---



CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDEDJULY 31, 2009, 2008 AND 2007

(Expressed in United States Dollars, unless otherwise
stated)

---

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

INDEPENDENT AUDITORS REPORT

To the Shareholders of
  Quartz Mountain Resources Ltd.

We have audited the consolidated balance sheets of Quartz Mountain
  Resources Ltd. as at July 31, 2009 and 2008 and the consolidated statements
  of operations, shareholders' equity and cash flows for the years ended July
  31, 2009, 2008 and 2007. These financial statements are the responsibility of
  the Company's management. Our responsibility is to express an opinion on these
  financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2009 and 2008 and the results of its operations and cash flows for
  the years ended July 31, 2009, 2008 and 2007 in accordance with Canadian generally
  accepted accounting principles.

|                  | **"DAVIDSON** **& COMPANY
      LLP"**
|----------------- | --------------------------------------
|                  |                                       
|Vancouver, Canada | Chartered Accountants                 
|                  |                                       
|October 9, 2009   |                                       

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

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast substantial
  doubt on the Company's ability to continue as a going concern, such as those
  described in Note 1 to the financial statements. Our report to the shareholders
  dated October 9, 2009 is expressed in accordance with Canadian reporting standards
  which do not permit a reference to such events and conditions in the auditors'
  report when these are adequately disclosed in the financial statements.

|                  | **"DAVIDSON** **& COMPANY
      LLP"**
|----------------- | --------------------------------------
|                  |                                       
|Vancouver, Canada | Chartered Accountants                 
|                  |                                       
|October 9, 2009   |                                       

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(Expressed in United
States Dollars unless otherwise stated)

|                                                |   | July
      31 |   |   | July
      31 |  
|----------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                                |   | 2009          |   |   | 2008          |  
|                                                |   |               |   |   |               |  
|ASSETS                                          |   |               |   |   |               |  
|                                                |   |               |   |   |               |  
|Current assets                                  |   |               |   |   |               |  
|Cash and cash equivalents                       | $ | 391,040       |   | $ | 591,336       |  
|Amounts receivable and prepaids                 |   | 32,686        |   |   | 15,709        |  
|Amounts due
      from a related party (note 7) |   |              |   |   | 5,465         |  
|                                                |   | 423,726       |   |   | 612,510       |  
|                                                |   |               |   |   |               |  
|Mineral property interests(note 5)              |   | 1             |   |   | 1             |  
|                                                |   |               |   |   |               |  
|                                                | $ | 423,727       |   | $ | 612,511       |  
|                                                |   |               |   |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY            |   |               |   |   |               |  
|                                                |   |               |   |   |               |  
|Current liabilities                             |   |               |   |   |               |  
|Accounts payable and accrued liabilities        | $ | 20,722        |   | $ | 20,519        |  
|Amounts due to a related party (note 7)         |   | 35,116        |   |   |              |  
|                                                |   | 55,838        |   |   | 20,519        |  
|Shareholders' equity                            |   |               |   |   |               |  
|Share capital (note 6)                          |   | 21,269,046    |   |   | 21,269,046    |  
|Deficit                                         |   | (20,901,157   | ) |   | (20,677,054   | )
|                                                |   | 367,889       |   |   | 591,992       |  
|                                                |   |               |   |   |               |  
|                                                |   |               |   |   |               |  
|                                                | $ | 423,727       |   | $ | 612,511       |  

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

Approved by the Board of Directors

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

---

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

|                                                     |   | Years ended July 31 |  
|---------------------------------------------------- | - | ------------------- | -
|                                                     |   | 2009                |  
|Expenses and other                                   |   |                     |  
|Foreign exchange loss (gain)                         | $ | 55,267              |  
|Interest income                                      |   | (4,451              | )
|Legal, accounting and audit                          |   | 24,521              |  
|Mineral property investigations                      |   | 7,593               |  
|Office and administration                            |   | 113,587             |  
|Regulatory, trust and filing                         |   | 27,586              |  
|                                                     |   |                     |  
|Loss and comprehensive loss for the year             | $ | 224,103             |  
|                                                     |   |                     |  
|Basic and diluted loss per common share              | $ | 0.02                |  
|                                                     |   |                     |  
|Weighted average number of common shares outstanding |   | 13,399,426          |  

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

---

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

|                                         |  | Year
      ended    |  |   | Year ended          |   |  | Year ended    | 
|---------------------------------------- |  | ------------------- |  | - | ------------------- | - |  | ------------- | 
|                                         |  | July
      31, 2009 |  |   | July
      31, 2008 |   |  | July 31, 2007 | 
|                                         |  |                     |  |   |                     |   |  |               | 
|                                         |  |                     |  |   |                     |   |  |               | 
|                                         |  | Number of           |  |   |                     |   |  | Number of     | 
|Share capital                            |  | shares              |  |   | Amount              |   |  | shares        | 
|Balance at beginning and end of the year |  | 13,399,426          |  | $ | 21,269,046          |   |  | 13,399,426    | 
|                                         |  |                     |  |   |                     |   |  |               | 
|Deficit                                  |  |                     |  |   |                     |   |  |               | 
|Balance at beginning of the year         |  |                     |  |   | (20,677,054         | ) |  |               | 
|Loss for the year                        |  |                     |  |   | (224,103            | ) |  |               | 
|Balance
      at end of the year         |  |                     |  | $ | (20,901,157         | ) |  |               | 
|                                         |  |                     |  |   |                     |   |  |               | 
|TOTAL SHAREHOLDERS'
      EQUITY         |  |                     |  | $ | 367,889             |   |  |               | 

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

---

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

|                                                              |   | Years ended July 31 |  
|------------------------------------------------------------- | - | ------------------- | -
|Cash and cash equivalents
      provided by (used in)         |   | 2009                |  
|                                                              |   |                     |  
|Operating activities                                          |   |                     |  
|Loss for the year                                             | $ | (224,103            | )
|Changes in non-cash working capital
      items               |   |                     |  
|Amounts receivable and prepaids                               |   | (16,977             | )
|Accounts payable
      and accrued liabilities                |   | 203                 |  
|Amounts due from/(to) related parties                         |   | 40,581              |  
|                                                              |   | (200,296            | )
|                                                              |   |                     |  
|Decrease in cash and cash equivalents during
      the year   |   | (200,296            | )
|                                                              |   |                     |  
|Cash and cash equivalents, beginning of year                  |   | 591,336             |  
|                                                              |   |                     |  
|Cash and cash equivalents, end of year                        | $ | 391,040             |  
|                                                              |   |                     |  
|Components of cash and cash equivalents
      are as follows: |   |                     |  
|Cash                                                          | $ | 391,040             |  
|Commercial paper                                              |   |                    |  
|Government treasury bills                                     |   |                    |  
|Bankers acceptances                                           |   |                    |  
|                                                              | $ | 391,040             |  
|                                                              |   |                     |  
|Supplemental disclosure:                                      |   |                     |  
|Interest paid during the year                                 | $ |                    |  
|Income
      taxes paid during the year                       | $ |                    |  

There were no significant non-cash transactions during the
years ended July 31, 2009, 2008 and 2007.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                               
|-------------------------------------------------------------
|Notes to the Consolidated Financial Statements               
|For the years ended July 31, 2009 and 2008, 2007             
|(Expressed in United States Dollars, unless otherwise stated)

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

|(a) | Cash and cash equivalents                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                               
|    | Cash and cash equivalents consist of highly liquid
      investments, having maturity dates of three months or less from the date
      of purchase, which are readily convertible to known amounts of
  cash.
|    |                                                                                                                                                                                                               
|    | At July 31, 2009, the Company held
      Canadian-dollar-denominated cash and equivalents totaling Cdn$131,826
      (2008  Cdn$543,279).                                                                    

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|(b) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Mineral property acquisition costs, and exploration and development expenditures incurred subsequent to the determination of the feasibility of mining operations, are capitalized until the property to which they relate is placed
into production, sold, allowed to lapse or abandoned. Mineral property acquisition costs include the cash consideration and the estimated fair value of common shares and warrants issued for mineral property interests, pursuant to the terms of the
relevant agreement. These costs are amortized over the estimated life of the property following commencement of commercial production, or written off if the property is sold, allowed to lapse or abandoned, or when an impairment in value has been
determined to have occurred.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Exploration expenses incurred prior to determination of the feasibility of mining operations, including periodic option payments and administrative expenditures are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(c) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition,
construction, development and/or normal use of the assets. The Company also records a corresponding asset value which is amortized over the remaining service life of the asset being retired. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost).                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company also reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount
by which the carrying amount of the asset exceeds the fair value of the asset.                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company has no material asset obligations as at July 31, 2009, and 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(d) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company considers its functional currency to be the United States dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Monetary assets and liabilities of the Company and its integrated foreign operations are translated into United States dollars at exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are
translated at historical exchange rates unless such items are carried at market, in which case they are translated at the exchange rates in effect on the balance sheet date. Revenues and expenses, except amortization, are translated at the average
exchange rates for the period. Amortization is translated at the same exchange rate as the assets to which it relates. Gains or losses on translation are recorded in the statement of operations.                                                                                      

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|(e) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company uses the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are computed based on differences between the carrying amount of existing assets and
liabilities on the balance sheet and their corresponding tax values, using the enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled.                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Future income tax assets also result from unused loss carry forwards and other deductions. Future tax assets are recognized to the extent that they are considered more likely than not to be realized. The valuation of future income
tax assets is adjusted, if necessary, by the use of a valuation allowance to reflect the estimated realizable amount.                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(f) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company records proceeds from share issuances net of issue costs. Shares issued for consideration other than cash are valued at the quoted price on the stock exchange on the date that shares are issued pursuant to the relevant
agreement.                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(g) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company has a share option plan which is described in note 6(b). The Company accounts for all non-cash stock-based payments to non-employees, and employee awards that are direct awards of shares that call for settlement in
cash or other assets, or that are share appreciation rights which call for settlement by the issuance of equity instruments, using the fair value method.                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Under the fair value method, stock-based payments are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable.
The fair value of non-cash stock-based payments is periodically re-measured until counterparty performance is complete, and any change therein is recognized in the same manner as if the Company had paid cash instead of paying with or using equity
instruments. The cost of non-cash stock-based payments to service providers that are fully vested and non-forfeitable at the grant date is measured and recognized at that date.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Consideration received by the Company upon the exercise of share purchase options and warrants, and the stock-based compensation previously credited to contributed surplus related to such options and warrants, is credited to share
capital.                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | During the years ended July 31, 2009, 2008 and 2007, no stock options were granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(h) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Basic loss per share is calculated by dividing the loss for the period by the weighted average number of common shares outstanding during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Diluted loss per share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted loss per share assumes that the
proceeds to be received on the exercise of dilutive stock                                                                                                                                                                                                                                                                                                                                                                              

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|    | options and warrants are used to repurchase common shares
      at the average market price during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(i) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The preparation of consolidated financial statements in
      conformity with Canadian generally accepted accounting principles requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and the disclosure of contingent assets
      and liabilities as at the balance sheet date and the reported amounts of
      revenue and expenses during the reporting period. Significant areas
      requiring the use of management estimates include the determination of
      potential impairment of asset values, reclamation obligations, as well as
      the assumptions used in determining the fair value of non-cash stock-based
      compensation. Actual results could differ from those estimates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(j) | Segment disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company is currently operating in a single segment 
      the acquisition and exploration of mineral properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(k) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | All financial instruments are classified into one of the
      following five categories: held for trading, held-to-maturity, loans and
      receivables, available-for-sale financial assets, or other financial
      liabilities. Subsequent measurement and recognition of changes
      in the value of financial instruments depends on their initial
      classification:                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In accordance with this new standard, the Company has
      classified its financial instruments as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

| | • | Amounts receivable and amounts due from a related party
      are classified as loans and receivables and are measured initially at fair
      value and subsequently measured at amortized cost.                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                  
| | • | Accounts payable and accrued liabilities and amounts due
      to a related party are classified as other financial liabilities and are
      measured initially at fair value and subsequently measured at amortized
      cost.

|(l) | Comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Comprehensive  income is the change in the Company’s shareholders’ equity that results from  transactions and other events from other than the Company’s shareholders and  includes items that would not normally be included in net earnings (loss), such  as unrealized gains or losses on available-for-sale investments. Certain gains  and losses that would otherwise be recorded as part of net earnings are  presented in other “comprehensive income” until it is considered appropriate to  recognize into net earnings.  Comprehensive  income and its components are presented in a separate financial statement that  is displayed with the same prominence as the other financial statements. As at  July 31, 2009 and 2008, the Company had no accumulated other comprehensive  income and for the years ended July 31, 2009, 2008 and 2007, comprehensive  income (loss) equals net income.

|4. | CHANGES IN ACCOUNTING
POLICIES
|-- | ------------------------------

|(a) | Newly Adopted Accounting
Policies
|--- | ---------------------------------

*(i)******Section
1535  Capital Disclosures*

This standard requires disclosure of an
entity's objectives, policies and processes for managing capital, quantitative
data about what the entity regards as capital and whether the entity has
complied with any capital requirements and, if it has not complied, the
consequences of such non-compliance.

The Company's objective when managing
capital is to safeguard the Company's ability to continue as a going concern, so
that it can find suitable projects for the benefit of its shareholders and other
stakeholders. The Company considers the components of shareholders' equity, as
well as its cash and cash equivalents and debt (if any), as capital. The Company
manages the capital structure and makes adjustments to it in the light of
changes in economic conditions and the risk characteristics of the underlying
assets. Since the Company is in the exploration stage, the Company may issue new
shares through private placements in order to maintain or adjust its capital
structure.

The Company's cash resources at July
31, 2009 are sufficient for its present needs, specifically to continue planned
project investigation and administrative operations for at least the next twelve
months.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|    | There were no changes to the Company's approach to
      capital management during the year ended July 31, 2009. The Company is not
      subject to any externally imposed capital requirements as at July 31,
      2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | CICA 1400, General Standards of Financial Statement
      Presentation, was amended to include requirements to assess and disclose
      an entity's ability to continue as a going concern. The new requirements
      are effective for interim and annual financial statements relating to the
      Companys fiscal year ended July 31, 2009. Refer to note 1 of these
      financial statements for the relevant disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The AcSB issued EIC-173 which requires the  Corporation to consider its own credit risk as well as the credit risk of its  counterparty when determining the fair value of financial assets and  liabilities, including derivative instruments. This standard applies for  interim and annual financial statements for periods ending on or after January  20, 2009  and is required to be applied retrospectively without restatement of prior  periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The AcSB issued EIC-174, "Mining  Exploration Costs" which provides guidance to mining enterprises related  to the measurement of exploration costs and the conditions that a mining  enterprise should consider when determining the need to perform an impairment  review of such costs. The standard applies to financial statements  issued after March 27, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | Accounting Standards Issued But Not Yet
    Adopted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Canadian Accounting Standards Board (AcSB)
      confirmed in February 2008 that IFRS will replace Canadian generally
      accepted accounting principles (GAAP) for publicly accountable
      enterprises for financial periods beginning on or after January 1, 2011,
      with the option available to early adopt IFRS from periods beginning on or
      after January 1, 2009 upon receipt of approval from the Canadian
      Securities regulatory authorities. Due to the Companys July 31 fiscal
      year, the mandatory transition date for the Company is August 1, 2011 with
      the restatement of amounts reported by the Company for the year ended July
      31, 2011 for comparative purposes. If the Company elects to early adopt
      IFRS, the transition date will be August 1, 2009 or August 1, 2010 with
      the restatement of amounts reported by the Company for the year ended July
      31, 2009 or July 31, 2010 for comparative purposes. The Company has begun
      assessing the adoption of IFRS for 2011 as well as the merits of early
      adoption.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The AcSB issued CICA Handbook Section 3064 which replaces
      Section 3062, Goodwill and Other Intangible Assets, and Section 3450,
      Research and Development Costs. This new section establishes standards
      for the recognition, measurement, presentation and disclosure of goodwill
      subsequent to its initial recognition and of intangible assets. Standards
      concerning goodwill remain unchanged from the standards included in the
      previous Section 3062. The section applies to interim and annual financial
      statements relating to fiscal years beginning on or after October 1,
      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The AcSB issued CICA sections 1582 "Business
      Combinations", 1601 "Consolidated Financial Statements", and 1602
      "Non-Controlling Interests" which superseded current sections 1581
      "Business Combinations" and 1600 "Consolidated Financial Statements".
      These new sections replace existing guidance on business combinations and
      consolidated financial statements to harmonize Canadian accounting for
      business combinations with IFRS. These Sections will be applied
      prospectively to business combinations for which the acquisition date is
      on or after the beginning of the first annual reporting period beginning
      on or after January 1, 2011. Earlier adoption is permitted. If an entity
      applies these sections before January 1, 2011, it is required
  to                                                                                                                                                                                                                                                                                

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

disclose that fact and apply each of
the new sections concurrently. The Company is currently evaluating the impact of
the adoption of these changes on its consolidated financial statements.

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

Years
        ended July 312009
      
      
      2008Quartz Mountain PropertyNet smelter royalty
      $
      1
      
      $
      1


Quartz Mountain (Angels Camp)
Property  Oregon, USA

During the year ended July 31, 2002,
the Company sold 100% of its title, rights and interest in the Quartz Mountain
property located in Lake County, Oregon to Seabridge Resources Inc.
("Seabridge") for 300,000 common shares of Seabridge, 200,000 common share
purchase warrants of Seabridge, cash of $100,000, and a 1% net smelter return
royalty payable to the Company on any production from the Quartz Mountain
(subsequently renamed Angels Camp) property. In 2003, Seabridge optioned a
50% interest in the property to Quincy Gold Inc., which later changed its name
to Golden Predator Mines Inc., which in turn became Golden Predator Royalty
& Development Corporation.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|6. | SHARE CAPITAL
|-- | -------------

|(a) | Authorized share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Companys authorized share capital consists of an
      unlimited number of common shares, without par value and an unlimited
      number of preferred shares, without par value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b) | Share purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | On January 19, 2007, the Company amended its existing
      share purchase option compensation plan. The amended plan allows the
      Company to grant up to 10% of the issued and outstanding shares of the
      Company at any one time, typically vesting over two years, subject to
      regulatory terms and approval, to its directors, employees, officers, and
      consultants (previously, the Company was allowed to grant up to 1,900,000
      share purchase options). The exercise price of each option may be set
      equal to or greater than the closing market price of the common shares on
      the NEX Exchange on the day prior to the date of the grant of the option,
      less any allowable discounts.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | As at July 31, 2009, no share purchase options had been
      granted under the Companys Share Purchase Option Plan. Accordingly, there
      were no stock options outstanding as at July 31, 2009, 2008, and
    2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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

| | Amounts due from (to) a related party |   | As at   |  
| | ------------------------------------- | - | ------- | -
| |                                       |   | July 31 |  
| |                                       |   | 2009    |  
| | Hunter Dickinson Services Inc.        | $ | (35,116 | )

| | Transactions                              |   | Years
      ended July 31 | 
| | ----------------------------------------- | - | ------------------------- | 
| |                                           |   | 2009                      | 
| | Services rendered and expenses reimbursed |   |                           | 
| | Hunter Dickinson Services Inc.            | $ | 127,153                   | 

Related party balances receivable or
payable arise from advances by the Company for current and expected future
services rendered to, or costs incurred on behalf of, the Company by Hunter
Dickinson Services Inc. (HDSI). The related party balances are non-interest
bearing and due on demand. HDSI is a private company owned equally by several
public companies, one of which is the Company. HDSI provides geological,
corporate development, administrative and management services to, and incurs
third party costs on behalf of, the Company and its subsidiaries on a full cost
recovery basis pursuant to an agreement dated June 1, 2008.

The amounts charged to the Company for
the services provided have been determined by negotiation among the parties and
in certain cases, by signed agreements. These transactions were in the normal
course of operations and were measured at the exchange amount, which is the
amount of consideration established and agreed to by the related parties.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|   | Services rendered by and expenses reimbursed to HDSI for
      the years ended July 31, 2009, 2008 and 2007 are related to the
      reimbursement of travel expenses, office and administration services and
      geological consulting services for property investigation
    activities.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                              
|8. | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                        

|(a) | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The carrying amounts of the Companys cash and cash
      equivalents, amounts receivable, balances due to/receivable from a related
      party, accounts payable and accrued liabilities approximate their fair
      values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | Financial Instrument Risk Exposure and Risk
      Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company is exposed in varying degrees to a variety of
      financial instrument related risks. The Board approves and monitors the
      risk management processes, inclusive of documented treasury policies,
      counterparty limits, and controlling and reporting structures. The types
      of risk exposure and the way in which such exposure is managed is provided
      as follows:                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Credit risk is the risk of potential loss to the Company
      if a counterparty to a financial instrument fails to meet its contractual
      obligations. The Companys credit risk is primarily attributable to its
      liquid financial assets, including cash and cash equivalents, accounts
      receivable and balances receivable from a related party. The Company
      limits the exposure to credit risk by only investing its cash and cash
      equivalents with high credit quality financial institutions and in
      government treasury bills. The carrying value of the Companys cash and
      cash equivalents and accounts receivable represent the maximum exposure to
      credit risk. The Company does not have financial assets that are invested
      in asset backed commercial paper.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Liquidity risk is the risk that the Company will not be
      able to meet its financial obligations when they become due. The Company
      ensures, as far as reasonably possible, it will have sufficient capital in
      order to meet short term business requirements, after taking into account
      cash flows from operations and the Companys holdings of cash and cash
      equivalents. The Company believes that these sources will be sufficient to
      cover the likely short term cash requirements. The Companys cash and cash
      equivalents are invested in business accounts, bankers acceptances and in
      government treasury bills which are available on demand for the Companys
      programs.                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company is exposed to foreign exchange risk as its
      operating expenses are primarily incurred in Canadian dollars. The results
      of the Companys operations are subject to currency
  transaction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

risk and currency translation risk. The
operating results and financial position of the Company are reported in United
States dollars in the Companys consolidated financial statements. The
fluctuation of the Canadian dollar in relation to the United States dollar will
consequently have an impact upon the losses incurred by the Company and may also
affect the value of the Companys assets and the amount of shareholders
equity.

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

The exposure of the Companys cash and
cash equivalents, amounts receivable and amounts receivable from a related party
to foreign exchange risk is as follows:

| | Currency                   |   | July
      31, 2009 |  |   | July
      31, 2008 | 
| | -------------------------- | - | ------------------- |  | - | ------------------- | 
| |                            |   | Foreign             |  |   |                     | 
| |                            |   | currency            |  |   | Amount in           | 
| |                            |   | amount              |  |   | US dollars          | 
| | Canadian Dollar            |   |                     |  |   |                     | 
| | Cash and cash equivalents  | $ | 131,826             |  | $ | 122,344             | 
| | Amounts receivable         |   | 10,413              |  |   | 9,664               | 
| | Amounts due from a related |   |                     |  |   |                     | 
| | party                      |   |                    |  |   |                    | 
| | Total financial assets     | $ | 142,239             |  | $ | 132,008             | 

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

| | Currency                             |   | July
      31, 2009 |  |   | July
      31, 2008 | 
| | ------------------------------------ | - | ------------------- |  | - | ------------------- | 
| |                                      |   | Foreign             |  |   |                     | 
| |                                      |   | currency            |  |   | Amount in           | 
| |                                      |   | amount              |  |   | US dollars          | 
| | Canadian Dollar                      |   |                     |  |   |                     | 
| | Accounts payable and accrued         |   |                     |  |   |                     | 
| | liabilities                          | $ | 22,327              |  | $ | 20,722              | 
| | Amounts
      due to a related party |   | 37,837              |  |   | 35,116              | 
| | Total financial liabilities          | $ | 60,164              |  | $ | 55,838              | 

(iv)        
 Interest Rate Risk

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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|9. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | At July 31, 2009, the Company had estimated income tax
      losses available for application against future years taxable income of
      approximately $95,000 (2008  $182,000) in the United States which, if
      unused, will predominantly expire between fiscal years ending 2010 and
      2022. The Company also has tax losses in Canada of approximately
      $1,148,000 (2008  $1,015,000), which if unused, will expire between
      fiscal 2010 and 2029. The Company also has resource allowance expenditures
      and capital asset deductions of approximately $3,377,000 (2008 
      $3,554,000) and $105,000 (2008  $111,000), 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 30.21% (2008  32.59%, 2007  34.95%) with reported taxes is as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                        |   | Years
      ended July 31 |  
| | -------------------------------------- | - | ------------------------- | -
| | Income tax expense                     |   | 2009                      |  
| |                                        |   |                           |  
| | Loss before income taxes               | $ | (224,103                  | )
| |                                        |   |                           |  
| | Income tax recovery at statutory rates |   | (68,000                   | )
| | Permanent differences                  |   | 17,000                    |  
| | Change in future tax rate              |   | 47,000                    |  
| | Statutory rate differential            |   | 2,000                     |  
| | Foreign exchange                       |   | 66,000                    |  
| | Change in valuation allowance          |   | (90,000                   | )
| | Losses expired                         |   | 26,000                    |  
| | Non-deductible items                   |   |                          |  
| | Net income taxes (recovery)            | $ |                          |  

Amounts of future tax assets and
liabilities are as follows:

| |                                              |   | As at
      July 31 |  
| | -------------------------------------------- | - | ------------------- | -
| | Future tax assets
      and liabilities      |   | 2009                |  
| | Tax benefit of:                              |   |                     |  
| | Losses carried forward  Canada              | $ | 287,000             |  
| | Losses carried forward
       United States |   | 33,000              |  
| | Resource allowance                           |   | 844,000             |  
| | Property and equipment                       |   | 26,000              |  
| |                                              |   | 1,190,000           |  
| | Valuation allowance                          |   | (1,190,000          | )
| | Future income tax
      asset (liability)    | $ |                    |  

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

|10. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The  consolidated financial statements have been prepared in accordance with  Canadian generally accepted accounting principles (“Canadian GAAP”), which  differ in certain material aspects from those principles that the Company would  have followed had its consolidated financial statements been prepared in  accordance with United    States generally accepted accounting  principles (“US GAAP”).  Had the Company  followed US GAAP, certain items on the balance sheets and the statements of  operations, shareholders’ equity and cash flows would have been reported as  below:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Consolidated statements of
  operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                          |   | Years ended July 31 |  
| | ---------------------------------------- | - | ------------------- | -
| |                                          |   | 2009                |  
| | Loss for the year, Canadian GAAP and US  |   |                     |  
| | GAAP                                     | $ | (224,103            | )
| | Mineral property acquisition costs       |   |                    |  
| | Basic and diluted loss per common share, |   |                     |  
| | Canadian and US GAAP                     |   |                     |  
| |                                          | $ | (0.02               | )
| | Weighted average shares outstanding,     |   |                     |  
| | basic and diluted, Canadian GAAP and US  |   |                     |  
| | GAAP                                     |   | 13,399,426          |  

Consolidated balance sheets

| |                                                     |   | As at               |   |   | As at               |  
| | --------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
| |                                                     |   | July
      31, 2009 |   |   | July
      31, 2008 |  
| |                                                     |   |                     |   |   |                     |  
| | Total assets, Canadian GAAP                         | $ | 423,727             |   | $ | 612,511             |  
| | Mineral property interests expensed per US GAAP     |   | (1                  | ) |   | (1                  | )
| | Total assets  US GAAP                              | $ | 423,726             |   | $ | 612,510             |  
| |                                                     |   |                     |   |   |                     |  
| | Current liabilities, Canadian GAAP and US GAAP      | $ | 55,838              |   | $ | 20,519              |  
| |                                                     |   |                     |   |   |                     |  
| | Shareholders equity, Canadian GAAP                 |   | 367,889             |   |   | 591,992             |  
| | Mineral property
      interests                    |   | (1                  | ) |   | (1                  | )
| | Shareholders equity, US GAAP                       |   | 367,888             |   |   | 591,991             |  
| |                                                     |   |                     |   |   |                     |  
| | Total liabilities and shareholders equity, US GAAP | $ | 423,726             |   | $ | 612,510             |  

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

Consolidated statements of cash
flows

| |                                                        |   | Years ended July 31 |  
| | ------------------------------------------------------ | - | ------------------- | -
| |                                                        |   | 2009                |  
| |                                                        |   |                     |  
| | Cash flows used in operating activities,               |   |                     |  
| | Canadian and US GAAP                                   | $ | (200,296            | )
| |                                                        |   |                     |  
| | Cash flows provided by financing activities,           |   |                     |  
| | Canadian and US GAAP                                   |   |                    |  
| |                                                        |   |                     |  
| | Decrease in cash and cash equivalents during
      the |   |                     |  
| | year                                                   |   | (200,296            | )
| | Cash and cash equivalents, beginning of year           |   | 591,336             |  
| | Cash and cash equivalents,
      end of year           | $ | 391,040             |  

(a)          Mineral
  properties

Under Canadian GAAP, the Company
accounts for mineral properties as described in note 3(b).

Costs of acquiring mining properties
are capitalized upon acquisition. Mine development costs incurred either to
develop new ore deposits, expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially mineable
property. Costs incurred to maintain current production or to maintain assets on
a standby basis are charged to operations. Costs of abandoned projects are
charged to operations upon abandonment. The Company evaluates the carrying value
of capitalized mining costs and related property, plant and equipment costs, to
determine if these costs are in excess of their net recoverable amount whenever
events or changes in circumstances indicate that their carrying amounts may not
be recoverable. The periodic evaluation of carrying value of capitalized costs
and any related property, plant and equipment costs are based upon expected
future cash flows and/or estimated salvage value in accordance with Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets.

(b)          Other
  presentation items

Pursuant to US GAAP, the Company would
be considered an exploration stage company as it is devoting its efforts to
establishing a commercially viable mineral property. However, the identification
of the Company as such for accounting purposes does not impact the measurement
principles applied in these consolidated financial statements.

(c)Income tax

FASB Interpretation No. 48  Accounting
for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
(Accounting for Income Taxes) (FIN48)

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

FIN 48 prescribes a minimum recognition
threshold a tax position is required to meet before being recognized in the
financial statements.

The interpretation requires that the
Company recognize the impact of a tax position in the financial statements if
that position is more likely than not of being sustained on audit, based on the
technical merits of the position. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods and disclosure. In accordance with the provisions of FIN 48, any
cumulative effect resulting from the change in accounting principle is to be
recorded as an adjustment to the opening balance of deficit. The adoption of FIN
48 did not result in a material impact on the Companys consolidated financial
position or results of operations.

(d)         Impact of
recent United States accounting pronouncements:

| | (i)   | Statement of Financial Accounting Standards (SFAS) No.
      157, Fair Value Measurements,defines fair value, establishes a
      framework for measuring fair value in generally accepted accounting
      principles (GAAP), and expands disclosures about fair value measurements.
      SFAS No. 157 applies under other accounting pronouncements that require or
      permit fair value measurements. The adoption of this statement by the
      Company during the year ended July 31, 2009 did not result in a material
      impact on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ii)  | SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities Included an amendment of SFAS No.
      115.This Statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. This
      Statement applies to all entities, including not-for-profit organizations.
      The Company adopted this statement during the year ended July 31, 2009 and
      has indicated those financial instruments that are measured at fair value
      in note 8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (iii) | In March 2008, the FASB issued SFAS No. 161, Disclosure
      about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161
      changes the disclosure requirements for derivative instruments and hedging
      activities by requiring enhanced disclosures about how and why an entity
      uses derivative instruments, how derivative instruments and related
      hedged items affect an entitys operating results, financial position, and
      cash flows. This Statement encourages, but does not require, comparative
      disclosures for earlier periods at initial adoption. As the Company
      currently does not engage in hedging activities or derivative financial
      instruments, the adoption of FASB No. 161 did not result in any additional
      financial statement disclosure.                                                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (iv)  | In May 2008, the FASB issued SFAS No. 162, The
      Hierarchy of Generally Accepted Accounting Principles ("SFAS No.
      162"). The new statement identifies the sources of accounting
      principles and the framework for selecting the principles used in
      preparing the financial statements of nongovernmental entities that are
      presented in conformity with U.S. generally accepted accounting
      principles. SFAS No. 162 became effective on November 13, 2008 and did
      not result in a material impact on the
Company's consolidated financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (v)   | In May 2009, the FASB  issued SFAS No. 165 "Subsequent Events" ("SFAS 165"). SFAS  165 establishes general standards of accounting for and disclosure of events  that occur after the balance sheet date but before financial  statements are issued or are available to be issued. SFAS 165 sets forth (1) the  period after the balance sheet date during which management of a reporting  entity should evaluate events or transactions that may occur for potential  recognition or disclosure in the financial statements, (2) the circumstances under  which an entity should recognize events or transactions occurring after the  balance sheet date in its financial statements, and (3) the disclosures that an  entity should make about events or transactions that occur after the balance  sheet date. SFAS 165 is effective for interim or annual financial periods  ending after June 15, 2009. The Company has evaluated subsequent events through  to October 9, 2009. The adoption of SFAS 165 is not expected to have a  material effect on the Company’s financial statements.

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)



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

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2009 and 2008, 2007                   
|(Expressed
      in United States Dollars, unless otherwise stated)

| |      | assets and nonfinancial liabilities, the Company does not
      expect the adoption of SFAS 157 with respect to non financial assets and
      non financial liabilities will have a material impact on its consolidated
      results of operations, cash flows or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (iv) | In June 2008, the FASB issued Staff Position No. EITF
      03-6-1, Determining Whether Instruments Granted in Share-Based Payment
      Transactions Are Participating Securities ("FSP EITF 03-6-1"). FSP EITF
      03-6-1 provides that unvested share-based payment awards that contain
      non-forfeitable rights to dividends are participating securities and
      should be included in the computation of earnings per share pursuant to
      the two-class method. FSP EITF 03-6-1 is effective for the Companys 2010
      fiscal year. The Company is currently reviewing the provisions of this
      standard but does not expect the adoption of FSP EITF 03-6-1 to have a
      material effect on its consolidated results of operations, cash flows or
      financial position.                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (v)  | In June 2008, the FASB issued EITF 07-5, "Determining
      Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own
      Stock" ("EITF 07-5"). EITF 07-5 provides guidance in assessing whether an
      equity-linked financial instrument (or embedded feature) is indexed to an
      entity's own stock for purposes of determining whether the appropriate
      accounting treatment falls under the scope of SFAS 133, "Accounting For
      Derivative Instruments and Hedging Activities" and/or EITF 00-19,
      "Accounting For Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company's Own Stock". EITF 07-5 is effective for
      financial statements issued for the Companys 2010 fiscal year. The Company is currently reviewing the provisions of this
      standard but does not expect the adoption of EITF 07-5 to have a material
      effect on its consolidated results of operations, cash flows or financial
    position.

| | (vi) | In June 2009, the FASB issued SFAS No. 168 "The FASB
      Accounting Standards Codification and the Hierarchy of Generally Accepted
      Accounting Principles-a replacement of FASB Statement No. 162". The FASB
      Accounting Standards Codification ("Codification") will be the single
      source of authoritative nongovernmental U.S. generally accepted accounting
      principles. Rules and interpretive releases of the SEC under authority of
      federal securities laws are also sources of authoritative GAAP for SEC
      registrants. SFAS 168 is effective for interim and annual periods ending
      after September 15, 2009. All existing accounting standards are superseded
      as described in SFAS 168. All other accounting literature not included in
      the Codification is non-authoritative. The Company is evaluating the
      impact the adoption of SFAS 168 will have on its financial
    statements.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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