---



|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|                                                                   
|CONSOLIDATED FINANCIAL STATEMENTS                                  
|                                                                   
|YEARS ENDED                                                        
|JULY 31, 2005, 2004 AND 2003                                       
|                                                                   
|(Expressed in United States Dollars, unless otherwise
      stated)

F-i

---

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
  Quartz Mountain Resources Ltd.

We have audited the consolidated balance sheets of Quartz Mountain
  Resources Ltd. as at July 31, 2005 and 2004 and the consolidated statements
  of operations and deficit and cash flows for the years ended July 31, 2005,
  2004 and 2003. These consolidated financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these consolidated financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  July 31, 2005 and 2004 and the results of its operations and its cash flows
  for the years ended July 31, 2005, 2004 and 2003 in accordance with Canadian
  generally accepted accounting principles.

"DAVIDSON & COMPANY LLP"

|Vancouver, Canada | Chartered Accountants
|----------------- | ---------------------
|                  |                      
|October 14, 2005  |                      

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 14, 2005 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 14, 2005  |                      

A Member of SC INTERNATIONAL1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver,
  BC, Canada, V7Y 1G6
  Telephone (604) 687-0947 Fax (604) 687-6172

F-1

---

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

|                                               |   | July
      31 |   |   | July
      31 |  
|---------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                               |   | 2005          |   |   | 2004          |  
|                                               |   |               |   |   |               |  
|ASSETS                                         |   |               |   |   |               |  
|                                               |   |               |   |   |               |  
|Current assets                                 |   |               |   |   |               |  
|Cash and equivalents                           | $ | 670,755       |   | $ | 686,386       |  
|Amounts receivable and prepaids                |   | 16,525        |   |   | 7,311         |  
|                                               |   | 687,280       |   |   | 693,697       |  
|                                               |   |               |   |   |               |  
|Mineral
      property interests(note 5)       |   | 1             |   |   |              |  
|                                               |   |               |   |   |               |  
|                                               | $ | 687,281       |   | $ | 693,697       |  
|                                               |   |               |   |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY           |   |               |   |   |               |  
|                                               |   |               |   |   |               |  
|Current liabilities                            |   |               |   |   |               |  
|Accounts payable and accrued
      liabilities | $ | 8,726         |   | $ | 19,477        |  
|Amounts due
      to related parties (note 7)  |   | 3,933         |   |   | 3,372         |  
|                                               |   | 12,659        |   |   | 22,849        |  
|                                               |   |               |   |   |               |  
|Shareholders' equity                           |   |               |   |   |               |  
|Share capital (note 6)                         |   | 20,726,303    |   |   | 20,627,632    |  
|Contributed surplus (note 6(d))                |   | 54,540        |   |   | 64,032        |  
|Deficit                                        |   | (20,106,221   | ) |   | (20,020,816   | )
|                                               |   | 674,622       |   |   | 670,848       |  
|                                               |   |               |   |   |               |  
|                                               | $ | 687,281       |   | $ | 693,697       |  

Nature and continuance of operations (note 1)

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           

F-2

---

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

|                                                           |   | Years ended July 31 |  
|---------------------------------------------------------- | - | ------------------- | -
|                                                           |   | 2005                |  
|                                                           |   |                     |  
|                                                           |   |                     |  
|                                                           |   |                     |  
|Expenses                                                   |   |                     |  
|Exploration                                                | $ |                    |  
|Foreign exchange gain                                      |   | (47,485             | )
|Interest income                                            |   | (15,127             | )
|Legal, accounting and audit                                |   | 35,505              |  
|Mineral property investigations                            |   | 27,125              |  
|Office and administration                                  |   | 66,864              |  
|Regulatory, trust and filing                               |   | 18,523              |  
|Write-down of mineral property interests                   |   |                    |  
|                                                           |   |                     |  
|Loss (income) for the year                                 | $ | 85,405              |  
|                                                           |   |                     |  
|Basic and diluted loss per common share                    | $ | 0.01                |  
|                                                           |   |                     |  
|Weighted average number of common shares
      outstanding |   | 11,694,601          |  

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

|Consolidated Statements of Deficit                                 
|-------------------------------------------------------------------
|(Expressed in United States Dollars, unless otherwise
      stated)

|                           |   | Years ended
      July 31 | 
|-------------------------- | - | ------------------------- | 
|                           |   | 2005                      | 
|                           |   |                           | 
|                           |   |                           | 
|                           |   |                           | 
|                           |   |                           | 
|Deficit, beginning of year | $ | 20,020,816                | 
|Loss for the year          |   | 85,405                    | 
|Deficit, end of year       | $ | 20,106,221                | 

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

F-3

---

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

|                                                                    |   | Years ended
      July 31 |  
|------------------------------------------------------------------- | - | ------------------------- | -
|Cash provided
      by (used in)                                    |   | 2005                      |  
|                                                                    |   |                           |  
|                                                                    |   |                           |  
|                                                                    |   |                           |  
|                                                                    |   |                           |  
|Operating activities                                                |   |                           |  
|Income (loss) for the year                                          | $ | (85,405                   | )
|Items not involving cash                                            |   |                           |  
|Write-down of mineral property
      interests                      |   |                          |  
|Changes in non-cash working
      capital items                     |   |                           |  
|Amounts receivable and prepaids                                     |   | (9,214                    | )
|Accounts payable
      and accrued liabilities                      |   | (10,752                   | )
|Amounts due to related parties                                      |   | 561                       |  
|                                                                    |   | (104,810                  | )
|                                                                    |   |                           |  
|Investing activities                                                |   |                           |  
|Mineral property interests                                          |   |                          |  
|                                                                    |   |                           |  
|Financing activities                                                |   |                           |  
|Warrants exercised and shares issued net of
      issue costs       |   | 89,179                    |  
|                                                                    |   |                           |  
|Increase (decrease) in cash and
      equivalents                   |   |                           |  
|during the year                                                     |   | (15,631                   | )
|                                                                    |   |                           |  
|Cash and
      equivalents, beginning of year                       |   | 686,386                   |  
|                                                                    |   |                           |  
|Cash and
      equivalents, end of year                             | $ | 670,755                   |  
|                                                                    |   |                           |  
|Components of cash and equivalents are as follows:                  |   |                           |  
|Cash                                                                | $ | 7,786                     |  
|Commercial paper                                                    |   | 68,687                    |  
|Bankers acceptances                                                 |   | 594,282                   |  
|                                                                    | $ | 670,755                   |  
|                                                                    |   |                           |  
|Non-cash items                                                      |   |                           |  
|Shares issued on acquisition
      of mineral property interests    | $ |                          |  
|Fair value of warrants exercised transferred
      to share capital | $ | 9,492                     |  

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

F-4

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(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 Canadian generally accepted accounting principles assuming a going
        concern. At July 31, 2005, the Company had working capital of approximately
        $675,000 (2004  $671,000). Other than incidental interest income,
        the Company has incurred operating losses since its inception. The ability
        of the Company to continue as a going concern depends upon its ability
        to develop profitable operations and to continue to raise adequate financing.
        There can be no assurance that the Company will be able to secure additional
        financial resources nor achieve profitability or positive cash flows.
        If the Company is unable to obtain adequate additional financing or enter
        into business alliances, the Company will be required to curtail its operations
        and exploration activities. Failure to continue as a going concern would
        require that the Companys assets and liabilities be restated on
        a basis which could differ significantly from the going concern basis.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements have been prepared
        in accordance with Canadian generally accepted accounting principles.
        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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The results of applying measurement accounting principles
        generally accepted in the United States are set out in note 10.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|3. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

|(a) | Cash and equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Cash and equivalents include highly liquid investments
        with original maturities of three months or less.                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | At July 31, 2005, the Company held Canadian-dollar-denominated
        cash and equivalents totaling Cdn$735,417 (2004  Cdn$803,379).                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Companys financial instruments consist of
        cash and equivalents, amounts receivable, accounts payable and accrued
        liabilities and amounts due to related parties. It is managements
        opinion that the Company is not exposed to significant interest or credit
        risks arising from these financial instruments. The fair value of these
        financial instruments approximates their carrying values due to their
        short term nature.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company maintains its cash and equivalents substantially
        in Canadian dollars and is subject to currency risk.                                                                                                                                                                                                                                                                                                                                                          

F-5

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(c) | Allowance for receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company establishes an allowance for receivables
        on a specific account basis. No allowance for receivables was recorded
        by the Company as at July 31, 2005 and 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(e) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Effective August 1, 2004, the Company retroactively
        adopted the provisions of the Canadian Institute of Chartered Accountants
        (CICA) Handbook Section 3110 (HB3110). HB3110
        requires the recognition of a liability at its fair value for the obligation
        associated with the retirement of a tangible long-lived asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 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 long-lived assets. The Company also records a corresponding asset
        which is amortized over the life of the asset. Subsequent to the initial
        measurement of the asset retirement obligation, the obligation is 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 adoption of this standard has no effect on amounts
        previously reported.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(f) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | All of the Companys foreign operations are considered
        integrated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 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.                                                                                    

F-6

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(g) | 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, generally using the substantively enacted income tax rates expected
        to apply to taxable income in the years in which the asset is realized
        or the liability 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(h) | Share capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Shares issued for other than cash consideration are
        recorded at the fair market value based upon the trading price of the
        shares on the TSX Venture Exchange (TSXV) on the date of issue
        or as otherwise provided under the agreement terms to issue the shares.
        The Company records proceeds from share issuances net of issue costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(i) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company has a share option plan which is described
        in note 6(e). The Company records all stock- based payments granted 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 and are charged to operations over the vesting
        period. The offset is credited to contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Consideration received upon the exercise of stock options
        is credited to share capital and the related contributed surplus is transferred
        to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended July 31, 2005, 2004 and 2003,
        no stock options were granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(j) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company uses the treasury stock method to compute
        the dilutive effect of options, warrants and similar instruments. Under
        this method the dilutive effect on loss per share is recognized on the
        use of the proceeds that could be obtained upon exercise of options, warrants
        and similar instruments. It assumes that the proceeds would be used to
        purchase common shares at the average price during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Basic loss per share is calculated by dividing the loss
        available to common shareholders for the period by the weighted average
        number of shares outstanding during the period. At July 31, 2005 1,510,000
        (2004  2,221,111; 2003  711,111) potentially dilutive shares
        arising from options and warrants were excluded from loss per share as
        they would be anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(k) | 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 disclosure of contingent assets
        and liabilities as at the reporting date of the financial statements and
        the reported amounts of revenue and expenses for the reporting period.
        Significant areas requiring the use of management estimates relate to
        the determination of impairment of                                                                                                                                                                                                                                                                                                                        

F-7

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|    | assets, reclamation obligations and rates for amortization
        as well as the assumptions used in determining the fair value of non-cash
        stock-based compensation and warrants. Actual results could differ from
        those estimates.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                      
|(l) | Comparative figures                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                      
|    | Certain of the prior years figures have been reclassified
        to conform with the current years presentation.                                                                                                                                  

|4. | CHANGE IN ACCOUNTING POLICY
|-- | ---------------------------

Mineral property interest

During the year ended July 31, 2005,
  the Company changed its policy from capitalizing (deferring) mineral property
  exploration expenditures to charging these costs to earnings in the period incurred.
  This change in accounting policy is applied retroactively and the amounts presented
  for prior periods have been restated for this change. The effect of this change
  is to reduce loss for the year ended July 31, 2004 by $8,086 and to reduce income
  for the year ended July 31, 2003 by $8,086. There was no impact to opening deficit
  for the year ended July 31, 2005. The impact of this restatement on the July
  31, 2004 and 2003 consolidated financial statements is as follows:

| |                                                       |   | As         |   |   |            |   |   |                   |  
| | ----------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ----------------- | -
| |                                                       |   | previously |   |   |            |   |   |                   |  
| |                                                       |   | reported   |   |   | Adjustment |   |   | As
      restated |  
| |                                                       |   |            |   |   |            |   |   |                   |  
| | Year ended July 31, 2004:                             |   |            |   |   |            |   |   |                   |  
| | Write-down of mineral property interests              | $ | 23,296     |   | $ | (8,086     | ) | $ | 15,210            |  
| | Loss for the year                                     |   | 136,252    |   |   | (8,086     | ) |   | 128,166           |  
| | Loss (income) per share                               |   | 0.01       |   |   | 0.00       |   |   | 0.01              |  
| | Cash provided by (used
      in) operating activities |   | (117,219   | ) |   |           |   |   | (117,219          | )
| | Cash provided by (used in) investing activities       |   |           |   |   |           |   |   |                  |  
| |                                                       |   |            |   |   |            |   |   |                   |  
| | Year ended July 31, 2003:                             |   |            |   |   |            |   |   |                   |  
| | Exploration                                           | $ |           |   | $ | 8,086      |   | $ | 8,086             |  
| | Income for the year                                   |   | 15,971     |   |   | (8,086     | ) |   | 7,885             |  
| | Loss (income) per share                               |   | (0.00      | ) |   | 0.00       |   |   | (0.00             | )
| | Cash provided by (used in) operating activities       |   | (39,054    | ) |   | (8,086     | ) |   | (47,140           | )
| | Cash provided by (used
      in) investing activities |   | (14,432    | ) |   | 8,086      |   |   | (6,346            | )
| |                                                       |   |            |   |   |            |   |   |                   |  

F-8

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

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

| |                                          |   | Year ended July 31 | 
| | ---------------------------------------- | - | ------------------ | 
| |                                          |   | 2005               | 
| | Ample-Goldmax Property, British Columbia |   |                    | 
| |                                          |   |                    | 
| |                                          |   |                    | 
| |                                          |   |                    | 
| | Acquisition costs                        |   |                    | 
| | Balance, beginning of year               | $ |                   | 
| | Incurred during the year                 |   |                   | 
| | Written
      off during the year        |   |                   | 
| | Balance, end of year                     |   |                   | 
| |                                          |   |                    | 
| | Exploration costs                        |   |                    | 
| | Balance, beginning of year               |   |                   | 
| | Written off during the year              |   |                   | 
| | Balance,
      end of year               |   |                   | 
| |                                          |   |                    | 
| | Quartz Mountain Property                 |   |                    | 
| | Net smelter royalty                      |   | 1                  | 
| |                                          |   |                    | 
| |                                          |   |                    | 
| | Total mineral
      property interests   | $ | 1                  | 

|(a) | Ample-Goldmax Property 
        British Columbia, Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | During the year ended July 31, 2003, the Company entered
        into a Letter Option Agreement to acquire a 100% interest in the Ample-Goldmax
        Mineral Claims located in the Lillooet Mining Division. The Company paid
        the optionors Cdn$10,000 at the time of signing and issued 25,000 common
        shares on the date of regulatory approval. An additional 75,000 common
        shares were issued in fiscal 2003 and 25,000 common shares were issued
        in fiscal 2004 pursuant to the option agreement. During the year ended
        July 31, 2004, the Company terminated its option, and accordingly, wrote
        off its interest in the amount of $15,210. The Company has no further
        obligations under the option agreement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(b) | Quartz Mountain 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 property.                                                                                                                                                                                                                                                                                                 

F-9

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(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.                                                                                                        
|    |                                                                                                                                                                                                                            
|    | At the Companys Annual and Special General Meeting
        held on January 21, 2005, an increase in authorized share capital from
        60 million to an unlimited number of common shares was approved by shareholders.
|    |                                                                                                                                                                                                                            
|(b) | Issued and outstanding common shares                                                                                                                                                                                       

| |                                                         |  | Number of  |  |  | Price  |  |   | Amount     | 
| | ------------------------------------------------------- |  | ---------- |  |  | ------ |  | - | ---------- | 
| | Common shares issued                                    |  | Shares     |  |  | (US$)  |  |   | (US$)      | 
| | Balance at July 31, 2002                                |  | 8,597,204  |  |  |        |  | $ | 20,299,896 | 
| | Private placement, net of issue costs (i)               |  | 711,111    |  |  | 0.0710 |  |   | 40,895     | 
| | Exercise of warrants                                    |  | 260,000    |  |  | 0.0740 |  |   | 19,265     | 
| | Ample-Goldmax property
      option payment (note 5(a)) |  | 75,000     |  |  | 0.0880 |  |   | 6,569      | 
| | Balance at July 31, 2003                                |  | 9,643,315  |  |  |        |  |   | 20,366,625 | 
| | Private placement, net of issue costs (ii)              |  | 1,510,000  |  |  | 0.2100 |  |   | 258,712    | 
| | Ample-Goldmax property option payment (note 5(a))       |  | 25,000     |  |  | 0.0920 |  |   | 2,295      | 
| | Balance at July 31, 2004                                |  | 11,178,315 |  |  |        |  |   | 20,627,632 | 
| | Cash received on exercise of warrants (i)               |  | 711,111    |  |  | 0.1254 |  |   | 89,179     | 
| | Fair value of warrants
      exercised                  |  |           |  |  |        |  |   | 9,492      | 
| | Balance at July 31, 2005                                |  | 11,889,426 |  |  |        |  | $ | 20,726,303 | 

| | (i)  | On December 2, 2002, the Company issued 711,111 units
        at a price of Cdn$0.1125 (US$0.071) per unit for gross proceeds of Cdn$80,000
        (net proceeds of US$40,895). Each unit was comprised of one common share
        and one share purchase warrant. Each warrant entitled the holder to purchase
        a further common share exercisable until December 2, 2004 at a price of
        Cdn$0.15. The share purchase warrants issued as part of this private placement
        had been recorded at an estimated fair value of $9,492. In November 2004,
        these warrants were exercised by the warrant holders.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (ii) | On April 19, 2004, the Company issued 1,510,000 units
        at a price of Cdn$0.28 (US$0.210) per unit for net proceeds of $258,712.
        Each unit was comprised of one common share and one share purchase warrant.
        Each warrant is exercisable until April 19, 2006 and entitles the holder
        to purchase a further common share at a price of Cdn$0.37 per common share.
        The share purchase warrants issued as part of this private placement have
        been recorded at an estimated fair value of $54,540 and are included in
        contributed surplus.                                          

F-10

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

|(c) | Share purchase warrants                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                         
|    | The continuity of share purchase warrants (each exercisable
        into one common share) for the year ended July 31, 2005 and 2004 is:

| |                                                       |  | Number
      of |   |  |          | 
| | ----------------------------------------------------- |  | --------------- | - |  | -------- | 
| | Share purchase
      warrants issued                  |  | Warrants        |   |  | Price    | 
| |                                                       |  |                 |   |  |          | 
| | Balance at July 31, 2002                              |  | 260,000         |   |  | Cdn$0.10 | 
| | Private placement, December
      2002 (note 6(b)(i)) |  | 711,111         |   |  | Cdn$0.15 | 
| | Exercised during the year                             |  | (260,000        | ) |  | Cdn$0.10 | 
| |                                                       |  |                 |   |  |          | 
| | Balance at July 31, 2003                              |  | 711,111         |   |  | Cdn$0.15 | 
| | Private placement, April 2004 (note 6(b)(ii))         |  | 1,510,000       |   |  | Cdn$0.37 | 
| |                                                       |  |                 |   |  |          | 
| | Balance at July 31, 2004                              |  | 2,221,111       |   |  |          | 
| | Exercised (note 6(b)(i))                              |  | (711,111        | ) |  | Cdn$0.15 | 
| |                                                       |  |                 |   |  |          | 
| | Balance at July 31, 2005                              |  | 1,510,000       |   |  | Cdn$0.37 | 

|(d) | Contributed surplus
|--- | -------------------

| | Balance at July 31, 2002                                          | $ |       |  
| | ----------------------------------------------------------------- | - | ------ | -
| | Private placement, December 2002 (note 6(b)(i))                   |   | 9,492  |  
| |                                                                   |   |        |  
| | Balance at July 31, 2003 (note 6(b)(i))                           |   | 9,492  |  
| | Share purchase warrants
      issued, April 2004 (note 6(b)(ii))  |   | 54,540 |  
| |                                                                   |   |        |  
| | Balance at July 31, 2004                                          |   | 64,032 |  
| | Share purchase warrants exercised for common stock (note 6(b)(i)) |   | (9,492 | )
| |                                                                   |   |        |  
| | Balance at July 31,
      2005                                    | $ | 54,540 |  

|(e) | Share purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | At its Annual and Special General Meeting held in January
        2004, shareholders of the Company approved a Share Purchase Option Plan
        in accordance with the policies of the TSXV. Under this plan, the Company
        is authorized to grant up to 1,900,000 share purchase options to directors,
        officers, employees and consultants. The exercise price of each option
        normally equals or exceeds the market price of the Company's shares as
        calculated on the date of grant. No service provider can be granted an
        option if that option would result in the service provider receiving shares,
        in conjunction with any other share compensation arrangement, of greater
        than 5% of the outstanding listed shares. Options granted are for a term
        of no greater than five years. Vesting of options is at the discretion
        of the Board of Directors at the time the options are granted.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | To July 31, 2005, no share purchase options had been
        granted under this plan. Accordingly, there were no stock options outstanding
        as at July 31, 2005, 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-11

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

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

| | Balances payable                            |   |                    |  |   | As at July 31 | 
| | ------------------------------------------- | - | ------------------ |  | - | ------------- | 
| |                                             |   |                    |  |   | 2005          | 
| | Hunter Dickinson Inc. (a)                   |   |                    |  | $ | 3,933         | 
| | Due to
      a director                     |   |                    |  |   |              | 
| |                                             |   |                    |  | $ | 3,933         | 
| |                                             |   |                    |  |   |               | 
| | Transactions                                |   | Year ended July 31 | 
| |                                             |   | 2005               |  |   | 2004          | 
| | Services rendered and expenses reimbursed   |   |                    |  |   |               | 
| | Hunter Dickinson Inc. (a)                   | $ | 57,732             |  | $ | 19,776        | 
| | Euro-American Capital Corporation
      (b) |   | 571                |  |   | 606           | 
| | Other
      (c)                             |   |                   |  |   | 40,580        | 

Related party balances receivable arise
  from advances by the Company for normal course in-progress and near-term planned
  exploration and other work on the mineral properties.

| | (a) | Hunter Dickinson Inc. ("HDI") is a private company with
        certain directors in common with the Company. HDI 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 December
        31, 1996. These costs are included in office and administration expenses.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | During the year ended July 31, 2003, the Company completed
        a private placement with HDI of 711,111 units comprised of one common
        share and one share purchase warrant at a price of Cdn$0.1125 per unit.
        The share purchase warrants were subsequently exercised in the year ended
        July 31, 2005 by HDI (note 6(b)(i)).                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | Euro-American Capital Corporation is a private company
        controlled by a director of the Company that provides management services
        to the Company based on the fair market value of those services.                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (c) | During the year ended July 31, 2004, the Company paid
        $40,580 in consulting fees and reimbursement of expenses to a private
        company controlled by a former director and officer of the Company. These
        costs were included in office and administration expenses in fiscal 2004.
        In fiscal 2003, the Company paid $3,863 in legal fees to a law firm in
        which a director is a partner.                                       

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.

|8. | INCOME TAXES
|-- | ------------

At July 31, 2005, the Company had estimated
  income tax losses available for application against future years taxable
  income of approximately $2,516,000 (2004  $4,430,000) in the United States
  which, if unused, will predominantly expire between fiscal years ending 2006
  and 2023. The Company also has tax losses in Canada of approximately $314,000
  (2004  $249,000), which if unused, will expire between fiscal

F-12

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

2006 and 2015. The Company also has resource
  allowance expenditures and capital asset deductions of approximately $2,975,000
  (2004  $2,667,000) and $93,000 (2004  $85,000), respectively, which
  carry forward indefinitely. Because of the uncertainty regarding the Company's
  ability to utilize these amounts in future years, an allowance equal to the
  amount of the tax asset relating to these amounts has been provided.

A reconciliation of income tax expense
  at the statutory rate of 35.6% (2004  35.62%, 2003  37.62%) with
  reported taxes is as follows:

| |                                              |   | Year ended July 31 |  
| | -------------------------------------------- | - | ------------------ | -
| | Income tax expense                           |   | 2005               |  
| |                                              |   |                    |  
| | Income (loss) before income taxes (recovery) | $ | (85,405            | )
| |                                              |   |                    |  
| | Income taxes (recovery) at statutory rates   |   | (30,404            | )
| | Unrecognized (recognized) benefit of non-    |   |                    |  
| | capital losses                               |   | 30,404             |  
| | Net income taxes (recovery)                  | $ |                   |  

Amounts of future tax assets and liabilities
  are as follows:

| | Future tax assets and liabilities            |   | July 31    |   |   | July 31    |  
| | -------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                              |   | 2005       |   |   | 2004       |  
| |                                              |   |            |   |   |            |  
| | Tax benefit of:                              |   |            |   |   |            |  
| | Losses carried forward  Canada              | $ | 112,000    |   | $ | 89,000     |  
| | Losses carried forward
       United States |   | 881,000    |   |   | 1,551,000  |  
| | Resource allowance                           |   | 1,059,000  |   |   | 949,000    |  
| | Property and equipment                       |   | 33,000     |   |   | 30,000     |  
| |                                              |   | 2,085,000  |   |   | 2,619,000  |  
| | Valuation allowance                          |   | (2,085,000 | ) |   | (2,619,000 | )
| | Future income tax
      asset (liability)    | $ |           |   | $ |           |  

|9. | SEGMENTED INFORMATION
|-- | ---------------------

As at and during the years ended July
  31, 2005, 2004 and 2003, all of the Company's assets and operations, other than
  its net smelter royalty, were located in Canada.

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

These consolidated financial statements
  have been prepared in accordance with generally accepted accounting principles
  in Canada (Canadian GAAP). Material variations in accounting principles,
  practices and methods used in preparing these consolidated financial statements
  from principles, practices and methods accepted in the United States (US
  GAAP) are described and quantified below:

F-13

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

Consolidated statements of operations

| |                                                           |   | Year ended July 31 |  
| | --------------------------------------------------------- | - | ------------------ | -
| |                                                           |   | 2005               |  
| |                                                           |   |                    |  
| |                                                           |   |                    |  
| |                                                           |   |                    |  
| |                                                           |   |                    |  
| |                                                           |   |                    |  
| | Income (loss) for the year, Canadian GAAP                 | $ | (85,405            | )
| | Mineral property acquisition costs                        |   | (1                 | )
| | Writeoff of mineral property                             |   |                   |  
| |                                                           |   |                    |  
| | Income (loss) for the year, US GAAP                       | $ | (85,406            | )
| |                                                           |   |                    |  
| | Basic and diluted earnings (loss) per common
      share, |   |                    |  
| | US GAAP                                                   | $ | (0.01              | )
| |                                                           |   |                    |  
| | Weighted average shares outstanding,                      |   |                    |  
| | basic and diluted, US GAAP                                |   | 11,694,601         |  

Consolidated balance sheets

| |                                                               |   | July 31
      2005 |   |   | July 31
      2004 | 
| | ------------------------------------------------------------- | - | ------------------ | - | - | ------------------ | 
| |                                                               |   |                    |   |   |                    | 
| | Total assets, Canadian GAAP                                   | $ | 687,281            |   | $ | 693,697            | 
| | Mineral
      property acquisition costs expensed per US GAAP |   | (1                 | ) |   |                   | 
| | Total assets  US GAAP                                        | $ | 687,280            |   | $ | 693,697            | 
| |                                                               |   |                    |   |   |                    | 
| | Current liabilities, Canadian GAAP and US GAAP                | $ | 12,659             |   | $ | 22,849             | 
| |                                                               |   |                    |   |   |                    | 
| | Shareholders equity, Canadian GAAP                           |   | 674,622            |   |   | 670,848            | 
| | Mineral property acquisition costs                            |   |                    |   |   |                    | 
| | 2005                                                          |   | (1                 | ) |   |                   | 
| | Shareholders
      equity, US GAAP                           |   | 674,621            |   |   | 670,848            | 
| |                                                               |   |                    |   |   |                    | 
| | Total liabilities
      and shareholders equity, US GAAP     | $ | 687,280            |   | $ | 693,697            | 

F-14

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

Consolidated statements of cash flows

| |                                                        |   | Year ended July 31 |  
| | ------------------------------------------------------ | - | ------------------ | -
| |                                                        |   | 2005               |  
| |                                                        |   |                    |  
| |                                                        |   |                    |  
| |                                                        |   |                    |  
| |                                                        |   |                    |  
| |                                                        |   |                    |  
| | Cash flows used in operating activities, Canadian      |   |                    |  
| | GAAP                                                   | $ | (104,809           | )
| | Adjustments to mineral properties                      |   |                   |  
| | Cash flows used in
      operating activities, US GAAP |   | (104,810           | )
| |                                                        |   |                    |  
| | Cash flows provided by (used in) investing activities, |   |                    |  
| | Canadian GAAP                                          |   |                   |  
| | Adjustments to mineral
      properties                |   |                   |  
| | Cash flows provided by investing activities,
      US  |   |                    |  
| | GAAP                                                   |   |                   |  
| |                                                        |   |                    |  
| |                                                        |   |                    |  
| | Cash flows provided by financing activities,           |   |                    |  
| | Canadian
      GAAP and US GAAP                        |   | 89,179             |  
| |                                                        |   |                    |  
| | Increase in cash and cash equivalents during the year  |   | (15,631            | )
| |                                                        |   |                    |  
| | Cash and cash equivalents,
      beginning of year     |   | 686,386            |  
| |                                                        |   |                    |  
| | Cash and cash equivalents,
      end of year           | $ | 670,755            |  

| | (a) | Mineral properties
| | --- | ------------------

Under Canadian GAAP, mineral property
  interests are accounted for as disclosed in note 3(d). Under United States GAAP,
  mineral property expenditures are expensed as incurred. Once a final feasibility
  study has been completed, additional costs incurred to bring the mine into production
  are capitalized as development costs. Costs incurred to access ore bodies identified
  in the current mining plan after production has commenced are considered production
  costs and are expensed as incurred. Costs incurred to extend production beyond
  those areas identified in the mining plan where additional reserves have been
  established are deferred as development costs until the incremental reserves
  are produced. Capitalized costs are amortized using the unit-of-production method
  over the estimated life of the ore body based on proven and probable reserves.

| | (b) | Asset retirement obligation
| | --- | ---------------------------

Under United States GAAP, Statement
  of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
  Obligations"("SFAS 143") requires companies to record the fair value of
  the liability for closure and removal costs associated with the legal obligation
  upon retirement or removal of any tangible longlived asset, effective
  for years beginning on or after January 1, 2003. Under this standard, the initial
  recognition of the liability is capitalized as part of the asset cost and depreciated
  over its estimated useful life. The Company has determined that there were no
  asset retirement obligations as at July 31, 2005.

F-15

---

|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

For Canadian GAAP purposes, effective
  August 1, 2004, the Company retroactively adopted the provisions of CICA Handbook
  Section 3110 (HB3110). HB3110 requires essentially the same accounting
  treatment of asset retirement obligations as SFAS 143. Consequently, the Company
  believes there is no difference in asset retirement obligations under United
  States GAAP and Canadian GAAP for the Company upon the adoption of this standard,
  and there is no effect on amounts previously reported.

| | (c) | 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.

| | (d) | Recent accounting pronouncements
| | --- | --------------------------------

| | (i)   | In March 2004, the Emerging Issues Task Force ("EITF")
        issued EITF 04-3, "Mining Assets: Impairment and Business Combinations".
        EITF 04-3 requires mining companies to consider cash flows related to
        the economic value of mining assets (including mineral properties and
        rights) beyond those assets' proven and probable reserves, as well as
        anticipated market price fluctuations, when assigning value in a business
        combination in accordance with SFAS 141 and when testing the mining assets
        for impairment in accordance with SFAS 144. The consensus is effective
        for fiscal periods beginning after March 31, 2004. The adoption of EITF
        04-3 had no impact the Companys financial position, results of operations
        or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (ii)  | In December 2004, the Financial Accounting Standards
        Board ("FASB") issued Statement of Financial Accounting Standards No.
        123 (revised 2004), "Share-Based Payment" ("SFAS123(R)"), which
        is a revision of SFAS 123. SFAS 123(R) supersedes APB Opinion No. 25,
        "Accounting for Stock Issued to Employees". Generally, the approach
        in SFAS 123(R) requires all share-based payments to employees, including
        grants of employee stock options, to be recognized in the income statement
        based on their fair values. Pro forma disclosure is no longer an alternative.
        As the Company currently uses the fair value method to account for all
        stock option grants this statement is not expected to have any material
        impact on the financial statements when adopted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (iii) | In December 2004, the FASB issued Statement of Financial
        Accounting Standards No. 153, "Exchanges of Non-Monetary Assets - An
        Amendment of APB Opinion No. 29" ("SFAS 153"). The guidance in APB
        No. 29, "Accounting for Non-Monetary Transactions" is based on
        the principle that exchanges of non-monetary assets should be measured
        based on the fair value of the assets exchanged. The guidance in that
        Opinion, however, included certain exceptions to that principle. SFAS
        153 amends APB No. 29 to eliminate the exception for exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of non-monetary assets that do not have commercial substance. A non-monetary
        exchange has commercial substance if the future cash flows of the entity
        are expected to change significantly as a result of the exchange. SFAS
        153 will be effective for fiscal periods beginning after June 15, 2005.
        Earlier application is permitted for non-monetary asset exchanges incurred
        during fiscal years beginning after the date this Statement is issued.
        The Company believes the SFAS 153 will have no impact on the financial
        statements of the Company once adopted.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (iv)  | In March 2005, the EITF issued EITF 04-6, "Accounting
        for Stripping Costs in the Mining Industry". The consensus indicated
        that costs of removing overburden and waste materials ("stripping costs")
        after production begins, represent variable production costs and should
        be                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-16

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|QUARTZ MOUNTAIN RESOURCES LTD.                                     
|-------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                     
|For the years ended July 31, 2005, 2004 and 2003                   
|(Expressed in United
      States Dollars, unless otherwise stated)

| |     | considered a component of mineral inventory cost subject
        to the guidance in Chapter 4 of Accounting Research Bulletin No. 43, "Restatement
        and Revision of Accounting Research Bulletins". EITF 04-6 is effective
        for fiscal years beginning after December 15, 2005 and upon adoption,
        can be applied by either retroactively restating prior periods or using
        a cumulative catch- up adjustment. The Company believes this Statement
        will have no impact on the financial statements of the Company once adopted.                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (v) | In June 2005, the FASB issued Statement of Financial
        Accounting Standards No. 154, "Accounting Changes and Error Corrections
        - a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS
        154"). SFAS 154 requires retrospective application to prior periods
        financial statements of a change in accounting principle unless it is
        impracticable to do so. This is a change from the existing practice that
        requires most accounting changes to be accounted for by including in net
        income in the period of the change the cumulative effect of changing to
        the new accounting principle. SFAS 154 will be effective for accounting
        changes and corrections of errors made in fiscal years beginning after
        December 15, 2005. The impact of SFAS 154 cannot be determined until which
        time the Company makes a change in accounting policy.

F-17

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