---



QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDEDJULY 31, 2010, 2009 AND 2008

(Expressed in United States Dollars, unless otherwise
stated)

---

|DAVIDSON & COMPANY LLP |                       |                                             | 
|---------------------- | --------------------- | ------------------------------------------- | 
|                       | Chartered Accountants | A Partnership of Incorporated Professionals

INDEPENDENT AUDITORS REPORT

To the Shareholders of
  Quartz Mountain Resources Ltd.

We have audited the consolidated balance sheets of Quartz
  Mountain Resources Ltd. as at July 31, 2010 and 2009 and the consolidated
  statements of operations, shareholders' equity and cash flows for the years
  ended July 31, 2010, 2009 and 2008. These financial statements are the
  responsibility of the Company's management. Our responsibility is to express an
  opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards and with the standards of the Public Company
  Accounting Oversight Board (United States). Those standards require that we plan
  and perform an audit to obtain reasonable assurance whether the financial
  statements are free of material misstatement. An audit includes examining, on a
  test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used and
  significant estimates made by management, as well as evaluating the overall
  financial statement presentation.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2010 and 2009 and the results of its operations and its cash flows for
  the years ended July 31, 2010, 2009 and 2008 in accordance with Canadian
  generally accepted accounting principles.

|                   | **DAVIDSON** **&
      COMPANY LLP**
|------------------ | --------------------------------------
|                   |                                       
|Vancouver, Canada  | Chartered Accountants                 
|                   |                                       
|September 30, 2010 |                                       

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

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast
  substantial doubt on the Company's ability to continue as a going concern, such
  as those described in Note 1 to the financial statements. Our report to the
  shareholders dated September 30, 2010 is expressed in accordance with Canadian
  reporting standards which do not permit a reference to such events and
  conditions in the auditors' report when these are adequately disclosed in the
  financial statements.

|                   | **DAVIDSON** **&
      COMPANY LLP**
|------------------ | --------------------------------------
|                   |                                       
|Vancouver, Canada  | Chartered Accountants                 
|                   |                                       
|September 30, 2010 |                                       



---

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

|                                               |   | July
      31 |   |   | July
      31 |  
|---------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                               |   | 2010          |   |   | 2009          |  
|                                               |   |               |   |   |               |  
|ASSETS                                         |   |               |   |   |               |  
|                                               |   |               |   |   |               |  
|Current assets                                 |   |               |   |   |               |  
|Cash and cash equivalents                      | $ | 251,240       |   | $ | 391,040       |  
|Amounts receivable and prepaids                |   | 12,873        |   |   | 32,686        |  
|                                               |   | 264,113       |   |   | 423,726       |  
|                                               |   |               |   |   |               |  
|Mineral
      property interests(note 5)       |   | 1             |   |   | 1             |  
|                                               |   |               |   |   |               |  
|                                               | $ | 264,114       |   | $ | 423,727       |  
|                                               |   |               |   |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY           |   |               |   |   |               |  
|                                               |   |               |   |   |               |  
|Current liabilities                            |   |               |   |   |               |  
|Accounts payable and accrued
      liabilities | $ | 20,000        |   | $ | 20,722        |  
|Amounts due
      to a related party (note 7)  |   | 9,864         |   |   | 35,116        |  
|                                               |   | 29,864        |   |   | 55,838        |  
|Shareholders' equity                           |   |               |   |   |               |  
|Share capital (note 6)                         |   | 21,269,046    |   |   | 21,269,046    |  
|Deficit                                        |   | (21,034,796   | ) |   | (20,901,157   | )
|                                               |   | 234,250       |   |   | 367,889       |  
|                                               |   |               |   |   |               |  
|                                               |   |               |   |   |               |  
|                                               | $ | 264,114       |   | $ | 423,727       |  

Nature and continuance of operations (Note 1) Subsequent
events (note 11)

Approved by the Board of Directors:

|/s/ Rene G. Carrier | /s/ Brian F. Causey
|------------------- | -------------------
|                    |                    
|Rene G. Carrier     | Brian F. Causey    
|Director            | Director           

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

---

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

|                                                     |   | Years ended July 31 |  
|---------------------------------------------------- | - | ------------------- | -
|                                                     |   | 2010                |  
|Expenses and other                                   |   |                     |  
|Foreign exchange (gain) loss                         | $ | (13,470             | )
|Interest (income)                                    |   | (1,790              | )
|Legal, accounting and audit                          |   | 45,776              |  
|Mineral property
      investigations                |   | 1,096               |  
|Office and administration                            |   | 95,008              |  
|Regulatory, trust and filing                         |   | 27,370              |  
|Shareholder communication                            |   | 3,400               |  
|Administrative cost (recovery)                       |   | (23,751             | )
|                                                     |   |                     |  
|Loss and comprehensive loss for the year             | $ | 133,639             |  
|                                                     |   |                     |  
|Basic and diluted loss per common share              | $ | 0.01                |  
|                                                     |   |                     |  
|Weighted average number of common shares outstanding |   | 13,399,426          |  

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

---

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

|                                         |  |            |  |   | Years ended July 31 |   |  |            | 
|---------------------------------------- |  | ---------- |  | - | ------------------- | - |  | ---------- | 
|                                         |  | 2010       |  |   | 2009                |  
|                                         |  |            |  |   |                     |   |  |            | 
|                                         |  |            |  |   |                     |   |  |            | 
|                                         |  | Number of  |  |   |                     |   |  | Number of  | 
|Share capital                            |  | shares     |  |   | Amount              |   |  | shares     | 
|Balance at beginning and end of the year |  | 13,399,426 |  | $ | 21,269,046          |   |  | 13,399,426 | 
|                                         |  |            |  |   |                     |   |  |            | 
|Deficit                                  |  |            |  |   |                     |   |  |            | 
|Balance at beginning of the
      year   |  |            |  |   | (20,901,157         | ) |  |            | 
|Loss for the year                        |  |            |  |   | (133,639            | ) |  |            | 
|Balance at end of the year               |  |            |  | $ | (21,034,796         | ) |  |            | 
|                                         |  |            |  |   |                     |   |  |            | 
|TOTAL SHAREHOLDERS' EQUITY               |  |            |  | $ | 234,250             |   |  |            | 

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

---

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

|                                                              |   | Years ended July 31 |  
|------------------------------------------------------------- | - | ------------------- | -
|Cash and cash
      equivalents provided by (used in)         |   | 2010                |  
|                                                              |   |                     |  
|Operating activities                                          |   |                     |  
|Loss for the year                                             | $ | (133,639            | )
|Changes in non-cash working
      capital items               |   |                     |  
|Amounts receivable and prepaids                               |   | 19,813              |  
|Accounts payable
      and accrued liabilities                |   | (722                | )
|Amounts due to and from related parties                       |   | (25,252             | )
|                                                              |   | (139,800            | )
|                                                              |   |                     |  
|Decrease in cash and cash equivalents
      during the year   |   | (139,800            | )
|                                                              |   |                     |  
|Cash and cash equivalents, beginning of year                  |   | 391,040             |  
|                                                              |   |                     |  
|Cash and cash equivalents, end of year                        | $ | 251,240             |  
|                                                              |   |                     |  
|Components of cash and cash equivalents
      are as follows: |   |                     |  
|Cash                                                          | $ | 251,240             |  
|Commercial paper                                              |   |                    |  
|Government treasury bills                                     |   |                    |  
|                                                              | $ | 251,240             |  
|                                                              |   |                     |  
|Supplemental disclosure:                                      |   |                     |  
|Interest paid during the year                                 | $ |                    |  
|Income taxes paid during the year                             | $ |                    |  

There were no significant non-cash transactions during the
years ended July 31, 2010, 2009 and 2008.

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|1.  | NATURE AND CONTINUANCE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Quartz Mountain Resources Ltd.
        ("Quartz" or the "Company") is a Canadian public company incorporated
        in British Columbia. The Company is primarily engaged in the acquisition
        and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | These consolidated financial
        statements have been prepared using accounting principles applicable to
        a going concern. The Company has a history of losses and no operating
        revenue, other than interest income. The ability of the Company to carry
        out its planned business objectives is dependent on its ability to raise
        adequate financing from lenders, shareholders and other investors. There
        can be no assurances that the Company will continue to obtain additional
        financial resources and/or achieve profitability or positive cash flows
        in the future. If the Company is unable to obtain adequate additional
        financing, the Company will be required to curtail operations and exploration
        activities. Failure to continue as a going concern would require that
        the Company's assets and liabilities be restated on a liquidation basis
        which may differ significantly from the going concern basis. These consolidated
        financial statements do not include any adjustments to amounts and classifications
        of assets and liabilities that might be necessary should the Company be
        unable to continue operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2.  | BASIS OF PRESENTATION AND
        PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | These consolidated financial
        statements are prepared in accordance with Canadian generally accepted
        accounting principles and have been reconciled to United States generally
        accepted accounting principles in note 10. These consolidated financial
        statements include the accounts of (i) Quartz Mountain Resources Ltd.,
        (ii) Quartz Mountain Gold Inc., a wholly-owned subsidiary incorporated
        in the State of Nevada, and (iii) Wavecrest Resources Inc., a wholly-owned
        subsidiary of Quartz Mountain Gold Inc., incorporated in the State of
        Delaware.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | All material intercompany balances
        and transactions have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.  | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(a) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Cash and cash equivalents consist
        of highly liquid investments, having maturity dates of three months or
        less from the date of purchase, which are readily convertible to known
        amounts of cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | At July 31, 2010, the Company
        held Canadian-dollar-denominated cash and cash equivalents totaling C$252,197
        (2009  C$131,826).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(b) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Mineral property acquisition costs, and exploration
        and development expenditures incurred subsequent to the determination
        of the feasibility of mining operations, are capitalized until the property
        to which they relate is placed into production, sold, allowed to lapse
        or abandoned. Mineral property acquisition costs include the cash consideration
        and the estimated fair value of common shares and warrants issued for
        mineral property interests, pursuant to the terms of the relevant agreement.
        These costs are amortized over the estimated life of the property following
        commencement of commercial production, or written off if the property
        is sold, allowed to lapse or abandoned, or when an impairment in value
        has been determined to have occurred.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Exploration expenses incurred prior to determination
        of the feasibility of mining operations, including periodic option payments
        and administrative expenditures are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company reviews its long-lived assets for impairment
        whenever events or changes in circumstances indicate that the carrying
        value of an asset may not be recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(c) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company records the fair value of an asset retirement
        obligation as a liability in the period in which it incurs a legal obligation
        associated with the retirement of tangible long-lived assets that result
        from the acquisition, construction, development and/or normal use of the
        assets. The Company also records a corresponding asset value which is
        amortized over the remaining service life of the asset being retired.
        Subsequent to the initial measurement of the asset retirement obligation,
        the obligation will be adjusted at the end of each period to reflect the
        passage of time (accretion expense) and changes in the estimated future
        cash flows underlying the obligation (asset retirement cost).                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company also reviews its long-lived assets for impairment
        whenever events or changes in circumstances indicate that the carrying
        value of an asset may not be recoverable. Recoverability of assets to
        be held and used is measured by a comparison of the carrying amount of
        an asset to future net cash flows expected to be generated by the asset.
        If the carrying amount of an asset exceeds its estimated future cash flows,
        an impairment charge is recognized in the amount by which the carrying
        amount of the asset exceeds the fair value of the asset.                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company has no material asset retirement obligations
        as at July 31, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(d) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company considers its functional currency to be
        the United States dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Monetary assets and liabilities of the Company and its
        integrated foreign operations are translated into United States dollars
        at exchange rates in effect at the balance sheet date. Non- monetary assets
        and liabilities are translated at historical exchange rates unless such
        items are carried at market, in which case they are translated at the
        exchange rates in effect on the balance sheet date. Revenues and expenses,
        except amortization, are translated at the average exchange rates for the period. Amortization is translated at
        the same exchange rate as the assets to which it relates. Gains or losses
    on translation are recorded in the statement of operations.                                                                                                         

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(e) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company uses the asset and liability method of accounting
        for income taxes. Under this method, future income tax assets and liabilities
        are computed based on differences between the carrying amount of existing
        assets and liabilities on the balance sheet and their corresponding tax
        values, using the enacted or substantively enacted income tax rates expected
        to apply to taxable income in the years in which those temporary differences
        are expected to be recovered or settled.                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Future income tax assets also result from unused loss
        carry forwards and other deductions. Future tax assets are recognized
        to the extent that they are considered more likely than not to be realized.
        The valuation of future income tax assets is adjusted, if necessary, by
        the use of a valuation allowance to reflect the estimated realizable amount.                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(f) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company records proceeds from share issuances net
        of issue costs. Shares issued for consideration other than cash are valued
        at the quoted price on the stock exchange on the date that shares are
        issued pursuant to the relevant agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(g) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has a share option plan which is described
        in note 6(b). The Company accounts for all non-cash stock-based payments
        to non-employees, and employee awards that are direct awards of shares
        that call for settlement in cash or other assets, or that are share appreciation
        rights which call for settlement by the issuance of equity instruments,
        using the fair value method.                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Under the fair value method, stock-based payments are
        measured at the fair value of the consideration received, or the fair
        value of the equity instruments issued, or liabilities incurred, whichever
        is more reliably measurable. The fair value of non-cash stock-based payments
        is periodically re-measured until counterparty performance is complete,
        and any change therein is recognized in the same manner as if the Company
        had paid cash instead of paying with or using equity instruments. The
        cost of non-cash stock-based payments to service providers that are fully
        vested and non-forfeitable at the grant date is measured and recognized
        at that date.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Consideration received by the Company upon the exercise
        of share purchase options and warrants, and the stock-based compensation
        previously credited to contributed surplus related to such options and
        warrants, is credited to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | During the years ended July 31, 2010, 2009 and 2008,
        no stock options were granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(h) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Basic loss per share is calculated by dividing
        the loss for the period by the weighted average number of common shares
        outstanding during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Diluted loss per share is calculated using
        the treasury stock method. Under the treasury stock method, the weighted
        average number of common shares outstanding used for the calculation of
        diluted loss per share assumes that the proceeds to be received on the
        exercise of dilutive stock options and warrants are used to repurchase
        common shares at the average market price during the period.                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(i) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The preparation of consolidated financial statements in conformity with  Canadian generally accepted accounting principles requires management to make  estimates and assumptions that affect the reported amounts of assets and  liabilities and the disclosure of contingent assets and liabilities as at the  balance sheet date and the reported amounts of revenue and expenses during the  reporting period.  Significant areas requiring the use of management  estimates include the determination of potential impairment of asset values, and the assumptions  used in determining the fair value of non-cash stock-based compensation.   Actual results could differ from those estimates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(j) | Segment disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company is currently operating in a single
        segment  the acquisition and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(k) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | All financial instruments are classified into
        one of the following five categories: held for trading, held-to-maturity,
        loans and receivables, available-for-sale financial assets, or other financial
        liabilities. Subsequent measurement and recognition of changes in the
        value of financial instruments depends on their initial classification:                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | All derivative financial instruments
        are measured at fair value, even when they are part of a hedging relationship.
        All gains and losses are included in net earnings (loss) in the period
        in which they arise.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | The Company has classified
        its financial instruments as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Cash and cash equivalents are classified
        as held for trading financial instruments and are measured at fair value
        due to their short term nature and availability for prompt liquidation.                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Amounts receivable and amounts
        due from a related party are classified as loans and receivables and are
        measured initially at fair value and subsequently measured at amortized
        cost.                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Accounts payable and accrued
        liabilities and amounts due to a related party are classified as other
        financial liabilities and are measured initially at fair value and subsequently
        measured at amortized cost.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|(l) | Comprehensive income
        (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | Comprehensive income
        is the change in the Company's shareholders' equity that results from
        transactions and other events from other than the Company's shareholders
        and includes items that would not normally be included in net earnings
        (loss), such as unrealized gains or losses on available-for-sale investments.
        Certain gains and losses that would otherwise be recorded as part of net
        earnings are presented in other "comprehensive income" until it is considered
        appropriate to recognize into net earnings. Comprehensive income and its
        components are presented in a separate financial statement that is displayed
        with the same prominence as the other financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | As at July 31, 2010
        and 2009, the Company had no accumulated other comprehensive income and
        for the years ended July 31, 2010, 2009 and 2008, comprehensive loss equals
        net loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|4.  | CHANGES IN ACCOUNTING
        POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|(a) | Newly Adopted Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | Effective August 1,
        2009, the Company adopted the following new accounting standards issued
        by the Canadian Institute of Chartered Accountants ("CICA"):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Goodwill and Intangible Assets:                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                        
|    | The Canadian Accounting
        Standards Board ("AcSB") issued CICA 3064, Goodwill and Intangible Assets,
        which replaces CICA 3062, Goodwill and Other Intangible Assets, and CICA
        3450, Research and Development Costs. This new section establishes revised
        standards for the recognition, measurement and disclosure of
        goodwill and intangible assets. The Company evaluated the impact of this
        new standard and concluded that there was no material impact on the financial
        position or operating results of the Company as a result of the adoption
    of this standard.                                                                                                                                        

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Fair Value Hierarchy:                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | During the year, the AcSB amended CICA 3862,
        Financial Instruments  Disclosures, to require enhanced disclosures
        about the relative reliability of the data, or "inputs," that an entity
        uses to measure the fair values of its financial instruments. It requires
        financial instruments measured at fair value to be classified into one
        of three levels in the "fair value hierarchy" based on the lowest level
        input that is significant to the fair value measurement in its entirety.
        The amended section relates to disclosure only and did not have a material
        impact on the financial results of the Company. These disclosures are
        presented in note 8.                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|(b) | Accounting Standards Issued But Not Yet
        Adopted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Business Combinations/Consolidated Financial Statements/Non-Controlling
        Interests:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | The AcSB issued CICA sections 1582, Business
        Combinations, 1601, Consolidated Financial Statements, and 1602, Non-Controlling
        Interests, which replaced sections 1581, Business Combinations, and 1600,
        Consolidated Financial Statements. CICA 1582 is effective for business
        combinations for which the acquisition date is on or after the beginning
        of the first annual reporting period beginning on or after January 1,
        2011. CICA 1601 and CICA 1602 apply to interim and annual consolidated
        financial statements relating to fiscal years beginning on or after January
        1, 2011. Early adoption is permitted for these new standards. The Company
        does not expect the adoption of these sections to have a material impact
        on its consolidated financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Amendment to CICA 3855  Financial Instruments 
        Recognition and Measurement:     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | The AcSB amended CICA 3855 to clarify when
        an embedded prepayment option is separated from its host debt instrument
        for accounting purposes. The amendment is applicable to interim and annual
        financial statements relating to fiscal years beginning on or after January
        1, 2011. The Company does not expect the adoption of this amendment to
        have a material impact on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | International Financial Reporting Standards ("IFRS"):                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                           
|    | In February 2008, the AcSB announced that
        2011 is the changeover date for publicly-listed companies to use IFRS,
        replacing Canada's own GAAP. The transition date is for interim and annual
        financial statements relating to fiscal years beginning on or after January
        1, 2011. Due to the Company's July 31 fiscal year, the mandatory transition
        date for the Company is August 1, 2011 with the restatement of amounts
        reported by the Company for the year ended July 31, 2011                                                                                                                                                                                                                                                                                                                          

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

for comparative purposes. The Company
  has allocated resources, engaged expert consultants, and trained accounting
  staff to execute the transition from Canadian GAAP to IFRS.

|5. | MINERAL PROPERTY INTERESTS
|-- | --------------------------

| |                          |   | Years ended July 31 | 
| | ------------------------ | - | ------------------- | 
| | Quartz Mountain Property |   | 2010                | 
| | Net smelter royalty      | $ | 1                   | 

Quartz Mountain ("Angel's Camp") Property
   Oregon, USA

During the year ended July 31, 2002,
  the Company sold 100% of its title, rights and interest in the Quartz Mountain
  property located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"),
  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 Quartz
  Mountain (subsequently renamed "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., which in turn became Golden Predator
  Royalty & Development Corporation.

|6.  | SHARE CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(a) | Authorized share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company's authorized share
        capital consists of an unlimited number of common shares, without par
        value and an unlimited number of preferred shares, without par value.                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(b) | Share purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company's Share Purchase
        Option Plan allows the Company to grant up to 10% of the issued and outstanding
        shares of the Company at any one time, typically vesting over two years,
        subject to regulatory terms and approval, to its directors, employees,
        officers, and consultants. The exercise price of each option may be set
        equal to or greater than the closing market price of the common shares
        on the day prior to the date of the grant of the option, less any allowable
        discounts.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | As at July 31, 2010, no share
        purchase options had been granted under the Company's Share Purchase Option
        Plan. Accordingly, there were no stock options outstanding as at July
        31, 2010, 2009, and 2008.                                                                                                                                                                                                                                                                                                                         

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|7. | RELATED PARTY BALANCES AND TRANSACTIONS
|-- | ---------------------------------------

| | Amounts due to a related party |   | As at   | 
| | ------------------------------ | - | ------- | 
| |                                |   | July 31 | 
| |                                |   | 2010    | 
| | Hunter Dickinson Services Inc. | $ | 9,864   | 

| | Transactions                                                                   |   | Years ended July 31 | 
| | ------------------------------------------------------------------------------ | - | ------------------- | 
| |                                                                                |   | 2010                | 
| | Services rendered and expenses reimbursed Hunter
      Dickinson Services Inc. | $ | 69,156              | 

Hunter Dickinson Services Inc. ("HDSI")
  is a private company which until recently was owned equally by several public
  companies, one of which was Quartz. During the third quarter of fiscal 2010,
  the Company sold its interest in HDSI for nominal value. HDSI has certain directors
  in common with the Company and provides geological, corporate development, administrative
  and management services to, and incurs third party costs on behalf of, the Company
  and its subsidiaries on a full cost recovery basis per agreement dated June
  1, 2008. On July 2, 2010, the HDSI services agreement was amended and services
  will be provided based on annually set rates.

A director of the Company is an employee
  of HDSI.

Services rendered by and expenses reimbursed
  to HDSI for the years ended July 31, 2010, 2009 and 2008 are related to the
  reimbursement of travel expenses, office and administration services and geological
  consulting services for property investigation activities.

|8.  | CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(a) | 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 funds on hand for business opportunities as they
        arise. The Company considers the components of shareholders' equity, and
        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. As at
        July 31, 2010 the Company is not subject to any externally-imposed capital
        requirements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 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,
        that are readily convertible to known amounts of cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                          

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|    | There were no changes to the Company's approach to capital
        management during the year ended July 31, 2010.                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | The fair value of a financial instrument is the price
        at which a party would accept the rights and/or obligations of the financial
        instrument from an independent third party. Given the varying influencing
        factors, the reported fair values are only indicators of the prices that
        may actually be realized for these financial instruments.
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | 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.

The following table illustrates the classification
  of the Company's financial instruments recorded at fair value within the fair
  value hierarchy as at July 31, 2010:

| | Financial assets at fair value:            |   |               |  |   |               |  |   |               |  |   |         | 
| | ------------------------------------------ | - | ------------- |  | - | ------------- |  | - | ------------- |  | - | ------- | 
| |                                            |   |               |  |   |               |  |   |               |  |   | July 31 | 
| |                                            | 3 | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |   | 2010    | 
| | Cash and equivalents                       | $ | 251,240       |  | $ |              |  | $ |              |  | $ | 251,240 | 
| | Total financial assets
      at fair value | $ | 251,240       |  | $ |              |  | $ |              |  | $ | 251,240 | 

|    | The carrying amounts of the Company's cash and cash
        equivalents, amounts receivable, balances due to/receivable from a related
        party, and accounts payable and accrued liabilities approximate their
        fair values.                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|(c) | Financial Instrument Risk Exposure and 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. The types
        of risk exposure and the way in which such exposures are managed are provided
        as follows:

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

(i) Credit Risk

Credit risk is the risk of potential
  loss to the Company if a counterparty to a financial instrument fails to meet
  its contractual obligations. The Company's credit risk is primarily attributable
  to its liquid financial assets, including cash and cash equivalents, accounts
  receivable and balances receivable from a related party. The Company limits
  the exposure to credit risk by only investing its cash and cash equivalents
  with high credit quality financial institutions and in government treasury bills.
  The carrying value of the Company's cash and cash equivalents and amounts receivable
  represent the maximum exposure to credit risk. The Company does not have financial
  assets that are invested in asset backed commercial paper.

(ii) Liquidity Risk

Liquidity risk is the risk that the Company
  will not be able to meet its financial obligations when they become due. The
  Company ensures, as far as reasonably possible, it will have sufficient capital
  in order to meet short term business requirements, after taking into account
  cash flows from operations and the Company's holdings of cash and cash equivalents.
  The Company believes that these sources will be sufficient to cover the likely
  short term cash requirements. The Company's cash and cash equivalents are invested
  in business accounts, which are available on demand for the Company's programs.

(iii) Foreign Exchange Risk

The Company is exposed to foreign exchange
  risk as its operating expenses are primarily incurred in Canadian dollars. The
  results of the Company's operations are subject to currency transaction risk
  and currency translation risk. The operating results and financial position
  of the Company are reported in United States dollars in the Company's consolidated
  financial statements. The fluctuation of the Canadian dollar in relation to
  the United States dollar will consequently have an impact upon the losses incurred
  by the Company and may also affect the value of the Company's assets and the
  amount of shareholders' equity.

The Company has not entered into any
  agreements or purchased any instruments to hedge possible currency risks at
  this time.

The exposure of the Company's cash and
  cash equivalents and, amounts receivable to foreign exchange risk is as follows:

| | Currency               |   | July 31, 2010    |  |   | July 31, 2009 | 
| | ---------------------- | - | ---------------- |  | - | ------------- | 
| |                        |   | Foreign currency |  |   | Amount in US  | 
| |                        |   | amount           |  |   | dollars       | 
| | Canadian Dollar        |   |                  |  |   |               | 
| | Cash and cash          |   |                  |  |   |               | 
| | equivalents            | $ | 252,197          |  | $ | 245,256       | 
| | Amounts receivable     |   | 7,344            |  |   | 7,142         | 
| | Total financial assets | $ | 259,541          |  | $ | 252,398       | 

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

The exposure to foreign exchange risk
  of the Company's accounts payable and accrued liabilities, and amounts due to
  a related party is as follows:

| | Currency                                 |   | July 31, 2010 |  |   | July 31, 2009 | 
| | ---------------------------------------- | - | ------------- |  | - | ------------- | 
| |                                          |   | Foreign       |  |   |               | 
| |                                          |   | currency      |  |   | Amount in     | 
| |                                          |   | amount        |  |   | US dollars    | 
| | Canadian Dollar                          |   |               |  |   |               | 
| | Accounts payable and accrued liabilities | $ |              |  | $ |              | 
| | Amounts due to a related party           |   | 10,143        |  |   | 9,864         | 
| | Total financial liabilities              | $ | 10,143        |  | $ | 9,864         | 

The following significant exchange rates
  were applied during the year:

| |                                                |  | Years ended July 31 | 
| | ---------------------------------------------- |  | ------------------- | 
| | United States dollar
      per Canadian dollar |  | 2010                | 
| | Average rate for the year                      |  | 1.0491              | 
| | Closing rate July
      31                     |  | 1.0283              | 

(iv) Interest Rate 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.

|9. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | At July 31, 2010, the Company
        had estimated income tax losses available for application against future
        years' taxable income of approximately $56,000 (2009  $95,000) in
        the United States which, if unused, will predominantly expire between
        fiscal years ending 2011 and 2023.                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company has tax losses in
        Canada of approximately $1,323,000 (2009  $1,148,000), which if
        unused, will expire between fiscal 2011 and 2030. The Company also has
        resource allowance expenditures and capital asset deductions of approximately
        $3,539,000 (2009  $3,377,000) and $100,000 (2009  $105,000),
        respectively, which carry forward indefinitely. Because of the uncertainty
        regarding the Company's ability to utilize these amounts in future years,
        a valuation allowance equal to the amount of the tax asset relating to
        these amounts has been provided.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

A reconciliation of income tax expense
  at the statutory rate of 29.12% (2009  30.21%, 2008 32.59%) with
  reported taxes is as follows:

| |                                        |   | Years ended July 31 |  
| | -------------------------------------- | - | ------------------- | -
| | Income tax expense                     |   | 2010                |  
| |                                        |   |                     |  
| | Loss before income taxes               | $ | (133,639            | )
| |                                        |   |                     |  
| | Income tax recovery at statutory rates |   | (39,000             | )
| | Permanent differences                  |   | (4,000              | )
| | Change in future tax rate              |   |                    |  
| | Statutory rate differential            |   | 16,000              |  
| | Foreign exchange                       |   | (66,000             | )
| | Change in valuation allowance          |   | 72,000              |  
| | Losses expired                         |   | 21,000              |  
| | Non-deductible items                   |   |                    |  
| | Net income taxes (recovery)            | $ |                    |  

Amounts of future tax assets and liabilities
  are as follows:

| |                                           |   | As at July 31 |  
| | ----------------------------------------- | - | ------------- | -
| | Future tax assets and liabilities         |   | 2010          |  
| | Losses carried forward  Canada           | $ | 331,000       |  
| | Losses carried forward  United States    |   | 20,000        |  
| | Resource allowance                        |   | 885,000       |  
| | Property and equipment                    |   | 28,000        |  
| |                                           |   | 1,264,000     |  
| | Valuation allowance                       |   | (1,264,000    | )
| | Future income tax
      asset (liability) | $ |              |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
|--- | ---------------------------------------------------------------------------------------------

The consolidated financial statements
  have been prepared in accordance with Canadian generally accepted accounting
  principles ("Canadian GAAP"), which differ in certain material aspects from
  those principles that the Company would have followed had its consolidated financial
  statements been prepared in accordance with United States generally accepted
  accounting principles ("US GAAP"). Had the Company followed US GAAP, certain
  items on the balance sheets and the statements of operations, shareholders'
  equity and cash flows would have been reported as below:

Consolidated statements of operations

| |                                                                                               |   |                     |  
| | --------------------------------------------------------------------------------------------- | - | ------------------- | -
| |                                                                                               |   | Years ended July 31 |  
| |                                                                                               |   | 2010                |  
| | Loss for the year, Canadian GAAP and US GAAP                                                  | $ | (133,639            | )
| | Mineral property
      acquisition costs                                                      |   |                    |  
| | Basic and diluted loss per common share,      Canadian and US GAAP                            | $ | (0.01               | )
| | Weighted average shares outstanding,
      basic and diluted,
      Canadian GAAP and US GAAP |   | 13,399,426          |  

Consolidated balance sheets

| |                                                       |   |                     |   |   |                     |  
| | ----------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
| |                                                       |   | As at               |   |   | As at               |  
| |                                                       |   | July
      31, 2010 |   |   | July
      31, 2009 |  
| |                                                       |   |                     |   |   |                     |  
| | Total assets, Canadian GAAP                           | $ | 264,114             |   | $ | 423,727             |  
| | Mineral property interests
      expensed per US GAAP |   | (1                  | ) |   | (1                  | )
| | Total assets  US GAAP                                | $ | 264,113             |   | $ | 423,726             |  
| |                                                       |   |                     |   |   |                     |  
| | Current liabilities, Canadian GAAP and US GAAP        | $ | 29,864              |   | $ | 55,838              |  
| |                                                       |   |                     |   |   |                     |  
| | Shareholders' equity, Canadian GAAP                   |   | 234,250             |   |   | 367,889             |  
| | Mineral property interests                            |   | (1                  | ) |   | (1                  | )
| | Shareholders' equity, US GAAP                         |   | 234,249             |   |   | 367,888             |  
| |                                                       |   |                     |   |   |                     |  
| | Total liabilities and shareholders' equity, US GAAP   | $ | 264,113             |   | $ | 423,726             |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

Consolidated statements of cash flows

| |                                                                         |   |                     |  
| | ----------------------------------------------------------------------- | - | ------------------- | -
| |                                                                         |   | Years ended July 31 |  
| |                                                                         |   | 2010                |  
| |                                                                         |   |                     |  
| | Cash flows used in operating activities, Canadian and US GAAP           | $ | (139,800            | )
| |                                                                         |   |                     |  
| | Cash flows provided by financing activities, Canadian and US
      GAAP |   |                    |  
| |                                                                         |   |                     |  
| | Decrease in cash and cash equivalents during
      the year             |   | (139,800            | )
| | Cash and cash equivalents,
      beginning of year                      |   | 391,040             |  
| | Cash and cash equivalents, end of year                                  | $ | 251,240             |  

|(a) | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Under Canadian GAAP, the Company accounts for mineral
        properties as described in note 3(b).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Under US GAAP, costs of acquiring mining properties
        are capitalized upon acquisition. Mine development costs incurred either
        to develop new ore deposits, expand the capacity of mines, or to develop
        mine areas substantially in advance of current production are also capitalized
        once proven and probable reserves exist and the property is a commercially
        mineable property. Costs incurred to maintain current production or to
        maintain assets on a standby basis are charged to operations. Costs of
        abandoned projects are charged to operations upon abandonment. The Company
        evaluates the carrying value of capitalized mining costs and related property,
        plant and equipment costs, to determine if these costs are in excess of
        their net recoverable amount whenever events or changes in circumstances
        indicate that their carrying amounts may not be recoverable. The periodic
        evaluation of carrying value of capitalized costs and any related property,
        plant and equipment costs are based upon expected future cash flows and/or
        estimated salvage value.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | Other presentation items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Under US GAAP, the Company would be considered an exploration
        stage company as it is devoting its efforts to establishing a commercially
        viable mineral property. However, the identification of the Company as
        such for accounting purposes does not impact the measurement principles
        applied in these consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(c) | Income tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | FASB Codification 740-10 ("Codification 740-10")
        Accounting for Uncertainty in Income Taxes, prescribes a minimum recognition
        threshold a tax position is required to meet before being recognized in
        the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Codification 740-10 requires that the Company
        recognize the impact of a tax position in the financial statements if
        that position is more likely than not of being sustained on audit, based
        on the technical merits of the position. Codification 740-10 also provides
        guidance on derecognition, classification, interest and penalties, accounting
        in interim periods and disclosure. In accordance with the provisions of
        Codification 740-10, any cumulative effect resulting from the initial
        adoption of Codification 740-10 is to be recorded as an adjustment to
        the opening balance of deficit. The adoption of Codification 740-10 did
        not result in a material impact on the Company's consolidated financial
        position or results of operations.                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(d) | Impact of recent United States accounting
        pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In June 2009, the FASB issued Statement No.
        168, The FASB Accounting Standards Codification and the Hierarchy of GAAP
        (codified within ASC 105). The Accounting Standards Codification ("ASC")
        establishes the sources of accounting principles and the framework for
        selecting principles used in the preparation of financial statements of
        non-governmental entities presented in conformity with US GAAP. The statement
        establishes two levels of GAAP: authoritative and non-authoritative. An
        entity must first consider authoritative GAAP for similar transactions
        or events, and then consider non-authoritative guidance from other sources.
        The adoption of the ASC did not have an impact on the Company's consolidated
        financial statements.                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In June 2009, the FASB issued general standards
        of accounting for, and disclosure of, events that occur after the balance
        sheet date but before the financial statements are issued or are available
        to be issued (codified within ASC 855). The update sets forth: (a) the
        period after the balance sheet date during which management of a reporting
        entity should evaluate events or transactions that may occur for potential
        recognition or disclosure in the financial statements; (b) the circumstances
        under which an entity should recognize events or transactions occurring
        after the balance sheet date in its financial statements; and (c) the
        disclosures that an entity should make about events or transactions that
        occurred after the balance sheet date. The adoption of this standard had
        no impact on the Company's financial position, results of operations or
        cash flows. Refer to note 11 for the subsequent events note disclosure.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(e) | United States accounting pronouncements not
      yet effective
|--- | ---------------------------------------------------------------

(i) Share-based payments

In April 2010, the FASB provided an update
  to address the classification of an employee share-based payment award with
  an exercise price denominated in the currency of a market in which the underlying
  equity security trades. FASB Accounting Standards Codification Topic 718, CompensationStock
  Compensation, provides guidance on the classification of a share-based payment
  award as either equity or a liability. A share-based payment award that contains
  a condition that is not a market, performance, or service condition is required
  to be classified as a liability. This standard is effective for years beginning
  after December 15, 2010, and for subsequent interim and annual reporting periods
  thereafter. The Company does not expect the adoption of this standard to have
  a significant effect on the Company's results of operations or financial position.

(i) Fair value measurement and disclosures

In January 2010, the FASB issued Accounting
  Standards Update No. 2010-06, "Improving Disclosures about Fair Value Measurements"
  (ASU 2010-06 or the ASU). The ASU amends ASC 820 to require a number of additional
  disclosures regarding fair value measurements. Specifically, the ASU requires
  entities to disclose:

| | (a) | the amounts of significant transfers between Level 1
        and Level 2 of the fair value hierarchy and the reasons for these transfers              
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                       
| | (b) | the reasons for any transfers in or out of Level 3                                                                                                    
| |     |                                                                                                                                                       
| | (c) | information in the reconciliation of recurring Level
        3 measurements about purchases, sales, issuances and settlements on a
        gross basis

In addition to these new disclosure requirements,
  the ASU also amends ASC 820 to clarify certain existing disclosure requirements.

Except for the requirement to disclose
  information about purchases, sales, issuances, and settlements in the reconciliation
  of recurring Level 3 measurements on a gross basis, all the amendments to ASC
  820 made by ASU 2010-06 are effective for interim and annual reporting periods
  beginning after 15 December 2009. The requirement to separately disclose purchases,
  sales, issuances, and settlements of recurring Level 3 measurements does not
  become effective until fiscal years beginning after 15 December 2010, including
  interim periods within those fiscal years.

The Company does not expect the adoption
  of this standard to have a significant effect on the Company's results of operations
  or financial position.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2010 and 2009, 2008                   
|(Expressed in United
      States Dollars, unless otherwise stated)

(ii) Variable interest entities

In June 2009, the FASB issued new guidance
  relating to accounting for Variable Interest Entities ("VIE") codified within
  ASC 810-10. Key changes include: (a) the elimination of the exemption for qualifying
  special purpose entities ("QSPE"); (b) a new approach for determining who should
  consolidate a VIE; and (c) changes to when it is necessary to reassess who should
  consolidate a VIE. This standard is effective for years beginning after November
  15, 2009, and for subsequent interim and annual reporting periods thereafter.
  The Company does not expect the adoption of this standard to have a significant
  effect on the Company's results of operations or financial position.

|11. | SUBSEQUENT EVENTS                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                      
|    | There were no significant events subsequent to July
        31, 2010 requiring disclosure in these consolidated financial statements.

---