---







QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 2014, 2013 AND 2012



(Expressed in Canadian Dollars, unless otherwise stated)



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Shareholders and Directors of Quartz Mountain
Resources Ltd.

We have audited the accompanying consolidated financial
statements of Quartz Mountain Resources Ltd., which comprise the consolidated
statements of financial position as of July 31, 2014 and July 31, 2013, and the
related consolidated statements of loss and comprehensive loss, changes in
equity (deficiency), and cash flows for the years ended July 31, 2014, July 31,
2013, and July 31, 2012 and a summary of significant accounting policies and
other explanatory information.

Managements Responsibility for the Consolidated
Financial Statements

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

Auditors Responsibility

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

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

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





---

Opinion

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of Quartz Mountain
Resources Ltd. as at July 31, 2014 and July 31, 2013 and its financial
performance and its cash flows for the years ended July 31, 2014, July 31, 2013
and July 31, 2012 in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in
the consolidated financial statements which indicate that Quartz Mountain
Resources Ltd. has suffered recurring losses from operations and has a working
capital deficiency. These matters, along with the other matters set forth in
Note 1, indicate the existence of material uncertainties that raises 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                 
|                  |                                       
|October 9, 2014   |                                       

---

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

|                                                        |   | July 31     |   |   | July 31     |  
|------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                        |   | 2014        |   |   | 2013        |  
|                                                        |   |             |   |   |             |  
|ASSETS                                                  |   |             |   |   |             |  
|                                                        |   |             |   |   |             |  
|Current assets                                          |   |             |   |   |             |  
|Cash and cash equivalents
      (note 4(a))             | $ | 1,025,320   |   | $ | 706,393     |  
|Amounts receivable and other assets (note
      5)      |   | 11,504      |   |   | 143,487     |  
|                                                        |   | 1,036,824   |   |   | 849,880     |  
|                                                        |   |             |   |   |             |  
|Restricted cash (note 4(b))                             |   | 38,563      |   |   | 158,387     |  
|Amounts receivable and other
      assets (note 5)      |   | 8,295       |   |   | 440,000     |  
|Mineral property interests (note 6)                     |   | 891,628     |   |   | 1,021,547   |  
|                                                        |   |             |   |   |             |  
|Total assets                                            | $ | 1,975,310   |   | $ | 2,469,814   |  
|                                                        |   |             |   |   |             |  
|LIABILITIES AND SHAREHOLDERS' EQUITY
      (DEFICIENCY) |   |             |   |   |             |  
|                                                        |   |             |   |   |             |  
|Current liabilities                                     |   |             |   |   |             |  
|Amounts
      payable and other liabilities (note 8)    | $ | 6,844       |   | $ | 136,137     |  
|Convertible debenture
      (note 9)                    |   | 600,000     |   |   |            |  
|Flow-through share premium (note 10)                    |   |            |   |   | 35,639      |  
|Due to related parties (note 11)                        |   | 2,957,075   |   |   | 2,421,220   |  
|                                                        |   | 3,563,919   |   |   | 2,592,996   |  
|                                                        |   |             |   |   |             |  
|Convertible debenture (note 9)                          |   |            |   |   | 600,000     |  
|                                                        |   | 3,563,919   |   |   | 3,192,996   |  
|                                                        |   |             |   |   |             |  
|Shareholders' equity (deficiency)                       |   |             |   |   |             |  
|Share
      capital (note 6)                            |   | 26,050,118  |   |   | 26,050,118  |  
|Reserves                                                |   | 592,011     |   |   | 592,011     |  
|Accumulated deficit                                     |   | (28,230,738 | ) |   | (27,365,311 | )
|Total shareholders' equity (deficiency)                 |   | (1,588,609  | ) |   | (723,182    | )
|                                                        |   |             |   |   |             |  
|Total liabilities and shareholders' equity (deficiency) | $ | 1,975,310   |   | $ | 2,469,814   |  

Nature and continuance of operations (note 1) Event after
the reporting period (note 16)

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

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

2

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

|                                                                         |   | For the year ended July 31 |  
|------------------------------------------------------------------------ | - | -------------------------- | -
|                                                                         |   | 2014                       |  
|Expenses (note 12):                                                      |   |                            |  
|Exploration and evaluation                                               | $ | 261,971                    |  
|Assays and analysis                                                      |   | 20,921                     |  
|Drilling                                                                 |   | 90,773                     |  
|Engineering                                                              |   |                           |  
|Environmental                                                            |   | 1,507                      |  
|Geological                                                               |   | 67,687                     |  
|Graphics                                                                 |   | 3,417                      |  
|Property payments                                                        |   | 1,409                      |  
|Site activities                                                          |   | 37,549                     |  
|Socio-economic                                                           |   | 15,750                     |  
|Transportation                                                           |   | 4,770                      |  
|Travel and accommodation                                                 |   | 18,188                     |  
|                                                                         |   |                            |  
|General and
      administration                                         |   | 603,998                    |  
|Conferences and
      travel                                             |   | 8,147                      |  
|Legal, accounting and audit                                              |   | 50,321                     |  
|Office and
      administration                                          |   | 505,061                    |  
|Regulatory, trust and filing                                             |   | 21,904                     |  
|Shareholder
      communications                                         |   | 18,565                     |  
|                                                                         |   |                            |  
|Equity-settled share-based payments (note 7(c))                          |   |                           |  
|                                                                         |   | (865,969                   | )
|Other items                                                              |   |                            |  
|Flow-through
      share premium (note 10)                               |   | 35,639                     |  
|Interest income                                                          |   | 9,225                      |  
|Interest expense                                                         |   | (44,087                    | )
|Foreign exchange loss                                                    |   |                           |  
|Gain on
      disposition of a mineral property interest (note 6(a)(ii)) |   |                           |  
|Tax related to flow-through financing (note 10)                          |   | (235                       | )
|Loss before income tax                                                   |   | (865,427                   | )
|Income tax (note 14)                                                     |   |                           |  
|Loss and comprehensive loss for the year                                 |   | (865,427                   | )
|                                                                         |   |                            |  
|                                                                         |   |                            |  
|Basic and diluted loss per common share                                  | $ | (0.03                      | )
|                                                                         |   |                            |  
|Weighted average number of common shares outstanding                     |   | 27,299,513                 |  

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

3

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

Share Capital
    
    
    ReserveTotalTranslation
    
    
    Equity-settled
    
    
    
    
    
    shareholders'reserve
    
    
    share-based
    
    
    Accumulated
    
    
    equityNumber
    
    
    Amount
    
    
    (note 2
    )
    
    payments
    
    
    deficit
    
    
    (deficiency)Balance at July 31, 2011
    
    13,399,422
    
    $
    29,407,744
    
    $
    (331,903
    )
    $
    
    
    $
    (29,018,774
    )
    $
    57,067Functional currency translation adjustment (note 2)
    
    
    
    
    (9,031,998
    )
    
    331,903
    
    
    
    
    
    8,700,095
    
    
    Balance at August 1, 2011
    
    13,399,422
    
    
    20,375,746
    
    
    
    
    
    
    
    
    (20,318,679
    )
    
    57,067Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,587,805
    )
    
    (3,587,805
    )Equity-settled share-based
      payments (note 7(c))
    
    
    
    
    
    
    
    
    
    
    381,139
    
    
    
    
    
    381,139Shares issued for cash, net of issuance costs
      (note 7(b))
    
    7,183,371
    
    
    3,434,635
    
    
    
    
    
    
    
    
    
    
    
    3,434,635Shares issued for property option payments (note 6)
    
    1,450,000
    
    
    704,000
    
    
    
    
    
    
    
    
    
    
    
    704,000Balance at July 31, 2012
    
    22,032,793
    
    $
    24,514,381
    
    $
    
    
    $
    381,139
    
    $
    (23,906,484
    )
    $
    989,036Balance at August 1, 2012
    
    22,032,793
    
    $
    24,514,381
    
    $
    
    
    $
    381,139
    
    $
    (23,906,484
    )
    $
    989,036Loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,458,827
    )
    
    (3,458,827
    )Equity-settled share-based payments (note
      7(c))
    
    
    
    
    
    
    
    
    
    
    210,872
    
    
    
    
    
    210,872Shares issued for cash, net
      of issuance costs (note 7(b))
    
    2,214,323
    
    
    528,160
    
    
    
    
    
    
    
    
    
    
    
    528,160Shares issued for property option payments (note 6 (a))
    
    3,052,397
    
    
    1,007,577
    
    
    
    
    
    
    
    
    
    
    
    1,007,577Balance at July 31, 2013
    
    27,299,513
    
    $
    26,050,118
    
    $
    
    
    $
    592,011
    
    $
    (27,365,311
    )
    $
    (723,182
    )Balance at August 1, 2013
    
    27,299,513
    
    $
    26,050,118
    
    $
    
    
    $
    592,011
    
    $
    (27,365,311
    )
    $
    (723,182
    )Loss
      for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    (865,427
    )
    
    (865,427
    )Balance at July 31, 2014
    
    27,299,513
    
    $
    26,050,118
    
    $
    
    
    $
    592,011
    
    $
    (28,230,738
    )
    $
    (1,588,609
    )


Theaccompanying notes are anintegralpart of theseconsolidatedfinancialstatements.

4

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

|                                                                                |   | For the year ended July 31 |  
|------------------------------------------------------------------------------- | - | -------------------------- | -
|                                                                                |   | 2014                       |  
|Cash flows from operating
      activities:                                     |   |                            |  
|Loss for the year                                                               | $ | (865,427                   | )
|Adjusted for:                                                                   |   |                            |  
|Equity-settled
      share-based payments (note 7(c))                           |   |                           |  
|Flow-through share premium (note 10)                                            |   | (35,639                    | )
|Gain on disposition of a
      mineral property interest (note 6(a)(ii))        |   |                           |  
|Interest
      income                                                           |   | (9,225                     | )
|Interest expense                                                                |   | 44,087                     |  
|Property
      option payments paid through issuance of shares (note 6(a)(i))   |   |                           |  
|Restricted cash (note
      4(b))                                               |   | 119,824                    |  
|Changes in non-cash working
      capital items:                                |   |                            |  
|Amounts receivable and
      other assets - current                             |   | 131,990                    |  
|Amounts
      receivable and other assets - non-current                         |   | 191,705                    |  
|Amounts payable and other
      liabilities                                     |   | (122,334                   | )
|Due to related parties                                                          |   | 491,076                    |  
|Net
      cash used in operating activities                                     |   | (53,943                    | )
|                                                                                |   |                            |  
|Cash flows from investing activities:                                           |   |                            |  
|Acquisition of the Galaxie Project (note 6(a)(i))                               |   |                           |  
|Disposition of mineral
      property interest (note 6(a)(iii))                 |   | 402,636                    |  
|Interest received                                                               |   | 9,225                      |  
|Net
      cash provided by investing activities                                 |   | 411,861                    |  
|                                                                                |   |                            |  
|Cash flows from financing activities:                                           |   |                            |  
|Proceeds
      from issuance of share capital, net of issuance                  |   |                            |  
|costs (note 7(b))                                                               |   |                           |  
|Principal
      payment on convertible debenture (note 9)                       |   |                           |  
|Interest paid on convertible debenture                                          |   | (38,991                    | )
|Net cash provided by financing activities                                       |   | (38,991                    | )
|                                                                                |   |                            |  
|Increase (decrease) in
      cash and cash equivalents                          |   | 318,927                    |  
|                                                                                |   |                            |  
|Cash and cash equivalents, beginning of year                                    |   | 706,393                    |  
|Cash and cash equivalents, end of year (note 4(a))                              | $ | 1,025,320                  |  
|                                                                                |   |                            |  
|Supplementary cash flow information:                                            |   |                            |  
|Non cash investing and
      financing activities:                              |   |                            |  
|Property option payments
      paid through issuance of shares (note 6(a)(i))   | $ |                           |  
|Property
      acquisition costs paid through issuance of shares (note 6(a)(i)) |   |                           |  
|Property acquisition
      costs paid through issuance of convertible           |   |                            |  
|debenture (note 6(a)(i))                                                        |   |                           |  
|Portion of debenture assumed by Amarc (note
      6(a)(iv))                     |   | (240,000                   | )
|Total                                                                           | $ | (240,000                   | )

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

5

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|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 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, 2014 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, 2014, the Company had cash and cash
equivalents of $1.0 million, a working capital deficit of $2.6 million, and
accumulated losses of $28.2 million since inception. These material
uncertainties cast significant doubt on the ability of the Company to continue
as a going concern.

Of the total current liabilities of
$3.6 million at July 31, 2014, approximately $3.0 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
November 1, 2015. However, there is no guarantee or amended agreement and as
such the amount is presented as a current obligation.

After the reporting period, the Company
entered into an agreement with the holder of its convertible debenture to
restructure the payment terms of the debenture (note 16).

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 Financial Statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

6

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

|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").

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 fiscal year ended July 31, 2014.

Issuance of these Financial Statements
was authorized by the Companys Board of Directors on October 9, 2014.

|(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
management believes are reasonable under the circumstances. Changes in the
subjective inputs and assumptions can materially affect fair value
estimates.

7

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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;

8

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

| |  | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Basis of consolidation
|--- | ----------------------

These consolidated financial statements
include the accounts of the Company and the subsidiaries that it controls.
Control is achieved when the Company is exposed to, or has rights to, variable
returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.

Intercompany balances and transactions,
including any unrealized income and expenses arising from intercompany
transactions, are eliminated upon consolidation.

At July 31, 2014 and July 31, 2013 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   

|(e) | Foreign currency
|--- | ----------------

The functional and presentation
currency of the Company and its subsidiary, as at July 31, 2014, is the Canadian
dollar.

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.

9

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

Non-derivative financial assets:

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

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, restricted cash and cash and cash equivalents, described as follows:

Cash and cash equivalents

Cash and cash equivalents in the
statement of financial position consist of cash and highly liquid investments,
having maturity dates of three months or less from the date of purchase or
redeemable fixed-term deposits which are readily convertible to known amounts of
cash and are subject to an insignificant risk of changes in value. 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.

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.

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.

10

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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 a mineral property 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 impairment has
been determined to have occurred.

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

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.

11

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

|(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 greater of (i)
fair value less costs to sell, and (ii) value in use. Fair value is estimated 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 assessments of the Company's cost of
capital 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 an impairment loss is
recognized in the profit or loss for the period. For an asset that does not
generate largely independent cash inflows, the recoverable amount is determined
for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently
reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but to an amount
that does not exceed the carrying amount that would have been determined had no
impairment loss been recognized for the asset (or cash-generating unit) in prior
years. A reversal of an impairment loss is recognized immediately in profit or
loss.

|(i) | Share capital
|--- | -------------

Common shares are classified as equity.
Transaction costs directly attributable to the issuance of common shares and
share purchase options are recognized as a deduction from equity, net of any tax
effects.

Flowthrough shares

Canadian tax legislation permits mining
entities to issue flowthrough shares to investors. Flowthrough shares are
securities issued to investors whereby the deductions for tax purposes related
to eligible Canadian exploration expenses ("CEE"), as defined in the Income Tax
Act (Canada), may be claimed by investors instead of the entity, pursuant to a
defined renunciation process.

Renunciation may occur:

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

12

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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
|--- | --------------------

Share-based payments to employees and
others providing similar services are measured at the fair value of the
instruments at the grant date. The fair value determined at the grant date is
charged to operations over the vesting period, based on the Company's estimate
of equity instruments that will eventually vest. The Company revises the
estimate on each reporting date and the effect of the change is recognized in
profit or loss.

Share-based payment transactions with
other parties are measured at the fair value of the goods or services received,
except where the fair value cannot be estimated reliably, in which case they are
measured at the fair value of the equity instruments granted, measured at the
date the entity obtains the goods or the counterparty renders the service.

|(l) | Rehabilitation provision
|--- | ------------------------

An obligation to incur rehabilitation
and site restoration costs arises when environmental disturbance is caused by
the exploration, development or ongoing production of a mineral property
interest. Such costs arising from the decommissioning of plant and other site
preparation work, discounted to their net present value, are provided for and
capitalized at the start of each project, as soon as the obligation to incur
such costs arises. These costs are charged against earnings over the life of the
operation.

The Company has no material
rehabilitation and site restoration costs, as the disturbance to date has been
minimal.

|(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.

13

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 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 amounts 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. Directly attributable transaction costs, if
material, are allocated to the liability and equity components in proportion to
their initial carrying amounts.

14

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 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, 2013, 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:

| |  | Amendments to IAS 1, Presentation of Items of
      Other Comprehensive Income
| | - | ------------------------------------------------------------------------------
| |   |                                                                               
| |  | IFRS 13, Fair Value Measurement                                               
| |   |                                                                               
| |  | IAS 19, Employee Benefits                                                     
| |   |                                                                               
| |  | IFRIC 20, Stripping Costs in the Production
      Phase of a Surface Mine     

There was no material impact of the new
and amended accounting standards adopted during the period.

Accounting standards issued but not
yet effective:

Effective for annual periods beginning
on or after January 1, 2014

| |  | Amendments to IAS 32, Financial Instruments 
      Presentation
| | - | ----------------------------------------------------------------
| |   |                                                                 
| |  | Amendments to IAS 36, Impairment of Assets                      

15

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

| |  | Amendments to IAS 39, Financial Instrument 
      Recognition and Measurement
| | - | ------------------------------------------------------------------------------
| |   |                                                                               
| |  | IFRIC 21  Levies                                                             

Effective for annual periods beginning
on or after July 1, 2014

| |  | Amendments to IAS 19, Employee Benefits
| | - | ---------------------------------------

Effective for annual periods beginning
on or after January 1, 2016

| |  | IFRS 14, Regulatory Deferral Accruals                               
| | - | --------------------------------------------------------------------
| |   |                                                                     
| |  | Amendments to IFRS 11, Joint Operations                             
| |   |                                                                     
| |  | Amendments to IAS 16 and IAS 38, Depreciation
      and Amortization

Effective for annual periods beginning
on or after January 1, 2017

| |  | IFRS 15, Revenue from Contracts with Customers
| | - | ----------------------------------------------

Effective for annual periods beginning
on or after January 1, 2018

| |  | IFRS 9, Financial Instruments  Classification
      and Measurement
| | - | --------------------------------------------------------------------

The Company has not early adopted these
new standards, interpretations, or amendments to existing standards, and is
currently assessing the impact that these standards will have on the Company's
Financial Statements.

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

| |                                                       |   | July 31, 2014 |  |   | July 31, 2013 | 
| | ----------------------------------------------------- | - | ------------- |  | - | ------------- | 
| | Business and savings accounts                         | $ | 523,507       |  | $ | 706,393       | 
| | Cash
      held in guaranteed investment certificates |   | 501,813       |  |   |              | 
| | Total                                                 | $ | 1,025,320     |  | $ | 706,393       | 

|(b) | Restricted cash
|--- | ---------------

Restricted cash in the amount of
$38,563 (July 31, 2013  $158,387) consists of guaranteed investment
certificates held in support of explorations permits.

16

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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

| |                                                                             |   | July 31, 2014 |  |   | July 31, 2013 | 
| | --------------------------------------------------------------------------- | - | ------------- |  | - | ------------- | 
| | Current:                                                                    |   |               |  |   |               | 
| | Sales tax receivable                                                        | $ | 4,834         |  | $ | 17,679        | 
| | Prepaid insurance                                                           |   | 6,670         |  |   | 5,808         | 
| | Other receivables                                                           |   |              |  |   | 120,000       | 
| | Total                                                                       | $ | 11,504        |  | $ | 143,487       | 
| |                                                                             |   |               |  |   |               | 
| | Non-current:                                                                |   |               |  |   |               | 
| | Other receivable (note 6(a)(iv))                                            | $ |              |  | $ | 240,000       | 
| | Estimated British Columbia Mineral Exploration Tax Credit
      recoverable |   | 8,295         |  |   | 200,000       | 
| | Total                                                                       | $ | 8,295         |  | $ | 440,000       | 

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

| |                                  |   | July 31, 2014 |  |   | July 31, 2013 | 
| | -------------------------------- | - | ------------- |  | - | ------------- | 
| | Galaxie Project (note 6(a))      | $ | 891,627       |  | $ | 1,021,546     | 
| | Angel's Camp royalty (note 6(b)) |   | 1             |  |   | 1             | 
| | Total                            | $ | 891,628       |  | $ | 1,021,547     | 

17

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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

At July 31, 2014, the Company held a
100% interest in the Galaxie Project located approximately 24 kilometres south
of Dease Lake, BC.

| |                                                                                                                                            |   | Total     |  
| | ------------------------------------------------------------------------------------------------------------------------------------------ | - | --------- | -
| | Estimated fair value of the
      Company's shares issued upon initial acquisition                                                         | $ | 1,002,577 |  
| | Cash payment upon initial acquisition                                                                                                      |   | 50,000    |  
| | Convertible debenture issued to vendor (note 9)                                                                                            |   | 650,000   |  
| | Amount initially recognized as mineral
      property interest (note 6(a)(i))                                                              |   | 1,702,577 |  
| | Disposition of 40% to Galaxie joint arrangement (note 6(a)(ii))                                                                            |   | (681,031  | )
| | Galaxie Project balance as of July 31, 2013                                                                                                |   | 1,021,546 |  
| | Contributions received from
      Amarc (note 6(a)(iii))                                                                                   |   | (402,636  | )
| | Relinquishment of the underlying mineral property interest upon
      termination of the
        Galaxie joint arrangement (note 6(a)(iv)) |   | 272,717   |  
| | Galaxie Project balance as of July 31, 2014                                                                                                | $ | 891,627   |  

|(i) | Initial acquisition
|--- | -------------------

In August 2012, Quartz Mountain
acquired the Galaxie Project from Finsbury Exploration Ltd. ("Finsbury") by:

| |  | issuing 2,038,111 shares with a fair value of
      $672,577 to Finsbury,                           
| | - | ----------------------------------------------------------------------------------------------------
| |   |                                                                                                     
| |  | issuing 1,000,000 shares with a fair value of
      $330,000 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.              

Bearclaw retains a 1% net smelter
returns royalty on a portion of the Galaxie Project known as the Gnat Pass
Property, capped at aggregate payments of $7,500,000 (the "Gnat Pass Royalty
Agreement").

Hotai Claims

In July 2012, the Company acquired the
mineral property interest in the Hotailuh Slope mineral claims (the "Hotai
Claims") located in central British Columbia adjacent to, and forming part of,
the Galaxie Project. During the year ended July 2013, the Company made a cash
payment of $5,000 and issued 14,286 of its common shares with a fair value of
$5,000 under an earn-in agreement for the Hotai Claims. In September 2013, the
earn-in agreement for the Hotai Claims was terminated.

18

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

| | (ii) | November 2012 agreement with Amarc Resources Ltd.
      (Amarc)
| | ---- | -----------------------------------------------------------------

In November 2012, the Company and
Amarc, a publicly traded company with certain directors in common with the
Company, entered into an agreement (the Letter Agreement), pursuant to which
Amarc earned an initial 40% ownership interest (the Initial Interest) in the
Galaxie and ZNT Projects (the Galaxie ZNT Project "), by making a cash payment
of $1,000,000 to the Company (completed) and funding $1,000,000 in exploration
expenditures to be incurred by Quartz Mountain relating to the Galaxie ZNT
Project on or before December 31, 2012 (completed). The Company also granted to
Amarc an option to acquire an additional 10% (for a total of 50%) ownership
interest in the Galaxie ZNT Project, in consideration for Amarc funding an
additional $1,000,000 in exploration expenditures in relation to the Galaxie ZNT
Project, on or before September 30, 2013.

In December 2012, pursuant to the
Letter Agreement and upon satisfaction of the earn-in requirements by Amarc for
its Initial Interest, the Company and Amarc formed an unincorporated entity
subject to the joint control of the Company and Amarc (the Joint Arrangement)
to conduct exploration activities at the Galaxie ZNT Project. The Company
transferred into the Joint Arrangement its interest in the properties and the
Gnat Pass Royalty Agreement. Pursuant to the Joint Arrangement agreement, Amarc
agreed to pay its proportionate share (then 40%) of the principal amount due
under the Debenture, together with interest thereon, on their respective due
dates.

The Company recognized a gain of
$1,578,969 in relation to the 40% disposition of the Galaxie ZNT Project to the
Joint Arrangement.

| | (iii) | 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
continued to be governed by the terms of the November 2012 letter agreement.

Under the Amendment, Amarc had an
option until October 31, 2013 to increase its interest in the Galaxie Joint
Venture from its then-40% interest to a 60% interest by paying to the Company a
cash amount of $235,000 which the Company agreed to use to conduct a surface
exploration program at the Galaxie Project. Amarc also had an option until
October 31, 2013 to increase its interest in the ZNT Joint Venture from its
then-40% interest to a 60% interest by paying to the Company a cash amount of
$210,000 which the Company agreed to use to conduct a trenching and pitting
program at the ZNT Project. Amounts received from Amarc totalling $402,636
pursuant to these funding requirements were recorded as reductions to the
carrying amount of mineral property interest.

| | (iv) | Termination of the joint arrangements with
      Amarc
| | ---- | ------------------------------------------------------

On March 31, 2014 the Company and Amarc
agreed to terminate both the Galaxie Joint Venture and the ZNT Joint Venture.
Pursuant to the terms of the termination of the joint arrangements, Amarc was
released from all obligations of the unincorporated entities and relinquished
its interests in the underlying mineral assets to the Company.

19

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

Consequently, the Company recorded an
increase of $272,717 in mineral property interest in the Galaxie Project,
representing Amarcs share (40%) of the liabilities of the Galaxie Joint Venture
assumed by the Company, net of Amarcs share of certain financial assets of the
Galaxie Joint Venture, as summarized below:

| | Debenture obligation                                   | $ | 240,000 |  
| | ------------------------------------------------------ | - | ------- | -
| | Balances due to a related party                        |   | 44,779  |  
| | Other financial assets                                 |   | (12,062 | )
| | Increase in the carrying amount of the Galaxie Project | $ | 272,717 |  

|(b) | 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.

The royalty has been recorded at a
nominal amount of $1.

|7.  | CAPITAL ANDRESERVES     
|--- | ------------------------
|    |                         
|(a) | Authorized share capital

At July 31, 2014, 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.

20

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

Reconciliation of changes in share
capital:

| | Issued share capital                                                 |  | Number of  |  |   | Amount     |  
| | -------------------------------------------------------------------- |  | ---------- |  | - | ---------- | -
| |                                                                      |  | common     |  |   |            |  
| |                                                                      |  | shares     |  |   |            |  
| | 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 (note 7(b))       |  | 461,914    |  |   | 115,479    |  
| | Flowthrough shares issued for cash, December
      2012 (note 7(b)) |  | 1,752,409  |  |   | 525,723    |  
| | Recorded as flowthrough
      share premium liability (note 10)     |  |           |  |   | (87,620    | )
| | Share issuance costs, December 2012 (note
      7(b))                |  |           |  |   | (25,422    | )
| | Shares issued for property acquisition (note 7(a)(i))                |  | 3,052,397  |  |   | 1,007,577  |  
| | Balance at July 31, 2013                                             |  | 27,299,513 |  | $ | 26,050,118 |  
| | Balance at July 31, 2014                                             |  | 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 " 2012 Private Placement") of 2,214,323
common shares for aggregate gross proceeds of $641,202. The 2012 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 2012 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.

21

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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

|(c) | Equity-Settled Share-Based
  Payments
|--- | -------------------------------------

The Company has a share purchase option
plan (the 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 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.

The following summarizes the changes in
the Company's share purchase options for the years ended July 31, 2014, 2013 and
2012:

| |                                                                           |  | Number of   |   |   | Weighted         | 
| | ------------------------------------------------------------------------- |  | ----------- | - | - | ---------------- | 
| |                                                                           |  | options     |   |   | average exercise | 
| | Continuity of share options for the year ended July 31,
      2014        |  | outstanding |   |   | price            | 
| | Share purchase options outstanding at July
      31, 2013                 |  | 1,705,800   |   | $ | 0.45             | 
| | Forfeited during the year                                                 |  | (118,800    | ) | $ | 0.45             | 
| | Share purchase options outstanding and exercisable at July 31,
      2014 |  | 1,587,000   |   | $ | 0.45             | 

22

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

| |                                                                           |  | Number of   |   |   | Weighted         | 
| | ------------------------------------------------------------------------- |  | ----------- | - | - | ---------------- | 
| |                                                                           |  | options     |   |   | average exercise | 
| | Continuity of share options for the year ended July 31,
      2013        |  | outstanding |   |   | price            | 
| | 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 and exercisable at July 31,
      2013 |  | 1,705,800   |   | $ | 0.45             | 

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

The weighted average contractual
remaining life of the share purchase options outstanding at July 31, 2014 was
1.5 years (2013  2.5 years).

The share-based payments expense
recorded in the year ended July 31, 2013 represented the amortization of the
fair value of options granted in fiscal 2012 over their remaining vesting term;
those options were fair valued at $0.34 per option based on the Black-Scholes
option pricing model using the following weighted average assumptions: 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.

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

| |                     |   |       |  |   | Year ended July 31 | 
| | ------------------- | - | ----- |  | - | ------------------ | 
| |                     |   | 2014  |  |   | 2013               | 
| | Amounts payable     | $ | 6,438 |  | $ | 125,268            | 
| | Accrued liabilities |   | 406   |  |   | 10,869             | 
| | Total               | $ | 6,844 |  | $ | 136,137            | 

23

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

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

| | Convertible debenture issued,
      August 2013                          | $ | 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 | )
| | Balance, July 31, 2013 and July 31, 2014                                 | $ | 600,000 |  

Pursuant to the purchase of the Galaxie
Project (note 6(a)(i)), the Company issued an unsecured $650,000 convertible
debenture (the Debenture) to Bearclaw as part of the purchase price.

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 on the Debenture is payable
quarterly in arrears and the principal sum of Debenture, along with any unpaid
interest, is convertible at the option of the debenture holder into the
Company's common shares at $0.15 per share (previously $0.40 per share) on or
before maturity of the Debenture on October 31, 2014. Upon initial recognition
of the Debenture, management estimated that the residual value attributable to
the conversion option was nominal.

After the reporting period, the Company
entered into an agreement with Bearclaw to restructure the terms of the
debenture (note 16).

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

| | Balance, July 31, 2011                                             | $ |         |  
| | ------------------------------------------------------------------ | - | -------- | -
| | Recognized as liability upon issuance of
      flow-through shares |   | 604,317  |  
| | Derecognized upon eligible expenditures incurred                   |   | (193,308 | )
| | Balance, July 31, 2012                                             |   | 411,009  |  
| | Recognized as liability upon
      issuance of flow-through shares |   | 87,620   |  
| | Derecognized upon eligible expenditures incurred                   |   | (462,990 | )
| | Balance July 31, 2013                                              |   | 35,639   |  
| | Derecognized upon eligible expenditures incurred                   |   | (35,639  | )
| | Balance, July 31, 2014                                             | $ |         |  

Pursuant to the Private Placement of
the flow-through shares (note 7(b)) and in accordance with the Income Tax Act
(Canada), the Company was obligated to spend the Flow-through Funds on 24

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

eligible Canadian Exploration Expenses
("CEE") prior to December 31, 2013 (completed) and renounce them to the
investors (completed).

|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, 2014,
2013 and 2012, the Company compensated key management personnel as follows:

| |                                                                           |   |         |  |   | Year ended July 31 | 
| | ------------------------------------------------------------------------- | - | ------- |  | - | ------------------ | 
| |                                                                           |   | 2014    |  |   | 2013               | 
| | Short-term employee benefits,
      including salaries and directors fees | $ | 169,096 |  | $ | 420,943            | 
| | Equity-settled share-based payments                                       |   |        |  |   | 84,589             | 
| | Total                                                                     | $ | 169,096 |  | $ | 505,532            | 

Short-term employee benefits include
salaries, directors fees and amounts paid to HDSI (note 11(b)) for services
provided to the Company by certain HDSI personnel who serve as directors or
officers of the Company.

|(b) | Entities with Significant Influence over the
      Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company's management believes that Hunter Dickinson
      Services Inc. ("HDSI"), a private entity, has the power to participate in
      the financial or operating policies of the Company. Scott Cousens, Robert
      Dickinson, and Ronald Thiessen, are directors of both the Company and
      HDSI. Pursuant to a management agreement between the Company and HDSI
      dated July 2, 2010, the Company receives geological, engineering,
      corporate development, administrative, management and shareholder
      communication services from HDSI. These services are provided based on
      annually set rates. HDSI also incurs third party costs on behalf of the
      Company on full-cost recovery basis.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Transactions with these related parties were as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                                      |   |         |  |   | Year ended July 31 | 
| | -------------------------------------------------------------------- | - | ------- |  | - | ------------------ | 
| |                                                                      |   | 2014    |  |   | 2013               | 
| | HDSI: Services received based
      on management services agreement | $ | 511,241 |  | $ | 2,462,779          | 
| | HDSI: Reimbursement of third party expenses paid                     |   | 24,151  |  |   | 122,318            | 

25

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

Outstanding balances were as
follows:

| |                         |   | July 31, 2014 |  |   | July 31, 2013 | 
| | ----------------------- | - | ------------- |  | - | ------------- | 
| | Balance payable to HDSI | $ | 2,957,075     |  | $ | 2,421,220     | 

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 November 1, 2015.

|12. | EMPLOYEESBENEFITEXPENSES
|--- | ------------------------

The amount of employees' salaries and
benefits included in various expenses are as follows:

| |                                           |   |         |  |   | Year ended July 31 | 
| | ----------------------------------------- | - | ------- |  | - | ------------------ | 
| |                                           |   | 2014    |  |   | 2013               | 
| | Exploration and evaluation
      expenses | $ | 120,495 |  | $ | 1,332,985          | 
| | General and administration expenses       |   | 408,306 |  |   | 1,071,064          | 
| | Equity-settled share-based payment        |   |        |  |   | 210,872            | 
| | Total                                     | $ | 528,801 |  | $ | 2,614,921          | 

|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,
2014, the Company had unused non-capital loss carry forwards of approximately
$4,459,000 (2013  $4,489,000, 2012  $2,901,000) in Canada and $40,000 (2013 
$21,000, 2012  $37,000) in the United States.

26

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

The Company had approximately
$4,343,000 (2013  $4,519,000, 2012  $4,550,000) of resource tax pools
available, which may be used to shelter certain resource income. Reconciliation
of effective tax rate:

| |                           |   |          |   |   | Year ended July 31 |  
| | ------------------------- | - | -------- | - | - | ------------------ | -
| |                           |   | 2014     |   |   | 2013               |  
| | Loss for the period       | $ | (865,427 | ) | $ | (3,458,827         | )
| | Income tax expense        |   |         |   |   |                   |  
| | Loss excluding income tax | $ | (865,427 | ) | $ | (3,458,827         | )

| | Income tax recovery using the
      Company's domestic tax rate | $ | (225,000 | ) | $ | (874,000 | ) | $ | (919,000 | )
| | --------------------------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
| | Non-deductible expenses and other                               |   | 147,000  |   |   | 693,000  |   |   | 310,000  |  
| | Change in deferred tax rates                                    |   |         |   |   | (77,000  | ) |   |         |  
| | Differences in statutory tax rates                              |   | (2,000   | ) |   | (9,000   | ) |   | 16,000   |  
| | Changes in unrecognized
      temporary differences             |   | 80,000   |   |   | 267,000  |   |   | 594,000  |  
| | Differences due to foreign exchange                             |   |         |   |   |         |   |   | (1 000   | )
| |                                                                 | $ |         |   | $ |         |   | $ |         |  

The Company's domestic tax rate during
the year ended July 31, 2014 was 26.0% (2013  25.33%, 2012  25.6%) and the
effective tax rate was nil (2013  nil, 2012  nil).

As at July 31, 2014, the Company had
the following balances in respect of which no deferred tax assets had been
recognized:

| |                      |   |            |  |   | Resource  |  |   | Equipment | 
| | -------------------- | - | ---------- |  | - | --------- |  | - | --------- | 
| | Expiry:              |   | Tax losses |  |   | pools     |  |   | and other | 
| | Within one year      | $ | 131,000    |  | $ |          |  | $ |          | 
| | One to five years    |   | 8,000      |  |   |          |  |   | 78,000    | 
| | After five years     |   | 4,760,000  |  |   |          |  |   | 82,000    | 
| | No
      expiry date |   |           |  |   | 3,439,000 |  |   | 114,000   | 
| |                      | $ | 4,899,000  |  | $ | 3,439,000 |  | $ | 274,000   | 

|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:

27

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 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, 2014 |  |   | July 31, 2013   | 
| | Cash and cash equivalents
      (note 4(a))                 | $ | 1,025,320     |  | $ | 706,393         | 
| | Amounts receivable (current and non-current)
      (note 5) |   | 4,834         |  |   | 577,679         | 
| | Restricted cash (note 4(b))                                 |   | 38,563        |  |   | 158,387         | 
| | Total                                                       | $ | 1,068,717     |  | $ | 1,442,459       | 

|(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, 2014:

| |                                                      |   |           |  |   |             |  |   | Payments due by period | 
| | ---------------------------------------------------- | - | --------- |  | - | ----------- |  | - | ---------------------- | 
| |                                                      |   |           |  |   | Less than 1 |  |   |                        | 
| |                                                      |   | Total     |  |   | year        |  |   | 1-5 years              | 
| | Amounts payable and other
      liabilities (note 8) | $ | 6,844     |  | $ | 6,844       |  | $ |                       | 
| | Convertible debenture (note 9)                       |   | 600,000   |  |   | 600,000     |  |   |                       | 
| | Due to related parties (note 11)                     |   | 2,957,075 |  |   |            |  |   | 2,957,075              | 
| | Total                                                | $ | 3,563,919 |  | $ | 606,844     |  | $ | 2,957,075              | 

The Company has received a confirmation
from HDSI (note 11(b)) that HDSI will continue to provide services to the
Company and will not demand repayment of amounts outstanding, prior to November
1, 2015.

28

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

After the reporting period, the Company
entered into an agreement with the holder of its convertible debenture to
restructure the payment terms of the debenture (note 16).

The following obligations existed at
July 31, 2013:

| |                                                      |   |           |  |   |           |  |   | Payments due by period | 
| | ---------------------------------------------------- | - | --------- |  | - | --------- |  | - | ---------------------- | 
| |                                                      |   |           |  |   | Less than |  |   |                        | 
| |                                                      |   | Total     |  |   | 1 year    |  |   | 1-5 years              | 
| | Amounts payable and other
      liabilities (note 8) | $ | 136,137   |  | $ | 136,137   |  | $ |                       | 
| | Convertible debenture (note 9)                       |   | 600,000   |  |   |          |  |   | 600,000                | 
| | Due to related parties (note 11)                     |   | 2,421,220 |  |   | 2,421,220 |  |   |                       | 
| | Total                                                | $ | 3,157,357 |  | $ | 2,557,357 |  | $ | 600,000                | 

|(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, 2014 of approximately $900 (2013  $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.

29

---

|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

|(d) | Capital management
objectives
|--- | -----------------------------

The Company's primary objectives when
managing capital are to safeguard the Company's ability to continue as a going
concern, so that it can continue to provide returns for shareholders, and to
have sufficient liquidity available to fund ongoing expenditures and suitable
business opportunities as they arise.

The Company considers the components of
shareholders' equity as 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, 2014.

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 their carrying amount.

|16. | EVENTS AFTER THE REPORTING
  PERIOD
|--- | -----------------------------------

After the end of the reporting period,
effective October 1, 2014, the Company and Bearclaw amended the terms of the
Debenture (note 9) (hereafter referred to as the Amended Debenture) pursuant
to which, on October 8, 2014, the Company made a payment of $50,000 to Bearclaw
against the principal sum of the Debenture and the remaining balance of $550,000
(the Principal Sum) was rendered payable in equal annual installments of
$50,000, commencing on January 31, 2015 and thereafter on or before January 31
of each subsequent year until the Principal Sum is fully repaid. Effective
October 1, 2014, the Principal Sum outstanding will bear interest at 7.5% per
annum, payable quarterly in arrears.

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|Quartz Mountain Resources Ltd.                                
|--------------------------------------------------------------
|Notes to the Consolidated Financial Statements                
|For the years ended July 31, 2014, 2013 and 2012              
|(Expressed in
      Canadian Dollars, unless otherwise stated)

Upon a completion by the Company of an
equity financing (the New Financing) for a minimum amount of $1,000,000, at
least 50% of any outstanding balance of the Principal Sum along with any
interest accrued thereon will be automatically converted (the Automatic
Conversion) into the Companys common shares. Bearclaw may elect to convert,
concurrent to the Automatic Conversion, any portion of the remaining 50% of
outstanding balance of the Principal Sum and accrued interest thereon (the
Optional Conversion). For the purposes of Automatic Conversion and Optional
Conversion of any principal sum, subject to the rules and policies of the TSX
Venture Exchange the conversion price will be determined as greater of (i) the
volume-weighted average trading price (VWAP) of Common Shares
of the Company on the Exchange for the 20 consecutive trading days ending on the
fifth trading day preceding the date of such conversion and (ii) the price at
which the Company issues common shares pursuant to the New Financing. For the
purposes of Automatic Conversion and Optional Conversion of any accrued
interest, the conversion price will be the market price of the Companys common
shares on the date of conversion. Except pursuant to the Automatic Conversion
and Optional Conversion provisions, Bearclaw does not have an option to convert
the New Debenture into the Companys common shares.

31

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