---

QUARTZ MOUNTAIN RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS(Stated in United States dollars)

JULY 31, 2004

---

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

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of 
  Quartz Mountain Resources Ltd.

We have audited the consolidated balance sheets of Quartz
  Mountain Resources Ltd. as at July 31, 2004 and 2003 and the consolidated statements
  of operations, shareholders' equity (deficiency) and cash flows for the years
  ended July 31, 2004, 2003 and 2002. These financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2004 and 2003 and the results of its operations and its cash flows
  for the years ended July 31, 2004, 2003 and 2002 in accordance with Canadian
  generally accepted accounting principles.

"DAVIDSON & COMPANY"

|Vancouver, Canada | Chartered Accountants
|----------------- | ---------------------
|                  |                      
|November 25, 2004 |                      

A Member of SCINTERNATIONAL


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

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  CONSOLIDATED BALANCE SHEETS 
  (Stated in United States dollars) 
  As at July 31

|                                                          |   | 2004        |   |   | 2003        |  
|--------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                          |   |             |   |   |             |  
|                                                          |   |             |   |   |             |  
|Assets                                                    |   |             |   |   |             |  
|                                                          |   |             |   |   |             |  
|Current assets                                            |   |             |   |   |             |  
|Cash and cash equivalents                                 | $ | 686,386     |   | $ | 490,353     |  
|Receivables, net of allowance of $Nil
      (2003 - $Nil) |   | 7,311       |   |   | 8,741       |  
|                                                          |   |             |   |   |             |  
|Total current assets                                      |   | 693,697     |   |   | 499,094     |  
|                                                          |   |             |   |   |             |  
|Mineral properties(Note 3)                                |   | -           |   |   | 21,001      |  
|                                                          |   |             |   |   |             |  
|Total assets                                              | $ | 693,697     |   | $ | 520,095     |  
|                                                          |   |             |   |   |             |  
|                                                          |   |             |   |   |             |  
|Liabilities and Shareholders’ Equity                      |   |             |   |   |             |  
|                                                          |   |             |   |   |             |  
|Current liabilities                                       |   |             |   |   |             |  
|Accounts payable and accrued liabilities                  | $ | 19,477      |   | $ | 27,725      |  
|Accounts payable, related parties                         |   | 3,372       |   |   | 817         |  
|                                                          |   |             |   |   |             |  
|Total current liabilities                                 |   | 22,849      |   |   | 28,542      |  
|                                                          |   |             |   |   |             |  
|Shareholders’ equity                                      |   |             |   |   |             |  
|Share capital (Note 4)                                    |   |             |   |   |             |  
|Authorized                                                |   |             |   |   |             |  
|60,000,000
      common shares without par value          |   |             |   |   |             |  
|Issued and fully paid                                     |   |             |   |   |             |  
|11,178,315
      common shares (2003 – 9,643,315)         |   | 20,627,632  |   |   | 20,366,625  |  
|Contributed surplus (Note 4)                              |   | 64,032      |   |   | 9,492       |  
|Deficit                                                   |   | (20,020,816 | ) |   | (19,884,564 | )
|                                                          |   |             |   |   |             |  
|Total shareholders’ equity                                |   | 670,848     |   |   | 491,553     |  
|                                                          |   |             |   |   |             |  
|Total liabilities and shareholders’ equity                | $ | 693,697     |   | $ | 520,095     |  

Approved by the Board:

|“David S. Jennings” | Director | “Brian F. Causey” | Director
|------------------- | -------- | ----------------- | --------

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

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  CONSOLIDATED STATEMENTS OF OPERATIONS 
  (Stated in United States dollars) 
  Year ended July 31

|                                                                              |   | 2004       |   |   | 2003      |   |   | 2002      |  
|----------------------------------------------------------------------------- | - | ---------- | - | - | --------- | - | - | --------- | -
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|EXPENSES (INCOME)                                                             |   |            |   |   |           |   |   |           |  
|Administrative expenses (Note 5)                                              | $ | 62,963     |   | $ | 10,434    |   | $ | 11,155    |  
|Regulatory and transfer agent                                                 |   | 22,338     |   |   | 17,023    |   |   | 8,076     |  
|Professional fees (Note 5)                                                    |   | 16,637     |   |   | 7,550     |   |   | 5,769     |  
|Land maintenance fees                                                         |   | -          |   |   | -         |   |   | 6,700     |  
|Foreign exchange loss (gain)                                                  |   | (22,225    | ) |   | (40,487   | ) |   | 9,258     |  
|Mineral property investigations                                               |   | 44,848     |   |   | -         |   |   | -         |  
|Gain on sale of mineral property                                              |   | -          |   |   | -         |   |   | (195,505  | )
|Write-off of mineral property (Note 3)                                        |   | 23,296     |   |   | 1,271     |   |   | -         |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   | 147,857    |   |   | (4,209    | ) |   | (154,547  | )
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|OTHER ITEMS                                                                   |   |            |   |   |           |   |   |           |  
|Interest and other income                                                     |   | 11,605     |   |   | 11,762    |   |   | 2,354     |  
|Gain on disposal of investment in shares
      (Note 3)                       |   | -          |   |   | -         |   |   | 302,942   |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   | 11,605     |   |   | 11,762    |   |   | 305,296   |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|Income (loss) for the year                                                    | $ | (136,252   | ) | $ | 15,971    |   | $ | 459,843   |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|Basic and diluted earnings (loss) per common share                            | $ | (0.01      | ) | $ | 0.01      |   | $ | 0.05      |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|                                                                              |   |            |   |   |           |   |   |           |  
|Weighted average number of common shares outstanding,
      basic and diluted |   | 10,091,648 |   |   | 9,117,231 |   |   | 8,584,807 |  

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

---

QUARTZ MOUNTAIN RESOURCES LTD.
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY)
  (Stated in United States dollars)
  Year ended July 31

|                       |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|---------------------- | ---------------- |  | ----- |  | - | ------------- |  | - | ----------- |  | - | ----------- | - | - | -------- | -
|                       |                  |  |       |  |   | Common Shares |  |   |             |  |   |             |   |   |          |  
|                       | Number of Shares |  | Price |  |   | Issued and    |  |   | Contributed |  |   | Deficit     |   |   | Total    |  
|                       |                  |  |       |  |   | Outstanding   |  |   | Surplus     |  |   |             |   |   |          |  
|                       |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, July 31, 2001 | 8,572,204        |  |       |  | $ | 20,298,625    |  | $ | -           |  | $ | (20,360,378 | ) | $ | (61,753  | )
|Mineral property       | 25,000           |  | 0.051 |  |   | 1,271         |  |   | -           |  |   | -           |   |   | 1,271    |  
|Income for the year    | -                |  |       |  |   | -             |  |   | -           |  |   | 459,843     |   |   | 459,843  |  
|                       |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, July 31, 2002 | 8,597,204        |  |       |  |   | 20,299,896    |  |   | -           |  |   | (19,900,535 | ) |   | 399,361  |  
|Private placement,     | 711,111          |  | 0.071 |  |   | 40,895        |  |   | 9,492       |  |   | -           |   |   | 50,387   |  
|less issuance costs    |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Exercise of warrants   | 260,000          |  | 0.074 |  |   | 19,265        |  |   | -           |  |   | -           |   |   | 19,265   |  
|Mineral property       | 75,000           |  | 0.088 |  |   | 6,569         |  |   | -           |  |   | -           |   |   | 6,569    |  
|Income for the year    | -                |  |       |  |   | -             |  |   | -           |  |   | 15,971      |   |   | 15,971   |  
|                       |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, July 31, 2003 | 9,643,315        |  |       |  |   | 20,366,625    |  | $ | 9,492       |  |   | (19,884,564 | ) |   | 491,553  |  
|Private placement,     | 1,510,000        |  | 0.210 |  |   | 258,712       |  |   | 54,540      |  |   | -           |   |   | 313,252  |  
|less issuance costs    |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Mineral property       | 25,000           |  | 0.092 |  |   | 2,295         |  |   | -           |  |   | -           |   |   | 2,295    |  
|Loss for the year      | -                |  |       |  |   | -             |  |   | -           |  |   | (136,252    | ) |   | (136,252 | )
|                       |                  |  |       |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, July 31, 2004 | 11,178,315       |  |       |  | $ | 20,627,632    |  | $ | 64,032      |  | $ | (20,020,816 | ) | $ | 670,848  |  

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

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
  (Stated in United States dollars) 
  Year ended July 31

|                                                                |   | 2004     |   |   | 2003    |   |   | 2002     |  
|--------------------------------------------------------------- | - | -------- | - | - | ------- | - | - | -------- | -
|                                                                |   |          |   |   |         |   |   |          |  
|                                                                |   |          |   |   |         |   |   |          |  
|Cash flows from operating activities                            |   |          |   |   |         |   |   |          |  
|Income (loss) for the year                                      | $ | (136,252 | ) | $ | 15,971  |   | $ | 459,843  |  
|Items not affecting working capital                             |   |          |   |   |         |   |   |          |  
|Gain on disposal of investment in shares                        |   | -        |   |   | -       |   |   | (302,942 | )
|Gain on sale of mineral property                                |   | -        |   |   | -       |   |   | (195,505 | )
|Write-off of mineral property                                   |   | 23,296   |   |   | 1,271   |   |   | -        |  
|                                                                |   |          |   |   |         |   |   |          |  
|Changes in non-cash working capital items                       |   |          |   |   |         |   |   |          |  
|(Increase) decrease in receivable                               |   | 1,430    |   |   | (1,645  | ) |   | 569      |  
|                                                                |   |          |   |   |         |   |   |          |  
|Increase (decrease) in accounts payable and accrued liabilities |   | (8,248   | ) |   | 2,541   |   |   | (4,172   | )
|                                                                |   |          |   |   |         |   |   |          |  
|Increase (decrease) in accounts payable, related parties        |   | 2,555    |   |   | (57,192 | ) |   | 7,154    |  
|                                                                |   |          |   |   |         |   |   |          |  
|Net cash used in operating activities                           |   | (117,219 | ) |   | (39,054 | ) |   | (35,053  | )
|                                                                |   |          |   |   |         |   |   |          |  
|Cash flows from investing activities                            |   |          |   |   |         |   |   |          |  
|Mineral properties                                              |   | -        |   |   | (14,432 | ) |   | -        |  
|Cash received on disposal of marketable securities              |   | -        |   |   | -       |   |   | 513,862  |  
|Cash received on sale of mineral property                       |   | -        |   |   | -       |   |   | 100,000  |  
|Cash paid for investment in marketable securities               |   | -        |   |   | -       |   |   | (115,412 | )
|                                                                |   |          |   |   |         |   |   |          |  
|Net cash provided by (used in) investing activities             |   | -        |   |   | (14,432 | ) |   | 498,450  |  
|                                                                |   |          |   |   |         |   |   |          |  
|Cash flows from financing activities                            |   |          |   |   |         |   |   |          |  
|Issue of common shares, net of issuance costs                   |   | 313,252  |   |   | 69,652  |   |   | -        |  
|Net cash provided by financing activities                       |   | 313,252  |   |   | 69,652  |   |   | -        |  
|                                                                |   |          |   |   |         |   |   |          |  
|Increase in cash and cash equivalents                           |   | 196,033  |   |   | 16,166  |   |   | 463,397  |  
|                                                                |   |          |   |   |         |   |   |          |  
|Cash and cash equivalents, beginning of year                    |   | 490,353  |   |   | 474,187 |   |   | 10,790   |  
|                                                                |   |          |   |   |         |   |   |          |  
|Cash and cash equivalents, end of year                          | $ | 686,386  |   | $ | 490,353 |   | $ | 474,187  |  
|                                                                |   |          |   |   |         |   |   |          |  
|Cash paid during the year for interest                          | $ | -        |   | $ | -       |   | $ | -        |  
|Cash paid during the year for income taxes                      |   | -        |   |   | -       |   |   | -        |  
|                                                                |   |          |   |   |         |   |   |          |  

|The components of cash and cash equivalents are
      as follows: |   |         |  |   |         |  |   |         | 
|----------------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|Cash                                                              | $ | 22,327  |  | $ | 24,585  |  | $ | 4,362   | 
|Bonds                                                             |   | 79,959  |  |   | 89,201  |  |   | 88,048  | 
|Bankers acceptance                                                |   | 584,100 |  |   | 376,567 |  |   | 381,777 | 
|                                                                  |   |         |  |   |         |  |   |         | 
|                                                                  | $ | 686,386 |  | $ | 490,353 |  | $ | 474,187 | 

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

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|1. | CONTINUING OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Quartz Mountain Resources Ltd. (the “Company”)
        is a Canadian company incorporated in British Columbia. The Company is
        primarily engaged in the acquisition and exploration of mineral properties
        in British Columbia, Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements are prepared
        in accordance with accounting principles applicable to a going concern.
        The Company is in the exploration stage and has not, as yet, achieved
        commercial production. The continuing operations of the Company and the
        recoverability of the amounts shown for interests in mineral properties
        are dependent upon the continued support from the Company’s significant
        shareholders, the existence of economically recoverable reserves, the
        ability of the Company to obtain financing to complete development of
        the properties, on the outcome or timing of legislative or regulatory
        developments relating to environmental protection, and on future profitable
        operations or proceeds from the disposition thereof.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company’s working capital at July 31,
        2004, is sufficient to meet the Company’s objectives as presently
        planned. Management recognizes that the Company must generate additional
        resources to enable it to continue operations. Management’s plans
        also include consideration of alliances or other partnership agreements
        with entities interested in and with resources to support the Company’s
        exploration and development objectives, or other business transactions
        which would generate sufficient resources to assure continuation of the
        Company’s operations and exploration and development program. However,
        there can be no assurances that the Company will achieve profitability
        or positive cash flows.                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | If the Company is unable to obtain adequate additional
        financing or enter into business alliances, management will be required
        to curtail the Company’s operations and exploration and development
        activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in
        Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The presentation of consolidated financial statements
        in conformity with Canadian generally accepted accounting principles requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets
        and liabilities at the date of the financial statements and the reported
        amounts of revenue and expenses during the reporting period. Significant
        areas requiring the use of management estimates relate to the determination
        of impairment of assets, reclamation obligations and rates for amortization.
        Actual results could differ from those estimates.                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These consolidated financial statements include
        the accounts of the Company, Quartz Mountain Gold Inc., a wholly-owned
        subsidiary incorporated in the State of Nevada, and the latter company's
        wholly-owned subsidiary, Wavecrest Resources Inc. (“Wavecrest”),
        a company incorporated in the State of Delaware.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | All significant inter-company transactions have
        been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  (Stated in United States dollars) 
  July 31, 2004

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Cash and cash equivalents include highly liquid investments with original
      maturities of three months or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company’s financial instruments consist
        of cash and cash equivalents, receivables, accounts payable and accrued
        liabilities and accounts payable, related parties. Unless otherwise noted,
        it is management’s opinion that the Company is not exposed to significant
        interest, currency or credit risks arising from these financial instruments.
        The fair value of these financial instruments approximates their carrying
        values due to their short term nature.                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Allowance for receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company establishes an allowance for receivables
        on a specific account basis. No allowance for receivables was recorded
        by the Company as at July 31, 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Interests in mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Property acquisition costs and exploration and development
        costs are capitalized until the property to which they relate is placed
        into production, sold, abandoned or management has determined there to
        be an impairment in value. These costs are to be charged to future operations
        on a unit-of-production basis following commencement of production using
        estimated recoverable reserves of the property as a base or written off
        if the property is sold, abandoned or where there is an impairment in
        value. Proceeds received on options for mineral properties are credited
        against mineral property acquisition costs and exploration and development
        costs of the related mineral properties.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On an on-going basis, the Company evaluates each
        property based on results to date to determine the nature of exploration
        and development work that is warranted in the future. If there is little
        prospect of further work on a property being carried out, the deferred
        costs related to that property are written down to the estimated amount
        recoverable.                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Translation of foreign currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Monetary assets and liabilities are translated at
        the exchange rate in effect at the balance sheet date and non-monetary
        assets and liabilities at the rate in effect at the time of acquisition
        or issue. Revenues and expenses are translated at rates approximating
        exchange rates in effect at the time of the transactions. Gains or losses
        arising on currency translation are included in operations in the year
        they occur.                                                                                                                                                                                                                                                                                               

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Future income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Future income taxes are recorded using the asset
        and liability method. Under the asset and liability method, future tax
        assets and liabilities are recognized for the future tax consequences
        attributable to differences between the financial statement carrying amounts
        of existing assets and liabilities and their respective tax bases. Future
        tax assets and liabilities are measured using the enacted or substantively
        enacted tax rates expected to apply when the asset is realized or the
        liability settled. The effect on future tax assets and liabilities of
        a change in tax rates is recognized in income in the period that substantive
        enactment or enactment occurs. To the extent that the Company does not
        consider it more likely than not that a future tax asset will be recovered,
        it provides a valuation allowance against the excess.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Shares issued for other than cash consideration
        are recorded at the fair market value based upon the trading price of
        the shares on the date the agreement to issue the shares was reached.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Effective August 1, 2002, the Company adopted CICA
        Handbook Section 3870 “Stock-Based Compensation and Other Stock-Based
        Payments”, which establishes standards for the recognition, measurement
        and disclosure of stock-based compensation and other stock-based payments
        made in exchange for goods and services. Direct awards of stock granted
        to employees are recorded at fair value on the date of grant and the associated
        expense is amortized over the vesting period. During the current year,
        no stock options were granted.                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company uses the treasury stock method to compute
        the dilutive effect of options, warrants and similar instruments. Under
        this method the dilutive effect on earnings per share is recognized on
        the use of the proceeds that could be obtained upon exercise of options,
        warrants and similar instruments. It assumes that the proceeds would be
        used to purchase common shares at the average price during the period.
        For the years presented, this calculation proved to be anti-dilutive.
        At July 31, 2004, 2003 and 2002, the total number of potentially dilutive
        shares excluded from loss per share was 2,221,111; 711,111, and 260,000,
        respectively.                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Basic earnings (loss) per share is calculated using
        the weighted-average number of shares outstanding during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Comparative figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Where necessary, prior year’s figures have
        been reclassified to conform with the current year’s presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|3. | MINERAL PROPERTIES |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|-- | ------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | - | - | ------
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2004    |   |   | 2003  
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    | Newton Hill Property, British Columbia (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |   |   |       
|   |                    | Acquisition costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         |   |   |       
|   |                    | Balance, beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $ | -       |   | $ | 1,271 
|   |                    | Written-off during the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | -       |   |   | (1,271
|   |                    | Balance, end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | -       |   |   | -     
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    | Ample-Goldmax Property, British
      Columbia (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |         |   |   |       
|   |                    | Acquisition costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         |   |   |       
|   |                    | Balance, beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 12,915  |   |   | -     
|   |                    | Incurred during the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2,295   |   |   | 12,915
|   |                    | Written- off during the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (15,210 | ) |   | -     
|   |                    | Balance, end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | -       |   |   | 12,915
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    | Exploration costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         |   |   |       
|   |                    | Balance, beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 8,086   |   |   | -     
|   |                    | Incurred during the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | -       |   |   | 8,086 
|   |                    | Written-off during the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (8,086  | ) |   | -     
|   |                    | Balance, end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | -       |   |   | 8,086 
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   |                    | Total
      mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ | -       |   | $ | 21,001
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         |   |   |       
|   | (a)                | The Company
        entered into an option agreement to acquire a 100% interest in the Newton
        Hill property located in the Clinton Mining District in British Columbia.
        To earn its interest in the property, the Company was required to issue
        a total of 100,000 common shares (25,000 issued to date). The acquisition
        was also subject to a net smelter return royalty of 2%. During the year
        ended July 31, 2003, the Company terminated its option, and accordingly,
        wrote-off its interest in the amount of $1,271. The Company has no
        further obligation under the option agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (b)                | During
        the year ended July 31, 2003, the Company entered into a Letter Option
        Agreement to acquire a 100% interest in the Ample-Goldmax Mineral Claims
        located in the Lillooet Mining Division, British Columbia. The Company
        paid the optionors Cdn$10,000 at the time of signing and issued 25,000
        common shares on the date of regulatory approval, and issued payments
        of 25,000 common shares every three months for a total of 75,000 common
        shares until the property was written-off, of which 25,000 was issued
        in fiscal 2004. Cash payments of Cdn$25,000 were due on the first
        anniversary and Cdn$50,000 on the second anniversary of the approval
        date. Completion of a Cdn$100,000 work program within twenty-four
        months was also required. No cash payments were made and during the current
        year, the Company terminated its option, and accordingly, wrote-off its
        interest in the amount of $23,296. The Company has no further obligation
        under the option agreement.

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  (Stated in United States dollars) 
  July 31, 2004

|3. | MINERAL PROPERTIES
        (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Shares issued for mineral
        properties are valued at the closing market value on the date of the commitment
        to issue the shares.                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Title to mineral properties
        involves certain inherent risks due to the difficulties of determining
        the validity of certain claims as well as the potential for problems arising
        from the frequently ambiguous conveyancing history characteristic of many
        mineral properties. The Company has investigated title to all of its mineral
        properties and, to the best of its knowledge, title to all of its properties
        are in good standing.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | SHARE CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Stock options and warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | Warrants                          | Number of Warrants |   |       | Price | 
| | --------------------------------- | ------------------ | - | ----- | ----- | 
| |                                   |                    |   |       |       | 
| |                                   |                    |   |       |       | 
| | Balance at July 31, 2001 and 2002 | 260,000            |   | Cdn $ | 0.10  | 
| | Private placement                 | 711,111            |   | Cdn $ | 0.15  | 
| | Exercised                         | (260,000           | ) | Cdn $ | 0.10  | 
| |                                   |                    |   |       |       | 
| | Balance at July 31, 2003          | 711,111            |   | Cdn $ | 0.15  | 
| | Private placement                 | 1,510,000          |   | Cdn $ | 0.37  | 
| |                                   |                    |   |       |       | 
| | Balance at July 31, 2004          | 2,221,111          |   |       |       | 

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|4. | SHARE CAPITAL(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Stock options and warrants(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On December 2, 2002, the Company issued
        711,111 units at a price of Cdn$0.1125 for gross proceeds of Cdn$80,000.
        Each unit is comprised of one common share and one share purchase warrant.
        Each warrant entitles the holder to purchase a further common share exercisable
        until December 2, 2004 at a price of Cdn$0.15. The Company incurred
        professional fees of $793 in connection with this share issuance.
        The share purchase warrants issued as part of this private placement,
        have been recorded at a fair value of $9,492 and are included in contributed
        surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On April 19, 2004, the Company issued
        1,510,000 units at a price of Cdn$0.28 for gross proceeds of Cdn$422,800.
        Each unit is comprised of one common share and one share purchase warrant.
        Each warrant entitles the holder to purchase a further common share exercisable
        until April 19, 2006, at a price of Cdn$0.37 per common share. The
        Company incurred professional fees of $3,833 in connection with this
        share issuance. The share purchase warrants issued as part of this private
        placement, have been recorded at a fair value of $54,540 and are included
        in contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company has a Share Option Plan
        adopted in January 2004 the (“2004 Share Option Plan”). Under
        the Share Option Plan, participants, who are to be directors and employees
        of the Company and who, in the opinion of the Board of Directors, are
        in a position to contribute to the Company’s success or are worthy
        of special recognition, may be granted options to purchase common shares
        of the Company at a price per share as allowed under the rules and policies
        of the TSX Venture Exchange. The maximum aggregate number of shares that
        may be reserved for issuance under the 2004 Share Option Plan is 1,900,000
        unless the plan is amended pursuant to the requirements of the TSX Venture
        Exchange policies. No service provider can be granted an option if that
        option would result in the service provider receiving shares, in conjunction
        with other share compensation arrangement, of greater than 5% of the outstanding
        listed shares. No option is exercisable until it has vested according
        to a vesting schedule specified by the Board of Directors at the time
        of the grant of the option. An option is exercisable for any period specified
        by the Board of Directors at the time of the grant of the option up to
        a maximum of five years after the date of grant. The previous plan has
        been cancelled.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | There were no stock options outstanding
        at July 31, 2004, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the year, the Company entered
        into the following transactions with related parties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|5. | RELATED PARTY TRANSACTIONS(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The amounts charged to
        the Company for the services provided have been determined by negotiation
        among the parties and, in certain cases, are covered by signed agreements.
        These transactions were in the normal course of operations and were measured
        at the exchange value, which represented the amount of consideration established
        and agreed to by the related parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | At July 31, 2004, the Company
        had estimated income tax losses available for application against future
        years’ taxable income of approximately $1,551,000 in the United
        States which, if unused, will predominantly expire between fiscal years
        ending 2005 and 2023. The Company also has tax losses in Canada of approximately
        $89,000, which if unused, will expire between fiscal 2005 and 2012.
        The Company also has resource allowance expenditures and capital asset
        deductions of approximately $949,000 and $30,000, respectively,
        which carry forward indefinitely. Because of the uncertainty regarding
        the Company's ability to utilize these amounts in future years, an allowance
        equal to the amount of the tax asset relating to these amounts has been
        provided.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | A reconciliation of income
        tax expense at the statutory rate of 35.62% (2003 – 37.62%; 2002
        – 42.6%) with reported taxes is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                                         |   | 2004     |   |   | 2003   |   |   | 2002     |  
| | ------------------------------------------------------- | - | -------- | - | - | ------ | - | - | -------- | -
| |                                                         |   |          |   |   |        |   |   |          |  
| | Income (loss) before income taxes
      (recovery)      | $ | (136,252 | ) | $ | 15,971 |   | $ | 459,843  |  
| |                                                         |   |          |   |   |        |   |   |          |  
| | Income taxes at statutory rates                         | $ | (48,533  | ) | $ | 6,005  |   | $ | 195,893  |  
| | Unrecognized (recognized) benefit of non-capital        |   | -        |   |   | -      |   |   | (2,479   | )
| | losses of subsidiary
      taxed at a different rate    |   |          |   |   |        |   |   |          |  
| | Unrecognized (recognized) benefit of non-capital losses |   | 48,533   |   |   | (6,005 | ) |   | (28,887  | )
| | Reduction of taxes due to capital gain                  |   | -        |   |   | -      |   |   | (64,527  | )
| | Reduction of taxes due to resource allowance            |   | -        |   |   | -      |   |   | (100,000 | )
| |                                                         |   |          |   |   |        |   |   |          |  
| | Net income taxes (recovery)                             | $ | -        |   | $ | -      |   | $ | -        |  

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|6. | INCOME TAXES(continued)                                     
|-- | ------------------------------------------------------------
|   |                                                             
|   |                                                             
|   | Amounts of future tax assets and liabilities are as follows:

| |                                              |   | 2004       |   |   | 2003       |   |   | 2002       |  
| | -------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| | Tax benefit of:                              |   |            |   |   |            |   |   |            |  
| | Losses carried forward –
      Canada        | $ | 89,000     |   | $ | 911,000    |   | $ | 370,000    |  
| | Losses carried forward –
      United States |   | 1,551,000  |   |   | 3,349,000  |   |   | 3,762,000  |  
| | Resource allowance                           |   | 949,000    |   |   | 1,255,000  |   |   | 1,501,000  |  
| | Property and equipment                       |   | 30,000     |   |   | 40,400     |   |   | 48,140     |  
| |                                              |   |            |   |   |            |   |   |            |  
| |                                              |   | 2,619,000  |   |   | 5,555,400  |   |   | 5,681,140  |  
| |                                              |   |            |   |   |            |   |   |            |  
| | Valuation allowance                          |   | (2,619,000 | ) |   | (5,555,400 | ) |   | (5,681,140 | )
| |                                              |   |            |   |   |            |   |   |            |  
| | Deferred tax asset                           | $ | -          |   | $ | -          |   | $ | -          |  

|7. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
|-- | --------------------------------------------------

| |                                                              |   | 2004  |  |   | 2003  |  |   | 2002   | 
| | ------------------------------------------------------------ | - | ----- |  | - | ----- |  | - | ------ | 
| |                                                              |   |       |  |   |       |  |   |        | 
| | Issuance of share capital for mineral property               | $ | 2,295 |  | $ | 6,569 |  | $ | 1,271  | 
| | Receipt of marketable securities on sale of mineral property |   | -     |  |   | -     |  |   | 95,506 | 

|8. | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Operating segments are defined as components of
        an enterprise about which separate financial information is available
        that is evaluated regularly in deciding how to allocate resources and
        in assessing performance. The Company evaluates performance based on several
        factors, of which the primary financial measure is business segment income
        before taxes. As of July 31, 2004, all of the Company's assets and operations
        are located in British Columbia, Canada, principally in the resource industry.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|9. | SUBSEQUENT EVENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Subsequent to July 31, 2004, the Company issued
        711,111 common shares at a price of Cdn$0.15 per common share pursuant
        to the exercise of warrants.                                                                                                                                                                                                                                                                                                                                                                                             

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
        GENERALLY ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | These consolidated financial statements have been
        prepared in accordance with generally accepted accounting principles in
        Canada (“Canadian GAAP”). Material variations in accounting
        principles, practices and methods used in preparing these consolidated
        financial statements from principles, practices and methods accepted in
        the United States (“US GAAP”) are described and quantified
        below:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Consolidated statements of operations, balance sheets and cash flows                                                                                                                                                                                                                                                                                                                                                                                  

| |                                                                   | Year ended July 31, |           
| | ----------------------------------------------------------------- | ------------------- | ----------
| |                                                                   |                     | 2004      
| |                                                                   |                     |           
| | Income (loss) for the year, Canadian GAAP                         | $                   | (136,252  
| | Mineral property acquisition costs                                |                     | -         
| | Write-off of mineral property                                     |                     | 21,001    
| |                                                                   |                     |           
| | Income (loss) for the year, US GAAP                               | $                   | (115,251  
| |                                                                   |                     |           
| | Basic and diluted earnings (loss) per common share, US
      GAAP | $                   | (0.01     
| |                                                                   |                     |           
| | Weighted average shares outstanding, basic and diluted, US GAAP   |                     | 10,091,648
| |                                                                   |                     |           
| |                                                                   |                     |           
| |                                                                   |                     |           
| |                                                                   |                     |           
| | Total assets, Canadian GAAP                                       |                     |           
| | Mineral property acquisition costs expensed
      per US GAAP     |                     |           
| |                                                                   |                     |           
| | Total assets – US GAAP                                            |                     |           
| |                                                                   |                     |           
| | Current liabilities, Canadian GAAP and US GAAP                    |                     |           
| |                                                                   |                     |           
| | Shareholders’ equity, Canadian GAAP                               |                     |           
| |                                                                   |                     |           
| | Mineral property acquisition costs                                |                     |           
| | 2004                                                              |                     |           
| | 2003 and earlier                                                  |                     |           
| |                                                                   |                     |           
| | Shareholders’ equity, US GAAP                                     |                     |           
| |                                                                   |                     |           
| | Total liabilities and shareholders’ equity, US GAAP               |                     |           

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES(continued)
|--- | --------------------------------------------------------------------------------------------------------
|    |                                                                                                         
|    | Consolidated statements of operations, balance sheets and cash flows(continued)                         

| |                                                                              | Year ended July 31, |         
| | ---------------------------------------------------------------------------- | ------------------- | --------
| |                                                                              |                     | 2004    
| |                                                                              |                     |         
| | Cash flows used in operating activities, Canadian GAAP                       | $                   | (117,219
| | Adjustments to mineral properties                                            |                     | -       
| |                                                                              |                     |         
| | Cash flows used in operating activities, US GAAP                             |                     | (117,219
| |                                                                              |                     |         
| | Cash flows provided by (used in) investing activities,
      Canadian GAAP   |                     | -       
| | Adjustments to mineral properties                                            |                     | -       
| |                                                                              |                     |         
| | Cash flows provided by investing activities, US GAAP                         |                     | -       
| |                                                                              |                     |         
| | Cash flows provided by financing
      activities, Canadian GAAP and US GAAP |                     | 313,252 
| |                                                                              |                     |         
| | Increase in cash and cash equivalents during the year                        |                     | 196,033 
| |                                                                              |                     |         
| | Cash and cash equivalents, beginning of year                                 |                     | 490,353 
| |                                                                              |                     |         
| | Cash and cash equivalents, end of year                                       | $                   | 686,386 

| | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Under Canadian GAAP, mineral properties, including
        exploration, development and acquisition costs, are carried at cost and
        written down if the properties are abandoned, sold or if management decides
        not to pursue the properties. Under United States GAAP, mineral property
        expenditures are expensed as incurred. Once a final feasibility study
        has been completed, additional costs incurred to bring the mine into production
        are capitalized as development costs. Costs incurred to access ore bodies
        identified in the current mining plan after production has commenced are
        considered production costs and are expensed as incurred. Costs incurred
        to extend production beyond those areas identified in the mining plan
        where additional reserves have been established are deferred as development
        costs until the incremental reserves are produced. Capitalized costs are
        amortized using the unit-of-production method over the estimated life
        of the ore body based on proven and probable reserves.

---

QUARTZ MOUNTAIN RESOURCES LTD. 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (Stated in United States dollars) 
  July 31, 2004

|10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
        GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Asset retirement obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Under United States GAAP Statement Financial Accounting
        Standards No. 143, "Accounting for Asset Retirement Obligations" requires
        companies to record the fair value of the liability for closure and removal
        costs associated with the legal obligation upon retirement or removal
        of any tangible long-lived asset. Under this standard, the initial recognition
        of the liability is capitalized as part of the asset cost and depreciated
        over its estimated useful life. The Company has determined that there
        were no asset retirement obligations as at July 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Under Canadian GAAP, the Company was not required
        to record asset retirement obligations as at July 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In January 2003, FASB issued Financial Interpretation
        No. 46 “Consolidation of Variable Interest Entities”
        ("FIN 46") (revised in December 17, 2003). The objective of FIN 46 is
        to improve financial reporting by companies involved with variable interest
        entities. A variable interest entity is a corporation, partnership, trust,
        or any other legal structure used for business purposes that either (a)
        does not have equity investors with voting rights or (b) has equity investors
        that do not provide sufficient financial resources for the entity to support
        its activities. FIN 46 requires a variable interest entity to be consolidated
        by a company if that company is subject to a majority of the risk of loss
        from the variable interest entity's activities or entitled to receive
        a majority of the entity's residual returns or both. FIN 46 also requires
        disclosures about variable interest entities that the company is not required
        to consolidate but in which it has a significant variable interest. The
        consolidation requirements of FIN 46 is required in financial statements
        of public entities that have interests in variable interest entities for
        periods ending after December 15, 2003. The consolidation requirements
        applying to all other types of entities are required in financial statements
        for periods ending after March 15, 2004.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The adoption of this new pronouncement is not expected
        to have a material effect on the Company's consolidated financial position
        or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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