                           |   |                    | 
| | Amounts payable           | $ | 544,156            | 
| | Accrued
      liabilities |   | 63,233             | 
| | Total                     | $ | 607,389            | 

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|9. | FLOW-THROUGHSHAREPREMIUMLIABILITY
|-- | ---------------------------------

| |                                                                    |   | Year ended July 31 |  
| | ------------------------------------------------------------------ | - | ------------------ | -
| |                                                                    |   | 2012               |  
| |                                                                    |   |                    |  
| | Balance at beginning of year                                       | $ |                   |  
| | Recognized as liability upon issuance of flow-through
      shares |   | 604,317            |  
| | Derecognized upon eligible expenditures incurred                   |   | (193,308           | )
| | Balance at end of
      year                                       | $ | 411,009            |  

Pursuant to the Private Placement of
  the flow-through shares (note 7(b)) and in accordance with the Income Tax Act
  (Canada), the Company is obligated to spend the Flow-through Funds on eligible
  Canadian Exploration Expenses ("CEE") and to renounce them to the investors The
  renunciation of CEE to the investors was completed during the current year. At
  July 31, 2012, the balance of the flow-through share premium represents the
  prorated portion of the premium attributable to the Flow-through Funds that
  remained unspent on CEE at the end the reporting period.

To July 31, 2012, out of total
  Flow-through Funds of $3,625,902, the Company had incurred approximately
  $1,160,000 in CEE.

|10. | RELATEDPARTYBALANCES ANDTRANSACTIONS                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                    
|(a) | Transactions with Key Management Personnel                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                    
|    | Key management personnel are those persons that have the
      authority and responsibility for planning, directing and controlling the
      activities of the Company, directly and indirectly, and by definition
      include the directors of the Company.
      During the years ended July 31, 2012
    and 2011, the Group compensated key management personnel as follows:

| |                                                                           |   | Year ended July 31 | 
| | ------------------------------------------------------------------------- | - | ------------------ | 
| |                                                                           |   | 2012               | 
| |                                                                           |   |                    | 
| | Short-term employee benefits, including
      salaries and directors fees | $ | 237,563            | 
| | Equity-settled
      share-based payments                                 |   | 150,914            | 
| | Total                                                                     | $ | 388,477            | 

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|(b) | Entities with Significant Influence over the
      Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company's management believes that certain entities
      have the power to participate in the financial or operating policies of
      the Company. Several directors and other key management personnel of those
      entities, who are close business associates, are also key management
      personnel of the Company. Pursuant to management agreements between the
      Company and these entities which have significant influence over the
      Company, the Company receives geological, engineering, corporate
      development, administrative, management and shareholder communication
      services from such entities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Hunter Dickinson Services Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Hunter Dickinson Services Inc. ("HDSI") is a private
      company which has certain directors and officers in common with the
      Company. HDSI provides geological, corporate development, administrative
      and management services to, and incurs third party costs on behalf of the
      Group pursuant to an agreement dated July 2, 2010, and is based on
      annually set rates.                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Finsbury Exploration Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Finsbury Exploration Ltd. ("Finsbury") is a private
      company which has certain directors in common with the Company. The
      transactions and balances with Finsbury presented herein relate to the
      Galaxie Earn-in Agreement (note 6(b)).                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Transactions with these related parties were as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                                                      |   | Year ended July 31 | 
| | -------------------------------------------------------------------- | - | ------------------ | 
| |                                                                      |   | 2012               | 
| |                                                                      |   |                    | 
| |                                                                      |   |                    | 
| | HDSI: Services received based on management
      services agreement | $ | 1,135,345          | 
| | HDSI: Reimbursement of third party expenses paid                     |   | 120,444            | 
| | Finsbury: Reimbursement of third party expenses paid                 |   | 25,278             | 

Outstanding balances were as follows:

| |                                   |   | July 31, 2012 |  |   | July 31, 2011 |  
| | --------------------------------- | - | ------------- |  | - | ------------- | -
| |                                   |   |               |  |   | (restated,    |  
| |                                   |   |               |  |   | note
      15 | )
| | Balance payable to HDSI           | $ | 786,425       |  | $ |              |  
| | Balance payable to
      Finsbury |   | 27,430        |  |   |              |  
| | Total                             | $ | 813,855       |  | $ |              |  

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|11. | EMPLOYEESBENEFITEXPENSES                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                        
|    | The amount of employees' salaries and benefits (including
      equity-settled share-based payments) included in various expenses are as
      follows:

| |                                     |   | Year ended July 31 | 
| | ----------------------------------- | - | ------------------ | 
| |                                     |   | 2012               | 
| |                                     |   |                    | 
| |                                     |   |                    | 
| | Exploration and evaluation expenses | $ | 544,802            | 
| | General and administration expenses |   | 697,025            | 
| | Equity-settled share-based payment  |   | 381,139            | 
| | Total                               | $ | 1,622,966          | 

|12. | OPERATINGSEGMENTS                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                    
|    | The Group operates in a single reportable operating
      segment  the acquisition, exploration and evaluation of mineral property
      interests. The Company is currently focused on the acquisition and
      exploration of mineral property interests in Canada.                                            
|    |                                                                                                                                                                                                                                                                                                                    
|13. | TAXATION                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                    
|(a) | Provision for current tax                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                    
|    | No provision has been made for current income
      taxes, as the Company has no taxable income.                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                    
|(b) | Provision for deferred tax                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                    
|    | As future taxable profits of the Company are uncertain,
      no deferred tax asset has been recognized. As at July 31, 2012, the
      Company had unused non-capital loss carry forwards of approximately
      $2,901,000 (2011  $1,542,000) in Canada and $37,000 (2011  $50,000) in
      the United States.
|    |                                                                                                                                                                                                                                                                                                                    
|    | The Company had approximately $4,550,000 (2011 
      $3,639,000) of resource tax pools available, which may be used to shelter
      certain resource income.                                                                                                                                                    

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

Reconciliation of effective tax rate:

| |                                                           |   | Year ended July 31 |  
| | --------------------------------------------------------- | - | ------------------ | -
| |                                                           |   | 2012               |  
| |                                                           |   |                    |  
| |                                                           |   |                    |  
| | Loss for the period                                       | $ | (3,587,805         | )
| | Income tax expense                                        |   |                   |  
| | Loss excluding income tax                                 | $ | (3,587,805         | )
| | Effective tax rate                                        |   |                   |  
| |                                                           |   |                    |  
| | Income tax recovery using the Company's domestic tax rate | $ | (919,000           | )
| | Effect of tax rates in foreign
      jurisdictions        |   |                   |  
| | Non-deductible expenses and other                         |   | 310,000            |  
| | Differences in statutory tax rates                        |   | 16,000             |  
| | Differences due to foreign exchange                       |   | (1,000             | )
| | Changes in unrecognized temporary differences             |   | 594,000            |  
| |                                                           | $ |                   |  

The Company's domestic tax rate during
  the year ended July 31, 2012 was 25.6% (2011  27.3%) and the effective tax rate
  was nil (2011  nil).

As at July 31, 2012, the Company had
  the following balances in respect of which no deferred tax asset had been
  recognized:

| |                      |   |                  |  |   | Resource  |  |   | Equipment       | 
| | -------------------- | - | ---------------- |  | - | --------- |  | - | --------------- | 
| | Expiry:              |   | Tax
      losses |  |   | pools     |  |   | and
      other | 
| | Within one year      | $ | 16,000           |  | $ |           |  | $ |                | 
| |                      |   |                  |  |   |          |  |   |                 | 
| | One to five years    |   | 252,000          |  |   |          |  |   | 126,000         | 
| | After five years     |   | 2,670,000        |  |   |          |  |   |                | 
| | No
      expiry date |   |                 |  |   | 4,550,000 |  |   | 114,000         | 
| |                      | $ | 2,938,000        |  | $ | 4,550,000 |  | $ | 240,000         | 

|14. | FINANCIALRISKMANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Group is exposed in varying degrees to a variety of
      financial instrument related risks. The Board approves and monitors the
      risk management processes, inclusive of documented investment policies,
      counterparty limits, and controlling and reporting structures. The type of
      risk exposure and the way in which such exposure is managed is provided as
      follows:                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(a) | Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Credit risk is the risk of potential loss to the Group if
      the counterparty to a financial instrument fails to meet its contractual
      obligations. The Group's credit risk is primarily attributable to its liquid financial assets including cash
  and cash equivalents and amounts receivable. The Group limits its exposure to
  credit risk on liquid financial assets by only investing its cash and cash
  equivalents with high-credit quality financial institutions in business and
  savings accounts.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

The carrying value of the Group's cash
  and cash equivalents and trade and amounts receivable represent the maximum
exposure to credit risk.

| |                                       |   | Carrying Amount     | 
| | ------------------------------------- | - | ------------------- | 
| | Financial Assets                      |   | July
      31, 2012 | 
| | Cash and cash equivalents (note 4(a)) | $ | 2,450,451           | 
| | Amounts receivable (note 5)           |   | 280,777             | 
| | Restricted cash (note 4(b))           |   | 78,000              | 
| | Total                                 | $ | 2,809,228           | 

|(b) | Liquidity Risk                                                                                                                                                                                                                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                   
|    | Liquidity risk is the risk that the Group will not be
      able to meet its financial obligations when they become due. The Group
      ensures that there is sufficient capital in order to meet short term
      business requirements, after taking into account cash flows from
      operations and the Group's holdings of cash and cash
      equivalents.
|    |                                                                                                                                                                                                                                                                                                                                                                   
|    | The following obligations existed at July 31,
      2012:                                                                                                                                                                                                                                                                                                         

| |                                                      |   |           |  |   | Payments due by period | 
| | ---------------------------------------------------- | - | --------- |  | - | ---------------------- | 
| |                                                      |   |           |  |   | Less than 1            | 
| |                                                      |   | Total     |  |   | year                   | 
| | Amounts payable and other liabilities (note
      8) | $ | 607,389   |  | $ | 607,389                | 
| | Due to related
      parties (note 10)               |   | 813,855   |  |   | 813,855                | 
| | Total                                                | $ | 1,421,244 |  | $ | 1,421,244              | 

The following obligations existed at
  July 31, 2011:

| |                                                |   |        |  |   | Payments due by period | 
| | ---------------------------------------------- | - | ------ |  | - | ---------------------- | 
| |                                                |   |        |  |   | Less than 1            | 
| |                                                |   | Total  |  |   | year                   | 
| | Amounts payable and other liabilities (note 8) | $ | 42,163 |  | $ | 42,163                 | 
| | Total                                          | $ | 42,163 |  | $ | 42,163                 | 

|(c) | Market Risk                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                              
|    | Market risk is the risk that changes in market prices,
      such as foreign exchange rates, interest rates and equity prices will
      affect the Group's income or the value of its holdings of
      financial instruments. The objective of market risk management is
      to manage and control market risk exposures within acceptable parameters,
      while optimizing the return.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|    | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Group is subject to interest rate risk with respect
      to its investments in cash and cash equivalents. The Group's policy is to
      invest cash at fixed rates of interest and cash reserves are to be
      maintained in cash and cash equivalents in order to maintain liquidity,
      while achieving a satisfactory return for shareholders. Fluctuations in
      interest rates when cash and cash equivalents mature impact interest
      income earned.                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Assuming that all variables remain constant, a 10 basis
      points change representing a 0.1% increase or decrease in interest rates
      would have resulted in a decrease or increase in the loss for the year
      ended July 31, 2012 of approximately $1,300 (2011  $160).                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company incurs substantially all of its expenditures
      in Canada and substantially all of its cash and cash equivalents held are
      denominated in Canadian dollars. Consequently the Company is not subject
      to material foreign exchange risk.                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Price risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company is not subject to any price risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(d) | Capital management objectives                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company's primary objectives when managing capital
      are to safeguard the Company's ability to continue as a going concern, so
      that it can continue to provide returns for shareholders, and to have
      sufficient liquidity available to fund ongoing expenditures and suitable
      business opportunities as they arise.                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company considers the components of shareholders'
      equity, as well as its cash and cash equivalents as capital. The Company
      manages its capital structure and makes adjustments to it in light of
      changes in economic conditions and the risk characteristics of the
      underlying assets. In order to maintain or adjust the capital structure,
      the Company may issue equity, sell assets, or return capital to
      shareholders as well as issue or repay debt.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company's investment policy is to invest its cash in
      highly liquid shortterm interest bearing investments having maturity
      dates of three months or less from the date of acquisition and that are
      readily convertible to known amounts of cash.                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | There were no changes to the Company's approach to
      capital management during the year ended July 31, 2012.                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company is not subject to any externally imposed
      equity requirements.                                                                                                                                                                                                                                                                                                                                                                                                                  

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|(e) | Fair Value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The fair value of the Group's financial assets and
      liabilities approximate the carrying value. Due to their short-term
      nature, cash and cash equivalents are carried at a level 1 fair value.
      Financial instruments measured at fair value are classified into one of
      three levels in the fair value hierarchy according to the relative
      reliability of the inputs used to estimate the fair values. The three
      levels of the fair value hierarchy are:

Level 1  Unadjusted quoted prices in
  active markets for identical assets or liabilities; 
  Level 2  Inputs other
  than quoted prices that are observable for the asset or liability either
  directly or indirectly; and 
  Level 3  Inputs that are not based on
  observable market data.

There were no transfers between levels
  of the fair value hierarchy used in measuring the fair value of financial
  instruments during the year ended July 31, 2012.

|15. | FIRSTTIMEADOPTION
      OFINTERNATIONALFINANCIALREPORTINGSTANDARDS                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Canadian Accounting Standards Board has mandated the
      adoption of IFRS effective for interim and annual financial statements
      relating to fiscal years beginning on or after January 1, 2011 for
      Canadian publicly accountable profit-orientated enterprises. The date of
      transition is August 1, 2010 and as a result the fiscal 2011 comparative
      information has been adjusted to conform to IFRS.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Under IFRS 1, IFRS are applied retrospectively at the
      transition balance sheet with all adjustments to assets and liabilities as
      stated under Canadian GAAP ("CGAAP") recorded to retained earnings unless
      certain exemptions are applied. The Company has elected to take the
      following IFRS 1 optional exemptions:                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In preparing its opening IFRS balance sheet and financial
      statements for the year ended July 31, 2011, the Company has adjusted
      amounts reported previously in financial statements prepared in accordance
      with CGAAP.                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Additionally, as the Company opted to change its
      presentation currency effective August 1, 2011 (note 2) a retroactive
      restatement was required for all previous periods. Prior to August 1, 2011
      the Company was reporting under CGAAP guidelines and as such the
      comparative information was translated based on those guidelines, prior to
      transition to IFRS.                                     

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

The translation was performed using
  average exchange rates for income and expenses and the closing rate at the
  balance sheet date for assets, liabilities and items related to equity. Share
  capital and accumulated deficit have been translated using historic rates.
  Resulting exchange differences were recognized within equity.

Reconciliation of previously
  reported financial statements

Previously, under CGAAP, certain
  entities were determined to be related parties; however under IFRS these
  entities no longer meet the definition of a related party.

An explanation of how the transition
  from CGAAP to IFRS has affected the Company's financial position, financial
  performance and cash flows is set out in the following tables.

|(a) | Reconciliation of Balance
      Sheet
|--- | -------------------------------------

| | As at August 1, 2010                    |  |                   |   |   |                 |   |   | Effect of  |   |   |                |  
| | --------------------------------------- |  | ----------------- | - | - | --------------- | - | - | ---------- | - | - | -------------- | -
| | (date of transition to
      IFRS)      |  |                   |   |   |                 |   |   | Transition |   |   |                |  
| |                                         |  | CGAAP             |   |   |                 |   |   | to IFRS    |   |   |                |  
| |                                         |  | (US$)             |   |   | CGAAP
      ($) |   |   | ($)        |   |   | IFRS
      ($) |  
| | ASSETS                                  |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Cash and cash equivalents               |  | US$ 251,240       |   | $ | 258,526         |   | $ |           |   | $ | 258,526        |  
| | Amounts receivable and prepaid expenses |  | 12,873            |   |   | 13,291          |   |   |           |   |   | 13,291         |  
| | Total current assets                    |  | 264,113           |   |   | 271,817         |   |   |           |   |   | 271,817        |  
| | Mineral property interests              |  | 1                 |   |   | 1               |   |   |           |   |   | 1              |  
| | Total assets                            |  | US$
      264,114 |   | $ | 271,818         |   | $ |           |   | $ | 271,818        |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | LIABILITIES                             |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Accounts payable and other liabilities  |  | US$ 20,000        |   | $ | 21,118          |   | $ | 10,150     |   | $ | 31,268         |  
| | Due to a related
      party            |  | 9,864             |   |   | 10,150          |   |   | (10,150    | ) |   |               |  
| | Total current liabilities               |  | 29,864            |   |   | 31,268          |   |   |           |   |   | 31,268         |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | EQUITY                                  |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Share capital                           |  | 21,269,046        |   |   | 29,407,744      |   |   |           |   |   | 29,407,744     |  
| | Reserves                                |  |                  |   |   | (323,287        | ) |   |           |   |   | (323,287       | )
| | Accumulated
      deficit               |  | (21,034,796       | ) |   | (28,843,907     | ) |   |           |   |   | (28,843,907    | )
| | Total equity                            |  | 234,250           |   |   | 240,550         |   |   |           |   |   | 240,550        |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Total liabilities and equity            |  | US$ 264,114       |   | $ | 271,818         |   | $ |           |   | $ | 271,818        |  

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

| | As at July 31, 2011                     |  |                   |   |   |                 |   |   | Effect of  |   |   |                |  
| | --------------------------------------- |  | ----------------- | - | - | --------------- | - | - | ---------- | - | - | -------------- | -
| |                                         |  |                   |   |   |                 |   |   | Transition |   |   |                |  
| |                                         |  | CGAAP             |   |   |                 |   |   | to IFRS    |   |   |                |  
| |                                         |  | (US$)             |   |   | CGAAP
      ($) |   |   | ($)        |   |   | IFRS
      ($) |  
| | ASSETS                                  |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Cash and cash equivalents               |  | US$ 82,315        |   | $ | 78,652          |   | $ |           |   | $ | 78,652         |  
| | Amounts receivable and prepaid expenses |  | 21,380            |   |   | 20,577          |   |   |           |   |   | 20,577         |  
| | Total current assets                    |  | 103,695           |   |   | 99,229          |   |   |           |   |   | 99,229         |  
| | Mineral property interests              |  | 1                 |   |   | 1               |   |   |           |   |   | 1              |  
| | Total assets                            |  | US$
      103,696 |   | $ | 99,230          |   | $ |           |   | $ | 99,230         |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | LIABILITIES                             |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Accounts payable and other liabilities  |  | US$ 40,833        |   | $ | 39,017          |   | $ | 3,146      |   | $ | 42,163         |  
| | Due to a related
      party            |  | 3,293             |   |   | 3,146           |   |   | (3,146     | ) |   |               |  
| | Total current liabilities               |  | 44,126            |   |   | 42,163          |   |   |           |   |   | 42,163         |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | EQUITY                                  |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Share capital                           |  | 21,269,046        |   |   | 29,407,744      |   |   |           |   |   | 29,407,744     |  
| | Reserves                                |  |                  |   |   | (331,903        | ) |   |           |   |   | (331,903       | )
| | Accumulated
      deficit               |  | (21,209,476       | ) |   | (29,018,774     | ) |   |           |   |   | (29,018,774    | )
| | Total equity                            |  | 59,570            |   |   | 57,067          |   |   |           |   |   | 57,067         |  
| |                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Total liabilities and equity            |  | US$ 103,696       |   | $ | 99,230          |   | $ |           |   | $ | 99,230         |  

|(b) | Reconciliation of Statement of Comprehensive
      Loss
|--- | -------------------------------------------------------

| | Year Ended July 31, 2011              |  |                   |   |   |                 |   |   | Effect of  |  |   |                |  
| | ------------------------------------- |  | ----------------- | - | - | --------------- | - | - | ---------- |  | - | -------------- | -
| |                                       |  |                   |   |   |                 |   |   | Transition |  |   |                |  
| |                                       |  |                   |   |   |                 |   |   | to IFRS    |  |   |                |  
| |                                       |  | CGAAP
      (US$) |   |   | CGAAP
      ($) |   |   | ($)        |  |   | IFRS
      ($) |  
| | Expenses:                             |  |                   |   |   |                 |   |   |            |  |   |                |  
| | Legal, accounting and audit           |  | US$ 55,172        |   | $ | 55,125          |   | $ |           |  | $ | 55,125         |  
| | Office and administration             |  | 92,136            |   |   | 92,582          |   |   |           |  |   | 92,582         |  
| | Regulatory, trust and filing          |  | 36,390            |   |   | 36,090          |   |   |           |  |   | 36,090         |  
| | Shareholder communication             |  | 1,990             |   |   | 1,986           |   |   |           |  |   | 1,986          |  
| | Net loss before the following         |  | (185,688          | ) |   | (185,783        | ) |   |           |  |   | (185,783       | )
| | Interest income                       |  | 1,597             |   |   | 1,598           |   |   |           |  |   | 1,598          |  
| | Foreign exchange
      gain           |  | 9,411             |   |   | 9,318           |   |   |           |  |   | 9,318          |  
| | Loss for the period                   |  | (174,680          | ) |   | (174,867        | ) |   |           |  |   | (174,867       | )
| | Currency
      translation difference |  |                  |   |   | (8,616          | ) |   |           |  |   | (8,616         | )
| | Total comprehensive loss              |  | US$ (174,680      | ) | $ | (183,483        | ) | $ |           |  | $ | (183,483       | )

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

|(c) | Reconciliation of Statement of Cash
      Flows
|--- | -----------------------------------------------

| | Year Ended July 31, 2011                                |  |                   |   |   |                 |   |   | Effect of  |   |   |                |  
| | ------------------------------------------------------- |  | ----------------- | - | - | --------------- | - | - | ---------- | - | - | -------------- | -
| |                                                         |  |                   |   |   |                 |   |   | Transition |   |   |                |  
| |                                                         |  |                   |   |   |                 |   |   | to IFRS    |   |   |                |  
| |                                                         |  | CGAAP
      (US$) |   |   | CGAAP
      ($) |   |   | ($)        |   |   | IFRS
      ($) |  
| | Cash flows from operating activities:                   |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Loss for the year                                       |  | US$ (174,680      | ) | $ |                 |   | $ |           |   | $ | (174,867       | )
| |                                                         |  |                   |   |   | (174,867        | ) |   |            |   |   |                |  
| | Foreign exchange gain                                   |  |                  |   |   | (9,318          | ) |   |           |   |   | (9,318         | )
| | Changes in noncash working
      capital items:        |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Amounts receivable and other
      assets               |  | (8,507            | ) |   | (7,287          | ) |   | (7,003     | ) |   | (14,290        | )
| | Amounts due to
      related party                      |  | (6,571            | ) |   | (7,003          | ) |   | 7,003      |   |   |               |  
| | Amounts payable and other liabilities                   |  | 20,833            |   |   | 17,899          |   |   |           |   |   | 17,899         |  
| | Net cash used in operating activities                   |  | (168,925          | ) |   | (180,576        | ) |   |           |   |   | (180,576       | )
| |                                                         |  |                   |   |   |                 |   |   |            |   |   |                |  
| | Net decrease in cash and cash equivalents               |  | (168,925          | ) |   | (180,576        | ) |   |           |   |   | (180,576       | )
| | Effect of exchange
      rate fluctuations on cash held |  |                  |   |   | 702             |   |   |           |   |   | 702            |  
| |                                                         |  | (168,925          | ) |   | (179,874        | ) |   |           |   |   | (179,874       | )
| | Cash and cash
      equivalents, beginning of year      |  | 251,240           |   |   | 258,526         |   |   |           |   |   | 258,526        |  
| | Cash and cash equivalents, end of the year              |  | US$ 82,315        |   | $ | 78,652          |   | $ |           |   | $ | 78,652         |  

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

|16. | EVENTSAFTER THEREPORTINGPERIOD                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(a) | Acquisition of Galaxie Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | On August 20, 2012, pursuant to an agreement
      dated July 27, 2012 ("Galaxie Purchase Agreement") involving Finsbury and
      an unrelated publicly-listed company, Bearclaw Capital Corp. ("Bearclaw"),
      the Company completed the acquisition of a 100% interest in the Galaxie
      Project, and terminated the Galaxie Earn-in Agreement. Bearclaw retains a
      1% net smelter returns royalty, capped at aggregate payments of $7,500,000
      (the "Galaxie Royalty Agreement").
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Finsbury acquired the Galaxie Project from
      Bearclaw in 2011 and until the acquisition of the Galaxie Project by the
      Company, Finsbury was indebted to Bearclaw for a part of its purchase
      price. Pursuant to the Galaxie Purchase Agreement, the Company provided
      the following estimated consideration to Finsbury and Bearclaw that
      relieved Finsbury from its indebtedness to Bearclaw and transferred the
      ownership of the property to the Company:          

| |                                                                                                      |   | Payable to |  |   | Payable to |  |   |           | 
| | ---------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | --------- | 
| |                                                                                                      |   | Finsbury   |  |   | Bearclaw   |  |   | Total     | 
| | Estimated fair value of the Company's
      shares issued                                            |   |            |  |   |            |  |   |           | 
| | 2,038,111 common shares to
      Finsbury, and 
           1,000,000 common shares to
      Bearclaw | $ | 672,577    |  | $ | 330,000    |  | $ | 1,002,577 | 
| | Cash payment                                                                                         |   |           |  |   | 50,000     |  |   | 50,000    | 
| | Convertible
      debenture                                                                          |   |           |  |   | 650,000    |  |   | 650,000   | 
| |                                                                                                      |   |            |  |   |            |  |   |           | 
| | To be recognized
      as an exploration and evaluation expense                                      | $ | 672,577    |  | $ | 1,030,000  |  | $ | 1,702,577 | 

The common shares issued to Finsbury
  and Bearclaw were valued at the fair market value at the date of issuance ($0.33
  per common share).

The convertible debenture bears
  interest at a rate of 8% per annum (payable quarterly in arrears) and is
  convertible into the Company's common shares at an exercise price of $0.40 per
  share on or before maturity of the debenture on October 31, 2013. Any interest
  accrued, but unpaid, shall be converted at an exercise price of the higher of
  $0.40 per share and the market price at the time of conversion.

Hotai Claims

The Hotailuh Slope mineral claims (the
  "Hotai Claims") comprise nine mineral claims totalling 3,846 hectares located in
  central British Columbia adjacent to, and forming part of, the Galaxie Project.

In July 2012, the Company entered into
  an option agreement (the "Option") with certain arm's length private parties
  (the "Optionors") to acquire a 100% interest in the Hotai Claims, subject to 2%
  net smelter returns royalty, capped at aggregate payments of $5,000,000. The
  Company has the right to acquire half of the royalty (1%) by making a cash
  payment of $1,000,000.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)
|                                                        

Pursuant to the Option, in order to
  earn its interest in the Hotai Claims, the Company is required to spend
  $1,000,000 on the property within three years from the date of issuance of a
  Notice of Work (which was issued on August 23, 2012) and make certain scheduled
  payments to the Optionors as follows:

| |                            |   |          |  |   | Value of       |  |  |                             | 
| | -------------------------- | - | -------- |  | - | -------------- |  |  | --------------------------- | 
| |                            |   | Cash     |  |   | common shares  |  |  |                             | 
| |                            |   | payments |  |   | required to be |  |  |                             | 
| | Payable on or
      before |   | required |  |   | issued         |  |  | Status                      | 
| | August 1, 2012             | $ | 5,000    |  | $ | 5,000          |  |  | Cash paid and shares issued | 
| | August 23, 2013            | $ | 10,000   |  | $ | 10,000         |  |  |                             | 
| | August 23, 2014            | $ | 20,000   |  | $ | 20,000         |  |  |                             | 
| | August 23, 2015            | $ | 20,000   |  | $ | 20,000         |  |  |                             | 

|    | The value of common shares required to be issued are to
      be calculated using volume weighted- average market share price for the
      ten days prior to issuance. On August 1, 2012, 14,286 common shares were
      issued to the Optionors.                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(b) | ZNT Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | After the reporting period, the Company staked an
      additional 61 mineral claims for a total of 80 minerals claims, located
      approximately 15 kilometres southeast of the town of Smithers, BC, in
      central British Columbia (the ZNT Project). The claim staking costs
      totalled approximately $50,665 for these additional claims.                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(c) | Joint Venture Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | On November 1, 2012, the Company entered into a binding
      letter agreement with a publicly- listed company, Amarc Resources Ltd.
      ("Amarc") pursuant to which Amarc can earn up to a 50% interest in the
      Galaxie and ZNT Projects owned by the Company. The Company and Amarc have
      certain directors in common and both are subject to significant influence
      by HDSI (note 10(b)). The agreement is subject to regulatory approval and
      the parties intend to enter into more detailed definitive
      agreements.                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company and Amarc have agreed that, upon Amarc
      earning its interest in the Galaxie and ZNT Projects, the Company will
      contribute to an unincorporated joint venture with Amarc its interest in
      the properties, including its obligations under the related acquisition
      agreements, the Galaxie Royalty Agreement, and the convertible debenture
      held by Bearclaw. The Company and Amarc have agreed that the Company will
      initially be the manager of the joint venture.                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | An initial 40% interest will be earned by Amarc by paying to Quartz Mountain $1,000,000 in cash and also funding $1,000,000 of exploration expenses, as defined in the agreements, to be incurred by Quartz Mountain on the Galaxie Project, prior to December 31, 2012. In November, Amarc advanced $1,950,000 to the Company. Should the Company fail to meet any of the conditions precedent in the letter agreement any exploration expenditures funded by Amarc will constitute a demand loan bearing interest at the CIBC prime rate plus 5% from the date of advance.

---

|QuartzMountainResourcesLtd.                             
|--------------------------------------------------------
|NotestotheConsolidatedFinancialStatements               
|For the years ended July 31, 2012 and 2011              
|(Expressed in Canadian Dollars, unless otherwise stated)

Upon earning an initial 40% interest,
  Amarc will have an option to earn an additional 10% (for a total of 50%)
  interest in these properties by funding $1,000,000 of exploration expenses to be
  incurred by Quartz Mountain on the Galaxie and ZNT Projects, prior to September
  30, 2013. If Amarc chooses not to, or is unable to, exercise this option, its
  interest will remain at 40%, subject to customary dilution provisions.

---

|ITEM 18 | FINANCIAL STATEMENTS
|------- | --------------------

Not applicable. See Item 17.

|ITEM 19 | EXHIBITS
|------- | --------

The following Exhibits have been filed with the Company's
Annual Report on Form 20-F in previous years:

Exhibit Number
    Description of Exhibit
    Note1.1
    Transition Application dated October 11, 2005
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
      2006.1.2
    Notice of Articles dated October 11, 2005
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
      2006.1.3
    Notice of Alteration of Articles dated October
      11, 2005
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
      2006.


59

---

Exhibit
      Number
    Description of Exhibit
    Note1.4
    Notice of Alteration dated February 17, 2006
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2006, filed on January 29,
      2007.1.5
    Notice of Articles dated February 17, 2006
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2006, filed on January 29,
      2007.1.6
    Articles
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2010, filed on October 28,
      2010.4.2
    Geological and Management Services Agreement
      between Hunter Dickinson Inc. and the Company dated June 1, 2008 and
      amended July 2, 2010
    Incorporated by reference from our Annual
      Report on Form 20-F for the year ended July 31, 2010, filed on October 28,
      2010.


The following exhibits are filed with this Annual Report on
Form 20-F:

Exhibit
      Number
    Description of Exhibit4.1
    Sale Agreement between Finsbury Exploration
      Ltd. and the Company dated July 27, 20124.3
    Convertible Debenture Agreement between
      Bearclaw Capital Corp. and the Company dated August 20, 20124.4
    Letter Agreement between Amarc Resources Ltd
      and the Company, dated November 1, 20126.1
    Stock Option Plan approved by Shareholders on
      March 15, 20126.2
    Audit and Risk Committee Charter10.1.
    Articles approved by Shareholders on March 15,
      201212.1
    Section 302 Certification of the Chief
      Executive Officer12.2
    Section 302 Certification of the Chief
      Financial Officer13.1
    Section 906 Certification of the Chief
      Executive Officer13.2
    Section 906 Certification of the Chief
      Financial Officer16B.1
  Code of Ethics and Trading Restrictions


SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.

QUARTZ MOUNTAIN RESOURCES LTD.

|/s/ Ronald W. Thiessen                | 
|------------------------------------- | 
|Ronald W. Thiessen                    | 
|President and Chief Executive Officer | 
|                                      | 
|Dated: November 29, 2012              | 

60

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