---









QUARTZ MOUNTAIN RESOURCES
LTD.



CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2013 AND 2012





(Expressed in Canadian Dollars, unless otherwise stated)





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INDEPENDENT AUDITORS' REPORT

To the Shareholders of 
Quartz Mountain Resources Ltd.

We have audited the accompanying consolidated financial statements of Quartz Mountain Resources Ltd., which comprise the consolidated balance sheets as at July 31, 2013 and 2012 and the consolidated statements of loss and comprehensive loss, changes
in equity (deficiency) and cash flows for the years ended July 31, 2013, 2012 and 2011, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

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

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

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



1200-609 Granville Street, P.O. Box 10372, Pacific Centre,
Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947   Fax (604) 687-6172

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Opinion

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Quartz Mountain Resources Ltd. as at July 31, 2013 and 2012 and its financial performance and its cash flows for the years
ended July 31, 2013, 2012 and 2011 in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Emphasis of Matter

The accompanying consolidated financial statements have been prepared assuming that Quartz Mountain Resources Ltd. will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital
deficit and there can be no assurance the Company can achieve positive cash flows, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

|                  | “DAVIDSON
& COMPANY LLP”
|----------------- | ------------------------
|                  |                         
|Vancouver, Canada | Chartered Accountants   
|                  |                         
|November 22, 2013 |                         

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

|                                                        |   | July 31     |   |   | July 31     |  
|------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                        |   | 2013        |   |   | 2012        |  
|                                                        |   |             |   |   |             |  
|ASSETS                                                  |   |             |   |   |             |  
|                                                        |   |             |   |   |             |  
|Current assets                                          |   |             |   |   |             |  
|Cash and cash equivalents (note 4(a))                   | $ | 706,393     |   | $ | 2,450,451   |  
|Amounts receivable and other assets (note 5)            |   | 143,487     |   |   | 292,837     |  
|Total current
      assets                              |   | 849,880     |   |   | 2,743,288   |  
|                                                        |   |             |   |   |             |  
|Non-current assets                                      |   |             |   |   |             |  
|Restricted cash (note 4(b))                             |   | 158,387     |   |   | 78,000      |  
|Amounts receivable and other assets (note 5)            |   | 440,000     |   |   |            |  
|Mineral property interests (note 6)                     |   | 1,021,547   |   |   | 1           |  
|Total non-current
      assets                          |   | 1,619,934   |   |   | 78,001      |  
|                                                        |   |             |   |   |             |  
|Total assets                                            | $ | 2,469,814   |   | $ | 2,821,289   |  
|                                                        |   |             |   |   |             |  
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)       |   |             |   |   |             |  
|                                                        |   |             |   |   |             |  
|Current liabilities                                     |   |             |   |   |             |  
|Amounts payable and other
      liabilities (note 8)    | $ | 136,137     |   | $ | 607,389     |  
|Flow-through share premium (note 10)                    |   | 35,639      |   |   | 411,009     |  
|Due to related parties (note 11)                        |   | 2,421,220   |   |   | 813,855     |  
|Total current
      liabilities                         |   | 2,592,996   |   |   | 1,832,253   |  
|                                                        |   |             |   |   |             |  
|Convertible debenture (note 9)                          |   | 600,000     |   |   |            |  
|Total long-term liabilities                             |   | 600,000     |   |   |            |  
|                                                        |   |             |   |   |             |  
|Shareholders' equity (deficiency)                       |   |             |   |   |             |  
|Share capital (note 7)                                  |   | 26,050,118  |   |   | 24,514,381  |  
|Reserves (notes 2 and 7)                                |   | 592,011     |   |   | 381,139     |  
|Accumulated deficit                                     |   | (27,365,311 | ) |   | (23,906,484 | )
|Total shareholders' equity (deficiency)                 |   | (723,182    | ) |   | 989,036     |  
|                                                        |   |             |   |   |             |  
|Total liabilities and shareholders' equity (deficiency) | $ | 2,469,814   |   | $ | 2,821,289   |  
|                                                        |   |             |   |   |             |  
|Nature and continuance
      of operations (note 1)     |   |             |   |   |             |  

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

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

---

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

|                                                                     |   | For the year ended July 31 |  
|-------------------------------------------------------------------- | - | -------------------------- | -
|                                                                     |   | 2013                       |  
|Expenses (note 12):                                                  |   |                            |  
|Exploration and evaluation                                           | $ | 3,880,441                  |  
|Assays and analysis                                                  |   | 359,928                    |  
|Drilling                                                             |   | 265,336                    |  
|Engineering                                                          |   | 21,518                     |  
|Environmental                                                        |   | 610                        |  
|Geological                                                           |   | 1,560,270                  |  
|Graphics                                                             |   | 47,464                     |  
|Property payments                                                    |   | 83,962                     |  
|Site activities                                                      |   | 723,338                    |  
|Socio-economic                                                       |   | 34,333                     |  
|Transportation                                                       |   | 690,565                    |  
|Travel and
      accommodation                                       |   | 93,117                     |  
|                                                                     |   |                            |  
|General and administration                                           |   | 1,359,322                  |  
|Conferences and travel                                               |   | 40,197                     |  
|Legal, accounting and
      audit                                    |   | 61,634                     |  
|Office and administration                                            |   | 123,215                    |  
|Regulatory, trust and
      filing                                   |   | 45,371                     |  
|Salaries and benefits                                                |   | 1,038,364                  |  
|Shareholder
      communications                                     |   | 50,541                     |  
|                                                                     |   |                            |  
|Equity-settled share-based payments (note 7(c))                      |   | 210,872                    |  
|                                                                     |   | (5,450,635                 | )
|Other items                                                          |   |                            |  
|Flow-through share premium (note 10)                                 |   | 462,990                    |  
|Interest income                                                      |   | 10,984                     |  
|Interest expense                                                     |   | (40,326                    | )
|Foreign exchange (loss) gain                                         |   | (349                       | )
|Gain on disposition of a mineral property
      interest (note 6(a)) |   | 1,578,969                  |  
|Tax related to flow-through financing (note
      10)                |   | (20,460                    | )
|Loss before income tax                                               |   | (3,458,827                 | )
|Income tax (note 14)                                                 |   |                           |  
|Loss for the year                                                    |   | (3,458,827                 | )
|Other comprehensive loss:                                            |   |                            |  
|Currency translation difference (note 2)                             |   |                           |  
|Total comprehensive loss for the year                                | $ |                           |  
|                                                                     |   |                            |  
|Basic and diluted loss per common share                              | $ | (0.13                      | )
|                                                                     |   |                            |  
|Weighted average number of common shares outstanding                 |   | 26,223,006                 |  

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

---

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

|                                                                |  | Share Capital |  |   | Reserves   |   |   |             |   |   |                | 
|--------------------------------------------------------------- |  | ------------- |  | - | ---------- | - | - | ----------- | - | - | -------------- | 
|                                                                |  |               |  |   |            |   |   |             |   |   |                | 
|                                                                |  |               |  |   |            |   |   |             |   |   | Equity-settled | 
|                                                                |  |               |  |   |            |   |   | Translation |   |   | share-based    | 
|                                                                |  | Number        |  |   | Amount     |   |   | reserve     |   |   | payments       | 
|Balance at August 1, 2010                                       |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (323,287    | ) | $ |               | 
|Loss for the year                                               |  |               |  |   |           |   |   |            |   |   |               | 
|Currency translation difference (note 2)                        |  |               |  |   |           |   |   | (8,616      | ) |   |               | 
|Balance at July 31, 2011 (notes 2 and 15)                       |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (331,903    | ) | $ |               | 
|                                                                |  |               |  |   |            |   |   |             |   |   |                | 
|                                                                |  |               |  |   |            |   |   |             |   |   |                | 
|Balance at July 31, 2011                                        |  | 13,399,422    |  | $ | 29,407,744 |   | $ | (331,903    | ) | $ |               | 
|Functional currency translation adjustment (note 2)             |  |               |  |   | (9,031,998 | ) |   | 331,903     |   |   |               | 
|Balance at August 1, 2011                                       |  | 13,399,422    |  |   | 20,375,746 |   |   |            |   |   |               | 
|Loss for the year                                               |  |               |  |   |           |   |   |            |   |   |               | 
|Equity-settled share-based
      payments (note 7(c))           |  |               |  |   |           |   |   |            |   |   | 381,139        | 
|Shares issued for cash, net of issuance costs
      (note 7(b)) |  | 7,183,371     |  |   | 3,434,635  |   |   |            |   |   |               | 
|Shares issued for property option payments (note 6)             |  | 1,450,000     |  |   | 704,000    |   |   |            |   |   |               | 
|Balance at July 31, 2012                                        |  | 22,032,793    |  | $ | 24,514,381 |   | $ |            |   | $ | 381,139        | 
|                                                                |  |               |  |   |            |   |   |             |   |   |                | 
|                                                                |  |               |  |   |            |   |   |             |   |   |                | 
|Balance at August 1, 2012                                       |  | 22,032,793    |  | $ | 24,514,381 |   | $ |            |   | $ | 381,139        | 
|Loss for the year                                               |  |              |  |   |           |   |   |            |   |   |               | 
|Equity-settled share-based
      payments (note 7(c))           |  |              |  |   |           |   |   |            |   |   | 210,872        | 
|Shares issued for cash, net of issuance costs
      (note 7(b)) |  | 2,214,323     |  |   | 528,160    |   |   |            |   |   |               | 
|Shares issued for property option payment (note 6)              |  | 3,052,397     |  |   | 1,007,577  |   |   |            |   |   |               | 
|Balance at July 31, 2013                                        |  | 27,299,513    |  | $ | 26,050,118 |   | $ |            |   | $ | 592,011        | 

Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements.

---

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

|                                                                                     |   | For the year ended July 31 |  
|------------------------------------------------------------------------------------ | - | -------------------------- | -
|                                                                                     |   | 2013                       |  
|Cash flows from operating activities:                                                |   |                            |  
|Loss for the year                                                                    | $ | (3,458,827                 | )
|Adjusted for:                                                                        |   |                            |  
|Equity-settled share-based
      payments (note 7(c))                                |   | 210,872                    |  
|Foreign exchange                                                                     |   | 349                        |  
|Flow-through share premium
      (note 10)                                           |   | (462,990                   | )
|Gain on disposition of a mineral property
      interest (note 6(a))                 |   | (1,578,969                 | )
|Interest expense                                                                     |   | 40,326                     |  
|Property option payments paid through issuance
      of shares (note 6)              |   | 5,000                      |  
|Restricted cash (note 4(b))                                                          |   | (80,387                    | )
|Changes in non-cash working capital items:                                           |   |                            |  
|Amounts receivable and other
      assets - current                                  |   | 149,350                    |  
|Amounts payable and other liabilities                                                |   | (474,310                   | )
|Due to related parties                                                               |   | 1,607,365                  |  
|Amounts receivable and other assets - non-current                                    |   | (200,000                   | )
|Net cash used in operating activities                                                |   | (4,242,221                 | )
|                                                                                     |   |                            |  
|Cash flows from investing activities:                                                |   |                            |  
|Acquisition of mineral property (note 6(a))                                          |   | (50,000                    | )
|Disposition of mineral property interest (note 6(a))                                 |   | 2,000,000                  |  
|Net cash provided
      by investing activities                                      |   | 1,950,000                  |  
|                                                                                     |   |                            |  
|Cash flows from financing activities:                                                |   |                            |  
|Proceeds from issuance of share
      capital, net of issue costs (note 7(b))        |   | 615,780                    |  
|Principal payment on convertible debenture (note
      6(a))                         |   | (30,000                    | )
|Interest paid on convertible debenture                                               |   | (37,268                    | )
|Net cash provided
      by financing activities                                      |   | 548,512                    |  
|                                                                                     |   |                            |  
|(Decrease) increase in cash and cash equivalents                                     |   | (1,743,709                 | )
|Effect of exchange rate fluctuations on cash held                                    |   | (349                       | )
|                                                                                     |   | (1,744,058                 | )
|Cash and cash equivalents, beginning of year                                         |   | 2,450,451                  |  
|Cash and cash
      equivalents, end of year (note 4(a))                             | $ | 706,393                    |  
|                                                                                     |   |                            |  
|Supplementary cash flow information:                                                 |   |                            |  
|Non cash investing and financing
      activities:                                   |   |                            |  
|Property option payments paid through issuance
      of shares (note 6)              | $ | 5,000                      |  
|Property acquisition costs
      paid through issuance of shares (note 6)            |   | 1,002,577                  |  
|Property acquisition costs paid through
      issuance of convertible debenture (not |   | 650,000                    |  
|Portion of debenture assumed
      by Amarc (note 6)                                 |   | 240,000                    |  

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, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|1. | NATURE ANDCONTINUANCE OFOPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Quartz Mountain Resources Ltd. ("Quartz Mountain" or the
      "Company") is a Canadian public company incorporated in British Columbia
      on August 3, 1982. The Company's corporate office is located at 1040 West
      Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The
      Company is primarily engaged in the acquisition and exploration of mineral
      properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These consolidated financial statements (the "Financial
      Statements") of the Company as at and for the year ended July 31, 2013
      include Quartz Mountain Resources Ltd. and its subsidiary (together
      referred to as the "Company"). Quartz Mountain Resources Ltd. is the
      ultimate parent entity of the group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company is in the process of acquiring and exploring
      mineral property interests. The Company's continuing operations are
      entirely dependent upon the existence of economically recoverable mineral
      reserves, the ability of the Company to obtain the necessary financing to
      complete the exploration and development of these projects, obtaining the
      necessary permits to mine, on future profitable production of any mine and
      the proceeds from the disposition of the mineral property
  interests.                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | These Financial Statements have been prepared on a going
      concern basis which contemplates the realization of assets and discharge
      of liabilities in the normal course of business for the foreseeable
      future. As at July 31, 2013, the Company had cash and cash equivalents of
      $0.7 million, a working capital deficit of $1.7 million, and accumulated
      losses of $27.4 million since inception.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Of the total current liabilities of $2.6 million at July
      31, 2013, $2.4 million is payable to Hunter Dickinson Services Inc.
      ("HDSI"), a related party (note 11(b)). The Company has received a
      confirmation from HDSI that HDSI will continue to provide services to the
      Company and will not demand repayment of amounts outstanding, prior to
      December 31, 2014. However, there is no guarantee or amended agreement and
      as such the amount is presented as a current obligation.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Management believes that it is able to maintain its
      mineral rights in good standing for the next 12 month period. Additional
      debt or equity financing will be required to fund exploration or
      development programs. The Company has a reasonable expectation that
      additional funds will be available when necessary to meet ongoing
      exploration and development costs. However, there can be no assurance that
      the Company will continue to obtain additional financial resources and/or
      achieve profitability or positive cash flows. If the Company is unable to
      obtain adequate additional financing, the Company will be required to
      re-evaluate its planned expenditures until additional funds can be raised
      through financing activities. These material uncertainties cast
      significant doubt on the ability of the Company to continue as a going
      concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | CHANGE OFPRESENTATION ANDFUNCTIONALCURRENCY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Following the decision to acquire and explore mineral
      property interests in Canada (note 6), the Company's cash flows were
      anticipated to be principally denominated in Canadian dollars.
      Accordingly, effective August 1, 2011, the Company changed both the
      functional currency of the Company and the currency in which it presents
      its consolidated financial statements, from United States dollars ("USD")
      to Canadian dollars ("CAD").                                                                                                                                                                                                                                                                                                                                                                                                                                                         

8

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|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|   | A change in presentation currency is accounted for as a
      change in accounting policy and is applied retrospectively, as if the new
      presentation currency had always been the presentation currency.
      Consequently, comparative figures for years prior to the effective date of
      August 1, 2011 have been restated to be presented in Canadian dollars
      using average exchange rates for income and expenses and the closing rate
      at the balance sheet date for assets, liabilities and items related to
      equity. Share capital and accumulated deficit have been translated using
      historic rates. Resulting exchange differences were recognized within
      equity.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3. | SIGNIFICANTACCOUNTINGPOLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|(a) | Statement of compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | These Financial Statements have been prepared in
      accordance with International Financial Reporting Standards ("IFRS") as
      issued by the International Accounting Standards Board ("IASB") and the
      International Financial Reporting Interpretations Committee (IFRIC)
      effective for the Company's year ended July 31, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Issuance of these Financial Statements was authorized on
      November 22, 2013 by the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | These Financial Statements have been prepared on a
      historical cost basis, except for financial instruments measured at fair
      value. In addition, these Financial Statements have been prepared using
      the accrual basis of accounting, except for cash flow
  information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | Significant accounting estimates and
    judgments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The preparation of financial statements in conformity
      with IFRS requires management to make judgments, estimates and assumptions
      that affect the application of policies and reported amounts of assets and
      liabilities, income and expenses. Actual results may differ from these
      estimates. The impact of such estimates is pervasive throughout the
      financial statements, and may require accounting adjustments based on
      future occurrences. Revisions to accounting estimates are recognized in
      the period in which the estimate is revised and future periods if the
      revision affects both current and future periods. These estimates are
      based on historical experience, current and future economic conditions and
      other factors, including expectations of future events that are believed
      to be reasonable under the circumstances. Changes in the subjective inputs
      and assumptions can materially affect fair value
  estimates.

9

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|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Specific areas where significant
estimates or judgements exist are:

Sources of estimation uncertainty:

| |  | Management determines costs for share-based payments
      using market-based valuation techniques. The fair value of the
      market-based and performance-based share awards are determined at the date
      of grant using generally accepted valuation techniques. Assumptions are
      made and judgment used in applying valuation techniques. These assumptions
      and judgments include estimating the future volatility of the stock price,
      expected dividend yield, future employee turnover rates and future
      employee stock option exercise behaviors and corporate performance. Such
      judgments and assumptions are inherently uncertain. Changes in these
      assumptions affect the fair value estimates;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Estimate for the accrual of the Mineral Exploration Tax
      Credit ("METC"). The METC initiative was introduced by the government of
      British Columbia to stimulate mineral exploration activity in the province
      and includes an enhanced credit for mineral exploration in areas affected
      by the mountain pine beetle infestation. The Company is eligible to
      receive refunds under this tax credit. However, the timing and amounts of
      refunds pursuant to the METC program are uncertain as these amounts are
      subject to government audit;                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Estimated fair values of mineral properties acquired or
      disposed;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Provisions for income taxes are made using the best
      estimate of the amount expected to be paid based on a qualitative
      assessment of all relevant factors. The Company reviews the adequacy of
      these provisions at the end of the reporting period. However, it is
      possible that at some future date an additional liability could result
      from audits by taxation authorities. Where the final outcome of these
      tax-related matters is different from the amounts that were originally
      recorded, such differences will affect the tax provisions in the period in
      which such determination is made;                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Valuation of shares issued in non-cash transactions are
      measured at the fair value of the equity instruments granted based on
      quoted market prices on the date of grant or per the terms of the
      contract; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Estimate of the Companys borrowing rate at a rate
      consistent with the rate charged on the convertible debenture.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

10

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Critical accounting judgments:

| |  | Assessment of the Company's ability to continue as a
      going concern;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | The recoverability of the carrying value of the
      exploration and evaluation assets is dependent on successful development
      and commercial exploitation, or alternatively, sale of the respective
      areas of interest. The carrying value of these assets is reviewed by
      management when events or circumstances indicate that its carrying value
      may not be recovered. If impairment is determined to exist, an impairment
      loss is recognized to the extent that the carrying amount exceeds the
      recoverable amount;                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | The classification of the option agreements in respect of
      the Buck Property and the Hotai Claims as earn-in agreements, as opposed
      to the acquisition of mineral property interests, has been identified as
      an accounting policy which involves judgments or assessments made by
      management. Currently a feasibility study has not been completed on any of
      these properties to determine if the properties are capable of supporting
      commercial production; consequently the costs associated with these
      properties are expensed as incurred;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Information about the judgements used in the
      classification of the joint arrangement entered into during the year is
      provided in note 6(a). Judgment is required in assessing whether the
      arrangement is jointly controlled by all of its parties or by a group of
      the parties, or controlled by one of its parties alone; and                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Management is required to assess the functional currency
      of each entity of the Company. In concluding that the Canadian dollar is
      the functional currency of the parent and of its subsidiary, management
      considered the currency that mainly influences the cost of providing goods
      and services in each jurisdiction in which the Company operates.                                                                                                                                                                                                           

|(d) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | These Financial Statements include the accounts of the
      Company and its subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Subsidiaries are all entities over which the Company has
      the power to govern the financial and operating policies generally
      accompanying a shareholding of more than one half of the voting rights.
      The existence and effect of potential voting rights that are currently
      exercisable or convertible are considered when assessing whether the
      Company controls another entity. Subsidiaries are fully consolidated from
      the date on which control is transferred to the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Inter-company balances and transactions, including any
      unrealized income and expenses arising from inter-company transactions,
      are eliminated on consolidation. Unrealized losses are eliminated in the
      same way as unrealized gains, but only to the extent that there is no
      impairment.                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | At July 31, 2013 and July 31, 2012 the Company held an
      ownership interest in the following
subsidiary:                                                                                                                                                                                                                                                                                                                                                                                                          

| | Name
      of Subsidiary | Place
      of Incorporation | Ownership Interest | Principal Activity
| | ------------------------ | ---------------------------- | ------------------ | ------------------
| | Wavecrest Resources Inc. | Delaware                     | 100%               | Holding company   

11

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|(e) | Foreign currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The functional and presentation currency of the Company
      and its subsidiary, as at July 31, 2013, is the Canadian dollar (note
      2).                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Transactions in currencies other than the functional
      currency are recorded at the rates of exchange prevailing on the dates of
      transactions. At the end of each reporting period, monetary assets and
      liabilities that are denominated in foreign currencies are translated at
      the rates prevailing at the period end date. Non-monetary items that are
      measured in terms of historical cost in a foreign currency are not
      re-translated. Gains and losses arising on translation are included in
      profit or loss for the period.       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(f) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Financial assets and liabilities are recognized when the
      Company becomes party to the contracts that give rise to them. The Company
      determines the classification of its financial assets and liabilities at
      initial recognition and, where allowed and appropriate, re-evaluates such
      classification at each financial year end. The Company does not have any
      derivative financial instruments.                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Non-derivative financial assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company classifies its non-derivative financial
      assets into the following categories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Cash and cash equivalents are comprised of cash and short
      term deposits held at major financial institutions, which are readily
      convertible into a known amount of cash. The Company's cash and cash
      equivalents are invested in business and savings accounts which are
      available on demand by the Company for its programs. They are measured at
      fair value.                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Loans and receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Loans and receivables are financial assets with fixed or
      determinable payments that are not quoted in an active market. Such assets
      are initially recognized at fair value plus any directly attributable
      transaction costs. Subsequent to initial recognition loans and receivables
      are measured at amortized cost using the effective interest method, less
      any impairment losses.                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Loans and receivables comprise amounts receivable and
      restricted cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Non-derivative financial liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company's non-derivative financial liabilities
      comprise financial liabilities measured at amortized cost. Such financial
      liabilities are recognized initially at fair value net of any directly
      attributable transaction costs. Subsequent to initial recognition these
      financial liabilities are measured at amortized cost using the effective
      interest method. Financial liabilities measured at amortized cost comprise
      amounts payable and other liabilities, balances payable to related parties
      and a convertible debenture.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Impairment of financial assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Financial assets are assessed for indicators of
      impairment at the end of each reporting period. Financial assets are
      impaired when there is objective evidence that, as a result of one or more
      events that occurred after the initial recognition of the
      financial asset, the estimated future cash flows of the investment have been
  impacted.                                                                                                                                                                                                       

12

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Objective evidence of impairment could
include:

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

|    | For certain categories of financial assets, such as
      amounts receivable, assets that are assessed not to be impaired
      individually are subsequently assessed for impairment on a collective
      basis. The carrying amount of the financial asset is reduced by the
      impairment loss directly for all financial assets with the exception of
      amounts receivable, where the carrying amount is reduced through the use
      of an allowance account. When an amount receivable is considered
      uncollectible, it is written off against the allowance account. Subsequent
      recoveries of amounts previously written off are credited against the
      allowance account. Changes in the carrying amount of the allowance account
      are recognized in profit or loss.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | If, in a subsequent period, the amount of the impairment
      loss decreases and the decrease can be related objectively to an event
      occurring after the impairment was recognized, the previously recognized
      impairment loss is reversed through profit or loss to the extent that the
      carrying amount of the investment at the date the impairment is reversed
      does not exceed what the amortized cost would have been had the impairment
      not been recognized.                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(g) | Exploration and evaluation expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Exploration and evaluation expenditures are expenditures
      incurred by the Company in connection with the exploration for and
      evaluation of mineral resources before the technical feasibility and
      commercial viability of extracting a mineral resource are
    demonstrable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Exploration and evaluation expenditures are expensed as
      incurred, except for initial expenditures associated with the acquisition
      of exploration and evaluation assets through a business combination or an
      asset acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Exploration and evaluation expenditures include the cash
      consideration and the estimated fair market value of common shares on the
      date of issue or as otherwise provided under the relevant agreements.
      Costs for properties for which the Company does not possess unrestricted
      ownership and exploration rights, such as option agreements, are expensed
      in the period incurred or until a feasibility study has determined that
      the property is capable of commercial production.                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Administrative expenditures related to exploration
      activities are expensed in the period incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Expenditures incurred by the Company in connection with
      the exploration for and evaluation of mineral resources after the
      technical feasibility and commercial viability of extracting a mineral
      resource are demonstrable are capitalized. Such amounts are then amortized
      over the estimated life of the property following the commencement of
      commercial production, or are written off if the property is sold, allowed
      to lapse or abandoned, or when an impairment has been determined to have
      occurred.                                                                                                                                                                                                                                                

13

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

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

14

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Renunciation may occur:

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

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

15

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

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

16

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

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

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

The following temporary differences are
not provided for:

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

|    | The amount of deferred tax provided is based on the
      expected manner of realization or settlement of the carrying amount of
      assets and liabilities, using tax rates enacted or substantively enacted
      at the end of the reporting period applicable to the period of expected
      realization or settlement.                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | A deferred tax asset is recognized only to the extent
      that it is probable that future taxable profits will be available against
      which the asset can be utilized. Deferred tax assets and liabilities are
      offset when there is a legally enforceable right to set off current tax
      assets against current tax liabilities and when they relate to income
      taxes levied by the same taxation authority and the Company intends to
      settle its current tax assets and liabilities on a net basis.                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(n) | Government assistance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | When the Company is entitled to receive mineral
      exploration tax credits and other government grants, these government
      assistances are recognized as a cost recovery within exploration and
      evaluation expenditures when there is reasonable assurance of their
      recovery.                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(o) | Compound financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Compound financial instruments issued by the Company
      comprise a convertible debenture that can be converted into a fixed number
      of the Company's common shares at the option of the holder.                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The liability component of a compound financial
      instrument is recognized initially at the fair value of a similar
      liability that does not have an equity conversion option. The equity
      component, if any, is recognized initially as the difference between the
      estimated fair value of the compound financial instrument as a whole and
      the estimated fair value of the liability component. Material directly
      attributable transaction costs are allocated to the liability and equity
      components in proportion to their initial carrying
  amounts.

17

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|(p) | Joint venture activities and joint controlled
      operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Joint control is defined as the contractually agreed
      sharing of control over an economic activity, and exists only when the
      strategic, financial and operating decisions essential to the relevant
      activities require the unanimous consent of the parties sharing control.
      When the Company enters into agreements that provide for specific
      percentage interests in exploration properties, a portion of the Company's
      exploration activities is conducted jointly with others, without
      establishment of a corporation, partnership or other entity.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Under IFRS 11 "Joint Arrangements", this type of joint
      control of mineral assets and joint exploration and/or development
      activities is considered as a joint operation, which is defined as a joint
      arrangement whereby the parties that have joint control of the arrangement
      have rights to the assets, and obligations for the liabilities, relating
      to the arrangement.                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | In its financial statements, the Company recognizes the
      following in relation to its interest in a joint
  operation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |  | its assets, including its share
      of any assets held jointly;                     
| | - | --------------------------------------------------------------------------------------
| |   |                                                                                       
| |  | its liabilities, including its
      share of any liabilities incurred jointly;       
| |   |                                                                                       
| |  | its revenue from the sale of its
      share of the output of the joint operation; and
| |   |                                                                                       
| |  | its expenses, including its share
      of any expenses incurred jointly              

|(q) | Accounting standards, interpretations and amendments
      to existing standards                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                      
|    | Effective August 1, 2012, the Company adopted new and
      revised IFRS that were issued by the IASB. The application of these new
      and revised IFRS has not had any material impact on the amounts reported
      for the current and prior years but may affect the accounting for future
      transactions or arrangements.
|    |                                                                                                                                                                                                                                                                                                                                      
|    | Accounting policies adopted in the current
      year:                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                      
|    | (i)                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                      
|    | (ii)                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                      

18

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

| |       | IAS 27 was amended following the issuance of IFRS 10 to
      reflect the accounting for subsidiaries, associates and joint ventures in
      the separate financial statements of the parent company.                                                                                                                                                                                                        
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | The Company has applied these new and amended standards
      retrospectively. The above standards did not result in material changes to
      the Companys financial statements.                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (iii) | IFRS 11 "Joint Arrangements"                                                                                                                                                                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | Effective August 1, 2012, the Company early adopted IFRS
      11.                                                                                                                                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | IFRS 11 supersedes IAS 31 "Interests in Joint Ventures"
      and SIC-13 "Jointly Controlled Entities  Nonmonetary Contributions by
      Venturers", which had allowed entities the choice to proportionately
      consolidate or equity account for interests in joint ventures.                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | IFRS 11 requires a venturer to classify its interest in a
      joint arrangement as either a joint venture or a joint operation. Joint
      ventures are accounted for using the equity method of accounting. For a
      joint operation the venturer recognizes its share of the assets,
      liabilities, revenues and expenses of the joint operation.                                                 
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | The Company has adopted this standard retrospectively.
      The above standards did not result in material changes to the Companys
      previously filed financial statements.                                                                                                                                                                                                                             
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| | (iv)  | IFRS 12 "Disclosure of Interests in Other
      Entities"                                                                                                                                                                                                                                                                                                                                                     
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | Effective August 1, 2012, the Company early adopted IFRS
      12.                                                                                                                                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                               
| |       | IFRS 12 requires the Company to disclose the significant
      judgements and assumptions it has made in determining the nature of its
      interest in another entity or arrangement, and in determining the type of
      joint arrangement in which it has an interest, and information about its
      interests in subsidiaries, joint arrangements and associates, and other
      structured entities.

Accounting standards issued but not
yet effective:

| | (i) | Effective for annual periods beginning on or after
      January 1, 2013
| | --- | ------------------------------------------------------------------------

| |  | IFRS 13, Fair Value Measurement                                          
| | - | -------------------------------------------------------------------------
| |   |                                                                          
| |  | IAS 19, Employee Benefits                                                
| |   |                                                                          
| |  | IFRIC 20, Stripping Costs in the
      Production Phase of a Surface Mine

| | (ii) | Effective for annual periods beginning on or after
      January 1, 2014
| | ---- | ------------------------------------------------------------------------

| |  | IAS 32, Financial Instruments 
      Presentation
| | - | --------------------------------------------------

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

| |  | IFRS 9, Financial Instruments 
      Recognition and measurement
| | - | -----------------------------------------------------------------

The Company has not early adopted
these new standards, interpretations or amendments to existing standards. The
Company is currently assessing the impact that the standards, which have not
been early adopted, will have on the Company's financial statements.

19

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|4. | CASH ANDCASHEQUIVALENTS ANDRESTRICTEDCASH
|-- | -----------------------------------------

|(a) | Cash and cash
equivalents
|--- | -------------------------

| |                               |   | July
      31, 2013 |  |   | July
      31, 2012 | 
| | ----------------------------- | - | ------------------- |  | - | ------------------- | 
| | Business and savings accounts | $ | 706,393             |  | $ | 2,450,451           | 

|(b) | Restricted cash                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                        
|    | Restricted cash in the amount of $158,387 (July 31, 2012
       $78,000) consists of guaranteed investment certificates held in support
      of explorations permits.

20

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|5. | AMOUNTSRECEIVABLE ANDOTHERASSETS
|-- | --------------------------------

| |                                                       |   | July
      31, 2013 |  |   | July
      31, 2012 | 
| | ----------------------------------------------------- | - | ------------------- |  | - | ------------------- | 
| | Current:                                              |   |                     |  |   |                     | 
| | Harmonized sales tax receivable                       | $ | 17,679              |  | $ | 280,777             | 
| | Prepaid insurance                                     |   | 5,808               |  |   | 7,060               | 
| | Other receivables                                     |   | 120,000             |  |   | 5,000               | 
| | Total                                                 | $ | 143,487             |  | $ | 292,837             | 
| |                                                       |   |                     |  |   |                     | 
| | Non-current:                                          |   |                     |  |   |                     | 
| | Other receivable (note 6)                             | $ | 240,000             |  | $ |                    | 
| | British Columbia
      Mineral Exploration Tax Credit |   | 200,000             |  |   |                    | 
| | Total                                                 | $ | 440,000             |  | $ |                    | 

|6. | MINERALPROPERTYINTERESTS
|-- | ------------------------

|(a) | Galaxie Project
|--- | ---------------

| |                                                                                                                                                   |   | Payable to |  |   | Payable to |  |   |           |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | --------- | -
| |                                                                                                                                                   |   | Finsbury   |  |   | Bearclaw   |  |   | Total     |  
| | Estimated fair value of the Company's
      shares issued 2,038,111 common      shares to
      Finsbury, and 1,000,000 common shares to Bearclaw | $ | 672,577    |  | $ | 330,000    |  | $ | 1,002,577 |  
| | Cash payment                                                                                                                                      |   |           |  |   | 50,000     |  |   | 50,000    |  
| | Convertible debenture (note 7)                                                                                                                    |   |           |  |   | 650,000    |  |   | 650,000   |  
| | Recognized as a mineral property interest                                                                                                         |   | 672,577    |  |   | 1,030,000  |  |   | 1,702,577 |  
| | Disposition of 40% to Galaxie joint arrangement                                                                                                   |   |            |  |   |            |  |   | (681,031  | )
| | Galaxie Project
      balance as of July 31, 2013                                                                                                 |   |            |  |   |            |  | $ | 1,021,546 |  

At July 31, 2013, the Galaxie Project
comprised the Galaxie Claims and the Hotai Claims and consisted of 316 mineral
claims covering an area of approximately 1,204 square kilometers. The Galaxie
Project straddles the Stewart-Cassiar Highway, and is located 24 kilometers
south of the community of Dease Lake, British Columbia.

In August 2012, the Company acquired
the Galaxie Project by

| |  | issuing 2,038,111 shares to
      Finsbury Exploration Ltd. ("Finsbury"),             
| | - | --------------------------------------------------------------------------------------
| |   |                                                                                       
| |  | issuing 1,000,000 shares to
      Bearclaw Capital Corp. ("Bearclaw").                
| |   |                                                                                       
| |  | making a cash payment of $50,000
      to Bearclaw, and                               
| |   |                                                                                       
| |  | issuing a $650,000 convertible
      debenture (the "Debenture") (note 9) to Bearclaw.

21

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

The common shares issued to Finsbury
and Bearclaw were valued at the fair market value at the date of issuance ($0.33
per common share). Bearclaw retains a 1% net smelter returns royalty on the Gnat
Pass Property (wholly contained within the Galaxie Claims), capped at aggregate
payments of $7,500,000 (the "Gnat Pass Royalty Agreement").

November 2012 agreement with
Amarc

In November 2012, the Company entered
into a letter agreement (the "November 2012 Letter Agreement") with Amarc
Resources Ltd. ("Amarc") whereby Amarc could earn up to a 50% interest in the
Galaxie and ZNT (note 6(b)) properties (the Galaxie ZNT Project). The Company
and Amarc have certain directors in common. The Company and Amarc agreed to
conduct exploration activities at the Galaxie ZNT Project as an unincorporated
joint arrangement (the Joint Arrangement), upon Amarc earning its initial
interest in these properties, whereby the Company would transfer into the joint
arrangement its interest in the properties including its obligations under the
related acquisition agreements, the Gnat Pass Royalty Agreement, and its, at the
time $650,000 and now $600,000 convertible debenture, of which Amarc would
assume 40% (note 5).

Amarc earned an initial 40% interest
in the Galaxie ZNT Project by paying to the Company $1,000,000 in cash and also
funding $1,000,000 of exploration expenses, to be incurred by the Company on the
Galaxie property. The cash payment and exploration funding were completed on
December 31, 2012. The Company recognized a gain of $1,578,969 in relation to
the 40% disposition of its mineral property interest to the Joint Arrangement.

June 2013 agreement with Amarc

Effective June 26, 2013, the Company
and Amarc entered into an amendment agreement (the "Amendment") whereby the
Galaxie ZNT Project was split into two separate joint arrangements, named the
"Galaxie Joint Venture" and the "ZNT Joint Venture". Each joint arrangement
continues to be governed by the terms of the November 2012 letter agreement.

Under the Amendment, Amarc has an
option until October 31, 2013 to increase its interest in each of the ZNT Joint
Venture and Galaxie Joint Venture from its current 40% interest to a 60%
interest by funding exploration expenditures of $210,000 and $235,000,
respectively.

July 2013 agreement with debenture
holder

In July 2013, the terms of the
Debenture were amended. The Joint Arrangement made a $50,000 principal payment
on the Debenture, the interest rate was increased to 10% per annum, and the
maturity date was extended to October 31, 2014 (note 5 and 9).

Hotai Claims

The Hotailuh Slope mineral claims (the
"Hotai Claims") comprise 35 mineral claims totalling 14,633 hectares located in
central British Columbia adjacent to, and forming part of, the Galaxie Project.

In July 2012, the Company entered into
a mineral property purchase agreement (the "Purchase Agreement") with certain
arm's length private parties (the "Sellers") to acquire a 100% interest in the
Hotai Claims.

22

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|    | Pursuant to the Purchase Agreement, in order to purchase
      its interest in the Hotai Claims, the Company made a cash payment of
      $5,000 and issued $5,000 worth of shares in the Company to the Sellers.
      The number of common shares required to be issued was calculated using the
      volume weighted-average market share price for the ten days prior to
      issuance. On August 1, 2012, 14,286 common shares were issued to the
      Sellers.                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | After the reporting period, in September 2013, the option
      for the Hotai Claims was terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(b) | ZNT Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The ZNT Project comprises 84 mineral claims located
      approximately 15 kilometers southeast of the town of Smithers, in central
      British Columbia. The Company paid claim staking costs of approximately
      $57,000 relating to these claims
      In November 2012, the Company entered
        into a letter agreement with Amarc pursuant to which Amarc acquired an
        option to earn up to a 50% interest in the ZNT property. This agreement
        was amended in June 2013 to allow Amarc to earn up to a 60% interest in
    the ZNT property (note 6(a)).   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(c) | Buck Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In December 2011, the Company purchased an option (the
      "Option") to acquire a 100% interest in the Buck gold-silver property (the
      "Buck Project") located in central British Columbia, by paying $100,000 in
      cash and issuing 1,200,000 common shares to the vendor. The common shares
      issued were valued at the estimated fair value on the date of issue ($0.50
      per common share) and were expensed along with the cash consideration
      paid.                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company was also required to make certain scheduled
      payments to the underlying owners of the Buck Project (the "Underlying
      Owners"). The Company paid a total of $45,000 cash and issued 250,000
      common shares valued at $104,000 to the Underlying Owners. The common
      shares were valued based on the estimated fair value on the date of
      issuance and were expensed along with the cash consideration paid in the
      prior year.                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In July 2013, the Option for the Buck Project was
      terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(d) | Angel's Camp Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company retains a 1% net smelter return royalty
      payable to the Company on any production from the Angel's Camp property
      located in Lake County, Oregon. The Angel's Camp property is currently
      held by Alamos Gold Inc.                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the year ended July 31, 2002, the Company sold
      100% of its title, rights and interest in the Angel's Camp property
      located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"),
      which later changed its name to Seabridge Gold Inc., for 300,000 common
      shares of Seabridge (sold in prior years), 200,000 common share purchase
      warrants of Seabridge (exercised and sold in prior years), cash of
      $100,000, and a 1% net smelter return royalty payable to the Company on
      any production from the Angel's Camp property.

23

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|   | In 2003, Seabridge optioned a 50% interest in the
      property to Quincy Gold Inc., which later changed its name to Golden
      Predator Mines Inc., then to Golden Predator Royalty & Development
      Corporation, then to Golden Predator Corporation, and is now named
      Americas Bullion Royalty Corp (TSX:AMB).                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In April 2012, Orsa Ventures Corp. (Orsa) (TSX-V: ORN)
      exercised its option to acquire all of Seabridge's remaining undivided 50%
      beneficial joint venture interest in the Angel's Camp property. In March
      2013, Orsa announced it had entered into an agreement with Americas
      Bullion Royalty Corp. to acquire, over a number of years, the 50% of
      Angels Camp that it did not own. Additionally, in March 2013 Orsa
      announced that it had received regulatory approval for, and fulfilled
      closing requirements for the joint venture purchase agreement with
      Americas Bullion Royalty Corp. to acquire their 50% joint venture interest
      in the Angel's Camp Property.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | After the reporting period, in September 2013, Alamos
      Gold Inc. reported the completion of the acquisition of all of the issued
      and outstanding common shares of Orsa Ventures Corp.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The royalty has been recorded at a nominal amount of
      $1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|7. | CAPITAL ANDRESERVES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|(a) | Authorized share capital                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                          
|    | At July 31, 2013, the authorized share capital of the
      Company comprised an unlimited number of common shares without par value
      and an unlimited number of preferred shares without par value.
|    |                                                                                                                                                                                                          
|    | No preferred shares have been issued to date. All issued
      common shares are fully paid.                                                                                                             

24

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Reconciliation of changes in share
capital:

| |                                                                   |  | Number of     |  |   |            |  
| | ----------------------------------------------------------------- |  | ------------- |  | - | ---------- | -
| | Issued share
      capital                                        |  | common shares |  |   | Amount     |  
| | Balance at August 1, 2010                                         |  | 13,399,422    |  | $ | 29,407,744 |  
| | Balance, July 31, 2011                                            |  | 13,399,422    |  |   | 29,407,744 |  
| | Functional currency translation adjustment (note 2)               |  |              |  |   | (9,031,998 | )
| | Balance at August 1, 2011                                         |  | 13,399,422    |  |   | 20,375,746 |  
| | Common shares issued for cash, December
      2011                |  | 1,140,200     |  |   | 570,100    |  
| | Flowthrough common shares issued for cash, December 2011         |  | 6,043,171     |  |   | 3,625,902  |  
| | Recorded as flowthrough share premium
      liability            |  |              |  |   | (604,317   | )
| | Share issuance costs, December 2011                               |  |              |  |   | (157,050   | )
| | Shares issued for property option payment                         |  | 1,450,000     |  |   | 704,000    |  
| | Balance, July 31, 2012                                            |  | 22,032,793    |  |   | 24,514,381 |  
| | Common shares issued for cash, December
      2012                |  | 461,914       |  |   | 115,479    |  
| | Flowthrough common shares issued for cash, December 2012         |  | 1,752,409     |  |   | 525,723    |  
| | Recorded as flowthrough share premium
      liability (note 10)  |  |              |  |   | (87,620    | )
| | Share issuance costs, December 2012                               |  |              |  |   | (25,422    | )
| | Shares issued for Galaxie property
      acquisition (note 6(a))  |  | 3,038,111     |  |   | 1,002,577  |  
| | Shares issued for
      Hotai property option payment (note 6(a)) |  | 14,286        |  |   | 5,000      |  
| | Balance at July 31, 2013                                          |  | 27,299,513    |  | $ | 26,050,118 |  

|(b) | Private Placement and Flow-Through
  Financing                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                  
|    | In December 2012, the Company completed a non-brokered
      private placement (the "Private Placement") of 2,214,323 common shares for
      aggregate gross proceeds of $641,202. The Private Placement was comprised
      of:

| |  | 461,914 non-flow-through common shares issued at a price
      of $0.25 per share for gross proceeds of $115,479; and                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                    
| |  | 1,752,409 flow-through common shares issued at $0.30 per
      share, including a premium of $0.05 per share over the offering price for
      the non-flow through common shares, for gross proceeds of $525,723 (the
      "Flow-through Funds").

After issuance costs of $25,422, net
cash proceeds from the Private Placement were $615,780, of which $87,620 was
recorded as a flow-through share premium liability (note 10) and the balance of
$528,160 was allocated to the common shares issued.

Pursuant to the flow-through share
agreements, the Company renounced eligible Canadian Exploration Expenses
("CEE"), as defined in the Income Tax Act (Canada).

25

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

In December 2011, the Company completed
a non-brokered private placement (the "Private Placement") of 7,183,371 common
shares for aggregate gross proceeds of $4,196,002. The Private Placement was
comprised of:

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

|    | After issuance costs of $157,050, net cash proceeds from
      the Private Placement were $4,038,952, of which $604,317 was recorded as a
      flow-through share premium liability (note 10) and the balance of
      $3,434,635 was allocated to the common shares issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Pursuant to the flow-through share agreements, the
      Company renounced eligible Canadian Exploration Expenses ("CEE"), as
      defined in the Income Tax Act (Canada).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(c) | Equity-Settled Share-Based Payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has a share purchase option plan approved by
      the Company's shareholders that allows the Board of Directors to grant
      share purchase options, subject to regulatory terms and approval, to its
      officers, directors, employees, and service providers. The share purchase
      option plan (the "2012 Option Plan") is based on the maximum number of
      eligible shares equaling 10% of the Company's outstanding common shares,
      calculated from time to time.                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The exercise price of each share purchase option is set
      by the Board of Directors at the time of grant but cannot be less than the
      five day volume weighted average trading price of the Company's shares
      calculated on the day prior to the grant. Share purchase options may have
      a maximum term of ten years (although share purchase options have
      generally been granted with a term of up to five years) and typically
      terminate 90 days following the termination of the optionee's employment
      or engagement, except in the case of retirement or death. The vesting
      period for share purchase options is at the discretion of the Board of
      Directors at the time the options are granted.

26

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

The following summarizes the changes in
the Company's share purchase options for the years ended July 31, 2013, 2012 and 2011:

| |                                                                    |  | Number of options |   |   | Weighted average | 
| | ------------------------------------------------------------------ |  | ----------------- | - | - | ---------------- | 
| | Continuity of share options                                        |  | outstanding       |   |   | exercise price   | 
| | Share purchase options
      outstanding at July 31, 2011 and 2010 |  |                  |   |   |                 | 
| | Granted during the year                                            |  | 1,776,600         |   | $ | 0.45             | 
| | Forfeited during the year                                          |  | (9,000            | ) | $ | 0.45             | 
| | Share purchase options outstanding at July
      31, 2012          |  | 1,767,600         |   | $ | 0.45             | 
| | Forfeited during the year                                          |  | (61,800           | ) | $ | 0.45             | 
| | Share purchase options outstanding at July 31, 2013                |  | 1,705,800         |   | $ | 0.45             | 
| | Share purchase options exercisable at July 31, 2013                |  | 1,705,800         |   | $ | 0.45             | 

| |                                                                    |  | Number of options |   |   | Weighted average | 
| | ------------------------------------------------------------------ |  | ----------------- | - | - | ---------------- | 
| | Continuity of share options                                        |  | outstanding       |   |   | exercise price   | 
| | Share purchase options
      outstanding at July 31, 2011 and 2010 |  |                  |   |   |                 | 
| | Granted during the year                                            |  | 1,776,600         |   | $ | 0.45             | 
| | Forfeited during the year                                          |  | (9,000            | ) | $ | 0.45             | 
| | Share purchase options outstanding at July 31, 2012                |  | 1,767,600         |   | $ | 0.45             | 
| | Share purchase options exercisable at July 31, 2012                |  | 589,200           |   | $ | 0.45             | 

The weighted average contractual
remaining life of the share purchase options outstanding at July 31, 2013 was
2.5 years (2012  4.0 years; 2011  nil).

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

The estimated weighted average fair
value of options granted during the year ended July 31, 2013 was nil as no
options were granted in the year (2012  $0.34 per option; 2011  nil). The
Company recognized share-based payment expense of $210,872 in the year ended
July 31, 2013 (2012  $381,139; 2011  nil).

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

27

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

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

| |                           |   | July
      31 | 
| | ------------------------- | - | ------------- | 
| |                           |   | 2013          | 
| | Amounts payable           | $ | 125,268       | 
| | Accrued
      liabilities |   | 10,869        | 
| | Total                     | $ | 136,137       | 

|9. | CONVERTIBLEDEBENTURE
|-- | --------------------

| |                                                                          |   | July
      31 |  
| | ------------------------------------------------------------------------ | - | ------------- | -
| |                                                                          |   | 2013          |  
| | Opening Balance                                                          | $ |              |  
| | Convertible debenture issued                                             |   | 650,000       |  
| | Portion of payment made pursuant to
      amendment by Amarc (note 6(a)) |   | (20,000       | )
| | Payment made
      pursuant to amendment by the Company                  |   | (30,000       | )
| | Total                                                                    | $ | 600,000       |  

Pursuant to the Galaxie Sale Agreement,
the Company issued an unsecured $650,000 convertible debenture to Bearclaw as
part of the purchase price. As part of the Letter Agreement, Amarc assumed
$260,000 of this debt (note 6(a)).

In July 2013, Quartz Mountain and the
holder of the Debenture entered into an agreement to amend the Debenture,
whereby among other things, the Joint Arrangement made a $50,000 payment toward
the Debenture reducing the outstanding balance to $600,000, the interest rate
was increased to 10% per annum from 8% per annum, and the maturity date was
extended to October 31, 2014 from October 31, 2013.

Interest payments for the Debenture are
payable quarterly in arrears and the Debenture is convertible into the Company's
common shares at an exercise price of $0.15 per share (previously $0.40 per
share) on or before maturity of the Debenture on October 31, 2014. Any interest
accrued, but unpaid, shall be converted at an exercise price of the higher of
$0.15 per share (previously $0.40 per share) and the market price at the time of
conversion. The interest rate implicit in the Debenture approximates the
Company's borrowing rate. Accordingly, the net present value of the future cash
flows associated with the Debenture approximates its carrying amount.

28

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|10. | FLOW-THROUGHSHAREPREMIUMLIABILITY
|--- | ---------------------------------

| |                                                                    |   | 2013     |   |   | 2012     |   |   | 2011 | 
| | ------------------------------------------------------------------ | - | -------- | - | - | -------- | - | - | ---- | 
| | Balance at beginning of year                                       | $ | 411,009  |   | $ |         |   | $ |     | 
| | Recognized as liability upon issuance of flow-through
      shares |   | 87,620   |   |   | 604,317  |   |   |     | 
| | Derecognized upon eligible expenditures incurred                   |   | (462,990 | ) |   | (193,308 | ) |   |     | 
| | Balance at end of
      year                                       | $ | 35,639   |   | $ | 411,009  |   | $ |     | 

|    | Pursuant to the Private Placement of the flow-through
      shares (note 7(b)) and in accordance with the Income Tax Act (Canada), the
      Company is obligated to spend the Flow-through Funds on eligible Canadian
      Exploration Expenses ("CEE") and to renounce them to the investors. The
      renunciation of CEE to the investors was completed during the current
      year. At July 31, 2013, the balance of the flow- through share premium
      represents the prorated portion of the premium attributable to the
      Flow-through Funds that remained unspent on CEE at the end of the
      reporting period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | To July 31, 2013, out of total Flow-through Funds of
      $525,723, the Company had incurred approximately $312,000 in
CEE.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company is subject to a tax, calculated monthly, on
      the portion of the flow-through funds raised in December 2012 and December
      2011 remaining unspent after February 2013 and February 2012,
      respectively. The Company incurred a tax expense to date of $20,460
      related to these flow-through proceeds.                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|11. | RELATEDPARTYBALANCES ANDTRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|(a) | Transactions with Key Management
  Personnel                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                
|    | Key management personnel are those persons that have the
      authority and responsibility for planning, directing and controlling the
      activities of the Company, directly and indirectly, and by definition
      include the directors of the Company.
|    |                                                                                                                                                                                                                                                                
|    | During the years ended July 31, 2013 and 2012, the
      Company compensated key management personnel as
follows:                                                                                                                                              

| |                                                                           |   | 2013    |  |   | 2012    |  |   | 2011 | 
| | ------------------------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ---- | 
| | Short-term employee benefits, including
      salaries and directors fees | $ | 420,943 |  | $ | 237,563 |  | $ |     | 
| | Equity-settled
      share-based payments                                 |   | 84,589  |  |   | 150,914 |  |   |     | 
| | Total                                                                     | $ | 505,532 |  | $ | 388,477 |  | $ |     | 

|(b) | Entities with Significant Influence over the
      Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company's management believes that certain entities
      have the power to participate in the financial or operating policies of
      the Company. Several directors and other key management personnel of
      those entities, who are close business
associates, are also key management personnel of the Company. Pursuant to
management agreements between the Company and these entities which have
significant influence over the Company, the Company receives geological,
engineering, corporate development, administrative, management and shareholder
communication services from such entities.

29

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Hunter Dickinson Services
Inc.

Hunter Dickinson Services Inc. ("HDSI")
is a private company which has certain directors and officers in common with the
Company. HDSI provides geological, corporate development, administrative and
management services to, and incurs third party costs on behalf of the Company
pursuant to an agreement dated July 2, 2010, and is based on annually set
rates.

Finsbury Exploration Ltd.

Finsbury is a private company which has
certain directors in common with the Company.

In July 2012, the Company entered into
an earn-in agreement (the "Galaxie Earn-in Agreement") with Finsbury, a
non-arm's length party whereby it obtained an option to earn up to a 50%
interest in the Galaxie Project by spending up to $1,500,000 in exploration
expenditures. This agreement was terminated and in August 2012, the Company
acquired the Galaxie Project outright (note 6(a)).

The transactions and balances with
Finsbury presented herein relate to the Galaxie Earn-in Agreement.

Transactions
  with these related parties were as follows:

| |                                                                      |   | 2013      |  |   | 2012      |  |   | 2011 | 
| | -------------------------------------------------------------------- | - | --------- |  | - | --------- |  | - | ---- | 
| | HDSI: Services received based on management
      services agreement | $ | 2,462,779 |  | $ | 1,135,345 |  | $ |     | 
| | HDSI: Reimbursement of third party expenses paid                     |   | 122,318   |  |   | 120,444   |  |   |     | 
| | Finsbury: Reimbursement of third party expenses paid                 |   |          |  |   | 25,278    |  | $ |     | 

Outstanding balances were as follows:

| |                                   |   | July
      31, 2013 |  |   | July
      31, 2012 | 
| | --------------------------------- | - | ------------------- |  | - | ------------------- | 
| | Balance payable to HDSI (i)       | $ | 2,421,220           |  | $ | 786,425             | 
| | Balance payable to
      Finsbury |   |                    |  |   | 27,430              | 
| | Total                             | $ | 2,421,220           |  | $ | 813,855             | 

| | (i) | The Company has received a confirmation from HDSI that
      HDSI will continue to provide services to the Company and will not demand
      repayment of amounts outstanding, prior to December 31,
  2014.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|12. | EMPLOYEESBENEFITEXPENSES                                                                         
|--- | -------------------------------------------------------------------------------------------------
|    |                                                                                                  
|    | The amount of employees' salaries and benefits included
      in various expenses are as follows:

| |                                     |   | 2013      |  |   | 2012      |  |   | 2011   | 
| | ----------------------------------- | - | --------- |  | - | --------- |  | - | ------ | 
| | Exploration and evaluation expenses | $ | 1,332,985 |  | $ | 544,802   |  | $ |       | 
| | General and administration expenses |   | 1,071,064 |  |   | 697,025   |  |   | 72,798 | 
| | Equity-settled share-based payment  |   | 210,872   |  |   | 381,139   |  |   |       | 
| | Total                               | $ | 2,614,921 |  | $ | 1,622,966 |  | $ | 72,798 | 

|13. | OPERATINGSEGMENTS                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                          
|    | The Company operates in a single reportable operating
      segment  the acquisition, exploration and evaluation of mineral property
      interests. The Company is currently focused on the acquisition and
      exploration of mineral property interests in Canada.
|    |                                                                                                                                                                                                                                                                          
|14. | TAXATION                                                                                                                                                                                                                                                                 

|(a) | Provision for current tax                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                       
|    | No provision has been made for current income taxes, as
      the Company has no taxable income.                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                       
|(b) | Provision for deferred tax                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                       
|    | As future taxable profits of the Company are uncertain,
      no deferred tax asset has been recognized. As at July 31, 2013, the
      Company had unused non-capital loss carry forwards of approximately
      $4,489,000 (2012  $2,901,000; 2011  $1,542,000) in Canada and $21,000
      (2012  $37,000; 2011  $50,000) in the United States.
|    |                                                                                                                                                                                                                                                                                                                                                       
|    | The Company had approximately $4,519,000 (2012 
      $4,550,000; 2011  $3,639,000) of resource tax pools available, which may
      be used to shelter certain resource income.                                                                                                                                                                    

31

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

Reconciliation of effective tax rate:

| |                                                     |   | 2013       |   |   | 2012       |   |   | 2011     |  
| | --------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | -------- | -
| | Loss for the period                                 | $ | (3,458,827 | ) | $ | (3,587,805 | ) | $ | (174,680 | )
| | Income tax expense                                  |   |           |   |   |           |   |   |         |  
| | Loss excluding income tax                           | $ | (3,458,827 | ) | $ | (3,587,805 | ) | $ | (174,680 | )
| |                                                     |   |            |   |   |            |   |   |          |  
| |                                                     |   |            |   |   |            |   |   |         |  
| | Income tax recovery using domestic tax rate         | $ | (874,000   | ) | $ | (919,000   | ) | $ | (48,000  | )
| | Effect of tax rates in foreign
      jurisdictions  |   |           |   |   |           |   |   |         |  
| | Non-deductible expenses and other                   |   | 693,000    |   |   | 310,000    |   |   |         |  
| | Change in deferred tax rates                        |   | (77,000    | ) |   |           |   |   |         |  
| | Differences in statutory tax rates                  |   | (9,000     | ) |   | 16,000     |   |   | 14,000   |  
| | Differences due to foreign exchange                 |   |           |   |   | (1,000     | ) |   | (105,000 | )
| | Changes in
      unrecognized temporary differences |   | 267,000    |   |   | 594,000    |   |   | 139,000  |  
| |                                                     | $ |           |   | $ |           |   | $ |         |  

The Company's domestic tax rate during
the year ended July 31, 2013 was 25.3% (2012  25.6%; 2011  27.3%) and the
effective tax rate was nil (2012  nil; 2011  nil).

As at July 31, 2013, the Company had
the following balances in respect of which no deferred tax asset had been
recognized:

| |                   |   |                  |  |   |                |  |   | Equipment and | 
| | ----------------- | - | ---------------- |  | - | -------------- |  | - | ------------- | 
| | Expiry:           |   | Tax
      losses |  |   | Resource pools |  |   | other         | 
| | Within one year   | $ | 121,000          |  | $ |               |  | $ |              | 
| | One to five years |   | 139,000          |  |   |               |  |   | 115,000       | 
| | After five years  |   | 4,250,000        |  |   |               |  |   | 80,000        | 
| | No expiry date    |   |                 |  |   | 3,497,000      |  |   | 114,000       | 
| |                   | $ | 4,510,000        |  | $ | 3,497,000      |  | $ | 309,000       | 

|15. | FINANCIALRISKMANAGEMENT                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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 investment policies,
      counterparty limits, and controlling and reporting structures. The type of
      risk exposure and the way in which such exposure is managed is provided as
      follows:

32

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|(a) | Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Credit risk is the risk of potential loss to the Company
      if the 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 and amounts receivable. The Company limits its exposure to
      credit risk on liquid financial assets by only investing its cash and cash
      equivalents with high-credit quality financial institutions in business
      and savings accounts.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The carrying value of the Company's cash and cash
      equivalents and amounts receivable represent the maximum exposure to
      credit risk.                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                       |   |                     |  |   | Carrying Amount     | 
| | ----------------------------------------------------- | - | ------------------- |  | - | ------------------- | 
| | Financial Assets                                      |   | July
      31, 2013 |  |   | July
      31, 2012 | 
| | Cash and cash equivalents (note 4(a))                 | $ | 706,393             |  | $ | 2,450,451           | 
| | Amounts receivable (current and non-current) (note 5) |   | 577,679             |  |   | 280,777             | 
| | Restricted cash (note 4(b))                           |   | 158,387             |  |   | 78,000              | 
| | Total                                                 | $ | 1,442,459           |  | $ | 2,809,228           | 

|(b) | 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 that there is 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 following obligations existed at July 31,
  2013:                                                                                                                                                                                                                                                                                                               

| |                                                      |   |           |  |   | Payments due by period | 
| | ---------------------------------------------------- | - | --------- |  | - | ---------------------- | 
| |                                                      |   |           |  |   | Less than 1            | 
| |                                                      |   | Total     |  |   | year                   | 
| | Amounts payable and other liabilities (note
      8) | $ | 136,137   |  | $ | 136,137                | 
| | Convertible debentures (note 9)                      |   | 600,000   |  |   |                       | 
| | Due to related parties (note 11)                     |   | 2,421,220 |  |   | 2,421,220              | 
| | Total                                                | $ | 3,157,357 |  | $ | 2,557,357              | 

33

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|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

The following obligations existed at
July 31, 2012:

| |                                                      |   |           |  |   | Payments due by period | 
| | ---------------------------------------------------- | - | --------- |  | - | ---------------------- | 
| |                                                      |   |           |  |   | Less than 1            | 
| |                                                      |   | Total     |  |   | year                   | 
| |                                                      |   |           |  |   |                        | 
| | Amounts payable and other liabilities (note
      8) | $ | 607,389   |  | $ | 607,389                | 
| | Due to related
      parties (note 11)               |   | 813,855   |  |   | 813,855                | 
| |                                                      |   |           |  |   |                        | 
| | Total                                                | $ | 1,421,244 |  | $ | 1,421,244              | 

|(c) | Market Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Market risk is the risk that changes in market prices,
      such as foreign exchange rates, interest rates and equity prices will
      affect the Company's income or the value of its holdings of financial
      instruments. The objective of market risk management is to manage and
      control market risk exposures within acceptable parameters, while
      optimizing the return.                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | 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 cash and cash equivalents mature impact interest
      income earned.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Assuming that all variables remain constant, a 10 basis
      points change representing a 0.1% increase or decrease in interest rates
      would have resulted in a decrease or increase in the loss for the year
      ended July 31, 2013 of approximately $1,100 (2012  $1,300).                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Foreign exchange risk                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company incurs substantially all of its expenditures
      in Canada and substantially all of its cash and cash equivalents held are
      denominated in Canadian dollars. Consequently the Company is not subject
      to material foreign exchange risk.                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Price risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company is not subject to any price risk.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(d) | Capital management objectives                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company's primary objectives when managing capital
      are to safeguard the Company's ability to continue as a going concern, so
      that it can continue to provide returns for shareholders, and to have
      sufficient liquidity available to fund ongoing expenditures and suitable
      business opportunities as they arise.                                                                                                                                   

34

---

|Quartz Mountain
      Resources Ltd.                          
|--------------------------------------------------------------
|Notes to the Consolidated Financial
      Statements          
|For the years ended July 31, 2013 and 2012                    
|(Expressed in
      Canadian Dollars, unless otherwise stated)
|                                                              

|    | The Company considers the components of shareholders'
      equity as capital. The Company manages its capital structure and makes
      adjustments to it in light of changes in economic conditions and the risk
      characteristics of the underlying assets. In order to maintain or adjust
      the capital structure, the Company may issue equity, sell assets, or
      return capital to shareholders as well as issue or repay debt.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company's investment policy is to invest its cash in
      highly liquid shortterm interestbearing investments having maturity
      dates of three months or less from the date of acquisition and that are
      readily convertible to known amounts of cash.                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | There were no changes to the Company's approach to
      capital management during the year ended July 31, 2013.                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company is not subject to any externally imposed
      equity requirements.                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(e) | Fair Value                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The fair value of the Company's financial assets and
      liabilities approximate the carrying value. Due to their short-term
      nature, cash and cash equivalents are carried at a level 1 fair
    value.                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Financial instruments measured at fair value are
      classified into one of three levels in the fair value hierarchy according
      to the relative reliability of the inputs used to estimate the fair
      values. The three levels of the fair value hierarchy
are:                                                                                                                                                                       

Level 1  Unadjusted quoted prices in
active markets for identical assets or liabilities;

Level 2  Inputs other than quoted
prices that are observable for the asset or liability either directly or
indirectly; and

Level 3  Inputs that are not based on
observable market data.

There were no transfers between levels
of the fair value hierarchy used in measuring the fair value of financial
instruments during the year ended July 31, 2013.

35

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